The Internet has empowered all buyers with information and home buyers are no exception.    The amount of information available to public includes details on size, condition, sales history, current inventory, recent sales, photographs, videos, school info, drive-times, entertainment and much more.

When a seller realizes that buyers are educated with facts, it becomes unlikely that they will pay more than a home is worth. 

If a home is priced too high in the beginning, it may stay on the market longer than normal which could adversely affect the ultimate sales price.  It is a natural reaction from people, personally or professionally, to assume that something must be wrong with a home that doesn't sell in a reasonable time for that market.

The seller is entitled to maximize the equity in their home and pricing it properly in the beginning is the best way to achieve that.  Overpricing can reduce buyers activity because they assume that the best homes are purchased soon after they are offered for sale and if one has been on the market longer than normal, there must be a problem with it.  Similarly, sales associates may come to the same conclusion.

After buyers have seen a few homes in a certain price range, they begin to expect similar amenities in each home they look at.  If a home is overpriced, it will not compare favorably with the other homes that are being viewed.  Sometimes, the buyer may even think that another home could be a bargain because it offers much more for the same price as the overpriced listing.

Shopping the market means looking at the homes that meet a buyers' wants and needs and selecting the one that gives them the most, whether it is in price or amenities.  The overpriced listing doesn't compete well, and it extends the market time.  There is a documented study that shows that the longer a home stays on the market, the lower the price will be.

It is essential that a seller receive factual information to price their home to compete favorably in the current market.  Some of the obstacles can include:

• Failure to objectively compare the current and sold homes with theirs
• Neighbors who mislead the seller as to how much they got for their home
• Fear of making a mistake and thinking they can start high and always lower the price
• Loss of perspective because the seller is emotionally involved
• Expecting the home to sell for more than fair market value because they need the money
• Agents who will accept a listing at any price in order to tie up the property until the seller realizes the price is too high

What a seller paid for the home or the cost to rebuild it today do not affect market value.  Neither does the amount spent by sellers on certain improvements that were made for their own pleasure and enjoyment.
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It is unrealistic to expect a buyer to pay more than market value for a home.  The seller sets the price of a home but the buyer determines the value.  If the home is priced properly in the beginning, it is more likely to sell for a higher price, in a shorter period and with less problems.

35% of respondents, in a recent annual Gallup poll that dates back to 2002, identified real estate as the best long-term investment option compared to 27% who identified stocks.

The top choices included real estate, stocks, savings accounts and gold.  Even with the remarkable prices of the different U.S. stock indices recorded in 2019 through April and May, homes have the highest confidence in the minds of the respondents.

This seems to be based on the stability of the housing market and the expectation that home prices will continue to rise.  Homeowners build equity from both appreciation as well as reducing principal with each payment made. These same factors exist for investors of rental homes in predominantly owner-occupied neighborhoods.

Real estate has another dynamic working to produce favorable investment results due to leverage.  Leverage occurs when borrowed funds are used to control an asset.  When the borrowed funds are at a lower rate than the overall investment results, positive leverage occurs which can increase the yield from an all cash investment.

Gold and savings accounts must be funded with cash.  The maximum borrowed funds allowed for stocks is 50% and generally, at a rate higher than typical mortgage rates.

Homes are a particularly attractive investment because you can enjoy them personally by living in them.  The interest and property taxes are deductible and gains on the profit are excluded up $250,000 for single taxpayers and $500,000 for married taxpayers filing jointly. 

Many people consider an investment in a home for a rental property an IDEAL investment: Income, Depreciation, Equity Build-up & Leverage.

If you have questions or are curious about the process, contact me at [email protected] or (808) 345-6192. 

Equity build-up could be one of the biggest advantages to buying a home.  There are two distinct dynamics that take place to make this happen: each house payment applies an amount to reduce the mortgage owed and appreciation causes the value of the home to go up.

It is easy to make a projection based on the type of mortgage you get and your estimation of appreciation over the time you expect to own the home.  Even conservative estimates can produce impressive results.

Let's look at an example of a home with a $270,000 mortgage at 4.5% for 30 years and a total payment of $2,047.55 payment including principal, interest, taxes and insurance.  The average monthly principal reduction for the first year is $362.98. If you assume a 3% appreciation on the $300,000 home, the average monthly appreciation is $750 a month.

The total payment of $2,047.55 less $1,112.98 for principal reduction and appreciation makes the net monthly cost of housing, excluding tax benefits, $934.57.  If this hypothetical person was paying $2,500 in rent, it would cost them $1,565.43 more to rent than to own.  In the first year, it would cost them over $18,000 more to rent.

Together, the items in this example contribute over $1,100 to the equity in the home .  This is one of the reasons a home is considered forced savings.  By making your house payments and enjoying increases in value, the equity grows and the net cost of housing decreases by the same amount. 

In this same example, the $30,000 down payment grows to $133,991 in equity in seven years.  While this is equity build-up, the extraordinary growth is attributed to leverage.  Leverage is an investment principle involving the use of borrowed funds to control an asset.

To see what your net cost of housing and the effect of leverage will have on a home in your price range, see the Rent vs. Own.  If you have questions or need assistance, contact me at (808) 345-6192.

The process of buying a home can be different based on the price range and whether a mortgage is needed.  While some things are different, others are similar regardless of price, financing or local customs.

Each year, the National Association of REALTORS® surveys buyers and sellers who have purchased or sold in the previous twelve months in order to identify the process and steps taken.  It provides a lot of information for the people who will be going through the process now and in the near future.

44% of all buyers looked online for properties for sale.  This might be considered a logical first step to determine the prices of homes in certain areas and what features they offered.

17% of all buyers stated that their next step was to contact a real estate agent.  In another REALTOR study, it is reported that 87% of all buyers purchased their home through a real estate agent or broker.  Buyers identify a wide range of services the agents offer that is considered valuable in the purchase of a home.

The next step identified by most buyers is to look online for information about the home buying process.  In many cases, agents share this information in their first substantial meeting but since it is identified as the third highest steps taken by buyers, some people may not be getting adequate information from their agents or they are verifying the process as explained to them.

The fourth step identified by buyers is to contact a bank or mortgage lender.  The position this step takes place is interesting because many real estate professionals suggest that it be one of the first things buyers should do.  The reason is to find out how much mortgage they can qualify for, so they are looking for homes in the right price range.  This can save a lot of time and frustration.

The three next highest steps included driving by homes and neighborhoods, talking with a friend or relative about the home buying process and visiting open houses.

The buyers in this study mentioned that they depended on several sources for information during the home search.  The most frequently used were online website, their real estate agent, mobile search device, open houses and yard signs.

The three most difficult steps listed were finding the right property, the paperwork and understanding the process and steps.

You can download a Buyers Guide that has a lot of interesting information.  We have an array of Financial Apps that can provide insight on things like Rent vs. Own, Mortgage Payment and Your Best Investment.  And of course, I'd be happy to schedule an appointment with you to go over all these things and talk to you about finding your next home.  Call me at (808) 345-6192.

It is estimated that over 15% of the population in the U.S. are over 65 years of age.  With one of the most common fears of seniors being their money will run out early, it is understandable that downsizing may be strategy to meet their goals.

Once the kids are grown, have careers, relationships and get a place of their own, parents find they may not need their "big" home like they did before.  In other situations, their lifestyle might have changed, and the house just doesn't "fit" anymore.

The benefits of a smaller home can include the following:

• Easier to maintain
• Lower utilities
• Lower property taxes
• Lower insurance
• More convenient location
• Single level
• Possibly more energy efficient
• Possibly lower maintenance

Like any other big change in life, it is recommended that a person should take their time to consider the possible alternatives and outcomes.  Are they going to stay in the same area?  What type of property would suit their needs for the future?

The tax-free exclusion allows a homeowner to take up to $250,000 of gain for single taxpayers and up to $500,000 for married taxpayers.  Part or all of this could be used to generate income for retirement.  Other uses for the equity could include paying off other debt, taking the trip of a lifetime or making a special gift.

There will be expenses involved in selling a home as well as the purchase of a new home.  These will lower the amount of net proceeds you'll have to invest in the new home.

Homeowners should consult their tax professionals to see how this applies to their situation.  Please contact me at (808) 345-6192 or [email protected] if you have any questions about what your home is worth or how long it might take to sell it.  Other things that could be of value are our Homeowners Tax Guide or Sellers Guide.

Insurance is required on a home by the mortgage company, but homeowners rely on it for peace of mind also.  Unfortunately, people may not take the time to investigate their policy and what it covers until they need to file a claim, which could be too late.

While it may not seem like the best use of your time, an in-depth visit with your property insurance agent once a year could be valuable to you if you have losses and could increase your peace of mind.

The following are some questions you can ask your insurance agent:

• What is the insured value of the policy and the replacement cost of your home?  Insured value is the amount that would be paid for a total loss but replacing the home could cost more than that amount.
• What is the deductible?  Higher deductibles on the first amount of the loss are one way to lower the cost of the premium.  It may sound good when you're having to pay for the policy but feel very different at the time you file a claim.
• What does the policy cover? Typical policies cover fire, theft, vandalism and storms.  Homeowner policies bundle personal belongings and some liability coverage.  They can differ not only from company to company but from policy to policy.  Be clear on what is covered.
• What does it not cover? ... Some perils are usually not covered by policies like hurricane, flooding, power outage, rising water and earthquake.  It can be confusing because a broken pipe might be covered but rising water from backed up sewer is not.
• What is your anniversary date? ... Policies are usually written for one-year and should be renewed before they expire.  Mortgage companies like to renew them a month before they expire so there will not be a lapse in coverage.  That is why borrowers with escrow accounts for taxes and insurance must fund them accordingly.
• Is it paid by an escrow account with the mortgage?  New homeowners should verify that their house payment includes 1/12th the annual taxes and insurance so they will not be surprised with a large bill when they become due.
• Does your policy include liability coverage? ... This covers claims made by third parties of bodily or property damage done by the insured.  It could be as simple as a guest slips and injures themselves in your home.  It is important to know the limits of liability and consider larger amounts especially, if you have a higher net worth or risk profile.
• What is an umbrella policy? -  This is a separate policy that increases the liability coverage above the limits of the homeowner's policy.  It can be a relatively inexpensive coverage.
• Are personal belongings included? ... Most homeowners policies include an amount toward personal belongings like furniture, rugs, housewares, and clothes.  It may be expressed as a percentage of the overall policy.  The question is: will it cover your belongings or does it need to be increased?
• What is the process to file a claim? ... Most claims require proof of purchase or a current inventory of the home.  Since most people don't have receipts except for big ticket items at best, the inventory becomes important.  Videos, still pictures or a detailed list can help to satisfy this need.  Click here for a digital Home Inventory.
• Are there additional living expenses included? ... Some policies include temporary living expenses if you are displaced from your home. 
• Does a home office require additional insurance? ... Many homeowners work from their home and have special equipment that may not be covered normally.  If you "meet and greet" people at home, ask about additional liability coverage.
• Ask about floater policies on big-ticket items? ... Some items like jewelry, furs or collectibles need to be scheduled or covered on a separate policy.

​Insurance is meant to give you peace of mind against possible losses that could financially harm you without it.  Because insurance is very specific about what it does and does not cover, it is important that you have a good understanding of your policy.  A policy is a contract between you and the insurance company, and it deserves due consideration.

​Jennifer R. Rhodes (R), BIC
RB-22809
​(808) 345-6192
[email protected]

Real estate has consistently been one of the highest rated investments available to individuals.  TV shows certainly make rentals look easy and you may even know someone who has made a lot of money with them.  Possibly, the thought has crossed your mind that if they can do it, you can too.

Before you contract for your first investment, ask yourself some questions that could save you time and energy.  Not all people have the time, the inclination or even the skill to manage property.  Landlords need to be good business people who can maximize revenue and minimize expenses.  If investors don't have the skills and talent to handle some of the repairs, they at least need to know reputable and reasonable service professionals.

Another important element is to be familiar with the state and local landlord tenant laws.  You'll need to know what are allowable security deposits and where the money can be held.  Knowing how long you have to return it to a tenant is important and what to do if you plan to keep all or part of it for damages done.  It is important to know about the eviction process and how fair housing applies.

If you decide that you may not be cut out for being a landlord, it won't eliminate investing in rentals.  It does mean that you will need to engage a property management company who is capable of dealing with all aspects of the process.  The peace of mind and convenience will cost you a fee, usually a percentage of the rent collected.  They can handle finding a tenant, doing the background check and writing the lease but there will be an additional fee for that service.

Even though your expenses will be higher with a property manager, with their experience, they should be able to help you lease the property for more money than you can get and will probably have service providers to do the work needed for less.

Occasionally, rental property requires out of pocket expenses for repairs and improvements which is like making another capital contribution.  As equity builds in a rental property due to appreciation and principal reduction, the owner does have the option to take cash out of the investment either to pay additional expenses or to use any way the owner wants.  Pulling equity out of a rental doesn't even trigger a taxable event.

Single-family homes and up to four-unit buildings offer an investor the opportunity to get a high loan-to-value mortgage at a fixed interest rate for 30 years on appreciating assets with tax advantages and reasonable control compared to other alternative investments.

Many investors like the fact that you can borrow to purchase a rental investment where many other investments require cash.  The use of borrowed funds can create an advantage called leverage.  Assume you paid cash for a $100,000 home that generated $7,000 income after the rent was collected and expenses were paid.  Divide the value of the home into the income and it would earn 7%.

If you decided to put an $80,000 mortgage on it at 5% interest, the interest expense would be $4,000 leaving only $3,000 income.  However, at that point, you'd only have $20,000 invested in the property.  Divide the cash invested into the income and the rate of return would increase to 15%.

This is a simple example of leverage showing that borrowed funds can increase an investor's yield on a property.

Rental property can be an excellent investment when it is treated like the business that it is.  Knowledge of the investment will reduce the risk and enhance the opportunity to make a profit.  Some investors consider their rental income as "mailbox money" because each month, they go to their mailbox and they have money being sent to them by their tenants.  The benefits of rental property can easily outweigh risk involved.

Contact me for more information on rental properties and the option to be the landlord or to delegate it to a property manager.

Jennifer R. Rhodes (R), BIC
RB-22809
​(808) 345-6192
[email protected]

Occasionally, buyers who can qualify to purchase a home decide to "take a break" and wait to purchase a home.  When the focus of buying a home is relaxed, other uses for the money that was going to be used for the home are considered.

Maybe they think how much fun it would be to have a Sea Doo or a motorcycle or a new car.  It is amazing how many people would like to buy a home but either don't have the down payment, the income or the good credit to make it possible.

Instead of spending the money, consider investing the money for two years until the time is right to buy a home.  Let's look at putting the money in a certificate of deposit that earns 2% or in the stock market that could average a 5% return.

Assume you were purchasing a $295,000 home on a FHA loan with 3.5% down payment.  The $10,325 would grow to $10,742 in the CD which isn't a big increase but at least it is safe and secure, and it will be available when you're ready.
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If the same amount were invested in a safe stock or mutual fund that earned 5%, it would grow to $11,383 in the same two-year period.  It earns more but there is more risk involved.

Alternatively, if you invest the same amount in purchasing a home that appreciates at 3% a year, the equity would be $38,871 two years from now.  The dramatic increase is due to leverage, being able to control a large asset with a small amount of cash.  The appreciation is based on the purchase price not the down payment.

Another factor is that there is principal reduction with each payment that is made.

Make your own projections with Your Best Investment.

​Jennifer R. Rhodes (R), BIC
RB-22809
​(808) 345-6192
[email protected]