California is a tough place to get a home. But, a recent example of a smart way to beat the high cost of housing for Millennials, AND boomers, surfaced: buy a home with 4+ bedrooms and do the home sharing method for as long as you want to. Young couples, until you have kids. Seasoned couples close to retirement, until you and when you travel. You help your family of one, two or more; you ALSO help those who can’t yet buy but make good tenants. Instead of paying $2100 for a one bedroom apartment, rent for $1300 from a home sharer and bank the rest: $800 a month adds up quickly toward a down for your own home. Including a homeshare.
Let us help you flesh it out. Call us at 714 267 1413
Interest rates have cratered, relatively, with the 10 year T-bill hovering at the low 2s yield (this controls mortgage rates),pushing down loan rates into the high 3s, maybe low 4% range.
Values are up in SoCal, but the differential between a 1200sf 2 or 3 bedroom and a 2200+sf 4 or 5 bedroom has narrowed. Important factor! Why?
Let’s go deeper: Renters are scrambling for reasonable. 1 bedroom apartments run into the $1700-$2300 range, even higher in some areas. This makes it hard for millennials to save for their own homes and pay for luxuries like gas and food.
Other young buyers, saving for their first home, may be tempted to buy that 1 bedroom condo just to get a piece of the action. Values are up and we are oscillating from seller to buyer to seller markets. But, try and sell that one bedroom when you have 3 munchkins. Maryland’s Rep Adam & Eve Schiff have two kids; they certainly aren’t raising family in their 600 sf Burbank condoPad.
Shelve the common terms: don’t let them sidetrack you:
A seller’s market is when there is two or more offers at a point in time. A buyer’s market is when they are the only offer on a property for yes, a point in time. Economists expect mortgage rates to move to mid 4s this year, but experts used to be ‘perts’ and now they are ‘ex’: point being, crystal balls are murky.
Waiting for the perfect market forces too many to wait and miss the “good.” A little analysis goes long on the football field of life.
Millennials! Consider a great path to long term wealth: Buy to home share. Home share is not short term rentals (despised in cities like Anaheim and others) but a long term aid to owning a home. And if you need to have private mortgage payment insurance (PMI or MI), you can reinvest part or all of the homeshare rent $$ in reducing principal.
Young couples, once married, tend to have munchkins. But, a recent client success story needs to be broadcast.
Tim and Karen (possible name changes but true story) bought their 4 bedroom home for about $782K in a great city. AT 3.875%, mortgage principal and interest per month is $3677. Taxes another 1% and insurance, but still manageable, though homeowners insurance is on the rise due to the unnecessary wildfire conditions our ruling elite don’t do much to mitigate.. Learn the habit of home sharing with other millennials.
Tim & Karen shared living space with a non-family tenant for a couple years, which helped them save money to buy, in THEIR rented condo. Meanwhile, they didn’t buy brand new luxury cars and other depreciating (ie losing money) assets. They saved and saved.
This helped them afford more home when condos and homes in the 600k ranges were not in the best of realms NOR more than a condo or teeny home.
Think about it: renting two (at $900+ per) of the four bedrooms means their cash flow looks much better: $1877/mo. Now, not all of that is applicable, but it is money that can be used to reduce principal aggressively to remove costs like PMI (mortgage insurance), personal debt. AND build up reserves.
Reserves are important because markets and economies change. Hubby is a master accountant (super CPA) and wifey a beloved teech.
They will someday have triplets or at least an offspring or two but this could be years away. So, why not get the home of their dreams today, housing ‘insurance’ against a downturn, and pay it down as much as reasonably possible. Cars rust but homes tend to be essential. Mortgage interest deduction no longer can be the most important reason to buy in Taxifornia’s tax tax and spend SacraDEMento mentality, yet the cash flow improvement makes your home work more for you under the HomeShare banner.
Recall $1877: that won’t get you a rented studio in some locales. Yet, a 2200sf foot 4 bedroom can grow in value, no matter the market, because if Tim & Karen pay just ONE extra mortgage payment (two months of two rented rooms rental applied), their 30 year mortgage magically (actually mathematically) becomes a 23 year loan.
7 years shaved for one extra payment per year. And even if prices tank, you are still paying off principal faster.
Notice the graph: the red line shows how amortization works: at the beginning of a 30 or 15 year loan, most of the payment is interest and crosses the equal line years later. But if you pay one extra payment per year, you improve the principal (reduction) to interest picture considerably. More than that one payment, even more aggressively. But analyze before your amortize; be smart.
Let us help you analyze YOUR way to wealth. Dave Ramsey loves to talk about the paid off mortgage replacing the stylish BMV as the status symbol of choice. This real estate guy, Len, amazing Briana, magnificent Lisa, super Steve and other team members, believe we can help.
Getting rid of, or at least, curtailed depreciable things, like loaded up ‘death’ cards, is more than noble: essential for long term wealth growth. Wealthy people, believe it or not, are in the better position to help others with their needs (wants are a different story) and do great things. No poor person (though look around Jesus was right, they will be with us always) ever gave you or me a job. Dave Ramsey and the Millionaire Next Door highlight that wealth need not just be a lottery watch: hoping for the lining up of 6 numbers and a mega. Start today…or sooner. The rainbow’s end is a well lived life…and in the kitchen floor of your very own home.
But guess what!! Helping the poor can be a part of your day IF you do wise today. When the plane gets bumpy and the oxy masks drop down, the first step is putting yours on so you can help those more vulnerable. Do the same with life.
Congrats to our latest client success story! Tim & Karen, we wish you the best in your new place, plenty of limes and family celebrations; and the latest chapter in your life long adventure. We wish them excellence in a world that does not value industry, thriftiness and frugality. Ask the grasshopper and the ant who understands this more.
Len, Briana, Lisa and Steve are ALL licensed real estate professionals who can help you with the HomeShare advantage. It just takes a first step.