MANNY’S
Ask Cora
Hey Cora, I am a buyer, and I would like to buy a house, but I am worried that I won’t get my investment back. Any words of advice? Signed –Fence-sitter.
Dear Sitter, this is a question I get all the time. Everyone wants to be able to get into the market without risk. And, quite frankly, I do too. But here’s the truth: Every investment has risk! This is no exception; however, you do get use out of this investment unlike say, the stock market. This investment provides shelter and a safe haven to come home to every day. It provides a place of memories for your family and friends; it’s a place to live your life. This investment is useful, has an emotional component and stabilizes your economy. It also has the potential to be the biggest financial gain for you. Let me tell you a story: Two schoolteachers. Teacher one, we will call her Miss Abernathy and teacher two, we will call her Miss Baker. Both came to Alaska at the same time. Both make the same amount of money and are good at their jobs. But both made different decisions, Miss Abernathy purchased a home; Miss Baker rented.
Miss Abernathy had purchased a 3-bedroom, 2-bathroom, two car garage home for $350,000 and closed on August 5th. She had a zero-down payment, she asked the seller to pay for her closing costs. This got her into the home for only $0. Her first payment was due in October of $2650 Miss Baker rented a home also with 3 bedrooms, 2 bathrooms, and a two-car garage. Her first month’s rent was prorated for 26 days, because she moved in on August 5th. Her rent for the remainder of August was $2306.50 and her deposit was another $2750. She wrote a check for
Experience Matters!
$5,056.50 to move into her house. Her next rent payment was due September 1st.
After the first year, Miss Baker and I talked again about investing, she wanted to get a dog to go hiking with. Miss Baker had confided that the rent was about to increase $100 per month and she had thought about moving, but she liked the location of the home to the school. She decided to wait to purchase a home.
Miss Abernathy, on the other hand, was enjoying the home, the neighborhood, and her dog. Her payment was stable at $2650.00.
September 1st, Miss Abernathy’s payment $2650.00 Miss Baker’s payment $2850.00
This went on for years, Miss Baker, deciding not to purchase and Miss Abernathy staying in her home making the same payment with her dog.
On the 5th year, Miss Abernathy was getting married and moving out of state. We put her house up for sale and because of steady growth, she sold her home for $450,000! After all her expenses, she left Alaska with $121,000! Quite a nest-egg for a newlywed. She was quite pleased with her investment. This means that the entire time she lived in Alaska, she almost lived here rent free!
Now Miss Baker also left Alaska at the same time. She had older parents that needed her attention, so off to Texas she went. When she left, she did get her deposit back of $2,750.00. The first
year she lived in Alaska she paid $33,000 for housing. The next four years she paid $136,800.00 for housing. She was paying for someone else’s investment rather than hers.
Miss Abernathy left with $121,000.
Miss Baker left with $2,750 (that was already her money)
Do real estate investments always come out this good? No. Because it depends on how you take care of your property. Miss Abernathy had maintenance to keep up with, she had to pay a snowplow guy and someone to repair the shingles on her roof after a storm. She had to change the filters on her furnace and have the heating system maintained each year. Once she had to fix a leaky dishwasher. But she got to have her dog and even adopted a cat while she lived there. Miss Abernathy also gets the benefits of a tax write off for her interest that she paid on her mortgage each year. She had wonderful neighbors who threw her a bridal shower before she left.
Miss Baker, she didn’t have to maintain her home, the landlord did. She didn’t have to pay the snowplow guy or have the heating system looked at each year. If the dishwasher leaked, she called the landlord. She was never able to get a dog or a cat. She moved out of the house and into an apartment which was less expensive by about $250 per month but she no longer had a garage. Her neighbors were just okay and sometimes loud. One left with money, one left without. It’s your choice.
Call me and let’s talk about all the risks and benefits of investing. Follow me on Facebook and get more insight in real estate – not only am I your realtor, but I am also your best friend!
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