A Watched Pot Boils Not
by Evan Vanderwey on 14/01/10 at 7:30 pm
Many are asking me if NOW is the time to buy a home. If buying a home now will cause me to make money on it if I sell it in 1 or 2 or 3 years. This is no easy question to answer. We cannot know what will happen during the next 1, 2 or 3 years.
Two long time clients of mine recently called me to prepare to make offers on homes near their neighborhoods. Both want to hold the home as an investment and both homes were listed in the $30,000 range.
First we worked out financing in both situations ahead of the offer. One of them had enough equity in their home for a Home Equity Line of Credit with their Credit Union. The other had some cash and a paid off vehicle – a car loan made up the difference.
Second I suggested that they perform their inspection prior to writing the offer. One of them dewinterized the home and performed a full blown inspection and the other, being a contractor, simply walked through the cold house himself.
The third step was to make an offer – Cash, no inspection, close in 10 days. A very strong offer. One is planning to offer $15,000, the other is likely to offer around $25,000. After around $15,000 in repairs, the home is ready for occupancy. Check back later this week for a post about the two different offer strategies being employed here. They require very different follow up by the buyer.
My advice to them is to be prepared to own the home for more than five years. Forget about selling it for a while. A few things will happen during that time.
1. Bank owned homes should decline to normal levels by then. This will have a positive effect on house values across the board.
2. The investor will have paid down some of the moneys borrowed using the tenants rent payments. This will add to total profits in the end.
3. Tenants might become buyers in time. Coaching a tenant to improve credit while renting to them is good for them and possibly creates a buyer for the investor.
When you think about buying a home as an investment in this market – get creative financially. And don’t think about putting it back on the market for a while.
