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Seattle Micro-Housing

Seattle Micro Housing

The Seattle Council is considering allowing micro-housing in the city. If you’re not in the loop of what micro-housing is exactly it’s a much smaller option of living. Typically they are the size of a bedroom and they have common areas like kitchens and bathrooms that everyone shares. Yesterday the Seattle Council held a public discussion for comments and feedback. As you know with the Seattle Council, it’s ultimately their decision if it goes through or not. Over the years I have learned one thing and that is the Seattle Council will do what they want. It’s about the money and less about the people. This solution will certainly move forward but will be regulated so they can track the money easier.

Supporters suggest it’s an affordable solution to housing. While I like their ambitiousness, I assure you it won’t be cheap or even affordable. It will be expensive and Seattle residents will continue to pay their crazy rent. The demand is high for this so why would they make it cheap? Think about it.

Even though I understand the strain of more people in the city and even more parking issues, I do support micro-housing. Not because “it’s going to be affordable” (because it won’t) – I support it on the principle that land owners should be able to do what they want with their property. It’s also very common in other countries and we’re just behind the times on many issues including micro-housing.

Seattle Home Prices On The Rise

Seattle Home Prices Going Up
There has been lots of news recently about home values increasing.  I know some have increased in my area.  The Seattle Times is reporting this as well.  According to the S&P/Case-Shiller 20-city home-price index, Seattle jumped 1.9% in July.  Of course very few mention that the market is down 18% from 2007.  I guess by not mentioning that it builds customer confidence.  Also according to S&P/Case-Shiller 20-city home-price index, there were only 3 large metro cities that made gains.  These were Seattle, Tampa Florida, and Washington DC.

If you read the Emerald City Journal, you probably know I’m not a fan of buying a home.  I just don’t understand how someone could pay $250K for a home and another $350K in just interests and think they are going to make a profit on that.  Add in the property taxes and it’s just ridiculous the amount you pay in the end.  The “American Dream” is alive and well I guess.  I’m happy people are still falling for this because these are suckers paying for all the roads, schools, and city expenses.  America needs you to believe.

 

First Time Home Ownership Seattle

First Time Homeowner Seattle

I recently read an article by the Seattle Times about first time home ownership. It was written by Katherine Reynolds Lewis (Washington Post).  In short, it’s an article about the things you should have in order before buying your first home. If you’ve been on the Emerald City Journal awhile you know my view on the subject and that’s it’s a horrible liability.  You can read the article here.  The article by the Times covered the basics like looking at your credit report, consider talking to a tax advisor, stick to your budget, finding a good real estate agent, and research a good lender.  It’s pretty obvious stuff when considering buying a home.

The things it doesn’t cover is that homes are a liability – not an investment.  They are also rarely opportunities (unless you’re paying it all off completely without a lender).  You need to remember that when you purchase your first home that you’re not going to get your money back.  Here is the simple most basic formula.  Take your purchase price and multiply it by (2.5 – your interest fees) + yearly property tax X 30 years.   This number is what you’ll need to sell it at to get your money back.  Honestly,  do you really think you’re home is going to appreciate that much?  The truth is…. never.  This doesn’t even include the repairs down the road, updating the property, and the higher costs of just living in a larger space (heating, water, sewer) compared to renting.

Of course not everyone will agree with that statement above.  Most critiques say “well at least you’ll have something at the end” compared to renting which is just “burning money”.  My argument is that you’d be more wealthy renting.  You’re paying about 33% less renting so if you put the rest into a savings account (compared to giving the bank interest payments) at the end of 30 years you’ll have way more money saved.  You could actually pay cash for a home at that time if wanted.

 

City Council OKs Inspection of Rentals

We hang the petty thieves and appoint the great ones to public office.
~Aesop, Greek slave & fable author

Did anyone in their right mind think the City Council would not pass it? It appears they copied the one that pumped in 1.6 million to Los Angeles coffers. I really cant come up with a perfect word to describe what the Seattle Council is doing to property owners. A few descriptions, are legalized shakedowns, threats or fines if we don’t do exactly what they say. They will list all sorts of RCW’s and obscure laws and reasons for doing this and they know from the Housing Code mess in the 80’s that the judges will rubber stamp anything anyone tries to get clarified in court. Its actually taking over private property when they can tell a person who worked and bought a rental how we need to fix it. The law of supply and demand takes care of that. If a tenant is dumb enough to rent a place full of mold, a sink propped up with a 2 x 4, electrical sockets hanging out of a wall like one described then that’s between them and the landlord. We do not need government to tell us what/how to remodel a house we own, and bought with our own money.

Anyone who follows politics can see spending is totally out of control. They have to find somebody new to screw over. What better way than pass a law that requires every person who owns a rental (even to your Mother in law in your own home) must pay a fee and register your property with the city. Now if that is not hi-way robbery, blackmail or something I cant imagine what is. First of all the city already knows exactly who owns what. The tax rolls tells them that. If I pay property taxes and utility bills the odds are  I live in my house, but if I pay property taxes and someone else is paying the utility bills the odds are that it is a rental. But greed, corruption. what the heck ever kicks in and what a wonderful way to get $150.00  or whatever they decide on, from each everyone who owns property without actually having to put a gun in their back. Works for them. They say this is just to cover their expense of running the program. WOW they will have no budget, no limit to how many inspectors or how big of a boondoggle they can create, because they can set the fee at whatever they want to. They can raise it, they can add penalties and fines anytime you resist. Legalized plunder might describe it. They can spend whatever they want to run the program.

But that is not even the worst part. Their reason for passing this is to quote Sally Bagshaw: “This is watershed legislation, everyone has a RIGHT to good housing”. Their were no NO votes so we have to assume that every council member believes this. I think you have it completely bass ackwards. People who own property that they worked and paid for should be able remodel/upgrade or leave it as is without any interference for the government. We have a RIGHT  to be left alone. We have a RIGHT to whatever we worked for and paid for if its legal. I know we cant start up a drug lab etc, or create an eye sore, but to say everyone has a RIGHT to good housing is like telling the Little Red Hen to keep working her little tail off and do all the work but then share her baked bread with the others who did nothing have a right to her bread. Well the little Hen quit planting her wheat. I will just close up my little house when the time comes to register because for sure I wont be re plumbing, re wiring, putting in new windows or whatever you dream up. You are giving rights to tenants that they have no right to have. If they don’t like a place they can move. If it is crappy don’t move in. If it is trashed when they leave and take pictures of it, then they did the trashing. This is spreading the wealth in a sense. You want to force single family dwellings completely out and you may very well succeed. I have a little house that supplements my social security check. The house was built in the 1900’s. Of course its not up to code. No old house is. The house I live in is the same age and I have lived in it for 66 years. It is not insulated, not sure the locks would meet your approval, doubt your inspector would let me rent it to anyone without a lot of upgrades which I have no money or desire to do at this point in my life. I am 89 and don’t think it would be easy to make payments if I even could get a long term loan.  My tenants have all been working people but I have taken many applications that just blew my mind. One young black girl with 3 little kids filled out an application. I showed her the little rental(really clean and cute, bath fitter had just did the bathroom). It was not nice enough(thank heavens) but she showed me she was entitled to spend $1400 a month on rent. My house rented for $850. Another young heavy set white lady came and had section 8 and had $1100 a month to spend on rent and mine was only $850. So I want to talk about people who you would call poor and you say thy have a RIGHT TO A HOUSE. They don’t have a right to anything. The government has created a whole new class of people with a sense of entitlement. They are not poor at all. They don’t work, never have had a job but  government has convinced them they are victims of some  this sort. They get a stay at home check, food stamps, and money for rent and free medical. Just because they prefer to have a bunch of babies by a lot of different men and not get married is not MY problem. If someone wants to spend their life drugged up or drunk, its not MY problem. Its their excuse for not going to work. They say they have issues. They blame the government or the old landlord or anyone but themselves. If they didn’t work for it, they don’t have a right to it. At least that is the way it used to work in America.When you take from me to give to someone else its robbery.  From the time I can remember on the old farm we were taught, “work or we wont eat”. If you had a good crop you might be able to get a new piece of linoleum  for the kitchen floor. We did not have to worry about faulty plumbing or wiring because we did not have any of that. We had a three hole out house. We had whatever Mom and Dad could afford not on the government furnishing everything we thought we needed.

The countries that turned to Socialism are facing terrible times. The people they have taught that Government will take care of them are rioting because their governments have ran out of money. Its getting closer in America. You cannot keep hammering away at people who have worked all their life to take care of themselves and give it to people with no work ethic, no ambition, alcoholics, dopers, and single mothers. The bubble will burst. My little rental is the supplement to my social security check. My social security check(not SSI) that I worked from age 13 to 69 for,  is less than the government gives these so called poor people to use for rent. Now you want to make sure we fix our little rental for people who do nothing because they have a right to good housing. Of course the Seattle City Council knows all of this. They had the meeting all geared with the Tenants Union. They want to suck more money away from property owners to upgrade their property in the guise of helping tenants. You are hurting them. When you teach someone they deserve something they did not work for and take it away from the guy who worked for it is corruption and buying votes. Does not help anyone. If everyone is entitled to good housing how come there are so many homeless people wandering the streets downtown?

It’s hard to believe the load of crap the council members are shoveling out. They know better. They are not dumb. They know how to start up another layer of rules and regulations to buy more votes. Sure the tenants will vote for you, but remember they are not the ones you are able to “suck” the money from. It’s the property owners and people who work. When it get too top heavy it will fail.  Its mighty close right now. You are promising the tenants you are helping them. The tenants union has convinced them it is helping them. Neither is true. You are hurting them almost as much or more than us property owners. It will hurt them when people just tear down their rentals rather than jump when you say jump. The government will run out of money eventually and the people will riot because they have not been taught how to do a thing for themselves. It pays off to be told you are poor in Seattle. You are entitled to a good house. You do not have to ever work a day in your life, if your child gets a free lunch he is entitled to go to college even with a C grade. That’s like telling you that a D and F means you are doing fine.

Fair is fair. I have lived in an old house all my life and worked all my life. If someone who has never earned a dime has the right to good housing then I figure I am entitled to live in a mansion. With your reasoning I will state my case. Bill Gates lived in a mansion. Sure he accumulated his wealth all on his own. But according to your logic “I am entitled to live in a mansion”. Shouldn’t he have to furnish me with a mansion? The City Council can give me a check each month in the amount he wants for rent. How come it doesn’t work that way? I don’t begrudge the rich people one thing, they worked for it. I do begrudge rewarding drunks, dopers, lazy people and single mothers who think their lifes work is “breeding”. Welfare will even pay for delivering the babies then up the monthly check. No one holds the Dad’s accountable. If I am still alive when the day comes to register my rental house. All rent applications will have an added cost.  $150.00 for registering, the inspection cost, the upgrade cost, all non refundable to the tenant. Right now I am happy, my tenant is happy, the little house is not dangerous in anyway but the city need the money to screw away for IMPORTANT THNGS. Thought Robin Hood days were over, but I was wrong again.

 

Seattle Landlords Got A New Boss

If you’re a homeowner and decide to rent your home down the road, you just got a new boss.  That new boss is the City Of Seattle.  City Council is expect to pass legislation that would require landlords to get their rentals inspected.  They will need to register with the city (pay their fees) and hire a private home inspector to go through their rentals for repairs.  The scarcity of the bill that pushing it through is the inspection of mold and safety issues.  However, we all know it’s a way for the city to build up more revenue.  Lots of money is changing hands with this bill.  You have the city fees (old and all future rentals all pay registration fees).  You have the repair fees and I assure you that private home inspectors will happen to find every little change that needs to happen (it’s in their best interest financially).  Then you have the sales tax revenue generated on those “must have” rental repairs they fill are necessary.  The City Council says it’s not about the money… it’s about the safety.  Sounds like legal corruption to me personally.

The bill is backed by the Tenants Union of Washington.  We all know anything to do with Unions is about the money so we know their agenda. On their website they claim this bill is “the closest we have ever come in over twenty years in the fight for healthy homes for all in Seattle.” I guess they think money grows on trees.  They say they fight for “healthy and safe homes”.  They forgot to add at the dime of everyone else or by any way possible.

As a rental owner, the way the program works is pretty shady. First you must register with the city.  If you don’t register you’ll pay a fine.  It’s going to be monitored through your utility bills.  You then need to pay an inspector to come out from a private company whose sole purpose is to find problems with your rental.  Maybe it’s code violations, maybe its water damage, maybe you didn’t mow the lawn, maybe your roof could leak over the winter. Who knows really.  It could be nothing but most likely thousands of dollars depending on how much the private inspector needs the money or if his car payment is late that month.  After that is done, you need to get the repairs fixed and if you’re late doing that it’s going to cost you a $150 PER DAY fine.

I have seen this game played in several businesses now and it always leads to the same conclusion.  The owner is at the mercy of the City.  They’re always holding a carrot in front of your nose just to make sure you are aware of who is the real boss here.  It’s a power trip when it comes to licenses and they are always looking over your shoulder.  Typically the people telling you how to do things are people who have no experience, never been in your field, and think they know better then you how to run your business (or rental).  That is the reality and how this game is played.  It will also be how this new program is going to work.

The sad thing about this bill, the Seattle City Council, and the government is that they think they need and must “help” everyone.  Business owners, landlords, drivers, etc just want to be left alone.  Nobody (read all the comments on the Seattle times or news tribune about this bill) likes being told what to do or how to do it better by someone who has never done it themselves.  I know the only thing I want from the Government is to be left alone.  Just quite trying to “help” me.  It’s easy to pass bills like this because most people will never be financially sound enough to have a rental, probably are broke or near it most months, feel bad, or just don’t care about about others because it doesn’t and never will effect them.  I compare it to the 1% paying for everyone else.  It’s great for elections also….Why would the majority 99% care about the rich paying a little extra to help everyone else.  Sad but true.

Regarding this new legislation. I understand there are many slumlords out there.  Compared to the masses of landlords that number is low, however (like %10).  I guess we need the 90% to be burdened and pay the city extra and support the inspectors businesses just to fix the bad 10%?  Do you think renters are stupid and won’t leave if they don’t have heat or see mold where their kids play?  Seriously! We have laws about rental and tenants already in place to handle bad landlords and these situations.  You got mold in your rental and you didn’t see it when you did the initial walk through the rental, MOVE OUT, it’s unsafe and you have that right by law already.  The heating doesn’t work? MOVE OUT you’re all ready protected by law.  Good landlords don’t need to pay all the fees and have all the worries by these new bosses who know it all.  Yet they should pay the price also?  Registration fees each year and private inspectors looking to make money for their own business are not going to come out and work for free you know.

Another item to consider is that many rentals are supported income for the elderly.  They paid off and worked hard for an extra home/rental many years ago and the failed programs like social security don’t provide enough to live on. They are no bad landlords they are just getting by with the property taxes, insurance, and higher costs of home ownership. Again, if their rentals are not safe to live in, then by law the tenant can move out.  These laws are already in place to protect people. We don’t need to be hurting the elderly financially – they’re struggling enough and worked damn hard to have an extra rental.  In addition, these homes or rentals are 50 years old – you know how much it’s going to cost them to get repairs by their new inspector bosses. Some new doors with locks will cost more than what they’ll make the whole month in rent.  This program just causes more harm than good.  It’s way worse than anything a robber could do to them an alley somewhere.

It appears many of the Seattle news agencies have reported on this.  The comments from people are ALL negative and don’t support it.  Most describe it as I do above with Government getting bigger and continuing “helping” everyone to fill their pockets because they can’t manage a city financially.  Do they really have to try to “help” with everything and everyone all the time.  It’ seems like everything is “helped” someway by the Government now.  Everyone is expecting a helping hand, living rent free in luxury apartments, health care, cell phones etc the list goes on and on.

You have to understand there are many angles not discussed here such as pushing out the old who purchased 50 years ago for the new apartment luxury condos.  They bill causes more damage to the 90% of people who worked hard and paid the price to have that rental/s only to get a new boss to come in and bankrupt them (or force them to sell) because they simply don’t have the money for all the “must repair or fined” repairs that the inspector thinks the elderly in retirement really has.

This is a horrible bill and I don’t believe it’s really been examined fully to move forward into law. We already have laws in place we don’t need to have more bosses in our lives who think they know it all and dangling the carrot over our heads.  Just back off and let people live how they want too.  Perhaps they can experience the little bit of freedom that is left in this country.

Obama Refinance Plan FAILS

With our historically low mortgage rates, President Obama is pushing the Republicans again about a piece of legislation he proposed back in February.  The Obama Administration believes it would help many of the struggling homeowners and families trying to keep their homes, pay their debt, and prevent many foreclosures.

President Obama mentioned today on his weekly radio/Internet address that “Here we are – seven months later – still waiting on Congress to act”.  It’s the typical response from Obama and same whether we are talking about jobs or mortgages.

Republicans won’t agree to the proposal because of its $5 to $10 billion cost.  Like many things sitting in Congress from Obama they come at a high cost.  Just like this proposed refinance offer or the many construction bills on the table to inflate the jobs numbers spending money on special road projects that are not “must” have work.

The idea of refinancing your home fails in many ways.  Honestly, it was a failure before it even started.  The biggest problem is that it’s governed by your bank.  The bank evaluates if you even qualify for a refinance.  You need a job and steady income proven with years of IRS documents.  In short, you have a be a long term paying citizen to even quality.  If you break even at the end of the year when it comes to taxes or owe anything you wouldn’t “qualify” for refinancing.  On paper you wouldn’t be making any money to pay the bills.  However, if you’re really good citizen and make 100K a year (paying 35% to taxes) and keeping the rest – you would qualify for home refinancing.  If you get my point to be eligible by the bank you’re IRS documents must state you’re paying them and doing your civic duty.  Breaking even or paying the IRS isn’t going to allow you to refinance your mortgage rate.

The other problem and I am sure President Obama knows this (many homeowners don’t) is that Washington state like many states is a non recourse state.  If you ever just give up on your home and walk way in Washington State, the bank will foreclose on you (ruin your credit) and that will be it.  There will be no legal repercussions.  The bank won’t come after you for the remaining balance after auction should they lose money overall on your loan.  In some states they can sue you for the rest of the loan.   HOWEVER, take note that non-recourse doesn’t apply when you refinance.  Non recourse also doesn’t apply to equity loans should you have one. So trying to do the right thing may in fact make your financial issue even worse and that is why I would never support this refinance plan by Obama.  Many innocent people will get trapped into a bigger mess trying to do the “right thing” to make it work.  If you refinance and walk away the bank can come after you later once they low-ball it at an auction to some investor.

I have said it before that homes are not investments they are liabilities.  Buying something 4 times it’s worth will never work out.  The numbers simply don’t work out anymore.  Don’t get to attached and I’m a strong advocate of walking away if you must.  Banks got their bailout and already been paid for your home so know when to cut your losses on your home if you must.

By passing this Obama refinance plan, it forces people to try to make it work and not walk away from a really bad idea (home).  It puts you even more at the mercy of the bank and I assure you they don’t give a rats ass about you or your family.

Companion Story to Home Ownership – Take the Test

Subject: Companion Story to Home Ownership-Take the Test

The article Home Ownership is Dead – Take the test, written by my colleague, was really interesting and informative and should be required reading in schools. It is apparent that it is almost impossible to ever own a home free and clear these days. You would have to be able to keep your job, never have children and pay on it until you were a senior citizen. I am talking about the ordinary working person. Do you want to live in the same house all your life? Do you want to have to continually be making the repairs? Yes, we are taught the American Dream is to own your own home. You don’t think about the fact that property taxes could go sky high or there would come a time when you still owed more on your home than it was worth after paying on it for years? Your interest payment could be as much as rent would be. You never get either one back. So that’s a trade off.

I was raised with the mind set, get a home, get it paid for. Never go in debt. Work or you don’t eat. I followed what my parents taught me and I cant say it was the best advice. I stayed the same but the world around me changed. I definitely had the American Dream. I met a man who had the same dream. Yes we had the perfect wedding that we could afford, with only 6 wedding guests. But we did not go in debt. We both had jobs at Boeing. Got married and saved every penny and within a year were able to pay cash for a run down tiny house. We paid $2500 for it. Every night after work we remodeled. Within two years we were able to sell it for $4500. With a thousand dollars added to that we paid cash for the house I still live in. We paid $5,500 for this house that I have lived in for 66 years. Repairs just keep showing up. We built the white picket fence. We had 3 children. I had to quit work but we were never in debt. My husband died of cancer, I went back to work, finished raising the children alone, and am still in my old house. The property has been re-zoned. The assessor has assessed the land at its “best and highest use” which is two 8 unit condos. The property tax now is almost as much each year as I paid for the house. I get a senior citizen discount but cant sell my house as a single family dwelling and no condo’s are being build around me so I have never had a new house and never will.

Looking back at my experience of home ownership I would not change a thing. There was never a time in my life that I had to worry about foreclosure. The best great feature my home had was a Title that said it was mine, free and clear. BUT, I was also chained to it more or less. I could not sell it for enough to upgrade into a newer nicer house without having a house payment to make. Now with my land assessed at an inflated, stupid, arbitrary figure and my home assessed at $1,00(they call it a tear down) I still am sort of stuck here. If I were able to sell for $300,000, I would have to live someplace and houses are that price and more for most places. I am near 90 and I don’t want to move into a nice new place. Young people these days are more interested in big brand new homes, and if they can find a way to squeak into one they don’t think about what a small portion of their house payment actually goes on the principle. They have to have big screen TV’s and new furniture and they are sitting pretty FOR AWHILE. What will happen when you are laid off from your job? What happens when the perfect marriage goes south? You lose everything. In my case I have never had new furniture, never used a credit card, always lived in and old house needing repairs, but knew I would never be homeless. You have to judge which is the best for you. I can’t see how my great grandchildren can ever dream of buying a home. Hope this gives you a comparison with the previous article.

Home Ownership Is Dead! Take The Test.

I find it more and more difficult to talk about home ownership with people.  I understand most of their points and counter points, however, discussing it with them often leads to both parties agreeing to dis-agree on the topic.  I certainly don’t believe home ownership is completely dead but the likely hood of you or anyone you know making a positive return is certainly slim to none.  I of course have heard of some people making good money buying low and selling high, however, the stories are maybe one in a thousand if that.  I honestly don’t think people truly understand the financial numbers thus they truly believe (and arguing) they are making money or are going to be making money “in the long run”.

Growing up we hear a lot of the marketing propaganda.  I’m sure you’ve heard of the “American Dream” and the white picket fence of home ownership.  Maybe waiting to fall in love (or are in love) with that “perfect” person who turns out not so “perfect” down the road.  Are you creating the “perfect” wedding?  These are examples of over delivered hype in my opinion.  Sure we want them to be true.  The reality is home ownership is a lot of work that you probably can’t afford.  Relationships take work and it turns out that nobody is perfect.  The “perfect” wedding deep down wasn’t like you imagined it as a little girl and most fail.

Not to get to much off topic but looking back at grade school & middle school – and how we had to stand up each and everyday in the morning to recite the pledge of allegiance to the flag.  You’re trained from an early age to love this country.  No matter how much the government, banks, and companies screw you over on a daily basis – you’ll continue to love and build this “American Dream” in the country you were trained to love.  Being a home owner you support this city.  You provide a large chunk of the taxes (property taxes).  These yearly taxes help fund the schools, emergency, and other services.  Home owners are important and we must have them. We must have home owners who believe in this home ownership American dream to even function as a city financially.

I created this little test to see where you stand with your home.  Before I get to that, however, there are a few exceptions we need to discuss.  First, there was a time when home ownership was good.  If you have an older parent or maybe an older Grandma/Grandpa, they may have purchased a home for example 7K and now it’s worth 300K.  There is a good chance they have refinanced a few times and spent that money anyway.  The comparison between then and now isn’t even a comparison.  From the way banks operate today to the land available compared to now – we are in difference times and those deals are long gone.  The gap of profitability (buying and selling points) has been eaten up by the banks, taxes, interest etc.  today so just letting you know about that before starting the test.

Time for the home ownership test to see how you are doing. Are you throwing money into the fire or are you doing ok?

1)  Take your buying price and subtract any down payment.  Banks usually require 20% or may have paid more or less but figure out that down payment number.

Example: Home purchased for 240K my down payment was 20% so $48,000 is the magic number invested.

2)  Initially you may have had some closing costs, appraisals, purchased extra points.  Some banks bundle this together into the loan, however, you probably paid for some of them upfront.

Example:  $300 appraisal fee and $2000 points buy down so I’m at $50,300.

3) Add up your interest to date.

Example:  Three years (36 months) is approx. $39,000 in just interest so I add that to my previous figure amount which means I’m at $89,300.

4) Add up your property taxes.

Example:  $3000 per year for 3 years of home ownership is $9,000. dded to the above figure is now:  $98,300.

5)  Add in your Insurance.  If you’re lucky you don’t have PMI insurance being added to your payment each month.

Example:  $600 per year for 3 years costs me $1,800.  Added to previous figure is approx $100,100. for 3 years of ownership.

6) Optional:  Add in your renovations/upgrades to date.

Example:  $6000 added for new carpets and smaller kitchen updates to date.  Added into my above figure I am at:  $106,100.

7) Optional:  Homes are bigger than rentals usually so if you want to add in the extra cost like gas, water, sewer, electric, garbage – you can add those on now.

8) Optional:  HOA (Association fees) add those in if you have them.

9) Final question is to take what you owe to date (your current principal) and add the figure you calculated above.

Example:  My principal is $195,000 currently and adding the figure above my final number is:  $195,000 + $106,100 = $301,100.

So now you know what you need to break even on your home.  Well… not quite…. when you sell your home you’re going to pay about 6% in fees to the agents involved and also escrow & titles & other misc. fees.  So for the sake of keeping this simple lets just forget those fees.  Forget i mentioned that.

You should have our magic number now.  So for the example home above purchased for $240K it will need to be sold for at least $300K just to break even with no profit. Here is the fun part…. jump over to http://www.zillow.com and see what your home is approx. worth.    If you’re still with me at this point you’re probably heart broken or really happy.  Some will argue that Zillow is not the “end all be all” source of accuracy.  There is some truth to that i guess but in today’s society it is the number one source for buyers and agents.

If you’re happy with those numbers then you’re doing great and you won the test.  For everyone else, think about this.  What could you buy with your break even figure money – think like a new home buyer for a second.  Every year homes continue to get bigger and bigger and are costing less.  Communities of homes are being built around your home. These homes have brand new everything inside with big kitchens and master bathrooms.  What makes a family looking for a new home want your old overpriced home for?  They don’t want to live in your filth.  They don’t want to have to put a new roof on your home.  My point is chances are your break even number doesn’t even compare to what I can get brand new – and cheaper.

Here are the popular arguments why home ownership is so great.

Retirement:  First problem is that you’re assuming you’re going to live to retirement age.  Think about your close family members and how many have died before retirement whether its cancer, heart attacks, or whatever A LOT of people die early or just a few years after retirement.  Second, you’re paying 3 times the value of your home over 30 years and that makes it a horrible retirement investment.  You’re paying $500K for a $200K home.  If you’re bad at saving more and not dedicated to put money away for retirement then maybe that is an argument.  A better method would be to rent and put aside the extra $750 per month for retirement.  You’ll have way more in the long term.  OR you can give me $1400 per month for 30 years ($504K) and when you turn 65 I will give you $200K back (if you have good credit and equity).  Now that sounds like a good investment.

You can write off the Interest:  Yes, you do get to write off the overpriced interest you’re paying over the 30 years.  Interest is a loss, however, just like taxes.   Your theory is you’re saving money by “writing it off” and that is just silly. It’s not money you get back…ever.  It doesn’t go to your principal amount so it’s a total loss and goes into the banks pocket.  Just like taxes the theory of writing if off isn’t always a good thing.  If I got $100 dollars in my pocket and I have to give uncle sam $30 percent that means I still got $70 bucks in my pocket.  Your theory is to give it all to uncle sam and now you have nothing.

Renting is a total loss:  I heard this one a few times before.  Lets say for example a mortgage payment is $1400.  If I was to rent an apartment for $800 i would pocket $600 per month.  At the end of the year I would have $6,000 extra.  At the end of 5 years i would have $30,000 saved.  If you make your mortgage payment of $1400 per month (assuming you’ll be able to afford that) you’ll lose at least $1200 of that to interest the first 5 years.  That means you “kinda saved” $10,000.  (edit: actually assuming basic property taxes of 3K per year – you would be in the hole 5K… sorry) However, i can spend my money now and you’ll have to get approved and hope you can get your “kinda saved” money later.

Who makes money with real estate?

Investors or individuals who can pay cash for the house.  Investigate a property before hand and buy it at a courthouse auction. Most can’t and most never pay their mortgage off.  If you’re a house flipper, have cash to buy house, and can do the construction needed to flip it successfully there certainly is a lot of money to be made.

So… there you have it folks – lets hear how good or bad you’re doing and also your test results.

Seattle Real Estate Market – Down Again

The Seattle real estate market is down again in April and many are starting to think it may never rebound. I believe the general public is feeling better about real estate (compared to a year ago or more) but at the end of the day it’s comes down to money. Many don’t feel secure in their jobs and even more don’t have enough money to invest in a home. When you’re nickled and dimed everyday with the taxes, fines, tolls, penalties, and other dreamed up concoctions it makes it very difficult for the average family. When you were a child, you most likely were taught that home ownership is the American dream. It’s the best thing you can do for yourself. A place where you can call your own instead of paying rent every month (that goes no where).

The real estate market sure has changed overtime. Of course the wages were less back then but you could get a home in the 5K – 20K range. Over the course of 30 years the property would grow in appreciation and eventually you could make a profit, retire on it, or just live comfortably. Unfortuately, the banks have put a stop to that. The average family purchasing a home will not even come close to see the home appreciation as it once was. A home that cost $250K will cost you over $400K over the life of loan. If you add in the additional 3K+ per year property taxes over the 30 years, that would mean you would have paid over 490K. Do you really think your $250K home will appreciate over $490K? The value of home ownership and the Seattle real estate marketing is retirement. You must be in it for the longterm.

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