Rent or Buy – You Pay for the Denver House You Occupy

So often I find folks throughout Denver who are simply afraid of a long term commitment like buying a home. They feel they cannot afford it, that their credit is bad, or that homes are too expensive. At least in Denver, if you can afford the rent you can afford to buy a house. Feel free to reach out, in confidence: pete@DenverRelocation.com. 

The ironic thing about people who think they can’t afford to buy a home for themselves, end up buying the home for their landlord. There are several facts that support this notion.Denver Home is Leveraged Investment

Mortgages, whether held by an owner-occupant or an investor, are usually amortized so that each payment reduces the principal amount owed so that the loan will be repaid totally over the term. A tenant is inadvertently retiring the landlord’s mortgage with his monthly rent.

In most cases, the mortgage payment including taxes and insurance will be lower than the rent tenants are paying. Some experts are saying that we may never again experience the incredibly low mortgage interest rates currently available.

Renting precludes a person from enjoying the advantage a home has as a leveraged investment. When the borrowed funds cost less than the investment is returning, the rate of return on the down payment grows much faster. As you can see from the chart, a 2% appreciation on a home could result in big returns on the down payment. In most cases, there are very few or no alternative investments that offer homeowners similar returns.

Even if a buyer agrees with all of these things but doesn’t have the down payment or cannot qualify for a loan, they still need to investigate further. To find out exactly what types of loans are available and the specific down payment required which can be a whole lot less than 20%, they need to consult with an experienced, trusted loan professional (an Internet lender or a “BIG” bank may not be the best choice.) Call for a recommendation. 303-880-5585.

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Facts or Myths – Denver Home Buyers

I cannot express how often I hear this from prospective Denver Home Buyers! Banks and mortgage companies here are very receptive to providing financing for qualified individuals who can verify employment, assets and have good credit. Some even offer FREE credit repair services so you can lower your interest rate. So what are the facts & myths? Read on…

  • “It’s impossible to get low down payment loans.” – FACT! FHA down payments are 3.5% and VA is 0%. In some areas, there may be some 0% down payment USDA loans available. FNMA and Freddie Mac have 3% down payment programs.Denver Home Buyer
  • “It takes perfect credit to get a loan.” – FACT! There is a relationship of better rates to better credit but many issues on a credit report can be explained or corrected. The way to know for sure is to speak to a reliable lender.
  • “If I’ve had a bankruptcy or foreclosure, I can’t qualify.” – FACT! Credit history following a bankruptcy or foreclosure is very important and there can be extenuating circumstances. It only takes a few moments with a reliable lending professional to find out if your individual situation will allow you to qualify for a new mortgage.
  • “Getting pre-approved is expensive.” – FACT! Usually, the only expense to getting pre-approved is the cost of the credit report which could be around $35. The advantage is that you will know that you qualify for a particular mortgage amount.
  • “I should wait to qualify until I find a home.” – FACT! It can take weeks to qualify for a mortgage especially if there are issues that need to be corrected. The best interest rates are only available for the highest credit scores. It is to your advantage to start the qualifying process early in your home search.
  • “All lenders are the same.” – FACT! Reliable lending professionals will explain the entire process before collecting fees, quote fees up-front, have competitive products, do what is necessary to get the loan approved and close at the locked rate and terms. Ask for recommendations from recent borrowers.
  • “Adjustable Rate Mortgages are more expensive than fixed rate mortgages.” – FACT! Adjustable Rate Mortgages can be less expensive than fixed rate mortgages if the buyer’s circumstances warrant it. If a buyer is only going to be in a home for a few years before selling, it can be determined if an ARM loan will result in the lowest way to finance the property. There are many variables and you need to be aware of them before deciding which type of loan to finance your home purchase.

Buyers and Sellers need solid information to make good decisions. Call us with your questions or to get a recommendation of a reliable lender who can give you the real facts.

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“This is going to be the year”

Denver is a net 75,000 plus in population for the last few years. That requires a net 20,000 NEW living spaces. Re-sales of homes have only increased by 1000 over last year. Maybe that partially explains our real estate market. Add to it one of the lowest un-employment rates in the country and one of the most desirable environments to live in and we see what we have.

Every year, it seems like the same things are on the list but this could be the year you really do invest in a Denver rental home.Denver real estate resolution

Rents are climbing, values are solid and mortgage rates are still low for non-owner occupied properties. A $150,000 home (if you can find it in Denver) with 20% down payments can easily have a $300 to $500 monthly cash flow after paying all of the expenses.

There are lots of strategies that can be successful but a tried and true formula is to invest in below average price range homes in predominantly owner-occupied neighborhoods. These properties will appeal to the broadest range of tenants and buyers when you’re ready to sell.

Single family homes offer an opportunity to borrow high loan-to-value mortgages at fixed rates for long terms on appreciating assets with tax advantages and reasonable control.

This can be the year to make some real progress on your resolutions. The first step may be to invest some time learning about rental properties by attending a FREE webinar on January 4th at 7:00 PM Central time zone by national real estate speaker Pat Zaby. Click here to register. If you can’t attend live, by registering and you’ll be sent the link to watch at your convenience.

If you want to see the homes on the market go to www.DenverRelocation.com.

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What a Difference 50 years Makes

<H3>Denver & Colorado Love affair started 50 years ago</H3>

My first trip to Colorado occurred 50 years ago! As a 15 year old I flew into Stapleton International Airport in Denver and was met by what appeared to be a rickety Jeep CJ-5 and a fellow named Ed Link. I do not remember the other guy in the front seat as I was sitting on the un-cushioned wheel well in the back hanging on as we headed west and over Berthoud Pass. It seemed barely a 2 lane road then but I do remember looking out at the tops of 40 foot trees, and those amazing mountains. There was a comment from Ed about a school bus that was still resting in the trees after sliding off the last winter…hmmm? A fantastic start to what would be my first summer of being “SPIN & MARTY”, a teenage cowboy duo on the MIckey Mouse Club’s Western Day every Friday, not that I paid attention. I spent half of the next 2 months in the saddle which for me was heaven. But enough about me…

In 1966, a gallon of gas was $0.32 and today, it is $2.10 in Denver. A dozen eggs were $0.60 but they’ve only doubled to $1.33. A gallon of milk was $0.99 and today, it costs $3.98. You could send a letter for five cents and now, it costs forty-seven cents. Denverstamp.png

The average cost of a new car in 1966 was $3,500 and today, it will cost $33,560. New cars have more features than the earlier models but they’re still ten times more expensive. The median price of a new home was $21,700 and now, in Denver this past November was $370,000.

Interestingly, mortgage rates are actually lower today at 4-4.5% than they were fifty years ago when they were just under 7%. The rates have been low for long enough that many people have been lulled into believing that they are not going to go up.

Yes, rates are a little higher but in perspective, they’re still a bargain. Years from now, will you be remembering and comparing what they were back when?

Take a look at last week’s post for a chart showing the last 200 years of interest rates. It is my privilege to serve you and your friends and family here in Denver. And when you have someone moving to a different part of the country, I can normally help there. Call me.

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Denver – Can 0.5% Really Equal 5%?

Denver has Great Upside…STILL!

Some folks in Denver have been waiting for the home prices to go down. Interest rates can cause home prices down, but the payments remain the same. So read on and then tell me what you think.

Since the election, rates have started going up and it will have a direct effect on the cost of housing. There is a rule of thumb that a ½% change in interest is approximately equal to 5% change in price. Denver Real Estate

As the interest rates go up, it will cost you more to live in the very same home or to keep the payment the same, you’ll have to buy a lower priced home.

Before rates rise too much may be the best time to buy a home whether you’re going to use it for your principal residence or a rental property. Low interest rates and lower prices make housing more affordable.

Highlands Ranch interest affects price.png

Here is a 200 year history of interest rates from FNMA:

Denver200 years 2.jpg

It seems inevitable that rates will go up. How will that effect the Denver home prices? Denver is a +75,000 growth city every year. That requires 20,000 new housing units. Demand is still stronger than supply. Talk to me about your plans by calling 303-880-5585 ext 3. Or prefer to talk with a lender? Go to http://www.denverrelocation.com/lenders.shtml

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Time May Be Running Out

During the Great Recession, some Denver homeowners elected to rent their home rather than sell it for less than it was worth.

IRS tax code allows for a temporary rental of a principal residence without losing the exclusion of capital gain based on some specific time limits. During the five year period ending on the date of the sale, the taxpayer must have:denver real estate

  • Owned the home for at least two years
  • Lived in the home as their main home for at least two years
  • Ownership and use do not have to be continuous nor occur at the same time

If a home has been rented for more than three years, the owner will not have lived in it for two of the last five years. So the challenge for homeowners with gain in a rented principal residence that they don’t want to have to recognize is to sell and close the transaction prior to the crucial date.

Assume a person was selling a property which had been rented for 2 ½ years but had previously been their home for over two years. To qualify for the exclusion of capital gain, the home needs to be ready to sell, priced correctly, sold and closed within six months.

All of the gain may not qualify for the exclusion if depreciation has been taken for the period that it was rented. Depreciation is recaptured at a 25% tax rate.

A $200,000 gain in a home could have a $30,000 tax liability. Minimizing or eliminating unnecessary taxes is a legitimate concern and timing is important.

Selling a home for the most money is one thing; maximizing your proceeds is another. For more information, see IRS publication 523 and an example on the IRS website and consult a tax professional.

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Denver Relocation: then and now

Relocation to Denver…how do I get there?

Relocating to Denver in the 1950’s there was one main way to get here…the train. Back then the interstate highway system was still in Eisenhower’s dreams. Cross country car travel was much harder on 2 lane roads, and commercial air travel was expensive and in it’s infancy. Today you can still take the train to Denver on Amtrak, but the ride, the amenities and experience are so much different. As an example just imagine waking up on the train, showering and dressing in that business suit before breakfast, then disembarking in the downtown of your destination, maybe at Denver’s Union Station! I guess you can tell I enjoy the train, and train travel to and from Denver is pretty darn good on the California Zephyr. Yet I still love the more formal nature of travel “back in the day” so to get a flavor of what travel was like then I suggest you watch the Alfred Hitchcock movie North by Northwest with Cary Grant and Eva Marie Saint shows off the premier train of the day, New York Central’s 20th Century Limited.  It is a great classic suspense cops & robbers type movie, but only black & white.

DENVER road sign against clear blue sky

Follow the signs to Denver

Now, should that relocation to Denver be in your future, for that first trip you will probably fly in to Denver International Airport (DIA) and then rent a car. The airport and the car rental row are so far from downtown and where you may be going you might want to look at this quick video (there are a couple of others too-the first one is just fun) to figure out where things are:

When you relocate to a new city sometimes you want some boots on the ground before you get here…someone to help you scout out the work location and identify neighborhoods, school districts and homes for your lifestyle that you may want to look at. There are resources galore at www.DenverRelocation.com for you or anyone else moving to Denver and other cities across the country too. But to visit just reach out to me by clicking here or call me at 303-880-5585 ext 3.

 

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Denver Sale Isn’t Final Until It’s Funded

“Mortgage brokers”in Denver used to be far & few between, but they are making a comeback. They promise the moon and stars of lower interest rates and costs and yet cannot deliver. Denver s Professional Realtors always seem to have dependable, respected lenders, who will tell you the truth, not pump you full of promises. Rates are not the only savings a lender can offer you but read on, then call me at 720-989-6768 to discuss putting together a plan to get you moved into a new place here in Highlands Ranch, Littleton or Denver.We should talk!

Mortgage approval isn’t final until it’s funded. Things can change prior to the loan being closed that can affect a pre-approval such as changes in the borrowers’ financial situation or possibly, factors beyond their control like interest rate changes.Denver Home Buyer

Good advice to buyers is to do nothing that can affect your credit report until the loan closes. Opening new credit cards, taking on new debt for a car or furniture or changing jobs could affect the lender’s decision if they believe you may no longer be able to repay the loan.

The benefits of buyer’s pre-approval are definitive: it saves time, money and removes the uncertainty of knowing whether the buyer is qualified. The direct benefits include:

  • Amount the buyer can borrow – decreases as interest rates rise
  • Looking at “Right” homes – price, size, amenities, location
  • Find the best loan – rate, term, type
  • Uncover credit issues early – time to cure possible problems
  • Bargaining power – price, terms, & timing
  • Close quicker – verifications have been made

It is a very common practice for mortgage lenders to require income and bank verifications and to re-run the borrowers’ credit one final time just prior to closing. Mortgage approval isn’t final until it’s funded.

My Denver area recommended lenders can be found at http://www.denverrelocation.com/lenders.shtml. They won’t let you down. And when they say you can get a loan, I believe them! Yet sometimes their personality may not fit you. If you are concerned, about that, reach out to me by clicking here so we can talk about what you are looking for in Denver.

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Denver topic “Gift” or Inheritance aka Basis or “IN SERVICE”

It happens a lot here in Denver. It is a shame when a child has to pay taxes on $250,000 because the good hearted nature of the parent was to give the property to the child before the parent’s death. Before you make such a transfer, make sure to talk to someone who knows the rules for “basis” and “capital gains”. I can direct you to some great folks here in Denver who can confirm this for you. Now read on…

A person called into a radio talk program with a situation that was troubling to the caller and disturbing based on the potential tax liability that may have been avoided.Denver inheritance or a gift

The caller’s elderly father had deeded his home to his daughter a few years earlier because in his mind, his daughter was going to get the home eventually and this would be one less thing to be taken care of after his death. The daughter didn’t really care because the father was going to continue to live in the home and take care of it so that it would be no expense to her.

Obviously, unknown to either the father or the daughter, transferring the title of a home from one person to another could have significant tax implications. In this case, when the father “gave” the home to his daughter, he also gave her the basis in the home which is basically what he paid for it. If she sells the home in the future, the gain will be the difference in the net sales price and her father’s basis which could be considerably higher than had she inherited it.

If the home was purchased for $75,000 and worth $250,000 at the time of transfer, there is a possible gain of $175,000. However, when a person inherits property, the basis is “stepped-up” to fair market value at the time of the decedent’s death.  If the adult child had inherited the property, at the time of the parent’s death, their new basis would be $250,000 or the fair market value at the time of death and the possible gain would be zero.

In most cases, there are less tax consequences with inheritance than with a gift. There are other factors that may come into play but being aware that there is a difference between a gift and inheritance is certainly an important warning flag that would indicate that expert tax advice should be sought before any steps are taken.

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In Denver…It’s the Principal of the Thing

Denver Home Equity has grown. Now reduce the loan

Denver has seen 5 years of the median price of houses rising from $209,900 (10/11) to $345,000 (10/16). This is the result of lower inventory*, and from what the statistics look like today, this trend will continue especially with houses available to purchase in October 2016 standing at only 8,008 versus 2010 when there were over 23,049 houses for sale in Denver. So while your equity has grown making up for the downturn, your mortgage may not have shrunk as much as you would like. There are options to consider here in Denver and the following is a plan to reduce the time and current balance. See the end of that article for another pair of tools to help your Denver home mortgage shrink.

Most people think they’ll have a house payment and a car payment for the rest of their lives but it doesn’t have to be with a plan and a little discipline. The plan is to make additional principal contributions to a fixed rate mortgage to shorten the term and save tens of thousands in interest. Denver Home

If a person were to make an additional $100 payment each month applied to principal on a $175,000 mortgage, it would shorten the loan by five years six months. If the person were to make $200 a month additional payments, it would shorten the loan by 9 years. $459 additional payment would shorten it to 15 years.

Denver Real Estate

If a person does make a decision to regularly pre-pay their mortgage, it will be their responsibility to verify that the lender is applying the money to the principal each time as opposed to being placed in the reserve account for taxes and insurance.

In today’s market, a savings account pays around 0.5% or less. Even with the low mortgage rates available, there is still a considerable savings. People who might need the funds in the near future should carefully consider this option due to the difficulty to access equity easily from one’s home.

Make your own projections using the Equity Accelerator.

*Too often Realtors, self included, talk about homes as though they are just items on the shelf, or inventory. Unfortunately it seems that after 31 years in the residential real estate business, this is normal to me. It is your home and we, the Realtors, need to remember that. So challenge me when I come to talk about your home, make sure I do not use the word “inventory”.

When you have just purchased a Denver Home and have a new mortgage, it almost seems impossible to shrink it. There is a way and we should talk about a rather crafty way to shrink your mortgage. Just e-mail me and ask for my “Honey I Shrunk the Mortgage” presentation. It is another way to approach what appears to be a daunting task. OR Call me at 303-880-5585 ext 3 so we can visit!

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