Category: Real Estate Investing

Homeowner Average Net Worth 3,600% Higher Than Renter

Not only has the housing market made a strong economic recovery, but also in consumer and expert confidence in home-ownership as an investment.

Not Because of a Difference in Lifestyle

In the New York Times, an editorial entitled, “Homeownership and Wealth Creation” explains:

“Homeownership long has been central to Americans’ ability to amass wealth; even with the substantial decline in wealth after the housing bust, the net worth of homeowners over time has significantly outpaced that of renters, who tend as a group to accumulate little if any wealth.”

The Federal Reserve’s Own Research Agrees

While we have referenced this article before, many of the claims that the article makes are backed by the research that the Federal Reserve has conducted in their Survey of Consumer Finances. The study found that,

the average net worth of a homeowner ($194,500)
is 36x greater than that of a renter ($5,400).

The National Association of Realtors (NAR) expanded on the Federal Reserve’s research and projected that,

by the end of 2015, the average homeowner will have nearly
41x the net worth of a renter.

That’s nearly 4,100%!

The Gap Widens

Their findings are detailed in the graph below:

One reason for this large discrepancy in net worth is the concept of ‘forced savings’ created by having a mortgage payment and was explained by the New York Times:

“Homeownership requires potential buyers to save for a down payment, and forces them to continue to save by paying down a portion of the mortgage principal each month.” “Even in instances where renters have excess cash, saving a substantial amount is difficult without a near-term goal, like a down payment. It is also difficult to systematically invest each month in stocks, bonds or other assets without being compelled to do so.”

The Takeaway

“As a means to building wealth, there is no practical substitute for homeownership.”

If you are a renter who is considering making a purchase, talk with a Benchmark Mortgage professional who can explain the benefits of signing a contract to purchase over renewing your lease.

click here to find yours

15 Year Old Buys Her 2nd Investment Property in Florida

by bmadmin

Willow Tufano is a 15 year old girl that has just purchased her second investment home in Port Charlotte, FL.

She found this steal on the MLS for $17,500 and began renovations on Monday.

Where does Tufano get the money to buy houses? She finds free items, fixes them up, and sells them on Craigslist. She saved up half the money and convinced her mom to split the cost with her.

ABC News picked up the story last week and shared this about the remarkable teenager:

She’s been on “The Ellen DeGeneres Show” where the host gifted her $10,000 to spend at Ace Hardware, in addition to a new clothes dryer. She’s been interviewed by ABC’s “World News” and NPR and even for a television show in South Korea. She’s accustomed to television crews and media types clamoring for her attention, her mother says.

By the time she is 18 and can legally own a home in Florida, Willow has a goal to own 10 houses.

Foreign Buyers Continue Purchasing Cheap U.S. Homes

by bmadmin

Foreign consumers purchased $41 billion worth of American houses and apartments during the 12-month period that ended in March 2011, according to the latest statistics from the National Association of Realtors. That’s roughly the same as the previous year showing that foreign buyers continue to see value in U.S real estate.

But add in the $41 billion spent by immigrants who moved here within the last two years and people with visas of more than six months, and the total is $82 billion worth of U.S. residential real estate taken off the market by international buyers, up from $66 billion in the previous year.

The demand for American real estate is so strong that last fall, the National Association of Realtors launched an international version of its property search website. Now, the 4.4 million properties displayed on Realtor.com can be viewed more easily by buyers from practically any place in the world, and in almost a dozen languages.

The top destinations of foreign investors for U.S. real estate purchases are:

1. Florida: 31% of all home purchases in that state are made by foreign buyers, with most coming from Cuba, Haiti, and Colombia.

2. California: 12% of all home purchases (most coming from Mexico, the Philippines, China, India, and Vietnam)

3. Texas: 9% of all home purchases (most coming from Mexico, India, Vietnam, China, and the Philippines)

Thinking About Investing in Rental Real Estate?

by bmadmin

It’s easy to get thrown off by the appearance of a property, your emotions, or what the media is saying. Here are four ways to avoid making that mistake if you are thinking about investing in rental real estate:

Reality Check One: Who is Your Target Market?

If the property is a good fit for your target market, it doesn’t matter if you wouldn’t live there. A renter may enjoy the property.

Reality Check Two: Are You Emotionally Involved?

Emotions shouldn’t be involved in buying a rental property, but it’s something to be wary of. If, at any point in the negotiations, you feel you can’t walk away from the deal, you need to take a step back and review everything! When your emotions are involved, you can’t make rational decisions. It is also a good idea to have a trusted adviser to bounce ideas off and receive confirmation when the property is good.

Reality Check Three: Are the Numbers Really What They Say They Are?

The numbers might look good on paper, but will the rent cover all the expenses? Make sure the numbers are what the sellers say they are. Get copies of any leases to verify rents. Check market rental rates for the area to make sure the current tenants aren’t under or overpaying. And make sure you obtain copies of the bills you’ll be responsible for (taxes, utilities, insurance, etc.).

Reality Check Four: Are You Judging the Book by Its Cover?

Many opportunities are missed because a property makes a negative first impression. The best deals are often those that look rough but can be easily rehabbed. Some properties may need a major face-lift to maximize its potential – but don’t judge a property strictly on its looks or you may miss out on a deal that could pay off big in the long run.