First Time Home Buying Secrets - Investment & Getting Started
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Transcript:
Alright, investment. Big, big benefit. Remember, leverage is the key. Remember that we talked about getting in a home for zero down with USDA. Minimum down. 3.5% is about $5000 on a $150,000 purchase. Have the seller pay the closing costs. If you do USDA you go zero down. Now what happens if you bought that home 5 years ago and it did it’s appreciation based on the OFHEO.gov? You would have had very little money up front on the property, you would have had tax deductions all the way through out the ownership of the house, and you would have quite a bit more; $30,000 to $40,000. That’s called leverage. I can’t even figure the return on the investment if you didn’t put anything into it and it appreciated that much. All prices can vary depending on neighborhoods and there is no guarantee of appreciation. That’s why you need an expert. That’s why you need somebody who knows. There’s certain neighborhoods that haven’t appreciated at all and there’s certain areas in town that have down even better than 30% over the last 4 or 5 years. And still today, most of the average home owners net worth (myself included) is reflected in the equity in our homes. Two reasons: value goes up over time and the loan payment goes down over time, and secondly, it’s harder to get to the money. You know, it’s hard to get to the equity. They’re not giving equity loans like they used to. So in other words as you pay that mortgage off and the property goes up over time, you build equity. Make one extra payment on your 30 year mortgage, you guys in your 20s, make one extra payment and that’s just principle interest. You’ll pay that home off in 20 years. So you’re 25, make that extra payment. By the time you’re 45, you’ll have a free and clear house. If you do that two or three times and you have two or three houses then your tenants will be paying your living expenses. That’s a good way to go and we teach that in our investment seminars. Make sure you know the truth about HUD foreclosures and REOs. The pictures don’t tell you what it smells like.
People say, “I want to buy a HUD foreclosure, I want to buy an REO.” There are good opportunities out there, but you’re probably going to be doing more of what Will is doing, which is being prudent and sifting through all the garbage to find that one property. He hasn’t found his yet. We’ve come close. But we’re sifting through to find that one property and I guess it’s not going to be an REO or a HUD. There are good properties out there and they’re on the MLS, available to us. What the bank does is take the property and say “Oooo, we got it back. Who’s the best real estate agent in the area to sell it?” They give it to that person who then puts it on the MLS. So there is no secret website to find these REOs, just find a good realtor if you want to find them. Buy buyer beware when it comes to HUDs, repos, and foreclosures.
Alright, 10 steps to homeownership. Number 1 is to decide. The other side of that is to commit. A lot of people decide that they want to do it, but not many people commit to following through. The problem is that it does become a part-time job. And when you really get into it, sometimes it can become a fulltime job, right Will? What I mean is that there’s an added level of things to do when it comes to buying a house. It does take a level of commitment, but it also takes that decision and sometimes you need some guidance with making that decision. Make homeownership a goal and then never give up. I’ve worked with a woman for three years who was in the process of getting a divorce. She wanted to buy but she couldn’t because she hadn’t been divorced yet. In the state of Texas, it’s very difficult to buy a house when you’re in the middle of a divorce if the husband doesn’t want to sign off on it. But we started looking three years ago and I stuck with her for three years and we finally got her a home. So don’t ever let your credit or your situation get in the way of buying a home. It just sometimes takes some time and some expertise to get through it. Three percent of the United States have written goals. It’s funny that three percent of the United States also control ninety percent of the wealth. But that’s for another seminar.
The next step, step two, is plan. I kind of added this about the mind and the heart, which are both involved in the planning stages. The mind thinks why. Why am I going to do this? And the heart is how. How is this going to make me feel? So you want to answer these questions when you’re making your plan. Why am I going through this process and how is it going to make me feel? What’s it going to do for me? When you get to that decision-making process, part of it is being honest with yourself. Be honest with where you are. We’re looking for ready, willing, and able people to work with. I don’t care who it is as long as they want to get a home. What that means is ready, willing, and able. Sometimes the able part is what we need to help you through. In other words, you might have a credit issue or you might need some one to help get you the down payment or some guidance. It could be all kinds of different things. But we’re looking to make sure that you’re ready, willing and able. You want to assess your motives. The motives are “why am I doing this?” This is a really cool thing that I’ve been using. On one side of the paper, and I suggest that you do this now, is your needs. On the other side of the paper is your wants. You start with needs, things that you really must have in the house. Maybe it’s a school district, maybe it’s a certain amount of bedrooms, maybe it’s a game room. Maybe it’s a media room. Maybe it’s Cat 5 cabling. By the way, talk to your wife about these things too? We were in a meeting situation the other day and the gentleman says, “I need Cat 6 cabling.” His wife says, “Why do you need that?” and he replies, “I don’t need Cat 6 cabling.”