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gzz
ParticipantI agree with EconProf. If you sell and buy again later you will lose your low property tax base, have to pay the realtor and other fees, lose your mortgage deduction. You will also have a higher rate on your new mortgage, FHA loans at 3.375 are long gone.
Get a HELOC if you have high interest debt you can repay and have the discipline to resist further debt.
ParticipantThanks for the history. The listing does not mention that 70% of house is brand new. You’d think that would be a big selling point since so many of the large houses around there are old, even if nicely renovated.
ParticipantAnother thing is to be very careful about anything that could cause an inquiry. When I bought my car for cash, they wanted to do a credit check before I drove off with the car in case my personal check bounced. I talked them into taking a printout of a free credit report from annualcreditreport.com, plus a printout of my bank balance, and thereby avoided an inquiry.
I also decided not to sign up for a landline phone, even though I wanted one, because AT&T said they might check my credit.
ParticipantIt was not an issue for me the two times I applied for a mortgage, to buy then to refi. But I did cut it very close the second time. For the refi I used Box, at the time the lowest rate in the entire USA, and they don’t care where your credit is at as long as it is 760+.
I am at 30 years/3.375 with no MI, so I don’t expect to refi my house again. By my calculation, the 30 year treasury would have to drop 0.5 below its all time low, to around 1.75%, before it would make sense for me to refi.
When I start looking for another property I will stop churning cards though.
The safe way to do it is to do all your applications for the year on the same day (called an app o rama), which is reported as a single inquiry. You also have to check online and avoid banks that look at more than one credit agency. I think capital one does this, so applying with them is 3 times worse than chase.
Inquiries from credit card apps drop off after 2 years, and don’t really have too big an impact. But if you’re really worried, you can check your score first and only proceed if you are at 790+, which provides a safe margin. I also have kept one no-fee card open for 8 years, which also helps my score.
Participant[quote=AN]I would disagree. I think AMEX has the best rewards card for me. I love Starwood hotel chain and love their cash and points program. The best “cash back” (i.e. how much $ I save from the points I earned) I got was ~12%. No other cash back program can get even come close to that. I can easily get 3-5% cash back all day long with their average hotel deals. So, I use my AMEX Starwood card exclusively.[/quote]
That’s a good point if you are picky about your hotel when you travel. I usually use priceline and save 30-50% off the lowest published price for a 4 or 3.5 star hotel in the area. I only end up having to pay listed rates about 10% of the time when priceline fails me. Thus for me a free night in a downtown LA hotel like the giant Westin or the Marriott is only worth the $135 I pay on priceline, not the normal $250-300.
There is no comparable way to save on airfare. Priceline and hotwire will save you, at best 8% over lowest published, and so rarely that I usually don’t even check.
Also, the big bucks are in the sign-up bonuses. My CC spend is about 30K a year between biz and personal, so even with a 2% reward that is only $600. But with sign-up bonuses, I actually get more like $1500 the last couple years, and $2200 back when it was really rich 2008-2012.
Participant[quote=plm]When we got married, wife didn’t have any credit so I just added her to my accounts but now she can get separate cards. The only bonus I ever got was a beach towel for my first credit card while I was in college.[/quote]
You did the right thing by adding wife at first to build her credit. If you are not a travel type, you can still get yourself $1000 in cold cash by signing up for one chase card each each year.
I also, like a sucker, signed up for CCs in college at the picnic tables to get t-shirts and other stupid crap. For this reason, my credit report show like 40 accounts opened in the late 90’s with no activity on them ever. I did not cause any negative impact, but it looked silly.
ParticipantYou’re doing it wrong if you use joint cards.
Married people should get separate cards to double their sign up bonuses.
ParticipantI have never cared what CC interest rates are since I don’t carry balances.
The best way to use CC is to get 2 or 3 new ones a year for the sign-up bonuses worth about $500-800 each.
The second best way is to get the rewards. These days the best rewards are #1 Fidelity which is a flat 2% cash back on everything, and #2 is Chase Freedom/Sapphire, which is more complicated but is worth at minimum 1% in cash back and at max 2-3% for travel rewards.
Chase can be converted to Southwest points worth about 2.1 cents, and together with the signup bonuses I have used about $2000 in free southwest flights over the years.
Unless you fly Delta a lot, Amex has been lagging Chase and Citi on rewards the past few years.
ParticipantGetting advice on any website about what someone would do based on their limited experience is simply dangerous.
Talking to you could be what is dangerous. You seem to already want to put this person or his disabled mother into a loan on low price investment properties. I would be interested in others opinions but I think that is the worst possible option. Those “loopholes” you mention to get around “INSANE” mortgage rules also sounds like a red flag. Hard to really tell since you are being pretty vague.
I will also say this isn’t any website. There are many people who are full time real estate investors and have a lot of other life experiences. I’ve learned a lot.
ParticipantSell the empty house and use it for your down payment.
If you are going to be caring for your mother for an extended time, it is only fair you get this benefit from these properties and not your siblings.
I don’t know what type of profit you’ll get, but if she can claim it as a residence capital gains taxes may be 0 rather than 20%, which I think is now the long term rate.
It may not be worth it to declare it a residence then wait around for the minimum time. With a 15k profit it would only be a savings of $3000 in taxes.
The capital gains tax on profits during her lifetime goes away on her death. So if one is at a big profit and the other isn’t, sell the one without the profit first.
Or maybe sell them both. I got a 5% down mortgage with no problem and a low rate in 2012, however I had to pay $250 a month in mortgage insurance. You’d likely have to pay more like $4000 a year in mortgage insurance if only put down 5%. The best thing is to put down 20% and not pay any.
Finally, with these assets your mom may not be able to qualify for Medicaid, another reason for her to gift them now not later.
It is very common for older people to gift assets to their kids to qualify for Medicaid. But it is better to do it before you need Medicaid.
Another iasue is borrowing against a property in your moms name will not be tax deductible since her income is low, and she isn’t going to get a good rate for a variety of reasons: cash out, little income, low property value, not owner occupied, small loan size.
I rank your options in this order:
1. Sell the old houses and buy a new one
2. Sell the low profit house, or if there is no big difference the empty one
3. Try to save up 5% for a downpayment, and work hard to pay it down to 20% so you can refi to remove the wasted 300-400 a month mortgage insurance.
4. Borrowing against your mom’s property for a downpayment.Or maybe just rent a bigger house!
I also second the other comment that having three kids, a disabled parent, and two rentals in other cities is a recipe for extreme stress. Something will eventually go wrong at the worse possible time. Get rid of them even if you decide to keep renting. Stress is bad for your health and you have many people relying on you.
ParticipantA single guy making 100k is likely already paying enough state income taxes to itimize, or pretty close to it.
ParticipantAs for waiting for a correction, why would that happen? Prices are still far below their old highs when you adjust for inflation, population is higher, San Diego is even more attractive than before with crime falling and the job market improving. Winter already is the weakest time of the market.
One way rates could get even lower is the new $1.2 trillion ECB bond buying program. Whoever will be selling their bonds to the ECB will need an alternative investment, and GSE bonds (funding US conforming mortgages) are a favorite for the type of people/organizations that buy government bonds.
Assuming you don’t work there, buy QCOM while you wait to buy. Because if QCOM hits 80 or 90, that is going to put some massive pressure on prices here and you’ll need the profits to make up for the higher prices.
ParticipantCongrats on saving so much, and making good money while you’re young.
I was in your same boat in the mid 2000s. I moved here at 24 and was making 100K within a year, and saving more than half of my take home.
I waited until 2011 to buy a house in OB, and it was the best financial decision of my life. I actually saved money compared to renting, and have about 250k in unrealized cap gains, as well as a low property tax base locked in for life.
I dissent from the words of caution here and say go ahead and buy for sure if your job is safe, and stretch to get a house rather than a condo.
Unless you have student loans at a high rate, in which case pay them back as fast as you can. No safer way of improving your finances.
It was only after buying that how cheap homeownership can be sunk in. My mortgage payment is about $1900. Of that amount, $600 is principle, so increasing my net worth by decreasing my loan balance. The other 1300 is interest and property taxes (except a small amount for insurance). That gets deducted from my taxes. So my true cost of ownership is only around $880 a month for a house in OB. Your loan would have to be about double that, but $1700 as a true cost of ownership sounds like something you can afford.
I was did a refi when rates fell to 3.25%, and used this as a chance to pay in enough to remove mortgage insurance too. Rates are currently almost that low again, and when you own you always have the chance to take advantage of falling rates this way.
I think the market will continue to increase, probably by 15% over the next two years. There are just so many Chinese and Korean people who dream of moving to California, both the lifestyle, cleaner air, and the political stability. SD is not the top of their list, but SF and LA are getting really expensive and we offer more value. And we are getting a real critical mass in zone from Mira Mesa and Claremont to CV and Del Mar, pushing other buyers north to Carlsbad and South to OB and Point Loma.
Rates have also started to fall to near record lows again. Move-up buyers also now have plenty of equity to fund new purchases. And some potential moveup buyers like me will keep their old house, especially if it cashes out as a rental.
As for condo v house, I would have made more so far if I bought a condo. They go up more in good markets and down more in weak markets. However I think in 5-15 years single houses on lots zoned for 2 to 3 houses like mine will end up the best investment. Lately nearly all the construction in OB has been townhouses or townhouse style but detached houses. These keep selling for $650 to $950. Even if I’m wrong, I like having my own land with maximum freedom to do what I want with and no shared walls.
Right now there are about 5 houses on their own lots in OB under 700k. I think you should have a look, run the numbers, and make some offers. North Park and South Park would also be nice. You’re a little young and single for La Mesa and east county. For La Mesa in particular, I’d worry that all the boomers who bought in the 60s and 70s start to die off and their homes hit the market.
Another thing is, when I have free time from work I can improve the value of my house by fixing it up. Spend 20 hours improving the value of your house by $400, and that gain isn’t taxed at all now, and might never be since the first 250K of home capital gains is tax free.
ParticipantI used boxhomeloans.com for refi and got a lower rate than any local bank I saw. They did a pretty good job but are known for not overlooking even tiny deviances from the giant Fannie Mae guidelines book, so they work best with properties in good condition and buyers with w2 income. They were also pretty fast.
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