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Money Has no meaning

3/22/2016

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 A real estate agent I know just told me about two separate clients with the same issue.  Both are  women, one in her 60's and one in her 70's, that  say they are running out of money and  are being forced to downsize...sell their homes and rent or move in with children.  And both have told this agent they have contemplated suicide due to their financial situation.

I was shocked and saddened. There is a lot that we Americans  have psychologically tied up in money, it is an emotionally charged subject.  We can make money mean we are better than, worse than, smarter than or not smarter than others. In the situation these women find themselves in their current lack of money means something dire  in order for each of them to have thoughts of ending their lives.

But money is just a tool...plain and simple. Money is paper and metal formed into  shapes with different etchings and printings that on their own don't mean anything.  These pieces of paper and metal are simply a tool that we need to  to support our lives. We could as easily be using different colored beads or bartering  instead of dollars and coins. Sometimes we have more of this paper and sometimes we don't.

We give money A LOT of meaning in this country.
And when we don't have it we despair... sometimes to the point of contemplating or actually ending our lives.  Since the beginning of time there are stories of people "losing it all" but then  rebuilding what they lost. People have  jumped out of windows during a stock market crash only  to miss the upcoming market rally.  History shows us  that things go up then down then back up again.  Life is rarely one smooth upward trajectory...there are bumps, dips and caverns along the way. The sooner we get on board that this is life  the better we are able to navigate the ups, downs and sideways of it.  When we are in a dip, cavern or what feels like a bottomless pit, the key is to stay calm, breathe deeply and course correct. What can seem like such a  dead end situation one day can suddenly open up and become something  magnificent  the next.
The key is to ask for assistance and not suffer in silence.
So many people in this world have so much knowledge and are happy to help...to pass their wisdom along.  Sometimes a different  perspective   is  all we need to right our ship. Someone who sees things differently than we do... they see our path through and out of the forest when all we can see are the trees. ​  The best thing we can do is ask for help when we need it. There is no way we could  ever know everything about everything...ask and ye shall receive. When we find ourselves in a cavern sometimes we need someone to help...to reach in and pull us out.

After hearing about what  these older women were thinking I was again reminded of how much our younger self needs to care for our older self.  We must take the time to create cash flow that we cannot outlive. The best  way I know how to do that is with real estate.
...at last the ladder, which had been built slowly, one hope at a time reached up
​into the clouds and the dreamer began to climb.  - Katherine Berry
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Tiny House No...2-4 Unit Property Yes!

3/15/2016

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PicturePhoto Courtesy of Timbercraft Tiny Homes
       I recently started watching an HGTV show "Tiny  
      House  Hunters". The houses are so charming  but boy
      are they  expensive! I agree wholeheartedly in scaling
      back...staying   small so you can  live large in other areas
      of your life but I  don't think it's a good idea to spend a
​      ton of money on  a depreciating  asset.  

  A Tiny House is like an RV, it is not real property. It becomes real property when you buy land and affix it to the land on a permanent foundation.  My guess is that once you have purchased the land, the price tag for your Tiny House won't be so tiny  depending on where you live. Seems to me like then you will have paid a lot  of money for  an extremely small house. 


A Forbes article  in 2014 on Tiny Houses that said the average tiny house costs between  $200 to $400 square feet which is  far pricier than the cost of an average home. In March of 2014 Zillow said the average California home was $268 per square foot, far less than you will pay for a tiny house and the California house will  most likely appreciate over time, your tiny house on wheels will not.

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A smarter way to stay small so you can live large  is to buy a 2-4 unit property and live in one of the units. You'll collect rent from the other units so your portion of the payment is small. You'll live in one of the units so your living space and expenses are small. But now you'll own an appreciating asset...something that will go up in value over time.  Now you'll own an asset that will give you income in the form of rents from the other units.  Now you'll own an asset that one day will be paid off, giving you a free place to live and income from the other units. Now you'll own a retirement vehicle not a recreational vehicle. 

You Can buy an Owner Occupied 2-4 unit property With just ​3.5% Down and It can be a gift from a relative.

This is probably far less than you need to buy a Tiny House which you might have to pay cash for or finance at a horrendous interest rate. You can buy a 2-4 unit property with 3.5% down on an FHA loan (if you have more money you can put more down and get a conventional loan) and you will also need closing costs which can be another 1-2% of the purchase price. But FHA has a way to build your closing costs into your rate...you take a slightly higher interest rate that gives you a rebate  which you can use to pay your closing costs so it is easy to buy a 2-4 unit property even if you only have the 3.5% down. Oh, and the 3.5% down payment can be a gift from your parents or another relative.

I went on  Tinyhouselending.com    and found out that with a credit score of 680 you can pay anywhere from 5.99% to 32.99% to finance your Tiny House if you can't pay cash.  Today average fixed rates on an FHA are in the low to high 3% range. Now in addition to the principle and interest payment on an FHA loan you have  Mortgage Insurance and, on any real property you have Property Tax and Homeowner's Insurance. You will also have utilities on any type of house, tiny, medium or large.

Now...a  good portion of your monthly payments on real property (not your tiny RV house) are tax deductible which saves you money on your income taxes (talk to your accountant). On your 2-4 unit property your tenants will be paying a good chunk of the payment for you. Overtime your property will be paid off (a healthy portion of it by your tenants) and over time your property should appreciate based on history.

Let's pretend your 2-4 property NEVER appreciates...
​not Even one dime. 

So you buy a 2-4 unit property for $450,000 and 30 years later it is still worth $450,000, but 30 years later:
​
1.  Your mortgage is gone...thanks to your tenants and partly to you.

2. You are getting income from the other units.
3. You are living for free and  making money as well.
4. And now you own an income producing asset worth $450,000


So stay small so you can live large in other areas of your life, but maybe not in an expensive, depreciating Tiny House.
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Rent Control Doesn't Offer Security

3/12/2016

 
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There were two news stories lately both in the San Francisco/Bay Area that caught my eye.  (Lady 97 Years Old Being Evicted, Man 34 Years In Apartment Eviction) Both people are having the same issue...being evicted from their long time apartment and house. As rents have risen dramatically  since  these people began their tenancy, and they were under rent control,  both say they will no longer be able to afford to live in the city they love and have lived in for so long.

While this is difficult for each of them and their respective landlords, the bottom line is these tenants were lulled into a false sense of security.  My guess is they figured they would be able to stay until THEY  wanted to leave (Stories say they were friendly with their landlords but one landlord died  and the other sold the building).  When you don't own, you don't have control, it's that simple. You can get lawyers and go to court and kick and scream but who wants to end up in that place? The only way to have control over  your life and where you live is to own. When you own  no one can kick you out...you can live there until you die.

Now if you don't pay the mortgage the bank can evict you but this is why we buy units as our first purchase. If you buy units you are living small, collecting rents and paying only part of the mortgage yourself. Living small will allow you to live large in other areas of your life. Living small (below your means) makes life easier.
72% of Americans report money as the #1 stress in their lives.

Back before the mortgage meltdown some people were living large...buying houses they really couldn't afford and they lost them...they were evicted and foreclosed on.  But when you own units...the tenants (like those in San Francisco) are buying your property for you. Once it is paid off the tenants will still pay you rent. When you no longer have a mortgage and the tenants are paying you rent it would take a natural disaster to make you have to move or be homeless but guess what...you'll have insurance for that!

    Author

    Sandy Shaud, Licensed Mortgage Loan Originator, Licensed Real Estate Agent, Rental Property Owner  and M.A. In Spiritual
    ​Psychology.

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