I am originally from Philadelphia and after a        recent visit home I started looking into the                prices to buy in downtown. Downtown
Philly  has changed greatly since I left  many moons ago....it's vibrant, a great restaurant town and also still affordable to get started owning property even though it is the 5th largest city in  the country.

So I did a little search on Redfin to see how               much it would be if I was starting out and                   wanted to buy  a duplex  in a neighborhood that was already gentrified for only 3.5% down.

    Forget what you hear about having to put 10%   or 20% down to buy a property. With an FHA    loan you only need 3.5% to buy a 1-4 unit property provided you live in the property. With an FHA loan you can have the 3.5% down payment be a gift from your parents or other relative. With an FHA loan you can have a co signor like your parents or siblings to help you qualify. With an FHA loan  you can have a  credit score of about 620 and sometimes even lower. With an FHA loan you get to add the rent from the other units to your income to help you qualify.  FHA loans give us lots of options  to help get people started in real estate.

So for the property pictured above it is a duplex in the Bella Vista neighborhood of Philadelphia with one 2 bedroom/2.5 bath unit rented for $1350 and one 1 bedroom/1 bath unit rented for $925 . Utilities are separate so your tenant will pay for their own. After searching on Craigslist for similar rentals I believe these rents to be under market so there should be room to raise them in the future. 

Here is how the payment on this breaks down on an FHA loan using a current sample rate of 3.0% with no points  on a 30 year fixed rate loan. Note that in exchange for letting you put so little down on a property, FHA charges you two mortgage insurances. One is added to the loan amount (1.75% Up Front Mortgage Insurance) and one you pay monthly (.85% Monthly Mortgage Insurance)

Asking Price: $425,000
Down Payment: (3.5%) $14,875
Loan Amount: $410,125
Final Loan Amount after Up Front Mortgage Insurance of $7177 Is Added:  $417,302

Principle & Interest Estimate: $1760
Property Tax (1.4%) Estimate: $496
Homeowner's Insurance Estimate: $175
Monthly Mortgage Insurance Estimate: $296

Total Estimated Monthly Payment: $2727

Now if I move into the one bedroom apartment I will be receiving  $1350 in rent from the 2 bedroom unit based on the current lease. $2727 - $1350 =  $1377 will be my portion of the monthly payment.

So now I own a duplex in downtown Philly for less than $1400 a month!  In addition I  put less than $15,000 down. There will be closing costs but there is a way to cover those without having money. On FHA what you can do is choose a slightly higher  rate and get a "rebate" that is used to pay your closing costs. Your mortgage person will help you with this.

Bottom line is if I want to move out in a few years and buy another 1-4 unit property I can now rent this out (most likely the rents will cover my payment) and now the tenants will pay this property off for me so when I am retired I  have an income stream. The more 1-4 units I buy the more income I will have when I retire! 

I also looked up the last time this property sold....on July 13, 1989 this property sold for $62,000! Keep that in mind when buying property.  The best way to get wealthy with real estate  is time. Over time your property will appreciate, your tenants will  pay off your mortgage and you will reap the benefits of a secure retirement!

 It has been in the news for years...many pensions are woefully underfunded.  In 2014 Congress passed legislation  that allows for underfunded pensions to cut benefits if it will improve the solvency of the fund.

Shortly the Treasury Department will be deciding if one of the nations largest pension funds can cut retirees benefits by as much as 23%.  “This is going to be a national crisis for hundreds of thousands, and eventually millions, of retirees and their families,” said Karen Friedman, executive vice president of the Pension Rights Center.

See full article here

Here is the thing... you can only count on yourself for your  retirement...NO ONE ELSE IS GOING TO SAVE YOU.  Do not count on your parents to leave you money...they might want to spend it, they might  fall ill  or they might need expensive long term care. Don't count on a pension whose management and solvency is in someone else's  hand.

I recently did a loan for two  couples who had similar financial situations. Both were about 70, both still had mortgages on the house they lived in, both had some credit card debt and both lived on social security. One couple existed solely on social security and a small income from a part time job. At the end of the month this couple had just enough money to pay their bills...no eating out, no trips...absolutely no money was available for anything extra.

The other couple had one rental property that was mortgage/debt free. After expenses for tax/insurance, etc. that property generated about $2500 extra a month for them in addition to their social security. That extra  $2500 a month goes a long way to having a more enjoyable  life. That $2500 a month is  dinners out, a weekend away, ice cream for the grandchildren. 

So please...save yourself....don't wait for anyone else to do it. Even if you have a pension buy just one extra property that you can rent out. Over time the tenants will pay off the property for you and when you are retired it could be the difference between existing and living!

 As housing prices have been rising at a fairly good pace in Los Angeles, I have been wondering when it will  slow down or if it will reverse.  Lack of inventory coupled with low interest rates have been the catalyst for dramatic price increases  in many California cities. Add to that  foreign buyers and investors loaded with cash and the  regular homeowner might feel they have been left behind...they are right.

I remember sometime in 2010 and friends of mine didn't want to buy since they felt the prices hadn't hit bottom. My response was for them to buy with prices on the way down rather than on the way up. Once  everyone realizes that we have hit bottom it's too late, it means prices are climbing up again and you will be involved in a buying frenzy and overbidding. Prices have to be on the upswing for you to notice that we've already hit  bottom.  I know that my friends today wish they had bought back in 2010 rather than deal with current prices that are up almost 50% since 2009.

If you buy on the way down, you aren't competing with anyone. Today there was this article illustrating how bad it is. One lady just  paid $899,000 for  a property listed for $699,000 in Oakland  - $200,000 over asking. I currently have a number of clients  putting in offer after offer only to be out bid. These clients are first time buyers without the ability to pay $200,000 over asking, nor should they.  I'm not so sure that lady who paid $200,000 over asking won't be sorry in a year or two seeing as the San Francisco area is supposedly headed for a downturn. (article here) . 

But back to Los Angeles. It has been a very tight market for a long time due to limited inventory, foreign borrowers and all cash investors that together, have driven prices up. I started wondering when our market was going to finally normalize and was a correction around the corner? But according to the UCLA  Anderson Forecast,   Los Angeles is supposedly in for another 3-4 years and 35% price appreciation before there is any sort of correction. Add to that very low interest rates, that should stay low for a while longer, and I still seems like a good time to buy.

To soften your monthly payment consider buying a 2-4 unit property. A 2-4 unit comes in all different shapes and sizes. Sometimes it is a  single family home with another smaller house behind it. Sometimes it is a single family home with 2 or 3 additional units over a garage. Sometimes it is one building with all the units inside...and the variations go on and on. 

When you buy a 2-4 unit you are limiting your monthly cash outlay. You will collect rents that will help reduce what you have to pay every month. So if your mortgage is $5000 a month and the rents are $3000 then your portion is only $2000!

When you buy a 2-4 unit property you qualify for a much larger mortgage than you do for a single family home or a condo.  When prices continue to rise like they have, it forces a lot of buyers  into  less desirable neighborhoods or into a condo they really don't want. The way to live in a better neighborhood is to qualify for a larger mortgage by buying 2-4 units.  When getting a loan the lender will add 75% of the rents to your income which enables  you to qualify for a larger mortgage, which usually means buying  in a better neighborhood. 

And... if you lose your job or suffer some other  unforeseen challenging life  event...when you own a 2-4 unit property you  can move out and rent your unit so now all of the rents should pay for most if not all of your mortgage, taking  pressure off of you so you can  find a new job. 

So...I am telling my clients to stay the course, be patient and buy units.  Regardless of whether the value declines at some point, they will be on a nice low fixed rate and have tenants paying a good portion of the monthly mortgage for them. Then, in 30 years their building will give them a nice chunk of change every month to help  support them as they age.

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Nothing saved?  You can retire abroad for
$1500  a month  is the title of an article today
on  CNBC.com. While this  sounds adventurous
and romantic...to pick up and move to some
far away destination...the countries that
are featured are third world countries. After
a few months, or years you might just miss
the first world comforts of the  U.S. and want
​to come home.
​
According to Nations Online:

"Third World" are all the other countries, today often used to roughly describe the developing countries of Africa, Asia and Latin America.

And  what makes a nation third world? 

Despite ever evolving definitions, the concept of the third world serves to identify countries that suffer from high infant mortality, low economic development, high levels of poverty, low utilization of natural resources, and heavy dependence on industrialized nations. Third world nations tend to have economies dependent on the developed countries and are generally characterized as poor with unstable governments and having high rates of population growth, illiteracy, and disease. 

But who am I to judge, moving to one of these countries might be  a really fun adventure and turn out to be the best thing I ever do...or maybe not.  But when I have cash flow, more than just my social security check every month, I get more choices. I can go to an exotic destination for a few months,  stay for a spell and come back if I don't like it. If I like it I can stay and live like a Queen!

Money doesn't make you  happy but more money relieves the stress of physical world reality...the reality that we need to support ourselves while we are alive.  Money gives us options, more options are better than fewer options. Money supplies  us  with trips to the doctor, trips to the movies and a night out on the town. Don't want to spend it all on yourself?  Then leave it to your children, grandchildren or a charity.

If you own even one 2-4 unit property it will give you extra cash flow every month. Just one little building could save your life.  You  only need a very small down payment from $0 to 3.5% to buy a property. Then, over time the property gets paid off with the help of your tenants and in the end you live for free and get extra cash every month to supplement your retirement.

Give your future self options...don't box yourself into a corner where  you have no choice but  to leave the country in order to survive. Make sure your golden years are golden!

​Since I am a mortgage broker and have been in the business for almost 30 years I have seen a ton of people refinance, although I myself don't do too many of them.  I am not a big fan of refinancing back to a 30 year loan to save $50, $100, $200 or more a month.  What I am a fan of is refinancing to lower my clients mortgage term...going from 30 to 20  or 15 years...this is where the BIG savings are.  

Imagine no longer having a mortgage payment. Imagine not shelling out $1500, $2500 or more every month until you die. Could you then actually retire if you had an almost free place to live?  What could you do with that money? How much more could you save towards your  retirement if you were saving  $1500, $2500 or more a month?  Could this money pay for some of your kids college tuition?

Getting mortgage and debt free is true freedom.  Paying off your  mortgage early is the best way to increase your lifestyle rather than refinancing to save $200 a month. That extra $200 a month  is most likely going to slip right through your fingers every month into some restauranteurs pocket which isn't going to help you in the end.

Take a look at your current financial situation now and imagine not having a mortgage or rent payment. How much easier would your life be if you didn't  have to part with thousands of dollars every month? Would you have to work as hard? I'll bet you can think of lots of things you could do with a few extra thousand dollars a month.

       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.

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.

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!