Logan & Cache Rent to Own F.A.Q.

Why rent to own in Cache Valley?

Rent to own is ideal for families that are not yet able to qualify for a regular mortgage, but that should be ready within about a year. In stead of moving from apartment to apartment, it's a way to get into your home now, and you can rent it until you qualify for a mortgage. 

What costs are associated?

If an applicant is accepted into the rent to own program, they pay an up front option money deposit. This deposit is like a down payment, and goes toward the purchase of your new home. It can range from a thousand to a few thousand dollars. From the time a rent to own buyer moves in

Why don't I just get a mortgage and buy a house now?

Part of the pre qualification process is meeting with a mortgage loan officer. If the loan officer tells you that you qualify now, there is no reason not to get a regular mortgage. We are able to help you through the home purchase process, and some buyers are able to skip the rent to own process altogether. 

Stuck on the Financial News?

The charlatans in the financial markets media have been spreading fear about Chinese politics, and how they're devaluing their currency right now. Do you know someone that's been taking part in the hand wringing? Are you suffering from whiplash while watching your stock portfolio over the last 10 or 15 days? I find that the best way to track a market is to have at least some money invested in it. I've watched the limited stock portfolio I have do the Harlem Shake over the past few days, and it's interesting to read all of the stock pundits' reactions.

My knee jerk reaction is to come on here and tell everybody that they need to take control of their portfolio. "Sell your stocks and buy real estate!" But I'm not sure that's my real goal. More than anything, I think we need to understand our portfolios. If your securities broker sent you an email this week telling you that China is launching a hostile attack via their currency and markets, make sure that they clarify for you what that means. How does that change their overall outlook on the market? What can you do in the next 3, 6, or 12 months to protect yourself and be ready if it gets worse? Sure, you can't control the stock market in the same way you can affect the real estate you own, but we've seen that real estate is subject to market forces just as much as anything else. Figure out what your risk tolerance is. Limit your exposure, and only invest in things that you understand. Don't understand how to protect and grow your net worth using real estate? Give me a call. Let's talk.

Financial Education

The topic of financial education has been on the front of my mind quite a bit lately. As I work with a lot of potential home buyers and sellers I find that there has been a lot of misinformation spread and there are a lot of misconceptions that are being perpetrated by people in the news and media. 

I believe that lack of financial literacy is one of the primary causes of the stagnant poverty levels and slow wage growth in the country. I remember sitting in a class in grade school where the teacher was telling us about the stock market. She said that it's unlikely that your stock portfolio will outpace inflation as time goes on, so the risks of investing in the stock market were simply not worth the rewards. The fact that she was wrong is not what frustrates me. Sadly, she might've been speaking from direct experience. Her losses in the market were probably more caused by a reluctance or inability to take control than by poor money managers.

Owning real estate takes work. It is naturally less passive that investing in stocks. Even if you are not the one unclogging toilets, you probably know the name of the company that manages your property and does that for you. When you buy real estate vs. stocks, you're much more likely to pay attention to the purchase process, and the condition of the asset you're buying. I understand that it is tough to manage, but it's not as tough as some think - and per hour, sometimes it's better than any side job you can get. 

I have met so many real estate investors that didn't understand real estate before getting in, but stuck with it and learned a ton in the process. That's how I got started too! That said, I think there is a much better way. I feel that lack of good financial education in schools is keeping a whole lot of people out of the market unnecessarily.

What are your thoughts? Are we in need of better financial education in grade school & college?

Cash Out Refi vs Line of Credit

Here's a question that came up recently, and I felt like it was good enough to share here. 

The question was "I have a lot of equity in my first rental property, and I'm ready to cash out refinance and buy another property with the cash I pull from the rental. My problem is that my commercial lender is quoting me 5.5% on a mortgage that has a 5 or 10 year balloon. Is that what other investors are seeing as far as commercial loan rates?"

You're on the right track if they're sending you to the commercial lender at the bank when you ask for a cash out refinance. Even though it's not a commercial loan, their retail lenders are all just going to offer the Fannie/Freddie options.

I don't see much of a problem with getting a new loan every 5-10 years if the money is good. You are still maximizing leverage, and the money ought to cost something! My suggestion though is that you ask if your commercial lender will give you a line of credit on the property. You didn't say why you want the cash, but my guess it's to buy more real estate! The credit line will still probably only have a 10 year term (sometimes you can borrow for 10 years and then you have an additional 5 or 10 yr period to pay it all back) but there are some huge advantages. 

• Many banks will charge very low or no closing costs on a credit line
• You only have to qualify for the credit line once - if you're flipping or cash buying and refinancing, you can rinse and repeat without even notifying a lender!
• Though the rates aren't fixed, you only pay interest on the cash you're using. That way you only have payments when you are actually using the credit line, and any additional cash flow can just go right back in to paying off the line.

This is pretty much the infinite banking concept, but with SO much more control. The property is throwing off so much more income than a bank account would, so why not just become the bank and collect all the interest for yourself?​

Home Inspections

Home Inspections. Do you need them? When do you order them? Some important info coming in from a question that I got from a client working on purchasing an investment property. This is important if you're investing, or buying your own home - Don't miss something before it's too late!

When buying a house, you have an inspection period wherein you are able to order all the inspections you feel you will need, and if there's a problem with the property you can pull your offer with no consequence. Power to the people! See the vid for additional details :)

Many Logan and Cache Valley home buyers have this question and others - stay tuned for more answers to common questions about buying a home in Logan, Utah.

Bear Lake Cabin for Sale

New Listing for sale - 962 Gammil Lane, Garden City Utah

$449,000

Bear Lake

Come breathe in the immaculate view of beautiful Bear Lake from large windows all throughout this home. This is an exciting opportunity to join in the excitement of Bear Lake real estate. Bear Lake is located in Northern Utah, surrounded by beautiful National Forest and is a growing vacation spot for national and international guests. Find out more about Bear Lake recreation and opportunity.

Snow Meadows Nightly Rentals

Snow Meadows is one of the few neighborhoods that allows homes to be rented out nightly. That makes for the perfect location of this investment, wether you plan to rent it out or live in it full time, or figure out the mix that works best for you! You could join in a rental pool on the nights you're not using it or take over management and list on VRBO or Airbnb as a nightly vacation rental. Earning potential for this ideal location is $550+ per night!

Two Full Suites

With three bedrooms upstairs and three bedrooms downstairs, you can split the suites for rental purposes. Or if you'd like to live here year round, you could rent out the other side as a vacation rental to minimize your housing costs!  

Beautiful Brick Exterior

One feature not to be overlooked is the fine masonry and brick work on this home. Winter weather in Northern Utah can be hard on wood exteriors and wood cabins can require constant maintenance and attention. The sturdy brick on this cabin home is designed to be worry free so that your investment will require the least amount of upkeep necessary.

Click Here for the full gallery

Other Important Features

• Price - $449,000
• 3656 Square Feet (1578 Basement, 1578 1st floor, 500 2nd floor)
• 6 Bedrooms
• 3.75 Bathrooms
• 2 Family Rooms
• 2 Dens
• Brick & Stone Exterior
• .34 Acres
• HOA fee $25/month
• Dimmable Lights Throughout
• Custom archways inside
• Knotty alder framing
• Walnut floors
• Maple cabinets

How much money do you need to retire?

How much money do you need to retire? If only there were a one line answer to this question! I see this discussed on a lot of blogs and news articles. In a recent post, I talked about the value of investing for equity growth vs strictly cash flow as a young investor. The goal with that is to grow a portfolio that will be large enough to accommodate the cash flow you hope to achieve in retirement.  

How Much Monthly Cash Flow do you Need to Retire?

This is an easier number to divine, though is going to be different for every person’s situation. Ideally there will be social security in place, and potentially other sources of income at retirement. I think it’s safest to plan for the worst and take care of all of your financial needs and goals from your retirement portfolio. Let’s say for this example that you want $120,000 per year in order to feel secure in retirement. That translates to $10,000 per month. 

Work Backwards to get your Equity Goal

Now we take our goal of $10,000 per month, (or whatever the number is you wish to make monthly in retirement) we can work back to look at what our target portfolio should look like. Look at what apartment buildings and other real estate assets return on their investments in your area. You’ll want to find the return on your investment, which essentially is going to be the net annual income divided by the purchase price. This is often called the “cap rate.” If the average cap rate in your area is 10%, then a typical $1,000,000 property owned free and clear should produce $100,000 per year, or $8,333 per month.

If you need $10,000 per month in retirement, and you feel like you can get a 10% cap on an investment property, you can calculate the size of property you’ll need like this: 10000 / .1 * 12  where $10000 is your cash flow, .1 is the 10% cap rate, and 12 months in a year. In this simplified example, you will need $1,200,000 worth of real estate in order to get $10,000 usable income per month.

Make your Plan to Work up that Equity!

So how do you get from where you are now to your goal? It would require a lot of properties to get to your goal if you’re just planning to get $100/month on each one. My suggestion is to take all of this into consideration while you’re investing along the way. What if you could get a property that is appreciating quickly? Or say you get a property that you can easily add a bedroom to or improve the rents, to force equity? That’s probably the best way to reach your goals. Find ways to accelerate your equity while you’re young, and prepare to sell off and reposition your equity for stable cash flow when you get to the point that you’re ready to live off of the income from your portfolio. Failure to see how this can happen, or to plan this out can leave hundreds of thousands of dollars on the table when you’re ready to retire.

Conclusion

This is a 100MPH drive by of a fairly complicated topic. Many investors develop this mindset over many years of looking at deals and planning for their future. All I’m trying to do here is plant a seed for understanding wealth management. If you start to take these ideas and follow what they mean to you and your portfolio, you can proceed in your investing career as well as your professional career with confidence that your future will be as secure as possible.