Opportunity
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Is Harrisonburg Nearing Break Even Again On 80% LTV Investment Properties With Conservative Calculations? |
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![]() Many (many, many, many) townhouses were built in Harrisonburg between 2002 and 2007. They are still being built, but not at the same pace. The principal reason for this shift in building is that home values increased faster than rental rates. As such, a smaller and smaller pool of investors are considering purchasing townhomes as income generating properties --- though that may be changing again. Let's see how things compare when buying an income generating property in 2002 versus today. In 2002, a new two-story townhome in the City could be purchased for roughly $100,000, and rented for approximately $725/month. Here's how the annual cash flow looks: + $8,338 of rental income ($725 x 11.5 months) As you can see, this is a barely break even scenario using the conservative calculations above, though more positive cash flow was achieved by most investors by managing the properties by themselves, and because very few repairs were needed.- $5,916 for mortgage payments (80% LTV at 6.25%) - $750 for property management (9%) - optional - $590 for property taxes - $360 for property owners association dues - $300 for repairs - likely unnecessary - $252 for home owners insurance Cash Flow = $170 GAIN in the first year Fast forward to 2009, and here's how the cash flow might look on a new two-story townhome in the City that can be purchased for roughly $150,000, and rented for approximately $900/month: + $10,350 of rental income ($900 x 11.5 months) - $8,172 for mortgage payments (80% LTV at 5.5%) - $932 for property management (9%) - optional - $885 for property taxes - $360 for property owners association dues - $300 for repairs - likely unnecessary - $378 for home owners insurance Cash Flow = $677 LOSS in the first year As you can see, an investor would now have to bring more than 20% as a down payment to even break even in this townhome scenario. There are plenty of investors who do bring more than 20%, or who pursue other properties with better cash flow characteristics, but hopefully this is indicative of how the investment property landscape has changed over the past seven years. But --- perhaps some of those investors are, or should be, looking at the Harrisonburg market yet again. You see, there are quite a few townhouse owners who bought back in 2000, 2001, 2002, or 2003 who bought when townhouse prices were very low. If they haven't refinanced, or taken out a home equity line of credit (HELOC), they likely have a loan payoff significantly below what the market will bear for their townhouse. Thus --- there are deals to be found with investment properties right now in Harrisonburg. They won't always jump out at you, as they may be listed at reasonable "market price" --- but if the owner is motivated to sell, and they bought 7-10 years ago, they likely have quite a bit of equity with which they can negotiate. If you are looking for an income generating property, feel free to call me (540-578-0102) or e-mail me (scott@HarrisonburgHousingToday.com) and I can assist you in determining whether we can meet your investment goals given the opportunities in today's market. | |
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A Hidden, Energy-Efficient Gem In The Peak View School District |
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![]() It's hard to come by a decent sized, relatively new, sub-$300k home in the Peak View Elementary school district. This is the highest growth area of the County, and most homes being built in this school district are priced above $300k (some are way... above $300k). So, what's a buyer to do?? The home pictured above fits this bill, and is energy efficient to boot, as an EarthCraft certified home. What on earth is an EarthCraft home, you might ask? They are homes that (in varying degrees):
Also of note, there will be six other homes built in this neighborhood. If you are interested in building your own EarthCraft home, come take a tour of this existing home, and then we can discuss other house designs, etc. | |
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What Are Your Home Buying Goals: A Place To Live, An Investment, Or Both? |
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![]() Why do people buy homes? In a context stretching prior to 2002, people bought homes mostly because they needed a place to live --- and buying a home provided stability (your landlord won't kick you out), and had some financial side benefits (gradual appreciation, tax deductions). However, the paradigm of the American dream of home ownership shifted in the beginning of the 21st century when home values started to inflate by 10% - 50% per year in many markets. All of a sudden people weren't just buying houses because they needed somewhere to live --- but also because it would be an incredible investment. This new paradigm can be paralyzing to buyers in today's market. Certainly, people still need a place to live --- but now some buyers become hesitant and unable to act absent confidence that they will also have a strong financial return. I don't fault any buyer for desiring a good return on a home buying investment --- but I don't believe that keeping this new expectation on the forefront of our decision making is sustainable. Let me be more precise:
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Buying Real Estate in Harrisonburg As A JMU Student Or Parent To Qualify For In-State Tuition |
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PLEASE NOTE: This post has been updated since it was originally published to reflect my now more thorough understanding of this issue based on additional input from some of the fine administrators from JMU. ![]() I frequently receive questions from the parents of JMU students asking whether they can buy a property in Harrisonburg as an investment property in order to qualify for in-state tuition rates. If this seems like a far-fetched idea, check out the difference in tuition....
First -- if you want to start with the exact details, please check out the State Council of Higher Education for Virginia (SCHEV) web site where they provide a lengthy set of "Domicile Guidelines." OK -- here we go, the bottom line is that if a student arrives in Virginia in August, is enrolled in JMU and continues to be enrolled in JMU (fall and spring semesters) for several years, then the presumption is still that they are in Virginia for education and not as "bona fide" domiciles. So...how could a student establish themselves as a domicile in order to enjoy the in-state tuition rates?
Of note, SCHEV lists a variety of criteria that may indicate domiciliary intent, but these actions are not determinate in themselves:
My conclusion is this --- even if a student buys a house (or townhouse or condo) in Harrisonburg, lives in it, works in Virginia, pays income taxes in Virginia, has a car registered in Virginia, has a Virginia driver's license, votes in Virginia, intends to stay in Virginia after graduation, and is independent from their parents, that still doesn't necessarily mean that they will qualify for in-state tuition. The issue, again, is that it will be difficult to prove domiciliary intent when the move to Virginia and continued residency in Virginia is so immediately and directly tied to attending JMU. PLEASE NOTE: This is not an official interpretation of Virginia Domicile Requirements, it is solely my interpretation of SCHEV's guidelines to provide a hopefully-useful summary for you. If you have questions about these issues, contact the following people depending on your scenario....
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VHDA DELIVERS... How to use the $8,000 home buyer tax credit for your down payment and closing costs. |
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![]() There has been talk for some time about using the $8,000 home buyer tax credit as a down payment or for closing costs, but the details have been few and far between. How, however, VHDA has created a specific program for this purpose, which makes it quite a bit easier... Instead of waiting until you file your taxes next year, you can receive the $8,000 tax credit at closing if you are obtaining your mortgage through the VHDA program. The $8,000 becomes a second mortgage with no interest and no payments for 12 months. Thus, the $8,000 loan costs you nothing, and stretches the loan of the money through the time when you'll get the tax credit. Providing even more flexibility, when you do get your $8,000 tax credit, you can either:
Click here for the full program flyer. | |
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If you're a first time home buyer, you'd better start looking more seriously now -- the clock is ticking! |
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If, as a first time buyer, you close on your purchase of a home by November 30, 2009 you will receive an $8,000 tax credit on your 2009 taxes. That is to say that:
Most homes take 45 to 60 days to "close" -- in other words, it is usually 45 to 60 days after a house is under contract that the closing can take place. That means first time buyers ought to have their house under contract by September 30th in order to have time to close. And if you're planning to have a contract on a house before September 30th, NOW is the time to start looking. Lots of first time buyers are certainly in the market right now --- I'm working with quite a few, and I hear stories of many others as well who are buying --- but I believe there are quite a few other first time buyers who are still sitting on the bench. If you have questions about the $8,000 first time buyer credit, or if you're ready to start looking at properties, call (540-578-0102) or e-mail (scott@HarrisonburgHousingToday.com) me and we'll get started! | |
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$8,000 downpayment assistance for first-time buyers |
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![]() We've all (hopefully) heard of the $8,000 tax credit for first time home buyers --- if you haven't owned a home in the past three years you can receive $8,000 if you buy one by November 30th of this year (6.5 months to go). But yesterday, the HUD Secretary announced that the Federal Housing Administration is going to permit buyers to use the $8,000 tax credit as a downpayment! More details will be forthcoming -- check with your lender in the coming weeks to see how this might work for your situation. | |
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Current interest rates are incredibly low! |
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![]() Interest rates for a typical 30-year loan have never been better --- since they started being recorded in 1970. They're hovering just below 5% right now --- could they go lower? Of note --- rates for the purchase of an investment property may be as low as 5.25% on a 30-year fixed rate mortgage. This was a quote from Debbie Huntley (540-568-1056) at SunTrust Mortgage yesterday (4/24/2009). | |
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Complete a real estate survey for a chance to win $300 cash |
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Our company (Coldwell Banker Funkhouser Realtors) is conducting a real estate survey. Complete the survey and you'll be entered into a drawing for $300 cash! ![]() | |
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Benefits of $8,000 tax credit, record-low interest rates |
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![]() Let's assume for a moment that a first-time buyer decides to buy a $150,000 townhouse in Harrisonburg. With the appropriate income and credit scores, they may be able to obtain a rate as low as 4.625% on a 30 year fixed rate mortgage, with no downpayment. In the first year, this first-time buyer would likely have the following income and expenses:
Contrast this to a buyer who closes on December 1 of this year. At that point, the tax benefit will have ceased, and I predict that rates will be at least as high as 5.75% on a 30 year mortgage.
The combination of the tax credit, and the extremely low interest rates we are currently experiencing are likely to save you almost $9,000 in the first year of homeownership. As you can see, much of the above $9,000 of savings is in the $8,000 tax credit for first time buyers --- but the additional savings because of a low interest rate becomes quite dramatic over the course of the loan. Buying now at very low rates (4.625%) may save you as much as $37,000 over the next 30 years as compared to buying at 5.75%.
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Examples of Great Deals in Harrisonburg |
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Yesterday, I mentioned that there are good deals available on investment properties in Harrisonburg, with the key to finding them being: Seek properties listed at prices under market value in neighborhoods (subdivisions) where it is easy to understand market value. To continue that theme, here are a few examples of what I'm referring to: 1296 Victorian Village Drive (Beacon Hill) Asking price: $139,900 Average recent sale price: $155,633 Average current list price: $152,720 view details 1043 Meadowlark Drive (Reherd Acres) Asking price: $136,100 Average recent sale price: ~ $150,000 Average current list price: ~$150,000 view details There are other possibilities on the market right now, and these opportunities will continue to present themselves over time. If you have funds available (10% - 20% of the purchase price) to buy an investment property in Harrisonburg, I'd be more than happy to help you sort through the available properties to find some of your best options. | |
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Possibly the best real estate deals in Harrisonburg? |
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Here's a reminder of the very cool "Search by Square Foot" function on my web site in the Power Search area. You can quickly find the houses that offer the most house for the dollar by inserting search criteria in the "Price / SF" field. Here, for example, are the eight single family homes in the City of Harrisonburg with asking prices that equate to $90 per square foot or less. These are quite possibly some of the best deals available in Harrisonburg right now. ![]() | |
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26.5-Year Mortgages for First Time Buyers |
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First time buyers who purchase before December 1 of this year will be eligible for an $8,000 tax credit. While there are many things a first time buyer could do with that money, one idea might be to apply it directly to the principal balance of the mortgage! Assuming a $150,000 purchase price, this eliminates 3.5 years of mortgage payments off of the end of your loan! Even more exciting --- those 3.5 years of mortgage payments (that you won't pay) would have cost you a total of $33,000. There are many exciting aspects of this $8,000 tax credit to first-time buyers --- if you have any questions about it, feel free to call me (540-578-0102) or e-mail me (scott@cbfunkhouser.com). This illustration assumes a $150,000 purchase price, with 97% financing at 5.25%. Contact a qualified lender for more details! | |
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An $8,000 opportunity for first time home buyers! |
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![]() Just a few hours ago, the long-awaited (by some) stimulus package made its way through Congress, and it will likely be signed by President Obama by the end of the weekend. The stimulus plan affects many areas of our economy, as described in this AP press release, but one section in particular should stand out for first time home buyers. Potential first time home buyers will now have an $8,000 reason to buy a house in the next nine months! Here are a few of the fine details of this new (soon-to-be-finalized) legislation:
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Don't forget about the $7,500 tax credit |
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![]() In talking to one of my clients today, he commented that he thinks a lot of potential buyers have forgotten all about the $7,500 tax credit. I agree! Here is a quick reminder of the basics... If you haven't owned a home in the past three years, you have a great opportunity to save $7,500 on your 2009 income taxes. To pull of this credit you'll need to buy a home before July 1, and you'll then be able to claim the $7,500 tax credit on your return that you would file at the beginning of next year. There is some fine print, available at the IRS web site, which includes the fact that you will be paying the $7,500 back over a 15 year period. It is rumored that the repayment aspect of this tax credit may disappear as a result of upcoming economic stimulus changes, and even if it doesn't, you still will have a net savings of over $4,000. | |
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Timing the housing market, when to buy and sell... |
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![]() Thanks to John for this insightful comment... "A great cliche about the housing market (and the stock market, too): Most people get in too late, and they get out too late. The second mistake has already been made by most. Don't let the first happen, too." John also suggests that "Trying to call a housing market bottom is folly." With that in mind, let's entertain ourselves by making wild guesses about December sales figures. :) November's market report will give you a context for your guess. There were only 40 residential sales in Harrisonburg and Rockingham County last month. How many will we see in December? 30? 50? 75? The closest guess will receive a small, but delightful, gift certificate to Old Dominion Coffee Company in downtown Harrisonburg. Feel free to leave your guess in the comment section below, or send me an e-mail. | |
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Affordable Housing with a LOW interest rate! |
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![]() The current VHDA interest rate is already low, at 5.875%. But for first time buyers looking for affordable housing, it can be tough to finance a purchase even at that low rate. So....how about 4.875%? If you're buying at Covenant Heights, a neighborhood being developed by Hope Community Builders (a non-profit group), depending on your income levels, you may be able to have the current VHDA rate lowered by an entire percentage point! And these are nice properties we're talking about here -- duplexes and townhomes with three bedrooms, all of which are pre-inspected and built to EarthCraft and EnergyStar standards. If you have a friend or co-worker who is seeking affordable housing, do them a favor and tell them about Covenant Heights! | |
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Hurry! Eat at Dave's Downtown Taverna this week! |
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![]() If you like eating at Dave's Downtown Taverna, you'll want to eat there this week! (or maybe next week) Dave's is getting very close to serving their one millionth customer, and when they do, that customer will receive a $500 gift certificate to Dave's Downtown Taverna. Wow! So whether you're going for their gyro, souvlaki, pizza or pasta, make sure to eat at Dave's this week! Dave's is located in downtown Harrisonburg -- directions and a map are here. | |
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What if you could buy a house for $100.00!? |
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![]() For example, Angela Schaab in Grand Rapids, Michigan is attempting to sell her boardwalk condo by selling 2,500 $100 raffle tickets. As of today (9/27/2008) she has sold 235 tickets. Or, read the story of several owners attempting raffles in the Wall Street Journal's Raffles: Real Estate's Latest Game of Chance. So --- what do you think? If there were a house on the market in Harrisonburg, and you could buy a raffle ticket for $100 --- would you buy one? | |
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Mortgage rates are down --- if you're buying, lock in now! |
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If you have been holding off to lock in an interest rate on your purchase or re-finance, now may be the time! In a report released by Freddie Mac last Friday (9/12/2008), 30-year fixed-rate mortgages now average at 5.93%. That is a significant drop from the prior week's average of 6.35%. Yes, rates could go lower, but we're below 6% again --- which I hadn't thought we'd see for quite a while. If you have any questions, please e-mail me (scott@cbfunkhouser.com) or call me (540-578-0102). I'd be happy to talk things through with you, or to connect you with a qualified lender. | |
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Scott Rogers
Funkhouser Real
Estate Group
540-578-0102
scott@funkhousergroup.com
Licensed in the
Commonwealth of Virginia
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