Oct 30

Today, a guest post from Crystal –

Putting your home on the market can be a daunting experience and if you want to get the best price, it is essential that you are financially savvy throughout the house selling process. With this in mind, here are a few financial management tips to take into account when putting your property up for sale. These tips will prepare you for the sale of your home as well as making sure you save for unexpected costs.

Investigate House Prices

Selling a new home can be stressful, especially if you don’t have any accommodation lined up should you sell your home quickly. Therefore, the first step to take is to scope out the housing market for a prospective new home. This situation is financially tricky for any homeowner because if you buy a house while you are However, if you wait to sell your house first, you could end up paying a fortune in rent while you find a new home. In an ideal world, you want to get the highest price for your home while getting the lowest price for the home you wish to buy, so scoping out the house prices is essential.

Check your Credit Rating

In order to buy a home, you have to be creditworthy. Therefore, before you put your home on the market, it makes sense to check your credit rating. This will help you to understand what position you are in financially. Low credit scores can result in having to pay a higher interest rate on your mortgage and this is useful information to have before you start your search for a new home. You can get free credit reports quickly and easily online. Once you know what your credit score is you can take steps to improve it. If you are in debt, this is the time to deal with it. Eradicating credit card debt and loans can improve your credit score and put you in a better position financially.

Start Saving

Selling your home can be costly and you may have to dip into your savings to cover the costs involved. You will have to pay estate agent fees, legal fees, an exit fee as well as indemnity insurance. There could also be a whole host of unexpected costs to pay when selling your home so make sure you do your research beforehand.

If you don’t want to be left with two mortgages and a pile of estate agent fees, you could buy a new house and get a guaranteed quick sale with a property buying company like www.housebuyerbureau.co.uk.


written by Joe \\ tags: ,

Sep 02

A guest post today –

Investment dollars have been pouring into rental property over the last few years.

Institutional investors have been big buyers of real estate to rent – finding the yields higher than elsewhere in the market and property prices reasonable following the recent housing crisis. The wide interest has been highlighted (or capped?) with Deutsche Bank and Blackstone’s recent offering of bonds backed with rental property assets.

Individual investors have also been keen to grab to rental property as investments, particularly those confused and frustrated by losses in the stock market. Many use a common justification that goes something like: “I want to invest in something I can touch”.

Case in point: we at Guide Financial recently met Kumar while doing software testing. He is a well-paid IT consultant, but doesn’t hold any money in a retirement account. Instead, he gathered all his money in 2008 and bought a second house, which he now rents out.

He expects that his rental income will provide all the financial security he needs in retirement. His justification – “I can see and understand a house.”

But how does a house as a retirement asset stack up in a careful comparison against more traditional options?

The benefits:

Nice cash flows – Like bonds, or high-dividend stocks, rental properties provide steady cash flows, clearly ideal for people approaching retirement. In recent years, the yields have exceeded those available on other assets, widely above 5% in the US through the beginning of 2013.

Inflation protection – The other great feature of rental property is that it is effectively indexed to inflation. As prices rise in the economy, you can usually pass rent increases on to tenants. This combo of high yields and inflation protection is rare in fixed income securities.

Tax benefits – Landlords can deduct many of their big expenses on properties including mortgage interest, house depreciation and many expenses related to the management of the properties. The value of these benefits can be significant.

The downsides:

Big market risks – Property may be tangible and give people the feeling of security, but this doesn’t mean that it provides returns that are more stable or safer (anyone remember 2007?). When you invest in rental property you are assuming large market risks. The factors that affect property values are complex and unpredictable – just because rental prices have been increasing for the last few years this does not mean they will continue to do so. In fact, many analysts think we may be nearing the peak of a “rental bubble.

No diversification – Just as home prices don’t offer returns that are any safer than most stocks, a house is going to be a huge part of any average person’s total portfolio. For retirement, most financial planners will suggest that you maintain a diverse set of assets, to lower the likelihood of big losses for similar return potential. If you have a house that is 80%+ of your portfolio – your eggs are effectively in one basket. You’ll be taking a lot of risk you aren’t hedged against, for uncertain returns.

Illiquid – If your retirement stocks are falling in value, it’s easy to sell them. But selling your house is a huge headache, takes a lot of time and is very expensive (often up to 5% of the home’s value). Real estate is not liquid and creates additional risks for someone trying to use it as an investment.

Tax advantages complicated and not the biggest – While significant, the tax advantages from rental property investments are typically going to be less than those offered by retirement accounts like 401ks and IRAs. They also require a lot of complex accounting that will create substantial extra work for you. If you are saving for retirement, you’re probably better off minimizing taxes through investing in a 401k or IRA than putting money in rental property.

Managing property is a headache – You probably don’t want a full-time job in retirement, but managing a property can come close to taking a similar amount of time. You’ll have to deal with deadbeat tenants, frustrating repairs and time-consuming renter search processes.

The verdict:

A few years ago, the economic environment may have offered conditions that made rental property an attractive choice for investment. Now, rental yields are coming down while housing prices and mortgage rates rise. If you don’t have a large portfolio that makes owning a home a potential small piece in a broad mix of other assets, then it may be good to sit out the rental income property craze and focus on building other more traditional assets for retirement.

Interested in learning more? Look for more personal finance insights at

Blog.guidefinancial.com and follow us on Twitter @guidefinancial

Scott Burns, CFA covers personal finance for issues for Guide Financial, a San Francisco-based startup offering unbiased, comprehensive and affordable financial guidance to the millions of Americans who don’t have access to high-quality advice.

written by Joe \\ tags: ,

Jun 26

You knew that, of course. If you’ve searched for personal loans at sites such as http://www.cbonline.co.uk/personal/loans  you’ll discover competitive rates, but if you own a home in the US and have a mortgage, hopefully you’ve looked at the rates as they dropped and acted by refinancing to a lower rate. But, as I expected, the low rates were not going to last forever and we’ve recently seen the move back up.


This chart only goes back a year. If we went back 5 years, we’d see rates at 6%. Go back to the 80’s and the 30 year fixed rate was 18%. But I digress. The 30 year rate recently hugged 3.4% for a time, and has now risen nearly a full percent from that low.

mortratesHave I mentioned my love of spreadsheets? You know how there are rules of thumb that suggest you can afford X times you income on your house purchase? Those rules are tied to the interest rate, because as rates change, the payment you can afford gets lower as rates rise. I wanted to look at this with numbers that are reasonable to my readers, so I started with a $60K per year income. This is a bit over median income, and offered just as an example. A well qualified mortgage will permit you to use 28% of your monthly income for the mortgage, property tax and insurance, so I use 23% for the mortgage payment only, that’s $1150 per month. Strictly from an affordability perspective, you can see that at 3.5%, an earner just over median family income would be able to pay for a $256K mortgage. Since this is an 80% loan to value, the home price is $320K, twice the median home price. It was actually a great time to be a buyer. Now that rates are nearly a percent higher, we are close to 4.5%, with that same payment of $1150 only supporting a mortgage of $227, nearly $30K less just a few months ago. This chart gives you a good look at how the borrow power of that payment drops as rates rise. The real question is whether this will put downward pressure on home prices as well. I suspect housing wont drop to meet the new value supported by the payment, but there is a risk that home prices drop a bit from their current levels. This also prompts the question whether rates in the UK will rise and is now the time to check out the rates at http://www.cbonline.co.uk/personal/loans/personal/loans before they head up.

written by Joe \\ tags: , ,

Jun 26

A guest Post today –

In both the US and UK, times couldn’t be much tougher for first-time buyers. Those hoping to sell their properties find that few people are able to afford a mortgage, while those aspiring to become homeowners for the first time are hampered by sky-high property prices. In both countries, the market for first time buyers isn’t in great health, but there are subtle differences.

United States

Those who own properties are being advised by some lenders to check whether their mortgage is owned by them – beleaguered bank Fannie Mae are doing this via one of their sister sites. Struggling homeowners are eligible for schemes like HARP and HAMP if they have borrowed from Fannie Mae.

Those looking to buy a new home for the first time can also take advantage of something called Homepath. It’s designed to make home ownership less expensive for those on modest incomes, while, if successful, it might also help to stimulate a housing market which has been rocked by mass foreclosures.

For those unable to buy due to financial constraints, there are a handful of ways in which the government is helping to reduce the burden of paying rent. The U.S. Department of Housing and Urban Development has a number of schemes in place to help tenants and landlords who might otherwise struggle to own or rent a property of any description.

United Kingdom

In the UK, many of the same problems that affect first-time buyers across the Atlantic are persistent, namely high house prices. Paperwork and a perceived lack of value on offer from mortgage providers are other issues they might face.

Totally Money came up with a first-time buyers guide which explains in full the ins and outs of applying for a mortgage and setting up a first home. Every aspect of applying for a mortgage, from the biggest to smallest details, are laid out in full.

As in the US, the government have launched a few schemes to help buyers get onto the first rung of the property ladder. Help to Buy, for example, is designed to make buying a home more affordable for people on average incomes.

First-time buyers here also have to be wary of a number of costs they may incur. Stamp duty, valuation fees, solicitors’ costs and, in some cases, mortgage brokers’ fees are all possible expenses first-time buyers may face according to the Citizens’ Advice Bureau.

written by Joe \\ tags:

May 27

A guest post today from Aunty –

There are several ways to invest in real estate.

Pants on fire!

The one that gets the most attention is buying low and selling higher for a profit. This is called “flipping” and this method is fast and exciting with potentially high rewards in a relatively short period of time.

There are some drawbacks to flipping, the biggest ones are not timing the market and getting too greedy. Many a successful investor prior to 2008 got caught with upside down properties that hit them hard and left them with bad credit and nothing to show for it.

For the savvy and hardworking:

There are also creative ways to get into real estate such as wholesaling, purchasing liens, tax deeds, subject to financing, etc., but Aunty has never really gotten into those – mostly because I didn’t understand them well enough, but also because I always wanted to be a landlord.

Landlord dream

This was a dream of mine ever since I was a little girl growing up in Palolo Valley clutching $100 in cash and flying through the backyards of neighbors to deliver it to our nice landlord. My mom was a hardworking single mother supporting a family of 4 kids by herself, money was tight, and $100 was a LOT of money in the 50’s. (Yep, Aunty is old.)

Homes in Hawaii cost about $30K back then, and the ROI (return on investment) for a landlord would have been 4%. Not that great a return? Maybe not, but it was solid steady income, especially for a 7 year old who couldn’t believe the abundance in her hands as she ran through shortcuts to deliver this fortune into the hands of a landlord. [*note about ROI – this formula is an annualized return of monthly rent x 12 months divided by cost.]

Appreciation and rents over 50 years

Hawaii’s real estate appreciated over the years, and 3 decades later, in the 80’s, a house in Palolo would cost $120K, rents would have gone up to $400/month, and the ROI would have been 4%, with an appreciation of the original asset at 400%.

In the late 80’s, Hawaii house prices soared and soared even more in the 1990s. It was like a huge bubble that didn’t pop. It retraced a little, but never came close to mid 80’s prices.

Today, an average house in Palolo would sell for $600K. Palolo is an interesting neighborhood of older wooden houses with a spattering of huge new houses nestled into a valley with a couple of low income housing complexes. On the other side of the mountains is Manoa Valley, a verdant valley of wealthier residents with older larger homes in the $1+ million range.

At $600K, the average Palolo house has appreciated by 20 times its original value of 60 years ago. Rents have increased to about $2000/mo. ROI based on today’s FMV (fair market value) would be 4%. ROI based on 1980’s prices would be 20%. ROI based on 1950’s prices would be 80%!

[Please forgive Aunty’s overly simplified numbers – they are not taking into account monthly expenses that would offset rental income lower, and they are based on an all cash purchase of a property.]

Adding a mortgage to the mix

However, if the property was mortgaged at 70% LTV (loan to value), then the cash down portion of the investment, which is the amount of your investment drops to 30% of the cost of the property.

In 1987, if you could get a 70% LTV with a 10% annualized interest (loans had higher rates back then), you would have a negative ROI of on a $120K house bringing in $400/month in rental income because you would have a negative monthly cash flow of $800. Your cash basis would have been $36,000 with a -26% ROI.

Today, if you could get a 70% LTV with a 4% annualized interest, you would still have a negative ROI, and a negative monthly cash flow of $2400. Your cash basis would be $180,000 with a -16% ROI.

What does that mean?

Hawaii is not a cash flow income-generating place to invest in unless you have a huge chunk of cash to purchase and you will be satisfied with a 4% annual return on that cash, or you bought a while ago and your mortgage has been paid off.

It also means that Aunty does not invest in rental income properties in Hawaii, because these options and numbers are not good.

What to do?

If one does want to invest profitably in today’s Hawaii real estate, the modus operandi is buy and flip – but carefully, with good market research and reliable resources for rehabbing.

Or, look for better markets that have better numbers for investing. Places such as Indiana, Las Vegas, and other cities that have low property values and moderate rental incomes that give very decent cash flow and higher ROIs (10% or better!)

No more yesterday

Slowly and steadily, we are building a real estate portfolio, but not in Hawaii. Perhaps later, if and when it makes sense to do so.

Gone is the little girl who would fly on skinny legs to complete her most important task of delivering rent each month. Today’s scene includes a property manager who takes care of everything. Automatic deposits and debits in an investment business checking account replace the hand-to-hand payee/payer transaction that first sparked the aspiration, “I am going to be a landlady one day!”

Is real estate investing the best investment vehicle? I cannot say for you, but for Aunty, it fulfills her lifelong dream. Have your got your dreams, your success?

Whatever you dream of, may it be.

Note: Aunty is the gal that blogs at Honolulu Aunty where she writes on a variety of topics, money, recipes, travel, and a good half dozen more.


written by Joe \\ tags: