19 RULES FOR GETTING RICH AND STAYING RICH DESPITE WALL STREET by Eugene Kelly

Author:Eugene Kelly
Language: eng
Format: epub
Publisher: Marshwinds Press Company
Published: 2022-08-15T00:00:00+00:00

Rule 16: Build a Logical Real Estate Investment Strategy

The first and most important asset you should own is your principal residence. Why? Housing is a major ongoing lifestyle cost. If you rent, your landlord can raise your rent every time your lease expires. During economic cycles, when more people are entering the workforce, rents for housing usually increase. What you want to do is to fix, for as long as possible, the major part of your housing expense. You can’t do much about property taxes, insurance, or maintenance, but you can fix your principal and interest mortgage payments for a long period. Prequalify for a thirty-year fixed-rate mortgage. Along with the down payment amount, the prequalified loan will signal the target home price range you can afford. Look at all options to minimize the down payment; however, always make sure to qualify for the lowest available thirty-year mortgage interest rate without having to pay mortgage insurance.

Once the house price range is established, look around your community to determine the area that has the best schools (even if you have no children) and access to attractive amenities. There will be several neighborhoods for you to choose from, with homes in various price ranges, in the desired section of town. The determining factor is the home price range you qualify for. Find the smallest, oldest, and most-in-need-of-upgrading house in the best neighborhood you can afford in your chosen area. For example, perhaps there are two homes at the same price you are considering. One house may be new and at the top of the neighborhood’s price range. The other home, at the same price, may be one of the least expensive houses in its neighborhood. Your best investment is to buy the older home in a neighborhood of higher-priced homes. Why? Because most of the money will go into the land value, and you can renovate the house over time.

There is another plus to the strategy. You will probably remain in the home longer for two reasons: (1) its neighborhood is better than the other home’s neighborhood, and (2) the ongoing renovations will make the home more pleasing and unique to you as you implement your ideas for comfort and utility. One huge wealth destroyer many people succumb to is selling their home and buying another. Every time a home is sold, significant assets are spent on agent commissions, packing, moving, and renovating the new home. Starting off in a better neighborhood with a home that can be customized as the family expands will eliminate the need to move and incur these expenses.

The thirty-year fixed-rate mortgage is crucial to any real estate strategy. Why? When taken out, the loan is calculated as a certain percentage of your income at that time. Over the thirty years, the mortgage payment will remain the same while your income will probably continue to rise, making the mortgage payment a progressively lower percentage of your disposable income. This shift gives you more flexibility to enjoy your hard-earned income and, just as important, build your wealth faster.

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