Skip to main content

Playing Monopoly Is Good Homework



If you've ever been in a Monopoly game after most of the properties have been purchased and developed, it can be a relief to land on Free Parking, knowing the dice must rotate to the next player giving you a respite from paying rent.  Like the game, in real life, it would be nice to avoid paying rent and even better to have people paying you rent for property you own.

Winning in the game of Monopoly is all about investing.  If you travel around the board, trying to buy the ultimate property and pass Go to get another $200, you're missing the opportunity to purchase good properties along the way that could lead to upgrading into your dream home.

Starting early to buy your first home gives a buyer a chance to acquire a property with a minimum down payment, and inevitably, have a lower payment than paying rent for a similar home.  As the home appreciates and the loan amortizes, the equity grows.  Within a few years of average appreciation, the down payment can double or triple based on the leverage of using other people's money.

They could use the equity to stair-step their way into a larger home and finally, their dream home.  Or, if that homeowner's goal is to acquire rental properties, they could convert that home to a rental and buy another home on a low-down payment, owner-occupied mortgage to allow that property's equity to grow in the same way.

Multi-unit properties could be another option.  Finance it with the same type of owner-occupied, low down payment mortgage to achieve leverage that isn't available to non-owner-occupied investors; live in one unit and rent the others.  FHA, VA, and conventional mortgages allow for owner occupants to purchase up to a four-unit building with minimum down payments.

It is very impressive to see the portfolios of properties that some young people have built by focusing on their goals, living within their means, and not getting distracted along the way.  You can learn a lot from them but be careful about getting into a game of Monopoly with them; they know how to play the game.

Let's connect and talk about some of the specifics.

 

Comments

Post a Comment

Popular posts from this blog

When do you lock your mortgage rate?

Locking your interest rate protects you from increases due to market conditions.   Locking early safeguards your budgeted payment.   By locking the rate, if the market goes up, you get the lower rate; if it goes down after the lock, you may be able to pay a fee and lower the rate. Knowing when to take the lock is determined by which direction you think the market is going.   If you think rates are going up, lock in early.   If you think rates are going down, ride the rate to within a few days of closing. Some lenders may allow a borrower to lock a rate after pre-approval but is more common to not offer a lock until there is a signed contract on a home.   Even with a pre-approval, it could easily take 30 days or more to close a transaction and the rates can move a lot in that period. There may be a fee charged to lock a rate which is determined by the lender.  Generally, the longer the time for the rate lock, the higher the fee. There is ...
Post a Comment
Read more

Make Your Home Offer the Most Appealing

Sales in February 2023 were up 14.5% month over month and still down 22.6% year over year according to the NAR Housing Snapshot.   The median sales price dipped 0.2% to $363,000 and there are 2.6 months supply of homes on the market compared to 1.7 months a year ago. "Inventory levels are still at historic lows, and consequently, multiple offers are returning on a good number of properties." According to Lawrence Yun, Chief Economist for the National Association of REALTORS�. It is still important to have a strategy for potentially competing with other buyers on the house you want to buy.   The plan should include several available provisions and options, so that at the time of drafting the sales offer, you can consider exactly what to include based on the situation. Unless a person is paying cash, you need to be pre-approved by a trusted mortgage professional long before you start looking at homes.   Include the written pre-approval letter along ...
Post a Comment
Read more

Getting Comfortable with the New Normal Mortgage Rates

The biggest shock to homebuyers is the soaring mortgage rates of 2022 that doubled in one year resulting in approximately 15 million mortgage ready buyers displaced from the market due to affordability issues. As of February 23, 2023, the 30-year fixed rate mortgage was at 6.5%.   While that is twice as high as it was on January 6, 2022, it is still lower than the 7.75% average rate since April 2, 1971, according to the Freddie Mac Primary Mortgage Market Survey. When rates increase at a rapid pace like this, it takes time for the public to adjust and begin to accept it as the new normal. Prior to the housing bust that led to the Great Recession, the normal for mortgage rates was in the 6% range and existing home sales were over 6.5 million for three years.   From 2007 to 2014, home sales were closer to 5 million with 2008-2011 at just above 4 million annually. From January 17, 2008 to March 5, 2020, mortgage rates averaged 4.32%.   In this 12-year period...
Post a Comment
Read more