What Is Your Ideal Down Payment?

Majority Prefers A 10% Down Payment

Being in real estate, and helping buyers with their purchases I have been able to see a lot of peoples financial situations over the years. We know that housing is very important, but in the recent past I have started to see a shift in the type of houses people have wanted to buy.  For example, no too long ago it seemed as though having the nicest house, in the best neighborhood, with the most square footage was the most important.  Now, it seems as if there is a shift.  Instead of going after the most square footage, it seems that families are looking for the highest quality home they can get with the minimum space needs for their family.  Where putting the least amount of money down was important in the past (3.5% FHA), we are now seeing that people are willing to put more down on their primary residence so they can bring their home payment down.

In a recent study by American Financing, if given the choice between putting 10% – 30% down, the most popular down payment is 10%.   Looking at borrowers under the age of 35, it still seems the most common down payment would be less than 8% on average.  This tells us that people are looking to put down the minimum possible to get into their house, but they may also be willing to a little more down than in the recent past.

The American Financing survey also showed that renting is still less desirable than home ownership, and if people had their rent raised, by as little as $100/month, it would be a trigger to have them start looking at buying.  Also, the survey showed that married couples are more likely to start looking to buy within 2 years, versus single people who would be more likely to wait almost 5 years before purchasing.

What are your thoughts about down payment?  Do you understand how interest rates effect your payments?  Do you understand how Private Mortgage Insurance can affect your payments?

Feel free to ask your questions!


Start Building Wealth By Mistake

Working in Real Estate, specializing in working with investors, I help people create and grow their wealth. Just today, I was speaking to a new investor that had just purchased his first single family income property, and was very excited, admittedly probably too excited.

When we first started digging into the numbers, it seemed apparent that he would end up making about $150-$200/month after paying the mortgage (Step 1), but I had to bring him back down to earth when talking about the other expenses that would be involved (i.e. repairs, maintenance, property management fees, etc.). Not to mention, if the tenant wasn’t up to par! What if they came in and tore up the place, only to leave you high and dry with a rental that needed to be fixed up just to rent out again?

Once adding in these expenses, he quickly realized that this may not have been the best investment to start with, and his Realtor was not as well versed in this topic as another Realtor might be. The magic came when he realized that he was able to find someone who did have the experience and could guide him to finding the right investment for him (Not saying I’m right all the time!).

His current investment might not be a gold mine, but with a little elbow grease and luck, he would be able to get a tenant in the property that would help him pay down the mortgage, thus creating equity, and would only be set back on the path to his real estate empire about 6 months! Once pressed even further to determine what his true real estate goals were, he was able to settle on the fact that he would like to own multi-family residential real estate (i.e. 2-4 unit apartment buildings). We then formulated a plan on how to achieve that goal within the next 6 months, and went on our way.

My goal in writing this is not to say that you should come work with me because I am a great Realtor. My goal in writing this was to show people who are hesitant to take the first step into investing, that you can achieve your goals even if there is a small set back (and there almost always is). I have never met an investor who doesn’t have a dozen horror stories to tell, but it always amazes me that their story always ends up the same.

Persistence – If you make a mistake, try and try again.

Patience – Just because you want it now, doesn’t mean it will happen now.

Education – Learn from your mistakes (AND those around you).

And finally, I would add, build a team.

I think this article is a great example of how having the right team behind you can make a big difference in your success, and timeline to success. If I had met this investor a few weeks earlier, he may have decided not to go with this property, and we may have been able to find him something that was more in line with his investment objectives, with a better return.

But at least he got started, and often times that is half the battle right there!

Until next time,

SanjeevAdvani — Real Estate Agent, Investor, and Property Manager


Freddie Mac V. Hedge Funds

Freddie Mac predictions for the CA real estate market show that we should have a healthy market continuing into 2018.  New home sales are supposed to be the “primary driver” of sales in 2018 and we should see about a 2% increase in sales, across the board.  They are also saying that we should see an increase of 4%+ in value, as compared to 2017 which we saw a 6%+ increase in value, due to the historically low interest rates mostly.  “The economic environment remains favorable for housing and mortgage markets,” says Freddie Mac chief economist Sean Becketti.

Now, on to the real news!

Does anyone see that large hedge funds are buying up real estate in droves?  And, who is able to come up with the downpayment on a $500K plus house (median house price in CA)?!

As a Realtor, I see that the market is on fire within FHA limits right now (<$275,665 for Kern County), but what about the houses above that limit?  There seems to be a lot of foreign money floating around the market right now, which is helping hold prices up.

The question becomes, is this sustainable, and if it is sustainable for now, who is going to own the houses in the future?

The problem isn’t that we are seeing an average increase of house prices around 5%/yr (average), but it is more a question of who is buying those homes?  If hedge funds (Blackstone *cough cough*) keep buying up houses at the rates they have been, they will control the inventory.  He who controls the supply, has all the control.  If they decide to buy these houses assuming that markets will increase, they will be able to rent out those houses to those people who already cannot afford mortgages (isn’t that what we all are on BP trying to do?!) but they will also be able to increase rents which, if done correctly can severely hurt renters ability to purchase homes.  In effect, it will create the renter society which we have been hearing all about.

Now, I understand that Blackstone, and all the hedge funds out there can’t own ALL of the real estate, and therefore the supply will not be totally dependent on them, but if they start raising rents in your area, and you are a landlord who is keen to the market, then why wouldn’t you start increasing rents as well?

For all of us investors, this sounds like a blissful market, and should set us on the track to achieve the goal to own as many doors as possible so we can join the goliath hedge funds of the market, and make the world rent from us!

The biggest problem here becomes: Aren’t we a country that was built on home ownership?

What happens when that key tenet is taken away from our people (mostly the middle class and below)?

Does it matter?

Share your thoughts!

Until next time,
Sanjeev (Sunny) Advani
– Realtor/Property Manager/Investor