UTAH REAL ESTATE INVESTOR

I have an apartment for rent in Provo, UT for only $685/mo. This apartment is in a side x side duplex with a nice, large back yard. It also has central A/C, double paned windows and was just repainted. The apartment is available immediately and starts with a 1 year contract (through July 31). Please contract me if you would be interested in renting this apartment.

In this video I walk through a brief property analysis to evaluate the potential of a property in American Fork, UT for subdivision (lot split) possibility. This property has been on the market for about 1 year because the asking price does not justify what the property can become.

This property needs 150 feet of frontage to subdivide into 2 lots. Many people have approached the neighbors about buying the missing land but the neighbors do not want to sell. Using Highest & Best Real Estate Investing techniques we uncover another option.

This video goes through the steps of the initial property analysis to determine if there is enough potential to pursue this property (and move to the next step in the evaluation process).

The average renter in Provo, UT is paying $685/mo to live in a 2 bedroom apartment. That means that over the next 12 months this renter will spend over $8,200 just for housing. But what if there was a way to save that $8,200, would that make a difference in your life. What could you do with an extra $8,000?

Right now there is an opportunity for this renter to qualify for a special program that is currently being offered by the government. In order to help stimulate the economy the Obama administration has passed what is commonly known as the Obama Tax Credit for first time home owners. The tax credit is available to people who have not owned a home in the past 3 years and buy (and close) on their home before December 1, 2009.*

Imagine that you are currently looking to rent a 2 bedroom duplex apartment for $685/mo but instead you buy that same duplex for $200,000. Using the current FHA loan program you could buy the duplex with 3.5% down payment ($7,000; which is a little more than first and last month’s rent and a security deposit). You would then have a loan at 5.5% interest for 30 years (fixed rate) which would give you a principle and interest payment of $1,095.83. Now here is how you live here for free for the 1st year…

A duplex will have a renter in the other unit which is paying the same $685/mo that you were willing to pay. So after you receive your rent payment your $1095.83 payment becomes $410.83! Right there is you save about $275/mo just by buying the duplex you were going to rent. But there are more benefits!

Next, as a first time home owner you receive the Obama $8,000 tax credit which is money that is refunded back to you as soon as you file you 2009 taxes. $8,000 averaged over 12 months is like getting $666.67/mo. So your $410.83/mo is effectively reduced to -$256.84/mo (which means that you are being paid $256.84 a month to live in the duplex apartment that you were originally going to rent). But wait, there’s more…

As a home owner you also receive a tax deduction for the mortgage interest that you are paying on the duplex. Over the next 12 months you would expect to pay about $10,500 in mortgage interest. This $10,500 is subtracted from your income before you pay taxes which could eliminate up to an additional $3,000 from your taxes! That $3,000 tax saving is effectively another $250/mo paid to you. Now you are effectively receiving $256.84 + $250 = $506.84/mo because you are buying the duplex instead of renting it.

So the average renter could effectively be paid $506.84/mo to live in their duplex OR the can pay $685/mo simply to rent it. Not only does the renter become a home owner, they receive the monetary benefit of home ownership AND they will also receive the equity from the property appreciation. The best part is that this renter now owns a cash flowing property that will continue to pay them as long as they want the income!

*Some restrictions apply.

Below are the images of the properties used in the video. Click on each image to see a larger (more readable) picture.

This lovely period home has been updated and remodeled multiple times. The recent remodel updated the bathroom, new carpet & paint, heating & A/C, electrical upgrades, and wiring through out the home (with CAT-5 internet wiring to each bedroom).

The home is conveniently located close to the new retail development project (coming soon) in Spanish Fork. It also has easy access to I-15 and Main St. And this home is close to schools.

The list price on this home is $164,900. The seller is open to a convention purchase or various seller financing options. This home is available for immediate occupancy. A first time home buyer could purchase this property with an FHA loan. The buyer would need 3 1/2% down payment ($5,775) and could obtain a 30-year fixed rate loan at 5.5% for a principle and interest payment of $908.75/mo. Plus the first time home buyer can get an $8,000 tax credit if they buy before November 30, 2009.

An investor could buy this home with 20% down payment ($33,000) and get a 30-year fixed rate loan at 6.5% for a principle and interest payment of 749.48/mo. We had previously rented the home for $1,250/mo but at a conservative $1,100/mo the investor would have at least $300/mo in positive cash flow ($3,600/year) which gives more than 10% ROI!

I have listed a home in Pleasant Grove, UT that is an approved short sale. The home owners originally bought this home for about $175,000. According to the lender’s BPO the property is now only worth $150,000. However, the lender has already indicated that they are willing to sell the property for $135,500! A buyer on this property would start of with nearly $15,000 in instant equity. That is absolutely fantastic in this market.

The home has 3 bedrooms, 1 bathroom, 2 family rooms, 1,210 square feet and central A/C. This home is conveniently located with easy access to Main St (Geneva Road), State Street and I-15 (at the new Pleasant Grove exit). It is also located near shopping (including Wal-Mart) and schools.

The lender has approved a price of $135,500. A buyer (who would live there) could get an FHA loan with 3 1/2% down payment ($4,750) and have a 30-year fixed rate loan at 5.5% giving a principal and interest (PI) payment of $742.38. Not only that, as a first time home owner this buyer would also get $8,000 tax credit (refund) next year; that would make the first year’s payments effectively only $75.71/mo!

An investor could buy this property with a 20% down payment ($27,100) and get a 30-year fixed rate loan of 6.5% with a PI payment of $685.16. A 3 bedroom home average rent in Pleasant Grove is $1,000/mo. This gives the home at least $200/mo positive cash flow ($2,400/year) or a 9% ROI on the invested money, not including tax benefits.

View Complete Property Details

On July 1, 2009, Federal House Finance Agency (FHFA) Director James Lockhart joined Treasury Secretary Timothy Geithner and HUD Secretary Shaun Donovan in announcing a major expansion of the Obama Administration’s Home Affordable Refinance Program for Fannie Mae and Freddie Mac loans. The change will allow current borrowers with loan-to-value (LTV) ratios of more than 80 percent up to 125 percent (formerly 105 percent) to qualify if they meet other program requirements. This significantly expands eligibility for the program which allows borrowers to lock in today’s lower rates or move into a fixed rate product. Higher fees will apply to loans with LTVs above 105 percent, but the program includes lower fees for borrowers who opt for a 20-year or 25-year term, to build equity faster and reduce interest payments over the life of the loan. The easiest way for borrowers to find out if they have a Fannie Mae or Freddie Mac loan is to go to www.MakingHomeAffordable.gov and click on “loan look up.”

Reprinted from Realtor.org

Lenders will be subject to new disclosure requirements for mortgage loans under the Federal Reserve Board Truth in Lending Regulation (Reg Z). The new requirements apply to loan applications filed on or after July 30, 2009 (about two months earlier than originally planned). The new rules are complex and compliance will be a challenge for lenders. REALTORS® will want to learn the basics so they can advise clients of potential delays and the new procedures. Here are key highlights of the changes:

• The new requirements apply to all mortgages secured by a borrower’s home, including primary and second homes and refinancings. Investor loans continue to be exempt.
• Lenders must give good faith estimates of mortgage loan costs within 3 business days after the consumer applies for a loan (early disclosure). The lender may not collect any fees before the disclosure is provided, except for a reasonable fee for obtaining a credit report.
• The closing may not take place until expiration of a 7 day waiting period after the consumer receives the early disclosure.
• Consumers may shorten or waive the 3-day and/or 7-day waiting periods for a “bona fide personal financial emergency,” but only after receiving an accurate TILA disclosure. In the final rule’s preamble, the Fed stated that it “believes waivers should not be used routinely to expedite consummation for reasons of convenience.” The Fed decided not to insulate lenders from liaibility even where a consumer modifies or waives the waiting periods.
• If the annual percentage rate (APR) changes by more than 0.125 percent, the lender must provide a corrected disclosure to the borrower and wait an additional 3 business days before closing the loan. The APR includes not only the interest rate on the loan but certain other costs related to settlement, so it will be important for any fees that affect the APR to be as accurate as possible, as early as possible, to minimize the need for a corrected TILA disclosure.

Information reprinted from Realtor.org

(Original Article) by Kenneth R. Harney

If you’re applying for a loan to purchase a primary or secondary home, or planning to refinance, you should be aware of a little-publicized new set of federal consumer-protection rules that takes effect July 30.

Among other key changes, the new Federal Reserve guidelines require lenders to give you initial disclosures of your mortgage costs within three business days of your loan application. If you don’t get them, you can pull the plug.

The rule also prohibits lenders from collecting any fees, except a reasonable charge for checking your credit, until you have been given the loan-cost disclosures. This means no more out-of-pocket, upfront application charges until you have received the truth-in-lending disclosures and an annual percentage rate (APR) calculation of those loan costs.

Since many mortgage brokers and lenders traditionally have collected fees covering appraisal, credit and various other charges at the time of application — sometimes amounting to hundreds of dollars — this will be a significant change in procedure for the lending industry.

The rule also prohibits quickie closings on loans by requiring a seven-day waiting period after applicants are handed their early disclosures or the disclosures are mailed. You will now have up to a week to think about the transaction and decide whether it’s right for you. Final truth-in-lending disclosures are due three business days before closing.

Here’s an even more sweeping change for applications on or after July 30: The new Fed rules require lenders to deliver a copy of the real estate appraisal to you three business days before the scheduled closing on the loan.

In the past, even though federal regulations guaranteed that consumers could request and obtain a copy of the appraisal, lenders and home buyers frequently ignored that right. In fact, many consumers had no knowledge of this right because no one in the home purchase, financing or settlement process told them about it.

Now, the timing of the loan closing itself — which is the financial ballgame for loan officers, real estate agents, and title and escrow officials — will be dependent upon your receipt of the appraisal in advance. The exception will be that the three-day rule can be waived if you don’t think receiving the appraisal is necessary.

Another significant change under the new rules: If the APR on the early truth-in-lending disclosure increases by more than one-eighth of a percentage point (0.125), the lender will be required to “redisclose” — provide you a corrected version and allow you an additional seven business days to consider the transaction before settlement.

What might cause the APR to increase following the initial, early disclosure? Lots of things. If you allowed your initial rate on the loan to float with the market but rates increased, you would need to get an amended truth-in-lending disclosure. Or if the lender got inaccurate estimates of costs from a third-party participant in the transaction such as the settlement or escrow company. Or if unexpected, 11th-hour junk fees materialize.

All of these events, which have been frequent sources of consumer complaints this decade, could force the lender to redisclose loan costs and set back timing for the settlement.

What are some of the likely repercussions of the Fed’s new mandates? First, the traditional approach of aiming in advance for a date-certain settlement target for home loan transactions almost certainly will be affected. Actual closing dates will be more closely tied to lenders’ and settlement agents’ accurate estimates and their ability to deliver disclosures and appraisals by the required dates. For example, if appraisers are backlogged and can’t produce valuation reports quickly enough, settlements will have to be postponed.

Second, the purposes of the rules are to afford consumers better access to and more time to consider key elements of what, for most people, are major financial transactions. There might be fewer instances of last-minute closing-date surprises on fees, where buyers are slammed with hundreds of dollars of charges they never expected. But nobody can say that for sure.

Finally, the rules may well trigger new waves of litigation if lenders and their business partners are not scrupulous in their compliance. There is an aggressive segment of the legal profession that specializes in going after banks and mortgage companies for truth-in-lending violations. Don’t be surprised if you hear of lawsuits seeking cancellation of mortgage deals because timing deadlines were not met or appraisals were not received.

As David Berenbaum, executive vice president of the National Community Reinvestment Coalition, put it in an e-mail comment: “Consumer advocates will closely monitor” compliance with the new Fed regulations, and the lending industry can expect “civil litigation against bad actors.”

Kenneth R. Harney’s e-mail address is kenharney@earthlink.net.

I want to briefly summarize why it is better to buy a home (especially today) instead of renting one! Listed here are 3 major reasons why you should consider buying a home…

Cost:
Buying a home is actually less expensive than renting! Here’s why…

Renting a home for $1,000/mo for 5 years is $1,000/mo x 5 years x 12 months/year = $60,000

But buying a home for the same $1,000/mo for 5 years is less than $60,000!

When you buy a home the government gives you a tax deduction for the mortgage interest that you pay. While the exact amount may change let’s just assume that your tax deduction equals only $1,200/year or $100/mo. That means you get $100/mo x 5 years x 12 months/year=$6,000

Right now, you also may qualify for $8,000 First Time Home Buyer Tax Credit (2009). That means if you haven’t owned a home in the past 3 years you can get an additional $8,000 from the Government just for buying a home in 2009!

That means you can get ($8,000 + $6,000 =) $14,000 cash when you buy your home over the next 5 years. So you will pay $60,000 in housing payments over the next 5 years but if you own a home you will get $14,000 cash back. This means you only spend $46,000 for housing over the same 5 years which is only $766.67/month!

Dollar for dollar it is cheaper to buy a home instead of rent one.
 
Equity:
The owner of the home is entitled to the equity in the home. Equity is the difference between how much the house is worth and how much you owe. (If a house is worth $200,000 and you owe $150,000 then the equity is $50,000.) If you are renting then the landlord is the owner and they get to keep the equity in the home.

When you buy a home you have a mortgage payment each month. Generally, each payment has a principle amount, an interest amount, property taxes and hazard insurance. The principle amount of the payment reduces the amount that you owe on the property. (If you pay your mortgage payments for 30 years you will not owe anything on the home because you will have paid off the mortgage.) If you buy a home then your monthly payment reduces how much you owe so it is like paying yourself. But if you rent, your monthly payment reduces how much your landlord owes and it’s making them richer!

Every time there is a repair on the home, if done correctly, that repair can increase the value of your home because it will be worth more. If you upgrade old windows, replace the shingles on the roof or remodel the kitchen, that will make your home worth more money. When you own a home you have to pay for these repairs. When you rent, the landlord must pay for these repairs but they don’t mind because it makes the home worth more money!

Making regular payments on a home mortgage will increase your credit score. Better credit means better financing for your next home purchase, a refinance of the first home and for a vehicle purchase or any other credit purchases saving you thousands of dollars in interest over the years to come.
 
Timing:
Right now is the best time to buy a home. The home values in the area have bottomed out and the interest rates on loans are at all time lows.

We are seeing homes that used to be $200,000 that are now selling at $150,000 or less! The experts say that we are at the bottom of the housing cycle and prices for homes will never be this low again. You can buy a home that used to be worth $200,000 for only $150,000. Then, as the market cycles back up you will be able to capture the new equity in your home.

With interest rates dropping below 5.5% (30 year fixed rate) you could buy that $150,000 home for payments starting at only $825/month (principle and interest)! And that’s before you figure your $14,000 savings over the next 5 years.
 
Requirements:
The qualifications for buying a home are nearly the same qualifications for renting a home. You need to have okay credit, a deposit and a decent job.

If you have a credit score of 580 (or better) then you can qualify for a FHA loan. A 580 FICO score is not considered good credit and may even be low enough to prevent you from renting. But it is a good enough credit score to buy a small home. If you have better credit then you can qualify for better interest rates with other types of loans.

The deposit for a house purchase with an FHA loan is 3 ½% of the purchase price. This amount is nearly the same as first & last month’s rent and a security deposit. One of the little known “bonuses” for buying a house is that you essentially get the first month FREE! The reason is because the home’s mortgage interest is charged at the end of the month while rent is charged at the beginning of each month.

Having a decent job is essential for qualifying for any type of housing. Generally you need to have been in the same line of work (preferably the same job) for the previous 2 years to show stability in employment. You also need to be making at least 3-4 times your payment on a monthly basis. So if your mortgage payment is going to be $1,000/mo then you need to be making $3,000/mo or more (as a household) to qualify to buy the home.
 
Homes that Qualify:
To get a list of homes that qualify for an FHA loan or
To get a list of homes that qualify for the special $8,000 First Time Home Buyer Tax Credit
please contact:
Khayyam Jones
(801) 787-7797
mailto:Khayyam@KhayyamJones.com?subject=Home

Mortgage Qualification:
To find out which loan you can qualify for please contact:
Rick Anderton
(801) 414-8055
mailto:rick@lendutah.com?bcc=khayyam@khayyamjones.com