Winter update 2017-2018

Happy almost-December everyone! This will be the last update of 2017, and as such let's focus on giving AND receiving.

I've had several meetings with new clients recently in which we discussed getting a primary residence with the best potential as a future rental, and of course the ever-popular renting vs buying scenarios. Instead of bombarding you with ALL the reasons why owning is better than renting, let's recap seven of the most important reasons:

- Equity
- Tax write off
- Rates still low
- Equity
- Rents are high
- Northern Colorado has shown consistent increase in values vs. most of the nation
- Equity

Please note: there are of course some times when renting IS advantageous, but it typically involves either a plan to live in the house short term, or being in a rental that's super cheap. Let's face it - most people rent because they can't buy, or think they can't.

So let's do a little exercise. Currently, there's an active 2 bed, 2 bath condo in Fort Collins for $195,000. HOA is $245/ month, taxes are $832/year. The average rent for this type of place, according to Rent Cafe dot com, is $1366/month. A local rental website shows a range of $1100 - $1500 for 2/2s, so based on that and personal observations, $1366 is reasonable for our basis.

As an investment property, an investor would put 25% down, so the PITIHOA (that's principal, interest, taxes, insurance and HOA) at a rate of 4.625% would = a total payment of, roughly, $1096.

Sounds good, right? So what if you're a first time home buyer that can't qualify because you're, say, going to CSU or in your first year of a new career? Believe it or not the kiddie condo FHA deal is still a thing. And I always thought it should have been called Kiddie Kondo by FHA®. Kiddie Kondo is not exactly a "program", it's technically an FHA non-occupant co-borrower loan. But the kiddie condo name just sticks, even though it is aimed at buyers that likely recoil at the thought of being called a kiddie. And as long as you're related to the co-signers, you can get into a place for as little as 3.5% down.

So what does that look like on our $195,000 Fort Kollins kondo? Well, since it's an FHA loan you'll have mortgage insurance regardless of how much you have down, but let's assume you're going to do the bare minimum which most folks (and kiddies) do. So, 3.5% down on our $195k kondo, PITIMIHOA (the extra MI being mortgage insurance) at a rate of 4.25% would be roughly $1377/month, total. Which is $11 more than the average rent is. But of course the benefit is you'll be paying your own mortgage instead of your landlord's and getting a sweet little tax break from the interest. And then in 10 years when the value is $300,000 or more you'll either A) have it as a rental, B) pull out some equity and buy another place, or C) turn around and sell it and buy the latest Tesla SUV to pull the latest Tesla eBoat. Or upgrade your housing, your call.

The mortgage insurance, well, that's another newsletter entirely but ask me about it sometime. And bear in mind all my scenarios are based on qualifying, whatever rates are when you lock, etc. Special shout out to JB Corbeil and Sydney Dusek of Academy for fielding my queries on rates and such and double checking my math.

So for the holidays perhaps you can get your kids into a place (and out of yours) easier than you thought. You can also get a quick recap on investment properties from that savvy Robin, yo:  https://www.youtube.com/watch?v=SFgs18qh1Yg

Have a great December everybody!  Crip

originally published 11/30/2017