Creating Wealth through Home Ownership
Real Estate can be the best way to get on the path to real wealth. About 90% of Millionaires are wealthy through real estate. Whether you're ready to buy now, or, we sit down and create a specific plan now for YOU to buy in the near future... the sooner you decide to commit to this outcome the sooner you can start building Equity! Did you know there are opportunity zones in Montgomery County?
You hear the term 'Redlining' and the effects on lower-income neighborhoods. It's a topic frequently discussed... and we're seeing it make the news more and more.
One issue, are properties within these areas that are shells or foreclosed… thus affecting the value of neighboring homes. Appraisers need ‘sold comparables’. They will also give statements on the neighborhood and # of distressed properties. This in turn affects appraiser's assessed Value. Which in turn may affect lender’s decision.
The appraiser’s decision can also affect the price the seller can accept from the buyer. The Appraiser justifies value based on what other homes recently sold for ('comps'), and the number of recently distressed properties. Foreclosures, Short Sales, abandoned...
This is a vicious cycle and makes it harder for the good homes in these neighborhoods to appreciate. The Appraiser can allow for a slight increase above the sold comparables being used. The lender will allow for some appreciation in an up-market, thus value increase can happen, but slowly.
The only way for it to happen quickly, is if the buyer can pay the difference between asking price and appraised value.
Obviously in lower-income neighborhoods, this is more rare. But in wealthier neighborhoods more buyers have cash to push the sales prices up much faster. Because this is what gives the appraiser factual data to show Lender ‘sold comparables’ that he can now use to justify a much higher sales price to the lender.
So value is not only what the market (buyers) are willing to pay, it’s also what the banks are willing to lend based on appraisal findings.
We are seeing more people who want to live in the city and have the means to buy and then renovate. The more this happens, the more 'sold comparables' are available for Appraisers. The appraiser can then find available sold comps to justify to the buyer's lender that the Asking price is inline with the assessed Value.
There are 'opportunity zones' created to incentivize buyers to own in these neighborhoods. Ask me how.
Programs that offer no down payment, or assistance with down payment & closing costs... (good credit is always needed)
Many times I’ve had clients who were willing to pay a higher price, and the appraisal came back lower, thus Price was pushed back down lower than our contract. Seller and buyer were fine with a price, but the lender had to use appraisal data regarding value of this neighborhood to protect their lending risk. Seller is not happy! One way to look at it, is the Appraisal helped protect the Buyer from paying too much. The Buyer can pay as much as he/she wants, IF not beholden to the Lender.
Many residents in many of these lower-income neighborhoods are black, thus you'll see the news and others try to conflate & make headlines stating 'black homes' are devalued. If you separate low-income neighborhoods from the rest, you will see that blacks’ value of their homes are exactly the same as whites or any other race living in these other neighborhoods. Lower-income areas have their own separate issues which include what I've mentioned above. It's improving as more people want to live in the city, along with the lender incentives, and recently our govt committed to a huge investment of billions back into these zones. whitehouse.gov/opportunity-revitalization
These low-income neighborhoods can be more attractive to investors because of their deep pockets. Especially if not limited by a 3rd party lender. Many times the property is more valuable as a rental to receive monthly cash flow, payoff owner's mortgage in the meantime, and down the road have a nice asset that continues to bring higher cash flow & become more valuable.
I’m not arguing about past redlining that may have been due to racial reasons. I’m talking about today in the life we live. Can it happen, maybe. It’s a business. It’s risk vs reward. It’s will my money make me money? The only color business cares about is green.
Create wealth through homeownership. Start now, and and start building Equity. Don't wait years to save for your Down Payment as home prices continue to increase.
Build a Legacy for your family. If you can afford your Rental, you can own.