Dream Home Construction and Financing

Most of us that have ever bought a home did it in one of two ways. We either go into a new home development and walk through the models and purchase one of these new homes. Or we buy a resale home that is on the market from another homeowner. But have you ever driven by a golf course or the side of some remote hill that says lots available? Have you ever seen lots cut into the side of a mountain with that single lone house being built? Wonder what it takes to do this? I will give you some highlights to this process with some approximations of the numbers that make this work.

Picking the Lot – Just like shopping for a home, shopping for a lot takes some patience as well.   This is still a step that I would recommend using a valued real estate agent to help you navigate. You may see lots around town with reasonably priced lots but what about the lot with the city view of Las Vegas? These lots are priced between $500,000 and $3,000,000 just for the dirt lot. So what does it take financially to get a loan on that? Buying dirt usually requires a higher down payment because there is not as much recourse for the lender as there is with the home. The number is usually around 40% down for the lot. So if you find the lot you want for $1,000,0000 then you will have to bring approximately $400,000 to the table to purchase the lot.

Picking the home – Now that you have a clean slate with the lot you have chosen now you have to figure out how to build on it. Generally I would recommend getting plans from several builders, to make sure you are getting what you want. In order to get a loan on a new construction, the lender will usually ask for the builder’s financials to make sure that they know what they are doing and are reliable enough to get the job done. The lender does not want to get stuck with a construction project that is not complete and therefore the buyer is in a tough position. Once the buyer’s financials, home plans, and the budget are approved by the lender, then the bank will process the loan so construction can start. There will be construction financing in place that you will be paying during the time of construction, as funds are withdrawn to complete the project.

Permanent Financing – Once the project is completed, the lender will then have the home appraised and determine the total project cost, which will then be turned into permanent financing. This means that you will have to determine what type of loan you will want on the home going forward. At this point you will have already been approved, so it is more a matter of getting and signing loan documentation, so that the home can be recorded and you are able to move in.

Construction to permanent financing is a much more detailed process than just going and buying your standard resale home. This is a very generic roadmap to what this process looks like. Every lender will have their own tweaks to this process and finding a good lender has never been as crucial. If you are in the position to be able to make this giant step, then it is in your best interest to really do your research and find the right real estate agent, right lot, right builder and right lender to help you accomplish your dream.

Please leave a comment or contact me with questions.

Renter No More

I have discussed in a previous blog about the opportunities to buy your own building, but here I would like to discuss the opportunity to buy a home. Renting is usually where most people start and Las Vegas is no exception. The good new is; however, that the home market in Las Vegas is still affordable. If you are thinking about transitioning from being a renter to a homeowner, remember to find a good realtor and get your lending in place to find out what you can afford.

Let’s create some examples to paint a clearer picture of homeownership. Let’s say that you are currently renting a 2500 square foot home and you are paying $1900 per month for that rental. If you are comfortable with that payment, what can $1900 get you as far as purchasing a home including taxes and insurance? What would your down payment look like?

When you are leaving your rental one morning you see a For Sale sign right across the street and it is a model match. You decide to get out and take a flyer. It has a listing price of $295,000, so you are curious to find out what that looks like financially. At that price point you could do an FHA loan, which would be 3.5% down so approximately $10,000 for a down payment. The loan for the remaining $285,000 at a competitive rate would give you a monthly payment of about $1300 per month. You would then need to add in taxes and insurance of about $200 per month. So, let’s recap…

Rental $1900 per month

Own $1300 per month + $200 taxes and insurance for a total of $1500

That is a savings of $400 per month. All of these numbers are approximates, but it gives you a good idea of the possibilities out there for you if you want to shift from a home renter to a homeowner. Now if you are in Silicon Valley or New York this may not be a possibility, but here in Las Vegas, home prices are still very reasonable.

As we have discussed before there are many things that need to be considered. A good realtor will help you locate, search, and find a home for you. They will also help you understand the value and what your offer should be on the home. Make sure your lender gets you pre-approved before you shop, so you know exactly what you qualify for. Get a pre-qual letter from your lender, so your realtor can share that with the sellers to make them feel comfortable that you qualify. Home ownership can be very rewarding, so make sure you have all your ducks in a row to improve your chances for a smooth purchase process.

Please leave a comment or contact me with questions.

 

 

The Importance of Listing Photos

Today with such great cameras on our cell phones, everyone thinks that they are a professional photographer. You can get high quality shots, edit them on your phone, and post them directly to Facebook for all your friends to comment on. The problem is that just because you can take photos does not mean that you are a photographer. One area where this happens all too often is in real estate. Agents will come in and list a home for the seller and use their cell phone or some junky camera to take pictures of your most valuable asset that you are trying to sell.

When you are interviewing agents to list your home ask them about who takes their photos. This is just as important as any other questions you should be asking. Many agents have a photographer that takes photos of all of their listings, so it’s okay to ask to see them. If the agent has an issue with this, then maybe it is not the right agent for you. Here are a few tips that a good real estate photographer can help with.

Clutter – A good real estate photographer will not take pictures with clutter in them. Their job is to make each photo look as appealing as possible. Usually they will ask the borrower to clean the clutter up ahead of time so that they can get clean shots. I have seen them actually pile all of the homeowner’s junk in one corner on the spot, just to make sure the shot was clean.

Staging – If your house is empty it is always an option to stage it, but chances are it will be your stuff in the home. A good photographer will tell you that your Star Wars bed set does not photograph well, or that the piece of art you like should not be in the shot. This is not a time to argue with them about the details. This is their job and they generally know what they are doing.

Lighting – This might be the most important aspect of what they do. Have you ever booked a hotel room online because it looks really nice and you get there and… it’s not nice? That’s the art of photography and probably their ability to use lighting. I am not saying that you want to pull a fast one on the potential buyer, but rather give the best visual description of your home as possible. Lighting severely impacts photos if it is not used properly. Good photographers can use the light to your advantage and make your home look beautiful.

You really only have one chance to sell your home so utilize your resources. I will end this with an example. I was recently involved with a transaction and the home had a model match in the same neighborhood. One of them had photos taken with the realtors cell phone and the pictures were terrible. Although it was the nicer house, the other home that had solid photos closed for more money about 6 months ago. The cell phone picture home is still on the market and receives almost no foot traffic. This is the agent’s fault as well as the seller. My guess is the seller knows the agent and doesn’t want to hurt their feelings. Selling your home should not be looked at as an emotional transaction, but rather a business transaction. Use the people and resources that are best suited to get the job done and please use a professional photographer.

Please leave a comment or contact me with questions.

Navigating Credit Card Rewards

“I believe it’s best to pay in cash” – Eric Church. That being said I feel most people believe it’s best to pay with some form of credit card to earn rewards. I know we have all heard the commercials for double points, triple points, airline miles, black out dates, etc., etc. There are so many different types of credit cards out there on the market that it is almost impossible to figure out which one to use. I get asked all of the time what reward cards my clients should use. I usually respond with find one that rewards you with something you find of value. Here are some of the basics to consider when choosing your credit card.

Cash Back – This type of card earns you cash back based on the purchases you are making. Generally you will earn about 1% on all of your purchases. If you spend $100,000 in a year you will earn about $1000 cash back. Some will earn higher than the 1% on specific categories in specific months. Maybe this month you can earn 3% on gas and 2% on grocery stores. Cash back cards are good for people that pay off the balance each month.

Airline/Travel – Airline credit cards are usually specific to a particular airline and are co-branded with a specific hotel chain or cruise line. Every dollar you spend turns into some form of travel points or dollar value to be used within that specific chain of airline/travel. These are great for people that travel frequently. Usually the credit card will earn you double or triple points for purchasing travel through their brand and a lower percentage on everything else.  They will also offer benefits like VIP lounges, free drinks, and/or first class upgrades.

Balance Transfer – These credit cards are great for people trying to pay down their debt. They usually offer a zero percent or low percentage rate for a specified period of time and either no fee or low fee to transfer the balance to their card. For example, let’s say you owe $10,000 on your credit card and the APR is 15%, you would transfer to the new card at 0% for 18 months, which allows you to pay down the card without getting crushed by fees.

Low Interest – These cards either offer a low introductory APR or a low APR all the time for the user. These usually do not offer any rewards, but if you are a person that typically caries a balance it benefits you to have a card with a much lower rate. This type of card is also beneficial if you know you need to make a large purchase and need several months to pay it off.

Student – A student card usually offers a very low line of credit at a higher APR. This allows students to establish their credit at an early age without the fear of going into severe debt. The limit might be somewhere between $300-$500. I always recommend that a student gets their first card in college, so by the time they are out they can have some established credit. Parents can also set them up for auto pay to make sure the minimum is always paid.

Always do your research on the credit card you are going to use, because most people stick with their primary card for a very long time. There are unlimited resources online to help you choose. Always keep APR, terms, and annual fee in mind when choosing. I am very annual fee opposed and think you should not be charged a fee to use a specific companies card, but that is my opinion. I think your focus should be more geared toward the rewards they are offering.

Please leave a comment or contact me with questions.

 

New Business: Tips to Get Started

It appears the toughest part of starting your own business is just figuring out where to start. Often people have the idea, the resources, and the know how, but just don’t know how to begin. I am frequently asked if an attorney is needed to get this process started. I would say if you have the money to get an attorney, then sure use one, but you are definitely able to do it on your own. With technology today, most of this process can just be done online. I am guessing that most states are similar, but will be focusing on Nevada for this post.

Business Plan – This is a piece of the process that is optional. There isn’t a requirement to do a business plan, but I will say that it makes it easier. It is almost like a blue print for your business. If you are looking to get lending for your new business, SBA requires you to have a business plan. You can do this on your own or Google business plan and find a template.

Determine the Type of Entity – Are you going to be a Corporation, Limited Liability Company, Sole Proprietorship, Partnership, or some sort of variation of the above. Each of these have their own requirements, but should you choose a Corporation or an LLC you will also need to file Articles of Organization. Again, this can all be done online through the Secretary of State website.

File your Fictitious Firm Name – If your business will be titled under anything other than your personal name you will need to file a fictitious firm name with the County Clerk. This is a fairly easy and painless process, so you just need to go on for Clark County Clerk or Washoe County Clerk and fill out the form and pay the $20 fee.

State Business License – Once you have determined the type of entity you are going to operate as, then you need to obtain a state business license. This will again be done through the Secretary of State website. When opening bank accounts and/or obtaining loans you will be asked for a copy of this, so before hanging it on your wall at the new business take some photo copies to have on hand.

Local City or County Business License – You will also want to contact your local county office and see what requirements you have for county and city licenses depending on where you will be located. They will be able to lead you in the right direction for this component.

File for your EIN Number – Your Employee Identification Number is very important. As a business, you are required to have an EIN number, which kind of acts as a social security number for your business. You will need this to open bank accounts and loans, as well as for tax purposes. You can file for your EIN number here.

There may be other components that come along the way in this process, but this should be a quick roadmap to guide you in the right direction. Any answers you need should be just a quick Google search away or utilize your banker, CPA, or attorney to help.

Please leave a comment or contact me with questions.

 

Mobile Mortgage

There is quite a buzz right now about online mortgage. There have been several companies that have been utilizing this for some time now. They showcase this technology by sitting on the couch or standing in front of a house and completing their mortgage application on the phone, meanwhile the people using the old method miss out on the home.

I would like to start by saying, as someone that is in this business I have been waiting for this for quite some time. You can do everything from your phone as it stands, so why would this be any different.   As technology progresses this will become more of the norm as far as lending and if you are a smart lender you will learn to embrace this.

I don’t want to sound like the sour guy about this because I do believe this is the future of lending, but I think it only has a small place in the lending game currently. If you are a single income or dual income, strictly W2 employee this may be easy. However, for the clients with multiple income sources, W2, K1, multiple entities, incentives, etc., I believe this is where this system will become extremely difficult for the borrower.

This brings me to a point I have been waiting to jump on for quite some time and that is the value of having a good banker/lender that understands your industry and the complexities of the lending environment. Many of the clients that I manage have done loans with me for years, so not only do I understand their business, but I am also familiar with them. That is a huge difference. The mortgage app is not going to understand that your bonus structure is based on the profitability of your firm divided by the number of attorneys. It will then want you to contact a representative to discuss, which then loses the luster of being strictly online or mobile.

I think we will continue to see this progress in the mortgage, lending and real estate arena going forward. That being said just because something is new does not mean that it is the best. I believe there is still a lot to be said about relationship in this world and this is often forgotten. There are a lot of similarities here with the online investing market. Online investing has been around for a very long time offering cheap trades in the “do-it-yourself” platform, but it is extremely hard to get them to leave their broker because of relationship. I think having someone that you trust in your corner goes a long way.

Please leave a comment or contact me with questions.

I Need a Pool

Let’s face it… When it is 115 degrees in Vegas all you want to do is take a dip in your swimming pool. Between March and August I get a ton of interest in financing for pools. Most pool companies either do not offer financing or if they do it is not generally at great terms for the borrower. In this post I will give you some options to get you swimming.

“Straight Cash Homie” – Randy Moss. There are two strong opposite sides to this. I am against using cash whenever possible, especially in this case. If you have $50-100K to build a pool I think you would be better to go buy a condo or two and rent them out. You would get a much better return on your money. If you are anti-loan guy, then paying cash is definitely an option.

Home Equity Credit Line – This is an option where if you have a good amount of equity in your home, then you may be able to borrow against that equity (second lien) and use those funds to build a pool. This is the most common home improvement option, but requires you to have equity in the home. Banks often offer promotional rates or teasers to get you into a HECL, so do some research on rates and terms.

Asset Verified Line of Credit – This type of line of credit is not very common, but does exist in the market and may go by different names. With this type of line, the bank will take a look at all of your liquid assets; checking, savings, 401k, IRA, investments, etc. There is no hold placed on the funds, but rather they want to see that they exist. Once all of the assets are verified, based on numerous different requirements, the bank will assign a dollar amount that they will lend you based on that total.

Security Secured Line – So let’s say you have an investment portfolio, there is a chance that you can borrow against this. Not every investment firm does this, so again do your research. The way this works is that you open an investment account and based on the amount of the investment you are given a line of credit that is secured by those investments. The benefit to this one is that you are earning interest on your money, while paying a specific rate on the line of credit. This one gets a little confusing, but a good financial advisor, which I am not a financial advisor, would open the investment account and I would help you secure the line.

All of these lines will have credit and income requirements to qualify.

Pool Constrcution

Bottom line is you have options to build that pool in your back yard. I would recommend looking into financing before talking to the pool builder, so you have an idea of what you can qualify for. Pools can get very expensive, very quickly so knowing your budget is important. If you have any questions reach out to a trusted lender for advice.

Please leave a comment or contact me with questions.