Let’s take a look at the market and see what might be in your best interest as a purchaser. If you are in a rental at the moment, have you calculated the cost of staying where you are?
Are your investments paying you more than 3-5 percent per annum and at the same time, providing you viable tax deductions? When the market was a disaster 10 years ago, those who could keep their houses and condos and rent them did so.
But today, do you feel secure, that the landlord will not consider selling and cashing out in this current, still fairly strong market?
From my experience, I have found as landlords grow older, their patience grows thinner and they want to reduce their responsibilities and not have to deal with tenants and the required maintenance; so that is when they consider selling.
I am personally selling a two family in New Hyde Park because of the latter reasons.
A few years ago, I had lined up an excellent buyer, for this property; while advising the owner to do a 1031 deferred tax exchange, so he wouldn’t have to pay capital gains for the foreseeable future.
I was unaware at the time that he hadn’t secured a contract for the exchange, so he lost the deal and we couldn’t close on the property here. A small down payment and a contract would have secured the property and the transaction would have gone smoothly.
Moreover, the tenants were a bit shaken at the time, knowing that we were selling. I say, “live and learn.” This time around we prepared the tenants way in advance; but it was still upsetting to them, since they had been there for many years.
But they were all able to find places, so it should be smooth sailing to the closing. Now he just wants to sell and take his proceeds down to Florida, where he currently resides. He is resigned to the fact that he will have to pay capital gains. G_d only knows the U.S. government needs the money!
So as a tenant, you have to be aware and cognizant of the landlords plans and maybe you may want to make him or her aware of the fact, that you might consider purchasing the two family, single family or whatever you are living in by having a “right of first refusal” as part of the lease.
There are ways to structure the purchase, so it can be a win/win situation for both tenant and landlord. I have been involved in a number of transactions over the years structuring these type of sales.
So if you are contemplating or are already renting, you should analyze the long-term effect (15-20 years) of ownership to determine the benefits and any detriments versus renting. Those that still decide to rent, will never experience a stable monthly cost as a mortgage will provide.
Although there are costs to ownership, taxes, maintenance; the landlord has the same costs and he or she over the years will pass those costs on to you as increases in rent, while at the same time, you paying down his/her mortgage.
Also, as the demand for rentals increase for those who choose that path, it’s a supply and demand economics environment, and rents over the long run, will never go down, but continue to increase.
However, a mortgage is what I call a fixed lease for 30 years. How comfortable would you feel if you knew your landlord would keep your rent fixed for that length of time? I imagine you would probably be pretty ecstatic about that, right?
But, here the banks are offering you this situation and I don’t totally understand why more renters, don’t become purchasers. Maybe, some cannot afford to buy here, so I say, “move out of New York to a place where you can afford to purchase.
There are plenty of states where prices and real estate taxes are considerably lower. It all depends on what you qualify for; so you should be talking with a lender (we can help you to relocate and with a lender too).
Yes, I know family, job and other reasons might be keeping you here; but realize your financial future in creating wealth over your working years (and having an enjoyable retirement) will be reduced, by forking over your hard earned dollars to someone else, increasing their bank account and not yours!
Even if you have to live with relatives to save a bit more for your down payment to leave your rental, do it! You will not regret it! There are always cycles in real estate and we are seeing a little bit of softening in the market, so prices will not be increasing at the same pace and will become somewhat more normalized.
However, if you can purchase now, grab the lower interest rates, for they will continue to increase over the next 2 years and the cost of waiting will be greater, than even if prices were to decrease, where you think you will save; but I don’t see that happening for many years, until we have over seven-plus months of inventory.
Lastly, when George Washington was president an average home was about a $1,000, that same house today is $1,000,000-plus depending on its location.
Although that was 242 years ago, things have multiplied at a quicker progression over the last 30 years. Can you imagine prices doubling in another 30 years? The jury is out and only time will tell!
Philp A. Raices is the owner/Broker of Turn Key Real Estate at 3 Grace Ave Suite 180 Great Neck. He has earned designations as a Graduate of the Realtor Institute and a Certified International Property Specialist. Receive regular free”updates of sold homes in your area and what your home would sell for in today’s market or search on: WWW.Li-RealEstate.Com He can be reached by email, at: Phil@TurnKeyRealEstate.Com, or by cell: (516) 647-4289.
