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G.I. Lawrie Lawrence-(704) 994-8641

By G.I. LAWRIE LAWRENCE, Realtor | Broker in Mooresville, NC
  • Millennials and the American Dream

    Posted Under: Home Buying in Mooresville, Home Selling in Mooresville  |  September 19, 2014 7:23 AM  |  5 views  |  1 comment

    Based on a report released by The Demand Institute, Millennials and Their Homes: Still Seeking the American Dream:

    • In the next five years, 8.3 million new millennial (Gen Y) households will form. It is predicted that millennials will spend $1.6 trillion on home purchases and $600 billion on rent.
    • The generation is optimistic: 79% expect their financial situation to improve and 74% expect to move within the next five years.
    • Gen Y wants to own. Similar to other survey findings, 75% believe home ownership is an important long-term goal and 73% believe ownership is an excellent investment. 24% already own their home and an additional 60% plan to buy a home in the future.
    • Looking forward: when they move, they will want more space and they will move to the suburbs to start families.
    • 88% own a car, and they are open to moving locations where grocery stores, restaurants, and retail is within a short drive vs walking distance.
    • 44% do think it would be difficult to qualify for a mortgage, and 69% would consider lease-to-own approaches to home buying.
    • The data is based on a survey of more than 1,000 millennial households (ages 18 to 29).
    • Check out http://demandinstitute.org/sites/default/files/blog-uploads/millennials-and-their-homes-final.pdf to view the entire report.

    By:  Jessica Lautz

  • Get a Discount on Your Mortgage

    Posted Under: Home Buying in Mooresville, Financing in Mooresville, Credit Score in Mooresville  |  September 19, 2014 5:05 AM  |  17 views  |  No comments

    Lending giants Bank of America Corp. and Citigroup reportedly will offer mortgages at discounted rates to stir more lending among low-income borrowers and those with subprime credit histories. The loans will be originated through a program by the Neighborhood Assistance Corp. of America, a national nonprofit group that primarily assists low- to moderate-income borrowers.

    Credit Standards Easing

    Under the new program, the discounts, which will be offered on fixed-rate mortgages, will be greater than what banks usually reserve for borrowers with high credit scores, significant assets, and large down payments. To get the discount in the new loan program, the borrowers will have to pay mortgage points, which are upfront fees that lower the interest rate on a mortgage.

    For example, if borrowers pay a mortgage point — which is equal to 1 percent of the total loan amount taken — they typically receive a discount of 0.25 percent on the mortgage interest rate. However, under the new loan assistance program, the banks will offer a 0.5 percent discount for a single mortgage point.

    NACA, the originator of loans under the program, doesn't require borrowers to have down payments or to pay closing costs. It also approves borrowers for mortgages as soon as 12 months after a default on a loan. NACA conducts in-depth reviews of applicants' payment histories and requires income and asset documentation, according to CEO Bruce Marks.

    The banks' move to work with NACA follows on the heels of a $16.65 billion settlement reached by Bank of America with government regulators in August, as well as a $7 billion settlement Citigroup reached in July. The settlements were reached following accusations that the banks sold risky mortgage securities during the run-up to the housing crisis. Neither bank admits to wrongdoing. But the settlements do require that the banks assist struggling home owners, such as lending to low-income borrowers.

    The banks, however, say that their decision to issue NACA loans isn't related to the settlements.

    Source: “Citigroup and Bank of America Offer Mortgages with Discounted Rates,” The Wall Street Journal (Sept. 16, 2014)

  • Home Sales Generate $52,205 Impact on Economy

    Posted Under: Market Conditions in Mooresville, Home Buying in Mooresville  |  September 18, 2014 1:15 PM  |  24 views  |  No comments

    The National Association of Realtors (NAR) compiled data from research conducted by the Bureau of Economic Analysis & Macroeconomic Advisors on the economic impact of a home purchase.

    After reviewing the data , they concluded that the total economic impact of a typical home sale in the United States is an astonishing $52,205.

    Here is the breakdown of their report: 

    Economic Contributions are derived from:

    • Home construction
    • Real estate brokerage
    • Mortgage lending
    • Title insurance
    • Rental and Leasing
    • Home appraisal
    • Moving truck service
    • Other related activities

    When a House is Sold in the United States:

    $15,912 of income is generated from real estate related industries.

    New homeowners spend an additional $4,429 on consumer items such as furniture, appliances, and remodeling.

    It generates an economic multiplier impact. There is a greater sense of community associated with owning a home; therefore there is greater spending at restaurants, sports games, and charity events. The size of this “multiplier” effect is estimated to be: $9,764

    Additional home sales induce additional home production. Typically one new home is constructed for every 8 existing home sales. Therefore, for each existing home sale, 1/8 of new home value is added to the economy, which is estimated in the U.S. to be: $22,100

    When you add the numbers up it comes to $52,205!


  • Obama administration making more big promises on housing

    Posted Under: Home Buying in Mooresville, Rent vs Buy in Mooresville, Investment Properties in Mooresville  |  September 18, 2014 12:12 PM  |  29 views  |  No comments

    U.S. Department of Housing and Urban DevelopmentSecretary Julián Castro will join Department of Agriculture Secretary Tom Vilsack, Department of Transportation Secretary Anthony Foxx, Senator Bob Casey of Pennsylvania and Congressman Gary Peters of Michigan for a press call Friday at 11 a.m. ET to discuss the next round of Promise Zone applications.

    Promise Zones are part of the Obama administration’s plan to create a new pathway to the middle class by partnering with local communities and businesses to create jobs, increase economic security, improve educational opportunities, and reduce violent crime.

    In January of this year, the White House announced the first five Promise Zones located in San Antonio, Philadelphia, Los Angeles, Southeastern Kentucky, and the Choctaw Nation of Oklahoma.

    When the first five Promise Zones were announced, then-HUD Secretary Shaun Donovan said the effort will integrate housing, education and crime relief efforts, and bring together local community leaders with businesses through tax credits, coordinated by federal oversight.

    "This is a sharp departure from the way the government provided aid in the past," Donovan said at the time. "Washington would swoop in and impose solutions without working with local leaders to support their visions and strengthen all assets needed for communities to thrive.

    "We want to bring together a wide variety of stake holders to better communities. Home is the foundation of all of our lives. Now we are going to connect housing with other efforts to expand opportunity."

    During the Friday call, Administration officials will discuss the progress being made in these areas and discuss the next steps for bringing similar success to high-poverty communities across the country.

    HousingWire will have the coverage and will live tweet the event.

    By:  Trey Garrison
  • The 7 Deadly Pitfalls that Threaten Real Estate Investors

    Posted Under: Home Buying in Mooresville, Investment Properties in Mooresville  |  September 18, 2014 11:12 AM  |  25 views  |  No comments

    Strategic real estate investments have resulted in some of the world’s most renowned multi-billionaires.

    Real estate investors benefit from rental income, capital gains, leverage, tax incentives and inflation resistance. Still, investing in the industry requires immense prudence in order to overcome the huge risks involved.

    Here is a look at some of the biggest pitfalls that investors must avoid.

    7 Pitfalls that Threaten Real Estate Investors

    Pitfall 1: The Lure of the Décor

    Appearances can hide the reality from the view of the real estate investor.

    This is why many investors fall for the home’s decoration instead of the actual condition and location of the property. Investors should check the structural condition of the property and conduct meticulous appraisals to establish the actual property value and the potential gains they can make from the homes. The temptation to invest in a home because of its decoration is big mistake that must be avoided.


    Pitfall 2: Imprudence with Auctions

    Real estate investors must usually stick to their investment budgets if they are to make their target profits. Many prospective investors, however, are carried away during auctions and stretch their budgets beyond their plans.

    This is a huge mistake.

    Judicious real estate investors know that auctions are closed by the final bids, and they are never swayed by seemingly lucrative opening bids to make offers that are beyond their budgetary plans. Moreover, prudent investors guard their finances and avoid any auctions that go beyond their budgets. When the bids go beyond their specified budgets, they pull out and turn elsewhere for investment property options.


    Pitfall 3: Falling Prey to Agents

    Real estate agents usually seem to know everything in the market. They have mastered persuasion tricks and express their message compellingly. As a result, many potential investors take their message as gospel truth.

    What many real estate investors may not know is that some agents just want to get some property off their hands and will not present the ultimate truth to the investors. Therefore, investors should know their investment priorities, the kind of homes they are looking for and the property location they are targeting. The investors should, therefore, conduct their own research, understand the market history, explore their neighborhoods scrupulously and make their investments only when necessary.


    Pitfall 4: The Stock Market Approach

    Real estate pays huge profits when the investment takes a longer period of time. Typically, the values of the homes appreciate with time and are more likely to pull higher returns. Nonetheless, some real estate investors are tempted to think that property investment must be managed the way stock markets are managed.

    Such investors buy homes when prices fall and sell them when prices increase, an approach which may result into slim profit margins that fall short of the investors’ targets. In actuality, real estate investors should act with patience and only sell their property when the targeted profits can be made.


    Pitfall 5: Buying Property Sight Unseen

    Buying homes without inspecting them is a mistake made by many investors. The results are usually dire.

    In these cases, real estate investors may be likely to choose homes because of deluxe appearances and not the actual condition or location. Making property choices before seeing and inspecting them can result in massive losses in the long run. Therefore, regardless of how much the real estate investors trust their acquaintances and agents, they should visit the property and conduct inspections before spending their money.


    Pitfall 6: Ignoring Agents

    While real estate agents may  not give you the full story at times, the information and support they provide is extremely necessary for prudent investments.

    Agents understand market history and trends, offer reliable networks and know how to inspect property. Therefore, even after real estate investors find lucrative property deals online or through acquaintances, they should contact their trusted agents for counsel. Working with trusted agents can help dig out crucial information about property offers on online shops.


    Pitfall 7: Disregarding Professional Inspectors

    Professional inspectors can help to inform real estate investors about the actual conditions of their prospective property and to help them make informed choices. Besides, the inspectors can offer precise estimates of how much needs to be spent on property renovations.

    While some investors think that disregarding professional inspectors can help them to save money, the reality is that they can lose huge sums when they do not act on correct information. Indeed, it is a mighty investment mistake to disregard professional investors.

    By:  Gerald Harris

  • Wells Fargo says getting a mortgage is easier than some think

    Posted Under: Home Buying in Mooresville, Financing in Mooresville  |  September 17, 2014 5:16 AM  |  37 views  |  No comments

    Wells Fargo & Co. says people may be over-estimating the challenges of getting a mortgage these days.

    The nation's largest mortgage lender worked with Ipsos Public Affairs to gauge how Americans view home ownership. The San Francisco-based bank said the survey findings suggest several misconceptions about financing a home, especially around down-payment requirements and credit scores.

    In the wake of the housing bubble, when getting a mortgage largely required just a pulse, lenders raised the bar on getting a mortgage. (Anyone who has taken out a mortgage in recent years will know that's an understatement.)

    By:  Mark Calvey

  • 4 Arguments for Investing in Real Estate AND Notes for Retirement

    Posted Under: Home Buying in Mooresville, Investment Properties in Mooresville  |  September 16, 2014 12:08 PM  |  39 views  |  No comments

    It’s entertaining to watch them slowly transition into complete discounted note evangelists, at which point they wonder why they even own as much income property as they do.

    I usually tell ‘em to pull back on that throttle a bit. :) 

    Here’s an incomplete list of reasons why I would advise clients to stay invested in both real estate AND notes.

    4 Arguments for Investing in Real Estate AND Notes for Retirement Income

    1. Multiple sources of income is rarely a bad idea because it is more secure — and more fun.

    The vast majority of those I advise arrive at retirement with two or more income sources.

    Sometimes the same vehicle is wrapped in more than one ownership “envelope.” For example, you might own notes in both your name and a qualified retirement plan like an IRA or 401k, be it traditional or Roth in nature.

    Related: How Has Your Retirement Plan Been Workin’ Out For You Lately?

    The only practical differences between the notes you and your plans own are tax issues and when the income becomes available. When you own them, the income is available from the first payment on. You’ll pay taxes on the received interest at the income tax rate you pay at work.

    If your plan(s) own notes, the payments aren’t taxed as long as they remain inside the 401k/IRA. If any of them are Roth, they’re not taxed as they come out either, as long as you didn’t take the income out before the regs allowed it. That’s almost always 59.5 years old, with rare exception.

    NOTE: The infamous 70.5 year birthday on which the government then begins forcing you into taking more income (read: your principal) doesn’t apply to Roth IRAs. It applies to other Roth plans, and yeah, I know it makes no sense.

    But that’s why I have investors transfer from say, a Solo 401k (Roth) to a Roth IRA before they reach that “deadly” age. As a rule I like to have them do it annually or at least every couple years. It’d truly suck like a Dyson if they’d waited ’til the last date only to find the government had changed the rules in the middle of the game. Would they do that? :)

    By having more than one source of retirement income – each source independent of the others – the investor can afford to feel a bit more secure if Murphy visits the economy (or you personally). Typically the various sources provide their own solutions to acquiring cash, dealing with downturns or outright emergencies. Having multiple income sources allows more options when dealing with urgent cash needs or taking advantage of new opportunities.

    Keep in mind the BawldGuy Axiom: The one with the most options wins.

    2. Though note profits are built in, they don’t tend to appreciate the same way real estate does.

    They can, and I’ve seen their value increase over the price I’ve paid, which allows for a profit merely by reselling the note. I know, cause I’ve seen them do it. Generally though, that’s the exception and not the rule.

    The built in profits created when buying discounted notes secured by real estate aren’t the same as profits generated while investing in real estate. That is, the appreciation of real estate value can far exceed the built-in value “appreciation” of discounted notes.

    Here’s what I mean.

    If you buy a note with an unpaid balance of $100k for a price of $75,000, you’ve made a total of $25,000 profit, when the note eventually pays off in full. VERY simply put, you made just over 33% profit, when only principal in and principal out is measured in terms of yield.

    However, if you put that same $75,000 into an income property valued at $300,000, there’s no “built in” profit. If over time the property experiences some consistent rise in value due to market appreciation, profits materialize. Furthermore, due to your 25% down payment, every 1% of value appreciation is really 4% capital growth for you. 1% of $300,000 = $3,000. $3,000/$75,000 = 4%.

    For example, if that property rises in value for 3 consecutive years at the annual rate of 8%, the value would then be around $378,000. Even with selling costs of roughly 8%, your profit remains nearly twice that of the note. That doesn’t even take into account the fact that the note is far more likely to take longer than 3 years to pay off.

    Notes will generally have a higher cash on cash return than will real estate. This assumes the investor hasn’t compromised location quality for the mirage of higher cap rates, a common mistake.

    3. If significant inflation rears its ugly head, having real estate makes you less vulnerable to the lost purchasing power of the dollar.

    This is owing to the fact that both real estate prices and rents have shown a propensity to “track” inflation. Put more simply, property values and rents tend to rise along with inflation. We like that, right?

    When inflation strikes, our buying power weakens.

    When in the 1970s we saw double digit inflation for several years, we were all forced to batten down the hatches. Our family budgets suffered big time.

    Related: Investing In Real Estate Is Better For Retirement – PERIOD!

    The silver lining, though, came from income property values and rents. Since they’ve historically tended to track inflation, more or less, real estate investors were able to increase their overall cash flow per month. For example, San Diego duplexes sported values in the mid 70s of around $30-45k, give or take. By 1981 duplexes were selling at $100,000 and more. Inflation had been the real estate investor’s friend. Since the interest rates were fixed, the increase in rents over those inflationary years went almost completely to the bottom line, i.e. cash flow.

    Moreover, once things returned to a relative “normal” around 1984 or so, those duplexes were sold or exchanged for up to triple their original purchase price — and much more by the end of that decade.

    You just ain’t gonna get that while in notes. At least I haven’t. What those investors often very happily learned was they didn’t need to sell if refinancing was a better option. Since their $25,000 duplex loan balance was now representing a mere 25% LTV (loan to value), they could pull a whole bunch of cash out on a refi, which the vast majority of the time isn’t even a taxable event.

    Yep, inflation is a nasty intruder, but it does float real estate prices and rents along with it.

    4. If the investor owns notes in their own name, they can then combine the strategies of notes and real estate synergistically.

    That is, the after tax monthly note payments can be applied to debt reduction on the RE part of their investment portfolio. Doing this allows the investor to multiply their holdings of BOTH vehicles more rapidly than would otherwise be possible.

    The ability to combine 2 or more strategies synergistically can increase potential retirement income and/or net worth. Many find themselves able to accomplish both. Furthermore, they learn they are able to reap the benefits sooner, sometimes remarkably sooner than if they hadn’t executed multiple strategies simultaneously.

    Here’s an example.

    You own a couple 1-4 unit residential income properties. They each have $100,000 loans on ‘em, payable at 5% fixed rate interest. What if you spend that $50,000 cash, which is now burning a hole in your Levis, for notes instead of more real estate? What might you accomplish?

    An example scenario.

    Let’s say your 2 props are cash flowing at $150/mo each. Your new note(s) are spinning off monthly pre-tax income of roughly $500. Due to state/federal income taxes, that $500 note payment turns into a whole buncha $350. Likely more, but let’s err on the conservative side. That means each month, between real estate cash flow and after tax note payments you have around $650/mo to add to one of those prop’s loan payments.

    Here’s what would happen.

    I assumed the beginning loan balance was about $105,000, and had been paid down to around $100,000. If they apply the above $650/mo to the balance of one of those loans, the investor will have free ‘n cleared that property in approximately 8.5 years. That, my friends is synergy in action in real life — and real time.

    Now, for sure there are virtually an infinite number of scenarios to ponder. If those scenarios don’t include notes? The guy without the notes will not end up with nearly the net worth or cash flow of those who sported real estate AND notes.

    I don’t have time to do the numbers, but common sense and decades of experience have shown me that the second loan will be paid off FAR sooner than another 8.5 years. In fact, my guesstimate would be another five years or less.

    There are a few reasons for this. During the 8.5 years the other prop’s loan balance was still being systematically reduced by its monthly payment. In fact, its balance would be just over $81,000 the day the other loan was eliminated completely. Then there’s the increased cash flow of the newly free ‘n clear rental.

    In other words, not only would the beginning balance be nearly $20,000 less at the start, but the extra amount added each month would be appreciably larger. The wild card, of course, would be whether or not one of the originally purchased notes had paid off. If it/they had, that means the investor would’ve taken the after cap gains tax bucks and bought more notes with higher monthly payments. See how this works?

    Meanwhile, back at the ranch, this approach has produced a new page of options the investor didn’t have before. These options will have the power to allow the investor 1-3 more “cycles” of this synergistic strategy. A cycle is the time it’d take to refi the now debt-free rentals, buy more notes, then take the cash flow and after tax note income, combined with previous note income from original purchases.

    Rinse ‘n repeat a few times, and find out how much real estate and note income can really be created.Compared to the real estate only school of thought, the investor with real estate and notes will likely end up with 1.5-4 times the retirement income than the one using real estate alone.


    As I said earlier, that’s a woefully incomplete list, but they cover the major concepts and principles involved.

    Though this post barely scratches the surface as to what’s really possible, I hope it’s opened a new door for you to at least explore.

    By:  Jeff Brown

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