Category: U.S.homeGtmp

earn^ pay-rent ^ pay-mtg

Posted on by tiger40490

U.S. gross rental yield is usually higher than Singapore, for a comparable location. Therefore, compared to China or Singapore, it’s more important for U.S. residents to earn rental and avoid paying rental. When you rent out, the pTax burden is transferred to tenants.

I have always believed that “mortgage expenses are investment-like but rent expenses go down the drain”. This is esp. true in a (gradually) rising market.

Imagine you pay mtg interest just to hold the property, with only 5% of your monthly payment going towards 0.1% of the principal, and you rent out the home? This payment is similar to pTax. Virtually you are paying a rent to hold the asset hoping to benefit from appreciation and rental income.

How about a co-op, assuming sublet freedom? The coop HOA is just like the “rent” I described above

[16] buy 1st family home]U.S. #no hurry

Posted on by tiger40490

[1] 43R model suggests a low-price high-yield rental property. With that I can live rented or buy a family home

Rental as percentage of purchase price(i.e. gross rental yield) is high in NY and other part of U.S. so it’s better to buy rather than rent [1]. However, presumably in Chinese-like locations, leasing is probably cheaper than buying.

Holding a REIT with 6% yield, I can possibly delay the purchase by a few years.

My initial priorities:

Bargain —- let’s define the meaning. We find out the current asking prices and last transaction prices. Then we wait for something significantly cheaper. This is possible because the unit we like may not be favored by 90% of the buyers.

Budget —- default 300k. Only for a great bargain would I exceed that. Down-payment 50-100k. I can’t afford a heavy monthly commitment, given my single income.

The basic plan —- within 2 (not 4) qualifying locations for a family home (not rental property), wait for bargains in various categories. I guess the most affordable category would be a 1BR apartment or small wood house.

Before my son comes over, we could rent …. near a reasonable middle school and see how he fares.

Before high school, as Junli suggested we can buy a small family home (condo?) in a good school district for investment. After kids go to uni, we can sell it. XR, Jack He, grandpa, Bill Pinsky, and Junli had a 2nd suggestion — rent in a school district. See https://tanbinvest.dreamhosters.com/2017/05/13/school-district-tips/

If staying 5Y+ in the U.S. then we should buy not rent — rule of thumb[1]. Perhaps buy a small house near Chinese community first. I plan to buy a U.S. home soon after Cambodia shops.

However, consider the benefits of 43R model 17% GRY  and consider Not buying a family home. Grandpa told me many times that before I settle down in one city, it’s not urgent to buy a home.

Home purchase is a big decision and heavy commitment. Many immigrants pay high rent for many years before buying, so I could wait for 5 years. I’m not like some families with no property, so my rent outlay is offset by my rent income. So here a let-go attitude is a huge relief.

REIT — (Venkat) as a proxy to owning a property with reliable rental income and good liquidity, so I could buy it early and sell when I am ready to buy a home.

If we decide to wait, then accept the high rent. If we decide to buy, then consider the total cost:

  1. • mortgage burden
  2. • pTax – $8k/year for a 500k home
  3. • maintenance – Most wood houses need lots of maintenance… Condos may also need maintenance and require maintenance fees…

 

Mike Yin’s input

Posted on by tiger40490

NY upper west/east (clean areas) are more expensive ($1400 psf) than JC (typically $1000 psf)

Many cheaper parts of JC are black or unsafe. I may not mind but RD will be affected.

1br is typically 600 – 800 sqf. Smallest studio would be 500 sqf but I hope there are smaller, older ones without lift.

Journal square – only a few spots near the  PATH station are good.

 

U.S.cohorts’property^%%Asia property

Posted on by tiger40490

One thing potentially significant is the upward potential. Look at the Beijing curve and the Singapore curve. The initial increment was more than increment — more like multiplication.

  • AA) appreciation — My SEA investments offer potential for faster, larger appreciation that’s unlikely in a mature market like the U.S.

Familiarity is the opposite side of the coin. The initial increment usually correlates with unfamiliarity to the global affluent investors. BGC enjoys higher valuation partly due to the longer growth track record. U.S. market is familiar to U.S. investors.

Of course there are also risks. Among the risks, these /nascent/ property markets may not take off as Mumbai or Beijing.

  • BB) rental yield

Against the backdrop of these uncertainties, the reliability of rental income looks extremely attractive. This feature is missing from all of my U.S. peers’ property investments I have heard of. Also look at Ashish’s Pune apartment — regular rental income + appreciation.

  • CC) quantum — this factor is even more important to a small investor like me. I don’t have enough cash to buy any of the U.S. properties I have heard of.

Therefore, I feel my overseas properties are superior.

pTax^condo fee

Posted on by tiger40490

In Bayonne, condo fees + tax is comparable or slightly higher as percentage of price, compared to a house in the same location. I feel same for West New York waterfront condos.

Jack He said can be lower in some places. Joe also said “much lower” in his part of white plains.

I hate pTax. It’s like rent. If your kids don’t go to a good school in the district, then this tax has no ROI.

Condo fee feels better. Hopefully it helps reduce my own maintenance $tcost.

 

maintenance effort(hated): house^condo

Posted on by tiger40490

Junli said maintenance cost of a typical house (his area have very few condos) is much higher than an apartment in Singapore.

XR pointed out the difference between exterior vs interior maintenance. Condo fee covers exterior.

  • leaking?
  • flooding?
  • mold?
  • contamination?
  • maintain your own infrastructure for heating, wiring, pipes, antenna?
  • roof,
  • garage can take many hours of clean-up.
  • basement, attic, garage and yard need work and can become an eye sore, contamination and breeding ground for pests.
  • basement, attic, garage are “dark, cold” places I don’t want to go into esp. cold nights.
  • yard is the biggest effort. About 3 hours/week according to Jack He. Junli said it can take many days of maintenance. If you ignore it, it will get worse and worse.
  • I said I would just put concrete over the yard. Junli said sooner or later the foundation will give problems. I guess an old house are more likely to have foundation issues.

mortgage fact-finding with bofa guy

Posted on by tiger40490

I had a long fact-finding discussion with Kenneth Lemus.

  • 1. credit quality

https://tanbinvest.dreamhosters.com/2017/05/06/credit-score-tipsccards/ has his input on credit score.

Beside credit score, as a standard practice mortgage lenders look at 12M rent history. #1 show payment receipts #2 show lease agreement or a letter (signed by both parties) explaining there’s no written agreement.

  • 2. income. They need YTD payslips + last 2 tax returns. (they take the mean.) They only care about pretax income.
  • 3. Expenses. Expense-to-income ratio — 43%. I think lenders only look at your mortgage-related expenses
    1. mtg monthly amt
    2. pTax
    3. mtg bx — can be negotiated. Possible discount if you combine it with car insurance.
    4. PMI — Kenneth said to avoid PMI you need to make 20% down payment, or pay down the outstanding amount to below 80% (if you don’t have the 20% free cash initially). As soon as your equity reaches 20% PMI stops.
    5. condo fees if any
    6. —-
    7. household expenses? They can’t assess
    8. Overseas mortgage? not a concern to lenders.

Lenders also look at last 60 days bank statements. Any big income or expense will be questioned

I gave an example of a 300k SFH. 240k loan. Based on 3%, the monthly is $1011. Property tax is estimated at $7k/year for SFH ($4k estimated for a condo). Mtg bx is estimated at $100/m. Total 1700/m. Even with other debts added, it’s way below 43%

If you buy an “investment” property, the lender would look at everything above + your rent expense

  • 4. mortgage rate

30Y fixed is most popular. However, if you plan to pay off in a few years you can consider 5Y fixed + 25Y variable. The initial fixed rate will be lower.

coop^condo^house, according to Joe31A,Alok..

Posted on by tiger40490

For a 3BR house in a good school district, I may need 700k but a condo can be much cheaper, so I really need to find out the real trade-off.

Joe said coop is most restrictive. You aren’t allowed to make changes inside your unit. Alok said some coop board (“infamous” [1]) members could impose arbitrary rules such as what tenants you can bring in. Source [2] says There may be restrictions on your ability to rent out your condo or to sublet your co-op unit to someone else. It is not uncommon for condominiums and co-ops to prohibit such leases and sub-leases. More seriously, they could block your sale, so the “demand” on your asset could be artificially suppressed.

Condo is lower maintenance than houses. I agree with Joe. I said condo fee is high, but Joe pointed out pTax is lower. [1/2] say condo fees are lower then coop.

Financing — [2] says You can finance the purchase of a condo just as you would any other home (like a mortgage), but with a co-op, you’ll have to find a lender that’s willing to hold your co-op stock as security for repayment of the loan.

Joe felt condo purchase price is between coop and houses. Joe felt condo is the most easily available. He felt houses are harder to find.

http://www.moneycrashers.com/debate-single-family-home-or-townhouse/ points out that when you are away, the SFH would need someone to look after.

[1] http://www.huffingtonpost.com/greg-jacobs/coop-vs-condo-what-you-ne_b_3460551.html

[2] http://real-estate.lawyers.com/condominium-law/the-basics-of-condos-and-co-ops.html

[3] —– http://archive.northjersey.com/towns/co-ops-can-be-just-the-ticket-1.1251251?page=all is the last straw to break all my hopes about co-op:

“Condos sell for more than co-ops; the guesstimate is that each apartment will go up in value between 50 and 100 percent,” she said. That higher value is tied, in part, to the fact there are so many restrictions at co-ops. And that’s the freedom that residents were looking for, she said. Living in a co-op, residents could not get home equity loans, reverse mortgages and second mortgages or buy an apartment in the name of a corporation or a relative. They were strictly limited in renting out their homes, and the co-op board dictated when and how they could refinance their mortgages.

Here is the case of a buyer looking to come into a building with an all-cash offer, no debt and $200,000 in the bank. The co-op board still felt his financials were not strong enough, said Anderson, CEO of the Alexander Anderson Real Estate Group in Hackensack and Jersey City. “The potential buyer was upset, and he wound up renting an apartment, and the seller was upset because it took more than a year and a half to sell,” Anderson said.

 

property appraisals in the U.S.

Posted on by tiger40490

Before you commit to buy a home, you engage your own valuation agent; before the lender approves your loan, they do their independent valuation, to assess the collateral value.

These are two professional appraisal, supposed to be thorough. If something uncovered, they no sale deal. If something shows up long after you buy it, then it’s your own responsibility. You just have to repair it at your own cost.

I told Kenneth (bofa) that a condo unit is less complicated. He agreed.