Answers in Real Estate

Real estate investing involves the purchase, ownership, management, rental and/or sale of real estate for profit. Should I refinance now or later? Should I invest in real estate backed securities? Read on for popular real estate questions.
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It is called a Good Faith Estimate. It will show all costs involved with the loan which will be mostly accurate while some costs are in fact estimates. It is however a very good guideline for which the lender will be held to.
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Rose, it is best you seek legal counsel from a licensed attorney in your state. Each state has different rules on the division of assets, especially when it comes to real estate. Considering the investment you have made in the home, hiring and attorney ...(more)
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Edwin, Some states, like Maine, have first time homebuyer grants (Maine's gives $3,500). You may want to look into whether or not Florida has such a program. Even though you own a house, if you spouse does not appear on the deed or it has been 5-years ...(more)
1 vote
John Essigman Level 17
Hi Colin, I would agree with Curtis … you can always pay more on your mortgage if you choose to do so. However, should some emergency or calamity befall your family, you will not be able to pay less if you are locked into the 15 year mortgage payments. You ...(more)
15 votes
Hello Colin, Congrats on the impending home purchase. If I were in your shoes I would consider a couple of things before making my final decision. Can you afford the 15 year payment currently, if one of you lost employment, became disabled etc.? Are ...(more)
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I don't understand, if it is a second home, how would you be a first time homebuyer?
2 votes
Hi George, Your first question: 1) Can I use the proceed from the sale to invest in the other property. I recommend confirming it with your tax preparer but my understanding of 1031 exchanges is that it cannot be used to improve an existing property ...(more)
1 vote
Hi George, Rental property can be somewhat tricky. For starters, have you checked comps for similar properties in the area? You may find that this site can provide you with more insight into homes in the neighborhood where your rental property is located: ...(more)
1 vote
Cyril, you've received some outstanding advice from the advisors above. You can always view a house purchase as investment diversification away from the stock market also, and historically a fair inflation hedge too. Good luck.
3 votes
Hello Mike, I concur that the 401(k) loan is probably the better of the options. Check with HR before you get too far ahead of yourself, though, because every plan document is different and your 401(k) may or may not allow loans. Also, beware that you ...(more)
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Mike - it is important to note that if you want the $10,000 exemption you must roll the money from your 401k plan TO an IRA and then take it out...no home-purchase exemption applies to 401k withdrawals. Regarding a loan...first of all, not all plans ...(more)
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Mike, You can withdraw up to 10,000 from a 401k or an IRA and not be subject to the 10% penalty for an early distribution if you are purchasing a home , however you would be subject to ordinary income tax on that withdrawal . You may want to consider ...(more)
1 vote
It is not a very good place to get money to buy a home. For some strange reason, the IRS allows first time homebuyers to withdraw up to $10,000 without penalty - but this exception does not apply to qualified plans such as your 401k. This means you ...(more)
2 votes
John Essigman Level 17
Hi George, Before we inquire about capital gains… do you have a long-term gain, short-term gain, and how large is it? When did you buy the rental property and what is your cost basis. There has not been much noise recently about 1031 exchanges given ...(more)
1 vote
Thomas Larsen Level 5
The answer to the question is not either/or. It is both, if you are talking about your primary residence. The home should be a place to cook, sleep, and tuck kids into bed first, and an investment second. If you have a down payment shortfall for your ...(more)
4 votes
Cyril, I think your questions has a short term and a long term answer. Short term it would be better to save and buy the house, long term with the power of compounding you would be better off saving for retirement. I think James is right sitting down ...(more)
2 votes
This depends to some extent on your circumstances. If you can buy a house that you will be comfortable in for a long time (at least 5 years), then it is beneficial in my view to get that ball started sooner rather than later. Plan to buy enough to be ...(more)
1 vote
John Essigman Level 17
Hi Cyril, Agree with Peter but only to a point. Having savings and investment dollars both inside and outside of a qualified (401, IRA, etc) will provide some flexibility. Certainly continue to max out your 401(k) match but don’t do more than that as ...(more)
1 vote
Peter Cacioppo Level 16
Put maximum into the 401k since you will then pay less income tax. Then save for a house if; A.,you are buying in an area that should show increases in value over the next 10 years, and B.,you will be in a house for at least 3 years. Consider getting ...(more)
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In the most simple terms, you are paying $3200 in points in exchange for $800 less interest per year (although this savings will drop each year as the principle balance of your mortgage drops). I am assuming 5.50% vs. 5.00% on $160,000 ($200,000 less ...(more)
2 votes
John Essigman Level 17
Hi Ariana, Your question is not clear… How much would you save as compared to what? Are you saying that your mortgage is being offered at 7.5% and you can buy that down to 5.5%? Or are you saying you can buy it down from 5.5 to 5%? At what cost… ...(more)
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Tunc Tanin Level 10
While Kiplinger and Money magazine's used to say that it is a good idea to shorten your mortgage, then the rates were much higher. Also you may be able to afford it now,, but can you afford the extra payment in the future. One problem with paying off ...(more)
1 vote
Like everyone else, I'd discourage you from borrowing against your 401(k) to buy a house, since doing so will set you behind in your retirement savings. Plus, there's always the risk you'll get laid off, at which point you either need to pay back the ...(more)
1 vote
Tunc Tanin Level 10
The biggest risk with 401k loans is that if you loose your job the next day, you may have to pay back the amount in full sometimes within 30 days. Another issue to consider is that if you die the loan may have to be paid back right away, otherwise it ...(more)
1 vote
Not a big fan of this at all. Not only for the reasons mentioned above but you also lose the compounding interest of that money which defeats the purpose of having a 401(k). I would wait on the home purchase if this is the only way you are going to ...(more)
1 vote
Urban C Fleming Level 8
Elgin, You can borrow the smaller of your vested share or up to 50,000. They will charge you interest on what you borrow (ask your HR department what the rate is). The term for a home purchase may be around 15 years. The risk you take when borrowing from ...(more)
2 votes
I'm generally not in favor of 401(k) loans. Remember, the money in your 401(k) is pre-tax and you will be repaying the loan in post tax dollars. Basically, the money you use to pay back the loan (and interest) will be taxed twice. Also, if you leave ...(more)
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I am not a fan of the bi-weekly mortgage programs offered by banks. You can, as others have indicated, create the same payoff schedule by simply sending extra principal payments with your mortgage payment each month. That is, if your goal is to pay your ...(more)
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Tina, I have had a few clients do what you are thinking about doing over the years and it has never worked out as they expected. Borrowing from your 401k should be an "emergency only" action. Unfortunately, once money goes into a 401k, you lose a great ...(more)
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This is a really bad idea for the reasons others have given. Let me add another reason: real estate is not a liquid investment and you have very little in emergency money. If it does not rent immediately, or the renters fail to pay on time, you could ...(more)
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