Roadmap with Irina - June 2022

Hi <<First Name>>, 

Hope that the summer started very well for you. 

In the past few weeks, real estate market activity noticeably slowed down. The reasons are the same: growing interest rates that are over 6% now, and the stock market continues to go down. The Federal Reserve has been steadily raising interest rates, and indicated the trend will probably continue for the foreseeable future.

How do rising interest impact buyers? For every 1% increase in the interest rate, buyers’ buying power decreases by approximately 10%. For example, for buyers who were preapproved for a $2 million loan on a $2.5 million house, as the interest rate goes up, they would only qualify for a $1.8 million loan, no longer able to qualify to buy that house. Since they cannot qualify to buy this house, they either put their buying plans on hold or start looking for a more affordable house. And many buyers in Silicon Valley use their stocks for their down payment, so now they don’t want to sell and lose money to invest in a house.

I still think that now is a great time for buyers. Why? The competition is much lower: each sold house receives 1-4 offers that are close to the asking price. The average days on market are 22-25 days at the beginning of June, so the longer a house stays on the market, the more chances that it will be sold at the asking price or lower. If 6-7% for a 30-year fixed loan is too high for you, consider taking out a 7- or 10-year ARM. It is not as scary as many people think: interest rates for these types of loans are lower, and you will have a few years to refinance when the rates go down.      

Don’t forget that houses closed in May were sold in April, so this table below reflects market activity in the previous month.

Nobody knows when the real estate market reaches the top or hits the bottom until it starts to go in the opposite direction. If you think that this is the right time for you to buy or sell, maybe it is the right time. Let’s connect, talk about your options, run some numbers, and see if this is the right time for you. I am always here for you.
 

 

For many people, owning a home is a lifelong dream. For others, owning a second home can be just as important. There are a variety of reasons people have for purchasing a second home—as a family getaway, as a transition into retirement, or as an investment property for added financial security. Whatever your reasons, it’s important to understand a bit about the process as you begin your search.
 
Financing a second home
In many ways, financing for your second home works the same as financing for your primary home. Homeowners can have up to four homes financed through conventional mortgages, so you may want to reach out to your current lender in order to see what options they have available. In some cases, you have to provide a larger down payment for a second property, and your lender may also require a somewhat higher credit score.
If you have a great deal of equity in your current home, you may be able to tap into it through a home equity loan or a home equity line of credit (HELOC) in order to put together the funds you need to buy your second home. Talk with your lender about how this will affect your credit and your underwriting process.
If you decide to split the cost of your second home with trusted friends or family members, you will want to enlist the help of an experienced real estate attorney. He or she will create an agreement to designate how the home’s ownership will be structured in order to ensure that all of the property owners are protected in the event that one of them experiences an unforeseen illness, job loss, or financial reversal.
 
Property management for a second home
Whether your second home is around the corner or across the country, it can become difficult to manage. This is especially true if you are using your second home as a rental property, since you will have to take on the responsibility of finding and screening renters, maintaining the home, and making any needed repairs. In order to simplify second homeownership, you may want to enlist the services of a property management company.
If you are using your second home as an investment property, your property manager can take on all of the day-to-day landlord tasks that you either don’t want to do or don’t have time to do. They can set up systems and processes for collecting rent and fielding inquiries from tenants.
If you are using your second home as a vacation home, a property manager can still be a great idea. This is especially true if your second home is located in a market that is far away from your primary home. A property manager can shovel snow, cut grass, or pick up debris from a recent storm. In addition, some home management companies that focus primarily on the vacation home market offer amenities like grocery delivery, maid services, and other value-added options that make it a pleasure, rather than a chore, to stay at your property.
These types of services can be especially helpful if you share your vacation property with friends, family members, or co-owners. By ensuring that upkeep, maintenance, and cleaning services are completed on a regular basis and in a consistent way, you’ll experience less conflict and frustration.
 
Investment options for a second home
If you’re buying your second home primarily as an investment vehicle, it is important to talk with your attorney and your tax adviser. Owning an investment property can have both benefits and drawbacks, so make sure that you know how your investment will affect your particular financial situation.

Short-term
Short-term rentals include those conducted through local rental companies or through online platforms like Airbnb and VRBO. Rentals may be as short as overnight or you may require a longer stay of weeks or even months. Short-term rentals are especially popular in resort areas, coastal areas, or in areas with a large number of tourists.
One of the advantages of short-term rentals is that you can reserve the use of your home for part of the year in order to host friends and family or for your own vacations. This offers you the best of both a vacation home and a rental investment. It may be wise to consider reserving your second home for personal travel during the off-season, in order to maximize your return on investment.
In some neighborhoods with strict Homeowners Associations, buildings with strict co-op boards or condominium associations, and even in some cities and counties, you may be unable to rent out your investment property for short-term stays. Check to ensure that there is no pending legislation in the local municipality and that there are no HOA, condo, or co-op regulations currently in place.

Long-term
Long-term real estate investment—sometimes called a buy-and-hold investment strategy—involves longer leases, generally of a year or more. You may choose, for example, to purchase your retirement home at today’s rates, then use a few years of rental income to offset its cost and pay down the mortgage. Alternatively, you may buy a nearby home, rent it out, use the income to cover the mortgage, then collect additional income once the property is paid off.
Real estate investment can offer a number of tax advantages, both when you file each year and when your heirs inherit your investment properties. As always, it is a good idea for you to consult with your attorney and your financial advisor to find out if a long-term real estate investment strategy is a good choice to help you meet your financial goals.

If you are considering buying a second home, whether in town or in a distant real estate market, begin the conversation with your trusted real estate professional.

Marriage is a serious step for anyone, and you need to be ready for that physically, mentally, and financially, and usually, it happens when you are 25+ years old. But there are exceptions. I am super happy to announce that this month I officially became a mother-in-law. Well, it’s a little too early for me, but it is just in time for the newlyweds. My son is 20, and his wife is 19, but they are much more mature than you think.

They met over 6 years ago and had many opportunities to see each other in different situations: traveled with groups of friends and our families, danced at school events, volunteered together, helped each other with homework, skied, hiked, camped, etc. They managed to maintain a close long-distance relationship when my son was in university in Arizona, and she was still a high-school student here. One day they decided that they want to spend the rest of their life with each other and get married. These two have such unique and deep relations that my husband and I supported their decision without any doubts. I like the girl and her family a lot, and over the years our families have kind of blended, so it was an easy decision for us. We had a small and beautiful ceremony in a Russian Orthodox church and then a fun celebration in a country park. Time flew by and I think we didn’t have enough time to enjoy and experience the great event.

My son lived a very independent life before, and I got used to the fact that he lives somewhere else, but now I finally realized that he is not coming home for a school break or vacation, he has his own home now. It’s a bittersweet feeling to let him go, but I am happy for him.  So this is not just them starting a new life together, but also a new chapter in life for me. I have a great example in my mother-in-law and hopefully, I will become a good one too.

I wish the new family to live happily ever after and overcome all obstacles on their way together. In case they need anything, we are just one call away. God Bless you, Polina and Georgiy! 

Always yours,
Irina