Tag: real estate

The Cheapest Way to Buy a House: 6 Creative Methods

There are a lot of benefits to renting a home. For example, repairs and upkeep are the responsibility of the landlord. There’s no commitment to staying in one place for too long. There are also no property taxes or homeowner’s insurance to pay unless you get renter’s insurance, which is pretty inexpensive.

But, the cost of renting a home has been on the rise, while the cost of buying a home has leveled off. In fact, it’s a buyer’s market, and purchasing a home is easier than ever.

The thought of investing in a house may seem overwhelming, especially if you don’t have a ton of money saved up for a down payment or if your credit isn’t stellar.

So what is the cheapest way to buy a house? Read on to learn about 6 creative methods and you’ll be on your way to becoming a homeowner.

1. Find a Foreclosure

A foreclosed home is one that has been taken back by the bank because the homeowner stopped paying the mortgage.

More often than not, the previous owner lived in the property until they were kicked out. Also, if they couldn’t afford the mortgage payments, they couldn’t afford repairs either. This means that the home may be neglected.

In addition, many foreclosed homes are sold “as-is”. That means that in addition to needing repairs, they’re left in a terrible state. That’s not always true, but it can be. They are often stripped of all appliances, light fixtures, window coverings, and anything else that’s removable.

That said, foreclosed homes can be one of the cheapest ways to buy a house. The bank just wants their money back, and soon. They’re often willing to sell the home way below market value.

One thing to keep in mind is that if a foreclosed home is in a desirable neighborhood, it might get a lot of bids. If you’re up for the competition, a foreclosed home can be a good choice.

2. Settle on a Short Sale

A lot of people get confused about the difference between a short sale and a foreclosure. They both are homes owned by the bank due to the homeowner’s inability to pay the mortgage.

The difference is that with a short sale, the homeowner was responsible by letting the bank know of their financial circumstances.

The term “short” can be deceiving. Homes that are sold with a short sale often take a long time. The way it works is that you, the buyer, make an offer on the house, which is not always what is still owed. This is why it’s one of the cheapest ways to buy a house.

However, it’s up to the bank to accept this offer. Sure, they’re better off getting some of their money back than none. But banks often take a long time making this decision.

If you’re willing to wait, a short sale can be a great option.

3. Location, Location, Location

Prices of homes vary from location to location within a city. But many neighborhoods that seem less desirable might be the next up and coming locale.

One way to find out is to take a look at businesses that are starting up. If an area of town has a handful of new restaurants, shops, and bars, chances are, it’s a great place to buy. Jump in on a low-priced home before a neighborhood is gentrified.

Another option is to buy further out of town. As you go farther out of the hustle and bustle, home prices tend to drop. You can even get a bigger home for your money. Either way, taking a look at less than prime locations can be one of the cheapest ways to buy a house.

If you’re looking for a home in Florida, view here for some of the best home offers around.

4. Pay with Cash

If you have the money, buying a house with cash can often mean paying less. Some sellers are willing to drop the price if the buyer can pay outright, rather than getting a loan through the bank. You just have a lot more leverage and buying power if you can pay with cash in some situations.

Of course, that depends on the home and the seller, but anything that will give you a leg up when negotiating home prices is the way to go.

5. Consider a Duplex

You may pay more outright for a multi-family home, but buying a rental income property can help pay the mortgage.

In some cases, renting out half the house can pay all of your mortgage, taxes, and insurance, leaving you with a house you live in for free.

Now free isn’t really free. There’s a lot that goes into a rental property, including maintenance and upkeep of two homes and dealing with tenants. In addition, there’s the risk that the other half won’t always be rented. But if you’re up for the challenge of being a landlord, this can be one of the cheapest ways to buy a house.

6. Fixer-Upper Grants

There are a lot of options out there for people willing to buy a house in a developing neighborhood. Look around your city and you’re sure to see areas with historic homes that are falling to ruins with boarded-up windows. These dilapidated buildings are dollar signs for some people.

However, you have to be willing to fix the house up, live in it for a while, and keep it well maintained. If you’re not handy with a hammer, this option might not be for you. But if you are, buying a fixer-upper historic home in a “blighted area” is a great way to buy a cheap house.

Programs like the HUD Good Neighbor Program will allow eligible people to buy a house at a deep discount, as long as you live in the home for three years. They don’t want people who are just going to flip it. They’re creating neighborhoods.

The Cheapest Way to Buy a House

There’s no right answer when it comes to finding the cheapest way to buy a house. All of the above suggestions are options that can help you save some cash.

Many people believe that buying a home is out of their reach, but most of us can find a creative way to be homeowner rather than giving all your hard-earned cash to a landlord.

Owning a home is a big responsibility, but it’s also a great investment. If you take one or more of these options, you’ll be a having a housewarming party in no time.

Buying a new home doesn’t have to be a pipe dream. It can be a reality. Check out more great tips on personal finance.

How to Make the Home Buying Process Nice and Easy as a Single Mom

Are you a single parent looking to purchase a home?

As a single mom, you may feel that you have enough on your plate. Buying a home may feel all daunting, especially when you are daily responsible for your child’s welfare.

Luckily, it is entirely possible to purchase your dream home even if you are doing so solo. Read on for insight into the home buying process for single parents!

1. Know Your Budget

It’s vital to identify your financial standing before you start browsing properties on the market. This means assessing income sources, assets, and current outstanding debt. These numbers will help you ultimately determine your maximum budget for purchasing a home.

If you currently own a home, it may be wise to initiate the selling process sooner rather than later. This can help you nail down your budget even more precisely.

Click here if you’re thinking, “I need to sell my house fast!”

Be realistic when identifying your budget, and be liberal (rather than conservative) when calculating your monthly financial obligations. It may also be wise to check in on your credit score’s health.

A higher credit score will boost your eligibility for securing a mortgage with good rates.

2. Know Your Mortgage Options

As a single mom, you may be heading straight for a conventional home loan. However, single parents are at a disadvantage in that they typically do not have a co-signer (i.e., a spouse or domestic partner).

For this reason, it may be harder to secure a conventional mortgage. Yet you do have options when it comes to mortgages.

FHA and USDA loans, for example, cater to individuals of a certain income bracket within more rural areas of the U.S. VA loans may also be an option if you or your family have served in the military.

You may also wish to consult a lender to learn more about your financing options as a single parent.

3. Ask Friends for Lender Referrals

There’s nothing worse than navigating the home buying process alone. Reach out to family members and friends to ask for lender referrals.

Because there are so many lenders out there, referrals can save you both time and money. After all, your friends have already done the work of finding and selecting a reputable lender if they are current homeowners!

Browse consumer reviews online to learn more about what it will be like to borrow from specific lenders. Prioritize the ones that are reputable, certainly, but also don’t neglect locally-based lenders.

4. Meet With All Prospective Lenders

Once you have your list of prospective lenders, be sure to meet with each one in person (or over the phone). When meeting with lenders, clearly state your needs as a single parent.

Ask the lender for advice about which mortgage may be right for you, and be sure to pre-qualify for mortgages with lenders you like.

Pre-qualification will make the home buying process easier and faster. It will also help you compare rates from different lenders.

5. Work With an Agent You Like

Start browsing properties only once you’ve been pre-qualified for a mortgage. When doing so, work with an agent with a positive local reputation.

The best real estate agents will be attentive to your specific needs and supportive at every step of the home buying process.

Final Thoughts: The Home Buying Process

The home buying process can be intimidating, especially if you are navigating it alone! Luckily, even as a single mom, it is possible to purchase a home without too many headaches.

Be sure to identify your budget and mortgage type ahead of time. Ask your friends for lender referrals and be sure to compare offers from multiple lenders.

Get pre-qualified for a home loan before you start looking at properties, and be sure to work with a real estate agent you trust!

At Thrifty Momma Ramblings, we know that life can be challenging as a single mom. Find more personal finance tips here!

1031 Exchange Rules: How You Can Save Money When Selling a Property

It’s really nice to make a massive profit when you sell real estate.

But it’s not so nice when you have to fork over a huge chunk of those profits over to the IRS come tax time.

That’s the reality of selling real estate, particularly as it applies to investment properties. More specifically, capital gains taxes usually have to be paid on any gains – or profits – of a real estate deal. If you sell an investment property for a profit, odds are you’ll have to pay capital gains taxes on it.

Or do you?

Luckily for real estate investors, there’s this little thing called a “1031 exchange” that allows investors to avoid having to pay capital gains taxes when they sell their properties.

But it’s not so cut and dry. There are certain requirements that investors have to meet in order to take advantage of such a tax perk.

Let’s dive into 1031 exchange rules to see what they’re all about and how they can help you save tens of thousands of dollars when it comes time to sell any one of your investment properties.

What Are 1031 Exchange Rules?

Section 1031 of the IRS tax code allows investors to defer paying any capital gains taxes on the proceeds of the sale of real estate if the profits are put towards the purchase of a “like-kind” property.

Basically, like-kind means similar and can include just about any other type of real estate. That means you could realistically exchange an office building for a single family home.

But you wouldn’t be able to use the proceeds of the sale of real estate to be put towards buying a car. They’re not “like-kind.”

As long as the purchase of another investment property is done within a certain period of time, a 1031 exchange can be put into effect.

What Qualifies as a 1031 Exchange?

In order for you to be able to take advantage of a 1031 exchange, the property being sold must be an investment property. The transaction is not meant for homeowners who are buying and selling their primary residences. Both properties must be investments.

That said, homeowners who are selling their primary residences may also be subject to capital gains taxes if they don’t meet certain criteria. They can avoid paying up to $250,000 for single owners or $500,000 for married owners who have filed their taxes jointly. Still, 1031 exchanges are not meant for primary residences and are only meant for investment properties.

Further, the property that is being purchased needs to be worth more than the one that’s being sold. If you end up paying less for the new property, you’ll be paying taxes on the difference.

Types of 1031 Exchanges

There are three different ways that a 1031 exchange can take place:

  • Simultaneous exchange – This happens when a property is immediately exchanged for another.
  • Deferred exchange – This involves selling a property first then buying another property in its place after a certain amount of time using an exchange facilitator.
  • Reverse exchange – This occurs when the replacement property is bought first. with the help of an exchange titleholder. Then the current property is sold afterward.

It’s always important to use a qualified 1031 exchange facilitator for deferred or reverse 1031 exchanges. That’s because you’re not allowed to take possession of the proceeds of the sale before the exchange is complete.

There are even rules governing who can be an intermediary. For starters, you can’t use the same one that you used in the previous two years. You also can’t act as your own exchange facilitator.

Time is Ticking When it Comes to Finding a Replacement Property

In order to take advantage of 1031 exchanges, you can’t just take your time finding another property to purchase in its place. Instead, there is a certain amount of time that you have to find a like-kind property.

More specifically, you’ve got 45 days to identify a new property that you want to purchase. When you do, you’ll then have 180 days to complete the purchase.

A Maximum of Three 1031 Properties Can Be Identified

It’s pretty common for real estate investors to choose more than one piece of real estate that they have their eyes on. That’s because real estate deals typically take a long time to close, and any delays can creep up that would make them go past the 180-day mark.

By choosing more than one property, it’s more likely that at least one of the deals will go through. But only a maximum of three potential properties can be identified, as long as you close on one of them.

Further, any number of replacement properties can be identified as long as their combined market value doesn’t exceed 200% of the property being sold. For example, if you sell a property for $300,000, the combined market value of your next purchase can’t be more than $600,000.

How Are 1031 Exchanges Reported Come Tax Time?

You will have to pay the tax on the original profits of the sale of the property plus any additional gains since the purchase of the new property. A 1031 exchange is reported on IRS Form 8824 and submitted with your tax return for the year that the exchange took place.

Make sure you consult with a tax expert to ensure that all the rules are followed so the exchange doesn’t fall through.

For more information on 1031 exchanges, read more here.

Final Thoughts

1031 exchange rules are definitely complicated. That’s why it’s important to speak with an experienced tax associate to help you navigate all the ins and outs of 1031 exchanges.

These are handy tools that can help you save a ton of money. But you need to follow the rules closely in order to avoid getting dinged by the IRS.

Looking for more ways to save money? Be sure to visit our blog today!

For Sale By Owner vs Realtor: Which is Right for You?

Selling your house is one of the most intense times for your finances. No matter what your home’s price range might be, it’s one of the largest transactions you’ll ever make you so want to get it right.

Of the many decisions you’ll make along the way, the one that has the largest effect is to list your home for sale by owner vs realtor-listed. If you’re still trying to make that choice, these pros and cons can help.

For Sale By Owner Vs Realtor: The Pros and Cons

Do you try to take on the home-selling journey yourself or do you trust it to someone you don’t know? Here’s how to decide.

Pros and Cons of Selling Your Own House

If you’re thinking about the “for sale by owner” or FSBO route, here are the pros and cons to consider:

Pro: No Commission Payout

The largest reason homeowners choose FSBO is to save on the commission cost. As you’re adding up your expenses for the home sale, that commission is a big number to cut out if you can.

Pro: You Control the Whole Process

The fact is that selling your home can be intrusive, with agents and buyers poking their heads into every nook and cranny of the house. For some homeowners, listing the home themselves gives them more privacy.

Con: Potential for a Lower Sale Price

As much as you know about your home, you don’t know the market as well as a real estate agent does. There’s a high likelihood that you won’t be able to negotiate as high of a sale price as an agent could.

Con: More Likely to Have a Slower Sale

On top of the final price, an agent’s knowledge will probably help you sell your home fast. If that’s a priority for you, FSBO might not be the best choice.

Pros and Cons of Hiring a Real Estate Agent

You know the advantages and disadvantage of FSBO, but what about the alternative? Here’s what you need to know.

Pro: Less Time-Consuming from Start to Finish

When you hire an agent, they take the process off your hands. Most will handle all the marketing, scheduling, and showing for you so all you need to do is have the house ready for showings.

Pro: Lower Chance of Contract Problems

Real estate sales are complex transactions, and they’re hard for the average person to navigate. A real estate agent can handle the intimidating paperwork so you don’t find yourself in a legal mess.

Con: Losing Out on Commission Fees

As helpful as a real estate agent is, their commission fees can be more than many sellers bargain for. A typical real estate commision is between 4% and 7% in most areas. For a $300,000 home that’s up to $21,000 out of your pocket, or more in some locations.

Con: Not All Agents Are Equal

The scariest thing for many homeowners who hire an agent is that their agent won’t live up to their fees. While a real estate agent can offer you plenty of financial and time-saving benefits, that’s only true if they know what they’re doing. It’s possible to shell out a commission fee without enjoying the full benefits you’re paying for.

Setting the Tone for Your Real Estate Sale

Deciding between for sale by owner vs realtor will affect every aspect of your home’s sale. The pros and cons above can help you make the right choice.

For more great tips for your financial life, check out our frugal living blog.