Episode-2658- House Hunting in a Buyers Market — 5 Comments

  1. I wish I lived in Texas so I could take you and Dorothy out to dinner somewhere fancy and just pick your brain on this for an hour or two.

    I just sold my first house and over 6 years ended up with approximately 60% ROI by building loads of sweat equity doing simple things myself. I bought the house from an estate that really was only interested in just not dealing with the house and converting it to cash they could bicker over so it was the perfect situation to be in as a buyer. It was suffering from the 1% phenomenon you mentioned as the house had been vacant for a while, the family selling it were out of state and didn’t bother doing anything to make it look nicer, and so it showed like absolute shit because of it.

    The house had the NASTIEST carpet, but these beautiful original 1960’s hardwood floors under it. The day I closed I started ripping it out, that weekend got a guy to come over and refinish the floors which he did for a couple hundred bucks plus materials since it was so easy with a totally vacant house. In not even two days of work the house immediately likely became 10% more valuable.

    So, once again, you’re totally correct on your 1% effect, but I’m still going to pick up a copy of your book though so I can nod along in agreement!

    We recently followed your advice in walking to freedom, moving from the house I sold in the state government crime syndicate of Illinois to a month to month rental in Tennessee to serve as home base while we looked for another property. I did this primarily to have maximum leverage when negotiating, as we’ll be able to get under contract with no contingency and my partner works for a mortgage company so she could have us closed in 15 days or less if all the stars align properly. I think being able to move very quickly with no strings attached will work in our favor?

    One thing I don’t understand from listening is why if you have the 20% down for a typical mortgage why would you ever fool around with FHA or VA loans? If there’s a fee I can avoid paying, I do everything I can do make that happen. PMI to me is basically just the bank stealing my money to insure myself and my ability to pay a loan back. Why would you ever volunteer to pay that? I’m just curious if you could share some of the models you used in this decision, or at least get me on the right path to figuring out that decision as I’m at a loss as to why you would ever volunteer to pay PMI unless you were 100% confident the money you were using to rehab a place and what you would pay for a refinance would be less than your PMI?

    • For us, PMI is less than $52 a month, or under $650 a year, on a $250,000 property. The upfront cost difference between 20% and 10% would take over 30 years to break even.

      Upfront of $50,000 versus $25,000 is a $25K difference, $624 goes into that 40 times.

      In this instance, the PMI makes sense. Especially since we intend on moving in the future.