“Don’t wait to purchase real estate, purchase real estate and wait.”
– T. Harv Eker
If you’ve been considering the purchase of a home, a secondary home, becoming a landlord, and adding more cash-flow properties to your residential portfolio, why wait?
90% of millionaires are created through… Real Estate! (Source)
The most common reason that people have not purchased a home is because they are not educated on the process, nor understand the values and benefits of home ownership. And that’s okay! The reason why many people do not understand this concept is because many are misinformed, and think it’s too difficult. Owning real estate is such an important piece to creating wealth and financial independence.
Another reason why people rent versus home ownership is because they think that they do not have enough money, or cannot qualify for a loan. In many cases, you CAN qualify for a loan, and often times for MORE than you think you can afford. Let’s break it down..
When you go to rent a property through a property management company, there is usually an application fee, security deposit, first months rent, pet deposit, cleaning deposit, key deposit, and administration fees among other costs. You’re also paying off the mortgage of your landlord, and thus, losing money every single month – NOT taking into account the possibility of your home increasing in value.
Let’s say the property you want to rent is $1,700 per month (I have a friend who lives in Summerlin and pays $1,650 for a one bedroom apartment – CRAZY).
So you have $1,700 for first month’s rent, plus a $1,700 security deposit, a $500 pet deposit, a $350 cleaning fee, $75 per adult application fee (two adults is $150), a $100 administrative cost, and $100 key deposit, and sometimes some other small hidden fees. Let’s add this up:
$4,600 to get into a property that rents for $1,700 a month.
Let’s break down the costs of purchasing a home.
- FHA Loan – 3.5% Down ($294,515 Maximum qualify amount – Clark County)
- Conventional – 5% Down
- VA – 0% DOWN ($453,100 Maximum qualify amount – Clark County)
As a first time home buyer, there are many programs such as Home is Possible and Home Brings Your Home, which is a government grant (that doesn’t need to be paid back by the way), that offers up to 5% of the purchase price of your home. This completely eliminates your down payment, and if using FHA or VA, can be used for closing costs!
So now, you’re ready to purchase your first home. The median home price in Las Vegas is roughly $250,000.
You want to use an FHA Loan with 3.5% down. The 5% grant will give you $12,500 for down payment and closing costs.
You have $12,500 in FREE money from the Government to play with.
The seller requires a $2,000 Earnest Money Deposit. An “EMD” is the monies sent in good faith to secure the property once your offer has been accepted by the seller. This money can be utilized for your closing costs, or can be used towards the purchase price of your home. In this scenario, we will use that money to be used towards closing costs.
Your 3.5% down payment on a $250,000 home is $8,750. This leaves you $3,750 that can be used towards your closing costs.
To break down the closing costs, I have provided an example net sheet for your review.
In summary, your prorated costs are $2,567.19 and your closing costs (what you will need to wire after you sign with title) is approximately $2,526.08. The $2,000 EMD can be utilized towards these costs.
These costs include your home inspection, EMD, Grant application fee, appraisal, escrow fees, property tax, origination fees (lender), recording fees, title inspection, etc. You can see an estimate of these costs on this example net sheet.
With the 1% credit I offer all of my buyers ($2,500 in this scenario), your approximate grand total to purchase a property with a grant is: $5,093.27. Subtract this from the $4,600 you will pay to get into a rental, you are looking at only an additional $493.27 to purchase your first home! Why would you not take advantage of these programs and begin creating wealth through home ownership?