“According to Wall Street Journal, “Nearly 65% of students do not prepare for their future after college and they find a lifetime digging out debt and staying away from future financial success.”

In efforts to prevent this percentage from growing, Delta Sigma Pi – Beta Sigma, a professional co-ed business fraternity in the John Cook School of Business, hosts their annual “Make Me An Adult Day” on campus at Saint Louis University. We were SO excited that Lou Realty Group was able to participate in this event and present on the topic of Turning Your Home Into An Investment. Our team discussed the importance of prioritizing homeownership after college, how to financially prepare for this purchase, and the many ways to turn your home into an investment!

To most 18-23 year olds, purchasing  probably isn’t the first thing on their mind after graduating. Where do you begin? How much is your down payment? What are closing costs? Why do I need mortgage insurance? How do you begin saving for a purchase like this? These are all questions we were able to answer while sharing our own personal stories with real estate. Billy (pictured above) bought his first piece of real estate at just 19 years old! NINETEEN. He explained to the students the benefits of owning, the perks of being an owner occupied landlord, the best ways to add value to your home, and so much more. We had a great time presenting and all of the content from our presentation is available below…..

“Real estate cannot be lost or stolen, nor can it be carried away. Purchased with common sense, paid in full, and managed with reasonable care, it is about the safest investment in the world.”

WHY SHOULD YOU BUY?

-Rent prices are rising while housing prices are falling
-Average rental for a 2 bedroom apartment is approx. $1,350/month while average mortgage payment for a $120,000 home is approx. $994/month!
-Unlike rent, a fixed mortgage payment cannot go up (even if inflation does!)
-Homeowners can take tax deductions
-Mortgage interest payments
-Certain eligible expenses such as energy-efficient improvements
-Homeownership allows you to have a second stream of income (Take in a renter for a spare bedroom!)
-Take advantage of the currently low interest rates and home prices
-No landlord to kick you out or tell you what you can and can’t do!

WHAT SHOULD YOU BUY?

As a young first time home buyer & entrepreneur think about short term & long term goals of your investment.

3 consideration items a first time home buyer should be taking into consideration: PRICE, LOCATION & CONDITION!

Price:

-Identify a price that you can comfortably afford on your own!
-The mortgage payment should more desirable alternative than renting
—An average rental amount for a young professional adult is around $1100 a month
-Taking into consideration roommates as well as tenants
-Purchasing a property that you plan to rent out should be purchased at a price that would be less than what you can rent the property for.
-Example 1: A property purchased under $100,000 at a purchase price of $93,000.
-Mortgage payment is$734 all in (i.e. principle, interest, taxes & insurance)
-You’ll be able to profit off your investment as soon as you find tenants or roommates. Then you can take the money you earn and reinvest it in your property or use it to pay off other bills and debts.

Location:

Your investment will offer you an array of location opportunity.
Choose a location close to highway access and major roads, centrally located. Properties located next to parks and recreations are desirable and create an enjoyable lifestyle and community feel.
Commutes to consider:
Where you work
with in 15-20 minutes from the location of your job.
consider gas/mileage
Where you play:
Restaurants, bars, entertainment, shopping.
You are likely going to still have a social life outside of college right? While this is important to you, it will be important to potential renters, potential roommates and potential future buyers

Condition:

We are turning this home into an investment so we want there to be some work involved that gives you “sweat equity” into your property.
Buying below market value allows you to own an investment for significantly less than market value, especially as prices begin to rise your investment also will in return
Realtor will help with that
Determine your comfort level with the condition.
Embrace the idea of some TLC and renovation
Paint
Changing out light fixtures
Cleaning up landscaping
Remodeling kitchens/baths

Check out a few ideas for kitchen/bath remodels below:

A LOOK INTO THE FINANCIALS OF YOUR PURCHASE

Preparing for your purchase: Budgeting

Down Payment is $3,249.00
Interest rate: 4.500%
Property taxes: $123/mo
Homeowners insurance: $83/mo
Mortgage insurance: $73/mo
Loan term: 30 Years
Closing Costs
(Based on the purchase of a $92,840 home)

Home Purchased: 3bed, 2 bath, 1228sqft.
Purchase Price is $92,840.00
Down Payment is $3,249.00 (3.5%)
Interest rate: 4.500%
Property taxes: $123/mo
Homeowners insurance: $83/mo
Mortgage insurance: $73/mo
Loan term: 30 Years
Total Monthly Payment: $734
Principal and interest: $454/mo
Taxes: $123/mo
Insurance (homeowners and mortgage): $156/mo
So how much do you need to make to afford a $92,840 home? Approximately $25,000 per year!

TURNING YOUR HOME INTO AN INVESTMENT

Grab A Roommate!

Become an owner occupied landlord!
Total rent could be configured by $1 for finished sqft.
3bedrooms/3 people= $409/person. 2 roommates at $400 a person covers the mortgage in excess.
Non-owner occupied landlord
$1300 rental income

Add Value To Your Purchase

(below information is based on the 3 bed, 2 bath home we used as an example previously)

Total Investment:
New HVAC: $3850
New flooring: $1495
New Electrical Panel: $800
Updated lighting: $300
New Roof: $3863.00
Total Expenditures: $10,308.00
Total Investment: $103,148.00
Property SOLD @ $138,000

MORAL OF THE STORY

In a world full of renters…….

BE AN OWNER.

THANKS FOR READING 🙂

-LOU REALTY GROUP