Feel stuck in your current home? If you are under the impression that you need to sell and move out of it before you buy a new one, think again! You’re not alone in that impression, but the reality is that selling and moving out before you buy is not always necessary. Looking for an alternative route? Read on for three options to consider that may help you succeed with your next home purchase.
1. Sell after you buy your new home
This isn’t your average uber-expensive bridge loan that only wealthy folks can afford. There are several new home loan products out there that specialize in this niche home lending area. We’ve partnered up with one of the best new out-of-the-box-thinking lenders to help our clients buy before they sell. The “elevator pitch” for the Knock Home Swap? It allows you to buy a new home before you even list your current one for sale. Knock will provide up to a 20% down payment on your new home, six months of mortgage payments on your old home, and up to $25,000 to get your old home looking its best before it hits the market! Take a minute (86 seconds to be exact) and watch our quick video explaining the program. Have additional questions? Any of our brokers can help! We’re all Knock certified.
2. Don’t sell, and convert your current home into an investment property
Curious about investing? Why not buy a new home and own an investment property! The good news is that you’ve already got the latter. Most lenders will allow you to convert your current residence into an investment/rental property, provided the following criteria can be met:
- A lease signed by the future tenant who will occupy the home shortly after your new home is purchased.
- A security deposit from your new tenant, safely deposited into your bank account.
- A small cash reserve in an account owned by you. This amount varies between lenders, from 2 to 6 months of the investment property’s mortgage payment.
- Cash for your new home’s down payment.
Once these criteria are met, the debt magically disappears from your debt to income ratio and you qualify for the new purchase! The best part? Your new investment property keeps the same principal and interest payment you had when you lived there, you don’t have to refinance! This is a great way to diversify your retirement portfolio, generate passive income, and increase your net worth.
3. Sell before you buy, but continue living there while you search
If options one and two aren’t going to work for you, then number three has got you covered! Almost everyone who owns a home in Denver knows that it is a very competitive seller’s market right now.We all know if you submit an offer with a contingency to sell your current home, it immediately goes to the bottom of the offer pile. As part of your negotiation strategy, you should definitely employ a Post-Closing Occupancy Agreement, aka seller’s rent back. This agreement means that after you sell your current home, you become a tenant in it and you should have 60 days (or longer, depending on skillful your broker is) to find your replacement home, hopefully at no cost. If you go this route, you’ll need some tips for successfully finding and purchasing a new home in under 60 days:
- Be aggressive. See homes as soon as they hit the market and make sure you are getting your new listings from the most reliable and up to date source.
- Commit to one lender who will provide you a competitive rate (not the lowest) and who will be available during your search. I can’t say this enough: if the lender doesn’t give you their cell phone, don’t use them!
- Get pre-approved! And submit all requested documentation to your lender. And yes, there is a difference between pre-approval and pre-qualification.
- Review all of the purchase contracts and ask your questions before starting your search.
- Research and discuss the hot market strategies with your broker before starting your search.
Listing brokers who pitch their services have one goal: for you to sign that listing agreement. Remember, that isn’t always the best option for you! The current housing market can be a stressful realm for buyers, and careful consideration should be made before making a plan. Have conversations with your tax advisor, financial planner, lender, and real estate professional so that you make the best decision for you, not for a listing agent.
“There’s speculators buying up houses:” Denver’s East Colfax braces for transit, density and displacement
Source: Andrew Kenney of the Denver Post
Denver government and development reporter Andrew Kenney believes, “East Colfax is the next frontier.” From small-scale home-flippers, to development firms, to the City of Denver, investors have big plans for this neighborhood. The danger, as it always is with development, is displacement. Can the City of Denver and its housing market players revive this area’s businesses and public transportation? And, can they do it without destroying one of Denver’s last pockets of affordable housing? Read the full article below to learn more!
Curious what’s for sale in this neighborhood? Find out here:
Source: Ben Casselman and Conor Dougherty of the New York Times
Competition from investors has made the already tough housing market even more difficult for first time home buyers. Anyone who has ever seen HGTV knows the appeal to flip homes has been glamorized and popularized, and now big time Wall Street investors have entered the game. Last year, investors bought one out of five starter homes in the U.S. This is pushing prices up rapidly in areas of future growth. Coupled with their ability to pay with cash and sit on homes until they are double in price, first time home buyers have an added competitor.
To hear more about where investors are honing in on homes, read the full article below.
Source: Jeff Johnson and Andrew Monette of Pinnacle Real Estate Advisors
Do you invest in real estate? If so, we have great news for you! The largest tax system overhaul in 30 years will benefit most real estate investors. Let’s shed some light on a few of the less apparent changes in the new tax code:
There will be no new restrictions on 1031 exchanges.
Unfamiliar with IRC Section 1031? It allows real estate investors to postpone paying taxes on gains, so long as those profits are reinvested into bundles containing property similar to the one they profited on. Keeping this section in place favors real estate investments over other opportunities.
Several changes were made to the way equipment and other improvements are depreciated.
For residential owners, nonaffixed appliances and furniture can be fully expensed in the first year. The same is now true for property that falls under MACRS with a life of 20 years or less, computer software, water utility property, and other qualified improvements. The last depreciation change the article mentions is the increased cap for immediate expensing of tangible personal property from $500,000 to $1,000,000.
A pass-through tax deduction, or bonus depreciation has been created.
This allows for sole proprietors and investors using pass-through entities to enjoy a 20% deduction on taxable income. A pass-through entity is one that allows investors to set up an entity to relieve liability of themselves, while “passing” their revenue through that entity to themselves before paying taxes at their personal rate.
As a result of the new tax code, the authors of this article predict a shift in investment from equities to real property both in the Denver market and Across the United States.
By guest author: Christian Durland of Homeowner’s Blueprint
Here in Denver, Colorado, things have been quite exciting in the local world of Real Estate. While many other parts of the country are still struggling in terms of foreclosures and short-sales, and an over saturated Real Estate market, here in Denver, we’re actually enjoying some home appreciation with certain pockets of the Metro area going up into double digit appreciation rates over the last year, along with home inventories (homes currently being offered for sale) being at a 23 year low.
With all this positive news, many are now thinking that this maybe the right time to dive into Real Estate and purchase a new home, but many of those who are making this decision must also sell their current home before purchasing a new home, which is still (even though the market has “healed” quite a bit) not as easy as it once was before “mortgage meltdown” and the subsequent housing crisis of 2007-2010. Then there will be those, who will opt to retain their current home and convert it into a rental property, either by necessity, or because they choose to, however this transition may not be as simple as one might think either. (more…)