Real Estate! What's not to like?

Afraid of buying a house in this economy? Think you will get stuck in a downward spiral?

• Historically low Interest rates
• Abundant of properties to choose from
• Affordable prices
• Ever increasing rents

So, Think Again.

Let's run some numbers. 
Let's say you are buying a house for $200K with a 20%($40K ) down-payment.Your annual real estate tax may be around 1.5%($3000) and lets keep another $300/month for HOA fee.
Let us look at your monthly expenses now

• Mortgage expense: 160000@5%(current rate) = $860/month
• Monthly Property tax payment: 3000/12 = $265/moth
• HOA fees = $300/month

Put together, you will be spending $1425/month for a place of your own.

If you are presently renting, you can easily expect to pay $1200-$1500/month for a similar house/condo/apartment depending on the location and amenities.

Now let us go one step further and say you are going to live in same city for 5 years.
Can you even imagine how much rent you would have paid in those five years?
Let's do the numbers again.
Monthly rent(Avg rent from 1200-1500)*no. of months*no. of years
$1350*12*5=$81000 (whopping 81 thousand dollars going down the drain)

Had you owned your place for 5 years, you would have spent

$1425*12*5=$85,500 (Wow! this is more than renting)
NOT AT ALL. LET US SEE HOW!
Out of the $85,500 you spent, $51,600 went to your lender for your mortgage.
Further, out of $51,600, your interest payment was $38460.85 that is subject Federal Tax credit on Mortgage Interest. So, you are sure to get something back from $38460.85
This is the PROUD PART, In those 5 years, you build yourself a NICE EQUITY of $13074.03

Out of remaining $33,900(85,500-51,600), You paid $15,000 in your property taxes that is again subject to Federal Tax credit.

So, all in all you paid a lot less to OWN than to RENT

With the economy recovering, you will certainly do fine. With all the EQUITY you would have built by then, your down-payment on your next house would be ready.

This was the WORST-CASE scenario. On the brighter side, the REAL ESTATE is bound to recover sooner or later. You can't rent forever or can't live in your parents house forever simply because you will outgrow the space and would need some space of your own.

Who knows if you let this opportunity go by and wait for a few more years, what would be interest rate or real estate prices.

One piece of advise is that your total housing expense(whether owning or renting) should not be more than 30%-35% of own take home pay. Look for rental property and something to buy in that range and you will do just fine.

If you want to discuss or have a specific question, please leave a comment and I would glad to answer to the best of my ability.

Sure, You can live debt free

I never thought I would write something like this on the internet. Thanks to my sister, she motivated me to go online and share my thoughts with the outside world. Here I am writing my very first post.

Do you ever wish of having financial independence? Do ever think of living debt free? Do you enjoy the life on credit?

Well, life is certainly beautiful and too precious to fret over financial ruins and crisis. It is entirely in our hands to write or build our financial status.

To get our financial house in order, we need to start distinguishing between needs and wants. We all know what needs and wants are. We can easily distinguish between them. All we need is discipline and will power to stay within our needs until the debt is paid off.

In order to get there, we need to know what we are spending on. Lets list down all our expenses on a easy to locate and reachable place.  Every time we spend any money, it should be written down with the date, amount and type of expense like food, clothing, rent, mortgage etc. Once we know where and how much we are spending, it is easy to categorize the expenses. It is really surprising at the end of this exercise to see how much we are spending on items that we don't really need.

It is not that difficult rather you can enjoy this process and in the process you are sure to learn a lot about yourself. So, lets start writing down our expenses...

Credit Cards are not necessarily evil elements. You can really save money with credit cards. Just remember to use them like debit card. Spend only what you can pay in full and enjoy all the perks your credit card offers. Always check all the benefits your credit card offers and keep them in mind when in need. For instance, I was very upset when my laptop got stolen in NYC. Obviously there was no scope of getting it back. Fortunately, I had bought it on my credit card. I contacted my credit card, completed the paper work like forms, the receipts, police report etc and there you go, I got the amount credited on my account. I then bought even better laptop. 
There are tons of credit card with 'NO ANNUAL FEE'. No need to pay the hefty fees if you are not going to use those extra features. You may want to check this out for all the great credit cards on offer.
/http://www.creditcards.org/

So keeping our financial health in tact in really in our hands. Spend wisely and remain disciplined focusing on needs. Make of prioritized list of your wants. Set the goal for your top priority 'want' and start saving for it. I am sure you will start appreciating the process and get your financial house in order.

In the closing, I wish you and your family good financial health and I sincerely thank you for spending your valuable time with me.

I will be back with more....