Don’t Fall Into These Real Estate Traps!

Real Estate is one of the safest investments you can make, isn’t it??  So why does a quick observation of the housing market tell us otherwise? Foreclosures,subprime loans, housing bubbles, defaults, homeowner assistance programs-all these things have become common terminology in the last few years. This leads those easily intimidated to believe that it’s nearly impossible to ever build wealth (or at least not lose it) in real estate. Like most things in life that come with a reward, successful real estate transactions require due diligence and discipline. They also require you to stay away of some easily real estate traps.

don't fall in love with a homeGet Emotionally Involved With a Property
You say you “fell in love” with that great new two-story custom home by a park. Good for you. Make sure you let the sellers know that, so that they can raise their price accordingly. Never give monopoly power to the person you’re doing business with!

You fall in love with people, maybe your pet. Which is to say, things that don’t come with economic potential. Real estate is for investing in, not for having an attachment to.

Buy the Pick of the Litter
The neighborhood is just ok, but the house in question is the best around! It’s twice as big as any other on the block, with decorative water fountains and many other custom upgrades. It stands to reason that such a house will make a better investment over the lessor homes around it, right?

Well, it won’t. You might not like this, but a house’s surroundings have as big an impact on its value as the house itself. In fact, the house mentioned about will only help the values of the other “lessor” homes in the area.

Remember, shopping around for a favorable interest rate is at least as important as shopping around for a well priced home. Getting a mortgage loan with even a few basic points in your favor can put you in a much larger house than you might otherwise have budgeted for. (Or, it could keep you in a smaller house at a much lower payment.)

Put Down as Little as Possible, Preferably Nothing
Don’t delay your gratification? That’s for suckers! You want it and you want it now. Saving up 20% of the price of a house for down payment could take years. Without that 20% 20% down payment for a new housedown payment, you will likely end up paying private mortgage insurance until you have 20% equity in the place.

Don’t leave money on the table. At the same time, never spend money you don’t need to. When you put little or nothing down, you’re already overextending yourself. Paying monthly mortgage insurance is the equivalent of undergoing a credit check that costs you hundreds if not thousands of dollars every year.

The Bottom Line
When you buy a house, you are not simply buying four walls and a roof. You are purchasing decades worth of mortgage interest and possibly, mortgage insurance. It’s helpful to think of the entire purchase as one item, and understand that a $300,000 house can end up costing you over $550,000 among principal, interest and insurance, not to mention property taxes.

Understand that a desirable property has financial potential. Many people who switch houses, whether they’re trading up or trading down, never think (or care to) keep the original house and rent it out. They want the cash to buy the new home. But what if you could rent it out for more than the mortgage payment? You could then use that difference to help pay for part of the new house.

Yes, a house is a home. But you’re missing out if you see it only as that. Real estate is a financial instrument that, under the right conditions, can help you solidify long-term wealth.


Ryan Blanco-Realtor-San Diego Real Estate BlogAbout Me: I am a full time agent and I dedicate 100% of myself and my time to my valued clients in addition to the San Diego communities that I serve. It is imperative that I continuously evolve with local and national trends in addition to always looking ahead of the industry. It is a must to always provide the best service to my clients, their families and friends.




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