Continuing the home-buying saga that I started yesterday, We sealed our offer with a 1000 dollar earnest money and a contingency clause for an inspection. That is most often the wisest thing to do because it gives the buyer an escape if he finds problems with the property. However, in this buyer’s market, the seller won’t wait for an inspection or any other clauses, not even Santa Clause for the most part. This time, however, the buyer DID wait!
The inspection was done, by my friend Terry Russel, owner of Blessed Assurance Home Inspection, and came back with the “minor details” that Amie had mentioned earlier. However, none of the items were worth losing the deal. And with the price reduction, the owner was actually saying, “I want to sell, and here is some fix-up money to help you out.” This guy was a godsend. Literally.
Then the fun part began. When an offer is accepted on a property, the UW (underwriter) part begins. The UW wants to know every number in your DNA unless you are paying cash. Then, of course, you can leave the blessed UW out of the picture. I prefer that route when possible. However, I have discovered lately that there is such a thing as good debt. Have you ever heard about that? No, it's not when you take your family to Disney and put it on your credit card. We're actually using good debt on this purchase.
Good debt takes some planning to use. You can't use it without saving up a chunk of change beforehand. When you purchase a house, you usually have to put down 20% of the sale price. So, a 127,500 house costs a downpayment of $25 grand with an added $11 grand of closing costs. Ouch! The total actually came to $36,357.
Here is how all of that money can be considered good debt. This money came from our other rental properties. We did what is called a re-fi on a paid-for property and had more than enough to cover the above costs and all of the rent-ready costs. The future renters will cover this property's monthly taxes, insurance, and mortgage payments. We'll have a house that is being paid for by someone else at no cost to us! Can you see how this type of arrangement is considered good debt?
In just a few months or years, there will also be what is called appreciation. Appreciation is not when someone stands outside on the sidewalk and clapping for your property. It is when, because of the economy, your property gains value. Throughout the history of the United States, property has gone up in value for the most part. There can be times when the cycle is in a downward trend for a year or few. But historically, properties have appreciated in value.
So, over time, this house that cost an initial investment of over $36 grand will go up in value and be paid for by the people that live there.
"Whoa, Mike! You said that you and Dawn were going to live in that place, didn't you?"
I did say that that was a possibility. So, if we move in, we'll be responsible for all of the above costs. However, we were able to secure a 30 year fixed rate mortgage at a low interest rate and low monthly payments, and we have five other properties that will help us make those payments with ease. We will also be reaping the benefits of Federal Tax deductions such as depreciation, mortgage interest, property tax deductions, all repairs, and maintenance. I bet that you'd like to be able to do that on your own home wouldn't you? Yes you would.
But, how did all of this deal take place? I'll share more tomorrow. However, before I go, I want to thank several people who have been involved in this journey: Amie, Jim, Abby, Kristal, and Terry. THANK YOU ALL.
I also want to acknowledge God's part in this purchase. As shared yesterday in Job's comment, He knoweth the way that I take... and the psalmist statement in Psalm 1, The LORD knoweth the way of the righteous...
God's care in negotiations like this is crucial. Also as mentioned, we depend on God to guide us through these relatively new waters. We have tried to do that throughout our married lives. Thus we find ourselves in Brazil at the moment. I watch some really knowledgeable guys on YouTube who are property investors. I enjoy their channels and have even been interviewed by one of them. That was scary and cool at the same time. These men have fascinating stories and are financially free because of their investments. However, their dominant theme is financial freedom and the ability to do what they want with their time.
I imagine that this is probably the goal of 99% of the American population. I, as a Christian, however, need to have a different goal, that of redeeming the time, because the days are evil (Ephesians 5:16). I also need to keep my focus on the fact that this world is passing away. We don't know exactly when Jesus Christ will return for His redeemed, but we can be sure that he is going to return. When he does, all that we see now will disappear, and all will be made new. Christ must be our focus. However, this does not prevent us from property investing here and now. When God provides, either by a W2 job or investments in rental property, we can use those funds to provide for our needs and to help others too.
We were in the States recently and we went to church at First Baptist Church of Lake Orion. That morning there was a special speaker and his message was exactly what I had traveled 5500 miles to hear. His challenge was to give a million dollars to God's work. I had never thought that possible, and am a long way from that possibility just now. But I can reduce that figure to say 100,000 or 250,000 and see how it goes. What do you think?
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