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Effective Strategies For Escaping The Rent Trap

YOUR PAST HAS NO MEANING - WHAT YOU DO NOW IS IMPORTANT

I am not selling you a diet pill. Owning a home requires sacrifice. Think of me as your personal coach. Escaping the rent trap will require some sweat and education. If you aren't prepared to sweat and learn you will need to find someone else to help you.

Lets start with the basic rules of income AND house. You need to start modestly and pick a house that's appropriate for your income. As long as you get into a home that you can afford, you are good to go. Although your credit score does affect your monthly payment, your income is the largest factor in determining your home. The table below is a "safe" rule of thumb. This means, that if you have a rainy day, your world won't collapse.

 

$100k Home

$200k Home

$300k Home

$400k Home
Household Gross Monthly Income
$2,700
$4,800
$7,200
$9,600
Household Gross Yearly Income
$32,400
$57,600
$86,400
$115,200
Household NET CASH Monthly Income
$1,800
$3,200
$4,800
$6,400

For you folks that make a lot of cash, get child support and make money creatively, look at the "NET CASH" row to determine how much home you should get. It's also handy to calculate income from roommates. Yes roommates. Want a larger house that you can't afford on your own, no problem. Get a roommate. Yep. Get them to pay you to escape the rent trap! DO NOT LET YOUR "SLEEPING BUDDY" be your roommate. They don't count and they may not be your sleeping buddy 4 months from now. Get someone you barely know, and act as if you are a landlord complete with deposits, first month's rent and a lease. You can pick up basic lease agreements at any UPS or office supply store. If you need help in either filling out a lease or evicting a roommate, call me, my advice is free. This is something you need to learn later in life anyway.

Can you live in a house according the table above?

If you answered yes, you are in business. If you can't. Stop reading, go back to renting and make your landlord wealthy. If you have have put some cash under the mattress or have something of value, lets talk. The numbers below indicate how much cash or "collateral value" required to move forward with a home. Collateral value is about 50% the worth the item. For example, if you own a 2003 Jeep Wrangler (clear title - no loans), you've got about $6k worth of collateral. If you don't know, pull up Kelly Blue Book and find out. Essentially, my partners and I are willing to do hard money loans on your collateral to secure your down. You probably don't have credit cards, but if you do, there is cash in them.

 

$100k Home

$200k Home

$300k Home

$400k Home
Cash saved up or "Collateral Value"
$2,500
$4,000
$6,000
$8,000
Cash you will need 2 weeks after move in
$1,000
$1,300
$1,600
$2,200

Do you have enough collateral or cash to move in according to the above table?

If you answered yes, than you can proceed forward. If you don't, you need to stop wasting money and/or get another job. If you can't save money or don't want to get another job, you have no business owning a home. There are ways to save money and unless you are working over 60 hours a week now, there is time for another job. If you have gone this far and agree with the tables above, you are ready to go. Let's get to the fun part of methods of purchasing a home.

Method
Summary
Advantages
Disadvantages
Conventional Financing This is the most common method to purchasing a home. A mortgage broker finds out what you are qualified for and a real estate agent finds a home that fits your needs. This is the most efficient use of your money and you have many more homes to choose from. The best part is the tax advantages. You must have at least a 630 credit score to qualify. You are probably on my site because you don't fit this profile. This process takes anywhere from 30-60 days.

Lease/ Options aka Rent to Own

(This is my bag. You don't need me if you qualify for conventional financing.)

This method allows you to move into a home while you rebuild credit and equity in the home. When the lease expires you will get a conventional loan and/or a seller will be willing to carry a second mortgage. Regardless of your credit score, you can move into a home if you have sufficient money to move in. Most negotiations can be accomplished in a couple of days. A large portion of your money is still thrown away and the price of the home could increase if you take too long to get your credit cleaned up. What you see on my website is all there is.

Seller Financing

(I can help you with this only if you can prove to me that you have 10% - 20% to put down. )

Some owners will carry a personal loan or combination of loans (usually up to 5 years) and then require you to get conventional financing. You get all the benefits (including taxes) of a conventional loan while your name is on title. Your credit has some impact mitigated by how much you can put down. Since you are on title, most sellers want a substantial down payment. Most down payments in are in the 10% to 20% range. These are also very difficult to find and negotiate. You must have infinite patience and be in no hurry to move.

You now have the basic strategies to own a home. You may also do a combination of the above strategies. I can help you develop your own as long as you understand basic principles of home ownership and tell me the truth about your situation. Don't be afraid to call me and explain your current financial situation as it will help me guide you.

 

 

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Jim Eagan - Agent - Las Vegas Realty LLC (702) 287-1092 jim@ifindproperties.com