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Is it a Good Time to Buy REITS?
Buy Rental Property or a REIT?
Although many individuals prefer rental units as additional income, one of the last things you probably want to do in your retirement is to find renters and deal with the drama that comes from having them rent for you. You have to find tenants with reliable income, continue to provide maintenance and other support for them, and worry about potential problems with non-payment or other issues.
Buy REITS?
Traditionally, one of the best retirement investment options is a real estate investment trust (REIT). According to Wikipedia:
A REIT or “real estate investment trust” is a tax designation for a corporate entity investing in real estate. The purpose of this designation is to reduce or eliminate corporate tax. In return, REITs are required to distribute 90% of their taxable income into the hands of investors. The REIT structure was designed to provide a real estate investment structure similar to the structure mutual funds provide for investment in stocks.
As opposed to buying rental homes or properties, REITs offer a lot of diversification and are very liquid. It’s easy to sell REIT shares on the stock market and they are usually very stable. On the other hand, houses can be difficult to liquidate and people are finicky, leaving landlords with a lot of potential risk. Continue reading
Using the MIP to Decide- When to Refinance
The MIP (Moore Inflation Predictor) is our proprietary index that projects future inflation rates one year into the future.
It uses a “fan” style with varying level of likelihood that certain rates will be attained. If you are considering refinancing (see When is it Right to Refinance? ) naturally you want the best rate. In order to determine the timing just look at the MIP chart.
From it you can determine when the next bottom will be occurring. Even though the MIP tracks and predicts the “Inflation” rate, interest rates tend to track fairly well with Inflation. So when the inflation rate is bottoming the interest rate should be bottoming as well. And this makes sense because Continue reading
When is it Right to Refinance?
With “everyone” talking about the historically low mortgage rates you are ready to decide if it “pays” to refinance. The “rule of thumb” supplied by mortgage companies is that if you can reduce your interest rate by 1% it is usually profitable.
But there is more to it than that. Like how long are you planning on staying in the house? If there were no fees or costs involved that wouldn’t be a consideration.
But in the real world, the first thing you need to determine is what rates do you qualify for and what are the other factors like points and closing costs. (See How to Find a Good Mortgage)
When you refinance it is common to roll the additional costs and fees back into the mortgage so there are no “out of pocket” costs. But this allows the Bank or other mortgage holder to charge you interest on these fees. At the current low interest rates and if you choose a short time period for your mortgage the additional interest will be relatively small.
But even at these low rates, if you have a 30 year mortgage, interest will end up doubling the amount of fees over the 30 year life of the loan. Continue reading
Low Mortgage Rates – Reduce Your Payment or the Length of the Loan?
Prior to 2008 current mortgage rates were at their lowest levels in decades and many people were refinancing. At the time I warned that “this trend seems dangerous to me because rather than using this as an opportunity to shorten the life of their mortgage people are just reducing their payments.” Or worse still they were increasing their debt levels by maxing out their home equity.
Why would paying less on your monthly mortgage be bad? Paying less to the bank sounds like a good idea to me! The reason I think this is a bad idea is because many people are using this as an opportunity to increase their debt. Because they can afford the payment on a larger debt they are simply spending up to the limit. People who do this will never get out of debt and will remain slaves to the bank for their entire lives.
1st Choice- Refinance to reduce the life of your loan
Remember the old song “16 tons” which spoke of shoveling coal all day long and just ending up another day older and deeper in debt. Not even being able to die because I “owe my soul to the company store”. Today people have an opportunity to get out from under and they aren’t taking it. Continue reading
How to find a Good Mortgage
It is always a good idea to compare mortgage rates from several different companies. But there are several factors to keep in mind. The lowest rate isn’t always the best deal.
Other factors to consider are “points” and “closing costs”.
Points are simply additional finance charges tacked on to the beginning of a loan. They can be paid up front or spread out over the life of the loan. Although adding them into the loan makes your up front costs lower, it greatly increases your total cost since in effect you are paying interest on interest.
Closing Costs are additional fees and expenses necessary in order to transfer ownership of a property. Some examples of typical closing costs are title insurance, title searches, court filing fees, and survey charges. Sometimes closing costs are called settlement costs. These fees are not the same with every lender so be sure to include them in your comparison. Continue reading
