If you read through any of my websites or blogs you probably know that I currently own three multi-family investment properties. Through the years I have racked up many memorable moments to blog about. This post, however, concerns the buyer I’m dealing with. I have two of my houses under contract and with a little luck will be closing in a month or so.
I’m sure you’ve all heard the infamous cliché on assuming, “You should never assume because you’ll just make an @ss of u and me”. This is true for about 99% of the time. The other 1% is when buying a home.
Being a young real estate agent, I’ve been going out of my way to help my buyer purchase my properties. He is in his mid 20’s and these will be his first investment purchases. I was 26 when I bought them and wish I had someone like myself to help me through the process. At the time, I neither had my real estate license nor much experience under my belt. I gave him advice throughout the entire process and was very lenient with credits and wording in the contract. My goal was to sell my houses, not take advantage of a young aspiring investor. We have been in agreement throughout the process except for one issue. My loans are assumable. This is very rare in today’s mortgage industry, except for FHA loans. I advised him to assume my loans. This would save time, bypass the approval process with another lender and save him thousands of dollars. Unfortunately, like many buyers he was stuck on one thing – the interest rate. Focusing only on the interest rate is a mistake made by many buyers in today’s market. Interest rate is a crucial part of the purchasing process, however, it is only one piece of the entire purchasing puzzle. He has decided to get his own mortgage because he will save a couple points on the interest rate, as my rate is slightly higher than today’s going rate. His argument is that he will save money monthly over time and that will equate to a larger sum than the money he would save upfront. My answer… STUPID!!! Ok, that’s not so nice but it really is silly. The cost of assuming my loan according to my lender is $500 per loan for a total of $1,000. The closing costs combined on the other two properties will be at least $8,000. It is ALWAYS better to keep that amount of money in your pocket then try to accumulate it over a long period of time. Not to mention there is a nice positive cash flow, which is covering all expenses anyway. Take a slightly lower positive cash flow and keep $7,000 in my bank account… Sounds like a pretty easy decision to me.
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