All Forum Posts by: Kenny Smith

Property taxes is something some may forget about when shopping for homes in other states. Believe me, I get it. Your home here in CO has appreciated tremendously over the last couple of years, and why wouldn't you consider cashing in and moving elsewhere?

However, just because you're buying in another state that may have cheaper home prices, doesn't necessarily your mortgage would be substantially cheaper.

Colorado has the 3rd lowest property taxes out of all states throughout the country. Now this can and will vary by county within the state, but the average state tax rate is .51%. That means (ballpark), you'll pay .51% of your assessed value of your home, in property taxes.

If your home has been re-assessed this year at $500,000, on average, you'll pay around $2,550 per year.

On the contrary, let's say you want to move to a state like Illinois, where you can get a lot more bang for your buck in certain parts of the state. However, their state property taxes are some of the highest in the country at an average of 2.23%

That $500,000 home in Illinois is now costing you an average of $11,150 per year in property taxes. That is 437% more expensive taxes than Colorado!

Certainly each state is going to be different than what advantages and disadvantages, and you need to figure out what makes most sense for you...

We closed out the summer with interest rates going to a 23 year high, but that wasn't the only thing to increase. We saw days on market, expired, and daily price reductions ALL go up, with median home prices going down.

To me, this is a shift in the other direction. Albeit a small one, a shift nonetheless.

I get asked all the time about when is the market perfectly balanced? When I know it's not moving either for me or against me whether I am a buyer or seller? The answer is never...

The market is always in flux, shifting one way or the other. What is important to know and understand is how significant are these shifts month over month, what is the data telling us, and how can we put together an educated guess of what is going to happen in the coming months.

Certainly nobody can accurately predict what will happen with the market, rates, inventory, etc. Only their best educated guess based off of the data.

So, let's look at the numbers. We saw median days on market go from 11 days to close out July, to 14 days to close out August.

Expired listings (house never sold and expired off the MLS) and daily price reductions also increased dramatically in August. Meaning, sellers aren't getting the price for their homes that their "comparatives" were getting the month or two prior.

Lastly, median home prices went from $587k in July to $579k in August.

After 3 months of seeing this data move in a certain direction, I would argue we are seeing a trend unfold. Now, that we are out of the historically busy buying and selling summer season..could these now "trends" in the market increase at a larger scale if the variables stay consistent? The Septembers numbers will for sure be intriguing...

Starting in 1987, we saw the birth rate here in the U.S. start to climb again. That year, we saw 15.7 births per 1,000 people.

In 1990, that number peaked at 16.7 births per 1,000. To put things into perspective, today, the rate is roughly 35% lower at 11.

What's significant about that peak birth rate in 1990, is the people that were born that year, are now in their mid 30's. The same age that the average person buys their first home here in the U.S; 34-36.

Over the next several years, the buyer demand is going to continue to be ever prevalent with all of these home buyers entering the market for the first time.

Coupled with the ever growing inventory issue, long term, prices are likely going to continue to go up and up for the foreseeable future.

The big relief will come on the the other end of the spectrum from baby boomers. They are getting older pushing into their 70's, and will start trading down or selling and moving into retirement homes.

The birth rate for baby boomers between 1945 and 1960 hit a peak of 24.6 births per 1,000 people in 1950. Over the next 10 years, this could be the inventory the market desperately needs...

Curious to hear your thoughts on this?

@Alfredo Sanchez

As a few people already mentioned, sometimes it's the agent, your offer, or just the luck of the draw! You can get lucky and lock in your first offer, or it takes 5, 10, 20 offers sometimes.  

I don't know your market exactly, but I do thoroughly believe there will be more and more opportunity the next several months.  Your everyday home buyers aren't typically looking around the holidays.  And, most sellers know if they want to get top dollar, they should wait until the spring to sell.  So what you get is the people that are selling in the "off-season" are typically very motivated.  Maybe they are going through a divorce, relocating due to a job, finished a flip, or simply have to sell for financial reasons.  Regardless, these people don't want or cannot wait to sell their home.  

Yes, inventory is typically lower so there isn't as much to choose from.  However, with this year and rates almost at the mid 7's right now with the potential to go up even more, buyers could really back off.  Which means current houses that are on market will sit longer, building up inventory which means opportunity.

Lastly, something a lot of investors/agents aren't talking about right now is what the future buyer demand is going to look like.  Yes, we all know there is much pent up demand right now.  But many people don't know that we saw a very large birth rate spike back in 1990.  That is significant because the average age for a first time homebuyer in the US is between 34-36.  That means over the next few years, you are going to see even more buyers enter the market which is going to make buying later even harder.  Rates go down, and it's going to be a feeding frenzy.

Word of advice, get in now.  Don't wait, you will regret you did.

Best of luck!

@Tyler Woolums

First off, sorry you're dealing with this.  Definitely not fun right after you close on a large purchase.  A couple things.

1. I am not sure why your agent did not request to see all receipts and invoices by final walk through.  That is negligent on their part.  They are certainly not obligated to do anything, but if I didn't get the invoices or receipts for work we asked to be repaired, shame on me.  I would feel responsible to help my client out in some way.

2. Although your agent can now no longer represent you in any way as the transaction is over with, you could always reach out to the seller and talk to them directly.  I would just be honest, but professional, and call them out.  Tell them you want to avoid taking this to small claims court, so you'd like to get them to pay.  They may or may not go for this, but it's worth a shot.

I would say these are really your only 2 options, and of course small claims court afterwards if it's worth it.  To someone else's point, probably not worth it over a few hundred bucks.

Best of luck!

@Francesca Zanzucchi

great question.  So we have a number of MTRs, and I will say I have never gotten a 6 month rental.  I know there are plenty of people that have in their properties, but depending on who you're catering too, that may be tough.  If the goal is to cater to travel nurses, their contracts are typically 13 weeks, but could vary by a few weeks give or take.

I don't know the AZ market, but you are certainly limiting your MTR pool by requiring 6 months.  Travel nurses certainly aren't the only ones to market to when it comes to MTR's, but they are a very large chunk.

Best of luck!

@Douglas Gratz

To better understand the situation, Is there any specific reason you'd like to do that?

If it was me, I'd have him pay half of your closing costs, cap ex/maintenance, and current equity gain since you've bought the property.  Anything that has come out of your pocket, in my opinion, is only fair to have them compensate.  You took all of the risk when you bought the place, therefore, you need to be compensated on what looks like a great deal on paper.  They are walking into a cash flowing property with little to zero work or risk on their part up front.

Best of luck!

@Alexander McConaughey

Everyone has made good points here, but you also need to ask yourself what your net worth return on investment is. COC return plus the equity you've grew in the property.

Couple questions...

What do you owe on the property?

What is your expected average appreciation over the next 5-10 years?

Have you looked into other rental strategies to increase cash flow?

If it is appreciated well, have you looked into tapping into that equity through a HELOC or second home loan to continue to build your portfolio?

What is your current interest rate?

And if you haven't lived in the property 2 out of the last 5 years, you'll have to pay Uncle Sam his capital gains tax on $105k or do a 1031 buying something equal to or greater value.  And to Nathan and Jon's point, if you don't have another plan where you could get better returns elsewhere, inflation will eat away at your money as it sits in the bank.  The fact is, you're not going to hit a home-run on every deal.  But it is really important you look at all possible scenarios and potential outcomes before making a decision to sell.

@Erika Martinez

I used Grayce property management for a while on my condo at 8%.  They were great, and I've established a really good relationship with them even though I self manage now.

I am not sure what type of property you have, but I would assume they charge slightly higher for a SFH vs a condo due to less maintenance.

Shoot me a DM for contact information if interested!

@Brady Mullen

Great question!  As I tell all my clients, you have to look at the facts and the data of what is going on in the market and based off of that, make your best educated guess of what could happen if you wait to buy and keep renting.

First off, interest rates. We have seen rates continue to increase, with rates hitting a 23 year high last week at a national average of 7.49% for a 30 year fixed mortgage.  With all that said, now is a great time to buy. Think about it like this, if you are on the sideline waiting for rates to drop, so is everyone else. There is insane pent up demand right now, and when rates drop, everyone is going to get back into the market, and home prices will sky rocket again. Especially with inventory going to continue to be a problem in the coming years.

Regardless of the rate, prices have kept going up or stabilizing because we are dealing with such low inventory. This is not good for both buyers and sellers. Buyers in the fact their monthly mortgage will go up tremendously, but also sellers for those who want to trade up, don't want to because they become a buyer in this market. Also, if they bought or refinanced during COVID, they likely have a very low rate they don't want to give up. For those reasons, sellers are holding onto their homes until rates go below a certain percent. Who knows what that number is, maybe between 5-6%?

If the rates keep going up, it is actually a good thing for investors and buyers. This will scare a lot of buyers out of the market and they will wait to buy. Those that are savvy will get into the market, negotiate a lower price on a home (especially in the offseason), and refinance the mortgage/rate if and when rates drop.

You can also negotiate into an offer what is called a temporary rate buy down paid by the seller. That can help alleviate short term interest rates buying you time until they drop and you refinance permanently.

Lastly, if demand isn't at an all-time high right now, we have a record number of early to mid 30's in the US right now.  Back in 1990, we saw the birth rate here in the US skyrocket in comparison to previous years and following years.  The average age of your first time homebuyer here in the US is 34-36.  All of these buyers have or will enter the market in the coming years pushing demand even higher.

Waiting to buy is only going to cost you more and more the longer you wait.  Hope this gives you some ammo!