If you’re looking for a home in a particular neighborhood, and suffering from sticker shock, then it might be time to consider a long term strategy. Leveraging real estate not applies to homes but to condos as well. Let’s discuss how Long Beach condos might be your ticket to getting into that neighborhood.
Long Beach Condos – A Strategy
Condos (short for condominium) are viewed in one of two ways. First: people who spend their entire lives in condos do so for the convenience of it. No yard to maintain, everyone works together towards a common goal. The downside to this is that you pay for this convenience in the form of Home Owner Association (HOA) fees, which are not tax deductible. Also Long Beach Condos are the first to suffer when the housing market turns down and the last to recover when the market turns up.
The second way condos are viewed are as a stepping stone. Use the condo to eventually purchase a house. How is this done? Build equity and property appreciation.
Let’s say you purchase a condo at $250,000. Most loan programs require 3% down so you will be financing a mortgage of $242,500. which means your monthly payment is $1,157/month on a 30-year fixed loan based on today’s interest rates. After 5 years, the mortgage has been paid down to $217,938. This means you now have close to $33,000 in equity to use towards the purchase of your new home.
Markets go up; markets go down. Despite what the news idiots pundits tell us, real estate overall appreciates over the long term. What do I mean by long term? It means anything greater than 5 years. Long Beach condos in 2011 at the $250,000 price then today it would be valued at $275,000. Of course this is the median sales price of a home. Many factors can impact this number. The neighborhood where you purchase, the location to amenities such as the ocean, changes to local ordinances, etc. Let’s get back on topic. Over this five year period, your condo appreciated $25,000.
With the $33,000 in equity and the $25,000 in appreciation, you now have $58,000 in total equity to use towards the purchase of a home.
What Else is Going On
During this time period, you should be moving forward with other things in your life. The decisions and changes you make directly impact your purchasing power.
Increase in Income – You change jobs, get promotions, start a business, get married … the possibilities are numerous for you to get your income level up. You may only qualify for a $300,000 mortgage today but in five years that could easily be $500,000.
Decrease in Unsecured Debt – Pay down and eliminate credit card debt. The average American family has $15,000 in credit card debt. Be the weird one and pay that off. The more credit card debt you have, the less house you can afford.
Decrease in Secured Debt – Stay away from car leases. Pay off your vehicle. The more car payment you have, the less house you can afford.
Putting the Strategy Together
Obviously this article is a high-level plan and there are no guarantees in life. As stated before, the condos are the first to get hit and the last to recover when the housing market changes. This is a fact of life. For every down turn, there is always a boom.
The best thing you can do is always consult with a Realtor®. Someone who can access the current information, analyze trends, understands your neighborhood and will tell you what kind of market you are in. It’s always a good time to buy but there are also horrible times to sell.
Always think long term.