This is Mr. Daniel. How are you doing? Hope you are doing well!
I had a question from one of my student about buying a house in the future. I included here some fun stuff about real estate. I hope you can learn these skills for your future. Real estate investments can be a wonderful means for you to build wealth and skill sets! I hope this article brings you some interest in real estate.
Imaging you are in your last year of college, taking your last upper division courses of your major requirement. You are thinking about if you should be buy or lease as you get ready for a new career. There are pros and cons of buying and leasing depending on your unique situations. In college, I rented 2-bedroom and split $1400/month rent with my friends. But that was eons ago. Now days, you have choices to live in apartments, studio, furnished or unfurnished in Westwood. The rent can range from $1500 to $4000 per month for a 1-bedroom apartment in Westwood, Los Angeles!
Spoil Alert, you would never want to spend on fancy apartment and burden yourself with large payments. Share rents with friends and colleagues to bring down your monthly spending. Save and invest the rest =)
These some real estate vocabularies you may see,
- Down payment – the money upfront you will need when buying a new house. Normally at 20% of the house value. But it can be as low as 3.5% for 1st home buyers.
- Primary residence– the place you live most of the time. You can only have 1 primary residence for tax purposes
- Lender– Bank that lend you money to buy your house. Lender also charges you interest for lending you the money.
- Mortgage– “death contact” in French, it is basically the amount of money you borrowed from lender.
- Appreciation– when your house value increases
- Depreciation– when your property decreases in value eg. Like a fancy car that depreciate in value after you bought it.
- Lease– is a contract you sign with specific terms. eg. when rent a house you need to sign a contract called lease.
- Property Tax – If you own a property, the value of the property will be taxed. This is normally a % of your property value that you have to pay to the government and is due Nov 1 and Feb 1 each year.
- Equity – how much money you actually have in your house (Equity = value of the house – how much you owe on the house)
- Credit Score– a number, maxed at 850, assign to each person depending on your financial habits. You credit score is important if you want to borrow money. Below 580 is bad….
- 580-669: Fair.
- 670-739: Good.
- 740-799: Very good.
- 800-850: Excellent.
- Principal – is the amount of money you borrowed from lender. (Principal + Interest charged = monthly payment)
So what are the Pros and Cons of buying and renting? For me, there is no right or wrong, to buy or lease depends on your near and long term financial goals.
Why you should Rent?
Benefit #1: You do not need to pay property tax – As a renter, you do not need to pay for expensive property tax! Some property tax in California can go as high as 1.9%! This means that for a small condo around $600,000, you would need to pay $11,400 in property taxes! That can be a good size of your total salary.
Benefit #2: You do not need to come up with a large down payment. With the market for housing at the peak, it is difficult to come up with a down payment on a home for purchase. A 20% down payment on a $600,000 condo would be $120,000 of your savings. For many people, it may take many years to save $120,000.
Benefit #3: No maintenance costs. As a renter, you do not have to pay for major costs like leaking and plumbing issues. You do not need to worry about keeping grass trimmed and garden maintained. These costs are Landlords to cover.
Benefit #4: Flexibility. As a renter, you can relocate when lease comes up each year. You can relocate to a different city if you have better job offers. There is a lot of flexibility in life. You do not need to settle down.
Benefit #5: Lower monthly expenses: When you rent, you pay less each month. This means you can save more each month and invest the saving to boost income! Renting allows you to control and lower your monthly expenses and invest the amount saved for your future.
Why you should Buy?
Benefit #1: Appreciation – Your property will appreciate in value over time. If you look at real estate prices since 2009 in LA county, the median price have gone up from $400,000 to $740,000, about 84%. This build up in equity is a form of your wealth building.
Benefit #2: Tax benefits: If you buy, your paid mortgage interest (Calculated from total pay out – loan principal) is deductible on tax return. Rent payments are not tax deductible. So you also can pay less taxes as a results of tax deduction
Benefit #3: Pride of Ownership: Buying your own property is to fulfil your American dream. The land, the house belongs to you, as long as you pay property tax.
Benefit #4: Build Equity: Buying a property allows you to build equity in the house and save for retirement. Each monthly mortgage payment includes principals. This way you can force yourself to save each month for the length of the loan.
Your loan principal & the appreciated value becomes your equity!
Benefit 5: Stability & Flexibility. Buying your own property allows you to settle down and focus on life. You do not need to constantly search for a new place to live when the lease is up. You can also modify your own to suit your living styles. You can add landscape, you can add a pool, you can build a patio. You can stability and flexibility!
High school students can start learning about these concepts! They are not taught enough at school. I remembered working on one of the algebra II word problems that ask one of my students to solve for the Interest earned. School teaches you to plug in a formula, show work and find the answer. But there are so many ways to define Interest. Interest can be the Interest earned from an investment but it can also be the amount owed because of a borrowed money.
Start thinking about how you can afford to buy a home, google for vocabularies and learn how they are used in real estate languages =) I hope this news letter bring you some thing new you can learn in your life this week!
See you next time!
早上好！我是丹尼爾。 你們好嗎？ 希望一切順利！
我的一個學生向我提出了一個關於將來要買房子的問題。 在這裡我包括了一些有關房地產有趣的東西。 希望你們能為自己的未來學習這些技能。 房地產投資可能是你們建立財富和技能的絕妙方法！ 我希望本文能使你們對房地產感興趣。
想像一下您即將進入大學的最後一年，修習主要的最後一科必修高級課程。 您正在考慮在準備開始新工作時是應該購買還是租賃房子。 根據您的獨特情況，買或租賃各有利弊。 在大學裡，我租了兩居室，並和朋友分了$ 1400 /月的房租。 但這是很久以前。 如今，您可以選擇住在Westwood帶家具或不帶家具的公寓，一室公寓。 在洛杉磯Ｗestwood，一居室公寓的租金可以從每月1500美元到4000美元不等！劇透警報，您永遠都不想花在高檔公寓上，讓自己負擔大筆費用。 與朋友和同事分擔租金，以減少您的每月支出。 其餘的存起來並做投資=）
1.首付-購買新房時需要的預付款。 通常為房屋價值的20％。 但對於首次購房者，這一比例可能低至3.5％。
7.租賃-是您按特定條款簽訂的合同。 例如。 租房子時，您需要簽訂一項稱為“租賃”的合同。
10.信用評分-一個數字，最高為850，這是根據每個人財務使用習慣所給予的分數。 如果您想藉錢，您的信用評分很重要。低於580不好…. 580-669：一般。670-739：好。740-799：很好。800-850：非常好。
好處1：您無需支付財產稅-作為房客，無需支付昂貴的財產稅！ 加州的部分物業稅可能高達1.9％！ 這意味著，對於一個約$ 600,000的小型公寓，您需要支付$ 11,400的物業稅！這可能是總薪水的一個好數目。
好處2：無需大筆定金。 由於住房市場處於高峰期，很難為購買的住房支付首付。以20％首付購買600,000美元的公寓你將可以節省120,000美元首付金。 對於許多人來說，節省12萬美元可能需要很多年。
好處3：無維護成本。 作為房客，不必支付諸如洩漏和管道問題之類的主要費用。 無需擔心修剪草坪和維護花園。 這些費用由房東承擔。
好處4：靈活性。 作為房客，你可以在每年租約到期時搬遷。 如果有更好的工作機會，可以搬到其他城市。 生活中有很多靈活性。 無需安定下來。
好處5：降低每月開支：租房時，每月只需支付較少的費用。 這意味著可以每月節省更多，並進行儲蓄增加收入！ 租賃使你可以控制和降低每月開支，並為未來節省下來的錢。
好處1：升值-你的財產將隨著時間的推移而升值。 如果看一下2009年以來洛杉磯縣的房地產價格，中位數價格從40萬美元上升至74萬美元，增幅約為84％。 積累的股權是你積累財富的一種形式。
好處2：稅收優惠：如果購買，則你的已付抵押貸款利息（根據總支出-貸款本金計算）可在納稅申報表中扣除。 房租付款不可減稅。 因此，由於減稅，你還可以少交一些稅。
好處4：建立資產：購買物業可讓您在房屋中建立資產並為退休儲蓄。 每個月的抵押貸款都包括本金。 這樣，你可以強迫自己每月節省貸款期限。你的貸款本金和升值的價值就成為您的權益！
好處5：穩定性和靈活性。 購買自己的財產可以使你安定下來並專注於生活。 租約到期時，你無需不斷尋找新的居住地。 你也可以修改自己的樣式以適合自己的生活方式。 可以添加景觀，可以添加泳池，可以建造露台。 可以穩定和靈活！
高中學生可以開始學習這些概念！ 學校的教學不夠。 我記得我曾處理過一個代數II單詞問題，該問題要求我的一名學生解決所賺取的利息。 學校教你代入公式，演示步驟並找到答案。 但是，定義利息的方法有很多。 利息可以是從投資中獲得的利息，也可以是借貸所欠金額的利息。