Atkinson Realty

Have you ever heard someone constantly complaining that they own too much real estate? I didn’t think so!  Most people who have built up a property portfolio are usually pretty satisfied with their investment’s performance and, if anything, wish they had bought more.  Real estate investing is one of the most reliable and stable investments you can make for long term wealth generation and familial/generational wealth.  But how do you get started?  In a word – Courage.  

Any real estate investing book will tell you the 4 elements of how to value a property acquisition are location, condition, price, and terms.  However, the most important thing in making the first step is the courage to commit to buying.  Real estate investment is not for the faint of heart and the one thing that stops most people from diving in is fear.  What they actually fear is not the property purchase but the debt load.  Most investment mortgages require 20% down in order to mortgage the rest.  It is this long term debt load commitment that can seize your valor and make your shoes seem filled with lead.  To begin your journey as a savvy real estate investor, you must bravely push past this fear.    

The first step to fortify yourself is to get educated by building a team of professionals that will assist you along the way.  The two people you will need most are a real estate agent to help with property location and contract negotiation and a mortgage broker to take care of the financing.  Even if you are not ready to start buying yet, you will need to sit down with these people and cultivate a relationship so that you are ready when the time comes.    

The mortgage broker will be able to determine how much property you can afford and what terms you can get.  Some key items you will need to know are interest rates, conforming loan limits, limits on seller assistance, how much rental income can be used toward qualification, and how much, if any,  money for renovations can be financed.  

The real estate agent is who will help you find and acquire properties to maximize your ROI (return on investment).  A qualified real estate agent is one that will be able to sift through over 7000 homes in the MLS to find that diamond in the rough but will also be willing to bird dog and prospect for you to find properties that are of interest.  Your agent will be able to do a market analysis to see where a property’s value is compared to others and can create a pro forma to show what the expected rents and expenses should be.  With these two reports, you will be armed to make educated choices to start building your property empire.    

Knowledge is more powerful than fear. If real estate investing is something that you really want to explore, then starting your journey is as easy as making a call to your local and knowledgeable real estate professionals.  

**Be Warned all who enter here, this article contains prophecies divined by observing a ball of crystal, truths revealed by staring at tea leaves, and play calling from an armchair on a Monday.**

The Covid19 epidemic has revealed much to America about Americans.  About who we are as a nation and how we respond when called to help our country and fellow citizens in a time of crisis. 
Given the extraordinary circumstances and conditions we have been faced with I truly believe we have proven ourselves to be a great nation filled with compassion, toughness, and innovation. As the crisis begins to abate and life returns to normal (and it will return to normal) a lot of people in the Real Estate industry are asking What’s Next?  

There is a craft industry of prognosticators who try to predict the future about what is coming next in the housing market; trying to predict if it is a seller’s market, a buyer’s market, a good time to invest, or a good time to liquidate.  With all the soothsaying I can muster here is my take on the big picture and what we can expect to see in the next 12 months.  

The most obvious and catastrophic result of the first government mandated recession in history is the staggering loss of over 26 million jobs in the last 2 months.  For perspective this is almost 10 million higher than immediately following the 2008 financial crisis.  Markets do not like uncertainty and with a “Real” unemployment rate of around 20%, concerns about how people will pay mortgages and rents is going to cause disruptions in the mortgage market.  In the industry we have already seen mortgage criteria stiffen and some specialty loan products have been eliminated.  The end result will likely be that it will be more difficult to qualify for a mortgage, but interest rates will stay between the 3.5%-4.5% over the next year.  

Housing inventory in Hampton Roads was near historic lows in January of 2020 and was actually lower in April.  Beginning in 2014 the total number of homes available for sale has decreased year to year so in a way this decline in housing inventory fits the larger pattern.  However, what I believe we are seeing right now is homeowners who were considering a housing change deciding to wait and see what happens after the crisis is over.  My prediction is that in 4-8 months the housing inventory is going to increase as homeowners who were adversely affected by job losses decide to sell.  Sudden increases in housing inventory can negatively affect the value of a home but we are so deep into a seller’s market and inventory crunch that even if total inventory increases by 20-30% overall home prices should remain stable.           

Nobody and I mean NOBODY wants to see a massive run of foreclosures similar to what happened in 2008.  Everything from the stimulus bill, quantitative easing by The Fed, and easy access to loan forbearances and modifications are blunting the overall impact to homeowners.  The goal is to give a substantial buffer so homeowners can recover and not fall into an economic hole causing a flood of distressed properties on the market.  If too many distressed properties go up for sale at once it creates a negative feedback loop that drags prices down for everyone.  So far the government’s strategy is working but it is going to take time, probably 2+ years, to completely recover from this economic damage.  As long as distressed sales trickle and don’t flood the market will be able to absorb them with little or no adverse impact.         

In time this crisis will pass just as all others have.  Our nation is strong and perhaps made a bit stronger by all of this.  Hope, charity, and mercy are still the pillars of our society and my personal belief is that the future is bright and I can’t wait to get there.    

The True Cost of Aging in Place

The home ladder paradigm for the American family has been completely turned on its head in the last 10 years.  The pattern that was established just after World War II was Starter Home, Family Home, Dream Home, Downsized Home, and Managed Care Home.  The property ladder works as long as new buyers are constantly entering the market to buy the Starter Homes which then allows the group selling the Starter Homes to move up to the larger Family Homes, which in turn allows people selling Family Homes to move to Dream Homes, and on and on it goes.  

The ladder began to fall apart on the eve of the new millennium when the dot.com stock market bust wiped out massive amounts of accumulated family wealth and technology began its total disruption of traditional career paths.  These two events combined with the beginning of the “War on Terror” created a generational sense of uncertainty in younger Americans that collectively decided to delay marriage, having children, and home ownership.  This group essentially skipped buying a Starter Home in their 20’s and went straight to buying the Family Home in their 30’s; in some cases straight to Dream Home in the 40’s.  To find proof of this pattern go to any new home site in Virginia Beach and look at the prices.  As of the writing of this article there are only 11 new construction homes in Virginia Beach that are under $300,000 in list price and only 1 of them is a detached single family.  Builders always build what the market is demanding and in Virginia Beach people are demanding larger Family Homes or Dream Homes.  

Skipping now to the disruption at the other end of the property ladder is the group that should be moving out of the Family Home or Dream Home and have decided to “Age in Place.”  Aging in Place is when a family decides to remain in the larger homes for the later years of their life and do not plan to shift to a Downsized Home or a Managed Care Home.  There are many reasons why families state they are doing this.  Everything from “I want to have a place where all the grandkids can come visit” to “I’ve heard horror stories about assisted living facilities.”  But, the reality is it is near impossible to get all the grandkids to come at the same time and Virginia Beach has some incredible assisted living facilities.  In the end it mostly is a financial decision, but is it the right one?  

Any family that purchased a house before the year 2000 has seen their home value triple and possibly quadruple along the Great Neck corridor.  Families have either paid off their mortgage or the monthly expense is low and easily manageable.  The accumulated home equity can be quite substantial and is perceived as a nest egg that can be tapped into later if needed.  However, families tend to under account for the increased effort and cost to maintain a large home, most of which are 30+ years old.  As homes get older they simply cost more to keep up.  The cost of roofs, siding, fixtures, and finishes have not gotten cheaper over time.  As homes age more and more repairs have to be done more often.  

Another issue that can be quite costly is the expense to modify a home for aging adults.  According to the CDC, falls are the number one cause of injury to adults over the age of 65.  The cost to modify a home to allow for ease of mobility, hygiene, and simply eating can be incredibly expensive.  Plus over time aging adults will need additional assistance with basic choirs like laundry, cleaning, yard work, and maintenance.  

Some families think it is a good idea to leave the old family residence as part of their estate.  Before making this decision a family needs to consult with an experienced estate planning  attorney to discuss all the potential pitfalls.  Next to the family silver, the family residence is a huge source of estate conflict.  Home equity can’t be divided and split between heirs as easily as cash.  

If you are someone who is considering “Age in Place”, take time to sit down and really examine thoroughly what that looks like and the costs. Right now with low interest rates and high demand for Family and Dream Homes your home has never been worth more.  Is it really worth keeping a big house where 50% of the interior space will not be used outside of major holidays or maintaining a large yard that isn’t going to be enjoyed to its fullest

*Starter Home-Smaller affordable units for people just getting established in their career and have not started raising a family yet. 

*Family Home-Larger medium priced homes for people established in their careers with the additional space for children.   

*Dream Home-Upper end of the housing market for families’ in the peak of their earning potential with the disposable income to upgrade their family’s living standard.    

*Downsize Home-Families that are moving into smaller but still upgraded units after children have left home.   

*Managed Care Home-Housing facilities specifically designed for the needs of aging adults.