hello hello hello this is selling
Greenville yes I'm opening this slightly
different than all of my other episodes
we are excited I don't know why well
it's holiday season all this fun stuff
that we're doing giving out gifts
meeting with family lots of cool things
I'm excited we're we're near the end
of the year 2021 it's been pointed
out that next year when we say the
the year we'll be saying
2022 which sounds like we're saying like
2020 also or 2020 all over again so
perhaps we will need to change what we
say for this upcoming year to perhaps
the year of Our Lord 2022 or something
like that so that it doesn't just sound
like we're saying
20202 because we don't want to relive
2020 right that was that was not a year
none none of us enjoyed that year
nobody likes to to be surprised by a
pandemic that comes from overseas so
let's not relive 2020 again it's a new
year you know what they say all these
catchphrases new year new you all
these things I don't know but what I
do know is that we have a podcast here
about real estate and and I am not going
to skip just because we are in the
middle of all these holidays I'm
recording this podcast early so that I
don't have to you know be recording
in the middle of all the holiday seasons
and I appreciate you guys listening as
you're doing all your holiday activities
so thank you very much for tuning in
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I put it in there I know I had to
put like an extra space in there which
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podcast platforms but nonetheless
I have to do that because of the Apple
podcast app change some things
earlier this year and and and made
that mandatory for whatever reason so
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me know if you need that all right today
as we're thinking about as we're going
into a new year right we're we're right
on the verge of
entering a new year I'm thinking about
what happens if
you decide you know what I'm going to
wait another year before I make a move
before I I make a purchase before I buy
my first home I I'm I'm I just I'm
I'm not ready the market is just a
little bit too crazy I just kind of want
to sit things out for now and just kind
of you know wait to see if it slows down
wait to see this or that you know
wait until the school year is out you
know all of these
things what happens what what can we
reasonably predict will happen in terms
of pricing in terms of mortgage payments
in terms of what you can afford let's
just say a year from
now
and we talked about if if you didn't
listen to to last week's Market stats
episode we talked about a lot of
different things related to pricing and
trajectories and Trends and really the
conclusion I've come to is that the
housing market it's not going to slow
down very much if at all in 22 there at
the moment are no indicators outside of
a little bit of an increase in mortgage
interest rates but outside of
those increasing dramatically like let's
say that they go into the fours in
the 4% you know that type of range I
don't see it personally I don't see it
having that huge of an impact we've seen
those mortgage rates fluctuate all year
I'm not not ready yet to say that
that is going to slow down the market
that much so we we talked about in
general we have seen market-wide
appreciation of about 1% per month
prices are going up real estate prices
in the greater Greenville area are going
up about 1% per month well on top of
that we have interest rates going up as
well they were down to you know below 3%
for a good bit of time there now they're
generally speaking up above 3% that's
something that we have to reckon with
and the FED has indicated as we
mentioned last week that rates are going
to continue to creep up because they
want to make sure that inflation
doesn't become a major problem they're
they're concerned about about
inflation I'm no expert about all of
that stuff stuff so I'm simply
regurgitating what I've read what I've
heard there's not going to be a whole
lot of nuance in terms of how I present
that because I don't fully get into
all of the mechanics of of the feds
tinkering and all of that I just look at
it from the standpoint of how it impacts
me we talked about last week that
the median sale price in the greater
Greenville area got up to
285 for the month of November which is
an insane number absolutely insane
number for the mediprice point
we're going to kind of round that up for
the purposes of this podcast and talk
about what it would be like purchasing a
$300,000 home right now versus 12 months
from now and and perhaps a little bit
along along the way I have't haven't
scripted this episode so we're going to
see sometimes I do script my episodes
sometimes I don't this one's a little
bit more improv I just have a
spreadsheet in front of me we'll see
we'll see where it goes but I've done
this I've broken
out three I I started with the number
$300,000 right and then I'm assuming you
know a conventional loan at 5% down
payment so that your loan amount would
be your your starting principal for
your loan would be 95% of $300,000 which
is
$285,000 I then took based on I
believe it was the
Deer tax District if I remember
correctly I I looked at that ta tax
district and looked at okay generally
speaking what is a $300,000 house going
to be taxed at if you're an owner
occupant or if you are a non- owner
occupant if you're an investor how does
that impact things I also am putting
in here PMI remember if you if you have
less than
20% of a down payment when you
purchase your house you have to pay some
kind of mortgage insurance sometimes
it's called PMI sometimes it's called
MIP whatever the case I'm just going
to assume and this is probably the
biggest variable out of all of them
we don't exactly know you know that
that's between the lender and the
borrower and it's they do their own
calculations I'm just assuming for the
purposes of this podcast that a borrower
would have to pay a half a percentage
Point PMI per month which on a
$300,000 house is
$18.75 and I am assuming that our
interest rate right now is 3.25%
depending on where you go that number
might be higher or lower and I'm
assuming as well that in addition to
prices going up 1% per month I'm
assuming that the interest rate is going
up 1% per month on that rate
now that that could sound crazy I don't
mean that the rate itself is going up 1%
it's not going up from 3.25 to 4.25 to
5.25 but an increase of 1 % per month on
the interest rate so you take 3.25 and
say what is a 1% increase to that whole
number that is what I'm assuming is
going to happen this year it may or it
may not happen this year I've I've
looked at a lot of data some people
think you know that we're going to end
up in the mid 3s and some think that we
will end up in in the fours in terms of
of what the mortgage rate will end up
being on average by the end of this
year who knows we we don't know exactly
what the FED is going to do in that way
but those are kind of my underlying
assumptions if you were able to keep
keep track with all of that and then
with that in mind we can kind of take a
look at okay what is happening with all
these prices and then what is happening
with our monthly payments over the
course of over the course of a of a
12 Monon period of time if we wait what
is ultimately what I'm trying to get at
is what is the cost of waiting for a
year to to make your move to make your
real estate trans transaction you know
if you know that you're you're going to
purchase a house you know that you're
going to make a move pretty soon what
will it cost you if you say you know
what I'm not ready right now I'm just
going to wait a year all right so let's
start with this let's start with just
the purchase price right we're we're
starting off with a a
$300,000 purchase price and we are
increasing that by simply 1% a month for
12 months right and and and by the
way I guess depending on how you look at
this you might say that I'm I'm actually
doing this based on 13 months because
the $300,000 column the way it's set up
in my spreadsheet that is not month one
so you can sue me for that if you want
but I have 12 months I have $300,000
in its own column and then I have 12
months of of growth after that but again
we're talking about this in December
and so 13 months from now will be
will be you know the 12th month of of
the new year as it were so I guess it
all works
out so all that to be said here is what
we see the purchase price the the
direction of the purchase price and some
of these numbers going if you wait a
year on a $300,000 house it it
everything starts to compound right
so
a month after 1% appreciation a month
later that $300,000 house is now worth
33,000 the second month 306 the third
month 309 the fourth month 312 and it
just keeps going up from there and
eventually it starts to compound where
by month 12 we're now at 338,000
and three 338,000 4751
um
waiting a year is going to cost you and
and if you and again if you're annoyed
by how I how I did that month 11 would
be basically 335,000
okay SO waiting a year on a $300,000
house is going to cost you roughly $35
to
$38,000 now that has on on the total
sales price now how does does that
impact some of these other things well
your down payment is now more which
means that your cash to close is more
your down payment which was originally
$115,000 now it's right at the verge of
$177,000 so that's a huge increase from
a percent perspective on your down
payment it's now gone up from $
15,000 to
$16,900 your and your loan amount
of course in in that scenario would be
about
$321,000 well that also impacts your
taxes right because here's what
typically happens in Greenville County
once a real estate transaction happens
that automatically triggers a
reassessment of the taxable value of the
house and usually that taxable value
ends up being pretty darn close to the
purchase price just so happens you know
the the county you know they're not
doing any of their own work assessing
the the value of these homes they're
just looking at oh it's sold for that
price okay then we're going to tax it at
that price so that goes up so based
on like I said I believe it was the
the deer it was like a tax District that
was referred to as deer something or
another the the starting
price of your month of your annual taxes
at the 4% rate so this is the owner
occupied rate would be 2,000 58 on a
$300,000 house if you now bump that up
to a
$338,000 house now that number has gone
up about $250 now it's
$2,318 per year per year so you're
paying an extra
$250 to the county now every single
year for the the lifetime of your
ownership in that house because you
waited 12
months and that number that number
goes up even more if at you know at
the non-owner occupied rate so at the
non-owner occupied rate let's say that
this is an investment property for
you at $300,000 and and this is one of
the crazy things about Greenville is
that it's about 2 and a half to to three
times the owner occupied property tax
rate if you're owning an investment
property so at $300,000 the 6% rate
which is the investor tax rate in this
specific District that I was dealing
with would be
$566 if you bought that same house at
$338 now that number has just gone up
wow it went up about 7 it went up $700
to now6 ,
382 so you have now I I mean in some
cases depending on the type of property
that might be a half a half or a third
of a month's rent that extra
$700 PMI which if if you're an
investor you're probably not paying PMI
because you're probably over that
20% over that 20% threshold 20% down
payment threshold but if you're an
owner occupant you've only put 5% down
PMI becomes a very real
consideration and so it's a I'm I'm
calculating this off of a half a
percentage Point and and that's based
on the the total loan amount and
so with the total loan amount of
$285,000 on the $300,000 house your PMI
which is a monthly let me just explain
PMI for a second that's a monthly quote
unquote Insurance fee that you have to
pay until you get to 20% although
even at 20% they don't drop it off and
this is like to me borderline illegal
the bank can still collect that until
you reach
22% equity in the house you have to
request it at 20% for them to drop it
off so it's a it's just a monthly fee
that doesn't benefit you in any tangible
way so your PMI
for a $300,000 house is
$18.75
$118.6 per month again may be higher
maybe lower depending on the on the
lender I'm just ballparking it that
goes up to if you waited until the the
12th month here waited a year that goes
up to
$133 and 81 so that's an increase of $15
per month so all these little things
factor in and impact what your what Your
overall payment is it it all adds up you
you hear all these different numbers and
yeah they all Impact each other all
right so let's look at your mortgage
interest rate okay again I said we were
starting with under the assumption that
we are at
3.25% and that we are increasing that
number by 1% of that number per month so
that takes us up to in the next month
3.28 then 3.32 then
3.35 3.38
3.42 etc etc we get to the 12th month
and it's now up to 3.66% and I think
that that is a I think I I like that
number I think that that is a good
middle ground it may be like I said it
may be higher than that but we're being
conservative here
that by the 12th month you may end
up having you know roughly a point
for not quite an entire half a
percentage Point higher mortgage rate
but that's also not out of the question
as well it may be you know again it may
be 3.75 it may be 4% we have no idea
going into this year and that's that is
a really really big variable and a
really really big consideration but I
think think that this is a good again I
like the the 3.66% because I think if we
are seeing the
1% per month growth and appreciation
then we're probably also seeing the one
uh% per month growth in mortgage
rates I think that those two things are
going to be pegged pretty closely and I
think if the mortgage rates start to
increase at a higher percentage at a
higher rate then I think probably
appreciation will probably go down at
a
not it it won't be quite as fast so I
think that those numbers will kind of
balance out all right so what does
all of that
mean so I looked at a few different
things here I looked at your your owner
occupant monthly principle and interest
with a $300,000 house with 5% down
and a
3.25% mortgage interest rate which by
the way and this is another important
consideration I've not even factored APR
in here because a
3.25% mortgage rate that's a little
bit deceptive your APR might actually be
3.4% so even this is even a little bit
generous in in that regard as well and
that's simply because APR I I can't get
into that that each lender it's going to
be a little bit different they're
factoring fees and things in there
when it comes to real estate a lot of
numbers that are the lender side of
things are really subjective and
there's not a way to to just completely
quantify that simply but all that to be
said we're we're basing it on just a
3.25% rate that then increases by 1%
of that rate every month and so I
looked at the principal and interest and
then I calculated the principal interest
taxes and insurance and I'm I'm making
just an assumption that insurance is
just $100 per month your homeowner's
insurance and that's a a pretty good
rule of thumb for you know a $300,000
house and then I did the same thing
for an investor owned property for a
non-owner occupied property with 20%
down what does that look like how does
that change things okay so your your
principal in interest for a $300,000
house with 5% down at
3.25% mortgage interest rate your
principal and interest is
1,240 when you factor in
the property tax
PMI and and that $100 per month
assumption for your homeowners insurance
that comes out to
$1,630
59 now what happens to that number what
happens to those two numbers if you wait
a year what's the cost of waiting the
principle and interest only jumps from
12240 per month to 1471 per month we're
looking at nearly a 200 well it's
basically a
$231 per month
difference which is a a big deal right
because you started at at
1240
adding another 230 that's a huge percent
change that's like a 20% increase if my
quick math is right I didn't calculate
that on my spreadsheet so I'm just doing
that remember we're winging it today
not a scripted episode
that's a big increase that that is a
massive increase what happens if we look
at the the Piti principal interest
taxes Insurance Plus PMI remember the
number at 300,000 with
3.25% mortgage interest rate that
was
$1,630 that jumps up to basically 1,000
it's
$1,898 basically $1,900 that goes up
$270 per month from $630 to $1900 that's
the cost of waiting this is the same
house this is the important detail this
is the exact same house
that now cost
$270 per month more
than than it does right now if you and
and again you can wait you can you can
hold out for 12 months do whatever you
need to do but this is the likely
trajectory your payment on a $300,000
house just went up
$270 per month what does that come
out to to per year that comes out to
$3,240 per year do you think that you
might be able to find better things to
do with that than to just be paying
that towards the house I I would say so
so you guys know I'm not a pushy
realtor and and the goal of this podcast
is not to to tell you to get off the
fence and buy a house I'm simply laying
out the data this is what the data says
there is a major cost of waiting and I
think that people don't fully understand
that I I you know I've I've had
conversations with people that you know
are very very
particular about what they're looking
for and they've just been waiting for a
really long time for the right house to
come up and and there's you know there's
a real risk in these situations and and
listen I don't have any problem with
with my buyer clients being particular
it actually makes things easier in a lot
of ways because if we have a very narrow
criteria then then I can really help
them find that versus a very broad
criteria it's kind of like you know
I'm not really sure what we're looking
for here so I like when my clients
are particular but you have to
understand if you're so particular that
you simply can never find the right
house you're going to get out priced
eventually the market is going to just
leave you behind unless your your salary
and your wages are able to keep up with
this type of appreciation and for a lot
of people it doesn't what about on
the real estate investor side of
things so again remember now we're
talking about 20% down instead of 5%
down we're talking about no PMI because
that drops off when when you typically
when you put 20% down and we're
talking about 6% now the 6% tax rate
which is roughly 2 and 1 half to three
times the owner occupied property tax
rate and we're operating on the
assumption that home owners insurance is
the same we're just slapping $100 a
month in this
formula so the monthly principal and
interest obviously drops because your
your your principle well it drops
because your your total loan amount is
lower your initial principal is lower
because of the fact that you put 20%
down so that is
$1,044 per month but but remember even
in spite of the fact that you're not
having to pay PMI you're not having to
pay the
the extra you know amount of
interest because of the fact that you
put a higher down payment down e all of
these different
things don't account for the fact that
the property taxes are so much higher
your total payment if you
include principal interest taxes and
insurance
$1,616 it's almost $600 a month more it
goes up by nearly
60% just when you factor in taxes and
insurance and we've talked about this
before about how the tax code the
property tax code code really hurts
landlords and this is how it hurts them
the compare that to the owner occupant
that had to pay all of those other
things and had less of a down payment
that owner occupant had to pay
$1,630 a month the non-owner occupant
the real estate investor that put down
$60,000 as a down payment as opposed to
the the mere $5 ,000 that the owner
occupant paid is only paying $14 per
month less than the owner occupant that
is an insane that was one of the numbers
on here I talked last week about you
know a number that popped off the page I
was looking at with that data that
number popped off the page how close
those were despite the real estate
investor having to bring
$45,000 more cash not paying PMI and
still ending up basically at the same
number as the owner occupant it's
it's it's it's really
insane if we go all the way down to
month 12 okay let's just skip down to
the end the principal and interest
for the for the investor is
$1,239 so that's interesting because
that's essentially the starting number
for the non-owner occupant which was
1,240 that's the end number for
principal and interest at the end of
month 12 for the real estate investor
but that that's that's an aside that's
basically an increase of pretty close
to $200 a month from the
$1,044 that we started with so you wait
a year you're an an investor your
principal and interest payment is going
to be close to $200 a month more that's
a big deal people don't realize
landlord's margins are really Slim we're
going to talk about this a little bit
next week $200 a month is a big big
deal when you're a landlord
in terms of the the total
Piti that comes out to now it jumps from
$1,616 per month to
$1,870 per month so the total increase
is about 200 is a little bit more than
$250 per month again that is a massive
massive number if you are purchasing
something as a as an investment property
as a rental property and and the
increase is is very comparable to the
to the owner occupant increase you'll
you'll notice and these numbers
you know I could play around with with
other amounts that aren't you know three
$100,000 I could plug in other numbers
and and these numbers kind of fluctuate
obviously the higher the purchase
price the greater the impact these
percent increases are you know for
instance if I change the starting
price to
$400,000 now rather than being a
$38,000 increase at the end it's a
$50,000 increase at the end so
that's just something to keep in mind as
well it's it's not just a flat okay if
you wait a year you're going to pay $250
a month more it does vary and of
course I I will mention that we're just
talking about numbers in aggregate not
every house is going to appreciate 1%
per month just in perpetuity but this
is a this is what the market has been
doing and so these are this is the best
that that we have this this is the best
that we can come up with in terms of in
terms of the numbers and and and I
think it gives you an idea this is what
the cost of waiting is it's a huge cost
it is a huge cost and so everyone you
know has different reasons for waiting
or for not waiting or for doing whatever
it is that that they need to do when
deciding to make a move just understand
that the market at the current Pace
that it's at it's growing very quickly
and if you have family members that
are on the fence about moving and
they're saying you know I don't know
maybe a year from now maybe you know
something like that I just want the
market to slow down a little bit there
are no indicators the market will slow
down but what we do know is that all
the indicators are and we now have two
years of data to tell us this all
indicators are that it's going to keep
appreciating and keep grow growing and
keep getting crazier and crazier and
you could buy some people that extra
$250 per month or whatever the amount is
that could be the difference between
them qualifying for the loan or not like
it's not just the factor of whether you
can you know the fact that you're oh
now outling an extra $3,200 per year
it's also the factor of the lender might
not say might not qualify you to even
make purchase that house that you could
purchase at $300,000 now you can't
purchase it at
$338,000 and so those are all things
to consider and I hope that that is
helpful for you guys as you think about
okay what what does all this mean what
are all these moving Parts how does this
relate to waiting waiting for however
long to to to move into the Market to
make a purchase hopefully that
simplified things with you guys a little
bit and that's something that you guys
can consider if you want to even look at
my spreadsheet I'd be happy to share
that with you guys as well just let me
know all my contact information is in
the show notes like I said if you want
to look at that spreadsheet happy to
share it not a big deal it's not
proprietary and and you guys could
calculate all this on your own if you
wanted to get into the weeds yourself
but please reach out to me for any of
your real estate needs please subscribe
to the show if you haven't already rate
review it do all of those things
download episodes that helps out the
show I appreciate it hey we're almost in
the New Year the year of Our Lord
2022 I hope that you guys have a
wonderful New Year get out the bubbly
shoot off some fireworks cover your
dog's ears so that he or she doesn't
freak out when those fireworks are going
off and we'll see you next year
[Music]