Monthly Archives: November 2021

[et_pb_section fb_built=”1″ _builder_version=”4.9.4″ _module_preset=”default”][et_pb_row _builder_version=”4.9.4″ _module_preset=”default”][et_pb_column type=”4_4″ _builder_version=”4.9.4″ _module_preset=”default”][et_pb_text _builder_version=”4.9.4″ _module_preset=”default”]

Learn how to determine your current net worth and how an investment in real estate can help improve your bottom line.

Among its many impacts, COVID-19 has had a pronounced effect on the housing market. Low home inventory and high buyer demand have driven home prices to an all-time high. This has given an unexpected financial boost to many homeowners during a challenging time. However, for some renters, rising home prices are making dreams of homeownership feel further out of reach.

If you’re a homeowner, it’s important for you to understand how your home’s value contributes to your overall net worth. If you’re a renter, now is the time for you to figure out how homeownership fits into your short-term goals and your long-term financial future. An investment in real estate can help you grow your net worth, build wealth over time, and gain a foothold in the housing market to keep pace with rising prices.

What is net worth?

Net worth is the net balance of your total assets minus your total liabilities. Or, basically, it is what you own minus what you owe.

Assets include the cash you have on hand in your checking and savings accounts, investment account balances, salable items like jewelry or a car and, of course, your home and any other real estate you own. 

Liabilities include your total debt obligations like car loans, credit card debt, the amount you owe on your mortgage, and student loans. In addition, liabilities would include any other payment obligations you have, like outstanding bills and taxes.

How do I calculate my net worth?

To calculate your net worth, you’ll want to add up all of your assets and all of your liabilities. Then subtract your total liabilities from your total assets. The balance represents your current net worth. 

Total Assets – Total Liabilities = Net Worth

Ready to calculate your net worth? Contact for a free assessment of your home’s current market value!

Keep in mind that your net worth is a snapshot of your financial position at a single point in time. Your assets and liabilities will fluctuate over both the short term and long term. For example, if you take out a loan to buy a car, you decrease your liability with each payment. Of course, the value of your asset (the car) will depreciate over time, as well. An asset that is invested in stocks or bonds can be even less predictable, as it’s subject to daily fluctuations in the market.

As a homeowner, you enjoy significant stability through your monthly real estate investment, also known as your home mortgage payment. While the actual value of your home can fluctuate depending on market conditions, your mortgage payment will decrease your liability each month. And unlike a vehicle purchase, the value of your home is likely to appreciate over time, which can help to grow your net worth. Right now, your asset may be worth significantly more than it was this time last year.

If you’re a homeowner, contact us for an estimate of your home’s market value so that you can factor it into your net worth calculation. If you’re not a current homeowner, let’s talk about how homes in our area have appreciated over the last several years. That way, you can get an idea of how a home purchase could positively affect your net worth.

How can real estate increase my net worth?

When you put your real estate dollars to work, it’s possible to grow your net worth, generate cash flow, and even fund your retirement. We can help you realize the possibilities and maximize the return on your investment.

Property Appreciation

Generally, property appreciates in one of two ways: either through changes to the overall market or through value-added modifications to the property itself.

1. Rising prices

This type of property appreciation is the one that many homeowners are enjoying right now. Buyer demand is at an all-time high due to a combination of record-low interest rates and limited housing inventory. At other times, rising home prices have been attributed to different factors. Certain local conditions—like a new commercial development, influx of jobs, or infrastructure project—can encourage rapid growth in a community or region and a corresponding rise in home values. Historically, home prices have been shown to experience an upward trend punctuated by intermittent booms and corrections.

2. Strategic home improvements

Well-planned and executed home improvements can also impact a home’s value and increase homeowner equity at the same time. The type of home improvement should be appropriate for the home and in tune with the desires of local buyers.

For example, a tasteful exterior remodel that is in keeping with the preferences of local home buyers is likely to add significant value to a home, while remodeling the home to look like the Taj Mahal or a favorite theme park attraction will not. A modern kitchen remodel tends to add value, while a kitchen remodel that is overly expensive or personalized may not provide an adequate return on investment.

Investment Property

You may be used to thinking of investments primarily in terms of stocks and bonds. However, the purchase of a real estate investment property offers the opportunity to increase your net worth both upon purchase and year after year through appreciation. In addition, rental payments can have a positive impact on your monthly income and cash flow. If you currently have significant equity in your home, let’s talk about how you could put that equity to work by funding the purchase of an investment property.

1. Long-term or traditional rental

A long-term rental property is one that is leased for an extended period and typically used as a primary residence by the renter. This type of real estate investment offers you the opportunity to generate consistent cash flow while building equity and appreciation.

As an owner, you don’t usually have to worry about paying the utility bills or furnishing the property—both of which are typically covered by the tenant. Add to this the fact that traditional tenants translate into less time and effort spent on day-to-day property management, and long-term rentals are an attractive option for many investors.

2.   Short-term or vacation rental 

Short-term rentals are often referred to as vacation rentals because they are primarily geared towards recreational travelers. And as more people start to feel comfortable traveling again, the short-term rental market is poised to become a more popular option than ever. In 2020 alone, in the thick of widespread travel bans, the short-term rental platform Airbnb’s market share of the hospitality industry reached as high as 41 percent.

Investing in a short-term rental offers many benefits. If you purchase an investment property in a top tourist destination, you can expect steady demand from travelers while taking advantage of any non-rented periods to enjoy the home yourself. You can also adjust your rental price around peak demand to maximize your cash flow while building equity and long-term appreciation. 

To reap these benefits, however, you’ll need to understand the local laws and regulations on short-term rentals. We can help you identify suitable markets with investment potential.

WE’RE HERE TO HELP

Ready to calculate your personal net worth? Contact us to find out your home’s current value. Whether you’re hoping to maximize the value of your current home or invest in a new property, we’re here to help you achieve your real estate goals.

The above references an opinion and is for informational purposes only.  It is not intended to be financial advice. Consult the appropriate professionals for advice regarding your individual needs.

Sources: 

1. National Association of Realtors –
   https://www.nar.realtor/newsroom/housing-market-reaches-record-high-home-price-and-gains-in-march
2. Forbes –
   https://www.forbes.com/advisor/investing/what-is-net-worth/
3. The Washington Post –
   https://www.washingtonpost.com/business/on-small-business/your-net-worth-is-americas-secret-economic-weapon/2020/08/20/70df5b92-e2d4-11ea-82d8-5e55d47e90ca_story.html
4. Bloomberg –
   https://www.bloomberg.com/news/articles/2021-04-09/home-prices-soar-in-frenzied-u-s-market-drained-of-supply
5. Federal Reserve Economic Data –
   https://fred.stlouisfed.org/series/MSPUS
6. Propmodo –
   https://www.propmodo.com/what-the-growing-short-term-rental-market-means-for-multifamily-real-estate/

 

[/et_pb_text][/et_pb_column][/et_pb_row][/et_pb_section]

[et_pb_section fb_built=”1″ _builder_version=”4.9.4″ _module_preset=”default”][et_pb_row _builder_version=”4.9.4″ _module_preset=”default”][et_pb_column type=”4_4″ _builder_version=”4.9.4″ _module_preset=”default”][et_pb_text _builder_version=”4.9.4″ _module_preset=”default”]

This is a follow up article to our October 28th article title, “The Sleeping Millennial Giant has Awakened.”

With ranks reaching 72 million strong, millennials are reaching peak age for homeownership. This generation has struggled to enter the housing market thanks to the fallout of the Great Recession and a mountain of student debt. But this Sleeping Giant has awoken, fueled by the work from home trend. And even if just 10% of millennials enter the home buying market – that’s 7 million people – that’s more than the number of homes sold in all of 2020 to ALL demographics.

Here are some fascinating, quick notes on the next wave of home buyers: Millennials…

• The share of millennials purchasing homes was on the rise between 2015 and 2019. The pandemic supercharged this trend, surging for those under 44 years of age in 2020, mostly due to super low mortgage rates.

• Millennials (26-41 years old and 22% of the US population) are working and reducing debt.

• There are roughly 72.8 million of them in the US.

• They also account for about 36% of the workforce.

• They are accumulating savings to pay down student loans and other obligations, a pivotal hurdle to homeownership.

• The Education Data Initiative estimates that while the youngest millennials have $22,953, on average, in student-loan debt, those in their early 30s have only $874, and those in their early 40s have largely paid off their debt.

• From November 2020 to April 2021, 3,458 applicants received loan discharges from the Public Service Loan Forgiveness program with total student loan forgiveness at $583 million.

• 95,000 applications were approved under the borrower-defense program, over its length, with close to $600 million discharged.

• They received more than $380 million in federal stimulus, starting in March 2020. 49% of the money was used for goods and services, 33% for paying down debt.

• 18% was used for savings and investments, probably including homes.

• The median net worth of millennials was $91,300 in 2019, compared with $64,600 in 2016…..up 40%

   

• The pandemic further fueled their wealth via stimulus checks.

• Many recently discovered investing. The median age of people who began investing during the pandemic was 35, compared with 48 for those who began doing so pre pandemic.

   

• Millennials make up 51% of new pandemic-era investors. (Schwab)

• Millennials are forming households, marrying, and having children, all of which requires space.

• The number of households headed by adults 30-to-44 years old jumped by 1.3 million during the pandemic.

• Married couples 31 to 40 were more likely than any other age group to purchase homes. (NAR, 2021 survey)

• The largest group of unmarried couples who purchased homes were adults aged 22 – 30.

• Millennials 31-to-40 years old were the most likely (61%) to have at least one child under 18 at home.

• Millennials accounted for the largest share of home buyers (37%) over the past year.

• Millennials are approaching peak earning years—ages 45 – 54—a critical time for financing a home.

• Their median annual income was $77,800 in 2019, suggesting that millennials have the earning power necessary for homeownership.

• Over the next two decades, 25% of the U.S. population is going to reach peak earning years, fueling continued housing demand—especially for inexpensive starter homes.

• An April 2021 YPulse study revealed that 55% of millennials want to work from home post pandemic.

• An NAR study revealed that millennials were the most likely to say that the reason for owning a home was to have a space of their own or for a larger abode—62% of 22-to-30-year-olds and 54% of 31-to-40-year-olds.

• As work from home is probably here to stay, millennial housing demand has room to run.

The demand from this important consumer group is likely to persist for several years….and homeownership is still central to them achieving the American Dream.

The Dinsmore Group would like to give content and writing credit to Leonard Steinberg @theleonardsteinbergteam. He shares his valuable insights through his wonderful Compass wide journal, Compass Contemplations. Mr. Steinberg holds the esteemed title of Chief Evangelist at Compass.

[/et_pb_text][/et_pb_column][/et_pb_row][/et_pb_section]