Pensacola Realty Masters Blog
Realty Masters is happy to present the following Pensacola area community and Pensacola real estate information!
Buying a home can be very overwhelming, especially in today’s market. You may be interested in purchasing but not know where to start. Here’s Pensacola Realtor Mike Hamby, Realtor, to discuss the steps for first time homebuyers to find buy a house!
- You need a realtor to help you buy a house. The commission is paid by the seller so no cost to you to have a buyer’s agent represent you! Please do note, that some agents and companies may charge a buyer transaction fee so always ask your agent before choosing them if they charge a fee. Our agents do not! Now that that’s out of the way, you want to meet with your realtor to discuss your wants and needs.
- Your realtor will introduce you to trusted lenders who can get you pre-qualified for a loan.
- Start looking at homes! We will review pros and cons of the location, condition, and price.
- Found one you like? Make an offer. If it gets accepted, we move forward to inspections.
- Discuss the inspection results and remedies possible.
- The bank orders the appraisal to ensure the value matches the price you are paying.
- If all comes back well with the appraisal, you move to the next step with the lender which is the underwriting process.
- The typical closing time in Pensacola takes about 45 days once you are under contract. Keep in mind, with the fierce competition in today’s market, it could take 3-5 months to find a house. It is typical to put in a few offers before anything gets accepted!
This is a really simplified breakdown of the steps towards homeownership, but it does entail a lot more than this. That’s why it’s best to find a Realtor that you feel comfortable with and trust to help guide you through the process. If you are interested in purchasing a Pensacola area home and want more information, call or text Mike Hamby at Mike Hamby (850) 290-4745.
Let’s talk about Milton and Pace real estate market trends over the past year.
Here's the Milton, Florida Real Estate Market update.
- Median Home Value: $178,000
- Over the most recent 12-month period, Milton is in the green with an increasing home value of 7.14% and increase of 13.25% in the last 24 months.
Here's the Pace, Florida Real Estate Market update.
- Median estimated home value in Pace is $219,000
- Pace, FL is showing even higher increase of 8.26% in the home value over the last 12 months and 12.65% over the last 24 months.
This is good news for Pace and Milton homeowners. If you are not planning on moving, it means you are earning more equity in your home. If you are planning to sell, chances are you can probably sell at a profit. The average days on the market is less than a month in both of these areas.
We're sure that many of you are wondering how the COVID-19 virus is affecting the buying and selling of homes in our area. In fact, over the last 3 months, both Pace and Milton real estate have remained strong with positive equity increase, a decrease in number of days on the market, and an increase in number of real estate sales.
Are you interested in purchasing a home in Milton or Pace? Browse Pace and Milton area homes for sale on our sales website at www.RealtyMastersofFlorida.com.
With any measurement based on a future predictions or hypotheticals, we know that many parameters, and events can change the results,but that shouldn't stop us from doing our due diligence on the front end of investment properties.
Let's take a look at the kinds of properties I focus on, which are single family homes that are easy to finance with 20% down for investors.
Below is an example of a home purchased for $100,000 with a $20,000 down payment and an $80,000 mortgage at 5% interest. I used a 2% property appreciation rate and 2% annual increase for rents and expenses, and a 10 year holding period.
Annual Rental Income: $1000 per month rents less 2% vacancy = $980 * 12 = $11,760 per year.
Basic view: Invested $20,000 (down payment) for 10 years and then cashed out.
See the chart that shows the growth. (Chart is courtesy of Chris Bird with CRS and came from his investment analysis course which I attended).
Feel free to utilize this formula and information when analyzing your own real estate investments. Reach out if you have any questions about analyzing real estate investments in the Pensacola area.
You now own your home! You have been living the good life of homeownership, but you find your needs changing. You could have received a job offer somewhere else and need to move. When you bought the place you were single and now you have a spouse and children, or the space is too small and you are looking for more room. If this sounds like you, you may consider the option of selling the home and buying another or keeping it to rent and moving to a new home. Not all landlords set out to become landlords, but life happens and you should look at your situation, weigh the options, and do what makes the most sense for you.
The 1st step you should take, look at the math and see what makes sense for you
If you rent the home, will it be a positive or negative cash flow after you make your mortgage payment and other monthly expenses associated with owning the home. For example - Taxes, Insurance, and HOA dues which may or may not be part of your mortgage payment. If it is going to cost you more money to keep the house, you may want to consider selling.
The second step, is can you profit from selling
You should take into consideration the expenses of selling. First, determine the approximate value of the home, subtract about 8-10% for real estate fees and other expenses, and look at your mortgage payoff. If you take the likely selling price, subtract your loan payoff and other expenses, how much will you put in your pocket? If you like that number, you should consider selling. If you would walk away with little or no profit from a sale, or would need to bring money to the closing to sell the home, you may want to keep the home and wait for property values to appreciate more. Especially, if you will have a monthly positive cash flow renting the property.
You will find that one option, or both, other make the most sense in your particular situation based on the math, so lets go a step further and consider the taxes.
Lets say you bought the home for $150,000 - 5 years ago and it is now worth $250,000. You have lived in the home for 5 years, but even after subtracting 10% for expenses, you could potentially profit $75,000 from the sale. Normally, if you sell real estate and make a profit, you'll have to pay capital gains tax on the sale, which can be up to 20% depending on your tax bracket. However, the IRS allows homeowners to exclude the gain on a sale of up to $250,000 (or $500,000 if married filing jointly) of a primary residence if you lived in the home for at least two of the last five years, so in this case the $75,000 profit would be tax free. If you move out and turn the home into a rental, it becomes an investment property. If you then decide you don't like being a landlord and sell it down the road, you may have to pay up to 20% of the profit in income taxes when you sell.
I'm not a CPA, so to learn more about this possible capital gains tax exclusion, consult a tax advisor or read the IRS's rules on the topic.
The third step, look at past and current market trends where your home is located
Questions to ask yourself when considering selling or renting your home.
- The quality of the schools in the area
- Is the area growing and do people want to live there
- Are property values, as a rule, increasing, remaining the same, or declining?
We don't know for certain what the future will bring, but if you have doubts or you know of economic factors that could adversely affect future rental potential and/or appreciation, you may want to consider selling now.
Last step of all, you should ask yourself are you cut out to be a landlord
Landlording can be a pleasant experience or sometimes a very stressful one. You may learn a thing or two along the way and making mistakes can be costly. Of course if you do not want to actually deal with your tenants yourselves, you can always hire a professional property management firm like Realty Masters of Florida to do the job for you.
I hope this blog gives you some good information to help you make the decision to sell or rent a little easier for you; However, if you need more information you can read my latest book published in 2017
“The Real Estate Rulebook, Everything you need to know to build wealth and create passive income" which is available for purchase on Amazon.
originally posted 02-01-2018
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