The best offense is a good defense.
If you can score touchdowns easily in a football game and run up the score, then does it matter that your defense usually gives up 2-3 touchdowns a game?
What if your entire team could shoot like Steph Curry and you could score 150 points a game, does defense matter?
Interest rates have been pretty low for a long time. They were 2.68% in 2020/2021. That’s insane. Did it really make sense to pay off debt aggressively when your interest is that low?
These aren’t credit cards with 20% interest, a pay day loan, a car note with high interest etc…Less than 3%? You were sitting pretty. And people couldn’t wait to tell you about their low interest rate 😂😂😂.
So you were probably better off investing in the stock market, bonds, crypto, more real estate etc…For example, the stock market usually will grow your money 8-10% per year.
Investing $1000 into the stock market today, will grow it to $1,080 in 1 year, $1,188 the 2nd year, $1306 the 3rd year etc…
Offense. It was clearly a better decision to focus on growing your money vs aggressively paying down “good” debt.
Defense Wins Championships
Today, in July 2023, interest rates for a 30yr conventional home loan for people with exceptional credit are around 7%.
If you’re like most people who may put down less than 20%, have less than perfect credit, a debt to income ratio that is a but high etc…collectively called loan level pricing adjustments, LLPs, your interest rate will probably be higher than 7%. Investment property? You may be looking at damn near 9%.
In that context, the decision on whether to play offense or defense is not so cut and dry. Yes, you may grow your money at 8-10% per year, but the interest payments on your debt may also be 8-10%.
Do you focus on aggressively paying down debt or do you focus on growing your money? Maybe both. Whatever helps you sleep better at night. There’s no wrong or right answer.
Renting is NOT Throwing Money Away
- Person: “I need an agent to help me buy a home somewhere within 100 miles of Atlanta“
- US: “O..k.. are you familiar with the Atlanta metro area?”
- Person: “No, not really but I heard it’s nice”
- US: “Do you know what neighborhoods, or zip codes you want to be in?”
- Person: “No, that’s why we need an agent…”
Please, please, please stop making this mistake. Buying property in an area you don’t know is a recipe for disaster.
Relying on an agent, or their showing assistant, to drive you around to areas that they like that you may or may not end up liking is not a sound strategy either.
It’s ok to rent, even a short term rental, if you absolutely must buy.
Spend some actual time getting to know the various neighborhoods, school districts, shopping, restaurants, potential commute etc…before buying.
A lot of people have been contacting us lately seeking to help to sell a home they just bought 1-2 years ago.
Even if they bought the home with a low interest rate, they typically have very little or no equity at all in their home.
Here’s why: During the first few years of your mortgage payments, most of the money goes towards paying your interest, not your principal balance. Detailed explanation here.
When they sell their home, even if it’s gone up in value by a bit, by the time they pay the commissions to a real estate agent and the closing costs, they may end up breaking even or even owing money.
Some people end up buying land and realize it’s extremely hard to sell it later.
The point is, you don’t want to be a “forced seller.” You would be far better taking your time and figuring out exactly where you want to be so you don’t end up in the same shoes.
Ignoring the Money Part
Looking at beautiful homes on Zillow is fun. We all do it.
But you won’t be taken seriously by anyone without first applying for a home loan with a mortgage lender.
Don’t like about being pre approved. You’re only cheating yourself.
It’s not sexy, it’s not fun dealing with a mortgage lender as they comb through your finances, credit score, debt payments etc…But think about it, they’re loaning you hundreds of thousands of dollars.
I get mad when a friend doesn’t pay me back $100 😂
For the love of real estate, please get pre approved before doing anything.
As always, holler at us when ready. If you’re not ready, take your time, relax and enjoy the summer. Real estate isn’t going anywhere.
Oh, and the whole “Is it a Good Time to Buy a House?” question.
The best time to buy was 5 years ago. The 2nd best time to buy is now (if you’re financially ready).
Stop falling for all of those “Real Estate Market is Going to Crash” Headlines. Long story short, you’re being played.