Real Estate Investments
Introduction
Tenisha
Welcome back to another episode of Black Girl Fly. I'm your girl, Tenisha Nicole.
Tashaunda
And I'm Tashaunda Dixon.
Tenisha
And today, guys, we're talking about investments, but really something that we've seen right now in the market, the housing market specifically high demand is like really high.
Tashaunda
Insanely high.
The Best Time to Sell Your Home
Tenisha
Insanely high. Interest rates have been really low, although that is changing. And and also prices have been high as well and so of homes. And so a lot of people have been selling in this market. One question that I always have is like if you're selling in a home market, you're going to be buying in a high market.
Tenisha
So, you know, that's probably something you want to consider. But I want to ask you, like, when is the right time to sell your home or is there a right time yeah.
Tashaunda
So so I would actually put this into two separate category. So I'd ask a couple of things first. So is this like are you talking about your home? Home like where are you going to be living where you're you know, this is not an investment. This is your primary residence, right? That's your scope. So I struggle with this.
Tashaunda
And the reason I struggle with this, because I've been in the marketplace where I've seen like the home prices go crazy low. I remember actually right around the time I bought my first house prices were just super low and I was like, there's no way they're selling these big old house. Well, this is right.
Tenisha
Well, you're.
Tashaunda
Within 2012, 20, 13.
Tenisha
Oh, wow.
Tashaunda
Wow. So so and I'll tell you about another time to you, but I was looking at these things and if you've lived for a while, you can tell at least I can because I pay I've always paid attention to real estate, but you can tell when the house prices are low. And I was looking at time, I was like I was in like right outside of Dallas and the houses were going for like one 3140.
Tashaunda
And these homes are 2003 thousand square feet. Like they're not tiny, they're big nice size homes, not mansions, but nice, nice homes. And I was like, man, I wish I had the cash. At that time I was married. I was like, We need the cash. And so I watched it. And then, by the way, so since then, by the way, these same homes that I just saw are now like 350, 400,000 our home.
Tashaunda
And this was, this was ten years. Yeah, 20, 12, 20, 22. And it's tripled in price. Pretty good return, right? 300 divided by ten 30% annually. Mm hmm. So I'm just saying that so so I saw that. But then, but now I'm at a place where things are a little different and I'm looking at the home prices. And quite frankly, I think it is market specific.
Tashaunda
They're not giving you real estate advice. I'm not supposed to do that. But but I'm looking at these homes. So we're in Charlotte, right? And in my neighborhood, when I first moved to Charlotte, you know, they were cheaper. And, yes, it's gone up substantially. But I was actually looking at neighborhoods around us, like Raleigh, Durham, all those those homes were already what our prices are.
Tenisha
They were already high. Yeah. Yeah, the market was lower.
Tashaunda
Yeah. And not only that, like, you have to look at the the jobs around and what the average income is. And they were actually pretty comparable. And so I'm struggling with this Charlotte market because, yes, I do think there were at the height, but I don't think that Charlotte is going to see the downturn that some of the other places in the country will see.
Tenisha
And I say that because you think it's just the market is correcting.
Tashaunda
I think it was slow so so if you look at the city of Charlotte, Charlotte has like some of that there in the top I think the top ten of incoming residents, what do they call them, people moving to the city.
Tenisha
Yeah.
Tashaunda
I plan yeah. Yeah. Like they're in probably the top ten top 20 in the country of cities and people are moving into, you.
Tenisha
Know, to I think two, three years ago I saw a stat that said there were a hundred people a day moving to the city.
Tashaunda
Yep. And also the job market. So in the Charlotte area, we have all the big banks have headquarters here.
Tenisha
Yeah.
Tashaunda
Yeah. And and that industry pays on average more than a lot of other industries. And so you have a higher revenue base here, higher income bracket here as well. And so I do think so I struggle with it. So to back to your question, I think that you have to acknowledge that if you're going to sell your house in an upward market, unless you're willing to be uncomfortable, meaning moving to an apartment or, you know, alternate to living living with someone for a period of time.
Tashaunda
Yeah, you are not going to make a significant gain in your ability to buy more home. Right. But I but but but here but if you were in an in an uncomfortable buying position when you purchased your home, that isn't necessarily bad. Meaning if you took out an FHA loan and you put less than 20% down, that means your interest rate was higher.
Tashaunda
That means you could be paying PMI, which is money just for saying thank you for trusting me then to pay you back, even though I have no proof that I can show you that I'm going to pay you back. It's an extra fee that you pay every month. If you were in that situation, you have now been able to sell your home.
Tashaunda
So if you bought I mean, I say in general, if you bought two and a half years ago, you have more than 20% of equity. So so you can get out of your uncomfortable position and this might be good knowing that you're going to move to an apples, to apples, maybe you can get a little upgrade because you are getting more cash down.
Tashaunda
But and by this time you might have made more income, especially given the other environment. Right, of the employee relationship that's going on now. But you could sell your home and so if you bought a home and you bought a home at 253 years ago, your home is probably worth 450 maybe, you know, for, let's say for though at the lowest.
Tashaunda
So if you sell it, that's 150, let's say $120,000 extra you could now buy even though you bought it at 250 before you can now buy a home at 300,000 and put down 20%, whereas in your 250 home you probably wouldn't down three and a half with your FHA loan. Right. And so what happens means that PMI goes away so you can afford more house then you could before.
Tashaunda
And also your interest rate would have gone down because your credit was better because your debt to income ratio on the house you purchased was better. And so you are now in a better position, but just know you are not going to get a substantially better house, right? You might get a little downgrade, but you're in a better position to better position to purchase.
Tashaunda
So in that case, I would say do it right.
Tenisha
That scenario definitely makes sense. So but the other scenario, I think is what you're alluding to on the flip side, like you're saying, if you would probably if it wasn't probably the best purchase and you were a little bit uncomfortable, you might have an opportunity but say that's not your circumstance. How would you look at this?
Tashaunda
So so the other part of this is I told you, you're not going to a better house right now.
Tenisha
The prices that's the thing. The prices are high everywhere. Yeah. So you sell, you buy high or sell, you sell high, you're going to have to buy high. So unless you're moving to a different market.
Tashaunda
That's good. So I wasn't saying just maybe think about like some of the people who go to the south. So people who were in New York and California, whatnot, cash out. Yeah, actually, I'll go to actually positive because it's definitely positive even, you know, when it was it's the parallel cheaper. And so that's another place do.
Purchase vs. Home Addition
Tenisha
It, right? Yeah. My dad is is contemplating that right now. They're in a city where it's booming and they want to move out to the burbs basically. Yeah. And doing that transition they can get pretty much same size house or like a hundred hundred $50,000 cheaper. But as for the outside of the city, you know, and you know, it's just different it's not saying yeah.
Tashaunda
So if you're willing to do it also benefit right now what I would say to other people is this was actually something that I went through that I was contemplating. So my own personal situation I was contemplating getting a larger house because my family's bigger and I was looking at the house and I was like, wait, I paid X number of dollars for my house?
Tashaunda
And if I add on the square footage that I need to my house, it's actually still 200 to $300,000. Well, $200,000 cheaper than me buying that same house in the market space.
Tenisha
Wow.
Tashaunda
And so for me, I was like, I could get $100,000 and make this house into one of those houses, or I can spend an extra 200,000 and buy a new house with a higher payment and all this stuff. And so I was like, the thing that I don't think anybody ever told me before is that you can cash out, refinance and so you're getting the, the value of an up market, meaning your house is now been appraised for more, right?
Tashaunda
And if you have the credit, people are going to allow you to borrow that just on the basis of you having the same house that you had before.
Tenisha
Exactly.
Tashaunda
And you don't have to actually move and pay more money for a house right. And so it became a real alternative to me that, hey, yes, I understand. I need to need a better house. Is there an improvement that I can make to my own house? Right. For the cost of construction versus the difference in the market space?
Tenisha
Right.
Tashaunda
And not only that, by the end of the day, when you fix your house up, your house is now increase in value.
Tenisha
Worth more yes.
Tashaunda
So now that you so so put this in a numbers for you. I paid 200,000. I was looking to move and I saw the house that I really want in this new market for 500,000 and I decided that I was going to take out 100 to 150 they out 150 to make my house comparable to that 500,000. And so now I'm all in for 350 but my house value is 500,000.
Tenisha
Mm hmm.
Tashaunda
And so my payment didn't go up as high as the other house, I didn't have to you know, move to take out that house, I didn't have to do the hassle, sell it and putting down and competing and all this other stuff that's going on now. Yeah. And people already told me that they can give me this money up front because my house is already worth the extra hundred thousand that I was trying to pull out of it.
Cash Out and Refinance
Tenisha
Exactly. Yeah. I love the cash. However, so you're saying. But I think you have to do it. I mean, you have to understand what you're doing, right? Your payments are going to go up because now, I mean, essentially it's another mortgage and so there are some implications on it. Yeah. But I think one question that I've been having in this market, we have a property in a market that has boomed and have been like, should we sell it or should we cash our refi on this property?
Tenisha
And there are tradeoffs to both, right? I mean, if you do a cash out refi, you're basically betting that the market is going to stay at or above that level right forward because your payments are going to increase. Right. And when you go to sell it, if you ever do, you need to sell it at that amount or higher or.
Tenisha
So you're saying it's not an exit strategy. Exactly. OK, yeah. So that's something I've been thinking about. We hadn't exactly talked about it.
Tashaunda
But to me. So let me change lanes now. Yeah. So what I just was talking about was about your personal residence.
Tenisha
Personal residence, right. We're switching over live.
Tashaunda
So and now we're talking about investment properties.
Tenisha
So I'm wondering, though, if the strategies are different.
Tashaunda
And so I mean, the strategies are different. So with the cash out, I'd say I didn't think about what you said about the exit strategy of selling the house later on, but I, I still don't think that gets you out of the benefit. And the reason I'm saying this is because so right now you have a property, and if you don't take cash out that property has now increase your return, meaning whatever you do with that cash that you pulled out.
Tashaunda
Now, it's not just making money from the income that you're already producing from that property, even though it's a reduced income because of the, the loan, but that that money that you took out is now less than something else that adds to the cash flow of the value of that home. Does that make sense?
Tenisha
Mm. I can yeah. I definitely seen that scenario, but I'm like, would you be better off now if you didn't have like, if you will?
Tashaunda
So let me ask you this. So what is the value of selling a home if you essentially have access to 80% of the cash? I still owning the home.
Real Estate is a Scarce Resource
Tenisha
This is a question that I've always asked people. And then, you know, I always hear investors regret selling their home honestly. They're like, Oh yeah, I had this property 20 years ago and I mean I should've never so I.
Tashaunda
Wish I had my first home.
Tenisha
If every I was that.
Tashaunda
Low and that homes were for 2000 I pay 136.
Tenisha
Says literally every real estate investor ever so I think the answer is don't sell just cash.
Tashaunda
To someone. Someone was talking about how we don't realize that real estate is a scarce resource and ultimately you have to understand that it's a sign of wealth. It's it's it's what gold used to be right like like this piece of land is always going to be worth something. And there's only so much land out there. The population is growing.
Tashaunda
The the knowledge of how important land is, is growing. People's ability to purchase land is also growing. And so I feel like land is never a bad investment and that you should hold on to as much as you can of it because it's better than these dollars. It's better than gold. It's better than like like there is always going to be an intrinsic value.
Tashaunda
There's no way that you can take it away because it is a scarce resource because you can't print any more of it.
Tenisha
But I'm like, How can you say that? You've sold several homes.
Tashaunda
I've sold homes to get to a greater position it was always about getting a higher rate of return. Or in some cases I realized that I was drowning, and if I didn't let it go, I was going to sink because.
Tenisha
Right, because that's why I'm like, there are a lot of people who lose their shirts on real estate.
Tashaunda
Yeah, right. Yeah. So so there is a point. And and by the way, I don't think that had anything to do with the real estate in fact, those same homes that I let go for nothing are worth a ton of money right now because someone had the money to do what it was, what it took to do with it.
Tenisha
So it just was a bad investment for you. I mean, you were the you were the problem. Yes.
Tashaunda
Yes. Not the property. Yes.
Tenisha
Point you out now. OK, interesting. Yeah. I got a nugget. We got stuff to do. Yeah, go right. We got moves to make. Now, I feel like you solved a couple of challenges that I've been thinking about. For, for our property. So you also to the.
Tashaunda
Next now she has to get you guys off so she can go make these plans, you know, these five year plans.
Tenisha
Until next time. Y'all think about it before you sell your property. I'm your girl, Tenisha Nicole.
Tashaunda
And I'm Tashaunda Dixon and we are Black Girl Fly.