Keith and Kinsey's Real Estate Update

Giving Challenge – Commit to Charitable Giving
December 24, 2012, 11:25 am
Filed under: Business, Life, Money | Tags: , , , , ,

I love the Holidays, It’s a time of year when people seem to be happy to give and help others. In fact, we’ve rung bells for the Salvation Army at Millers & Sons Supermarket twice in the recent weeks, and I’ve been amazed at the generosity of people in our small town of Verona! Although, this spirit of giving, doesn’t always seem to continue year round.

At Keith & Kinsey Real Estate we’ve made the commitment to donate 10% of our commissions to the charity of our clients choice. We started the charity program in 2010 after the earthquake in Haiti, and it’s been a hit with our clients. It always makes us and our clients feel good to know that people get help as a result of every closing. Even so, sometimes it’s easy to loose site of the real spirit of things. My wife recently emailed me a picture of another real estate agent’s business card which said, I donate 10% to XYZ. For a split second my reaction was one of spite, thinking she copied us and used it to market herself. However, that initial reaction quickly turned to delight realizing, she copied us and more charities are getting more money! 🙂

I started thinking… What if more businesses did this? What if more individuals did this? Would it every be possible for charities to replace government programs? Could it lead to the cure of certain diseases? Could it help the next generation?

My point here is not to boast or market ourselves based on our charity program. Instead, I’d like to encourage others to make the same commitment in the coming years. I challenge you to commit a portion of your income to charity. Lets see if we can change the world together.

If you need help deciding what is a worth cause to give to, Charity Navigator is a great place to research charities. They have a rating system that is based on the efficiency and performance of each charity, and they show financial information for most charities.

Acts 20:35 It is more blessed to give than to receive.

Luke 6:38 Give, and it will be given to you.

Luke 6:38 For if you give, you will get! Your gift will return to you in full and overflowing measure.

Proverbs 28:27 He who gives to the poor will never want

Related posts:

Making a Difference Through Charity


The Fiscal Cliff – How Does It Affect Real Estate?
November 28, 2012, 6:43 pm
Filed under: Income Property, Money, Real Estate | Tags: , , , , ,

There’s been a lot of discussion in the news about the fiscal cliff lately. In case you aren’t already familiar, the fiscal cliff is a combination of several laws which would result in tax increases and spending cuts starting in 2013. So, how does any of this relate to real estate?

The Mortgage Debt Relief Act of 2007 is one of the tax breaks that is set to expire at the end of the year. Generally, if debt is forgiven or canceled, this can be considered income to the borrower because it’s money they borrowed that they no longer have to pay back. So the borrower could be taxed on the amount of debt they were forgiven. This act excludes forgiven debt related to foreclosure, short sale, or loan modification of a primary residence from being taxable.

Even though the NAR (National Association of Realtors) is fighting hard to extend this act, I’m kind of torn on my opinion. Part of me says, we absolutely need to prevent people who have lost their home from being kicked while they are down and taxed on their debt forgiveness. Although, the other part of me says without this act we would have fewer people strategically foreclosing (walking away for convenience or part of their financial plan), which I don’t agree with. Maybe this act could be revised to provide incentives for short sales instead of foreclosures? This may prevent some strategic defaults while still helping those that are really trying to work with the banks.

Capital Gains Taxes are also set to increase from 15 to 20% on January 1st. I’m somewhat indifferent on this topic too. As real estate investors, lower capital gains taxes are beneficial for my wife and I in the long run. Although, I also understand the need for the government collect more than they spend, and I don’t think this is such a terrible place to squeeze more money out of tax payers. This will however, raise expenses for investors who are helping to revitalizing distressed properties, which could have a negative impact on a recovering market. So, I’d prefer to delay the increase a year or two or slowly raise it back to 20% over a period of a couple years.

The Mortgage Interest Tax Deduction is also a discussion item. Currently mortgage interest is a tax deductible item. Although, law makers are threatening to trim deductions allowed related to mortgage interest. Again the NAR is fighting to keep this tax deduction around. I think we all realize that this tax deduction is an incentive for home ownership and taking it away could slow (if not severely damage) the recovery of real estate markets. Although, I don’t think it would have much market affect if they set a lower maximum allowable deduction or eliminated the deduction for second homes. I’m probably the only Realtor and real estate investor that you will ever hear say this…  but I wouldn’t mind if this tax deduction was reduced over time and eventually disappeared. Why? because I don’t think our government should dole out rewards for having debt. Debt and the willingness of the American people to overspend is what got us in this mess to begin with.

What are your thoughts on the fiscal cliff? Do you agree or disagree with my thoughts?


Ditching The Credit Cards
October 31, 2012, 9:52 am
Filed under: Money | Tags: , , , ,

Since moving recently, we’ve been working on getting our address updated every time we get a piece of forwarded mail. It came to the credit cards and we decided, “why update the address, let’s just close them!”

I know, I know, many of you are probably thinking closing your credit card accounts will hurt your credit score, but here is why we made the choice to ditch the plastic:

  • We’ve been using a debit card for the past 2 years that is tied to an interest bearing checking account earning 2% interest at Heartland Credit Union. It beats credit card rewards.
  • We spend less knowing we are using actual cash.
  • The service from the credit card companies sucks. When I called Citi to cancel our card I spent 37 minutes on the phone (28 minutes of that was on hold) and I got transferred 4 times.
  • We have an emergency fund and don’t need to rely on credit.
  • We wanted to simplify our accounting by reducing the number of accounts we need to track.
  • The rewards aren’t worth the hassles.
  • Fewer accounts means a lower chance of identity theft.

We use to be people who worked hard to maintain a high credit score. Doing real estate investment and carrying multiple mortgages on multiple properties, a credit score was extremely important to purchase the next property. Although, we have come to realize, Dave Ramsey was right; a credit score really is a “I love debt score”. You borrow and pay back; just to get a good enough score to borrow more and pay it back more with interest.  Wash, rinse, repeat.

We’ve reached a point in our lives where we are happy and content where we are. We don’t plan to move for at least 20 years. We’ve steered our real estate investments into a more conservative approach, we’ve got an emergency fund and IRA’s if we really get in trouble, and we have simplified the ways we handle our finances. So, at this point, I’d be perfectly happy if we never borrow another penny. Ever again.

I know closing long standing credit card accounts will hurt our currently phenomenal credit scores due even though there hasn’t been a balance in years. …but go ahead (not so) Fair Isaac, ding our credit score for cutting up our credit cards and closing our accounts. Even if our credit gets a 100 point hit (I don’t think it will be that much), dropping to a 710 credit score won’t bother me a bit.

I will admit, I kept one card open just for a backup if we are traveling. I’ve had instances when on a motorcycle road trip where my card got locked out due to gas stops every couple of hours in multiple states across the country. So, I figure one backup card probably isn’t a bad idea.

Also for those of you that currently use credit cards and looking to buy a house soon, don’t go closing your accounts just yet. If you are planning to get a mortgage in the next few years and you have been a user of credit, you are better off just keeping the credit card account open but not using it. My credit score did stay over 810 without using a credit card for 2+ years. Although, if you close long stand accounts your score will drop and it could negatively affect your mortgage terms. Amount owed vs credit available, and a length of account history are a large part of what makes up your credit score.

For those of you that haven’t started using credit of any sort but want to get a mortgage someday, you can get a mortgage with no credit score (just not a bad credit score). So, don’t go opening credit cards just to build a credit score.

Deciding to Buy a House – When Are You Ready?
October 2, 2012, 8:08 am
Filed under: Money, Real Estate | Tags: , , , , ,

A couple weeks ago, we wrote a step by step guide to home buying, and step one is making the decision to buy. So, you’ve been thinking about buying a home, but aren’t quite sure if you’re ready. It’s a big decision, and now is an amazing time to buy. Prices are still low, the market seems to be starting to recover, and the current interest rates unbelievable. Are your lifestyle, your job, and your financials ready to buy though?

One of our goals is to never have a buyer/client go through foreclosure after selling them a house. Obviously some aspects of a person’s financial or job situation are well beyond our control. Although, we can offer advice as to when we think you are financially ready. We’ve had a lot of people come to us wanting to buy a house when they are on very shaking financial ground. We will be completely honest with these people and tell them, “We think you should wait a bit to buy a home.” We would rather see a buyer comfortable and happy in the long term rather than happy in the short term, but in serious trouble a year from now.

In our opinion, these items are must haves in order to buy a house:

  • 3 month emergency fund – Take your monthly expenses (including your projected mortgage payments) and multiply it by 3. You should have this much set aside as a safety net.
  • Stable income – If your job is questionable, or you go through temporary layoffs, you probably want to look for a more stable income. The exception would be somebody who has budgeted well and makes enough of an irregular income to spread out throughout the whole year.
  • Plans to stay for 3 years – If you don’t plan to stay in the same place for 3 years or more, your likelihood of losing money when you sell is higher. If your location is short term, just rent.
  • No credit card debt -If you have credit card debt, your part of the norm in America. Life and home ownership is so much easier without credit card debt. Please get rid of these payments before buying a home.

These are recommendations, but not necessities:

  • 6 month emergency fund – Take your monthly expenses (including your projected mortgage payments) and multiply it by 6. You should have this much set aside as a safety net.
  • No student loans – You’re likely going to be paying on that mortgage for a long time. Just knock this debt out before you have a mortgage payment.
  • No car payments – Seriously, you bought an expensive fancy car before a house? Cars go down in value; real estate generally goes up over the long term. I’d take a mortgage over a car payment any day.
  • No debts at all – If the only payment you have is a mortgage think of how much simpler and comfortable your finances will be.
  • 15% of your income going toward retirement – Many people look at home ownership as an investment, but let’s face it; your home is not a retirement plan. You still need a place to live when you are retired.
  • 20% Down payment -While there’s still low money/no money down loans out there. You’ll find yourself much more comfortable and getting a better interest rate if you have money to put down. 20% down will get you the best rate and avoid PMI.

These are signs you are not ready to buy

  • You live paycheck to paycheck – if you are waiting on the next check to come in to pay your next bill, you are probably too tight on cash for home ownership.
  • You pay minimum credit card payments – If you are only able to pay minimum payments now, how much harder is it going to be once you have a mortgage and home to maintain?
  • Unexpected expenses throw you off for months – When your car breaks down, does it take you several months to get caught back up? This is a sign you don’t have a good emergency fund. Keep in mind, once you buy a house, you no longer have the landlord to call for repairs, you’re responsible.
  • You’re worried about every penny of closing expenses – If you are stressed about your closing costs being $1800 vs $1725, you definitely don’t have enough cushion.

If you’re not quite in position to buy, there’s a lot you can do to get yourself in position to buy. First, start tracking your expenses and set yourself a budget. A structured budget will quickly help you see where you are wasting money. Then cut back on your wasteful expenses and pay down your existing debt. Lastly, if there’s still not much extra room in your budget, pick up some overtime or get a second job. Once you get accustomed to living on tighter finances to get rid of your debts and save a down payment, you’ll find paying a mortgage payment and maintaining a home a breeze.

Investment Property Financing – Latest Requirements

This is a Guest Post by Ryan Huemmer, the lender we use on our own rental properties.

As an owner of investment properties, I get no greater joy than helping someone purchase their first investment property.  I’ve worked with AnchorBank for almost 8 years and the world of investment property financing has changed dramatically.  With larger down payment requirements, higher interest rates and fees, limits to the number of properties financed and minimum cash reserve requirements.  It’s best before you contact Keith & Kinsey about buying an investment property, you need to consult with a mortgage lender…….hopefully me.  Ryan Huemmer, 221-6533 or 

Fannie Mae only finances 1-4 unit investment properties.  The down payment requirement varies based on the number of units.  When buying a 2-4 unit property a 25% down payment is required.  In addition to standard closing cost Fannie Mae has its own fees.  The Investment Fee is 1.75% (fee times the loan amount) and the Multiple-Unit Fee is 1.00% so you would have to pay a 2.75% fee to buy the property.  That fee can also be converted to an interest rate increase instead.  (1.00% equals a 0.25% rate increase)  The maximum fee conversion allowed is 2.00%.  So you can get market rate with a 2.75% fee or market rate plus 0.50% with a 0.75% fee.

A borrower who owns 1 to 4 financed properties has a 2 month PITI reserve is required for each property.  A borrower with five to ten financed properties will require 6 month reserve for each property and the required down payment is 30%.  Fannie Mae will not finance more than 10 properties and properties in LLC’s.

There is really so much to know about buying an investment property so I was only able to touch on the key guidelines.  With record low mortgage rates, no interest being paid on deposit accounts, extreme volatility in the stock market and home prices down; why not invest your money in real estate.  Whether it is for additional tax deductions, monthly cash flow or just to have someone else grow your equity position in a property……..I believe in investment properties.

Added note, by Keith… These requirements that Ryan mentions are for non-owner occupied investment properties. Financing for an owner occupied rental property can be much easier. So, if you are a first time home buyer considering income property ownership, think about buying an multi-unit property and living in one unit. I started with living in one half of a duplex that I purchased, and it worked out great.

100th Post – Help Us Give!
September 3, 2012, 8:05 am
Filed under: Business, Income Property, Money, Real Estate | Tags: , , , , ,

This is our 100th post! In the short time we’ve been blogging, we’ve seen our readership numbers drastically increasing and we are approaching our 10,000th view. Thank you to all of our readers for paying attention to what we have to express. We hope you are enjoying our information on real estate, finances, investments, and some personal tidbits

To celebrate our 100th post and an amazingly successful year thus far, we wanted to do something more for charity and to spread the word of what we do. So, for the next week, in addition to our usual charity program, we will donate $1 to charity for any new Facebook page “like”, Twitter follower, or blog subscriber (up to $1000). The best part is you get to help us choose the charity! Go to our Facebook page to vote which charity you like the best. If you find our Blog, Twitter feed, Facebook page, or website useful information, please share it with your friends and family to help us donate more! Thanks for your support!

Our top 5 posts of all time have been:

1) Marriage and Money – Dave Ramsey vs. Suze Orman

2) Homeowner (and Rental Owner) Tax Deductions

3) Build Wealth and Passive Income With Rental Properties

4) Our Home Build Series

5) My Debate With Suze Orman

…and one of my favorites that I thought was way underrated is Entrepreneurial Ideas For the Unemployed

Marriage and Money – Dave Ramsey vs. Suze Orman

Money is one of the primary reasons for divorce in America these days. It’s a challenge taking two different personalities and getting them to agree on how to spend and save money. So, how do you manage your money well and keep your relationship strong?

Leading financial show hosts Suze Orman and Dave Ramsey provide great guidance on money but have very different views on relationships and money. Suze takes the approach of separate accounts and what’s yours is yours. She recommends that couples keep individual accounts and that they should each contribute a percentage to the joint bills, such as housing and food. The percentage that she recommends is based on the percentage of income each person earns. For example, Spouse A’s income is 40% of the household income and Spouse B’s income is 60%, they would split the joint bills 40/60. Suze says whatever is left over from the budgeted monthly payments is personal money for each person.

Dave, on the other hand, recommends Christian principals of a couple becoming one. He says spouses should combine all finances and work together towards a common agreed upon goal. He tells people to work together on a household budget and a piece of that budget should be spending money. This way, all money decisions are made together and nobody feels like they are earning less.

Kinsey and I lean towards the Dave Ramsey model. We plan our financial goals together, budget money together, plan our giving (to church and charity) together, and pool all our money and investments into joint accounts. We do have separate accounts too, but the separate accounts are only for our budgeted spending money. All of our money goes into our joint account, and then every 2 weeks we each of us gets our budgeted spending cash (we call it our allowance). This way, we plan our financial life together, but we still each have a little fun money.

We started out our relationship with separate money and never saw eye to eye about a lot of things. However, since combining our money and planning together, we’ve been much more successful, at saving, giving, investing, and planning for our future. We were able to quickly save up a down payment for a new home once we agreed on the same goal and planned for it. Most importantly, we rarely argue about money anymore, because we both know what to expect and what is planned for.

Recently I saw an episode of the Suze Orman Show, in which a woman had just won a hefty law suit settlement. Suze had advised the woman to pay her own debts and keep the rest of the money for herself – not paying off her husband’s student loan. Yikes! Really?! Aren’t we in this together as a married couple? There are several flaws I see with the separate money method.

1) Separate money equals separate lives. When married, you are in it for the long haul. Your life plans should be agreed upon with your spouse. We have seen real estate clients who can’t purchase a house because they live separate financial lives. One person has saved, while the other has blown their money and damaged their credit.

2) What if one spouse ends up staying home to raise kids? Then what? Does this mean that they are broke and the other spouse is in control? I don’t think so. Both spouses need to have some spending cash and equal say in financial matters.

3) Separate money equals greed. When spouses have separate money and separate financial goals, they can easily end up greedy. You end up having arguments over the dumbest little things like whose turn is it to pay for dinner? Arguments like that can destroy your date night real fast.

4) Retirement. What happens if one spouse is properly saving for retirement and the other is not? What could happen 30 years down the road?

5) Shouldn’t you be planning for a lifelong marriage, rather than planning how you can get ahead individually?

The bottom line is this: couples that plan their lives and finances together are much more successful financially and with their relationships. This involves a lot of work, communication, understanding and patience; but it’s well worth it.

Related post: My Debate With Suze Orman