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Investing on Your Side of The Fence

by Don DeHanas, Broker

The grass tends to look greener on the other side of the fence. Maybe that’s why some people invest in things they don’t understand. It has been said that the grass is just as hard to mow on the other side of the fence so stay with what your most familiar.

Single-family homes used for rental property give a person a chance to invest in something they understand: a home. They also have distinct advantages over other types of investments. An investor can borrow up to 80% of the value at fixed interest rates 30 years.

The financing creates leverage so that the investor can benefit from the increase in value of the home not just the down payment. It is reasonable to expect that the home will appreciate while providing tax advantages and practical control that are not available with many other investments. Low housing inventory in many markets has caused rents to increase and low new home growth will make it difficult to keep up with demand.

Consider a $150,000 home purchased for cash that would rent for $1,500 per month. With $18,000 income and allowing for property taxes, insurance and maintenance, it is still reasonable to expect $10,000 net income. There would be an 8% return on investment without considering tax savings or future appreciation compared with 5-year CDs paying less than 2.35% and a 10-year Treasury yield at 2.13%. An added bonus is the amortization that occurs on the loan as the principal is reduced with each payment. It becomes a forced savings account that increases the equity and isn’t taxable until the property is sold.

The reasonable control has a lot of appeal to many investors who find the volatility of the stock market unacceptable and don’t want the risk associated with alternative investments. Please contact me if you’d like to know more about available opportunities. If you or someone you know is looking to invest in real estate, The DeHanas Team can help! Call 301-870-1717.

Insurance For A Catastrophe

by Don DeHanas, Broker

The purpose of insurance is to shift the risk of loss to a company in exchange for a premium. Most policies have a deductible which reduces the amount of the claim that is paid by having the insured share in the first part of the loss. In the process of managing insurance premiums, policy holders often consider higher deductibles to lower the premium. Lower deductibles mean less money out of pocket if a loss occurs but also results in higher premiums. Higher deductibles result in lower premiums but require that the insured bear a larger part of the loss.

A small fire in a $300,000 home that resulted in $2,500 of damage might not be covered if the policy holder has a 1% deductible. If the homeowner can afford to handle the cost of repairs in exchange for cheaper premiums, it might be worth it. On the other hand, if that loss would be difficult for the homeowner, a change in the deductible could be considered. Homes in high-risk flood areas with mortgages from federally regulated or insured lenders require additional flood insurance. However, each homeowner needs to assess the risk of being able to financially sustain a flood loss on their home when flood insurance is not required.

The recent events in south Texas and Louisiana are evidence that the unexpected can happen. It is important to review your deductible and discuss risks with your property insurance agent so that you’re familiar with the amount and make any changes that would be appropriate before a claim is made.  The FEMA website has information and frequently asked questions about flood insurance.

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The DeHanas Team
DeHanas Real Estate Services
1218 Smallwood Drive
Waldorf MD 20603
Office: 301-870-1717
1-800-842-0190
Fax: 240-754-7867

Servicing all Anne Arundel County, Calvert County, Charles County, and Prince George's County as well as Annapolis, Bowie, Chesapeake Beach, Crofton, Dunkirk, Edgewater, Ft. Meade, Huntingtown, La Plata, North Beach, Odenton, Owings, Pasadena, Severn, Waldorf, and the Upper Marlboro areas of Maryland, all of Washington DC, and Northern Virginia, including Alexandria, Arlington, and King George County real estate advertised in this website are subject to the Federal Fair Housing Act of 1968 which makes it illegal to advertise any preference, limitation, or discrimination based on race, color, religion, sex, handicap and familial status, or national origin, or any intention to make any such preference, limitation or discrimination. DeHanas Real Estate Services will not knowingly accept any listing agreement for real estate sales in Anne Arundel County, Calvert County, Charles County, and Prince George's County as well as Annapolis, Bowie, Chesapeake Beach, Crofton, Dunkirk, Edgewater MD, Ft. Meade, Huntingtown, La Plata, North Beach, Odenton, Owings, Pasadena, Severn, Waldorf, and the Upper Marlboro, all of Washington DC, and Northern Virginia, including Alexandria, Arlington, and King George County areas which are in violation of the law. Our clients and customers are informed that all dwellings advertised on our website in Anne Arundel County, Calvert County, Charles County, and Prince George's County as well as Annapolis, Bowie, Chesapeake Beach, Crofton, Dunkirk, Edgewater MD, Ft. Meade, Huntingtown, La Plata, North Beach, Odenton, Owings, Pasadena, Severn, Waldorf, and the Upper Marlboro, all of Washington DC, and Northern Virginia, including Alexandria, Arlington, and King George County areas are available on an equal opportunity basis. All prices and finance claims appearing in this site are subject to change without notice.