Money Chisme: Personal Finance Tips for Latinos
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Money Chisme: Personal Finance Tips for Latinos
Real Estate Chisme: FED Rate Cuts, RealPage Lawsuit & Kamala's Home Affordability Plan
Is owning a home starting to feel like a distant dream? With mortgage rates hanging out between 6.4% and 7.5% and the Federal Reserve's next move just around the corner, we'll break down what this all means for homebuyers and investors. We get into this latest real estate chisme. Plus, we’ll dive into the Department of Justice's antitrust lawsuit against RealPage Inc., exploring how alleged algorithm tricks might be pushing up rental prices and making the market even trickier.
With the election year, Presidential Candidate Kamala Harris drops her plan to help combat the home affordability problem. From tax incentives for builders to downpayment assistance, we get into it. What could this mean for new homebuyers and small time real estate? We’ll also chat about the growing challenges of rising property taxes and insurance rates, with tips on what can be done to make homeownership more affordable.
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Well, the feds cut interest rates and what is going on with the Department of Justice filing a lawsuit against RealPage? Let's get into some real estate chisme. So there are quite a few things that are going on in real estate that can affect, you know, homebuyers and real estate investors, and I want to talk about it. First up, let's talk about the mortgage interest rates Currently. Last that I checked recently if you want to buy a home or invest in a property, you're looking at a mortgage interest rate of about 6.4% to roughly around 7.5%, you know, depending on your credit score. Now these rates are still high enough to deter a lot of buyers and, according to realtorcom they did kind of like a survey and there's still a lot of buyers that are just waiting to buy but they're standing on the sidelines right now and this is because they are trying to wait out and see if the interest rates are going to drop. And there's a few that they interviewed and you know there's one home buyer that says you know what, I'm gonna wait to buy until the interest rates drop down to below 5%. And they also interviewed a real estate investor and they're like I'm not going to buy or invest until the rates drop below 6.2% and honestly, as a real estate investor, I kind of agree. I mean, like, don't get me wrong, there are still deals out there, but it is a bit harder to find them and make the numbers work with the high prices and these high interest rates. But you know, they're still out there, it's still doable and I personally am still looking.
Speaker 1:But apparently the rumor is that the feds will announce that they are going to start cutting down the rates. They are expected to announce it in their September 18 meeting. What does that mean? Well, usually, typically, the theory is that when they cut rates, that means that the it's cheaper for them to borrow money, which in turn should, or possibly could, lower the mortgage interest rates, meaning that it's going to be more affordable to buy, you know, homes because you're going to have a lower interest rate. But honestly, we're just going to have to wait and see what happens, because you know I've been hearing about possible interest cuts, like since last year, and you know you had the rumors that they were gonna drop to below five percent and all that. And I think you know they had said that it would drop below 6.4 percent by the end of the year and like the rumors have been circulating, so we really don't have any other choice than to wait it out and see what actually happens on September 18. I believe their meeting is the 17th and 18th, so I guess we're on standby for that.
Speaker 1:Next up is that the Department of Justice has filed an antitrust lawsuit against RealPage Inc. The DOJ is accusing the company of violating the antitrust laws through the use of the algorithm. They claim that the algorithm is allowing landlords to use the inflated prices to further hike up rental prices, which is, of course, we are all hurting, especially me now that you know I'm renting again and those rental prices have skyrocketed and they're saying these types of algorithms are kind of to blame. So who is RealPage? Realpage is a platform where real estate owners and property managers can do things like various, numerous things like find and screen tenants. They can do like market their properties. They can keep track of their properties through like the bookkeeping products that they have and also, you know, they could create leases and things like that. But it also provides data insights and, you know, like asset performance for their properties, which a lot of landlords and you know property managers use to help price their rentals, and so they're using these and I guess they input stuff. I'm not too familiar on how exactly they're creating this data, but it creates some insights and they're able to track how the properties are doing. And they're able to track how the properties are doing and then they use that to determine how much they're going to charge in rent. Now, allegedly, this allows them to follow the algorithm. Again, it's whatever gets inputted and it's based on you know how the algorithm does their calculations, I guess, does their calculations, I guess, and you know the landlords and property managers will price it based on the algorithm versus the actual rental market and the actual competition. Now, of course, realpage has released a statement saying that the DOJ is basically looking for a scapegoat and that it's not really going to help with these high rental prices. It's not going to really help make these rentals more affordable because, at the end of the day, it's also a supply issue and you know there's a shortage of homes and rentals.
Speaker 1:But my personal thoughts are that I do see a lot of landlords and property managers using more like AI and online tools to you know, help them determine um rents. And, of course, real estate investors use a lot of online tools to do their property analysis, to, um, to kind of gauge how much rent they are expected to get so they could calculate their cashflow. And it's one of the things that you know investors who are looking at a potential property. They're going to use these types of tools like RealPage and use it to do a market analysis and do their calculations. And I can see how this can give a false analysis and can really hurt, especially if you are looking to invest in a property in a certain area, because investors and landlords are going to follow the recommendations of these tools. But I have found that it can lead you astray. Lead you astray. And I speak from personal experience and I don't necessarily know, um, the algorithm that you know my property managers use, um, I know the software that they use but I'm not sure, like, how the algorithm or how they are getting, uh, the prices of how much they're going to charge for rent. But I do know that last year, towards the end of last year, I had to deal with this where, you know, my property manager was, you know, listing some units for 925 and you know it was taking a little bit longer to rent them out and the reality was that I eventually had to come down to around 850, I believe it was at that time for um, the new tenants, the new leases, and that was a more accurate um ideal rental price than the 925 that they were thinking, than the 925 that they were thinking. And I believe it's because of, probably, these types of tools. I'm sure you know they take into account a few things, but I know they're probably using some software with that has probably similar algorithms that were giving them a false market value of $9.25. And when reality, the competition says you're going to get more like $8.50. So you really have to be careful when you're using these types of softwares and tools online, because the reality is probably gonna be a little bit different.
Speaker 1:And the last thing that I want to talk about is the potential future of real estate. And we are in an election year and vice president and presidential candidate, kamala Harris has made her statements on how she plans to combat the home affordability problem. And, as a real estate investor and if you're someone that wants to buy a home within the next few years, this is something to keep in mind and could help you plan if Kamala Harris wins the presidency, because she wants to make owning a home and renting more affordable, and she's basically proposing a few ways to help that. So, as stated earlier, there's definitely a supply problem and you know there's just not enough homes available. There's not enough homes and rental properties that are being built, which is causing a lot of the shortage, and she wants to incentivize builders with a tax incentive for them to build starter homes but also sell them to first time home buyers.
Speaker 1:Now, the thing is there's a lot to consider. I mean, it's kind of difficult to tell like a builder like, hey, build more starter homes because you know it is a business and they have to balance that along with, you know, being able to be profitable, and with labor costs and material costs that are super high right now, it's like how are they going to make an affordable home, especially a starter home? Um, how are they going to be able to build them and still make a profit? And I also find, whenever, like there's like initiatives like this or legislation that's coming up that they want to pass for something similar, there's always a lot of loopholes. It's always very loose and very vague that it's really ineffective. So I hope, if this does come around, that it's more specific. Of course, this is just her general thoughts and I know that hopefully it's going to be more detailed, have more definitions in there and ensure that there's not loopholes where builders can, you know, take advantage, get that tax incentive and still screw homebuyers first-time homebuyers because there's several other legislations that the idea was to help out the people that wanted to buy homes, but then it was used for other things and it wasn't really beneficial. So hopefully there's not as many loopholes if this comes around.
Speaker 1:The second thing she wants to do is she wants to assist first-time home buyers with down payment assistance and she's proposing about up to $25,000 that you will be given. I'm not sure too much on the details yet, but the idea is that you will be given. I'm not sure too much on the details yet, but the idea is that you will get down payment assistance for up to $25,000 towards your first home and, of course, one of the requirements is geared towards first-time home buyers and one of the requirements will be that you have paid your rent on time for the past two years. That's one of the things that I've seen. Now, of course, there's always the argument that you know, doing these types of programs is just going to, you know, cause home prices to just go up. Because there's going to be more buyers. Because there's going to be more buyers meaning there's going to be a higher demand and we're still short in supply of houses. So then house prices are going to go up and so a lot of.
Speaker 1:There's some, you know, hesitation with that and of course there's going to be more competition. But also there's the idea that if they're not able to afford the down payment, then maybe they're not as financially literate or financially stable, so they might be put more at risk to default on their mortgage payment. But here in California we already have a down payment assistant program and I think it's similar and it's more like a lottery system. So you have to like sign up and they give you a ticket and all that. But it is also geared for first time home buyers. And one of the things that I like is not only helping um, you know, first time home buyers with down payment assistance, but it also requires them to take some type of home buying and financial counseling um to reduce that risk of them defaulting on a mortgage. But with this one it's more like a loan. So if you decide that you want to sell that home, then you do pay back that down payment assistance. So I'm not sure if it's going to be the same. But you know, I have mixed feelings as well. Like I, I like the idea of helping people you know be, you know, uh homeowners, because that's one of the greatest ways to get into real estate investing and start building wealth. Um, but I think, you know, I'm going to wait to see what all the details are and how that's going to be executed, if it does come, you know, to fruition, I guess.
Speaker 1:Lastly, one of the other things that she wants to do is to get Congress to pass the Stop Predatory Investing Act, which is, you know, going to target those who have 50 or more single family homes as rental properties, and it's going to prevent them from being able to use one of the tax deductions. So I'll link it below. But you know, I did do an episode of talking about, like, lots of the tax incentives that you get with real estate investing, and one of them is being able to deduct the interest that you pay when you have a mortgage, and so this act is going to prevent those who own 50 or more single family homes as rentals to be able to utilize that. Now, I know many people will not like that and I get, I guess I get it. But I personally like it because I, although I'm a real estate investor, I do not believe in buying up like neighborhoods and, you know, stacking up single family homes. I do more multifamily homes. Um, I did have up single family homes. I do more multifamily homes. I did have some single family homes. I ended up selling them. But if you have a few, I don't see the problem with that.
Speaker 1:But there's investors, especially the big timers, that target a lot of single family homes and neighborhoods and it definitely is, you know, contributing to the problem of being able to afford homes and you know, driving up rental prices as well. So it's really going to affect these big timers that are like multi, multi millionaires, which I don't really care about. So if you're a real estate investor, small timer like me, that is, you know, just getting a few just to, you know, build financial freedom and build a little bit of wealth and stuff, it's not really going to affect you because for most small timers, you usually buy a few single family homes and then you move on to like multifamily properties and then possibly go to apartment buildings and that's not really going to affect you with the if this passes, and really it's going to affect these big companies that are buying up. So I don't know if it's going to be like an individual that owns 50 plus properties or is it going to be a company or what's. What's going on with that. So I guess I'll see as more information comes out on that.
Speaker 1:Now, overall, all these things sound good in theory and again, as I mentioned before the, the legislation needs to be just more detailed and close some loopholes and make sure that they really define some of these things For example, what's a starter home, you know how many square footage and stuff like that, price ranges and all that and to prevent you know these builders and you know others to, from going and finding loopholes where they could get around it and still get the tax incentive, which would be kind of productive. Uh, addressing some of the property taxes and insurance rate hikes, because that is also driving up rent prices and really hurting current homeowners and also driving up the house prices, because it's ridiculous with some of these freaking tax jumps like uh, I know my like me and my dad were recently talking about it that you know, his property taxes went really high and home insurance as well, and this is, you know, similar stories across. You know, the nation of, especially, like I keep hearing, like california's one and florida and te and Texas, is one of the big ones that are getting hits of, you know, insurance going up and property taxes going up. So, uh, current homeowners are really struggling, their mortgage payments are going higher and it's really straining some people's budgets. So I think these also need to be taken into account and figure out a way to bring some of that down or at least slow it down, because the jumps are pretty high and I would like to see a little bit more on that to actually, you know, help combat the home affordability problem.
Speaker 1:Well, that's it for the real estate chisme, don't forget. If you want to learn about rental property investing, you can download my free ebook on how to buy your first rental property. It's linked down below. It's free to download. Check it out. Hasta la proxima Bye.