Category: (2)

Thanksgiving is always ‘in season’!

by char-maccallum-real-estate-group-inc

Thanksgiving is Always in Season  

Thanksgiving250.jpgWe all know what we learned in grade school. Thanksgiving dates back to the Pilgrims at Plymouth as early as 1621. By the late 1660’s, it had become traditional to hold a harvest festival in New England.  However, here in Olathe, Kansas at The Char MacCallum Real Estate Group, we enjoy hearing about history, but celebrating being thankful all year round.

President George Washington declared the first nation-wide thanksgiving in 1789 “as a day of public thanksgiving and prayer to be observed by acknowledging with grateful hearts the many and signal favours of Almighty God.”

One hundred fifty years ago during the Civil War, in October, 1863, President Abraham Lincoln proclaimed the first national day of Thanksgiving.

William Seward, Lincoln’s secretary of state, drafted the proclamation: “No human counsel hath devised nor hath any mortal hand worked out these great things. They are the gracious gifts of the Most High God…they should be solemnly, reverently and gratefully acknowledged as with one heart and one voice by the whole American People.”

Even though the country was in the middle of the costly Civil War, the people of America started an enduring tradition to give thanks. In 1941, Congress determined that Thanksgiving will be celebrated on the fourth Thursday in November.  Of course this tradition continues and we celbrate with food, festivities, parades and by being around the ones we love.  There are others around us that the holidays are just plain tough.  Embrace your neighbor, say a prayer for those in need and open your hearts and homes to those around you.  We live in the mid west – these are part of our roots that we enjoy sharing with others.

We’re looking forward to seeing families and friends this week around our office.  Some people we haven’t seen since they closed on their Olathe homes, others we talk to regularly.

From our Char MacCallum Real Estate Group Family to yours,

Happy Thanksgiving!

Who’s paying your mortgage?

by char-maccallum-real-estate-group-inc

who is paying your mortgageDo you have a rental property?

As a homeowner, you obviously pay for your mortgage but as an investor, your tenant does.  Equity build-up is a significant benefit of mortgaged rental property.  As the investor collects rent and pays expenses, the principal amount of the loan is reduced which increases the equity in the property.  Over time, the tenant pays for the property to the benefit of the investor.

Equity build-up occurs with normal amortization as the loan is paid down.  It can be accelerated by making additional contributions to the principal each month along with the normal payment.  Some investors consider this a good use of the cash flows because interest rates on savings accounts and certificates of deposits are much lower than their mortgage rate.

In the example below, is a hypothetical rental with a purchase price of $125,000 with 80% loan-to-value mortgage at 4.5% for 30 years compared to a 3.5% for 15 years.  The acquisition costs were estimated at $3,000, the monthly rent is estimated at $1,250 and $4,800 for operating expenses.

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Notice that both properties have a positive cash flow before tax.  The cash on cash return is the revenue less expenses including debt service divided by the initial investment to acquire the property.  The 15 year mortgage will obviously have a smaller cash flow and lower cash on cash but the equity build-up is significantly higher.

If the goal of the investor is to pay off the property to provide the highest possible cash flow at a later date, a shorter term mortgage with a lower interest rate will help them achieve that.  A simple definition of an investment is to put away today so you’ll have more tomorrow.  Sacrificing cash flow now, during an investor’s earning years, is a reasonable expectation to provide more cash flow in the future when it might be needed more.

The Char MacCallum Real Estate Group has helped many homeowners purchase Olathe and Kansas City homes for sale to help build personal wealth.  If you’d like to explore rental property opportunities, give us a call at 913-782-8857