Home Buyers

With Higher Mortgage Rates Here to Stay, Long Island Real Estate Investor Says an Interest-Only Mortgage Can Pay off for Homebuyers and Investors Concerned about Higher Mortgage Payments

Although mortgage rates have stayed below 7% for the past few months, some prospective homebuyers are still staying away from making that purchase as rates are starting to creep up again.

On January 5, 2023, Freddie Mac reported that the 30-year fixed-rate mortgage rate is at 6.48%, up from 6.42% the previous week. It was the second straight week of increases after six weeks of declines.

For those who are looking to buy a home in this turbulent economic climate, Levi Kushnir, President, Stable Holdings Inc., recommends that prospective homeowners consider taking out an interest-only mortgage loan. “Your payments will initially be lower than if you took out a traditional mortgage,” he says. “This can enable you to ease your way into your home, albeit at a higher rate.”

In an interest-only mortgage, the borrower spends a predetermined period of time paying the interest only, then spends the rest of the term paying off the principal and the interest. If they wish, they can pay off the balance in one lump sum.

Another advantage, Mr. Kushnir says, is that the payments on the interest are completely tax-deductible, but that is only applicable to the primary residence.

Interest-only mortgages are ideal, not only for homeowners, but for real estate investors as well. “Investors who use interest-only mortgages when buying properties can use the money they save on the monthly payments to make repairs and buy more houses to build up their portfolios,” Mr. Kushnir says.

Mr. Kushnir can speak from experience, as he has used interest-only mortgages to buy several  of his own investment properties. The experienced real estate investor, who has been in the business since he was 18 years old, got his start in the mortgage lending business and later bought his first house at the age of 19. Since then, he has raised and invested tens of millions of dollars in real estate properties.

While paying only the interest for the first few years sounds attractive, he says there are a few drawbacks with this niche mortgage. “First, you won’t be building any equity in your home as you pay,” Mr. Kushnir says. “Second, once the interest-only period is complete, the payments increase substantially as you now have the absent years of principal ballooned into the remaining years in addition to the interest you have to pay. That would be a bad time to find out that you don’t have the money to make the higher payments.”

Long Island Real Estate Investor Tells Homebuyers What to Know before Looking to Purchase a House “As Is”

Buying a house “as is” might be a fast track to the dream of homeownership, but the unknowns that may come with it can become a nightmare. Levi Kushnir, President, Stable Holdings, says there are some things people need to know before making that purchase.

The main advantages of buying a house in its current condition are that the price will be lower than other houses that are in better shape and there are fewer people interested in the house. “You’re not going to have to compete with the typical bidders over how much you want to pay for the home,” he says. “There is way less competition.”

However, Mr. Kushnir says, the disadvantages of buying such a house are the quick turnaround time and the unpleasant surprises the homebuyer may face. “When you buy a house as is, there are going to be unknowns, and the seller may be anxious to sell and is usually pressed for time,” he says. “You won’t have the time to apply for and secure a traditional mortgage.”

When people look to buy a house that is in less-than-perfect condition, they believe they are buying for the same reasons as a “fixer-upper,” but Mr. Kushnir says that is not the case. “With an as-is house, the seller is usually in some sort of situation and needs to sell the house quickly,” he says. “With a fixer-upper, the owner may just sell the house because they gave up on doing the renovations themselves or the contractors took too long. In either case, the house would need significant repairs.”

Mr. Kushnir says that, by law, the seller should disclose to the buyers of any lead paint in the house, as well as any structural or other problems with the house, according to the Property Condition Disclosure Act (PCDA). “The PCDA requires the seller to list anything that may be defective with the property prior to closing,” he says. “Should it be discovered that it was not discussed and resolved prior to closing, it is possible the seller may be held liable for damages incurred by the buyer.”

To avoid such legal problems, Mr. Kushnir says, the seller will offer a $500 property disclosure credit. “By doing this, the seller can completely avoid having to go through the process by trying to list every single possible defect there may be with the home, thus avoiding a lot of liability or recourse,” he says.

Finally, Mr. Kushnir says, when ordering an inspection on an as-is house, some sellers may not even allow this. “Should you be allowed to, do not expect any price reductions or any credit at closing for any problems or defects found at this inspection,” he says. “This inspection is solely for the purpose of the buyer knowing the ins and outs of the property, but it is likely that if you nickel-and-dime your seller, he will see that you are not a real as-is buyer and will refuse to deal with you.”

Long Island Real Estate Expert Says Biden’s Proposed Cuts to FHA Mortgage Insurance Premiums Won’t Really Help First-Time, Low-Income Homebuyers

In an effort to help those who are buying a house for the first time, but cannot afford a conventional mortgage, President Joe Biden is proposing cutting insurance premiums on new Fair Housing Administration (FHA) loans.

While some say this will help prospective buyers achieve their dreams of homeownership, others believe this will continue to push home prices to record highs. Levi Kushnir, Founder/Owner, Stable Holdings, says the proposed savings on the insurance premiums is a paltry amount and, therefore, will not help low-income homebuyers in the long run.

President Biden recently introduced a plan in which insurance premiums on mortgages insured by the FHA would be cut. Those in the mortgage industry are seeking a reduction of $50 to $70 a month for new borrowers, but the FHA said any cut the agency proposes would be less than that. This proposal comes as median home prices exceeded $400,000 for the first time this year in May and the 30-year fixed-rate mortgage rate was 5.7%

Mr. Kushnir says the savings are negligible and would be wiped out by any mortgage rate increases. “For the typical homeowner, $70 a month is nothing,” he says. “This proposal is not going to save anyone any money. The facts of the matter are interest rates have gone up a lot more than the proposed premium cuts would be, the cost of living is becoming more expensive, and people just don’t have the same amount of money they used to have to spend on a home.”

When Should I Buy a House?

I was recently asked by a member of the media: When is it a good time to buy a house? This is what I told them:

Buying a home is usually the largest purchase one makes in their lifetime. Fear will exist, no matter what. If you have an opportunity to buy something, then GRAB IT! Kicking the can down the road will only increase your worry and angst.

Most people who have been looking for homes for several months can tell you that they “regret not buying one of the homes they had been shown earlier in the process.” In life, there will always be something “bigger” and “nicer.” If you can make something work now and it checks the important boxes, go for it.

What are the pros and cons of buying a fixer-upper?

I was recently asked by a member of the media:  What are the pros and cons of buying a fixer-upper instead of a turnkey home?  This is what I told them:

These are the pros of buying a fixer-upper:

  • Taxes are less: Most residential property taxes are calculated using the most recent purchase price of a property. As a homeowner, you will pay less when buying a “handyman special” than, say, a freshly renovated, walk-in-ready home. Sometimes, if done properly, a homeowner can apply for energy-efficient tax credits when doing certain renovations which can help the bottom line as well. And finally, most of the money you do spend on the renovations can count towards your bottom line and can go towards your capital gains tax when it comes time to sell the home.
  • Flip potential: When purchasing the property, you should look around the area at similar homes to see what the other fixed-up ones are selling for. If executed properly, your home should be worth more than what you paid for it and spent in upgrades/renovations. As a general rule, try to stick to houses that only need cosmetic work, as opposed to structural. This will save you a whole lot of heartache and will make it easier for you to turn a potential profit.
  • Creativity: One of the best parts of buying a “handyman special” is that you can really make it your own. You can choose everything from start to finish. Depending on how much you decide to do, it can be anything from the color of the paint to the cabinets in the kitchen and beyond. When you buy a home that is all fixed up, you usually won’t have enough money to change anything, and usually will just settle with what’s there. Sure, you may like it, you may even like it a lot, but it’s not going to be exactly what you want.

And now, here are the cons of buying a fixer-upper:

  • Renovation costs: Prior to bidding on a property, try to calculate how much work the home will need, and how much this work is going to cost. If you have the time and the ability, it’s recommended to speak to at least three different contractors and get three separate itemized quotes. In addition, I would also suggest getting a separate quote for labor and materials. Always include a 20% cushion of the entire budget for unforeseen expenses.
  • Effort: Fixing up a house is a grueling and stressful process. Most remodels can take anywhere from 3-9 months. You need to be prepared for your living quarters to be a “war zone” for quite some time. If you’re not up to dealing with contractors yelling at you, nagging and nosy neighbors, and unforeseen leaks here and there, a brand new, fully cleaned up home may just be the thing you need.

 

Long Island Real Estate Investor Starts His Business from the Ground Up at an Early Age

Levi Kushnir Flipped and Sold His First House at the Age of 19

Ever since he got his start in the real estate industry in 2012, Levi Kushnir has exhibited the drive and hustle needed to succeed in the tumultuous real estate market. His hard work paid off and he soon formed his own company that is a reflection of his success.

His company, Stable Holdings, and its predecessor raised tens of millions of dollars and sold several hundred properties. “After some time with other firms, I decided to branch out on my own,” he said. “Since branching out, I have never been more successful.”

Mr. Kushnir began his real estate career at the age of 18 as an intern with First Meridian Mortgage in Brooklyn. His responsibilities included selling and closing loans in the secondary market. “I was able to quickly learn the business and, six months later, they promoted me to Salesperson,” he said. “As a result, I brought in my first deal when I was still an intern and closed my first mortgage.”

When he was 19 years old, Mr. Kushnir flipped his first home. He bought a three-family house in Elmont for the purpose of making renovations to the house and selling it for a profit. He used $35,000 of his own money, borrowed $50,000 from a relative and the balance from a private lender. “As part of the deal, I would pay him a generous rate of return and a portion of my profits, and he agreed,” he said.

After making the renovations, he put the house on the market. Months went by and there were no buyers. “I had to take out a cash-out refinance and continued to pay my investor before I could pay myself,” Mr. Kushnir said.

He soon had a buyer for the house. They worked out a rent-to-own agreement and settled on a purchase price. “Everything worked out in the end and that is how I closed my first deal,” Mr. Kushnir said. “I was able to pay back my investor and put some extra money in my pocket.”

Mr. Kushnir attributes his success to several factors. First, he does not pressure his clients into making a deal. Second, he makes it a point to meet with his clients personally; no matter how busy he may be, Mr. Kushnir will make his clients feel that they are his only priority. Lastly, he is honest and direct with the people he deals with; if he learns of any issues with the property or the transaction, he will let his clients know immediately.

The main challenge for Mr. Kushnir is to find available properties for investment opportunities. “As an investor, you have to work harder to find properties to purchase and execute with precision to avoid supply chain issues and cost overruns and ensure you can find sellable properties in the market before there are any possible drops in inventory and rising home prices.”

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