Here is how I bought my last home at $80,000 discount!
First, please let me share the details of my last purchase. I bought a home at a prime location in greater Boston area, listed for $539,000. The home is 3,200 sqft and already priced at a discount. I arranged a low-cost private financing and made an all-cash offer of $460,000. The offer was accepted. My cost at the purchase time was around $40,000 upfront payment and $1,800 in monthly payments! The best part is that I did not have to take any debt either!! Let me explain how LivNJoy Public Benefit Corporation (PBC) brings the same low-cost housing solution to you too.
Let us visit our corner bank. No, not for taking mortgage, but to understand how the bank owns their own home, i.e., their own office. Obviously, the bank has no lack of money, and they have the best financial planners to help them get the best deal on their own office. So learning how they do it might teach us a trick or two.
Typically, a bank owns just the building while leases the land underneath. The bank maintains their own building, pays for insurance, and taxes. As a way of example, let us say, the real estate is worth $4,000,000, where the land is worth $3,000,000 and the building is built for $1,000,000. The bank leases the land for 50 years at an initial rent of as little as $10,000 per month which increases gradually over time.
Why does the bank do that? Why does not it give mortgage to itself, and own both the land and the building? Because it makes financial sense to own just the building. Let us now analyze what if we do the same for owning home? We will see it might make sense for us too in owning our own home, only if someone rent us the land for the duration of our lives.
Let us say, we found a $800,000 home. Let us say the building is worth $200,000 while the land is worth $600,000. Let us consider what if we buy just the building and lease the land, practically forever. The starting monthly rent on the land is just $2,000. So your cost of buying this home is just $200,000 upfront and $2,000 monthly. There is no debt on your credit history!
If you were to take mortgage on the home, you would have reduced upfront cost, i.e., $160,000 (20%), but your monthly installment on $640,000 loan at current mortgage interest rate would be $3,634 per month. You will also have significant debt on your credit report. In case the market crashes by 35% as it did between 2008-2010, your loss can be as much as $280,000 on a $800,000 home, which will ruin both your future financial situation and as well as your credit history.
Financing your single-family home as a manufactured home or an RV, reduces its monthly cost substantially! A $800,000 home can be financed for $2,000 monthly, rather than $3,634 with traditional mortgage!!
LivNJoy can get you a better deal on land leases than even a bank gets. First, we can get you a 99-year lease rather than 50 years. 99-year lease is practically forever. Second, we can reduce the cost of the building to 20%, the same as with the mortgage and attribute the remaining cost to the land. Third, we allow you to re-sell your building whenever you wish to whomever you wish, at whatever price you wish. Your personal credit history is not involved. The home on leased land appreciates together with the market. For full disclosure, it may depreciate too if the market depreciates, but your depreciation is limited by your own investment on the building.
Before suggesting this structure to you, the managing broker of LivNJoy PBC, Dev, just bought a home on leased land at a prime location as explained above. Dev plans to rent the home at a market rent of $4,000 per month, thereby keep $2,200 for himself after paying $1,800 of ground rent. Dev himself is very satisfied with the arrangement and decided to bring a similar arrangement to all the buyers, that is how LivNJoy is founded.
Not having ownership of the land may feel like an emotional issue, but it may be a better financial decision for many, just like it is for the bank to own their own office and not the land. First, it allows many homebuyers to buy their home, rather than continue renting, especially those who can't afford current mortgage rates. Second, even if you could have afforded the current mortgage rates, investing the monthly savings in other investments may both diversify your portfolio and may overall give you a better return. You may use the monthly savings to fund your own retirement account, or your children's education account, both are crucially important investments for the betterment of your own and your children's lives. You may also use the monthly savings to pay down your high interest credit card loans. Further, to have an apple-to-apple comparison, you can use the monthly savings to buy another investment property, thereby earning appreciation and rent on that too. Dev has the same plan, the money he saved with this arrangement, he is looking to use it to buy more homes. At some point he will sell that home for hundreds of thousands, and someone will buy it because it will generate tens of thousands in net income annually.
The ownership structure we discussed here is called leasehold on ground lease. It is very common with commercial real estate, not just the bank, but quite likely the nearby McDonald, Walmart, CVS, or Kroger is owned under a similar structure. This structure is also common with homeowners in many countries, and cities in the US. In fact, a similar ownership structure is very common among American homebuyers too. Millions of Americans own manufactured homes on leased land. They do so because it saves them thousands of dollars!! In fact, Dev's cost was even lesser than the cost of a manufactured home, just at $13 per sqft. You can't even buy a 3,200 sqft manufactured home for just $40,000.
You do not actually have to use any creative financing but keeping it in your back pocket will help you negotiate a great deal. That is why we are promising that you will win the home you love at a fair price, or we will give you $1,000 credit towards your eventual home purchase.
Please book a free online or in person consultation with Dev, if you are looking to buy or sell home.