Q: My wife and I are trying to decide whether to continue to rent, or to buy a three-bedroom house for $50,000. We are both 58 and our annual income is $17,000 ($12,000 salary and $5,000 pension). If we buy, our down payment (with a VA loan) will be $21,000. This is all our savings, except $3,000. Our payments would be $354 per month. We can rent for $350 per month. If we rent, our savings will be earning about $150 per month interest. Should we buy or rent? What happens if we buy and fall behind in our payments?
A: The decision here is a close one because of your age, income and amount of savings. I must make two assumptions to answer you adequately. First, I must assume that the $354 monthly payment includes taxes and insurance. Second, I must assume that you have a medical care program that at least covers the most burdensome medical expenses.
With the foregoing in mind, I suggest you buy rather than rent.
If you fall behind in your payments, normally both the VA and the lender will give you every possible opportunity to avoid foreclosure. If, finally, all opportunities are exhausted, the lender will foreclose on the house, retake possession and sell it. Normally, any money realized from the sale that exceeds the amount owed the lender (including delinquent interest) plus the costs of foreclosing and selling, will be returned to you.
Q: I'm considering a joint venture to develop a project in Roanoke, Va. I'm investing most of the front money. The developer says we need a marketability study. I've heard about market studies. Are these two different things?
A: In most cases, yes. Usually a market study determines general market demand for a single kind of real estate in a specific area. It may consider office buildings, multi-family dwellings, shopping centers, or warehouses. It analyzes both present and future demand and supply.
A marketability study focuses on a particular improvement (office building, warehouse, etc.) at a particular location. It analyzes the particular project in terms of (1) existing and future supply and demand, (2) probable selling price or rental rates, (3) probable square feet that can be sold or rented during a specific period and (4) conditions favorable to rapid rental or sale.
Earl A. Snyder, a realtor, appraiser and attorney who specializes in investment real estate appraising and counseling, answers questions only in this column. His address: 14909 Kalmia Dr., Laurel, Md. 20810.