HOHMAN FINANCE

Homeownership in the US for the last forty years has fluctuated around 65%. https://fred.stlouisfed.org/graph/fredgraph.png?g=1tddY

That’s great! Now also consider that it is regularly cited and our research confirms that about 60% of US households have less than $1,000 in the bank. 

We tend to have a sincere conversation with each client about their current and future potential income, other debts and their interest rates and terms, as well as their personal financial goals. This is certainly helpful in creating plans for first time home buyers so their financing options will be more favorable. We definitely recommend that current home owners should have a plan to buy their next house. We consider and often recommend debt-consolidation and other ways that mortgage finance can be engineered to stabilize a financial situation and increase wealth.

There are many analytical calculations Wall Street uses to evaluate the risk/reward of real estate investments and loans. Some are fairly simple and others can be quite complex, variable dependent and even sometimes very subjective.

We apply institutional investing methods to confirm or caution your purchase or refinancing options. Our recommendations typically go beyond a capitalization rate to also include considerations of yield, total rate of return, relative value, net present value, opportunity cost and other historically dependable measurements. 

Did you know the average life of a mortgage is between six to eight years? By then the majority of borrowers have sold their home or refinanced. Rarely, as in almost never, does anyone make a 360th payment. 

We differentiate between short- and long-term financing for real estate assets. Our clients are empowered to take advantage of current interest rate environments rather than feeling subjected to them. 

We typically recommend specific pricing mechanisms to align with the financial goals and/or investment objectives of our clients. These small nuances can add up to a great deal of money over time when accounting for compounding and/or considering opportunity costs.

The lending industry standard is to assess if borrowers will have the ability to make only the first 36 mortgage payments. What happens after that is not their concern. Worse, the hard truth is their assessment often only establishes if you can make the first mortgage payment. 

We guide you toward a better financial future throughout your entire lifetime. Investopedia defines asset/liability management as “the process of managing the use of assets and cash flows to reduce the firm’s risk of loss from not paying a liability on time.” Implementing a similar approach that banks use, we apply this layer to model various stages of life where income and expenses are by nature likely to change. 

Over the last forty years, the average rent has inflated by over 400%, beating the average of all measured inflation by 33%. https://fred.stlouisfed.org/graph/?g=1o5ji 

Going back that far, mortgage interest rates averaged about 8% in 1984, more or less the same as today. An investor would expect to at least cover the mortgage principal & interest payment among other things to merit the investment. It would reason if they borrowed $100,000 in 1984 and incurred a $750 mortgage payment, the 30-year mortgage would have been paid off 10 years ago and that $750 portion of the rent would now be a positive cash flow of approximately $3,000 per month while other inflated expenses would be closer to $2,000. 

A potentially endless appreciating cash flow stream versus a finite number of fixed payments is a recipe for success. It’s possible even today.

The average length of homeownership is somewhere around ten years, probably less. Yet nearly all borrowers approach the idea of buying a home as a 30-year commitment. 

In stark contrast, we encourage our clients to embrace a mortgage as the best opportunity to build wealth. When it comes to wealth management, we advocate more of a business approach where the expectation is to last “in perpetuity”. Therefore, we would define true wealth as having assets that generate income sufficient to cover expenses forever. 

With few exceptions we advocate that real estate assets should never be sold but viewed as an income source. Real estate finance is perhaps the most lucrative way consumers can access financial leverage on an investment.