Which is the Better Investment?

According to my analysis, it's no contest.  Avalon is the winner by a mile.

Want to see for yourself?  In 1994, the average selling price for a property in Avalon was just a shade under $286,000.  Assume a down payment of 2- percent.  Set's round it up to $60,000.

Over the next 10 years, you would pay about $30,000 in taxes and about $15,000 for insurance for a total cash outlay over the 10 years of $105,000.

We'll assume for these purposes that your annual operating expenses, including interest payments, equal your rental income, so that is a wash.  And we're not going to try to calculate tax benefits, since everyone's situation is different.

Between 1994 and 2004, the value of your property increased to $1.4 million.  Of course, you still have a mortgage of about $200,000 for a net equity of about $1.2 million.

If you think that example is too abstract, consider the experience of George and Pat Edwards, my good friends from Doylestown, Bucks County.  In 1997 I showed them an older Cape Cod at 12th and Avalon, which they bought for about $250,000.

"It needed a bit of work, " Pat Edwards reminded me.  "But it had all kind of possibilities."

The Edwards spent a few bucks doing cosmetic work to the house -- new rugs, some painting, replacement windows -- to improve its look.  The leases they inherited continue to produce annual income.

"It's been a terrific investment for us,"  Pat Edwards said, "It's going to be our retirement.  Because of some family situations we had not been able to save as much early in our lives as we would have liked.  But this house is going to make our retirement very enjoyable."

The Long View
A 10-year Perspective on the Stock Market

SOURCES: Big Charts.com, U.S. Bureau of Labor Statistics

Along the inlet, it will be hard to miss ongoing construction of the sea wall.  A joint project among the federal, state and local governments, the sea wall is designed to protect homes on the inlet.

The work in Avalon and Stone Harbor is part of a larger effort to protect beach front properties from a 12-mile portion of the coast, from Townsend's Inlet to Cape May Inlet.

The Avalon sea wall is scheduled for completion next year.

Consider a property with a sale price of $2 million.  You put 20 percent down ($400,000) and finance $1.6 million with an interest-only mortgage.

The monthly payment at 5 percent annual interest is $6.667.

Projected annual gross rental income is $60,000 (or $54,000 after broker fees).  Your estimated annual operating expenses total about $13,300.

This leaves a positive operating income of $40,700.  After subtracting annual mortgage interest of $80,000, your cash flow before taxes becomes negative $39,300, for a monthly expense of about $3,275.

This analysis does not include any potential tax benefit, which could be significant.  Consult a tax adviser to discuss your specific situation.

Maybe owning a home at the shore can become a reality for your family!

The average price for the 543 properties sold in 2004 -- including single-family houses, condos, commercial sites, and vacant land -- shot up 36 percent to just over $1.3 million.  And for the first time ever, the median price reached $1 million.

A closer look at the statistics show even more interesting tidbits:

• In Avalon, the average sale price for a single-family property was up 37 percent to $1.7 million, while the median price was up 45 percent to $1.5 million;

• in Stone Harbor, the average sale price for a single-family property was up 34 percent to $1.7 million, while the median price was up 38 percent to $1.6 million;
   
• overall, sales of single-family properties in the tow communities were up 12 percent to 311 units, the average sale price was up 36 percent to $1.7 million, and the median price was up 44 percent to $1.5 million.
   
• among condominiums and townhouses, the average sale price was up 19 percent to $628,963 while the median price was up 20 percent to $635,100.

Sold Market Analysis
Avalon/Stone Harbor 2004
Thanks to your support and referrals I have $45,000,000 in personal sales for 2005 as of 4/15.

Market Snapshot
Active Listings as of April 6, 2005

In the past several years this resort market has opened up to buyers who never dreamed they could participate -- baby boomers with two kids incomes and kids just out of college, empty nesters, and those looking to retire amidst the sand and surf they enjoyed during all-too-brief summer vacations.  And when it comes to financing this dream, these buyers are turning to an option once reserved only for a bank's best customers -- the interest-only mortgage.

With this type of financing setup (also known as an intermediate ARM), the homebuyer pays only the interest on the loan for a specified period of time, typically five, seven or even 10 years.  Principal payments begin only after the "interest-only period" has expired and continue for the remainder of the loan's term.

While the thought of an interest-only loan may horrify those of us who grew up believing that paying off a mortgage was the best long-term investment you could make, today's savvy borrowers realize that cash-flow and equity are the building stones to wealth and an interest-only loan is the vehicle they are using to pave the way!

First, a buyer can qualify for a large loan amount, which may translate into a larger home; and if buying additional real estate is part of your long-term investment strategy, the interest-only payment keeps debt-to-income ratios lower, making future qualifying easier.

Further, if a borrower wants to make payments toward principal, as many lenders allow, they do so at an interest rate considerably lower than the current fixed rates.

If you still have lingering doubts about the concept of paying only interest, there is another alternative.

Gaining in popularity, especially in the second home market, is the Option ARM.  This innovative loan product allows a borrower to choose from four different payment options each month -- the minimum due, interest-only, fully amortized, and accelerated amortized.

Like its interest-only counterpart, the Option ARM, with its low qualifying rates, lifetime interest cap, minimum payment protection, and 30- or 40-year terms, enables borrowers to maximize their buying power while deciding for themselves how to allocate their monthly budget to their mortgage.  This ability to "pick-a-payment" is especially appealing to those with seasonal or fluctuating incomes.

In the end, you alone will decide whether owning a second home at the Jersey Shore will remain just a dream.  But if you're seriously considering turning fantasy into reality, there are mortgage products available that will allow you to realize the dream with flexible payment terms that adapt to your lifestyle.
 

Washington Mutual Home Loans

Kirk George is a Loan Consultant with Washington Mutual Home Loans.  He can be reached at 800-624-1951, extension 2465.

Workers will be busy this summer trying to complete Avalon's brand new public library in time for schools to open in September.  The 9,000-square foot building behind borough hall on Dune Drive will contain more than 40,000 books and includes state of the art computer and Internet technology, videos, compact discs, magazines, online data bases and other resources and research material.

"The library will become the educational and intellectual recreation centerpiece in Avalon," Mayor Martin Pagliughi said.  "Our residents and guests will soon enjoy the most modern library facility in Cape May County."

General registration is on-going all summer.

• All daily activities except aerobics begin June 20 and end Aug. 26.
• All activities are held at Community Hall unless otherwise noted.
• Children must be five or older to participate in most programs.

June 21 TBA
June 23 TBA
June 28 Turtle Singer
June 30 The Earth Singer
July 5 Captain Visual
July 7 TBA
July 12 Magical Songwriter
July 14 Chaku the Clown
July 19 TBA
July 21 76ers Basketball Clinic 10:30 Start
July 26 NJ Blackbelt
July 28 Wagner Marionettes
Aug 2 Haldini Magic
Aug 4 Flyers Hockey Clinic 39th Street
Aug 9 Ken Northridge Magic
Aug 11 Nancy Fox Children's Theater
Aug 16 Rainbow the Magic Clown
Aug 18 Tucker’s Tale Puppet Theater
Aug 23 Joanne Reagan Dancers
Aug 25 Turtle Singer

Avalon Performing Arts Council
Meetings are held the first Monday of every month at the Senior Center starting at 9 a.m.  The public is welcomed to attend.

April 23, 8 p.m. Spring Concert - Tom Del Moore
June 26, 10 a.m. - 4 p.m. - 18th Annual Art Show and Sale
October 1, 6:30 p.m. - 10 p.m. - Cabaret Night

Big Beach Movie Night: Every Tuesday, 8:30 p.m. at 36th Street beach (free). Will be held indoors incase of rain.

June 25 McHugh & Co
July 2 Snake Brothers
July 3 Earth Daddy
July 9 Tommy Zito
July 16 The Mighty Parrot
July 17 Danny Eyer Band
July 23 Suite Insperation
July 30 McHugh & Co.
July 31 Shannon Cole & See No Evil
August 6 Remedy
August 13 Only Footprints
August 14 Howard Isaacson
August 20 Brendan Borek Surf Contest
August 21 Dawgfish
August 27 Alligator Zydeco band
August 28 Tyler & Joel
September 3 Earth Daddy

Big Band Dances
Doors open at 8pm; Music starts at 8:30pm
$5 at the door BYOB; Reservations are appreciated.

March 12 Tommy Darro
April 16 Al Raymond Orchestra
May 7 Hal Davis Orchestra directed by Bill Newman
June 4 Gene Boney Band
July 16 Walt Wagner Orchestra
August 13 John Clark Orchestra
September 24 Tommy Darro Band
November 5 The Silhouettes
December 10 John Clark Dance Band

Volunteers In Medicine

As many of you know, I have been involved in the Volunteer in Medicine of Cape May County project for a number of years.  It's a terrific organization that I believe strongly in.  VIM provides primary health care to the under-served an uninsured people living and working in Cape May County.  Some estimates place the number of people without adequate health insurance at more than 18,000.

Since opening in March 2002, VIM's clinic in Cape May Court House has treated almost 2,000 patients, providing imaging and specialized testing, surgical referrals, eye care, podiatry and pediatrics.  VIM provides care and medication for chronic ailments that, if left untreated, could require emergency room treatment and expensive on-going procedures.

I am please to announce that I will step up my involvement with VIM by donating $500 at closing for every referral that results in a sale.  Why not help raise thousands of dollars to help the community?