Have you considered a newly-built home? Maybe you should

Homebuilders are paying attention. “Homebuilders are downsizing the American Dream to lure in entry-level buyers frustrated by the resale housing market,” according to Dani Romero at Yahoo Finance.

They’ve already increased housing starts, which reflects their aim to meet the wants and needs of homebuyers who are frustrated by the paltry number of existing homes for sale.

This is huge news for you if you’re among that group. Would you ever imagine that you could buy a brand-new home? No greasy smells from someone else’s cooking, no nasty carpet. Everything, down to the last detail, is brand new.

But wait … there’s more

Have you ever met a homeowner who threw in a pricey country club membership as an enticement to purchase his home? We haven’t either, yet we have met home builders who do just that.

It’s called an incentive and in slow-moving real estate markets, it takes more than offering a choice of countertops and sexy landscaping to sell a home. In some luxury home communities, in fact, huge incentives are the norm.

Incentives from builders run the gamut from appliances to gift cards to mortgage rate buydowns. The latter should be particularly attractive to first-time homebuyers.

If you aren’t familiar with rate buydowns, learn more at CNBC.com.

Incentives aren’t the only reason, however, that many Americans are touring new home communities.

Shop smart and you’ll save money in the long run

Most new homes are energy efficient. If you go a step further and buy a house that bears the ENERGY STAR label, you’ll use 20 to 30 percent less energy every year than you would had you purchased an existing home without ENERGY STAR labeling.

Considering that the average American spends $2,368 on utility bills every year (NerdWallet.com), this reflects substantial savings. What would you do with an extra $473 to $710 a year?

Add that to any incentives you’re offered and you may save a significant chunk of money, not only on the purchase, but down the road with less expensive power bills.

While all of this is good news for homebuyers there are aspects of the new-home purchase that should be considered.

Don’t shop without representation

The builder is represented by a real estate agent. As such, he or she owes a fiduciary duty to the builder, not the buyer.

To protect your interests, use a real estate agent while shopping for and purchasing a newly constructed home. It will cost you nothing, as the builder pays all real estate brokerage fees.

Try to ignore the bling

Model homes are alluring – it’s easy to fall head over heels in love with them. The builder knows this and loads the models with her top-of-the-line options and upgrades.

So, while you dream of having a replica of the model home, the builder dreams of giving it to you – at tens of thousands of dollars over the original price of the home.

New home specialists suggest that you choose options and upgrades that appeal to you and will make living in the home more pleasant, rather than trying to copy the model home’s features.

Ask the builder’s representative if you will be held financially responsible for installed upgrades should you need to cancel the sale.

Finally, if you absolutely must have an expensive upgrade, find out how much it would cost to have an outside contractor purchase and install it after the close of escrow. You may be surprised how much money you can save by going this route.

Inspect to protect

“Buy a new one [home], and you’re essentially the guinea pig testing how well the HVAC system works and whether the basement floods during a storm,” cautions Lisa Kaplan Gordon at Realtor.com.

There are several other reasons you should have the new home professionally inspected by an independent third party prior to closing escrow.

Experts with the California Real Estate Inspection Association take the inspection process one step further, suggesting that the home should be inspected during construction. This helps “… ensure that the work completed is in compliance with plans, specifications, and the construction schedule.”

Finally, real estate legal experts suggest that you purchase a new home warranty that takes up any slack in the builder’s warranty.

So, what are you waiting for? Grab your real estate agent (that would be us, by the way!) and head out to tour the new homes under construction. You may be surprised by what you find.

 

Selling your home? What to look for in a listing agent

If you’re thinking that finding the perfect real estate to help you sell your home is akin to finding a white cat in a snowstorm, you’re not alone. In fact, ask Google “how to find a listing agent” and you’ll get 151,000 answers.

The task isn’t quite as challenging as it seems when you understand that the listing agent’s primary job is to market your home. So, yes, you want to find an agent you feel comfortable with and one with experience listing homes. Beyond that, there are three important qualities to look for as you interview agents (and please interview more than one) for the job of selling your home.

Communication

One thing I hear most often from my clients is that their last agent was unresponsive. I understand that selling your home is stressful and that you’ll have questions along the way. It’s a pity that not all agents feel the same, so ensure that the one you choose will respond to your calls in a timely manner and keep you updated on the progress of the sale.

Experience and Expertise

Look for a listing agent with a proven track record in the local market. An experienced agent is more likely to have a deep understanding of current market trends, pricing strategies, and effective marketing techniques. A seasoned professional will also have the negotiation skills necessary to maximize your profit.

Scrutinize the Agent’s Suggested List Price

Yes, determining an accurate market value for a home and suggesting a strategic listing price is very much a part of an agent’s marketing plan. Homes priced right sell faster and the quicker your home sells, the more money you’ll get for it.

Beware of the agent who suggests a price considerably higher than others you interview. This is an old, dishonest trick known as “buying the listing.” Thankfully, not many agents attempt this but those who do will price your home high at the outset and then continually ask you to drop the price.

Marketing

Homeowners hire a real estate agent to not only list their homes but market them as well. The listing aspect is merely sticking a sign in the yard and information in the Multiple Listing Service database.

Marketing it is how he or she will get the word out about your home to other agents and unrepresented homebuyers.

Ask the agent to explain his or her approach to marketing homes and exactly how your home will be marketed. And, since most homebuyers start their search online, clear, compelling photographs act as bait to get them off the couch and into your home.

Additional marketing tools that attract homebuyers include floor plans and 3D virtual tours.

In today’s digital age, an agent who leverages technology and online platforms effectively can significantly increase your home’s visibility to potential buyers.

Personality Fit

Selling a home can be an emotional process, and it’s important to find an agent whose personality aligns with yours. A compatible working relationship can help reduce stress and facilitate effective collaboration throughout the selling process.

Hiring the right listing agent is critical to the successful sale of your home. Take your time and don’t rush the process.

3 FAQs from home sellers and the answers you need

You have questions and we have the answers. If you’re considering selling your home, read on.

Is one season better than another to sell a home?

I know – it seems like summer only just started and here we are on the cusp of autumn (it starts September 23). And, while we’re all trying to wring out every last drop of this glorious summer, I am starting to get what I call the “seasonal selling” questions from homeowners.

Long ago, “Spring is the best time to sell a home” became the media’s mantra. And, to be fair, they’re partially correct. The media are also fond of telling us that winter is a terrible time to sell. There, they are wrong.

Home sales in November do tend to fall around 8 percent, nationwide. By January, the number of homes sold tumbles further, to 27 percent. But what the media gets wrong is the fact that so many homeowners choose not to sell their homes in the winter. With fewer homes on the market, naturally, fewer homes will sell.

For my friends who love statistics, the official tally is that 40 percent of any year’s home sales will occur in May, June, July and August, according to research from the National Association of REALTORS.

These same numbers tell us, however, that homes put up for sale in the winter actually sell one week faster, bring in more money and there is a 9 percent better chance that the home will sell than at any other time of year.

And, lest you think this isn’t true for regions with frigid winters, think again. The numbers held, whether the home was located in Fairbanks, Alaska or in Hilo, Hawai’i.

According to the NAR, fall is the second-best home-selling season, and for good reason:

  • The weather is still conducive for house hunting
  • Folks who want to buy a home and are thinking of tax breaks will be incentivized to move now
  • Many want to be in their new home before the winter holidays

If you think you may be putting your home on the market this fall or winter, let’s get some exterior photos of it now, while everything is still green and the sun is shining. Think how much your listing will stand out in the MLS, compared to those with dormant trees and lawns.

2. How will you determine what our price will be?

If there is one aspect of selling a home that confuses home sellers more than anything else it’s the evaluation process. It doesn’t help that there’s so much misinformation online, so I get the befuddlement.

In a nutshell, your home is worth what a buyer is willing to pay for it – known as “market value.” And, no, we don’t read minds to find out how much buyers are willing to pay. That amount is reflected in the prices they’ve paid (in the recent past) for homes similar to yours.

So, we’ll study recent sales in close proximity to your home, and compare your home to each of these to come up with a list of what we call “comparables.”

We’ll then analyze these homes – features, size, age and more – to determine if your home’s market value is more or less until we arrive at a figure that we believe represents the market value of your home.

Next, we’ll need to figure out a list price for your home. While the homeowner has the last word with regards to the asking price, we will offer our expert opinion. By the way, we offer a free evaluation of your home’s current market value. No strings attached. . .no obligation.

3. How long will it take to sell my home?

While this question is common, because there are many variables to consider, it’s not one that has an easy answer.

The first of these variables is the current state of the local housing market. In a sellers’ market (when there are many buyers but few homes on the market), the home may sell quickly. That’s the market we’re in right now.

In a buyers’ market, where there is a large inventory of homes for sale and few buyers competing for them, the home may take longer to sell.

Your list price will also impact how long your home sits on the market. Price it too high and you’ll have few people view it, thus lengthening the time it will take to sell. There is a very good chance that you will end up taking less for the home than you’d hoped.

The agent you choose can make or break the sale of your home. A novice, or an agent who lacks a marketing budget, won’t be able to market your home in ways that will make buyers snatch it up. With a marketing-savvy agent, your home will spend less time on the market.

Finally, the offer to purchase will contain timelines that the buyer must meet for tasks such as loan approval, home inspections and others. These timelines, or contingencies as they are known, are negotiable, however, so you will have a say in how long the buyer has to complete them.

There are other variables to consider as well and we’re happy to discuss these with you. Feel free to reach out to us.

The Real Estate Commission: A detailed explanation

Like any other service, when you enlist the services of a real estate broker or agent, there will be a fee. In the real estate industry, this fee is known as the “commission.” Some real estate consumers don’t believe that professionals are worth their fee so they attempt to sell the home themselves.

They typically end up losing more money on the sale than they would have paid for professional representation.

“FSBOs typically sell for less than the selling price of other homes; FSBO homes sold at a median of $225,000 last year [2022], significantly lower than the median of agent-assisted homes at $345,000.” (National Association of REALTORS® “Profile of Homebuyers and Sellers.”)

Paying for expert services, be it a plumber, an attorney or, yes, a real estate agent, saves you from losing money and gives you the security that the job will get done.

So, let’s dive into the whole real estate commission topic.

How much will it cost me to hire a real estate agent?

The answer to this question is, it depends.

First, it depends on whether you are the buyer or the seller. Buyers do pay closing costs just as sellers do, but the real estate commission is typically charged to the seller.

How much? It depends on where the seller lives. Brokers in different regions charge different fees, but typically you can expect to pay between 5% and 6% of the sale price of the home.

Here’s an example: Joe sells his home for $300,000. Let’s assume that the real estate fee (which the commission is generally called) is 5% of that price, which works out to be $15,000.

Yikes! Does my real estate agent make THAT much money from each sale?

Wouldn’t that be nice? But, no, there are others that need to be paid. The broker for the buyer’s agent gets half of the commission and that of the seller gets the other half.

Then, it is divvied up to the agents. How much the agent will get depends on his or her arrangement with the broker.

For instance, newer agents tend to make less of a percentage than seasoned agents, but each agent negotiates his or her cut of the broker’s fee, which generally ranges from 50% to 95%. According to most studies, the average commission split is 50/50.

If you still think this represents a big gob of money, consider this:

The “… median income for real estate agents and brokers was $48,770 annually in 2021, according to the U.S. Bureau of Labor Statistics,”

according to Kellye Guinan and Taylor Freitas, Bankrate.com.

What does the seller get for this money?

The typical listing agent faces a hefty outlay of money for each listing he or she takes. Here are a few of the ways the commission money is spent:

  • Lockboxes
  • Online marketing
  • MLS fees
  • Direct mail marketing
  • Photography
  • Signage
  • Fliers
  • Broker’s open expenses
  • Errors and Omissions Insurance
  • Brokerage fees
  • Association fees
  • Lead generation website to bring in buyers

That’s the shortlist. Depending on how challenging the market is or the attractiveness and condition of the home, the agent may spend thousands of dollars to help you sell your home.

What you also get for that money is a buyer for your home. Priceless, right?

Questions? We’re happy to answer them. Feel free to reach out!

Buying a house with bad credit: Is it possible?

The one thing that many of our first-time homebuying clients worry about is whether or not they qualify for a home loan. The reason for this is the dreaded credit score; those three numbers can make or break the dream.

The worry is overblown for the most part. Yes, lenders rely heavily on the potential buyer’s credit score. After all, it is typically an indication of whether or not the borrower uses credit responsibly, if he or she pays bills on time and how much of a risk the borrower presents to the lender.

There are loans available to folks with less-than-perfect credit. The downside is that you may pay more in mortgage interest, fees and may need a higher down payment.

What’s a good and what’s a bad credit score?

Typically, credit scores can range from 300 to 850. “Although ranges vary depending on the credit scoring model, generally credit scores from:

  • 580 to 669 are considered fair
  • 670 to 739 are considered good
  • 740 to 799 are considered very good
  • 800 and up are considered excellent,”

According to the experts at equifax.com. Let’s put the above numbers into perspective. On a loan for $350,000, borrowers with credit scores between 760 and 850 will receive (as of July 2023) a mortgage interest rate that is 1.589 percent less than borrowers with a score between 620 and 639.

So, yes, provided all other stipulations are met (stable employment, income, etc.), you can buy a home if you have bad credit. You will, however, pay more for it than someone with better credit.

Your credit score may not be considered “bad”

Americans with less-than-stellar credit scores, those that fall below 670, are considered subprime borrowers. Learn more about getting a subprime mortgage at Experian.com.

If your score is lower than 579, it is considered “bad.” This is why it’s important to check your score before embarking on the journey to buy a home. It may not be as bad as you think, or it could be worse.

Thankfully, lenders also look at other aspects of your financial situation. These include:

  • Your current debt and any delinquencies
  • The amount of your down payment
  • Your income

There are loans for that

The best route for those with poor credit is government-backed mortgages. These include mortgages backed by the:

  • U.S. Department of Agriculture (USDA) Rural Development Department
  • Federal Housing Administration (FHA)
  • Veterans Affairs (VA)

USDA loans typically don’t require a down payment. The catch is that the home you will purchase must be located in what the department considers a “rural” area. If you have an idea of where you want to live, especially the address of a property, enter it on the USDA Rural Development’s website to see if it is eligible for the program.

The best part of this program, aside from the zero down payment for those who qualify, is that the credit score requirement is quite low: at least 580. Higher scores, however, qualify for the no down payment bonus.

FHA loans are quite popular among those with poor credit scores. The minimum credit score required is 500, although if yours is at least 580, you may only be required to put down 3.5% of the purchase price. Learn more about down payments at consumerfinance.gov.

If you or your spouse have served in the U.S. military, or are a widow or widower of someone who did, check out the mortgages offered by the Department of Veterans Affairs. Available to both veterans and active-duty members of the military, the minimum acceptable credit score is 580.

There is no down payment requirement for those who qualify. Learn more online at benefits.va.gov.

Additional tips

Before you begin the mortgage application process, take a deep dive into your credit reports. Look specifically for errors. Why?

“More Than a Third of Volunteers in a Consumer Reports Study Found Errors in Their Credit Reports,” according to Lisa L. Gill at consumerreports.org. Fixing these errors is one of the easiest and fastest ways to raise your credit score.

“You should dispute with each credit bureau that has the mistake,” suggests the experts at the Federal Trade Commission.   Follow the link to read a walk-through of the dispute process.

If all options fail, take the time to save cash. It’s king, remember? And lenders are more likely to approve your loan if you have cash to pay the difference between the price of the home and your loan approval amount.

Poor credit shouldn’t put an end to your homebuying dreams. There are options out there and we’re happy to discuss them in further detail with you.

The information above is not to be considered as financial advice, but is for informational purposes only. We are not financial or mortgage specialists.

How to find and hire a professional home inspector

Buying a house is a big deal – it’s like reaching for the stars and finally touching one.

But before you reach Sirius, you have some work to do. One of those is critical to your future use and enjoyment of that home you want so badly: hiring a home inspector.

These professionals are like the superheroes of home buying, ensuring your dream home is in tip-top shape. Let’s dive in and discover how to find the perfect home inspector and what questions you should ask to make the best decision.

Why a home inspector is your hero

Picture this: you’ve found the house of your dreams – cozy, charming, and just right. But wait! Before you get all starry-eyed, let a professional home inspector work their magic. These awesome folks are licensed and super-knowledgeable.

Their mission? To check the systems in your potential new home, from the roof to the foundation. They’ll spot any red flags that could turn your fairytale home into a real-life nightmare.

Mind you, their superpowers are limited. They only inspect what they can actually see. This means they can’t tell you what is happening behind the walls, under the floors or deep into the recesses of the HVAC system.

Those limitations, however, shouldn’t keep you from having the home inspected. What they can tell you may turn out to be the determining factor, positive or negative, on whether or not you still want that particular home.

The quest for the perfect home inspector

Now, let’s embark on the grand quest of finding the perfect home inspector.

Start by asking your family, friends and colleagues which inspector they used when they bought their homes. Many homebuyers turn to their real estate agent for a referral to a home inspector, but in some states, that activity is illegal.

Another good source of referrals can be found on neighborhood sites, such as NextDoor.com and any location-specific Facebook neighborhood groups.

While you’re online, check the review sites, such as Yelp.com and, of course, look at the home inspectors’ Better Business Bureau rating. Don’t forget to navigate to the inspector’s (or company’s) websites and peruse the reviews and general information.

Just in case you need more help in your quest:

This sounds basic, but it’s surprising how many homebuyers neglect this step: ensure the home inspector is licensed. We also urge you to interview more than one inspector.

Your list of questions for the home inspectors you interview

  • “Are you licensed and insured?” A professional home inspector will proudly show you their credentials, including insurance. That way, the homeowner is protected if anything unexpected happens during the inspection.
  • “How long have you been in the game?” The more experience, the better. An inspector with years of inspecting homes under their belt knows how to spot even the sneakiest of problems.
  • “How long does the inspection take?” Most inspections take from 2 to 4 hours, according to Tobie Stanger at ConsumerReports.org.  Regardless of how experienced the inspector is, if he or she says he takes less time than that, reconsider hiring“. . . being knowledgeable doesn’t mean the inspector is going to be diligent or conscientious,” according to Stanger,  which they can’t be if they are “ … rushing through the inspection.”
  • “Can I join you during the inspection?” Tagging along during the inspection allows you to ask questions you may not even think to ask if you just work off the written report. You’ll get to see first-hand what the inspector uncovers.
  • “What do you check during an inspection?” A good inspector will cover everything, from the roof, plumbing, electrical, and more.
  • “When will I get the report?” Residential home inspectors are aware that time is of the essence when one is under contract in a home sale so they are pretty speedy in getting the report finished.
  • Let the inspector know the end date of your inspection contingency (it’s in the purchase agreement or, give us a call, we’re happy to help).
  • “May I see a copy of an inspection you have performed?” This sample copy should give you an idea of how detailed the inspector’s reports are, what is inspected and the scope of work you can expect.

Also, compare this inspector’s report to the others you are interviewing.

“In Consumer Reports’ examination of reports from home inspectors across the country, we found that the typical report consists of a few dozen pages covering findings on all the major systems in the house, and includes photographs and descriptions of documented problems and maintenance suggestions,” Stanger said.

The home inspection is one of the most important aspects of the home purchase process. Ensure that you are getting what you pay for before you pay.

What is a 1031 Exchange?

A 1031 exchange, also known as a like-kind exchange, is a tax-deferred real estate transaction authorized by the Internal Revenue Code. In fact, it takes its name from a section of the IRS Code – you guessed it, Section 1031.

The IRS, by the way, refers to it as a “like-kind exchange.” Here’s why:

The 1031 Exchange allows Americans who own investment properties to sell them and use the proceeds to buy another property while deferring capital gains taxes on the sale of the first property.

Let’s learn some 1031 Exchange lingo  

Like the home purchase and sale process, a 1031 Exchange transaction has its own lingo:

  • Relinquished Property: The property being sold by the exchanger.
  • Replacement Property: The property being acquired in exchange for the relinquished property.
  • The Exchanger: This is the individual or entity selling the relinquished property and acquiring the replacement property.
  • Qualified Intermediary (QI): Also known as a 1031 Exchange Accommodator, this is an impartial third party who helps facilitate the exchange by holding the funds during the process.

How a 1031 Exchange transaction works

Here’s a step-by-step breakdown of how a 1031 exchange works:

Step 1: Sell the Relinquished Property

The exchanger sells their investment property and identifies potential replacement properties within 45 days.

Step 2: Choose a Qualified Intermediary

According to IRS rules, a qualified intermediary is engaged to hold the funds from the sale until the replacement property is purchased.

Step 3: Identify Replacement Property

Within 45 days of selling the relinquished property, the exchanger must identify one or more replacement properties in writing to the QI.

Step 4: Acquire the Replacement Property

The exchanger has 180 days from the sale of the relinquished property to complete the acquisition of the replacement property.

Step 5: Complete the Exchange

The QI transfers the funds to purchase the replacement property, and the exchanger completes the exchange, deferring capital gains taxes.

Visit IRS.gov for more information on the 1031 Exchange

How to find the right 1031 qualified intermediary

“Under federal regulations for 1031 exchanges, practically anyone can become a qualified intermediary,” according to the experts at 1031CrowdFunding.com. This doesn’t mean you should appoint Uncle Fred who used to be a real estate agent for the job.

The folks at 1031CrowdFunding.com offer a list of QI duties, stressing the importance of choosing someone who knows what he or she is doing. Some of these duties include:

  • Dealing with the legal documents
  • “Preparing documentation regarding the relinquished and replacement properties.”
  • Working with the title or escrow company with regards to giving them the instructions and documents.
  • Placing the funds from the sale of the relinquished property in an escrow account until the exchanger has identified the replacement property.
  • Making sure that the exchange is done in accordance with IRS rules.

There are additional considerations and you can find them at the aforementioned 1031Crowdfunding.com website.

Finding this 1031 superhero isn’t as difficult as it may seem. First, ask the title or escrow company for a referral. If that doesn’t pan out, consult the Federation of Exchange Accommodators website.

We must warn you, it’s a rather antiquated and not a user-friendly website but it does offer good information and contacts.

 The benefits of the 1031 Exchange

A 1031 exchange offers several benefits, chief among them the ability to defer capital gains taxes. By doing this, you can reinvest the full proceeds from the sale into a more valuable property, potentially increasing your wealth. Additional benefits include:

  • The Exchange allows you to diversify your real estate portfolio by swapping properties in different locations or asset classes.
  • Repeated exchanges can enable you to continuously defer taxes, facilitating the accumulation of wealth over time.

However, there are some considerations to keep in mind:

Remember what the IRS calls a 1031 Exchange? Like-Kind Exchange. The replacement property must be of “like-kind” to the relinquished property, typically meaning it should be investment or business property rather than personal property. So, no, you can’t use your home in a 1031 Exchange.

Then, there are the timelines. Yes, they are strict and yes, you will be expected to meet the deadlines.

Finally, we cannot impress upon you enough that a 1031 Exchange is not a DIY project for the newbie. Please consult with a qualified intermediary, tax advisor and real estate attorney to ensure compliance and make informed decisions.

Remember, while the concept of a 1031 exchange may seem overwhelming at first, consulting with professionals and qualified intermediaries can help you navigate the process smoothly.

So, if you’re considering selling an investment or business property and reinvesting, don’t forget to explore the potential benefits of a 1031 exchange.

5 Things to consider before becoming a landlord: What they don’t tell you

Nobody really knows the total number of people who consider themselves landlords in the U.S.

The IRS puts the estimate at 7.1% of tax filers. They also claim that 17.1 million properties generated income for their owners,” according to David Bitton at Doorloop.com.

The most interesting statistics are of a financial nature. Bitton explains that, according to the US Census, “. . . landlords’ income is typically solid, earning up to $97,000 annually. It’s $35,000 more than the actual median household income.”

If you’re toying with buying a rental property, read on as we discuss five often-overlooked factors you should consider before becoming a landlord.

1. Legal and financial responsibilities

Being a landlord involves more than just collecting rent. You need to familiarize yourself with local landlord-tenant laws, which can vary significantly from one jurisdiction to another.

Understanding your legal obligations as a landlord is essential to protect your rights and avoid potential legal troubles down the road. We urge all new landlords to consult a legal professional to ensure compliance.

Moreover, being a landlord requires a solid grasp of your financial responsibilities. You’ll need to factor in costs such as property maintenance, repairs, insurance, property taxes, and possibly mortgage payments.

Be prepared for unexpected expenses, such as a leaky roof or a broken furnace, which can quickly eat into your profits. A comprehensive financial plan will help you weather these challenges.

2. Time and commitment

Owning rental properties may appear to be a passive income source, but it requires a significant investment of time and energy if you don’t hire a property manager.

From finding and vetting tenants to addressing maintenance requests and handling administrative tasks, being a landlord is a commitment that demands your attention.

Consider whether you have the time and willingness to take on these responsibilities. Are you prepared to be available 24/7 for emergencies? Can you handle tenant inquiries promptly?

If you’re already juggling a busy schedule, you might want to think twice before becoming a landlord. Alternatively, you can hire a property management company to handle these tasks, which will cut your profits.

3. Dealing with Difficult Tenants

As a landlord, you’re likely to encounter various types of tenants, and not all of them will be easy to deal with. While most tenants are responsible and respectful, there may be instances where you have to handle difficult situations.

Late rent payments, property damage, noise complaints, and even eviction procedures can be financially, emotionally, and mentally challenging.

Developing strong communication and conflict-resolution skills is crucial to handle these situations effectively. Being fair, firm, and proactive can help maintain a positive landlord-tenant relationship.

However, if confrontation and problem-solving aren’t your strong suits, being a landlord may not be the right choice for you.

4. Market volatility and vacancies

The real estate market is prone to fluctuations, and vacancies are an inevitable part of the job.

Assessing the local rental market and gauging the demand for rental properties in your area is important. Understanding the vacancy rates and rental prices will help you make informed decisions and set appropriate rent levels.

Additionally, periods of vacancy can result in financial strain, as you’ll still be responsible for mortgage payments and other property-related expenses. To avoid undue stress, have a financial buffer to sustain yourself during these lean periods.

5. Emotional attachment

While it’s natural to feel a sense of attachment towards your property, especially if it’s your former home or an investment you’ve poured your heart into, emotional attachment can cloud your judgment as a landlord.

Remember that this is a business venture, and making decisions based solely on sentimentality may not be in your best interest.

Treat your rental property as a business asset and make decisions based on sound financial considerations. Keep emotions at bay when dealing with tenant issues or making decisions about repairs and upgrades. It’s important to detach yourself emotionally and approach situations pragmatically.

Remember, being a landlord is not for everyone, and that’s perfectly okay. Weigh the pros and cons, evaluate your personal circumstances, consult with your legal and financial advisors, and make an informed decision.

Easy ways to increase your property value before selling

Have you ever noticed how the longer you live in a home, the less you notice or the more you can tolerate stuff that’s wrong with it? It starts feeling less like an investment and more like your territory.

When you decide to sell the home, common sense hits. The faucet drips, the oven doesn’t heat properly and the paint is 20 years old. Your home’s value becomes top-of-mind.

While there may be a lengthy list of tasks you’d like to perform before putting the home on the market, and it may seem overwhelming, relax.

Some tasks take priority. Others are more cosmetic in nature. Let’s take a look at some projects that won’t break the bank and may increase the home’s value.

If you have repairs that need to be made, do those first

It’s a wise use of your money to make repairs before doing any cosmetic work. The problems will most likely appear in the home inspection report, and you may pay for some of them anyway.

At least take care of any major repairs, such as repairing or replacing an HVAC systems, fixing roof problems or plumbing or electrical issues.

No major problems? Great!

Get to work on providing potential buyers with what they crave.

Flooring

When you turn your attention to upgrades, it pays to know what homebuyers are seeking in their new home. Flooring is near the top of the list. Although hardwood flooring is a draw for luxury homebuyers, starter and family homeowners would do well to consider luxury vinyl plank flooring.

Why?

A large real estate conglomerate studied online listing descriptions to determine which features yielded a good return on investment. They found that homes described as boasting luxury vinyl plank flooring sold for nearly 2% more than those without it.

Not only that, but they sold four days faster than the other homes. Learn the pros and cons of vinyl plank flooring at TheSpruce.com.

Update the kitchen

Since it’s the most important room in the home, according to numerous surveys of homebuyers, updating the kitchen should be first on your list. Not only will the work be popular with buyers but it will also help boost your home’s value.

Here are a few tasks to consider:

  • Repaint the kitchen. Nearly 45% of real estate agents surveyed by Homelight.com claim that homebuyers crave “… light or calming color palettes in the kitchen,” according to Daniel Feininger at housedigest.com.
  • If it’s within budget, replace your countertops with granite or quartz.
  • Replace or paint the cabinetry and add new hardware.
  • Add new, task-oriented lighting.
  • Hit the appliance sales because 75% of homebuyers say they want new appliances in their next home. Energy-efficient appliances will bring in even more money at closing.
  • Install an undermount sink and a new faucet.

Do the same for the second most important room, the bathroom 

The most important task in the bathroom is to ensure that it’s impeccably clean, then turn your attention to the following:

  • Replace the countertop toiletries with decorative items.
  • Replace the builder-grade towel racks.
  • Add new plumbing hardware.
  • Freshen up the towels and throw the rug.
  • Replace the mirror.
  • Update the lighting.

All that remains now is to clean the home, top to bottom. Make it look move-in ready, and you’ll have buyers clamoring after it.

From Tenant to Homeowner: A Guide for Young Renters

Slightly more than 35% of Americans are tenants, paying $1,937 (median) in rent each month, according to Rent.com. The total monthly housing cost for these folks is $1,301, while the housing cost for homeowners is $1,510, only $209.00 more, according to the US Census Bureau.

Of course, we are looking at median costs here so your situation may be different. In the main, however, owning a home is not prohibitively more expensive than renting.

It’s the actual purchase that has many tenants, especially those in the younger generations, feeling as if they are locked out of homeownership.

From the perpetuation of the myth that a 20% down payment is the law of the land to the notion that a house payment would be significantly higher than a rent payment, many Americans remain in the cycle of paying someone else’s mortgage payment.

Today, we’ll dive into the various ways you can get on the path to homeownership: to make a move from “No, you can’t paint the living room” to the complete freedom to decorate how you want, to plant what you desire and to have a dog, finally.

Step one in the journey to homeownership

Before embarking on the path to homeownership, it’s crucial to be mentally prepared and financially ready. Consider the following questions:

  • Do you have a solid support system in place to help you through the process?
  • Have you thought about what type of real estate agent you need? Many new homebuyers require a bit of hand-holding and a substantial amount of tutoring on the ins and outs of the process. Some agents are adept at “real estate therapy,” so if you feel you might need that type of support, you’ll want to make a note to choose your real estate agent carefully.
  • Are you ready to begin letting go of emotions and thinking like an investor during the purchase process? For example, your dream might be a suburban home with the quintessential white picket fence. Your financial reality, on the other hand, may dictate that you purchase a condo to keep home maintenance costs low enough to be affordable. Are you ready for that? For doing whatever is necessary to start building equity?

Get clear on your credit and finances

Becoming a homeowner requires financial stability and planning. Start by assessing your current financial situation. Take a close look at your income, expenses, and savings. To make this easier, use a worksheet like these from the folks at MortgageCenter.com and this one from the Consumer Financial Protection Bureau.

Then, check your credit report and score. Every American is entitled to a free credit report each year from AnnualCreditReport.com, the only company authorized to provide these reports by Federal law.

Here is a list of which aspects of your credit report lenders will scrutinize the most:

  • Have you recently applied for credit?
  • Do you pay your bills on time?
  • Are your credit limits maxed out? Lenders want to see balances no higher than 30% of the limit.
  • Have you declared bankruptcy?
  • Are you an authorized user of someone else’s credit card?

Work on getting your credit balances where they should be, paying bills on time, and avoiding opening new credit accounts.

Consult a mortgage broker

Implement some changes once you have a clear idea about your budget and credit. If you don’t make enough money to buy a home, consider taking on a side gig.

Fix your credit, if necessary. Then, visit with a mortgage broker to determine how much you can borrow and how much you’ll need to put down.

Ask the broker about state, local, and federal down payment assistance programs and whether or not you qualify.

Finally, ask for a ballpark figure on what you can expect to pay in closing costs.

Save up some money for the down payment and closing costs

Now that you know how much money you’ll need for the down payment and closing costs, have you figured out how to come up with it? Here are a few tips from mortgage professionals:

  • Create a dedicated homebuying savings account and direct your employer to auto-deposit a portion of each paycheck.
  • Take on another job. This can be a part-time job or a side gig, such as driving for Uber or one of the other similar companies. Or, check out freelance, work-from-home opportunities at Upwork.com.
  • Look into the down payment assistance programs recommended by the mortgage broker.
  • Find ways to cut expenses. Many young people are moving back in with Mom and Dad to speed up the savings process. As of February 2023, the median rent nationwide was $1,937. By moving back home, you can save $23,244 in just one year.

Transitioning from being a tenant to a homeowner is an exciting and fulfilling journey, but it requires careful preparation and planning. You can confidently navigate the homebuying process by getting clear on your goals, assessing your financial situation, saving diligently, and seeking professional advice.

Let us know how we can help. Advice is always free.

We are not mortgage professionals. This blog post’s legal and financial information is provided for general informational and educational purposes only and is not a substitute for professional advice.