The Realities of Income Properties

Many homeowners consider investing in an income or rental property as a means for extra income. Many real estate markets throughout the U.S. have seen tons of growth in recent years, with rental properties highly sought-after in some popular markets. Generally, real estate is a solid investment in terms of ROI (return on investment) over the long term. While a rental property might seem like a sure thing for extra income, there are advantages as well as disadvantages to income properties. If you’ve been toying with the idea of investing in another property, consider some of the points below before making your final decision.

Advantages of Rental/Income Properties

Direct Income Stream

One major advantage of an income property is a direct income stream. Monthly rent checks go directly to you, which based on whether or not the property has a mortgage, go directly into your business account. Should the property be continually rented throughout the year, the monthly payments will add up to a pretty sizeable sum by the end of the year, which is extra income in your pocket. Even if the property has a mortgage, the difference between the mortgage payment and rent check will undoubtedly be a positive addition to your account.

Property Value Increases

One of the biggest draws for real estate is the expected property value increase over the long term. In a good real estate market, a property should increase in value a specific percentage in accordance with the market. If you’re able to purchase a property while the market is down, the long term return on investment (ROI) could be quite significant if you plan on keeping the property for some time. If you live in a popular market, the value increase could be significant in only a couple years, and if you have a mortgage on the property, you will be able to leverage your ROI even more since the property value increase is based on the total value of the property and your initial investment may have been a small percentage.

Sweat Equity

As you maintain and upgrade the property, you’ll likely recoup some of the costs you’ve put into it. Regular maintenance (things like exterior painting, new siding, upgrading a roof, landscaping, etc.) help to increase the overall value of the property. Pair sweat equity with a property value increase, and the overall value of your investment property should grow over the years, garnering you more money in the long run.

Tax Deductions

As a property owner, tax deductions are always a good thing. When it comes to rental property, tax deductions are a for sure thing. With the current guidelines, property owners have the ability to write-off interest on the mortgage or credit card used to make purchases for the income property. Things that can also be written off: insurance, any maintenance repairs, expenses for travel to and from the property, any legal or professional fees, and of course the property taxes.

Disadvantages of Rental/Income Properties

Risk of Asset Concentration

For many of those interested in a rental or income property, the ability to purchase the property outright is not a reality. Many owners will need to have a mortgage on the property; and for those able to buy in cash, the amount needed will likely eat into the majority of a person’s total net worth. Because of the huge concentration of assets in one item, there is a potential to see no return on the initial investment, especially if the real estate market as a whole takes a drastic turn or the economy goes into a recession. If you’re looking at an investment property as a financial investment, having the majority of your assets concentrated in one item is not advised and a poor investment scheme. Also, real estate requires a sufficient amount of funds on the side to handle any periods of time when you, as a property owner, need cash.

Tenant Issues

The only way to make money off a rental or income property is to have tenants. While the Internet provides a number of ways to find tenants, as a property owner you want your tenants to be responsible (pay the bills on time, take care of the property, and be long-term renters). Finding the right tenant can be a process: from running advertisements to credit and background checks, the tenant process can take some time and can cost a property owner a considerable amount in a short time. Should the tenants end up being a nightmare, you’ll see additional costs to fix any wear and tear.

Taxes, Fees, Insurance

Regardless of whether or not the property is rented, as the owner you’ll have regular payments for property taxes, home insurance, HOA fees, and regular upkeep. Property insurance on rental properties can be higher than non-rentals, and overall taxes, fees and insurance eat into the overall income generated by the property. You are able to write some things off on your taxes, but that only happens once a year, not every month.

Being Involved

One of the biggest parts of owning an income property is maintenance. Maintaining the property is a challenge, especially when it has to be done regularly. From major appliances to structural components like the roof or the driveway, the property owner maintains and covers the cost. If you have tenants that don’t like fixing things, it’s likely you will be called when something goes wrong – from a clogged toilet or sink to leaking appliances or major property damage. Not only does maintenance take time, it also takes money.

Owning an income or rental property has its advantages and disadvantages. It’s important, as a potential investor, to know the real estate market you’re looking to invest in. You should take your time to thoroughly consider your financial resources, the real estate market and economy as a whole, and all the pluses and minuses of owning a rental home before you take the plunge.

Finding the Value in a Real Estate Agent

Perhaps you’re considering buying or selling a home or property in the New Year. For some, the idea of selling a home might seem like a challenge worth taking. For others, the thought of selling or buying a property is incredibly daunting, which is a major reason why real estate agents and brokers exist: to help us with our real estate transactions. Even so, there are some people who question the value in an agent. Because a normal real estate transaction takes on average between 30 to 45 days (there are times when it’s shorter or much longer), it might seem as though an agent gets a lot more out of the transaction than they put in, prompting a buyer or seller to attempt the transaction on his/her own. What many people don’t realize is the incredible value offered to buyers and sellers by using an agent. If you’re looking to buy or sell in the New Year, read below to find out all the value you receive by using a real estate agent.

Pre-Listing Activities

A huge value offered by hiring a real estate agent is all the work that occurs before your property is even listed on the market. An agent will not only arrange appointments and other meetings with the seller, he or she will also research comparable properties and the MLS or public record sales activity, download and review the property tax information, and research and review a number of things pertaining to the property like the ownership and deed type, public record information for lot size/dimensions, the legal description and current use and zoning. The pre-listing process ensures the property is ready for the market. It can be tedious, but part of the value in using a real estate agent is the agent does these items and more for you.

Exposure/Marketing

Long gone are the days when a home sold because there was a sign in the front yard or an ad in the newspaper. With the advent of social media, exposure and marketing are huge assets to any seller. One value afforded to a seller through an agent is the amount of exposure and marketing available to them via the agent. Not only will your property be listed on the agent’s site and the agent’s company site (if they have one), you will also have the added benefit of your home likely appearing on the agent and company’s social media accounts (think Facebook, Instagram, Twitter, etc.). Many of us don’t have the time to properly market a home or property because of other commitments (jobs and family). With a real estate agent, the marketing and exposure of a listing takes top priority with the agent because it’s essential to an eventual sale. Not only will the agent prepare all the marketing materials, but s/he handles internet and social media marketing, hosts open houses and networks with other agents. Marketing is a huge part of any successful business, and selling a home is no different. Agents offer a tremendous value in terms of marketing and exposure of a property – don’t miss out on this added value by avoiding a real estate agent.

Negotiating

There is a reason why real estate agents do what they do for a living: selling or buying a home is a major life event. Most people wouldn’t try to negotiate the stock market with their life savings if they didn’t know what they were doing, and the same can be said for navigating the real estate market. A home purchase or sale is a major transaction, and a real estate agent knows the ins and outs of a sale or purchase. With selling, there is the initial offer, the counter offer, and the period after acceptance of the offer. When it comes to buying, an agent is skilled at negotiation and will be able to provide assistance when it comes to home inspections, repairs and other items. For the seller, he or she will also be able to provide advice if there are any requests for concessions from the buyer. Sellers and buyers alike benefit from all a real estate agent can offer.

Smooth Transaction

When it comes to the thick of it, most buyers and sellers want the entire transaction to be as smooth and successful as possible. Success comes with experience, and a professional real estate agent offers experience. One of the true values in all that an agent offers is experience – agents know the market, they are efficient at their jobs, they know how to help if there are financing problems. They know how to deal with any objections or complaints from buyers; they deal directly with contracts and escrow, and they ultimately keep everything on track. The value in an agent is tenfold when you consider all the benefits of having one on your side during a real estate transaction.

 

Things To Do Before Listing On The Market

Listing a home or property for sale is no small task, and it takes a lot of preparation for a seller to be ready to list. If you’ve been thinking about selling your home, but you’re not completely ready to pull the trigger (maybe you’d like to list within the next few months or even within a year), consider some of the tips listed below to help prepare your home or property for when you’re comfortable listing it on the real estate market.

Remove Personal Items

While you’ve spent a lot of time turning your house into your home, when you decide to sell and list it on the market, there will be a number of people looking at your property (either in person or via the Internet). A step you can take prior to listing is to remove the personal items in your home. You need to walk through the property as a potential buyer: what do you notice? Are there pictures and other things that stick out? The best thing you can do for your home is to create a neutral space or environment for buyers to look at. By removing personal items from your home, you not only help a buyer envision the property as his/her own, you also help break the emotional attachment you have for your own property.

Another thing to consider is renting a storage unit. If you find that you maybe have too many things, and you’re not inclined to part with them, renting a small storage unit once you list your home will give you the ability to free up space in your home but also keep those precious items you can’t part with.

Ask A Listing Agent for Input

You know your house, and it’s pretty likely that you’ve developed a strong affection for your home. It’s common that when we love something, we may become a little blind to some of its issues or things that could be improved. If you know you want to list your property, but you’re not totally ready to do so, have an agent or Realtor do a walk through and provide feedback on what they’d change based on their professional experience. An agent spends a lot of time with buyers, and he or she will be able to point to things buyers might object to or find off-putting in a property.

An agent will also be up-to-date on current trends and will be able to provide feedback on what buyers are looking for in your particular area. Getting a professional opinion from someone that knows the market and talks to other real estate professionals on a regular basis is a great way to prepare your home for a future sale. An unbiased opinion about what works and what could be changed regarding your home is an excellent tool for a future successful sale.

Hire A Home Inspector

When you think of a home inspection, it’s likely you think of one taking place once an offer has been accepted and papers have been signed. If you’re considering listing your house in the future, hiring a home inspector and doing a preliminary home inspection can be a huge asset to your future sale.

A home inspection will let you know what needs to be addressed in terms of your property: a reputable inspector will look at the foundation and other structural components, exterior features, the roof (which includes shingles, flashing and any skylights); electrical, plumbing, heating and cooling systems, interior features like doors, windows and floors; and an inspector will check the insulation in the attic and any fireplaces in the property.

Many home sales do not succeed or move to the next step because of issues brought up in a home inspection. If you’ve decided to wait to sell your home, consider doing a preliminary home inspection well before you put your home on the market so you know where your property stands and have time to fix anything that might put off buyers once you do list.

Fall Fixes

Yes, it’s true: Fall is here and that means winter is just around the corner. The changing of the seasons is always a good time to invest in a little home maintenance so your abode is running smoothly and you catch any potentially large (and expensive) problems before they get out of hand. Following this checklist and you’ll be in good shape for the winter.

Interior

  • Check ceiling and surfaces around windows for evidence of moister.
  • Check caulking around showers, bathtubs, sinks and toilet bases.
  • Ensure all stairs and railing do not have any loose sections.
  • Test all fire and safety systems, including carbon monoxide detectors.

Heating and Cooling

  • Clean and change furnace filters.
  • Keep area around heating and cooling equipment clear.
  • For boiler systems, check water level and shut-off valve for leaks.

Electrical

  • Periodically check for exposed wiring and cable. Replace as necessary.
  • Check all lamp cords, extension cords and receptacles for wear.
  • Trip circuit breakers every six months and ground fault circuits interrupters monthly.

Doors & Windows

  • Look for loose or missing glazing putty.
  • Check caulking for deterioration at the opening and joints between dissimilar materials.
  • Check weather stripping.
  • Check for broken glass and damaged or missing screens.

Plumbing

  • Check all faucets, hose bibbs and supply valves for leaking.
  • Check for evidence of leaks around and under sinks, showers, toilets and tubs.
  • Inspect lawn sprinkler system for leaky valves and exposed lines.
  • Check the main water shut-off valve for operations and leakage.

Roof

  • Check for any missing, loose or damaged shingles.
  • Look for open seams, blisters and bald areas on flat roofs.
  • Clean gutters, strainers and downspouts.
  • Check flashing around all surface projections, sidewalls and protrusions.
  • Trim back all tree limbs and vegetation away from the roof.

Foundation and Exterior

  • Check foundation walls and floors for cracking, heaving, spalling, deterioration or efflorescence.
  • Inspect chimney for loose, deteriorated or missing mortar or bricks.
  • Verify basement and crawlspace has no moisture or leaks.
  • Inspect all decks, patios, porches, stairs and railings for deterioration.
  • Cut back and trim all vegetation from structures.

Source: CRS newsletter

Trend Report

With rising home prices that boost home equity, many homeowners are opting to remodel rather than move. But any savvy homeowner knows that renovations without an eye on return on investment isn’t a smart move. So stick with remodeling projects that will really increase the value of your home. Here’s five home-design trends.

An open floor plan. Forty-six percent of today’s buyers, regardless of generation, want an open floor plan, according to Truila. You don’t have to add space to get the open concept going through. Call a contractor to see how your existing floor plan can be opened up.

Update the bathroom. The National Association of Home Builders (NAHB) says this is the most popular trend, and the ROI is up to 58 percent.* Strong design trends include a walk-in shower and bigger tiles on the walls and floors.

More purposeful kitchen storage. The NAHB says that this is the second most popular renovation project of the year. Think more and deeper drawer banks, and adding a kitchen island and pantries. The ROI is about 67 percent.

Specialize a room or area. Entryways are transformed into mudrooms and basements are being converted into man caves or playrooms. Even a sunny niche can be turned into a useful reading nook.

Embrace hardwood flooring. Homebuyers definitely want hardwood and they’ll pay for it. The ROI for new hardwood flooring is more than 90 percent, and it’s 100 percent for refinishing existing wood floors.

*All ROI figures from the 2015 Remodeling Impact Report

Source: CRS newsletter

The Best Times of Year for Real Estate

For many in the United States it seems as though real estate season starts in the spring and ends just as the kids head back to school in the early fall. While many home and property sales take place in the spring and summer, the reality of the real estate market in the United States is that it’s all about timing. Whether you’re a buyer or a seller of a home or property, there are optimal times throughout the year, but for the most part, the real estate market and when it’s ‘hot’ depends on where you’re located and the time of year or season.

Spring and Summer
Real estate inventory fluctuates with every season. For many of us that peruse the market throughout the year, the spring and summer months (for the majority of the country) seem to be when the most properties are available. Spring and summer and even early fall are considered the best times for real estate for buyers as the market will see a wide variety of properties, but it also likely means more competition from other buyers. The reality of this, though, is that if you live in a competitive real estate market, no matter the time of the year people will search for real estate and sellers will be able to sell their properties.

One of the main things that drives an influx of real estate in the spring and summer are households with children – parents want and like to move when kids are out of school. If you live in an area where there are a number of families, or where schools are relatively close, spring and summer are great seasons for properties.

Location plays a huge part in the best time to list a property. Areas that are known for their seasonal visitors (like snowbirds) will see more traffic during those seasonal times when people are in town. For example, if you live in a mountain area that sees more visitors in the winter because of snow or winter sports, listing in the winter might be a better way to attract potential buyers than listing in the summer when visitors are limited.

A handy tip for sellers: if you’re going to have an open house, the first Sunday of every month is considered the best day to host it. Many listings will hit the market on Thursday afternoon or Friday morning and have a rushed open house the Sunday after. To create intrigue and build momentum of your property, talk to your agent or Realtor to have your listing appear on Monday or Tuesday and follow with an open house the following weekend.

Fall and Winter
Early fall is also a very popular time to list property. Buyers will find a good number of listings hitting the market by those sellers who were not quite ready to list over the summer. If you’re a buyer, the winter is also a great time of the year for buyers as sellers who are motivated and eager to sell will have no issue listing in the winter and making a deal. Listing in the winter allows sellers to get what they want for their property rather than feel pressured to make quick decisions in the spring or summer when competition is hot.

Real Estate in General
The real estate market in the U.S. will always see motivated sellers and buyers throughout the year. There are times in each season when listings and properties will be more plentiful. But it’s important to remember that while there might be more properties in the summer, that doesn’t mean the market will be any less competitive. Competition is the name of the game in many U.S. markets; if you’re interested in a new home or property, start your search as soon as possible.

Spring and summer will see more properties and greater competition while the late fall and winter will attract more serious sellers and buyers will find less competition overall. If you’re looking to buy or sell remember to enjoy yourself, and work with your agent or Realtor so you have the best real estate experience you can have.