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Buying Versus Renting A Home…That Old Debate

Why would someone write an article on buying versus renting a home?

What’s in it for the author of the article?

Why would you read one?

What is it you want to hear? Do you just want confirmation and justification for what you already believe and want to do? Or, are you looking to be convinced otherwise?

These are all good questions to ask yourself if you find yourself reading an article on whether it makes more sense to buy a home, or rent a house.

 

There are “reasons” to buy, and “reasons” to rent.

People want to make choices based upon reason. So, if you start reading about whether to buy versus rent a home, you’ll certainly be given “reasons”, like:

  • When renting you’re just paying someone else’s mortgage.
  • You’re throwing your money away when you rent. You have nothing to show for it. If you buy, you’re building equity.
  • Many of the richest people built their wealth through real estate.
  • Real estate is a great long-term investment. Values always go up in the long-term.

Certainly all valid to some degree.

But if you start reading articles bent on renting a home, versus buying, you’ll be given opposing “reasons”, like:

  • When you rent, you aren’t tied down to an area. You have freedom.
  • You aren’t responsible for the upkeep and maintenance when things break.
  • Real estate values are not guaranteed to always go up.
  • Your house could be less than you bought it for at times.

Again, all valid “reasons” to some degree.

Regardless of whether the article is pro-buying or pro-renting, the “reasons” cited tend to be the same, decade after decade, regardless of the market. They are overused, and pretty useless to anyone in particular.

There is no absolute answer that is right for everyone.

 

It shouldn’t be a DIY diagnosis

You can find plenty of “sources” to formulate your opinion on what makes sense for you.

There are online calculators to help you figure out if renting or buying makes more sense for you.

But that’s kind of like looking up health information online…

It’s good to get some thoughts and perspective. Educate yourself. But it’s not necessarily proper for you to diagnose and treat yourself.

Same when it comes to financial and real estate decisions.

Certainly educate yourself. Become informed. But truly assessing whether or not it makes more sense for you to buy a home or rent a house warrants getting some professional help.

 

Professional help can cost less than self-help. (At least in real estate…)

While you can certainly sift through all the information you want for free, and come to your own conclusion, you can also get the advice of someone who is a real estate expert for free.

All you have to do is reach out to a real estate agent. A good real estate agent will help you figure out if buying or renting makes better sense for you. They’ll help you assess your situation lend you their thoughts and insight based upon their knowledge and experience.

And most of them will do this for free. They get paid if and when you end up buying or renting a place.

Now, certainly, you might question their motives…

Will they push you to buy versus rent to make more money? Will they push you to rent because it’s quicker, easier money? Why would they help me for free? There’s got to be a catch…

Sure, there are some agents who are in it just to make money. But most real estate agents are more caring and concerned about their clients’ best interests, than their own self-interest.
That doesn’t mean every real estate agent will necessarily be able to give you the best advice, even if they are caring, concerned, and not pushy.

So, make sure you find a great agent when you ask for an agent’s advice.

(If they’re all offering their advice for free, you might as well choose the best, right?)

 

Who’s the best agent to talk to?

Considering this is my article, of course it makes sense that I feel like I’m the best agent for you to talk to.

The best way to find out is for us to have a quick chat. Maybe I’m the best agent for you to talk to… Maybe not. But if I’m not, I probably know another agent who may suit your situation better.

So why not give me a call, or send me an email, and let’s schedule a time to talk. No obligation.

I never push people to do one thing over another. If buying makes more sense for you, we’ll figure that out. If renting does, we’ll figure that out.

I just want to make sure you’re able to make the best and most objective decision possible.

 

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The Ultimate Home Buyer’s Guide

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Are Investment Rentals Right For You?

 

 

When thinking about investments and retirement goals, many people think about owning rental properties. After all, they pay for themselves, right? They can be excellent additions to a savings and investment portfolio, but there are also risks. Here are the things to consider.

First off, the good news…

If you are considering purchasing a rental property, just about all of your expenses are tax deductible (unless you rent to family members). Your mortgage loan interest, property taxes, and maintenance expenses are all allowable deductions. Your accountant may find other deductions for you as well, such as a 27-year depreciation rule.

Now for the risks…

Many areas are too expensive for rental investments. You will want to know that your monthly cash flow from the property meets or exceeds your expenses. In pricey locations, you may wind up upside-down and spending more each month than you are taking in. Believe it or not, prior to the Great Recession, many investors did not worry about rental income meeting expenses because they had so much ongoing appreciation in property value. We know how that worked out.

Speaking of appreciation, the best rental properties are in areas with steady appreciation in value. It is tempting to purchase costly investment properties in high-end neighborhoods, but you may get better long term increases in value in other neighborhoods as well. This is important because you will eventually want to sell your property and make a profit.

Ongoing maintenance is necessary, of course, but may cut into your spare time. You may also get those yucky middle-of-the-night backed up plumbing calls. Do you really want to handle this? The solution is to hire a management company, which will add to your (tax deductible) expenses but may provide you with a lot of peace of mind.

Then there are landlord-tenant laws to contend with. Be familiar with your locality’s laws before even considering purchasing. Is there rent control? If your tenant stops paying, what are the rules for eviction? How much notice do you have to give before entering a property? Just about every city has posted laws online. You may wish to consult a real estate attorney if you have detailed questions.

It is tempting to focus on your monthly return. Keep in mind that vacancies and maintenance expenses are inevitable and make sure your budget takes those costs into consideration.
Finally, can you afford another monthly bill and twice-yearly property taxes? If your finances are already stretched, another payment or two might be really unpleasant, even if you are achieving a cash return.

If you have considered everything and still would like investment properties, have fun becoming a budding real estate mogul!

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Selling A House Is As Easy As Pi… Or Is It?

 

For whatever reason, most of us are aware of “Pi”.

Mostly we just think of it as that number that goes on and on forever, with no end or solution. And we just know it as 3.14.

When and why do we learn about it in life? What good does it ever do us?

There’s certainly a lot more to it…

For instance, it’s a “constant” ratio in circles. And, it’s an “irrational” number. They teach us that, too. Maybe that stuff sticks with us. Maybe not.

For most of us, just knowing the 3.14 part is good enough. There’s no need to think about it much beyond that. Pi probably isn’t going to affect you or me one way or another in life…

But…there is a rather “constant” and “irrational” number in real estate that does affect many people. And most people never learn about it in life…at least until they list their home for sale.

That number is the listing price of a home…

It’s a “constant” in the sense that almost every homeowner wants the listing price of their home to be a much bigger number than it should be.

It is also a “constant” thing that real estate agents have to help clients understand, and even come to terms with.

But many homeowners disregard what real estate agents explain, and list their home for an “irrational” number, which is too high.

Which then creates an unsolvable problem (much like Pi is)…

Listing a home for too high of a price, typically makes the process of selling a home go on, and on, and on. Forever. With no end…(also much like Pi is).

But, unlike Pi, proper listing prices for homes are not unsolvable. There’s a rational number to list every individual home for on the market.

No, it isn’t necessarily easy to figure out. But it doesn’t take a mathematician. It takes a real estate agent who knows how to analyze where the house should be priced and positioned within the current market. And, it takes an agent who knows how to explain it well, so that their client doesn’t decide to list for too high of a price.

Not all agents can or do these things well. Which is why “irrational” pricing is a “constant” problem so many owners struggle with.

When selling your home, it’s important to find an agent who prices homes perfectly. Not too high… but also, not too low. It’s a fine balance that needs to be struck.

So, when it comes time to list your home for sale, it’s important that you or your agent finds, and understands, the most rational number to list your home for on the market.

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Think Owning A Home Is Out Of Your Reach? Think Again

In the current economic climate, a lot of renters thinking homeownership is out of their reach. But if you think buying a home is out of reach, you might want to think again.

According to the National Association of Realtors’ Realtors Confidence® Index, first-time buyers accounted for 29% of all home sales from late 2016 to late 2017. That’s nearly one-third of all home sales! And there’s a reason so many people are making the transition from renting to owning…

Rents are rising. According to a recent Zillow study, the median US rent is taking up 29.1% of household income, and costing tenants a whopping $2,000 more per year.

Data Source: Zillow

As renting becomes less economical, more and more tenants are exploring homeownership. And thanks to low down payment mortgage options (61% of first-time buyers made a down payment between 0 and 6%, according to the National Association of Realtors’ Realtors Confidence® Index), homeownership is more accessible for first-time buyers than ever, making it the ideal time to make a move.

The Takeaway

If you’re currently throwing a large chunk of your paycheck towards your rent, now’s the time to make a move and buy your first home. Not only is homeownership one of the best investments you can make in your future, but thanks to rising rents, you may also find yourself saving money in the short-term.

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4 Reasons Why We’re Not Headed For Another Housing Crash

With home prices rising in many areas of the country, many people are worried that we’re headed for a housing crash like the one we suffered in 2008.

But here’s the thing: it’s just not true. While it’s understandable that people would look at the current market, consider it a “housing bubble,” and assume it’s going to pop, the truth of the matter is the market today couldn’t be any more different than they were before the crash of 2008.

Let’s take a look at four reasons why we’re not headed for another housing crash:

1. Banks have tightened their lending practices

The biggest contributor to the crash of 2008 was risky lending practices. Financial institutions had extremely loose standards in terms of who they’d lend to; they were giving out mortgages to people with low incomes, bad credit, and who were unlikely to be able to pay their mortgage once their interest rates increased. Getting a mortgage was easy, regardless of your financial situation. While this made homeownership possible for people who previously would have needed to rent due to lack of income or bad credit, it also led to serious problems when millions of people began defaulting on their loans, leading to the housing crash and the ensuing economic crisis.

Today, those predatory and unethical lending practices have been completely overhauled. Mortgage standards are much more strict, and lenders are much more cautious in who they grant loans to and the terms of those loans. This has led to greater stability in the market and will prevent another crash like the one we experienced in 2008.

2. Fixed rate mortgages are the norm

As mentioned, a huge part of the housing crisis of 2008 was subprime mortgages. The mortgages given to the riskiest borrowers were adjustable rate mortgages. Once the introductory period was over, borrowers saw their interest rates skyrocket and their mortgage payments quickly double or triple in size, making them completely unaffordable and leading to mass defaults on loans across the country.

But today, while adjustable rate mortgages still exist, they’re significantly less common. Fixed rate mortgages are the norm. When people borrow, they know exactly how much their mortgage payment is going to be for the life of their loan. This allows them to assess their budget and only borrow as much as they can afford, making it much less likely they’ll default on their loans in the future.

3. Today’s rising prices are a supply and demand issue, not the makings of a bubble

In 2008, prices rose rapidly because everyone wanted to buy property. Real estate experts called it a “mania” because so many people who weren’t able to buy property suddenly had the ability to do so. Purchasing a home in the US accelerated to a frenzied pace, which drove up prices.

But today, prices aren’t rising because there’s a flood of frenzied buyers in the market. Instead, it’s a supply and demand issue. People are staying in their homes longer, which means there’s less inventory available in competitive markets. When there’s less inventory, there are more people vying for the limited homes available, which drives up property prices. This kind of price increase is just a normal part of a competitive market, not a reason to worry we’re headed for another housing bubble.

4. There’s economic growth to support rising prices

Perhaps the biggest reason you don’t need to worry about the US heading for another housing crisis, is the fact there’s economic growth to support rising prices.

The reason the most competitive markets in the country (like Silicon Valley or Seattle, WA) are rapidly growing and showing historic price increases is due to economic growth. The most competitive housing markets in the US are the markets with the most opportunity. People are flocking to areas where there are jobs, stable economic growth, and opportunities for the future. Potential homebuyers want to purchase property in a place they know will offer them plenty of career and economic opportunities.

When there’s economic growth to support growing prices like there are in today’s hottest cities, it makes for a much more stable market—and a market unlikely to head towards a housing crash.

If you’re worried that rising housing prices are an indicator another housing crash is on the horizon, take a deep breath. The conditions in the market today are completely different from the conditions in 2008, and thanks to the changes made in lending practices after the crash and our booming economy, you can rest assured we won’t see a housing crash anytime soon.

 

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Time for a HOA Management Change?

Communities and property management companies have a very unique relationship.  They can exist cohesively for many years based off a focus that both possess the same goals and work hard to achieve them.  There is mutual respect and some give and take over the years but both work for the greater good of the community.   They can also change drastically when one side either changes the goals or the expectations.  

 

Do you need a change or are you reacting?  That is the question that communities must face with every new board or new community manager.  Some signs that it is time to look for a new management company:

  1. Communication is lacking.  Is the manager returning calls promptly?  24 hours is the rule in our company even if you’re not in the office.  We have voicemail sent directly to our mobile phones so there’s no excuse.  Email is not promptly returned or addressed.  Same rule applies.  The Board may be getting prompt responses but are the community members complaining?  The rule of thumb is to treat everyone the same, remember those community members are your next board members so no preferential treatment allowed.

 

  1. How long does it take to get a project completed?  Of course this depends on a multitude of variables but if a simple task like bids, minor repairs, etc are not being addressed with no valid reason it’s cause for concern.

 

  1. Property visits aren’t being done per the agreed upon method.  Some communities are so large that a walk isn’t feasible but a slow drive through is.  Whatever  the contract calls for; a drive through or walk monthly, the manager should be preparing a written report for the Board.  When this is lacking or the board begins to notice the same issues/violations over and over it’s safe to assume the visits aren’t being done regularly.

 

  1. Financials:  this is vital for a board to have access to whenever they request.  Financials should be completed every month with a balance sheet, income statement, invoice copies and reconciled bank statements at the very least.  Most communities request HOA fee delinquencies and work orders as well.  

 

So now you’ve determined that you aren’t getting the service you contracted for……..what next?

 

First and foremost read your management agreement thoroughly.  If you don’t have a copy, request it.  The manager will probably get clued into the reason for it but it’s vital.  It’s your contract so they must send a copy.   

Determine the length, specifically the end date.  Does it auto renew and what time period that encompasses as well as how many days notice do you have to give (typically 30,60,90 days).  

Make sure you check for hidden fees like transfer of data charges or remaining management fees to be charged  as well.

 

Searching for the best management company

 

  1. Research research research.  The communities that do their due diligence on the front end will not be going through the process in the following year or two.  Those that select from one or two choices and don’t properly investigate and interview will.

As part of a search committee in my community we decided the best way to see how a company operates is to go to them for the initial interviews.  We got a wealth of information just by seeing the offices.  One company had a woman set up at a card table in the hallway working on payables!  We had to squeeze around her to get to the office we were meeting in.  That owner had piles of paper everywhere.  It was hard to tell where the desk ended and the floor began.  Needless to say they weren’t given a second interview.

  1. Ask for references.  That goes without saying but you should ask for a complete list of the portfolio and at least one board members contact info.  Then call several to see what a good sampling is saying.  Again you will get a variety of answers but a trend should emerge pretty quickly.
  2.     As part of the interview process ask to have the potential new manager be included.  You know the company owner can sell but you won’t be working with him/her on a daily basis so the feel you get from the manager is extremely important.  If the owner hesitates to make the manager available take that as a bad omen…….are you getting a new inexperienced manager?  Someone who isn’t so good with people? The haven’t thought out who will manage you?  I could go on but you get the idea.
  3.     In the references there should be some vendors (if not ask for them).  Vendors can be your biggest asset.  Landscapers, pool guys, and handymen always seem to know what’s going on behind the scenes.  Ask them about your potential manager, are they paid promptly, how are work orders handled.  The owner can give you the procedure for a work order but the vendor can tell you how it really happens.

 

The Termination/Transition

It goes without saying but make sure you give your notice in plenty of time and in writing – not email.  

Management companies do this all the time and you need to trust in the new company but stay on top of the transition as well.  There will be a checklist with dates assigned to transition everything from bank/community member accounts to governing documents.  Letters should come from both the departing as well as the incoming company to vendors and suppliers.  This usually ends up being a one sided notification but it’s worth asking the outgoing company to do.

 

While a tedious process, if done correctly you shouldn’t have to go through it very often.  Good luck!