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Investing in Real Estate Rentals
Real estate investments are a large percentage of all home sales, accounting for 24 percent of real estate transactions in 2012, according to the National Association of REALTORS®. If you are looking to feather your retirement nest, rental properties can provide an additional source of monthly income. They’re also a good way to diversify you investment portfolio if your 401(k) or other retirement plans are primarily held in stocks and bonds.
To determine if investing in a rental property is the right choice for you, here are a few things to consider.
Figuring out the dollars and sense
The first step is to calculate the potential cash flow; this is the amount of money a property brings in and the amount you need to pay out to cover expenses. It’s not uncommon for rental properties to start out having a negative cash flow which means that the amount you collect for rent does not cover the mortgage payment. If that is the case, you need to determine whether you feel comfortable making this additional cash outlay each month. Here’s how to estimate what your monthly cash flow will be.
1.Estimate your income
The first step is to determine the amount of rent you can charge for the property. Look at what comparable homes (same size, location, amenities) are renting for in your area. You can get a good idea by browsing craigslist, Zillow or Trulia for rental properties. When estimating your income, allow for the amount of time that your property may be vacant. Most landlords factor in about five percent per year; however, figures vary depending on the current rental market in your area.
2.Tally up your expenses
Your monthly mortgage payment and property taxes are your largest expenses. You may also end up picking up the tab for utilities, such as garbage, water, or gas. Again, check what comparable rental properties are offering in your market. If you do plan on paying utilities, use your own usage as a ballpark estimate.
Property insurance is another cost. Your insurance company can tell you what the premium will be if you utilize the property as a rental.
Rental properties need repairs and maintenance just like any other home. Appliances break, plumbing leaks, fixtures wear out. Figure on spending about one percent of the property’s value per year on maintenance, repairs, and cleaning.
Finding a good tenant always pays in the long run, but it does take time and money to conduct and effective search. If you use a property management company or rental broker, include those fees. If you are conducting the tenant search yourself, add in any advertising expenses and a nominal cost, about $30, for running credit checks on prospective tenants.
The good news about all these operating and maintenance expenses is that they may be deducted from your rental income on your taxes. If you’re thinking about upgrading the property, keep in mind that expenses related to improvements to the property must be depreciated over time, rather than deducted in the year paid. Improvements are designed as actions that add to the value of the property or substantially prolong its life. Examples include adding a new bathroom, remodeling a kitchen, installing insulation or building a deck.
3.Calculate the cash flow
Now total all the monthly expenses and subtract that number from your estimated monthly income to determine your cash flow. To fully evaluate the investment, you also want to factor in the tax write-off benefits of depreciation. Depreciation is an accounting deduction that the IRS allows you to take for the overall wear and tear that occurs on the home over time. Only the building can be depreciated, not that land. The value of a residential structure is depreciated over 27 ½ years at a rate of 3.64 percent of the building value per year. For example, if you buy a residential rental property for $300,000, and the building is worth $200,000, you can take $7,280 each year as a depreciation deduction ($200,000 x .0364)
In addition, if your rental property shows a loss for the year, you may be able to deduct the loss on your tax return. It’s a good idea to consult with your tax advisor to help determine which deductions you qualify for and other tax implications for your situation.
For more information on Windermere Evergreen please contact us here.
Multigenerational Real Estate Trends
When making an important decision like buying a new home, personal circumstances are often a driving force. Whether you are a first-time homebuyer, need more space for your growing family, downsizing to fit an empty nest, or looking for a retirement property, finding the right information, the right real estate agent, and the right properties that fit your needs are all important parts of that process. Based on recent studies by the National Association of REALTORS® on generational trends, we can identify the best resources to help you in any phase of your life.
Among all generations, the first step most buyers take when searching for a home is online. Younger generations tend to find the home they eventually purchase online, while older generations generally find the home they purchase through their real estate agent.
Across generations, home ownership still represents a significant step in achieving the American Dream. According to a study by LearnVest, an online financial resource, 77 percent of those surveyed believed that buying a home of their own was, “first and foremost in achieving the American Dream”.
Millennials:
1980-2000
Also known as Generation Y or the Echo Boomers because this generation almost equals the baby boomers in population. This age group is the second largest group of recent homebuyers, representing 28 percent according to the National Association of REALTORS . Seventy nine percent of homebuyers in this age are purchasing their first home. According to the 2012 Trulia American Dream Study, ninety three percent of renters in this generation plan on purchasing a home someday.
When considering a home purchase, Millennials (and some Generation X buyers) place a high value on convenience to work, affordability, and the quality of school district. This generation is the most likely to choose an urban center as the location of their first home. According to market research by Gfk Roper, this group is most interested in their home being a social hub, with a focus on entertainment and amenities.
When looking for a real estate agent, Millennials are most likely to looks to friends and family for a referral. They generally place a high value on an agent’s honesty and trustworthiness because they are often relying on their agent to walk them through the home purchase process for the first time.
Generation X:
1965-1979
As the largest group of recent homebuyers, the LearnVest findings suggest that 72 percent of Americans in this generation are already homeowners. They also represent the largest group of home sellers, with a substantial percentage of the group looking to upgrade their home to accommodate their growing families or increase investment. Experts in the real estate industry expect this group to lead in the recovered real estate market.
Generation X households are more likely to have a dual income, with both adult members in the household working. According to a study by GfK Roper, a market research company, this generation placed state-of-the-art kitchens at the top of their priorities, as well as large closets and amenities for organization, since many Gen Xers have children living in their homes. They are less concerned about formality in their home and have less interest in formal dining and living rooms.
Baby Boomers:
1946-1964
Interestingly enough, the NAR study finds that as the age of the homebuyer increases, the age of the home being purchased declines. Baby boomers and older buyers are looking for newer construction, with less need for renovations or large maintenance issues. This generation ranks state-of-the-art kitchens, whirlpool baths, walk-in closets, and hobby spaces high on their list of must-haves, according to GfK Roper.
The boomer generation is also looking to the future for both themselves and their aging parents, “fourteen percent of homebuyers over the age of 48 are looking to purchase senior-related homes, for themselves or others” according to the NAR study. Boomer parents are becoming accustomed to (or preparing for) an empty nest, so this group may be downsizing or looking for a home that specifically fits their needs.
Silent Generation:
1925-1945
This generation of buyers places a bigger emphasis on finding a home closer to friends, family, and health facilities. While this generation uses the Internet to find their home in the early stages of a home search, they work more directly with a trusted real estate agent to find the home that specifically fits their needs. A home purchase for members of this generation will likely not be a first-time experience so they are less willing to compromise on the price, size, or condition of a home. This generation is generally more satisfied with the homebuying and selling process because they have been through it before and know what to expect. According to the Trulia American Dream study, this group is also most likely to have realistic assumptions about the cost of a home and mortgage.
For more information on Windermere Evergreen please contact us here.
What is Modern?
Sleek design, open floor plans, and great natural lighting are all appealing characteristics of modern architecture. Over the years, modern design concepts in home building have become more popular, as is the resurgence of interest in modern real estate. More companies, like 360 modern, are specializing in modern properties. Modern homes vary greatly in style; however, they have some unifying qualities that distinguish them from other properties built over the last 60 years. Here are some characteristics often found in modern homes:
Clean geometric lines: The core of modernist values is the simplification of form. Modernist homes have a very ‘linear’ feel with straight lines and exposed building materials. Furnishings and adornment reflect this value, incorporating vibrant, geometric and abstract designs.
Modern materials: Large windows are abundant in modern architecture, allowing light to fill and expand the interior space, bringing the natural world indoors. Generally all exposed building materials are kept close to their natural state, including exposed wood beams, poured concrete floors or counter tops, stone walls and stainless steel.
Modern homes are well suited for technological and green upgrades, as well including eco-friendly building materials and energy efficient practices. Flat roofs accommodate solar power. Energy efficient appliances work with the aesthetics of modern homes. Modernist landscaping need not require water-thirsty lawns, but instead can reflect local flora.
Post-and-beam structure: One classic element in modern architecture is the exposed wood posts and ceiling beams. This style of building has been around for thousands of years; however, modern homes really emphasize the structure, rather than hiding the bones behind drywall. In new modern homes the post-and-beam structure can be made out of concrete, iron or other materials. The highly visible horizontal and vertical beams reinforce the clean geometric lines of the space.
Low-pitched gable or shed roof: One of the most differential characteristics of modern homes than more traditional home design is the shape of the roof. Classic modern homes on the west coast generally have a flat or low-pitched roof, highly influenced by architect Joseph Eichler. New urban homes also leverage roof tops for outdoor entertaining space.
Open floor plan: Modern design strives to “open” the space by eliminating enclosed rooms. For example opening the kitchen and dining room into an open living space, allowing the ‘rooms’ to flow into one another.
Large windows: Natural light and the incorporation of natural elements are important aspects of modern home design. Large, floor-to-ceiling windows illuminate the open space and highlight the natural landscape. Some new modern homes have adjusted the large windows to open, diminishing the barrier between the indoors and out.
Incorporation of outdoor elements: Frank Lloyd Wright, one of the pioneering modernist architects, incorporated the natural setting into his architecture, most famously with Falling Water. Outdoor elements are incorporated into modern architecture in many ways; through large windows, landscaped terraces, and patios, and through use of natural and organic materials in building including stone walls, and more.
Minimalism: With open and connected modernist spaces, careful curation of furniture, adornments, and household objects is important to preserving the modernist aesthetic. Generally, modernist homes have art and furniture that reflects the clean geometric lines and the natural materials of the architecture, leaving less space for clutter. Minimalist philosophies of few household items that serve both form and function work well within this design and architectural style.
If you are looking for a qualified Real Estate Agent please contact us here.
Time to De-Clutter? Some Tips for Selling Your Stuff
If you are looking around your home and thinking to yourself that it’s time to de-clutter, the summer months provide an ideal time to hold a garage sale. But if that sounds like too big of an undertaking, there are other options available to you thanks to popular resale sites like eBay and Craigslist. And if even that sounds like too much effort, you might also consider donating lightly used items to charity or sending them off to the dump. Here are some questions to help you decide which method is best for you.How much stuff do you have? Are you liquidating your space of large furniture items, a large quantity or quality items, or do you have a small pile of electronics?
If you have yards worth of stuff to get rid of, you definitely want to consider a garage sale. Getting rid of multiple items on Craig’s list can be time consuming, and shipping items sold on eBay can be expensive and eat into your profits. On the other hand, if your items are easily shippable or you have a small enough quantity to take quality photos and post online, then you can save time by using eBay or Craig’s list – and potentially make more money too.
What type of stuff am I getting rid of? Is it worth anything?
If you have large furniture or unique/valuable pieces it may be worth the time to take some quality photos and try to sell these items on Craigslist first. Generally Craigslist works as “first come, first serve” so be prepared to respond to inquiries quickly. If you have small items that have some value, you may want to consider eBay. You reach a much larger audience through eBay which can result in a greater financial return.
How much time do I have?
Garage/yard sales are by far the most time intensive of your options. If you choose to hold a garage sale, you will likely need to dedicate at least three days for prep, clean-up, and the sale itself. All items should be cleaned up, priced, and neatly displayed for sale. Signage should be prominently placed around your neighborhood. You can also place an ad in your local classifieds or on Craigslist to attract a larger crowd.
Will your home/community accommodate a Garage Sale?
Garage and yard sales are generally held at a single-family residence. If you live in an apartment or condo, you may want to consider alternatives due to limited public space. You may also want to consider your community traffic. If you live on a quiet street, you may not get enough customers to generate sales.
Can you enhance a sale by joining with neighbors, friends and family?
Some communities hold an annual neighborhood garage sale, encouraging all neighbors to participate on the same day. This increases your ability to market the event and attract a larger audience.
If you are looking for a qualified Real Estate Agent please contact us here.
