Archive for year: 2018

Having plenty of space in a home is a luxury. But what might be enough space for some may be too much for others.

While many buyers are trading up in the word of real estate, many others have reached the point where downsizing makes sense. Whether you’re an empty nester or are simply looking for something more affordable and less work to maintain, downsizing may be the right thing for you to do.

But before you start enjoying cheaper utility bills and less space to clean, having a specific plan in place before you start moving your stuff can help ensure the process is a smooth one. Here are some things you should consider to make the most of downsizing.

Figure Out Your Lifestyle Needs

Before you buy a smaller place, consider a few things first. Figure out what type of lifestyle you’re going for that may be different than the one you’re leading now.

How much smaller should you go? What type of amenities do you want to have within close proximity? Would you prefer something with only one level? Are you open to condo living? Are you looking for a community with a certain age demographic?

The answers to these questions will help you figure out not only how much smaller you want to go, but also what factors will also play a role in helping you live the lifestyle you’re looking to lead.

Make a List of All Your Belongings

No matter what type of dwelling you’re moving to, it’s always important to take inventory of all of your belongings before you even call the moving company. Take the time well in advance of the big move to make note of all of your things and decide what you should keep and what you can toss.

This might seem like a pesky, overwhelming task, but it’s an important one that shouldn’t be skipped. Take your time with it, and go room by room so it doesn’t seem as though you’re taking inventory of the whole house at once, which can certainly be daunting.

While you’re taking inventory, be sure to make a distinction between your wants versus your needs. Quite often we assume that something is a necessity when it’s more of a luxury. And when you’re downsizing to a smaller place, having a distinct list of each can help you wean out things that are just taking up space when you actually don’t need or even use them. 

Sell/Donate/Trash Some of Your Things

After you’ve taken inventory of all of your stuff, decide what to do with them. During your list-taking task, consider placing items in specific columns, including things you should keep, donate, or throw out. Whatever you choose to keep, start boxing them up. Everything else should either be given away or tossed in the trash.

Consider having a yard sale to help you whittle down your belongings. Sell things on online classified sites or on garage sale apps. Whatever you don’t sell, consider donating it to the local charity. Anything that isn’t worth donating should be trashed. And the sooner you do this, the better, as it will help to clear the place out and making moving day much more streamlined.

Consider How Your Furniture Will Fit

The way your furniture may fit in your current home doesn’t necessarily mean that it will fit just as well in your new, smaller home. It’s quite possible that you might not have enough space to fit all of the furniture that you might want to keep. When downsizing, be sure to measure your furniture to see if it will fit well with the dimensions of your new home.

You certainly don’t want to be in a position to have made the effort to move your furniture, only to realize that it doesn’t fit in your new space. Measuring your furniture long before moving day will give you an idea of which pieces you’ll be able to take with you and which ones you might have to leave behind.

Choose Double-Duty Furniture

If you’ve decided that new furniture is the way to go after careful measuring, consider choosing pieces that can serve more than one function. For instance, consoles with shelving, coffee tables with storage space underneath, dressers as bedside tables, and shelving units as room dividers are only a handful of examples of pieces that serve more than one purpose.

If the place you’re moving into is particularly short on square footage, pieces like these can make the perfect choice to help you avoid taking up precious space while offering plenty of function.

Make Good Use of Storage Space

Once you’ve made it to your new place, be sure to make smart use of storage. This will help you keep as many of your precious belongings as you can from your old home. The following are great ways to house your things without having to take up so much space in your closets, attic, or shed:

• Hanging shelves
• Storage ottomans
• Built-in shelving units
• Drawers under beds
• Garage shelving

Get creative with your storage space to help you neatly tuck your belongings away and avoiding clutter that typically comes with inadequate storage solutions.

The Bottom Line

Downsizing is a rather common phenomenon among people who no longer have use for so much space in their current homes. Rather than spending so much extra time, cleaning and maintaining larger homes and paying more in utility bills and property taxes, homeowners with no more use for extra space choose to downsize. If you fit into this category, consider keeping the above-mentioned tips in mind to help make your downsizing process a success.

When it comes time to apply for a mortgage, which avenue should you take? There are several types of home loan products available, but the one you decide on should closely match your needs and financial position.

More specifically, should you apply for a conventional mortgage, or does an FHA home loan work best for you? How can you decide between the two?

What is a Conventional Loan?

Before you decide which product is best for you, it’s important to understand what each one is and what they can provide you with.

A conventional loan is a mortgage that requires a 20% down payment. They also tend to be the more challenging types of mortgages to get approved for, as the loan criteria that borrowers must have to get approved are pretty stringent. To get approved for a conventional loan, you’ll typically require the following:

• A good credit score (at least 650)
• A low debt-to-income ratio (DTI), which should be no more than 43%
• A down payment of at least 20%, which will allow you to avoid paying private mortgage insurance (PMI)

These loans are not backed by the government like FHA loans are.

It should be noted that although conventional mortgages require a 20% down payment, there are high-ratio conventional mortgages available that allow borrowers to put down as little as 5%. They’re named so because the loan-to-value ratio (LTV) is more than 80%.

In this case, the lender is more at risk in case the borrower defaults on the loan because the loan amount is much higher. In this case, PMI would be charged as a means to protect the lender should the borrower default on the mortgage payments.

What is an FHA Loan?

FHA loans are those that are backed by the Federal Housing Administration (FHA) and has less stringent loan criteria. For this reason, FHA loans tend to be pretty popular among first-time homebuyers and borrowers with a less-than-perfect credit score. Borrowers with a score of at least 580 should be able to qualify for an FHA loan.

These types of mortgages are also attractive for those who can’t come up with a sizeable down payment, as they allow a minimum down payment amount of 3.5% of the purchase price of a home. Like high-ratio conventional loans, FHA loans require mortgage insurance to be paid given the low down payment and high loan amounts.

Which Loan Type is Right For You?

In order to help you decide between these two loan types, let’s dive deeper and get more detailed into the factors listed above.

Credit score.

In order to qualify for a conventional loan, you’ll need a good credit score. More specifically, a score of at least 650 would be required for approval. A higher credit score will not only increase your chances of approval, but it will also help you obtain a lower interest rate, which can make your overall home loan more affordable.

If your credit is suffering somewhat, a conventional loan might not work in your favor. In this case, an FHA loan might work better for you. Generally speaking, a score of 580 should be enough to get you approved, as long as all other factors align with home loan approval. That said, every lender will have their own specific criteria when it comes to credit scores required.

Down payment and mortgage insurance.

As mentioned earlier, an FHA loan requires a minimum down payment amount of 3.5% of the purchase price of the home. If you’re having a tough time coming up with a sizeable down payment for a mortgage, an FHA loan might be easier for you.

It should be noted, however, that Mortgage Insurance (MIP) will be required on down payments that are less than 10% with FHA loans. Even though you are responsible for making these premium payments, it’s the lender that’s protected, not you. If you ever default on your loan payments, the insurance policy will kick in to reimburse the lender.

Conventional loans require a 20% down payment, which can be a hefty amount with a more expensive home purchase. But with a 20% down payment, you can avoid having to pay Private Mortgage Insurance (PMI), which works similar to MIP. However, high-ratio conventional loans allow as little as 5% down, though PMI would have to be paid in this case.

That said, you can eventually eliminate PMI payments once you’ve paid down the loan balance to 80% of your home’s original appraised value. With FHA loans, mortgage insurance can’t be eliminated.

Debt-to-income ratio (DTI).

No matter what type of loan you apply for, your lender will look at your income and debt load. More specifically, they’ll assess how much of your monthly income is dedicated to paying down your monthly debt obligations. A debt-to-income ratio is calculated by dividing your debt by your income. For example, if your monthly debt is $3,000 per month and your monthly income is $7,000, your DTI would be 43%.

Conventional lenders like to see DTIs of no more than 43% before agreeing to approve a mortgage application. However, DTIs that are lower than 36% are preferred.

With FHA loans, you may be able to get approved with a DTI as high as 50% as long as all other factors check out.

Refinancing process.

Refinancing basically involves replacing your existing loan with a new one, in which the new loan pays off the current debt. If you want to take advantage of refinancing at some point throughout your mortgage, you might find that the process is much more streamlined with FHA loans compared to conventional mortgages.

With a conventional mortgage, you’ll likely have to go through the entire loan application process over again and pay all the associated closing costs, which can wind up taking up a lot of time and money. With FHA loans, you can refinance your FHA loan through the Streamline Refinance process without having to fill out all the same amount of paperwork and paying all the fees that would be associated with refinancing a conventional loan.

The Bottom Line

Depending on your credit score, debt load, down payment amount, and income, one specific loan type might be better than the other for you. It’s important to assess your current financial situation and your eligibility criteria, which will then help guide to which loan product you might be better suited for. Speak with a licensed mortgage specialist to help you make the right decision for you.

Certain features in a home have stood the test of time in terms of adding value to a property, while others often don’t bring in the type of ROI that sellers usually look for when they sell.

As a seller, you’ll obviously want to prep your home accordingly in order to attract the masses of buyers out there. That’s precisely why many sellers employ professional home stagers. But in many cases, taking on certain home improvement or upgrading projects might be warranted to bring your home up to par.

That said, you’ll need to be very careful about the type of projects that you undertake.  More specifically, the following projects might not add as much value as you’d like and probably won’t allow you to fully recoup what you spend on them.

Upgraded Utilities

When it comes to adding perceived value to a home, features that buyers can actually see are what really matters. While things like the electrical panel and wiring or new plumbing pipes are certainly nice to have, buyers might not always associate the importance of such upgrades with offering more money.

Even though you may have spent thousands of dollars upgrading the wiring and pipes, you may not see all that money recouped in the offers that buyers submit.

Of course, making the necessary improvements in these areas isn’t necessarily a bad idea, and it may sometimes be needed in order to actually sell your home. That said, don’t assume that such upgrades will allow you to hike up your asking price.

New HVAC System

Like the utilities in your home, the HVAC system isn’t something that buyers will notice. Of course, if the A/C is completely dead and the inside of the home is boiling hot, buyers will notice. In this case, you’ll have little choice but to repair or replace the unit before you sell.

But simply upgrading your entire HVAC system isn’t necessarily going to allow you to recoup all the money you may spend on it when it comes time to sell. Buyers are not likely to pay more for it.

Adding a Swimming Pool

Many buyers in California expect a home to have a pool when they buy. But if your home doesn’t already have one, adding one now isn’t exactly going to bring you a high ROI. In fact, you could lose money by taking on such a huge project.

Installing a pool is a very expensive job. You’ll likely spend no less than $30,000 on a pool installation, but you probably won’t be able to tack on that extra $30,000 to the asking price.

Buyers who really want a pool can always install one themselves and design it in the way they like. If other homes on the block have a pool, you’ll need to make the appropriate price adjustment to your asking price, which might be the better way to go than installing (and paying) for a pool installation that will likely cost much more than you’ll get back for it.

Solar Panel Installation

An increasing number of buyers – especially those in the millennial demographic – appreciate “green” homes that are easy on the environment – and their pocketbooks. And solar paneling is certainly a great feature for a home to have that can save energy and money.

But the installation cost is extremely high. People who install solar panels usually do so if they are planning to remain in their homes for the long haul, as they won’t see any recouping for years to come. Installing them today will definitely not add the kind of value that you’ll be able to get back when you sell.

New Bathrooms

Bathrooms might be small in size, but they play a key role in the value of a home. A home with three updated bathrooms is obviously better than a home with one old and outdated bathroom, for example. But while you might want to spruce up a tired-looking space, installing a brand new bathroom might not bring you back what you spend on such a project.

In fact, you can expect to get back no more than half of what you spend on a new bathroom installation. If anything, consider updating the one(s) you already have, within reason.

Landscaping Overkill

Your home’s landscaping plays a key role in curb appeal, which is crucial when selling your home. Your lawn should be mowed and free of weeds, your flowers should be healthy, and your bushes should be trimmed. But going overboard with your landscaping will risk losing money when you finally sell.

Not only will you probably spend a lot more on your landscaping that you’ll get back, but you might even turn some buyers off who prefer to personalize their landscaping without so many extensive intricacies.

High-End Features

When prepping your home for the market, it’s important that you stay in line with what the majority of homes in the area offer. A home that’s been overloaded with high-end upgrades on a block that has more modest homes might not make sense. You’ll probably do nothing more than make your home stand out like a sore thumb.

You may have spent some good money on ornate lighting, extensive crown molding, decorative wainscoting, innovative kitchen appliances, or Italian marble countertops, but are buyers in the area willing to spend the big bucks to have all that? These types of features are super expensive, and it’s unlikely that you’ll find a buyer who would be willing to pay as much for your home as what you spent on it.

The Bottom Line

Upgrading your home is certainly a good thing when prepping your home for the market. But the types of projects you take on and the amount of money you spend on them should be carefully considered. While you want your home to impress buyers, you also want to make sure the ROI is worth it. Speak with your real estate agent to find out which projects make more financial sense, and which ones you should steer clear of.

There are plenty of ways to invest in real estate, and multi-family housing is a popular one.

Multi-family properties are basically homes that are incorporated into one larger complex, whether it’s an apartment building, duplex, triplex, or multiplex. Essentially, the homes are structured in such as way that they are able to house multiple families in the same complexes, though all separate from one another.

Multi-family housing investments can be a great option for many investors instead of just investing in a single family home, but perhaps not so much for others. There are obviously certain advantages to investing in this type of real estate, but there are also a few drawbacks as well. That’s why it’s so important for investors to weigh both the pros and cons of such investments before jumping in with both feet.

Pros of Multi-Family Housing Investments

Let’s get into the advantages of investing in a multi-family complex:

Bigger profits. Obviously, the more families living in the complex that you purchase, the bigger your cash flow is going to be. Collecting rent from several units as opposed to just one will bring in a larger flow of income. As long as the rent is paid on time and the amount you charge more than covers the operating costs, you stand to make a bigger profit with a multi-family complex as opposed to owing just one unit or a single-family home.

Less risk with tenants. If you only have one unit, the risk of vacancy is much higher. You’re depending on that one unit for rent collection. But with a multi-family complex, you’ll have a number of units on your hands. Even if you’ve got one vacancy, it doesn’t represent the entire makeup of your vacancy rate.

Even if one unit becomes vacant, there are still other units that are filled and bringing in rent money every month. And if one of the tenants happens to neglect to pay rent on time or is difficult to deal with, a multiple tenant situation probably won’t result in all tenants being a problem all at the same time. In this way, you won’t be putting all your eggs in one basket.

The value will hold over time. Multi-family properties are usually valued according to how much potential they have to generate a positive income every month. They’re typically purchased exclusively by investors, and if these properties are able to prove a decent income through rent, they’re usually able to maintain their value over the long haul.

Mortgage are easier to get. If you’re planning to buy a number of investment properties, you might find it easier to get one mortgage for a multi-family property as opposed to buying many single-family properties. Not only will it be easier to get approved, but it will also be easier to manage one loan under one lender instead of many if you were to purchase several separate properties.

Cons of Multi-Family Housing Investments

As great as multi-family property investing may be, it’s not without its drawbacks.

Cost. You can always buy just one single family home to rent out and collect income on. This will still bring in some level of income while costing you far less to purchase. Obviously, buying a multi-family complex is a much larger financial transaction than a single-family property.

Many first-time investors might choose to start smaller and get in the market with a single-family property at first before jumping into a multi-family property investment simply because of the high price tag attached to such an investment.

More tenants equal more hassles. A single-family home investment means you’ll only be dealing with one family With a multi-family complex, on the other hand, you’ll be dealing with multiple tenants. While this can mean your profits will be higher, it also means dealing with several tenants at once which can be more time-consuming and more of a hassle.

Further, if there’s an issue with the structure, you’ll have to deal with complaints from all tenants at once, which can translate in more headaches and higher maintenance/repair costs. That said, you can always hire a property manager to tackle these issues for you. While there is a cost associated with this type of assistance, it is typically tax-deductible.

Fewer properties available. It’s a lot easier to find a decent single family home to buy for investment purposes than it is to find a multi-family complex that checks off all the boxes. Multi-family homes are not as readily available to as single-family homes for a number of reasons, including less demand and higher purchase prices. As such, it can be more of a challenge to find the perfect property at the right price that meets all of your needs and wants.

The Bottom Line

Investing in any type of real estate can prove to be highly profitable and provide long-term wealth when done right. And multi-family properties provide investors with just one of many ways to realize a profit and bring in a handsome income every month. But there are always considerations to make before choosing this type of investment over others. Work with an experienced real estate professional to help you navigate the realm of multi-family home investments to make sure this is the right path for you.

The vast majority of homebuyers search online during the house-hunting process, which means your listing better be in tip-top shape before buyers set their sights on your property. More specifically, the photos you’ve got posted along with your listing must absolutely be as high-quality as possible in order to pique the interests of buyers.

Photos can be the deciding factor of whether or not a buyer decides to make an appointment to see your home in person. Just think about when you’re shopping online for just about any product: if the photo doesn’t do the product justice, you’d be more likely to look elsewhere than to make a purchase. The same concept applies with listings for homes.

Unfortunately, many sellers make a few mistakes with their online photos, which can totally sabotage their listings. Here are some blunders you should try your best to avoid making when it comes to your home’s photos.

Using Too Much Flash

First of all, photos should always be taken during the daytime when natural daylight is at its maximum. This will help to create bright, clear photos without having to depend too much on artificial lighting.

But sometimes there are certain rooms in a house that may be void of windows, but you still want to capture a photo of them anyway. In this case, a flash may be required. The problem is that most built-in flashes on regular cameras or even smartphones can leave bright spots that can cover up details that you want to be depicted in your photos.

You’d be better off illuminating the space appropriately with lighting placed in strategic places to avoid flash spots on your images. Or better yet, hire a pro to do it instead.

Using Blurry Photos

If you’re taking your own photos, make sure the image is in clear focus. Blurry photos will do absolutely nothing for your home. All they will do is tell buyers that you’re not really serious about your listing or don’t even have much pride in your home. Blurry images might also tell buyers that you’re trying to hide certain flaws by keeping them out of focus.

Leaving Odd Things in the Background

When taking photos of the rooms in your home, you shouldn’t just pay attention to the actual components that you want in the shot. You should also be paying attention to things that shouldn’t be in the picture that can compromise their quality.

For instance, you might inadvertently catch your own reflection or shadow in the picture, especially if there are mirrors or windows in the room. It’s also possible to catch another person in the next room who may accidentally photobomb your shot.

Whatever the case may be, forgetting to check the background of your photos could compromise them.

Focusing on the Wrong Things

Not only should your photos be void of any strange items in the background, but they should also not focus on the wrong components. Cameras with autofocus have a tendency to highlight specific items in a shot while leaving other items slightly out of focus.

For instance, it would be strange to have the vase in the living room be the center of a shot when you’re trying to convey the look of an open concept. If you’re taking your own photos with a DSLR camera, be sure to manually focus on what you want rather than leaving it up to the autofocus to decide what should be the center of attention.

Not Taking Enough Photos (Or Taking Too Many)

Buyers typically want to see all rooms of a home online before they make the decision to make an appointment for a showing. Not posting enough images can be a downfall for your listing. But the opposite might also be true. Too many images can just be overkill and can be overwhelming for buyers.

There’s actually a specific sweet spot for the number of images that should be posted online with listings, and that number is around the 15 mark. In fact, having around this number of photos on your listing can increase the number of clicks your listing can get!

Having Too Many Personal Items Out

What you want to do is sell a lifestyle to buyers so they can visualize themselves living in your house and calling it home. But if you’ve got too many things in your images – including personal items and photos – you could unknowingly be distracting buyers. When it comes to details in your listing photos, less is often more.

Not Including an Image of the Exterior of Your Home

Many listings include amazing interior images, but they fail to show buyers what the outside of the home looks like. Failure to include exterior shots will likely tell buyers that while the inside of the home may look nice, there’s probably something wrong with the outside. Or else, why leave such important details out?

Including Items That Could Make Your Home a Target For Theft

Certain expensive items can capture the attention of would-be thieves who may actually peruse online listings to choose their next target. If you leave any valuable items in your online photos, you could be leaving your home vulnerable to theft.

Also, you don’t want to include any details in your online photos that will indicate where you live. Ideally, the street name and house numbers should either be out of the shot completely or blurred out. You’ll also want to blur out the license plate of your car if it’s in the driveway. But ideally, your car shouldn’t be in the shot at all.

The Bottom Line

There are so many little mistakes that you can make with your photos that can actually weaken your listing. It would be in your best interests to learn exactly how to take the right types of photos and use the appropriate equipment to take high-quality shots. Better yet, hire a professional photographer to take photos of your home so you can be certain that you’ll end up with quality photos that will draw buyers in.