Why Buying a Condo for Your College Kid Could Be a Smart Move

UCSI_Off-Campus_Angkasa_Condo_Student_Life   Why Buying a Condo for Your College Kid Could Be a Smart Move

Prices in many real-estate markets are booming again. So the idea of buying a condo for your college-bound kid to use while in school may have some traction. You could avoid paying through the nose for a dorm room or apartment with no hope of any profit. And if you buy a condo that has some extra space, you can rent it out to your kid’s pal(s) and offset some of the ownership cost.

Lots of parents have made good money by following this strategy for the four or five (or, God forbid, six) years their kids spent in college and then selling the condo after graduation. Of course, the longer you can hold the property, the better the odds of cashing out for a profit. Another key factor to consider is the tax angles. Here’s what you need to know about them.

Deducting college condo ownership expenses

The federal income tax rules generally prevent you from deducting losses incurred from owning and renting out a residence that’s used more than a little bit by you or a member of your immediate family. However, a favorable exception applies when you rent at market rates to a family member who uses the property as his or her principal home. In this case, you can deduct tax losses from the rental activity (subject to the passive loss rules, which I’ll explain later). This beneficial loophole is open for you if you buy a condo and rent it out to your college-going child (and roomies, if any) at market rates.

But where will your poverty-stricken son or daughter get the money to pay you market rent for the condo? The same place he or she would get the cash to pay for a dorm room or an apartment rented from some third party. From you! You can give your kid up to $14,000 annually without any adverse federal tax consequences. If you’re married, you and your spouse can together give up to $28,000. Your child can use that money to write you monthly rent checks. Just make sure he or she actually sends the checks and make sure they say they are for rent. Also, it’s best if you open up a separate checking account to handle the rental income and expenses. Taking these simple steps will help keep the IRS off your back if you ever get audited.

Note: If you don’t charge your kid market rent, you can still deduct the real property taxes. If you designate the condo as your second home, you can deduct the interest on up to $1.1 million of combined mortgage debt on your main home and the condo.

Passive loss rules may postpone tax losses

If the condo throws off annual tax losses (which it probably will after counting depreciation deductions), the passive activity loss (PAL) rules generally apply. The fundamental PAL concept goes like this: You can only deduct passive losses to the extent you have passive income from other sources—like positive taxable income from other rental properties you own or gains from selling them. Fortunately, a special exception says you can deduct up to $25,000 of annual passive losses from rental real estate provided: (1) your annual adjusted gross income (before the real estate loss) is under $100,000 and (2) you “actively participate” in the rental activity. Active participation means being energetic enough to at least make management decisions like approving tenants, signing leases, and authorizing repairs. You don’t have to mop the floor or snake out the drains.

If you qualify for this exception, you won’t need any passive income from other sources to claim a deductible rental loss of up to $25,000 annually (your loss probably won’t be that big). Unfortunately, however, if your adjusted gross income (AGI) is between $100,000 and $150,000, the special exception gets proportionately phased out. So at AGI of $125,000, you can deduct no more than $12,500 of passive rental real estate losses each year (half the normal $25,000 maximum). If your AGI exceeds $150,000 and you have no passive income, you can’t currently deduct any rental real estate losses. However, any disallowed losses are carried forward to future tax years, and you’ll be able deduct them when you sell the college condo. All in all, this is not a bad tax outcome—as long as your losses are mostly of the “paper” variety from depreciation write-offs.

Favorable tax rules when you sell

When you sell rental real estate that you’ve owned for over a year, the profit—the difference between sales proceeds and the tax basis of the property after subtracting depreciation—is long-term capital gain. For most folks, the maximum federal income-tax rate on long-term gains is 15%. However, if you are in the top federal tax bracket, the maximum rate is 20%. Higher-income folks may also owe the 3.8% net investment income tax on long-term gains. Finally, part of the gain—the amount equal to your cumulative depreciation write-offs—can be taxed at a maximum federal rate of 25%. Remember those carry-over passive losses that we talked about earlier? You get to use them to offset any gain from selling the condo.

The bottom line

While buying a college condo is a pretty attractive idea purely from a tax perspective, it really only makes sense if you expect to come out ahead cash-wise when all is said and done. If you can buy relatively low now and sell high later, you’ll be glad you did the deal.

Source: Realtor.com

How to Buy and Sell a Home at the Same Time

house-fif-1   How to Buy and Sell a Home at the Same Time

Ah, to be a first-time home buyer again: How easy it was to buy a home when you weren’t carrying another mortgage on your back!

If you’re looking to graduate from first-timer to repeat buyer, you know things are about to get much trickier. Unless you’re a bona fide house collector, you’ll have to sell your home in order to buy anew—adding a whole separate layer of anxiety to what you already know is a stressful home-buying process.

In an ideal world, you’d buy a new home, move, and then, and when all the dust settles, deal with the turmoil of selling. But for most people, that’s totally unrealistic. Not only does it cost significantly more, since you’ll be paying two mortgages, but sellers might be quick to judge if you’re holding on to your current home.

You can do this! If selling and buying simultaneously is the only way to go, here’s what you need to know to make sure both processes go as smoothly as possible.

Know the market first

Before you start seriously searching for a new home—or put your current home on the market—make sure you have a solid understanding of the housing market in your area (and the area where you’re planning to buy). Is the market weighted toward buyers or sellers?

Only then will you be able to fully strategize. As is so often the case, the best plan of action may differ depending on exactly who has the power.

That doesn’t mean to find one house you like and call it a day: Find multiple suitable options. That way, you’re less likely to find yourself in trouble if your purchase falls through—your newly sold home won’t leave you stranded.

Similarly, make sure to hire an appraiser and price your old home fairly. Now is decidedly not the time for delusions of grandeur: Two extra months on the market because you couldn’t humble yourself to lower the price means two months you’ll be paying double mortgages. Two very long months…

Plan your schedule carefully…

Should you buy first, then sell—or vice versa? Both have their risks and rewards. Selling first makes getting a mortgage easier, but it also means you’ll need to find a temporary place to live. Buying first means moving will be easier, but it also skews your debt-to-income ratio, making it harder to qualify for a new mortgage—not to mention the difficulty of juggling two monthly house payments.

Whichever option you choose, make sure you’re prepared to accept the consequences: having to store your stuff and rent temporarily, or undergoing the financial burdens of dual mortgages.

… but don’t rely on timing

When buying and selling a home simultaneously, “there are so many external circumstances,” says DiMauro. “I’ve yet to see it really work smoothly and efficiently.”

Remember: You’re not the only party in this equation. For every seller there’s a buyer, for every buyer a seller. While things might appear to be working smoothly when viewing your master plan from above, that doesn’t take into account the variabilities of other people. Closings are rife with delays. Your buyers might have difficulty securing their mortgage; your home inspector may bring up issues that need to be fixed before you can move in.

“You’re relying on the seller of the place that you’re buying to be ready to move in concert with the buyer of your house,” DiMauro says.

So even if you’ve planned to sell your home first and are prepared to rent while buying, know that even the best-laid plans go awry—and you might end up juggling both mortgages. Preparing yourself for this (however remote) possibility ahead of time will ensure a smooth transition.

Know your financial solutions

For those who choose to sell first, the process is relatively straightforward other than the additional cost of a rental between homes. However, there is the option of a rent-back agreement, where you negotiate with the lenders and buyers to be able to remain in the property for a maximum of 60 to 90 days—often in exchange for a lower selling price or rent paid to the buyers. This can relieve some of the pressure of finding a new home, giving you additional time to house hunt.

But if you’re buying first, talk to your Realtor about ways to decrease your financial burden and risk. Here are the two most popular options for buyers:

Contract contingency: Buyers can request that their new home purchase be dependent on the successful sale of their old home. If you’re looking in a competitive market, this may not be a good option; however, if the seller of your intended home has had difficulty attracting interest, this may be a good deal for all parties involved—assuming you can convince them that your home will sell quickly.

Bridge loans: Bridge financing allows you to own two homes simultaneously if you don’t have deep pockets for a second down payment. This option is especially attractive if you’d planned to sell your home first and use the proceeds to buy the second. It functions as a short-term loan, intended to be repaid upon the sale of your original house.

Don’t let fear rush you

If your home has sold but you haven’t found a new place to live, don’t let anxiety push you toward a bad decision. DiMauro usually recommends that his clients pre-emptively plan on a short-term rental “so they don’t feel stressed or pushed into something that they would not normally be interested in,” he says. “They shouldn’t make a purchase because they felt like they were pressured from the time constraints.”

Found the perfect home right on schedule? That’s great. But don’t feel like you have to compromise on things that are important to you just because you need to find a home. Conversely, don’t accept a bid that you feel is too low just because your finances are strained by two mortgages. If you have a temporary apartment set up, you’re less likely to compromise.

Certainly, selling and buying a house simultaneously will be stressful—but carefully considering and planning for the risks and hurdles can mitigate the stress.

Source: Realtor.com

Open Houses Are Kinda Like First Dates: Here’s How to Know If They’re The One

0812a97   Open Houses Are Kinda Like First Dates

House hunting is a deeply emotional experience that often starts out exciting but might wind through multiple disappointments before you find The One. Kinda sounds like dating. Weird, right?

And if house hunting is like dating, then open houses are most definitely the first date. You get all the feels. You ask yourself, “Could I really do this?” And, if you’re lucky, you score a second date—which maybe, eventually leads to a long-term relationship.

But how do you really know you’re pursuing the right relationship when the first date is about both of you putting on your best face? How do you think critically without pushing away the potential one of your dreams? How do you know whether it’s love at first sight—or you’ve been blinded by lust?

1. Do some stalking recon

You wouldn’t go on a first date without doing a little research on Facebook or Google, would you? You’d check to see if you have any mutual friends, you’d scan their resume on LinkedIn, or maybe you’d see if they’ve tweeted about your date or when they were last active on OkCupid.

The same goes for open houses. You want to know what they’re all about. Have they had work done? Have the previous owners taken good care of them? Do any mutual friends live in the neighborhood? This is your chance to peek under the hood and really get a feel for the place. Seriously: Either beforehand or at the open house, Google the address, check out property tax records, or search on PropertyShark and see what comes up. Play investigator as much as possible so you aren’t caught by surprise if the home seems a little … different from how it appeared in the online listing.

2. Is beauty only skin-deep?

So, they’re gorgeous. Just like you melt for the hair, the eyes, the smile, you go gaga over the ambient lighting, the colorful accents, and the four-poster wrought-iron bed. But does that attractiveness go down to the core, or is it all just staging?

Try to picture the place without those flashy details. Still swooning? Now, picture it crammed with your own stuff. (Bring a tape measure and measurements of your own furniture to verify everything will fit.) Is that new coat of paint in the bathroom just makeup to cover a leak? Look for distress in the foundation that might give way to what you’re actually going to wake up to in the morning. Take a deep breath—literally: Are those fresh flowers covering up troublesome odors? Ask questions of the listing agent if anything seems amiss.

While you can’t ask a first date for a blood test and tax returns, you can thoroughly inspect a house. Open the kitchen drawers, the cabinets, and the closets; run the faucets; and look under sinks. This is your chance to get a feel for the place and how it works with your lifestyle. Does it meet your everyday needs and desires, or is it just fun for a weekend fling?

3. Can you handle a fixer-upper?

Sometimes outward appearances (that outdated goatee! those unwalkable stilettos!) mask an inner charm that, with a little work, you could bring to the fore. A coat of paint, some electrical work, a whole new roof, maybe a gut reno next year…

But do you really want to do all that work? Can you afford contractors and handymen? Could you live there during the work? Is it worth the cost and effort in the end? Maybe! If so, rock on: Homes that need work can be more affordable. If not, well, keep looking for the turnkey one that meets your needs and wants now—not later. Just remember: It’s not you—it’s them.

4. Be inquisitive—nosy, even!

You’ve done the Googling; you’ve tried to look past their appearance and into their soul. But at some point, you’re going to have to speak actual words to a live human being. This is where first-date psychology comes in: You want to ask questions that will elicit telling answers and imply interest. At the same time, you don’t want to go overboard. Take care that your queries don’t come across as uptight or critical—you want the sellers to want you just as much as you want them—or that you’ve fallen so head over heels for the place that you’re a pushover.

You’re going to have to answer questions, too. Be truthful and enthusiastic; but, again, don’t be so enthusiastic that you can be, uh, taken advantage of. Remember: poker face! Especially in a competitive market, you want to keep your thoughts to yourself until it’s time to negotiate a deal.

Above all, use your brain but trust your gut. Give yourself some time to think things over and evaluate how you really feel. Home buying (and romance) are risks that make you feel vulnerable and scared. But when you find The One, you’ll know it was all worth it.

5. Don’t get seduced by the competition

It’s smart to keep your ears open to what other folks at the open house are saying. They may note things about the home or neighborhood that you hadn’t yet noticed.

But even if others are swooning, be careful not to get swept up in the hype. It’s easy to fall for the one everyone else wants—competition breeds desire. But all that really matters is what makes you happy. Only you and your real estate agent know your budget, your wants, your needs now—and in the future. So use your agent as a sounding board and block out everything else. After all, you’re the one who has to live with the decision.

6. Let your agent be your wingman

Speaking of your agent, feel free to bring him or her to the open house if you’re uncomfortable going alone. Your agent could be either an unofficial chaperone on the “date” with you (think group hang) or the friend who’s agreed to check in by phone with an option for an out if things are going awry.

Having another, professional set of eyes as you tour the home can come in handy, and your agent will likely spot things more quickly, and with a more objective approach, than you might alone. (It’s always easier for us to be rational about relationships when we’re not the ones in them.) Think of your agent as your best friend, your therapist, your sage parent all rolled into one. Your agent is there to help, so take advantage of it!

7. Consult your diary

Finally, keep thorough notes. (A friend once kept a spreadsheet of all the guys she dated so she could keep up with what she liked about each one—and she’s doing the exact same thing with her current house hunt.)

Take a moment during an open house to write down what you liked and what you didn’t care for, just as you might excuse yourself for a moment to live-tweet a particularly embarrassing date. (A dinner date once told me he thought having pets was “inhumane.” The check couldn’t come fast enough.)

Take pictures or a video as you move throughout the house. (Make sure you ask before you start snapping photos—politeness still counts.) Document how the house made you feel. This will help serve two purposes: 1) Provide a record of issues that might help you negotiate a better deal, and 2) help refresh your memory when you’re making the decision about which house to buy. You probably don’t need us to tell you this: You can even post the notes and images to social media and get your friends, family, and random followers to weigh in (only if you want to open those floodgates).

When you find an open house that leaves you feeling excited and wanting more, call your real estate agent and ask for a second date. You never want to rush into relationships or real estate. But if you know what you truly want, you’ll be ready to fall in love.

Source: Realtor.com

The Unexpected Way Bad Credit Can Make Your Mortgage More Expensive

family-watching-tv-resized  Unexpected Way Bad Credit Can Make Your Mortgage More $$$

Conventional loans are crème de la crème of the mortgage market. This loan type offers the best possible terms and fees as well as relatively sustainable long-term affordability. However, those who come to the table with little equity and lower credit scores may find that a conventional loan costs them more than other alternatives. Here’s how to know if you need to explore your options.

A conventional loan is a mortgage originated by banks, lenders and brokers across the country and sold on the primary mortgage market to Fannie Mae and Freddie Mac. This type of loan offers the best terms and rates due to its mass appeal and large-scale availability. However, this mortgage type also contains what’s known in banking as risk-based pricing — a premium commensurate with the risk of the consumer’s financial picture.

A Conventional Mortgage Scenario

With a conventional mortgage loan, a borrower’s credit score is the biggest driver of cost.

If your credit score is between 620-679, you can expect to see higher costs when:

  • You’re refinancing to reduce your monthly payment.
  • Your loan size is more than $417,000 (or whatever your county’s conforming loan limit is).
  • You have less than 20% in equity/down payment.

Other factors that affect the price and rate of a mortgage include: occupancy, property type, loan-to-value and loan program.

So let’s say your homebuying scenario looks like this:

  • Primary home
  • Single family residence
  • Conventional loan
  • 5% down payment
  • 630 credit score
  • $417,000 loan size

Due to the lower credit score, it would not be uncommon to see an interest rate on this type of scenario approximately 0.375% higher than the average 30-year primary mortgage rate.

Also, when there is less than 20% equity or down payment (so 80% or more of the home price is being financed), the lender requires the borrower to pay a mortgage insurance premium of approximately 110% of the loan amount on an annualized basis. The borrower’s credit score also factors into the mortgage insurance premium amount for a conventional loan —  the lower your score, the more you’ll pay in mortgage insurance.

For someone with a 630 credit score in this case, that might be $4,587 per year, which would be $382 per month in mortgage insurance.

However, with a 700 credit score, the interest rate could be 0.25% higher than the primary market rate and the mortgage insurance premium would be approximately $3,127 per year — or $260 per month.

This is why it pays to have a good credit score when applying for a conventional loan. So if you expect to buy a home in the next year, now is the time to check your credit scores and credit reports and get yourself on a plan to build your credit. A lender can give you guidance on the best steps to take, too. (You can get your free credit report summary on Credit.com, updated every month so you can track your progress.)

How to Reduce Your Mortgage Costs

Often, you can raise your credit score simply by paying down credit card debt (this calculator can show you how long it would take to pay off your credit card debt) – though of course it all depends on your individual credit history. Ask your mortgage professional if they offer a complimentary credit analysis with their credit provider. Most brokers and direct lenders offer this service. By having the mortgage company run this analysis, you can see how much more your credit score could increase by taking specific actions. Generally, a good rule of financial thumb is you keep your credit cards to no more than 30% of the credit limits per credit card.

You may also want to consider putting more money down when buying a home to help offset a lower credit score.

Or, you may want to change gears and go with a different mortgage loan program. An FHA loan could be another viable route in keeping monthly mortgage costs affordable.

A loan insured by the Federal Housing Administration (FHA) used to be considered the most expensive mortgage available. That dynamic changed in early 2015, when the FHA announced it was reducing its annual mortgage insurance premiums to a fixed 0.80 premium, regardless of loan size or credit score.

Comparing an FHA loan to our conventional mortgage loan scenario above, the FHA does not discriminate on credit score the way a conventional loan does and the mortgage insurance premium on FHA loans is constant. There is no sliding scale based upon credit score like there is on the conventional side. The FHA loan of $417,000 would generate a monthly PMI payment at $278 per month, a whopping $100 dollars per month lower than the conventional loan for the lower credit score.

Granted, an FHA loan does charge an upfront mortgage insurance premium of 1.75% usually financed in the loan, but the effect of the payment would only change by approximately $30 per month, meaning the FHA loan is really $308 month, making the FHA loan a lower cost monthly alternative for the lower credit score scenario.

Other FHA loan facts:

  • FHA is not limited to first-time home buyers — it’s open to everyone.
  • FHA loans can be used to purchase a home or refinance a home.

If you are in the market for a mortgage and are trying to refinance or purchase a home, consider working with your loan officer to qualify on as many loan programs as possible upfront. Taking this approach can also allow you cherry-pick which loan is most suitable for you considering your payment, cash flow and home-equity objectives within your budget.

Source: Realtor.com

How to Sell a House in Just 5 Days

Giving away the keys

It’s a given when the housing market is hot, homes sell. But a home that’s barely on the market for five days before it sells? That’s an anomaly, although some agents (and sellers) are able to hit the jackpot with an ultraquick sale.

So sellers and agents, take note: We’re diving into the ins and outs of one of the quickest sales we’ve seen.

An emotional connection was crucial for a sale, because the owners wouldn’t sell to just anyone. The agents had to find a buyer who “would not consider the home a tear-down or even a candidate for remodeling and updating,” Brewster says.

In turn, the owners understood they’d have to make concessions. The agents drew up a list of necessary restoration projects that could adversely affect the sale price, putting the owners “in the shoes of the buyer,” Brewster says.

To attract buyers and work toward creating an emotional connection, the agents ditched the idea of having an open house. Instead they used invite-only, wine-and-cheese openings to show off the home. For traditional tract homes, this technique might be tricky, but if a home is unique or well-known by local architectural enthusiasts, as was the case here, it could work.

“Often our clients agree that open houses do not sell the house, but a more intimate showing where buyers can effortlessly experience a house by themselves is where the magic happens,” Brewster says.

To spread the word about the exclusive open house, the agents used an e-newsletter and social media. For a finishing touch, they enlisted the help of Veitzer at the invite-only gatherings, and the architect took potential buyers through the home while sharing memories of its construction.

Within days multiple offers rolled in—including one from a solid buyer who expressed an emotional connection to the home and a willingness to work with Veitzer on the restoration. The agents did not reveal the sale price, but the list price was $675,000.

Although this home clearly had some history and pedigree on its side, there are lessons every seller can extract from this extremely quick sale.

“Regardless of the type of home and its condition, working in concert with a highly regarded real estate professional that knows their community is key. We collaborated over many weeks to present this home at its best. The laundry list of preparation (repairs, cleaning, etc.) and smart marketing (including quality photography) to a community of interested, informed buyers is key to a quick deal,” York says.

Source: Realtor.com

Why Millennials Are Dominating the Housing Market

Happy-young-smiling-family-wit-25262453   How To Be a Young Homeowner

As a newlywed in his mid-20s, Andrew McFadden lived in an apartment in Fresno, California, with his wife, but they soon felt ready to move into a bigger place. “It met our needs, but as a finance guy, I thought we could get into a home and build equity in something as opposed to just paying out a monthly rental payment,” says McFadden, a certified financial planner. So at age 26, he purchased his first home. Six years and one daughter later, his family still lives in it.

Despite millennials’ reputation as a transient generation that’s not ready to settle down, McFadden’s experience is more common than you might think. The National Association of Realtors 2015 report on generational trends found that millennials, who are currently between ages 25 and 34, make up the largest share of homebuyers at 32 percent. Even more striking, millennials now constitute 68 percent of first-time homebuyers. That percentage might soon grow even more: A survey of 1,002 adults by TD Bank released in July found that just under half of millennials will be looking to buy their first home over the next two years.

“It’s surprising because all we keep hearing is that [millennials] don’t want to buy homes, that they’re the renter generation, but that’s just not true. They are the most optimistic that their home purchase is a good investment,” says Jessica Lautz, NAR’s director of survey research and communications. She notes that most millennials did not experience the housing crash firsthand, although they may have seen parents or older siblings go through it.

Millennials also appear more willing to purchase properties that need work and to invest their time and money into making improvements. A June 2015 report from Houzz, a home remodeling and design platform, found that millennial homeowners are just as likely to renovate their home as older age groups. Among millennial homeowners, 79 percent said they have decorated, 62 percent said they renovated and 58 percent made repairs to their homes.

“Millennials are embarking on projects because they’re likely to have recently purchased a home and are customizing it to their needs,” says Nino Sitchinava,​ principal economist at Houzz. The younger generation also tends to be drawn to DIY projects, which can make remodeling more affordable.

Dennis Delaney,​ partner at the law firm Hemenway& Barnes LLP in Boston, says buying a home can be a smart choice for millennials, as long as they are ready to settle down in it for more than a few years. “Having a home base or an anchor in your life is good to ground you,” he says, in addition to having a monthly payment to build net worth.

One way to figure out if you’re ready, he says, is to ask yourself if you’ve been able to consistently make progress toward your financial goals during the last year and a half. “Have you been putting more money into savings? Have you refrained from impulse purchases?” Once you’ve saved enough to make a down payment, then you’re probably ready to go house shopping, he adds.

Millennials who are still figuring out their careers and relationships might be smarter to wait. “If you like freedom and you don’t want to handle the maintenance and upkeep of a home, then you ought to delay the purchase,” says Tim Steffen​, director of financial planning for Robert W. Baird & Co., a financial services firm in Milwaukee. Homeowners often spend their free time on the weekends mowing the lawn and dealing with repairs, he warns.

Steffen has also seen single people buy one-bedroom condos only to find they soon get married and need a bigger place, or unmarried couples jointly purchase a home only to break up. “If neither of them can afford it on their own, then they’re forced to sell,” he says.

Here are more lessons that homeowners, and potential homeowners, can learn from the millennial homebuying generation:

1. Aim to put down 20 percent. McFadden, who is also the founder of the firm Panoramic Financial Advice​, encourages clients to make a down payment of 20 percent of the home’s price. That means slow and steady savings for several years, at least, before making a home purchase. If the market drops and the home’s value goes down, there’s a buffer to protect against the mortgage being higher than the value of the home​, he says. It also reduces the monthly mortgage payment.

2. Plan for all the extra costs of homeownership. As soon as you become a homeowner, there’s no landlord to call if the dishwasher breaks or the roof starts leaking. You’ll need to prepare for the physical burden of handling some repairs yourself, and McFadden recommends setting aside a portion of​ your monthly budget to handle unexpected costs​. Between mortgage payments, taxes, insurance, maintenance and utilities, he says homeowners should plan to spend between 10 and 20 percent of the value of the home every year.

3. Don’t underpurchase. While it’s smart to stay within budget, Steffen says, it also makes sense not to buy a home that you will quickly outgrow, which is a risk, especially for millennials. “At the beginning stages of your career, you’re probably at your lowest earning point, and your income will continue to rise,” he says. If you buy a home at the outer edge of what you can afford, then you’ll grow into it without feeling the need to upgrade to a new house in a few years.

4. Build your credit. Cathy Derus​, financial planner and founder of Chicago-based Brightwater Financial​, says strengthening credit by checking credit reports annually and paying monthly bills on time can make it easier for even young homeowners to secure a reasonable mortgage. When she was 27, she bought her first home with her husband, which they were able to do in part because they had excellent credit. She says they have plans to pay off the mortgage in the next 10 years, even though they have a 30-year mortgage. “That means we’ll be financially independent that much sooner,” she says.

5. Take the plunge. Several millennial financial planners interviewed for this article pointed out that like the decision to have children, you might never feel really ready to buy a home. ​Brandon Marcott,​ a 30-year-old financial planner and founder of Edify Financial Planning in Waukesha, Wisconsin​, says he didn’t feel like he was ready to buy a home when he and his wife purchased their house a year and a half ago.

“We felt pressure from multiple sides telling us, ‘Now is the time!’” he says. Still, the father of two says he is glad to have a fixed monthly mortgage payment that can’t go up, as rent can. “This is by far my favorite benefit,” he says.

Source: money.usnews.com

Housing Flipping 101

House and money   Higher home prices are making house flipping harder, but more lucrative

Flipping, which is generally defined as buying and selling a home in the same calendar year, was popular during the housing boom, when investors could get easy mortgage financing. Now investors need cash, and as lower-priced, distressed homes dry up, they need more cash.

Home flips made up just 4.5 percent of sales in the second quarter of this year, according to RealtyTrac, down from 4.9 percent a year ago. Flipping returns, however, the gross return on investment, increased to nearly 36 percent, up from 24 percent one year ago.

“Despite the rise in flipping returns in the second quarter, home flippers should proceed with caution in the next six to 12 months as home price appreciation slows and a possible interest rate increase could shrink the pool of prospective buyers for fix-and-flip homes,” said Daren Blomquist, vice president at RealtyTrac.

“While average flipping returns are up substantially from a year ago at the national level and in moderately priced markets such as Miami, Atlanta, Phoenix and Minneapolis, flipping returns are softening in some of the higher-priced markets such as San Francisco, Seattle, Denver and Los Angeles,” he said.

Nevada and Florida, where the share of distressed homes are still relatively high, are still seeing the most flipping action, but Chicago, Dayton and Baltimore offer some of the best gross returns.

In Washington, D.C., where home prices have flattened, flipping is still popular, but tricky.

“There has been a real sea change. You have to put a lot more work into the homes today,” said Christopher Harrison, a real estate investor who is flipping a home in Northwest D.C. “It’s interesting because when the market crashed you had a lot of investors making a ton of money on flips you didn’t even have to do work to.”

Harrison’s home is in a pricy neighborhood with desirable schools. He had to put about $400,000 into the property, which he purchased for about $700,000. He doubled the size of the 1,800-square-foot bungalow and listed it at the beginning of July at just over $1.5 million. He has now lowered the price by $54,000 and is considering doing more work to the property, possibly adding a parking space.

“We’ve gotten a lot of feedback, so we should have it sold soon,” said Harrison. “It just seemed like a really good investment.”

Flippers are now taking an average of almost six months to rehab their homes, which is an eight-year high, according to RealtyTrac. The higher-end renovations, however, may be adding to soaring profits at home remodeling retailers, like Home Depot and Lowe’s.

“The fewer foreclosure deals and longer flipping timelines that we see in the data demonstrate that flippers are getting squeezed on both sides of the profit equation,” said Blomquist. “Experienced flippers will often need to enter into higher-risk markets with less solid economic fundamentals to chase better yields.”

Flipping is not always profitable. Flips on the lowest-priced homes, below $50,000, saw negative returns in the second quarter. The sweet spot appears to be homes priced at $100,000 to $200,000, which yielded an average gross return of 44 percent.

Source: www.cnbc.com

13 Tips to Make Moving Slightly Less Stressful

Family moving house   13 Tips to Make Moving Slightly Less Stressful

The process of packing up an apartment and schlepping stuff to a new location is enough to reduce an otherwise competent adult to a crumpled, blubbering shell of someone who used to think it was a good idea to buy a lot of books. The boxes! The infernal sticky tape! The pulled muscles in your neck and back!

You might think you’ve purged your apartment of unnecessary crap: balled-up receipts from 2013, gratuitous bottles of half-empty ketchup, orphaned nails and screws clanging around in the bottom of a drawer. More likely, though, you’ve just done a passable job of squirreling away all the detritus. It will rear its fearsome head—like an angry, mangy phoenix—as soon as you start packing. What? What is this still doing here?

Moving is never fun, exactly. You might be relieved to get out of a basement apartment, or excited to finally have a balcony, but that’s the destination, not the journey. The journey—dragging recalcitrant, overstuffed boxes down and up many flights of stairs—is a trek through a hot, hellish landscape where tangled cords snarl at your ankles.

It’s going to be brutal. But CityLab asked some experts how to prevent it from becoming the worst day of your life. Here’s what they told us:

Before you start

1) Photograph your cords. “Take photos or make notes on how all of your media equipment is set up: television, sound equipment, modems and computer equipment,” suggests Lior Rachmany, CEO of Dumbo Moving + Storage in New York City. Keeping tabs on the cords will help you get connected quickly in your new place.

2) Change your address. Doing this a week or two in advance will help ensure that you get important items, such as bills, and don’t have a lag in services that are tied to a mailing address associated with a credit card (like Netflix or Seamless).

3) Set up utilities. You don’t have to wait until you’re settled in to make arrangements for the wi-fi or gas. Once you know your move-in date, call ahead to schedule whatever you need.

4) Make a plan for your pets. The chaos of moving is stressful for animals, too. To help keep them calm—and prevent them from having an accident or slipping out the propped-open door—consider making arrangements to leave your pet with a friend or at a boarding service.

5) Schedule touch-up painting. Check your lease: Some renters are responsible for a new paint job to get the security deposit back. If that’s your situation, reach out to a painter in advance. “Once you have a moving date set, get a painting bid and plan for the painter to be the last person in before you turn the keys over,” says Brendon DeSimone, author of Next Generation Real Estate. “Waiting until the last minute could be a logistical nightmare.”

6) Ask for help. If you’re not hiring a moving company, enlist friends or family, whom you’ll have to repay with money or lots and lots of snacks.


7) Designate a “first night” box. You can plan on being pretty exhausted and miserable once you get to the other side. Plan for it by putting your toothbrush, medications, deodorant, and a change of clothes in a separate box so you don’t have to dig for the essentials.

8) Start with the stuff you use least often. The first to go? Whatever you’re not getting a lot of mileage out of at the moment, whether that’s winter sports gear or a waffle maker. (Stuff you truly never use should be ditched before you begin.)

9) Use suitcases wisely. If you have to transport them anyway, you might as well fill them with stuff. Stash lightweight, non-breakable items—such as clothes or bedding—in large luggage.

10) Separate cleaning supplies. You won’t want to unload your stuff into weirdly sticky cabinets, notes Debra Johnson, a home cleaning expert from Merry Maids. Instead of tossing cleaners in with the rest of the bathroom supplies, put them in a separate box so that you can wipe off any crud on the counters or shelves before you unpack.

11) Don’t stow your important documents. You don’t want to shove your birth certificate or passport in with other papers, where it might be tough to find them. Tuck them into a folder and carry them with you.

12) Put up a schematic for furniture. Tape up photos or signs indicating where your couch, coffee table, and other big-ticket items should go. This will help movers figure out where you want things positioned, says Chicago-based professional organizer Meg Ricard.

13) Save your receipts. “In many cases, moving expenses are deductible from federal income taxes,” notes Rachmany of Dumbo Moving + Storage. “If you’re moving because of a change in employment, you may be able to claim this deduction even if you do not itemize.” To maximize your deductions, keep track of all of the costs you incur during the process and consult an accountant.


Source: www.citylab.com

US Rate on 30-Year Mortgage Falls

Mortgage-Tips   US Rate on 30-Year Mortgage Falls to 3.91 Percent

Mortgage giant Freddie Mac said Thursday the average rate on a 30-year fixed-rate mortgage dipped to 3.91 percent this week from 3.98 percent a week earlier. The rate on 15-year fixed-rate mortgages declined to 3.13 percent from 3.17 percent.

Mortgage rates followed the yield on the key 10-year Treasury note, which fell. Bond yields for Treasury’s were pushed lower by the increase in bond prices, as investors sought safety in U.S. Treasury bonds.

Investors are closely awaiting the government’s report Friday on July employment, since the jobs data could affect the timing of an anticipated interest rate increase by the Federal Reserve. The yield on the 10-year Treasury note slipped to 2.27 percent Wednesday from 2.29 percent a week earlier. It eased in trading Thursday morning to 2.26 percent.

The Fed is expected to raise interest rates from record lows sometime this year, having kept its key short-term rate near zero since the crisis year 2008. The only question seems to be when.

A statement the Fed issued last week after ending its latest policy meeting gave no timetable. The central bank signaled that it wants to see further economic gains and higher inflation before raising rates. Many analysts foresee the first hike next month, though Fed Chair Janet Yellen has stressed that any increase will be driven by the latest economic data.

To calculate average mortgage rates, Freddie Mac surveys lenders across the country at the beginning of each week. The average doesn’t include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.

The average fee for a 30-year mortgage was unchanged from last week at 0.6 point. The fee for a 15-year loan also held steady at 0.6 point.

The average rate on five-year adjustable-rate mortgages remained at 2.95 percent; the fee was unchanged at 0.4 point. The average rate on one-year ARMs rose to 2.54 percent from 2.52 percent; the fee was unchanged at 0.3 point.

Source: ABCnews.com

How to Begin Investing in Real Estate

investment-property   How to Begin Investing in Real Estate

An unusually long and harsh winter is delaying the start of the spring housing market, but for the investment-minded, continued low interest rates and high demand for rentals appear to outline an opportunity.

Institutional investors and their buckets of cash have dominated many markets for the past several years, according to real estate data cruncher CoreLogic. But at the end of 2014, cash sales declined to a national average of 36.1 percent, down from 38.8 percent in November 2013. CoreLogic also reported that the foreclosure inventory declined 34 percent at the end of 2014. That means individual investors are starting to have a shot at lower-priced properties ripe for fixing up and renting, real estate professionals say.

If you are thinking of tiptoeing into real estate as an investment, you have two basic approaches, says Leonard Baron, a lecturer at San Diego State University and author of several self-published guides to investing in real estate.

Buying shares in a real estate investment trust. You can invest in a REIT, but doing so involves buying shares of a portfolio of properties. “It’s really more like buying a stock or buying into a fund,” Baron says. “It’s a completely different animal from owning real estate directly.”

“There are three layers of value – the real estate itself, the management and cash flow that supports the trust, and the fund based on the trust,” explains Gary Gastineau, founder of ETFConsultants.com, based in Bonita Springs, Florida. “It’s a very different vehicle than buying real estate, but most of us can’t just go out and buy 1 percent of a skyscraper.”
Adding a REIT to your portfolio can complement stock and bond funds, Gastineau says, but you must be sure you understand how the real estate fund is designed and how its managers will likely extract value from the holdings. You can buy shares of REITs and real estate-based funds, but the performance of the funds is based on both cash flow and gains from occasionally selling properties – a very different scenario from the typical performance drivers of stock and bond funds.

Direct ownership. This is anything but a passive investment, Baron says. “People think it’s easy money, that there’s not a lot of work, that tenants will pay on time and that pipes never leak,” he says.

Some individuals enter the market by buying a small apartment building, he explains. You should research diligently to find a good deal on a building that produces positive cash flow and has no hidden defects that will require expensive repairs. Don’t take investment guidance from a real estate agent, Baron warns. To them, everything is a good investment, because they only win a commission when you buy.

Don’t assume your personal experience as a homeowner translates to managing rentals, just on a bigger scale, he adds. From complying with fair housing rental regulations to insurance, to making sure the property complies with building codes and common-sense safety guidelines, property management dominates your wallet and your time. “It’s a very complicated asset. But because it’s a physical asset, people think it isn’t complicated,” Baron says. “People way underestimate the number of issues that come up.”

One way to test your tolerance for being a landlord is to buy a duplex or a small apartment building, with the aim of living in one unit and renting the others.

A nascent rebound seems to be buoyed by millennials who are edging into the market as owner-occupants. Thin on cash, 20-somethings are finding they can gain a toehold into homeownership by buying a small, multiunit property, such as a duplex or three-apartment building. Their plan is to live in one unit and rent out the others, says John Mosey, president and CEO of Northstar MLS, a Saint Paul, Minnesota-based data service for real estate brokers.

Although this arrangement can stretch down payment dollars, it also demands a Himalayan learning curve: first-time homeownership simultaneous with first-time landlord.

The most important consideration for potential first-time landlords is to not assume today’s rising rental rates will lift future cash flow, Mosey says. Today’s tight rental market will be eased as projects under construction enter the market. That means rents will level off, so it’s best to work cash flow and return numbers using conservative projections, Mosey says.

Key cash-flow factors include not only predictable costs, such as property taxes, but also variables that can affect the appeal of the units to potential renters. For example, Mosey says, you may think including heat and water in the monthly rent will attract renters. But the actual cost of heat and water is quite different for a single occupant compared with a unit shared by three roommates. The more water and heat they use, the less money you keep.

Source: money.usnews.com