Something truly wonderful about homeownership.

Have you ever heard that old joke about boats?  That the two best days in the life of a boat owner are the day you buy it and the day you sell it. The joke is of course, many boat owners can’t wait to get rid of it.

In a different way you could almost say that about houses too. The day you buy it is a day to celebrate and the day you sell it, well, there’s plenty to celebrate then too. It’s largely because of that wonderful thing called the Capital Gains Exemption.

You probably know what that is, but just in case, let’s talk about it. The Capital Gains Exemption helps millions of homeowners keep a huge amount of profit when they sell. It says that if you are single and sell your home, you will pay no taxes on the profit up to $250,000. So, buy your house for $100,000 and years later sell it for $350,000 – no taxes. If you’re married it’s double that. No taxes on up to $500,000. Buy a place for $400,000 and later sell it for $900,000 – no taxes. It’s just incredible.

Now, if you’ve owned property for decades you might remember the old capital gains rule. The one that said to get the exemption you had to sell one place and then buy another one really quickly. That’s the way it used to be, but it’s not that way anymore.

Now what if you sell your house and make more than the $250,000 profit if you’re single? And more than the $500,000 profit if you’re married? One word – congratulations! Anyone who makes a profit like that in today’s market – well done. But if you do exceed those caps, you can possible pull them back by counting up all the improvements you’ve made. New deck, new kitchen, maybe even a new roof. They might count against your profit and bring it back down under the caps.

Now, full disclosure here. I am not an accountant and I am not a tax attorney. This is just general information. Definitely talk to a financial or legal professional to find out where you stand.

But what a great benefit. It helps retirees. It helps people trading up or trading down. If you sell and you have even a little profit, it helps you too. You don’t have to pay taxes on that amount either. It’s just one more way that homeownership can help you grow wealth over time.

Back to that joke about boats. I know, the best days when you own a house certainly include the day you buy it and the day you sell it. But let’s not forget all those days in between. The best moments of our lives often happen at home. It’s where you live that life. Where you build those memories. And where you know you belong.

So that boat analogy only goes so far. But I would agree that the day you sell your house can be a great one, thanks to way America supports homeownership with benefits like the Capital Gains Exception.

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So You Want to be a Landlord?

Moving to another house and keeping the first one and just renting it out is a tried and true method of becoming a real estate investor. You first have to make sure you’ll generate enough rental income and whether your lender will approve you to carry both properties.

Let’s say it all worked out and you did it. You’re now living in a brand new house and your old one is up for rent. Now what? You want to find that tenant right away and start those rent checks rolling in. There are some things you should do before all that. First, check with your REALTOR about all the local rules and regulations about renting your house.  Some places require landlords to have a business license, others don’t (not in San Antonio). Some places require you to have the home inspected first, others don’t (not in San Antonio). That inspection, it’s a really good idea. Because for the most part those inspections are all about safety. You might learn a few things. Like in some places the interior park of a deadbolt has to open with a latch instead of a key. So if there is an emergency the tennant won’t have to search for the key just to get out. So that inspection can be really important.

Next, you’ll have to advertise the place and make sure the potential tenants can find it. Your REALTOR can help you with that too. They can get the photos done, work through a description of the property, and get it all online.

Your REALTOR can also help you evaluate tenants, check their references, and pull their credit. Which will help you know if they’re a good candidate or not. That may be the most important step – finding a good tennant. Someone who pays the rent reliably every month. Someone who’ll keep the place clean and take care of it. You find a good tennant and you’re pretty much on your way.

Finally, your REALTOR can help you draw up the lease and make sure all the required paperwork is in place. They can also collect the rent, the security deposit, the other fees and basically take care of all of that. Some landlords prefer to do all that themselves and that’s fine if you have the time and you know the local laws about renting out property.

Now at this point you’re going to have to make a decision. From this point on do I want to do it all myself or do I want to hire a property management firm. Many landlords do all the work themselves and if you have the time that’s fine. In that case, if an appliance breaks down, you arrange to have another one brought in. If the shower won’t drain, you call in a plumber. That sort of thing. It’s really not that hard, but if you don’t have the time and don’t understand the laws, you might consider asking your REALTOR about managing the property. They’ll take care of everything (for a fee) and you just sit back and collect the rent checks.

Either way, once the tennant is in place and the rent checks are rolling in, congratulations, you’re a landlord. Just think about what that now means. You own two houses. One is your primary residence and one is your old house that you’re now renting out. That could mean a lot to you and your family moving forward. If the rent is sufficient to pay the mortgage, you’re really building wealth with that investment. Every month the mortgage is paid down bit by bit using someone else’s money. Over time as rents increase, that will happen faster. Plus, don’t forget that if property values rise so does your wealth. The equity in that first house and the one you live in will add up to become a substantial part of your financial picture.

So with that one big move, renting out the place you live in when you move to another home, that makes you a bonafide real estate investor. Which only leaves one more question, the next time you move, should you do it again?

 

 

Let’s Take it Outside: Landscaping Differences in Existing and New Homes

Let’s start with existing homes. First, the pros. Places that were built many years ago have seen many growing seasons come and go. So the bushes are bigger, the lawns are more established and the trees are often taller and fuller. It’s just not your house, the whole neighborhood could have a lush full look from big mature Azaleas to the canopy of green leaves over head. There’s only one way to get that look and feel and that is the passage of time. It can be breathtakingly beautiful and it can make a neighborhood absolutely shine.

Now when you buy a house in that kind of neighborhood your landscaping will be pretty much all set. It’s great for people who want a turn key house because all the landscaping is already done.  It’s already paid for too. All you have to do is move in, maintain it and enjoy it. Unless you don’t like it.  Then you have to make some changes, and that’s a lot of work. That’s the downside with landscaping at an existing home. You just have fewer choices when you buy the place. The good news is that’s really the only downside.

Now let’s compare that to a new home. The upside here is you have many more choices.  You can bring in a landscape designer to help plan the look and the feel. A play area, a raised garden, a rambling rose bush along the white picket fence. You name it, you got it. Of course you’ll have to invest in all that.  The designer, the plants, the installation.  It can be expensive. So if you want to create your own landscape from scratch you better sock away a few thousand beyond the price of the house.

Of course most new homes have at least something in the yard. The bushes are often young and little.  The lawn is often brand new turf.  The trees, some developers just clear the whole lot.  That makes the building process go a lot faster. So the trees they end up planting later are young saplings. Now some developers try to save trees as they build. So you could have some mature trees on the lot. But if it’s a development, chances are the developer will have taken down lots of trees. So your house and the entire neighborhood will have that brand new look with a big view of the sky since the trees will not develop that lush, green canopy for many years to come.

Overall, you’ll have far more choices when landscaping a brand new home. Just like the textures, colors, and fixtures inside, every choice will be yours and that’s nice. As for me, I’ve done both. I’ve bought older homes with huge bushes and hundred-year-old trees and flower gardens dating back many decades. I’ve also bought brand new places where the entire yard was red clay with a few trees that were lucky enough to be spared. For me, I thoroughly enjoyed both, old and new. Because whether I was tilling that vintage flower garden or watching that brand new lawn pop up through that red clay, I was working on my own house.

So what about you? What’s sounds best, restoring a vintage garden or creating your own masterpiece from scratch? That’s the best thing about owning your own home. It’s your choice. Whether you’re working on an older yard or a brand new one, you’re working the very land that you own. It’s yours, and what can be better than that.

Why Not To Go FSBO

FSBO. For Sale By Owner. Trying to sell the home yourself. No Realtor, just you. The fact is, some people try it. Their motivation, to save money. These folks don’t want to pay a commission to a real estate agent. So to save money, they figure they’ll sell it themselves. This is where a lot of home sellers find themselves in trouble.

If you want to sell your house yourself, you first need to figure out how much it’s worth, so you know how much to ask for it. Pricing your home right is critical. Price it too high and you’ve shut out potential buyers. Price it too low and you’ve cost yourself a lot of money. How do you find that out? It’s tough, when you look at most websites you can only find “for sale” prices. You usually don’t find the prices homes actually sold for. They also don’t tell you if there were seller credits, or help with the down payment, and all that sort of thing. Remember, pricing is crucial in today’s market.

How are you at marketing? If you’re selling your home yourself, you need to become an expert marketer. Quality photographs, flyers, and an excellent online presence. Be sure to budget for it too, because the expenses — print and online advertising, direct mail, flyers, virtual tours, and a professional photographer can add up to the hundreds if not thousands of dollars. You do know how to market on the internet, right? I hope so, because that’s how buyers start their search. Don’t forget, you’ll even have to budget for the small things, like the “For Sale” sign in the front yard.

Ok, say that “For Sale” sign gets some interest. A buyer knocks on your door and you’re not there. So they call you, can you leave work to show your place? Maybe, maybe not. You can make an appointment of course, if they’re still around when you’re available. What if a real estate agent brings you a buyer, will you pay that agent? If so, now you’re only saving half the commission. If not, the agents buyer will have to pay. Here’s a good bet, they won’t want to. Let’s forget all that for the moment. Say you do get an offer from a buyer, are they pre-approved from a lender? And how do you know? And don’t forget about the inspection, you’ll have to leave work for that too. Also, when the appraiser comes by, you’ll have to be there for that too.

Are you a good negotiator? The buyer may ask for a contingency sale, like having to sell their home first. You’ll need to know how to handle that along with counter offers, who pays title insurance, repairs, or anything else the buyer may request.

Let’s talk about sales contracts. Off the shelve sales contracts are available. But, is that the best and safest way to handle one of the biggest transactions of your life? You could hire a real estate attorney to draft one for you. But remember, you’re trying save money. Before you finish the sales contract make sure you’ve made all the necessary disclosures about your home that the law requires — lead paint, inclusions, and exclusions. You know all that, right?

After the negotiations, contracts, home inspections, and appraisals you finally make it to the closing table. Who’s going to represent you? Who’s going to protect your interests and money at closing? Say you get through all this, you’ve saved money, right? Wrong! In 2015, the typical FSBO home sold for $184,000 compared to agent assisted properties which typically sold for $230,000. That’s a difference of $46,000. Sound too good to be true. Ask Colby Sombrotto, founder and former CEO of FSBO.com. When the founder of the go it alone website tried to sell his condo himself, it sat on the market for six months. No buyers, no sales. So what did he do, he brought in an agent and the condo ended up selling for $150,000 over the original asking price. So, for these reasons and more, many people are deciding not to go it alone.

The number FSBO’s has dropped in recent years from 14% of sales in 2008 to only 9% last year. Why? FSBO’s report the most difficult tasks of selling a home were attracting buyers, pricing the home right, and understanding and performing all the paperwork.

The decision of course is yours, but all the evidence points to you’ll save time and you’ll make more money if you use a realtor to sell your home. They’ll know how to price your home, how to market your home, how to get it on the Internet where millions of people will see it. They’ll handle the showings so you do not have to leave work. They’ll know to qualify buyers and how to negotiate the deal on your behalf. They’ll know the contracts, the contingencies, the inspection process and at the closing table, they’ll watch every penny of your money like a hawk to make sure you get every penny you deserve. The bottom line, studies show you’ll make more money.

Your Smart Home

Do you really need your home to be a smart home or is your home just fine the way it is. Let’s take a look at that and look at some smart home devices and whether you really need them.

Let’s start at your front door. Chances are right now you have a regular deadbolt. And I would guess its works just fine. Get your key, unlock it and go right inside. And I bet your doorbell works fine too.  Someone pushes it, you hear the chime and you go to the front door to see who is there.

Let’s move inside now. If you want to turn the AC down or the heat up, the thermostat on your wall probably does the job just fine. You just walk up to it and spin that dial and your system does exactly what you tell it to. How about over in the room where you watch TV, you just pick up the remote and turn it on.  If you listen to the sound there through speakers throughout the room, you might turn on that system too. It’s all pretty easy.

Now when you’re at work or on vacation most of the time, you just leave your house, lock it up and everything is fine when you get back home.  So I think it’s reasonable to say that if your home is not a smart home it’s still just fine. But hey, why stop there? While we’re at it, why not use that old rotary telephone. You might have one in storage, and they still work, right?  Come to think of it, lots of really old things in every house still work fine.  That 30 year old counter top microwave works great.  The really old timer that you plug your lights into when you go on vacation works great. The old transistor radio your parents gave you when you where a kid, it just works great. Oh, and one more thing. Remember those old light bulbs, the types you can’t buy in stores anymore?  They work great too.

All of that old technology has been around for generations. If everything is working great, why change it?  Because as we all know just because if something works it doesn’t mean you have to use it forever. Things get better, and when they do, they can make your life better too. That’s the whole idea behind smart home technology – making your life better.

Sometimes that means just being able to lock or unlock your front door with your smart phone.  So that if you drive away and suddenly wonder did you remember to lock the door? You can do it with a tap on your screen instead of going all the way back home.  Sometimes making life better is being able to raise and lower the temperature inside of  your house without being there.  Again, your old thermostat works fine, if you’re home.  But a smart thermostat will do the job wherever you are.  That can save you money by lowering your utility bills.

Speaking of saving money. Those old light bulbs, they use a lot more electricity than the new CFL bulbs.  One home owner I know that the month after he swapped out every old light bulb in his house and put in the new CFL bulbs, his electric bill went down $50.

Sometimes making life better means making your home safer.  So sure, you’re old door bell works fine.  Some people like the idea of being able to see who is at the door before they open it.  Even if they’re not home. That can be some great piece of mind.

And sometimes making life better means having a little fun.  For many people that means walking into the TV room and saying “Alexa, turn on the evening news”.  And yes, you may not need a voice activated entertainment system, but it sure is fun.

Finally, think of the one thing that controls those devices – your smart phone.  Like I said, your old rotary telephone works just fine but your new smart phone just doesn’t sit at home.  It goes with you and it brings with it the power of the internet.  It connects you to your family, to your friends, and now to your home.

So while all the old stuff still works fine.  It probably won’t save you any money.  It probably won’t keep your house safer or more secure.  And it probably won’t make your life more fun.  That’s what the new home tech is all about, safety, security, saving money, and having some fun.  And that’s pretty smart.