Category Archives: Residential Real Estate

Increasing Interest Rates

Financing, Investing, Residential Real Estate, Tips, , , ,
Photo Credit: Fed Funds Roller Coaster
Photo Credit: Fed Funds Roller Coaster

On December 16, 2015, the Federal Reserve increased its benchmark interest rate by .25%. This was the first rate increase by the Fed in over nine years!

 

Generally the Fed makes interest rate moves in cycles. The chart shows the Fed Funds Rate rollercoaster over the past 25 years.

So what does this mean for you and your home loan?

 

Existing Loans

  • Fixed Rate Mortgages – no affect. Loan terms on existing fixed-rate loans will not change.
  • Adjustable Rate Mortgages (ARMs) – collateral affect. Generally the Fed changes also affects other rate indexes, meaning ARM loans may see increases during their adjustable period.
  • Home Equity Lines of Credit (HELOCs) – direct affect. Most HELOC’s adjust based on the Prime Index, which is directly impacted by the Fed rate change. This means HELOCs may see increases during their adjustable period.

 

New Loans

Surprisingly, Fed rate increases don’t immediately increase mortgage rates. That’s because the Fed changes affect the Discount Rate and Fed Funds Rate, which is very different from mortgage rates. A mortgage rate can be in effect for 30-years, a rate that is set by the Fed can change day-to-day.

 

A closer look at historical moves by the Fed shows that its rate cuts often increase mortgage rates in the short term, while its rate hikes often decrease mortgage rates in the short term.

 

So ultimately, new home loans in the short term will NOT see immediate increases in rates due to the Fed rate hike.

 

However, the Fed’s move does give a general indication of the overall markets and economy, meaning the trend to come will be elevated interest rate levels.

 

Feel free to contact us if you have any questions regarding interest rates…we’re here to help!!

Retirement Planning Guide For 401k’s and IRA’s

Broker, Financing, Insurance, Investing, Residential Real Estate, Taxes, Tips, ,
Photo Credit: http://www.moneychoice.org/faq/how-do-you-withdraw-from-a-retirement-plan/
Photo Credit: http://www.moneychoice.org/faq/how-do-you-withdraw-from-a-retirement-plan/

Below is a guide we put together for you to use in assessing the tax implications of different retirement plans, along with the benefits and negatives of each………

401K’S Benefits:

  • Employer matching
  • Higher contribution levels ($18,000 for under 50…$24k for over 50)
  • Contributions are pre-tax (or “tax deferred”)…lower taxable income
  • No income limits for contributions other than earned income must be greater than contribution

 

Negatives:

  • Normal distributions taxed as income
  • Forced distributions at 70 ½
  • Limited to employer fund availability

 

Traditional IRA’s Benefits:

  • Contributions are pre-tax (or “tax deferred”)…lower taxable income
  • You can pick the funds (not limited by employer’s fund managers)
  • No income limits for contributions other than earned income must be greater than contribution

 

Negatives:

  • Normal distributions taxed as income
  • Forced distributions at 70 ½
  • Contribution limited to $5,500 for under 50…$6,500 over 50 (earned income must be > contribution)
  • Contributions may be limited by other contributions (ie-401k)
  • No employer matching

 

Roth IRA’s Benefits:

  • Normal distributions tax-free (contributions & growth)…provides hedge against higher future tax rates
  • No forced distribution at 70 ½
  • You can pick the funds (not limited by employer’s fund managers)

 

Negatives:

  • Contributions are made post-tax so no upfront tax benefit
  • Contribution limited to $5,500 for under 50…$6,500 over 50 (earned income must be > contribution)
  • Income limitations (AGI) of $116-131k for Single and $183-193k for MFJ
  • Contributions may be limited by other contributions (ie-401k)
  • No employer matching

 

Strategy: 401k/Roth IRA Contributions

  • Contribute to your 401k up to employer match amount; and then contribute to a Roth IRA.
  • Always have 6-12 month Safety Fund before contributing to retirement plans
  • Need to plan for unexpected expenses (car maintenance, house repairs, etc.)
  • Need to be able to access penalty-free cash at drop of hat for job loss, health problems, etc.

 

Do you agree with the strategies mentioned regarding 401k/Roth IRA Contributions? Please leave your comments below. We would love your input!

Seize Each Season!

Residential Real Estate
Photo Credit: NatureServe, Matt Jones https://flic.kr/p/pQX6Dp
Photo Credit: NatureServe, Matt Jones https://flic.kr/p/pQX6Dp

Do you feel the hustle and bustle of the holiday season, yet?  For a month or so, Christmas décor has been on sale in our local stores.  AND although I absolutely LOVE Christmas, I really do love each of the holidays leading up to it.  In an effort to celebrate each season in it’s own right, here is my “Christmas Wish List” for the fall season!

 

1.  Enjoy Hot Apple Cider outside in the cool air

2.  Take the time to STOP and LOOK at the colorful leaves my 20-month-old daughter collects on our daily walks

3.  Add items I am thankful for to our “Thanksgiving Box” to be read at our Thanksgiving Feast

4.  Bake…something

5.  “Make Room for Santa” by gifting away gently used toys/clothes/etc.

 

What are some of the ways you “seize each season”?

 

Are you holding on to Thanksgiving or have you already started playing your favorite Christmas carols?

Should You Purchase A Home Warranty Plan?

Buying, Financing, Insurance, Investing, Residential Real Estate, Tips, Uncategorized, , ,
Photo Credit: Judy van der Velden https://flic.kr/p/bUqzYi
Photo Credit: Judy van der Velden https://flic.kr/p/bUqzYi

Generally when you buy a home, the seller will pay for you to have a home warranty plan in force for one year. After that first year, you then have to choose whether you want to continue paying the premiums to extend that plan.   This can be a confusing decision, but one with which we can help!   Below you’ll find information regarding the standard coverages provided by a home warranty plan, along with additional info to help you decide whether you should or should not renew your existing plan.

 

How Much Does a Home Warranty Plan Cost? Plans typically range from $250 to $450, depending on coverage specifics.

 

What is Generally Covered Under a Home Warranty Plan?

  • Air Conditioning
  • Ceiling Fans
  • Dishwashers
  • Doorbells
  • Ductwork
  • Electrical Systems
  • Furnace/Heating
  • Garbage Disposal
  • Inside Plumbing Stoppages
  • Range and Oven
  • Water Heater

 

What is Generally NOT Covered?

  • Compliance Upgrades (aka – bringing water heater up to code)
  • Haul-Away Costs
  • Outdoor Items (sprinklers, fences, etc.)
  • Permit Fees
  • Refrigerators, Washers/Dryers, Garage Door Openers, Faucet Repairs (not all plans cover these)
  • Spa or Pools (unless specific coverage requested)

 

Should You Renew Your Plan?Consider the following:

  • The general age of your items that would be covered by the plan (older items are more likely to fail)
  • Your experience maintaining a home (can you tackle the repairs on your own?)
  • Your resources for helping you fix problems (consider your friends & family…assess the tools you have)
  • Your financial capability to replace items should they fail (are you capable of buying a new dishwasher?)

 

If You Buy a Plan, What Type of Coverage Should You Get?Consider your specific needs. Make sure you pay close attention to whether the home warranty company will pay for repairs to make certain types of systems or appliances compliant with new regulations. We’ve seen water heaters go out with a home warranty plan that covers its replacement. But the plan didn’t cover the $500 in work that needed to be done in order to update the compliance of the system.

 

We hope this helps with your decision about your Home Warranty Plan options.   Feel free to contact us if you have questions about whether you should renew your Home Warranty Plan…we’re here to help!

Tips for Leasing Your Home

Investing, Renting, Residential Real Estate, Single Family, Tips, , ,
Photo Credit: www.lawyerslegalformsanddocuments.com
Photo Credit: www.lawyerslegalformsanddocuments.com

Here are several tips you’ll want to utilize when leasing your house to tenants:

 

1)    Keep Good Tax Records

Most landlords aren’t very good at keeping records for their rental home(s). It is critical to keep rental property transactions separate from your personal transactions. This means having a separate bank account for your rental. Deposit all your rental income into that account; and have separate checks and debit/credit cards solely for rental expenses. Do NOT comingle funds. It will make life much easier come tax time!

 

2)    Consider A Property Manager

One of the major complaints with owning rentals is the hassle. It requires responding to tenant calls at all times and you have to deal with acquiring new renters when your home goes vacant. A property manager can alleviate these issues. Just be aware it will generally cost you around 10% of your monthly rent. You must decide whether to maximize your profits, or keep your sanity!

 

3)    Entertain Taking Less Monthly Rent

We know this seems counter to what most landlords want – and that is the maximum monthly rent. But renting your property for slightly less than market value provides more tenant options to choose from upfront; which means you’ll be less likely to have a vacant home for months at a time. The low rent can also be used as a trade-off agreement with your tenants not to hassle you for minor repairs. With less hassle, maybe you won’t need the property manager mentioned above!

 

4)    Be Wise In Selecting Tenants

Conventional wisdom says to locate tenants with great credit, a strong income, and a perfect rental history. While these are important, they are not the most critical. You want tenants who feel lucky to rent your property; not ones who feel entitled. “Entitled” tenants are the ones who make demands and requests before you even decide to accept them as tenants. It’s often better to take tenants with lesser qualifications, if you feel they won’t be a pain in your neck! And of course you want to still assess their ability to pay rent. Don’t forget to look for tenants with good character!

 

Feel free to contact us if you have questions about leasing your property…we’re here to help!

Artificial Grass – Making OC Homes Permanently Green

Buying, Just for Fun, Remodeling, Residential Real Estate, Single Family, Tips, , ,

CI pic March BlogTurf has become more and more popular over recent years in Southern California. There is a wide array of reasons for the newly found popularity. Clearly droughts have played havoc on homeowner’s lawns and the ever-rising water costs don’t help. As the droughts continue, yards get browner and wallets emptier.
Artificial grass has become an easy alternative for homeowners frustrated with their lawns. While artificial grass may not have the exact look and feel as natural grass, the product has come a long way in recent years. In many instances it is difficult to tell the difference. Due to this fact, many homeowners are researching the possibilities.

 

Let me help you out. Artificial grass has numerous advantages over natural grass. Water Districts are currently offering large rebates to balance installation costs. In some cases the rebate programs can almost pay for entire installation of artificial grass.

 

Here are the advantages:

-Less maintenance

-Lower your monthly water bill

-Water District Rebate Programs (Often up to $3.50 a sq. ft. and the cost of labor)

-Lower cost to maintain

-Pet and Kid Friendly

 

There are clearly monetary reasons to consider the switch, but the up keep and maintenance is virtually nonexistent. Installing turf could lower your monthly water bill by $30. That could mean a $360 savings year after year!

 

There are very little disadvantages to installing turf. Clearly the look and feel of natural grass can’t be beat, but do the pros outweigh the cons for your family? Find out for yourself and schedule a time to meet with an artificial grass professional to review your “turf” options. If you need help, we have recommendations.

6 Things You Can Do With Your Tax Refund

Building, Buying, Financing, Insurance, Investing, Just for Fun, Remodeling, Residential Real Estate, Tips, Uncategorized, , , , ,
Photo Credit: ATCincometax.com
Photo Credit: ATCincometax.com

How you handle “windfalls” of money can largely determine your financial success. Here are a few ways you can apply your tax refund:

 

1.   Build an Emergency Fund – One of the best ways to reduce stress in your life is to increase your margin. That includes giving you some cushion for the occurrence of “life events” like job loss, family health issues, etc. It’s nice to have savings for these things when they come up rather than having to rely on credit cards!

 

2.   Payoff Debt – Paying credit card interest will cripple your chances of financial success. Delay immediate gratification with your refund and apply it towards paying off credit card debt. Then once you have an emergency fund in place and have paid off credit card debt, fire away at those student loans & car loans! Imagine the feeling of not having a student loan payment or a car payment. What could you do with that money each month?

 

3.   Save For a Major Purchase – Use your tax refund toward a major purchase goal such as your next car, home upgrades, new appliances, or new furniture. Set a goal for how much you’ll need and save that amount so you can pay cash, avoiding the purchase/debt cycle that plagues so many Americans today.

 

4.   Save to Purchase a Home – Depending on the size of your refund, you may be able to make a dent in saving for your new home down payment. If done right, buying a home is one of the best ways to secure your future retirement, and gain a tax deduction in the meantime. Depending on your situation, you may qualify to purchase a home with only 3% down. Contact us if you have questions regarding this.

 

5.   Contribute to Retirement Accounts – You can apply refund money toward retirement accounts such as Traditional IRA’s, Roth IRA’s, 401k’s, etc.

 

6.   Give to Those Less Fortunate – Bless somebody else with your money. There are many ways you can be generous and change somebody else’s life. Be creative! Here’s one fun idea: click here.

 

The key is to think about how you can best apply your refund according to your goals before you impulsively spend it aimlessly.

 

What are you going to do with your refund? Please reply and let us know!

Don’t Let SENIORITIS Sneak up in Your Home!

Just for Fun, Residential Real Estate, Single Family, Tips, Uncategorized, , , , , , , ,

Don’t let SENIORITIS sneak up on you!

 

Photo Credit: Sabl3t3k https://flic.kr/p/8YCJjB
Photo Credit: Sabl3t3k https://flic.kr/p/8YCJjB

With spring popping up just around the corner, it is likely that more than high school seniors will get senioritis.  That’s right, I believe senioritis affects students of all ages.  All kids know summer is right around the corner, and with Open House and warmer weather on the horizon; the clues are hard to miss!

 

How can your family stay motivated to finish out the school year strong?

 

Make a list of the remaining projects and/or reports.  Students excel in predictable circumstances.  By making a list of upcoming major assignments, your child will be able to anticipate where hard work is needed. The greatest struggle with senioritis is once a student is “Checked Out” they will have a really hard time checking back in!

 

Write upcoming assignments on a desk or wall calendar so it is simple to see the amount of time a teacher is allowing the class to complete the project.  Procrastination is the enemy!  Springtime is often one of the busiest times of the year.  It is crucial that your child be realistic about the amount of time needed to complete schoolwork.

 

Set up a reward’s system!  What motivates your child?  Consider setting up a reward’s system where your child can work toward a major goal for summer.  For example, let’s say Palace Park is a family favorite.  You could provide your child with a certain number of coins each week he/she turns in assignments on time.  Then those coins can be used when your family goes to the park.  Make sure you set a date for the reward.  If the reward isn’t something approachable or tangible students may lose focus.

 

Don’t count on extra credit!  Teachers structure their assignments so a fair amount of points are provided through homework/classwork, projects, reports, and assessments.  Remind your child that each aspect of the class is important to prove his/her understanding of the material.  By neglecting one part, enough points could be lost to dramatically lower a grade.  Remember, unless a teacher has already provided the option for extra credit, it isn’t likely they will at the very end of the year.

 

Motivated Kids – Motivate Kids!  I used to snicker when my mother would say, “Show me your friends, I’ll show you your future”, but now I know it is true! We are influenced by the people around us.  Encourage your children to spend time with kids who have the same values as your family, who respect education and treat others nicely.  That way, when behaviors rub off, which they always do, your child will be positively influenced to finish the year strong!

 

 

What are some ways you prevent SENIORITIS from sneaking up on your family?

Location, Location, Location!

Buying, Investing, Real Estate Agent, Residential Real Estate, Selling, Single Family, Tips, Uncategorized, , , , , , , , , ,
http://www.landandfarm.com/property/17_acres_in_Orange_County_California-381303/
http://www.landandfarm.com/property/17_acres_in_Orange_County_California-381303/

I work with a lot of first time home buyers. They are probably some of my best clients. For the most part, they are willing to learn the tricks of the trade. They ask all the right questions and cover their boundaries. In a lot of ways, they are trusting and accept advice easily. However, whether you are a first time home buyer or purchasing your 3rd, 4th or 5th home one rule of real estate always stands firm.

 

Location, Location, Location!

 

Location is one of the first things I discuss with my first time home buyers. As an agent, it is always at the forefront of my mind when touring properties.

When determining a home, and more importantly its value, the location of the property will determine the long term value and stability of that property. This can be said for a large geographic region such as Orange County all the way down to the specific location in a particular neighborhood. Orange County has higher home values than San Antonio, Texas for a reason. The value is in the land, location and proximity to certain desires such as, the beach. The beach may be the obvious determining factor in driving home values in Orange County, but there are many other factors to consider that drive the cost of your home.

 

When buying a home in Orange County, consider these items:

-Proximity to freeways

-Ease of getting to the beach

-Lot size and location

-Proximity to shopping, restaurants and grocery stores

 

Cities such as Costa Mesa, Aliso Viejo and Irvine have all seen significant gains in home values over the last year. One of the common denominators with these cities is the relative ease to freeways or toll roads allowing for shorter commutes to beach cities and work. There is a high demand for spending less time in your car and more time in the sun. All of these cities offer great shopping and dining, as well. As you move further out to Foothill Ranch, Mission Viejo, Rancho Santa Margarita or San Juan Capistrano (all great cities in their own right) you will see slight drops in home values due to their geographic location. They are often associated with a little longer commute and fewer “Town Centers” where you can get all your shopping done. However, when picking a neighborhood regardless of city one thing stays consistent in determining price. Land! For example, think about a neighborhood in Aliso Viejo. The average home price for that neighborhood may be $600,000. If you have a corner lot in that neighborhood, your home may sell for $50,000-$75,000 more just because of the lot. If you can find a deal with a corner lot, snatch it up quickly. It will retain its value year after year. Many people don’t realize that the value of their home is in the land. If you currently own a home, take a look at your next tax statement. Say, your home is in the same neighborhood as the example above. You get your tax bill and your property was assessed for $600,000. Take a closer look at your bill. I would be willing to bet my own home that your tax bill reads “Land Value $425,000” and “Structure Value $175,000”.  The fact is, building a home doesn’t cost a great deal comparatively speaking. The value is in the land and location!

Solar Panels: Are They the Right Investment for Your Home?

Buying, Financing, Investing, Real Estate Agent, Remodeling, Residential Real Estate, Selling, Single Family, Tips, Uncategorized, , , ,
Photo Credit: Michael Coghlan https://flic.kr/p/fGwupJ
Photo Credit: Michael Coghlan https://flic.kr/p/fGwupJ

You don’t have to look very far to find information on solar panels. There are all types of products and low financing options that guarantee to save you money. The average home owner may see solar panels as a way to avoid the ever increasing price of energy. I am not here to tell you solar panels are or are not a good investment.  As a Realtor, I am here to give you my professional, unbiased opinion on solar panels in the housing market and how they effect sellers.

How do solar panels work? Solar panels are typically sold on a long-term lease of 20 years with a monthly payment. In turn, the solar company will use the energy captured by the panels to eliminate your monthly energy bill from your existing energy company. If you sign up for a monthly lease of $150 and your typical energy bill is $200 a month, then you save $50/month or $600/year. Multiply that over the term of the lease and you just saved $12,000. Sounds great, right? Not so fast… Remember, you signed a 20 year lease. You are bound to the payments of the long-term contract and based on the example above that would be $36,000. What happens if you decide to move? What happens if technology advances and there are cheaper alternatives?

What happens if I want to sell my home and I have a long-term lease on the solar panels?  If you do want to sell your home, the potential buyer will have to take over the solar panel lease in order to purchase it. OR the new owners could purchase the home without taking over the lease, leaving you responsible for the payments even after you moved out.  At first glance, the monthly savings look great and the innovative technology is a must, but make sure you are familiar with the long term ramifications.

What could the future hold? Pretend it is the year 2024.  You own a home and purchased solar panels 10 years ago. You are halfway through your lease. In that time, technology has advanced and we can capture the same amount of energy on one panel as you can with the 20 rusty panels currently on your roof. In addition, the cost in the solar panel market is a monthly payment of $40 a month. Now you want to sell your home. When you list your home, interested buyers are notified that the home is attached to a 20 year solar lease with 10 more years remaining. Why would the buyer take over a lease at $150 a month when they can get it at $40 a month? Why have 20 solar panels on their home when they could have one? Why spend more for old technology? These are all valid questions that will cause problems in your future sell.

Let’s say you don’t plan on selling in the next 20 years. My initial response would be: 20 years is a long time. Your plan today may not be your plan tomorrow. My second response would be: keep in mind you are leasing solar panels. Once your 20 years is up, you still won’t own them. But you have the option of forking up about $5,000 to buy them at their market value.  Another extra expense…and to add insult to injury, any repairs that need to be done to the solar panels during your lease will be at your own expense. The hidden costs are everywhere.

Know the facts before you decide to lease or buy. Ask yourself one question. Is saving $50 a month worth the long term issues? You may save on the front end, but if you ever decide to move, it will likely cost you. In my professional opinion, if you want to go the solar panel route, purchase them or avoid them all together. Otherwise, your solar panel leasing agreement could be a disaster when it comes time to sell.

Feel free to contact me directly for some personal experiences with solar panels in the housing market.

 

Photo Credit: Michael Coghlan, https://www.flickr.com/photos/mikecogh/9647603520/