Home Selling • Tips and Advice • February 23, 2023

6 Landscaping Improvement Projects That Offer the Best and Worst Returns on Investment

by Shay Brunson

6 Landscaping Improvement Projects That Offer

the Best and Worst Returns on Investment

Kathleen Willcox

What your house looks like outside is just as important as what it looks like inside—especially if you plan on selling it one day.

Boosting your curb appeal will not only elevate your enjoyment of—and confidence in—your home, it will also mark an important investment in its long-term value. Curb appeal alone can add 7% or more to the value of your home. Also, the National Association of Realtors® found that 100% of landscaping and tree service costs are recovered when a home sells.

But which landscaping tasks will bring you the best return on investment, or ROI?

Read on for insights from real estate and design pros on the outdoor renovation projects that deliver the best and worst returns.

1. Adding a deck or patio: Good ROI

Spending time outside with friends and family is much more convenient if you have a deck or patio. “Patios or decks can provide a gathering place for outdoor entertaining and increase the value of your home,” says Martin Boonzaayer, CEO of the Trusted Home Buyer in Phoenix.

Homeowners who decide to make the investment can expect to recoup about 65% of their investment, Boonzaayer says.

How much should you budget? According to Remodeling Magazine’s Cost Vs. Value Report, homeowners can expect to spend about $16,000 on a 16-by-20-foot wood deck with pressure-treated planks. A composite deck is more expensive, but the ROI is comparable.

2. Installing a sprinkler system: Good ROI

A dry, brown lawn is quite an eyesore. Installing a sprinkler system is a great investment that prevents unsightly patches and delivers a killer ROI.

“A sprinkler system can help keep your lawn and plants healthy and looking great,” says Boonzaayer. “It can be especially helpful if you live in a region with drought conditions. A sprinkler system can recoup up to 100% of its value upon resale.”

The cost of a sprinkler system installation, depending on the size of your lawn and ZIP code, can be about $500 on the low end and $3,500 on the high end.

3. Paver walkway: Good ROI

A pretty path from your driveway to your front door can do wonders for your home’s overall aesthetic.

“One project that delivers exceptional ROI, and improves your own quality of life, is putting in a paver walkway,” says Joe Raboine, a former contractor and director of residential hardscapes at Belgard in Atlanta. “Replacing the front walkway is also one of the simplest ways to refresh the exterior of your home.”

You can get creative with a variety of paver styles, from simple cobblestones to more modern, large-format pavers.

Raboine says he has seen such walkways deliver more than 80% ROI.

Costs for a paver walkway range from $1,500 to $4,500-plus.

4. Planting trees: Good ROI

Spending time outside in nature—especially around trees—has been shown to reduce stress and boost happiness. Adding some foliage to your yard can also be a boon to your home’s value.

“Planting trees can help provide you and your home with shade, increase your curb appeal, and help the environment,” says Boonzaayer.

Well-placed trees can boost your home’s value by up to 15%, paying for itself and then some, he adds.

Planting a tree costs anywhere from $100 to $2,000 (including labor) depending on the size of the tree and your location.

5. Planting the wrong kind of plants: Bad ROI

“Thoughtful landscaping in general increases curb appeal,” says Tammy Sons, a horticulturist based in Tennessee.

But in certain cases, plants and trees can undercut the value of your home if you’re planting the wrong kind of greenery in the wrong places.

“Planting large trees near paved drives and sidewalks or patios where the tree’s roots could crack the concrete” is a no-no, Sons says.

Sons also encourages homeowners to focus on native plants.

“Planting non-native, invasive plants can lead to disaster,” Sons says. “Kudzu, for example, can grow up to 18 inches in one day. Plants like this will take over other plants and suck up all of the soil’s nutrients.”

6. Adding a garden: Bad ROI

Having a garden brimming with fresh vegetables, herbs, and flowers will sound like heaven if you have a green thumb. But for potential homebuyers who have a propensity to kill any plant they touch, a garden might be seen as a headache that’ll inevitably turn into an eyesore when weeds take over.

“Gardens can be a rewarding hobby, but the ROI isn’t there,” Boonzaayer says.

You can’t make all of your home renovation choices with the future buyer in mind. But if you’re choosing between planting a garden or putting in a patio, at least now you’ll know what to expect when it comes time to put your home on the market.

Home Buying • Home Selling • Tips and Advice • January 26, 2023

How To Sell Your House And Buy A New One At The Same Time

by Shay Brunson

How To Sell Your House And Buy A New One

At The Same Time

Beth Braverman

Things can get complicated when you’re trying to sell your house and buy your next place at the same time. The process of buying and selling simultaneously can be stressful, particularly if you need the money from the sale of your current home to put toward your new one.

In a perfect world, your next house would be ready and waiting as soon as you turn over the keys to your previous one. But of course, the world is not perfect, and the timing between selling one home and buying the next does not always line up the way you want it to. Take heart, though, because a little planning and working with a savvy real estate agent can help make both transactions run more smoothly.

Here are five key topics to consider, with handy tips to manage the process — and keep your sanity intact.

1. Partners: Assemble a team of pros

Given all the steps and paperwork involved in selling and buying a home at the same time, you’ll want seasoned professionals guiding you through the process. Hiring a skilled real estate agent can give you a realistic estimate of home prices in your area and how to price your current home. Using that figure, you can calculate how much equity you have and what your net proceeds will look like, so you can apply that money toward the down payment and closing costs of your new home.

2. Money: Consider your financial position

Ideally, you’d be able to have concurrent closings, selling your home in the morning and closing on your next place that afternoon — or at least within a few days. But what if things don’t go according to plan? You could suddenly find yourself without the necessary funds to close on your new home, or wind up paying two mortgages for an extended period of time. Worst-case scenario, you may be unable to get final approval for a mortgage and potentially lose your next home.

If you don’t have the means to handle two mortgages simultaneously, you might want to include a contingency in your real estate contract that gives you an escape route should the sale of your current home fall through. You may also consider adding a financing contingency, in case your new loan approval hinges on selling your current home. Such contingencies are fairly common, and a good agent will be able to help you negotiate and get them written into the purchase and sales agreement you sign with the seller.

3. Market: Does it favor buyers or sellers?

When trying to buy and sell a home simultaneously, a lot depends on the conditions of your local housing market.

In a seller’s market

In a seller’s market, sellers have the upper hand. This has been the case for most of the past two years, in which the housing scene all around the country was characterized by limited inventory and bidding wars. In the second half of 2022, however, residential real estate markets have begun showing signs of cooling down, with more housing inventory available and sharply increasing mortgage rates putting a damper on sales activity.

Even in a market that favors sellers, you’ll need to make your home market-ready if you want it to bring in top dollar. But this type of market also means you can be more selective about which offers to consider and limit your options to those with fewer contingencies. If the property is priced right and staged well, it will likely sell quickly. So make sure you’re ready to move fast on buying your next place.

In a buyer’s market

On the other hand, when inventory is high and demand is low, that’s a buyer’s market. When buyers are in the driver’s seat, it could take much longer to sell your home. In a buyer’s market, you may want to hold off on making an offer on your next place until you’ve gone into contract with a solid buyer for your current home. You may also want to include a contingency that voids the deal if the sale of your current home doesn’t go through, for peace of mind.

4. Timing: Negotiate the timeline, not just the money

Of course you want to get the best possible price on the sale of your home, and not to overpay for the next one. But consider the timing of the closing process as well when negotiating both deals. The closing date can be one of the most important details when negotiating a sale. The goal is to get both the buyer of your current home and the seller of your next home to agree to adjacent closings or any necessary contingencies. You can even arrange for back-to-back escrow, in which the proceeds from the sale go directly to the purchase of the new property.

5. Safety net: Have a backup plan

No matter how carefully you plan your transactions, surprises can occur. Things might not happen on schedule — or might fall through completely. If you have contingencies in your contract, you should be able to reschedule the closings accordingly or walk away with minimal financial pain.

But it’s smart to have a backup plan just in case. Here are some options:

If you sell your current home but haven’t found your next place yet, you’ll need to find a short-term rental. Be sure to factor in the added expense of renting a storage unit if all your belongings won’t fit into the temp home.
Consider asking your buyers to do a rent-back agreement, which would allow you to remain in your current home after closing for a short time and pay rent to the new owners until you can move.
If you close on your new place without selling the old one first, you’ll have two mortgages to pay. To cover the costs until you’re able to sell, consider a home equity line of credit or a bridge loan over the short-term. (If you do use a bridge loan, keep in mind that you’ll be responsible for making payments on it regardless of whether or when your house sells.)
If you’ve closed on the new dream house, move in and try renting out your old home and using the income to help offset the expense of the new place until you can sell it.

Should I sell my house now or wait?

Deciding whether it’s the right time to sell your home can be perplexing. That’s especially true if you’re locked into a mortgage rate that’s significantly lower than what’s available now.

There are a number of important factors to consider when it comes to the timing of your house sale. These include:

Interest rates. Low interest rates entice more prospective buyers to enter the market, which is advantageous for sellers.
The current housing inventory. A shortage of homes on the market also drives up demand and prices for available homes.
Whether you would like to downsize. Downsizing may be a more budget-friendly choice than maintaining a larger, costlier home.
If you need to relocate. If you want or need to move to a new state, selling might be unavoidable.

You should consider these factors carefully, and you definitely shouldn’t rush into a sale just because the market conditions are right. If you don’t have a solid game plan for where you’ll go after your home is sold, or if you fear you could be hit hard by a possible recession, then it may be smarter to hold off for now.

Finding a trusted agent to help

Using the same real estate agent and real estate attorney for both the sale and the new purchase can make the entire process go more smoothly. (An attorney is not required in every state, but even so, it’s smart to have one on your side. Whenever there’s complicated contract language and large sums of money at stake, professional legal advice is invaluable.)

Final word on simultaneously buying and selling a home

Trying to sell your house and find a new place at the same time can be quite a challenge. Working with an experienced real estate agent can help ease the transition and ensure consistent communication with everyone involved. Finally, make sure you keep close tabs on your finances and credit, both before and during the process, and get as much done ahead of time before you start looking and listing. It’s a delicate dance, but the steps can be mastered, letting you successfully conclude both deals simultaneously.

I’m here to guide you through the process, every step of the way. Give me a call at 678-744-8070 and let’s discuss your options. 🙋‍♀️ – Shay

Home Buying • Tips and Advice • December 17, 2022

How Long Does It Take To Buy A House?

by Shay Brunson

How Long Does It Take To Buy A House?

David McMillin

Buying a home doesn’t deliver the instant gratification you’re accustomed to in today’s e-commerce world. While you might be able to hit the “Buy Now” button and pick same-day delivery with loads of other purchases, buying real estate requires a number of steps.

Timeline to buy a house, step-by-step

Step 1: Get preapproved

If you’re going to borrow money to buy a house, the first step is to get preapproved for a mortgage. A mortgage lender will typically ask for information about your assets, income and credit history to make their assessment of how much they’re likely to loan you. In some cases, lenders with online-focused operations can issue an automated preapproval letter on the same day. The letter will serve as evidence to sellers that you’re a qualified buyer. Preapprovals aren’t good forever, though — they typically last between 60 and 90 days.

If preapproved, you’ll receive a loan estimate within three business days after applying for a mortgage that outlines your loan amount, interest rate and other loan details. It’s important to compare options, too. The Consumer Financial Protection Bureau recommends getting loan estimates from at least three different lenders.

Before you begin the preapproval process, consider what you’ll look like in the eyes of a lender. Do you have any errors on your credit report? Are you carrying a hefty balance on a credit card? Think about the preapproval process as a chance to show off your best self. Lenders need to feel confident that you will be a responsible borrower.

Here’s a general timeline of what you’ll need to prepare before submitting paperwork for a mortgage preapproval:

At least 6-12 months before: Start saving up for a down payment (if you haven’t already) so you can show a lender you have the means to purchase a home. Also, try to get a broad picture of your financial situation by checking your credit report and score. Lenders will look at your credit history (and, by extension, your credit score) to see how creditworthy you are. Understanding what’s in your report now will give you a chance to raise your credit score if needed. Then, when it comes time to get preapproved, you have a better chance of landing a better rate.
3-5 months before: During this time, avoid taking out any new loans or making other major changes, like switching jobs. Doing so could affect your eligibility for a loan. Lenders look at your debt-to-income ratio, or DTI, for example, to see whether you can afford to manage your monthly payments. Keeping the status quo in your finances, income and job situation can help you avoid delays in your loan approval.
1-2 months before: This is a good time to start organizing the paperwork you’ll need to submit for a preapproval. Documents typically include recent paystubs, two years of federal tax returns and two months’ worth of bank statements.

Step 2: Find a home

Now that you’re preapproved for a mortgage, you know how much house you can afford. That means it’s time to start looking for one. At this stage in the process, you can work with a real estate agent, check out open houses and start house-hunting in earnest.

It’s important to note that this step can take more time than you might expect, because housing inventory is still tight. According to the National Association of Realtors (NAR), the country had a 3.3-month supply of homes in July 2022 — that’s up from January’s record low of 1.8 months, but still well short of the 5 or 6 months required for a balanced market.

Step 3: Make an offer

Once you’ve found the house you want to buy, your real estate agent will help you submit an offer. Your agent can help you decide on an offer that’s competitive, aligned with home prices in your area and reflects your best interest. The offer might also include contingencies, which help protect you if you end up needing to back out of the offer.

If you’re able to make an all-cash offer, you can reduce your time to close. Without a need to secure financing, you won’t have to deal with a financial institution. However, even all-cash transactions require some waiting as the seller works out all the details and paperwork, so keep that in mind.

It’s also important to recognize that making an offer is a step you could wind up repeating, depending on how hot your local market is. NAR data from early 2022 indicated that only 25 percent of buyers were successful with their first offer. But times changed as mortgage rates rose significantly over the course of the year, so the market is not quite as competitive now.

Step 4: Go to contract and put down earnest money

If your offer is accepted, you’ll go to contract and have to make an earnest money deposit, which is an amount of money you put down in good faith to assure the seller you’re serious about the purchase. Think of this as another signal that you’re committed to doing all the work ahead toward actually closing on the house.

Step 5: Schedule a home inspection

The next step should be a home inspection. Depending on your state’s laws, a home inspection typically needs to be completed within a set number of days after you sign a purchase agreement. If the inspector uncovers any major concerns, you might want to negotiate repairs or seller concessions, which could take more time.

Step 6: Wait out the closing process

At this point in the process, you can expect to do some waiting as your lender moves the loan into underwriting. In this time, you may need to submit additional documentation for your lender to clear your loan to close, and the lender will order an appraisal to assess the home’s value.

The type of loan you take out could alter the timeline slightly, because of the types of assessments and paperwork needed. For example, an FHA purchase loan currently takes one day less than a conventional loan, according to ICE Mortgage Technology (49 vs. 50). And VA purchase loans have historically taken a bit longer to close, due to additional documentation requirements like a VA Certificate of Eligibility.

If there have been major changes to your financial situation since you were preapproved, your loan might be delayed as well. Lenders can get a bit spooked if you change jobs, open a new line of credit or make any other big money-related decisions between the time you apply and the time they’ll actually give you the funds.

Once your mortgage is approved, your lender will give you a copy of your closing disclosure at least three business days before the closing date. The disclosure lists all the loan details, fees and terms, as well as what you’ll need to pay in closing costs to finalize the purchase.

Step 7: Sign the closing documents and get the keys

Finally, after all that work, closing day has arrived. You will need to sign a small mountain of paperwork. You’ll also need to pay closing costs, if you didn’t opt to roll those expenses into the loan. And you will likely need to pay with a cashier’s check, as personal checks are typically not allowed. How long does this final step take? It varies, but you should plan on spending at least two hours dealing with all the documents.

How to avoid delays when you buy a house

According to NAR, 15 percent of home sales encountered some delays that held up the closing in June, July and August 2022. There are a wide range of potential issues that can create stumbling blocks, including:

The buyer has trouble securing financing.
The appraisal report comes back with a value that doesn’t match the loan terms.
The home inspection report identifies the need for serious repairs.
There are issues with the title/deed.
There are issues with hazard and flood insurance.
The buyer loses his or her job.

One of the most common reasons for a delay recently has been an appraisal gap. According to data from CoreLogic, 20 percent of home sales had appraisals that came back lower than the agreed-upon offer price in May of 2021. However, those appraisal gaps became less common by the end of the year. Now, in 2022, the housing market does appear to be cooling off, which means that appraisal issues may become less common.

The best way to avoid delays is treat communications from your lender as a top priority. If your lender requests additional documentation of your income or employment, for example, respond as quickly as possible.

One last simple rule to help make the process pain-free: The earlier you get a head start on ironing out your finances and securing a preapproval, the more likely you’ll have a relatively smooth and quick transaction.

Home Buying • Tips and Advice • November 18, 2022

How To Make The Buy vs. Rent Housing Decision As Mortgage Rates Surge

by Shay Brunson

How To Make The Buy vs. Rent Housing Decision As Mortgage Rates Surge

Cheryl Winokur Munk

With mortgage rates rising, more people may be asking themselves the age old question: rent or buy?

These decisions are particularly pertinent amid bubble-like housing prices, making monthly mortgage payments more difficult to manage, and also sky-high rents that have proven to be one of the economy’s stickier forms of inflation.

The latest Federal Reserve interest rate increase, while not directly tied to mortgage rates, is having some effect on lending and home prices. And the Fed isn’t done raising rates yet this year.

The average 30-year fixed-mortgage rate was 6.10% as of Sept. 13, according to Bankrate.com, and it has been rising steadily, up to 6.43% on Tuesday, according to the mortgage rate comparison service, after the Fed’s most recent decision last week to raise its benchmark interest rates by another three-quarters of a percentage point — the third-time in a row it has raised rates by that amount.

More homebuyers are pulling out of deals given the environment. Here’s how to weigh the biggest housing decision you may ever make in your life.

Take a big-picture approach

Cory J. Phillips, a financial advisor at Pittsburgh-based Fort Pitt Capital Group, said he’s heard from clients that they are concerned about buying now because of rising rates. But rates are only one consideration when it comes to buying a house.

Although they are higher than the recent past, rates are still among average levels over the last 30 years, he said. “The last couple years we, as consumers, got used to such a low rate. Now it’s our expectation,” he said.

Trying to time the rate market isn’t wise, Phillips said. If the buying elements are right for you, it could still make sense to buy, even as rates are rising.

But before plunking down money on a down payment, consider what the next few years could look like. Are you interested in planting roots, or is there a strong chance you’ll relocate in three to six years? If the latter is a possibility, Phillips said he wouldn’t generally advise buying now because the closing costs and commissions are likely to negate the benefits.

Rent premium versus ownership premium

Sure, renting is expensive. From 1985 to 2020, the national median rent price rose 149%, while overall median income grew just 35%, according to an analysis of publicly available data by Realestatewitch.com.

But homes are also pricey, even though they fell 0.77% from June to July. That’s the first monthly decline in nearly three years, according to Black Knight, a mortgage software, data and analytics firm, and prices have softened significantly in recent months relative to historical data. But the median price of an existing home sold in August was $389,500, still up 7.7% from a year ago.

Prospective buyers need to remember that the premium they are paying in rent is temporary, said Karl A. Wagner III, partner and senior wealth advisor at Milford, Pennsylvania-based Biondo Investment Advisors. “The premium you are paying to buy is not temporary; it’s a long-term commitment,” he said.

So in the least, do not force a decision to buy if your financial situation provides good reason to be more deliberate.

Determine whether you have enough money for a down payment or might you be better off delaying a purchase until you do. Phillips offers the example of a client who is looking to buy a house in the $200,000 to $275,000 range. He’s now saved enough to put 15% down, which would mean he would only have to pay private mortgage insurance for a few years — a form of mortgage insurance often required by lenders if the buyer does not initially have 20% for a down payment. He can continue to save until he finds his dream home, getting closer over time to the 20% mark that would allow him to avoid private mortgage insurance.

Moving and other miscellaneous costs

Moving, whether to a new rental or newly purchased home, has its costs.

Prospective buyers need to make sure they have enough set aside not only for moving expenses but also for home maintenance — initial and ongoing. These costs aren’t necessarily a drop in the bucket. The average cost of a local move is $1,250 and $4,890 for a long-distance move, according to Moving.com.

What’s more, “there are almost always costs that you forget to include in your move, and those you did add are usually expensive,” said Courtney Klosterman, home insights expert at home insurance provider Hippo.

And in addition to hiring movers and home repairs, homebuyers need more money set aside for buying new items and furniture. Additionally, if there is a gap or overlap between moving, buyers may have to pay double the mortgage or stay in a hotel until their new home is move-in ready.

Your income and personal financial security

Would-be buyers should also consider how their financial picture could change in the near-term, said Gregory W. Lawrence, certified financial planner and founder of Lawrence Legacy Group in Estero, Fla. What happens, for example, if a spouse wants to stay home to raise the children? Or what if one of you gets laid off? Can you afford to live on one income? Also consider the source of your income? Is it secure in a recession? And what’s your future spending likely to be?

“Don’t buy at a peak, get laid off and not have the money to pay for a house that you just put a bunch of money in and is now under water because the market declined,” Lawrence said.

If you have a great buying opportunity, but are concerned about your finances, it could make sense to put down a smaller deposit, even though it will mean private mortgage insurance, Lawrence said. “I would not be putting 20% on a house unless I had enough assets that I was assured I would never lose the house,” he said.

Wagner strongly recommends first-time house buyers wait out what he sees as a bubble destined to pop. He cautions people to remember the housing crisis of 2008 and how many people took major losses on homes purchased at the peak. “I fear that we’re in a similar situation where excessive speculation and excessive liquidity and low interest rate have led to this real estate boom,” he said.

“We know historically that nothing goes in one direction forever. If it’s possible for you to wait, I would.”

Home Buying • Real Estate News • Tips and Advice • October 25, 2022

Should You Buy a Home in 2022? Here’s What You Need to Know

by Shay Brunson

Should You Buy a Home in 2022? Here’s What You Need to Know

Alix Langone

Will rates continue rising? When will more inventory be available? Here’s what to consider before buying a home this year.

Right now, home prices are still seeing double-digit growth nationwide and all-cash offers still make up around a quarter of housing bids, according to Jessica Lautz, vice president of demographics and behavioral insights at the National Association of Realtors. Does that mean you should try to hold off until prices start going down? Not necessarily.

The first thing to keep in mind is that expert predictions are imperfect. No one knows what’s going to happen with the economy, even with warning signs for events like recessions. And timing the market, or trying to make decisions based on what you think will happen to prices or rates in the future, is generally not a sound strategy. “With housing, buyers tend to obsess over home values and how buying at a certain time may be better for appreciation and equity,” said Farnoosh Torabi, personal finance expert and editor-at-large at CNET. “That’s important, but your monthly housing payment is what really matters in the end.”

Even if you have a plan, be prepared to pivot in this market. Maggie Moroney, 27, is trying to buy her first home in the Washington, D.C. area, but can’t find anything affordable. Between sales and rentals, there’s low inventory in both markets.

“I probably could try to buy something, but it’d be a little bit of a stretch, especially with interest rates,” she said. Moroney doesn’t want to rush the decision and plans to wait it out if she doesn’t find a home she likes, with the hope that more inventory will start to hit the market. “I’d rather have a rental I’m not super in love with than a home I’m not in love with.”

If you’re teetering between buying a home and waiting, here are some factors to keep in mind.

1. Mortgage rates and price trends

In today’s housing market, high prices along with home loan rates are two of the most important factors at play. Although mortgage rates fluctuate daily, they are expected to remain between 5-6% for the rest of 2022 — though what happens next with inflation will tell where rates are headed. So far, rates are already more than 2 percentage points higher than this time a year ago and passed the 5.5% mark in June, but seem to be evening out since the announcement of the Fed’s fourth rate hike in July.

Although rates dipped slightly with the most recent interest hike, it’s still important to understand how the rate you lock in for your mortgage will impact your monthly payments, as well as the total amount you’ll pay over the lifetime of your loan.

For example, if you take out a 30-year fixed-rate mortgage to buy a $500,000 house at a 5.2% interest rate, you’ll pay $488,000 in interest over the life of your loan. But if you wait and buy a $450,000 house at a 6.5% interest rate, you’ll end up paying $574,000 in interest over the course of your mortgage. So even though you paid less for your home, you’re paying more than the difference in price due to interest over three decades.

Scaling back your budget and looking at homes that may be smaller or in less-expensive neighborhoods is an option to consider if higher mortgage rates have made your previous housing goals unattainable.

2. Financial and personal goals

Homeownership is still considered one of the most reliable ways to build wealth. When you make monthly mortgage payments, you’re building equity in your home that you can tap into later on. When you rent, you aren’t investing in your financial future the same way you are when you’re paying off a mortgage.

Another factor to take into consideration is how long you plan to live in the house. If you expect to live there for a decade or longer, you’ll likely be able to refinance your mortgage to a lower rate, reducing your monthly payment in the process. However, if you plan to move in a few years, it likely won’t make financial sense for you to refinance. In that case, it’s worth considering an adjustable-rate mortgage, which can help offset today’s high mortgage rates by offering you a lower initial interest rate that only adjusts or increases later on in your mortgage term.

3. Future housing trends and recession risks

As buyer competition decreases when buying a home becomes increasingly unaffordable, it could mean that inventory opens up where you’re looking. In June, the national inventory of available homes grew by 18.7% this year compared to last year. More available inventory means that you have more homes to choose from, increasing the chances you can buy something you actually want this year versus scrambling in a bidding war for whatever is available in your budget.

But there’s also talk of a looming recession. If you wait to buy instead, you could avoid potentially overpaying for a home that could lose its value in an upcoming economic downturn, said Torabi. Plus, if the economy slows down, it’s possible the Federal Reserve will raise interest rates less aggressively, which could benefit potential homeowners trying to lock in a better rate on their mortgage.

Is it better to rent than buy right now?

It depends, especially when we’re dealing with an unpredictable period of high inflation.

On one hand, if you buy a house and secure a fixed-rate mortgage, that means that no matter how much prices or interest rates go up, your fixed payment will stay the same every month. That’s an advantage over renting since there’s a good chance your landlord will raise your rent to counter inflationary pressures. Right now, rents are rising faster than wages, and if homebuyers are priced out of the housing market, there’ll be more pressure to rent, which will increase competition. Many are already experiencing a red-hot rental market, leading to rental bidding wars and evictions.

On the other hand, even though a fixed-rate mortgage can offer you more predictability and budget stability, “as long as inflation continues to outpace wages, there could be benefits to renting right now as the economy worsens,” said Torabi.

For example, one advantage of renting over buying is that you can save the cash you would have otherwise needed to use for a down payment. In a time of economic uncertainty, if you don’t have to worry about coming up with a down payment and emptying most of your entire bank account to secure yourself a home, you can stay more liquid. Having more cash on hand can offer you added security if a recession negatively impacts your financial situation.

“It’s important to know the differences in cost of owning a home versus the cost of renting,” said Robert Heck, vice president of mortgages at Morty, an online mortgage marketplace. “How much is homeowners insurance going to cost? How much are the annual property taxes? Maybe you’re not used to paying property taxes if you’ve been renting. Consider the costs that will go into maintaining a home.”

Ultimately, whether you rent or buy often comes down to practical considerations like whether you need more space to start a family, or your lease is ending — regardless of market conditions.

Real Estate Investment • Tips and Advice • September 21, 2022

Becoming A Landlord: Do You Have What It Takes?

by Shay Brunson

Becoming A Landlord: Do You Have What It Takes?

Michelle Honeyager

Whether you have extra cash you’re looking to invest or extra space in a home you already own, it can be tempting to jump into the landlord game. After all, earning passive rental income can seem like easy money. And with today’s high inflation and tough real estate market, who couldn’t use some additional income?

Jill Wente, a Realtor with Better Homes and Gardens Real Estate Gary Greene in Spring, Texas, says that many of her clients entertain the idea of establishing a rental property and becoming a landlord. “Most clients are thinking about buying a move-up property for themselves and holding on to their current home to turn into a rental property,” she says.

But before you decide to rent out your home or buy something new, ask yourself, are you really cut out to be a landlord? Here are some of the key things you should consider.

Landlords manage both property and people

Being a landlord isn’t just sitting back and watching the rent checks flow in. It’s a lot of work: Not only do you have to manage the property itself, making sure everything is in good repair and all bills are paid, you also have to stay on top of your tenants and how they treat your investment. This is not a job for the laid-back, or the non-confrontational.

Financial considerations

Real estate can be a good investment. But as a potential landlord, you need to be realistic about your ability to afford the property — whether rent checks are coming in or not. Something unexpected will always come up, and you need to make sure you can cover both routine maintenance and emergency repairs.

“Chances are, your rental will be vacant from time to time,” says Wente. “Your next renter rarely comes walking in the next day. It may only be a couple of days, or it may be as long as 60 days.”

Doug Quattrochi, executive director of MassLandlords, a nonprofit association based in Massachusetts, echoes that sentiment. He advises prospective landlords to ask themselves this question: “Will the rents pay for the mortgage, taxes, insurance and repairs, with extra, in case I have a vacancy?”

It’s not a get-rich-quick game, Quattrochi continues. “Real estate can be very worthwhile, but it’s usually ‘get rich slowly.’ You should invest thinking about your retirement, your children and the long-term.”

Tenant risks

Being stuck with a bad tenant is one of the main reasons landlords fail. “One bad renter can ruin you,” says Quattrochi. He recommends building a network of support to help deal with tenant-related issues: “Join your local landlord club or association. Other landlords can be invaluable when it comes to knowing what to do or who to hire when problems arise.”

It’s crucial to have a good grasp of local landlord-tenant laws. “Always know and understand your federal, state and local rental laws,” says Brittney Benson, chief operating officer of the National Association of Independent Landlords. “Many landlords learn the hard way that not being knowledgeable about the laws can end in costly lawsuits or lost rental income.”

You also need to be prepared to be the bad guy when necessary. It’s important to assess if you can emotionally handle tenant relationships, Wente says: “Ask yourself if you can be objective. When a tenant is unable to make the rent payment because of the saddest story you’ve ever heard, what are you going to do?”

One thing all experts agree on: Tenant screening is a must. “Do your due diligence when selecting renters,” says Benson. “Do as much screening as you possibly can, regardless of the cost associated with it.” Taking the time to screen a prospective tenant before a lease is signed could save you a lot of hassle, money and unpleasantness — including a potential eviction.

Typical landlord expenses

Down payment: If you’re investing in a rental property, you’ll be forking over what is likely to be a sizable down payment. When purchasing a second property, most lenders will require at least 20 percent down to secure financing. “The good news,” says Wente, “is that you will have the opportunity to gain price appreciation on 100 percent of the property while having only 20 percent in it.”
Insurance: Insuring a rental property is more expensive than insurance for a home you live in. If you decide to rent your current property, you’ll see a change in your homeowners insurance. “Because your home is no longer owner-occupied, your homeowners insurance is going to increase,” says Wente. Landlord policies are typically 25 percent higher than standard homeowner policies, according to the Insurance Information Institute.
Maintenance: Upkeep costs can add up quickly — if you’re not the handyman type, be prepared with a reserve fund to pay for fixing things like broken pipes or electrical issues. It’s also smart to compile a list of people you trust, and can afford, to hire. “When repairs are needed, do you have contractors you can depend on to get the plumbing fixed and the air conditioner back on?” asks Wente.
Vacancy: There will likely be periods when your rental is unoccupied, or tenants simply don’t pay the rent on time. And that can cause cash-flow problems. Benson suggests potential landlords ask themselves, “Do I have the extra funds to cover rental costs, such as mortgage payments or property taxes, if there is a problem with tenants not paying rent?”

Other common hassles

Money isn’t the only thing that can make a landlord’s life difficult. Time management can cause problems as well. “Many people decide to leave the rental property business because of time constraints and attention required,” says Benson. “Maintenance requests, lock-outs, repairs, evictions and numerous other potential time-consuming surprises” are all part of the process, she says.

Remember, you will be your tenant’s very first text or phone call anytime something goes wrong — no matter what time of day that might be. Wente asks clients “if they’d mind getting a call on a Saturday morning with a toilet emergency, or at 11 o’clock at night because the air conditioner isn’t working.”

Quattrochi suggests carefully considering the logistics of managing a property: “Who is going to have keys for an emergency, or am I able to get there quickly myself?”

And don’t forget about the work needed to market the property to prospective tenants. Photographing, listing and showing the property, screening applicants: The entire rental process takes time.

Should you hire an outside property manager?

As a landlord, you’ll need to decide whether you want to manage the property yourself or pay someone else to do it. Hiring a property-management company to handle things makes landlord life easier — but also, of course, more expensive.

“Property managers can be an incredible resource for some landlords,” says Benson. “If the owner lives out of state or far from the rental property, a property manager might be a great option.”

It’s important to know exactly what your property manager will charge, and what he or she will handle versus what is still your responsibility. Don’t make assumptions. And make sure to thoroughly read your contract — and ask questions — before signing on.

Another thing to consider is how much control you might be giving up. “Property managers will manage the way they want, not necessarily the way you want,” says Quattrochi. “Get to know how they screen tenants, supervise contractors and bill their fees. Don’t assume that just because you have a manager, you don’t need to audit their handling of maintenance issues and renter/customer service.”

Becoming a landlord checklist

If you’re ready to try your hand at being a landlord, do some extra planning to avoid winding up with more headaches than profits. Here’s a checklist of things to make sure you take care of:

Calculate how much rent you’d need to charge to cover all your costs
Familiarize yourself with laws about fair housing and landlord-tenant rights
Create a list of contractors you can depend on and trust
Weigh the pros and cons of using a property manager
Network with other landlords to create a support system
Carefully and thoroughly screen potential tenants

“It’s a hard business to be in for some people,” Benson says. “But if you’re prepared and perform your due diligence, it can be very easy as well.”

Home Buying • Real Estate Investment • Tips and Advice • August 23, 2022

Real Estate Stays On Top As Americans’ Favorite Investment For The Long Term

by Shay Brunson

Real Estate Stays On Top As Americans’ Favorite Investment For The Long Term

James Royal

Mortgage rates are surging higher, inflation is soaring, and many experts are forecasting a recession may soon be on the way. Despite these negative impacts on the housing market, real estate remains America’s favorite long-term investment in 2022, according to a just-released Bankrate survey. It was the third time in the last four years that real estate took the top honors.

In all, 29 percent of Americans said that real estate was their top pick for investing money that they didn’t need for 10 or more years. Real estate made a strong showing, and it was the second-highest result – behind only the 31 percent it notched in 2019 – in the survey’s 10 years of polling.

“Despite a housing market that is coming off the boil, preference for real estate remains high,” says Greg McBride, CFA, Bankrate chief financial analyst. “For the third time in the past four years and sixth time in the past 10 years, real estate is Americans’ preferred way to invest money not needed for more than 10 years.”

Key takeaways:

Real estate remains the most popular long-term investment, with 29 percent of Americans saying it’s their top choice.
Of those who did not select stocks as their preferred investment, 36 percent cited high volatility as the biggest reason why they picked something else.
About 75 percent of Americans say they’re uncomfortable with cryptocurrency.
Stocks were the top pick for baby boomers, college graduates and higher earners.

Real estate remains the most popular long-term investment

As it did last year and for three of the past four years, real estate sits atop the list of Americans’ favorite ways to invest money not needed for 10 or more years. More than 29 percent tapped real estate as their preferred long-term investment, the second-highest showing ever in the 10 years of the Bankrate survey.

Here’s the full list of responses and the percentage of Americans who favored each:

Real estate – 29 percent
Stock market – 26 percent
Cash investments (savings, CDs) – 17 percent
Gold or other precious metals – 9 percent
Bonds – 9 percent
Bitcoin/cryptocurrency – 6 percent
None of these – 3 percent

Real Estate News • July 27, 2022

Rising Mortgage Rates Are Hitting Americans’ Wallets. Here’s How to Adjust Your Housing Budget

by Shay Brunson

Rising Mortgage Rates Are Hitting Americans’ Wallets. Here’s How to Adjust Your Housing Budget

Michelle Fox

Homebuyers are feeling the squeeze of rising mortgage rates. On top of that, housing prices remain high. That may lead many to rethink their budget.

“As mortgage rates go up, it raises the cost of buying a home with a mortgage,” explained Danielle Hale, chief economist at Realtor.com.

“For many homebuyers, higher mortgage rates equal a higher monthly cost, especially for those taking out a large mortgage.”

The rate for a 30-year fixed mortgage is now 5.65%, according to Mortgage News Daily, up from 3.29% at the start of the year. The median listing price hit a record $450,000 in June, according to Realtor.com.

At the current rate, the cost of a 30-year fixed mortgage on a $450,000 home means $2,078 in monthly payments, if you put down 20%, according to Realtor.com’s calculator. That doesn’t include property tax, home insurance, homeowner association fees or mortgage insurance, since the down payment was 20%. If you put down less, you are typically subject to private mortgage insurance, or PMI.

At a 3.29% rate, the cost for such an arrangement is $1,575 a month.

The good news is that supply constraints are easing as more homes are coming on to the market.

“We are seeing a shift from where we were six months ago,” said Glenn Brunker, president of Ally Home.

“I wouldn’t say we are in a buyer’s market, but definitely the market where the seller controls the experience, the transaction [and] the price, we are seeing some softening in that.”

Here’s what to look at when adjusting your housing budget.

Consider your overall budget

Take into account all of your monthly expenses when looking at your housing budget.

The general rule of thumb for how much you should spend on housing costs is 30% of your income. Those costs include not only the mortgage payment, but also any property taxes, homeowners insurance and maintenance.

However, how much you actually devote to housing costs depends on your situation. If you don’t have children, perhaps you can spend more than 30% of your income — or if you have children or student debt, it may mean less than that percentage, Hale said.

“The No. 1 thing for buyers to make sure [of] is that the monthly payment is comfortable and fits their budget,” she said.

Look into available interest rates

In addition to having a dependable real estate agent, research mortgage lenders and find one you can trust. Compare available interest rates and be aware of any fees the lenders charge.

The interest rate you get depends in part on your credit score. Generally, to land more favorable advertised rates, your credit score should be over 740, Brunker said.

Work with your lender on different scenarios, so that you can get an idea of how your monthly payment would change with future rate increases. You can also test out different payments on a variety of mortgage calculators, from either lenders or sites like Bankrate or NerdWallet.

Consider your mortgage terms

There are different mortgage products on the market and different ways to approach calculating your monthly bill.

One way to lower your monthly payments is to make a larger down payment so that you aren’t borrowing as much on the cost of the property. That may work for someone who is selling a home and has a large amount of equity available, but this choice is likely a difficult one for first-time buyers, Hale said.

Similarly, shelling out money ahead of time by buying what are termed “mortgage points” can lower your interest rate. Each point costs 1% of the mortgage amount and typically lowers the rate by 0.25%, according to Bankrate. This approach may or may not work for your financial situation.

“It may be a very high cost to bring the mortgage rate down just a little bit, or sometimes you get a big reduction without paying many points,” Hale said. “Most lenders will give you the best execution rate.”

On the flipside, you can lower the final cost of the home if you get a 15-year fixed mortgage instead of a 30-year fixed loan, Brunker said. Right now, a 15-year fixed loan has a 4.95% interest rate, according to Mortgage Daily News.

“You’ll pay off the loan faster, saving 15 years of interest,” Brunker noted.

However, the monthly payments will be higher.

A riskier way to lower your payments is taking out an adjustable-rate mortgage. The loans offer lower initial rates than fixed-rate loans. After a certain period — which is generally three, five, seven or 10 years — the rate of the ARM adjusts to reflect current market conditions.

The risk is that once the fixed rate ends, you could wind up with a higher interest rate and, therefore, higher monthly payments. Make sure you’ll be able to afford those payments when the time comes, even if you think mortgage rates will eventually go down and give you the opportunity to refinance.

“I would not bet on that happening and risking long-term homeownership,” Brunker said.

Home Buying • Real Estate News • June 21, 2022

How Buying a House Can Hedge Against Inflation

by Shay Brunson

How Buying a House Can Hedge Against Inflation

Natalie Campisi

The cost of goods across industries is rising, leading to broader concerns about inflation and whether people will struggle to purchase the items they could afford in the past. But there are financial moves consumers can make to hedge against inflation. One of those strategies is to invest in real estate, especially when mortgage rates are low, as they are now.

The latest Consumer Price Index (CPI)—which is the weighted average of the price of goods and services over time—jumped 5% for the 12 months ending in May, the highest annual increase since August 2008. A rise in the CPI is an indicator of inflation.

As inflation rises, the cost of everything goes up, including real estate. However, if you can lock in a low-interest, fixed-rate mortgage, then the cost of your home—an appreciating asset—will stay the same as the value of your property rises.

“We often get hung up on the exact definition of inflation, but one thing we all know is that prices for a lot of items in the economy have gone up,” says Ali Wolf, chief economist at Zonda, a housing data and consulting firm. “If you have cash and are expecting inflation, you want to think through where you can put your money so it does not lose value. Housing is commonly looked at as a good inflation hedge, especially with interest rates so low.”

On the flip side, a bad inflationary hedge would be to leave your cash in a savings account. Even though banks usually pay higher interest rates during inflationary periods, the value likely won’t outperform inflation.

3 Ways a Home Purchase Is a Reliable Hedge Against Inflation

Typically, inflation ushers in higher prices for everything, including mortgage rates, home prices and rental costs. So, if you’re considering buying a home and think we might be heading for rising inflation, here are some ways buying a home now can help you later.

Lock in a mortgage with a low, fixed rate. The average rate for a 30-year fixed mortgage is bouncing around the low-3% range, making this a great time to borrow money. As inflation increases, mortgage rates will likely climb, so folks who lock in a low rate now can avoid paying higher interest rates later.
You won’t be exposed to rising rent. The rising inflation tide lifts all boats, including rent prices. Homeowners are shielded from mounting rental prices because their cost is fixed, regardless of what’s happening in the market
Property values increase over time. Tangible assets like real estate get more valuable over time, which makes buying a home a good way to spend your money during inflationary times.

Private Investors Are Taking Advantage of Cheap Money

You might have heard lately about private investors scooping up single-family homes, making it even more challenging for first-time homebuyers to enter today’s extremely competitive housing market.

Even though housing prices are surging, most homebuyers are interested now because they want to take advantage of the low interest-rate environment. Likewise, investors are keen on getting cheap money for assets that will go up in value.

In the first quarter of 2021, investors bought one of every seven U.S. homes purchased, which is a significant jump from the previous three quarters, when they were grabbing about one out of every 10 homes. Investors are the largest segment of buyers of multifamily properties, making up 25.8% of all purchases in the first quarter, according to a report by Redfin.

Lennar Homes—one of the largest homebuilders in the United States—recently announced it was purchasing more than $4 billion of new single-family homes and townhomes in high-growth areas in order to rent them out. This is a prime example of investors hedging against inflation while loan rates are low.

“If an investor can lock in a low 30-year, fixed-rate loan, offset that with rising rents due to lack of housing supply and also enjoy the property value appreciation that has been roaring through the U.S., that investor would be well suited against rising inflation,” says John Toohig, a managing director at Raymond James. “Couple this with fintech—like Airbnb, Landing.com or Whyle.com,—making rental access ever easier for consumers and you could see a surge in this product.”

Where Inflation is Headed

For nearly a decade, the Federal Open Market Committee (FOMC), which is in charge of monetary policy for the Federal Reserve, has set the inflation target at around 2%. Inflation has consistently fallen short of that goal, so its new spike—deemed transitory by the Fed—is not as concerning.

Because of scarcity in different parts of the economy, from computer chips to the labor market, the cost of goods and services is rising. This causes inflation to climb. Whether it’s a short-term rise or the beginning of a longer inflationary period is still uncertain.

“The near-term inflation is almost a free lunch and it’s something the Fed wants to encourage,” says Chester Spatt, professor of finance at the Tepper School of Business at Carnegie Mellon University. “Central bankers are more fearful of deflation than inflation. People will delay purchasing goods in deflation which really gets in the way of an effective economy.”

Some economists, like Gus Faucher, chief economist at PNC Financial Services Group, expect inflation to remain at around 4% through the end of the year, followed by some tapering in 2022, with inflation falling to 3%.

“This 4% level is above the recent average, but it’s certainly contained,” Faucher says. “Inflation in 2023 and beyond will be around 2% to 2.5%, right where the Fed wants it.”

Final Thoughts for Homebuyers

Although buying a home can help protect the homeowner’s money against inflation, buyers should still consider how long they plan on staying in the house.

Because closing costs are so expensive, buyers have to factor in those costs before buying a home because it impacts your ability to afford that home in the long run. When you purchase a house you will pay between 2% to 6% of the purchase price in closing costs. And when you sell the home, closing costs can run anywhere from 1% to 3% of the sale price.

If you don’t accrue enough equity in your home to cover those costs, you could end up losing money on the sale. Similarly, some people are purchasing homes above the appraised value, which means they start out in their new home upside down on their mortgage—they owe more than what the property is worth. This is not a good position to be in if you don’t plan on staying in the home long enough for appreciation to catch up.

Often, the only thing that can help you build equity is time. Of course, there are wild card events that cause a housing market boom, and you could see your home appreciate much more rapidly than the average appreciation rate, which is typically 3% to 5%.

Today’s housing market is a great example of rapid price appreciation. Depending on your area, you could be paying top dollar for a house. This isn’t necessarily a bad thing if you plan on staying in the house long-term, says Steve Schnall, CEO of Quontic Bank.

“Even homes that were bought at the peak of the housing market, prior to the Great Recession of 2008, are worth much more now than they were then. Time smoothes out the dips and proves equity growth,” Schnall says. “If, on the other hand, you’re buying with an eye on flipping or simply as a speculative move, buyer beware.”

Home Buying • May 25, 2022

Is it Better to Rent or Own a Home? Here’s How to Decide the Right Move for you

by Shay Brunson

Is it Better to Rent or Own a Home? Here’s How to Decide the Right Move for you

Michelle Fox

With skyrocketing housing prices, homeownership may be out of reach for many Americans.

Yet rents are also rising. So how do you know if you should own a home or rent? It depends on a number of factors, experts said.

“If you’re not sure whether or not you want to rent or buy right now … it’s better to make your decision based on your personal situation and your personal needs,” said Lexie Holbert, housing and lifestyle expert for Realtor.com.

More from Invest in You:

When to up your home-buying budget or stick to your original price. Why you should start paying off debt now — and how to get started. Inflation is costing U.S. households nearly $300 more a month.

Home prices jumped 19.2% year over year in January, according to the S&P CoreLogic Case-Shiller Index. Meanwhile, single-family rental homes gained a record 12.6% in January from 12 months prior, according to CoreLogic.

On top of rising prices, mortgage interest rates are also soaring, hitting their highest level in more than three years last week.

When it comes down to the numbers, it’s generally more affordable to own a home, but the gap in affordability is shrinking as interest rates rise, according to ATTOM, a real estate data tracker. Owning the median-priced home is more affordable than the average rent on a three-bedroom home in 58% of the country, ATTOM reported in January.

To be sure, affordability is an issue for many. Fully 64% of non-homeowners said it’s holding them back from owning a home, including 43% who believe their income levels are not high enough, a Bankrate survey found. High home prices and the inability to swing a down payment and/or closing costs were also constraining buyers.

Here’s what to consider when making a decision whether to own a home or rent.

Timing is everything

Before you consider buying, think about where you are in your life. Are you looking to settle down somewhere for a while or will you be moving in a couple of years?

The general rule of thumb is it takes about five years to seven years in a home to recoup the purchase costs, Holbert said. That includes closing costs, which add between 2% and 5% to the purchase price.

“If your home needs are going to be pretty consistent and pretty stable over the next few years, now may be a really good time to buy for you,” she said.

“If they’re changing, you may want to consider renting so that you have the flexibility to move.”

Check your finances

Ask yourself if you are financially ready to own a home. That includes having enough emergency savings in case something happens in your first year of homeownership, Holbert said. You should also have enough monthly income to afford the mortgage payment, taxes and insurance, as well as extra monthly expenses like utilities.

Check your credit report, as well, since your credit score has a direct bearing on the mortgage you’ll get and interest rate you may pay. If you see any mistakes, get them corrected before you apply for a loan.

If you can’t afford the monthly payments, continue to rent and keep saving money if homeownership is your ultimate goal, Holbert said. If high rent prohibits you from saving, consider downsizing or making other big lifestyle changes so you can start putting more money aside.

“You’ll read that if you cut back on your $4 latte habit, it could really help you save for a home,” she noted.

“While it’s really good to save, where you’re really going to find that big cash for that down payment is going to be in those big spending categories, like housing or your car.”

Know your number

Figuring out what you can afford if you were to purchase a home is especially important now as home prices are rising, Greg McBride, chief financial analyst at Bankrate.

This way, you have boundaries set around your home shopping.

“The position you won’t want to be in is falling in love with a home and getting your offer accepted and then having to figure out how to pay for it,” he said.

Check out homes in your price range to determine if they fit your needs.

You can also use online calculators to help you make a financial determination between renting and buying.

Also, keep an eye on rising mortgage rates, Holbert warned. The Federal Reserve has indicated it will increase interest rates six more times this year, which, in turn, impacts mortgage rates. That’s why, if you are currently in the market to buy a home, it may be better to do so now before rates and prices climb higher, she said.

Just don’t get caught up in FOMO — or the fear of missing out. That could lead you to regret your purchase and put you in a financial bind down the road, McBride said.

“The novelty of that house will wear off; the mortgage payments will not,” he said.