Winter Maintenance

With a 2,000+ mile long winter storm affecting much of the country, there are plenty of home owners who wish they were better prepared.  Even when you live in warm climates, some of these things are important to check periodically.

Preparing for the change of seasons can make your home more comfortable and protect your investment.  Regular maintenance extends the various components of a home and can generate savings in operating costs while avoiding expensive replacements.

• Weather strips around doors and windows should be checked for possible air leaks.
• Caulking around windows and doors should seal out moisture and air leaks.
• HVAC should be inspected and serviced by a professional annually.
• Smoke and carbon monoxide detectors should be tested regularly.
• Duct work and supply lines from water heaters should be insulated.
• Fireplace chimneys should be cleaned regularly and fireplaces should be inspected for cracks in mortar and to see if the damper closes properly.
• Gutters should be free of leaves and debris to prevent rainwater build-up.
• Tree branches touching or hanging over your roof should be trimmed.

Please contact us if you need a service provider recommendation.
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Who's Paying Your Mortgage?

As a homeowner, you obviously pay for your mortgage but as an investor, your tenant does.  Equity build-up is a significant benefit of mortgaged rental property.  As the investor collects rent and pays expenses, the principal amount of the loan is reduced which increases the equity in the property.  Over time, the tenant pays for the property to the benefit of the investor.

Equity build-up occurs with normal amortization as the loan is paid down.  It can be accelerated by making additional contributions to the principal each month along with the normal payment.  Some investors consider this a good use of the cash flows because interest rates on savings accounts and certificates of deposits are much lower than their mortgage rate.

In the example below, is a hypothetical rental with a purchase price of $125,000 with 80% loan-to-value mortgage at 4.5% for 30 years compared to a 3.5% for 15 years.  The acquisition costs were estimated at $3,000, the monthly rent is estimated at $1,250 and $4,800 for operating expenses.



Notice that both properties have a positive cash flow before tax.  The cash on cash return is the revenue less expenses including debt service divided by the initial investment to acquire the property.  The 15 year mortgage will obviously have a smaller cash flow and lower cash on cash but the equity build-up is significantly higher.

If the goal of the investor is to pay off the property to provide the highest possible cash flow at a later date, a shorter term mortgage with a lower interest rate will help them achieve that.  A simple definition of an investment is to put away today so you’ll have more tomorrow.  Sacrificing cash flow now, during an investor’s earning years, is a reasonable expectation to provide more cash flow in the future when it might be needed more.

Contact me if you’d like to explore rental property opportunities with an experienced buyer agent.

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Marilyn Messenger is an Accredited Buyer Representative and a member of the Real Estate Buyer Agency Council and has been representing buyers and sellers in Wayland, Sudbury, Maynard, Concord, and the towns west of Boston since 1993.

If I'd Known...

We’ve probably all said or at least thought “if I knew then, what I know now, I would have done things differently.” We should have stayed in school longer. We should have listened to our parents. We should have bought Apple stock in 2002 for $8.50 that sells for $400 today. Or we could have bought gold in 2000 for under $300 for a four-fold profit today.

Years from now, if we look back at 2012, we may say that it was the best buyer’s market ever. Even now, in 2013, it’s apparent that both housing and mortgage prices are going up and they may never return to the record low levels.
The housing affordability index, which is considered to be good at 100, had increased to over 200 this past December, January and February. Shrinking inventories and rising prices in most markets have caused the index to fall to 172.7 for May 2013.

This market applies equally to acquiring a home to live in or a home to use as a rental. It is estimated that about 30% of the property purchased last year was done by investors. It is understandable because the positive cash flows far exceed most other investment alternatives.

Homeowners moving up in a rising market may sell their home for more by waiting but it will also cost them more for a new house. Typically, a person buys a 50% larger home when they move up. If they wait for prices to go up 10% on the $150,000 home they're selling, they’ll realize $15,000 more but will pay $22,500 more for the new home purchase. They’ll actually net $7,500 less by waiting for prices to go up and may have to pay a higher mortgage rate too.

The question homebuyers and investors alike are faced with today is whether they will be saying years from now that they seized or missed an opportunity of a lifetime.
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NOTE: Housing prices are examples taken from national stats. The prices in Concord, Wayland, Sudbury and the suburbs west of Boston are substantially higher, however the principle concept in this post still apply.

View market reports, search for homes and sign up for MLS listing updates go to www.MarilynMessenger.com or call 508-596-3501.

Renters Want to Buy

Fannie Mae, in a recently released study, states that consumer attitudes continue to be favorable about homeownership, particularly with the younger generations, ages 18 to 34. Slightly over half of them think that owning makes more sense than renting when comparing the financial and lifestyle benefits.
90% of aspiring owners expect to purchase a home someday and slightly over half think they’ll do it within five years. The primary challenges are having sufficient savings and the difficulty of getting a mortgage today.

Younger renters see renting as a temporary stepping stone toward homeownership.
Homeowners are far more likely than renters to be “very positive” about their housing experience. Some of the benefits identified are:

• Having control over what you do with your living space
• Having a sense of privacy and security
• Having a good place for your family or to raise your children
• Having the best investment plan
• Living in a nicer home
• Building up wealth
• Saving for retirement
• Living in a place where you and your family feel safe
• Feeling engaged in your community

To satisfy a buyer’s doubts about qualifying for a mortgage, make an appointment with a trusted mortgage professional. If you’d like a recommendation at no cost or obligation, please contact me at marilynmessenger@realtor.com.  Check out this Rent vs. Own to see the real cost of owning a home.
For more information about the Fannie Mae survey in presentation form, Click Here.

Will the "Good Life" Be Ready When You Are?

The Life of Riley was a TV show from the 50’s starring William Bendix but the title’s origin came from an expression meaning that a person was living the “good life.” Most people envision themselves living the good life by retirement but don’t really have a plan to get there.

There’s a rough rule of thumb used to estimate how much net worth a person would need by the time they retire to generate a certain income. The target annual income is divided by a safe, conservative yield to determine the investable assets needed.

A person who wanted $100,000 annual income generated from a 5% investment would need investable assets of $2,000,000. If a person had $500,000 now, they would need to accumulate $1.5 million more by the time they retire. If it was estimated to be 15 years away, they would need to save about $100,000 a year, each year until retirement.
It is a sobering example that could be depressing without a plan. It might be easy to say, “I should have started sooner” which may be true but there is still hope.

Gradually, over the next several years, accumulate rental property and allow the tenant to retire the debt for you. The equity in each property will grow from the amortization of the loan each time a payment is made. It also grows as the property increases in value due to appreciation.

Single family homes as rentals offer the investor an opportunity to meet their retirement and financial goals for the following reasons:

• The ability to borrow large loan-to-value mortgages
• At fixed interest rates
• For long terms (easily up to 30 years)
• On appreciating assets
• With significant tax advantages
• And reasonable control not offered by alternative investments.

Handling the Eyesore

It can be unsightly and upsetting when a home in a neighborhood isn't being maintained like the others. It might be an overgrown yard, a fence in need of repair, paint peeling on the home or even a car parked in front of the home that hasn't moved in weeks.

I believe most people want to be good neighbors and may be willing to correct the issue once it is brought to their attention. In some cases, they may not agree with the same urgency and it might be necessary to seek other remedies.
The most expedient solution may be to contact the responsible person and describe your perception of the problem. An owner-occupant may be sympathetic to the neighbors and more than willing to correct the issue.

However, if you suspect that it is a rental property, check with the county tax records to identify the owner. They may be unaware of the situation and would actually welcome the "heads-up" to protect their investment.

The next step might be to notify the homeowner's association if there is one. The covenants or bylaws will specify how properties must be maintained and the association can enforce them.

The final step would be to notify the city for a possible code violation. Most cities have a separate code and neighborhood services division and some cities have 311 for non-emergency assistance.

Manners Matter - Home Buying Etiquette

It is often surprising how easy it is for people who are generally considerate and well-mannered to forget their manners when they are looking for a house. Sure, it’s not something people do every day; it’s a big purchase and at least a little scary for most people. Sometimes, when there’s more than one person involved they may not agree, the kids are cranky from driving around, and everyone is concerned about making the right decision. All of these stress factors can cause people to act in ways they never would otherwise.

Here are a few things to keep in mind as you begin the home buying process:

1. Information. Houses belong to someone even when they are on the market. Owners want know who is asking about their home - wouldn’t you? When you contact a real estate agent or call an office be prepared to give some basic information – name, address, phone number, and whether or not you are pre-approved for a mortgage.

2. Get pre-approved for a mortgage. Don’t be offended if an agent won’t show you a house if you are not pre-approved for a mortgage. Instead, ask who you can contact to get it done. Without a recent pre-approval, you run the risk of either falling in love with home you don’t quality to purchase or worse, you might miss out on your dream home because you thought it was out of your price range.

3. Open houses. Please sign-in and give correct information. If you are under contract with a buyer agent, make sure you write that on the sign-in sheet. If you don’t want the agent at house to contact you just write please do not contact next to your information – we respect your request.

4. Plan ahead. Houses are shown by appointment. If someone is living there, they need some notice to pick up and get out – very few people can keep their house ready for visitors with a moment’s notice – can you? Even new construction is shown by appointment – there might be workers at the house, etc.

Also, it is not realistic to call an agent or an office from in front of a house and expect an agent come right out to meet you. Imagine calling your lawyer, dentist, hair-dresser, plumber, mechanic, financial planner, or anyone else expecting on the spot service!

6. Invest an hour. Set up a meeting with an agent at their office (or other convenient location) so you can talk about your needs and get to know each other. Buying a home is a big investment and can take several months – don’t you owe it to yourself to invest an hour upfront?

7. If you bring the kids. For their safety and the safety of the home and the owners belongings, keep your children by your side at all times, especially in new construction where things are unfinished and may be dangerous. And please don’t let them play with the home-owners’ kids toys - wouldn't you feel aweful if they broke something!

8. Respect property. Of course you need to look inside closets and cabinets, etc. Dresser drawers, medicine cabinets, and all personal belongings are off limits. But please don't sit on someone’s bed or use the master bath – sellers know they give up some privacy when their homes are on the market but put yourself in their shoes!

9. Loyalty matters. If you are under contract with a real estate agent, always contact that agent when you need information. People can get really impatient sometimes or they don’t want to “bother” their agent so they start calling offices or listing agents demanding information or make an appointment pretending that they are going to be clients.

Call your agent – he/she will call you back. If your agent doesn’t return calls and give you the information you need then find another agent. If you can’t stop yourself from calling an office or listing agent directly, make sure that you disclose that you are working with an agent right away and that you would appreciate some information.

10. Golden Rule/Common Sense – as with everything else, treat others the way you would like to be treated and the home-buying process will be efficient and the transaction will be a lot easier. If you’re not sure what the protocol is, just ask – we’re here to help!


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