COMING SOON - PEARL STREET - Available 3/1/2019

Hey everybody! Hope you are all enjoying our transition to spring. We are looking forward to more sun and brighter days.

I was notified today that our clients at Pearl Street have received military orders to move elsewhere. We are sad to see them go because we have loved having them!

However, it DOES mean that our fabulous Pearl Street. home is going to be available a bit sooner than we thought! If you or someone you know is looking to rent a home in Haymount, please contact us right away. We are going to be scheduling showings soon. This home classically rents out very quickly, so please do let me know if you would like to take a peek!

Here is an overview of the home, and you can access the information on our website here at Pearl Street. and also on zillow at 547 Pearl Street, Fayetteville, NC 28303. This home features great materials and designs, and we know you’ll adore it like we do!

Thanks for passing the word and let me know if you are interested or have any questions. I’d love to answer them for you!

All the best - enjoy this gorgeous transition to spring!

- Casey

INTRODUCING GLENVILLE AVE - OUR NEWEST HAYMOUNT HOME

We are delighted to announce the completion (or near completion anyway) of the newest Haymount Home: Glenville Ave.  This 1941 beauty features 2 bedrooms and 1 one bathroom and is on a wonderful street in the heart of Haymount.

This project was a shotgun renovation, featuring top to bottom renovations throughout, and it was completed in less than 8 weeks.  We discovered this home and realized that it needed to be brought back to its full potential and could not wait to get moving on making it shine!

Please enjoy this home tour.  Forgive the fact that everything was not perfectly cleaned up (floors still need cleaning and there are a few little things missing like the smoke detectors that are not in and a few missing outlet covers :)  They will be finalized this week.  There is also a shed that is still under construction and will be renovated as well.  Our focus was on the house for now.  Don't worry - over the next few weeks we will be featuring a bunch of blog posts with before and after photos for your enjoyment. 

Normally we stage all our homes to highlight their beautiful potential, but we were not able to do that for Glenville....because we already have clients moving in!  They contacted us prior to finishing the renovations and fell in love with Glenville.  We could not turn them away and they promised to decorate it beautifully and let us come back for pictures; we are excited to see how they make it their home!

We welcome your feedback on Glenville.  Please drop us a line and let us know your thoughts.  What did we get right? What did we miss? Though Glenville was rented before it even hit the market, there is good news in store: we start our next project at the end of the month, so stay tuned!

“House + Love = HOME”

Hope you enjoyed our tour!  Drop me a line and let me know what you think!  Have a great week!

- Casey and Carl

DUE DILIGENCE PERIOD - WHAT TO LOOK FOR

Hey everyone!  We are in the due diligence period on our new rental home on Greenland Dr.  I realized today that some of you might benefit from a breakdown on how we go about this process and what it even means, so allow me to explain.  Also, I wanted to update you that I will start using #HAYMOUNTHOMESGREENLAND for those of you that want to follow the updates on social media. 

Have you ever bought a home?  If you have, you know that it can be overwhelming because there are so many things to look when trying to determine if you have made a safe investment.  You have a lot of moving parts during this process including but not limited to: two realtors, the sellers, lawyers, loan officers, inspectors, appraisers and more. There can be a lot of companies or groups involved, including home owners associations, managers, utilities, county tax offices and more.  Seeing that list can be enough to make you decide to rent forever!  

WHAT IS DUE DILIGENCE?

Because things can get a bit complicated with all those people involved, typically written into a contract is a due diligence period.  The due diligence period is a protected time designed to allow you the chance to inspect the home and determine that you do indeed want to proceed with the contract for the home you are purchasing.  During this time, you can decide to pull out of the contract if you find out something more major is wrong with the home. 

Let's give you an example.  Pretend you have found your dream home and have signed a contract for purchase.  You receive an inspection report and it identifies that the home will need an entirely new foundation.  You receive the estimate for the repair and it will be $40,000.  Yikes.  You might decide to change your offer price or you might decide to move on to a different house.  You have inspected the home (and done your due diligence) and have determined that this home is not for you. 

If you have a great realtor, he or she will likely guide you through the process of due diligence.  That stated, this post can serve as a guideline for anyone looking to purchase a home.  This is how I go about looking at things on a potential rental home.  Disclaimer: I am not a home inspector, nor are my contractors.  I don't recommend you skip the inspection if you want a more complete picture of your home).  Sometimes it takes a bit of time for an inspection to happen and I get antsy....so this guide is intended to be used as an overview of what to look for while you wait. 

DUE DILIGENCE CHECKLIST

When looking at a home, I don't get too bogged down in the smaller details of a home.  I know that much of that can add up, but I know that a lot of small things will likely be addressed as we remodel.  This is especially true of property in a rough condition.  I will just add additional money into my figure planning to cover several minor things (ie, floor treads, replace and outlet, change a light fixture, etc).  What I am looking for during due diligence are the "big guns" that are going to really change the matrix of my situation - aka, a deal breaker.

CRAWLSPACE

Ready to get down and dirty?  It's time.  With my contractor, I inspect the outside of home home, looking for cracks, instability, and any signs of decreased function.  Then I get my trusted 'nasty clothes' on and head under the house.  So far, I have not encountered any creatures or dead bodies under houses (though I will admit, I wonder every time...) I get under there and he points out anything of concern.  I see the trusses, the floors, the support, any areas of improvement or water damage, or any signs of termites.  I look for mold, moisture or entry points that are open.  While we are there, we consider the electrical, plumbing and insulation under the house. I am not an expert, which is why I rely on my contractors (who I love!!).  I go with them under the house so I can visualize what really needs to happen.  If you want to understand, you need to see.  If there is any suspected mold, I call my water mitigation people for testing.  If there is any question of termite damage, I call my pest people for their opinion.

HEATING AND AIR "HVAC" unit

Here is another area for an expert. I call in my HVAC guy in an have him inspect the unit.  We test the functionality and note the age of the unit.  Most units can be considered "good" for 15 years, "might consider planning replacement" at 15-20 years.  After that point, you are lucky to have it going but better be sure that you plan for an upcoming replacement soon.  I also have him look at duct work and any additional venting that I might have to change in the house.  

ELECTRICAL

I look at the electrical panel.  If that has been updated, you'll know that you are at least in decent shape.  If anything in your plan is considering space addition or renovation, you might need to adjust the panel size and that can cost a bit of money.  Additionally, I find that the panels are often in less than desirable locations.  Sometimes I am considering moving them or flipping them to a new wall to make my renovations.  I want to be sure that can be done, and at what cost. 

FIREPLACE

Look for damage and functionality.  Has it been cared for? Is it safe?

ROOF

Don't miss this.  You'll want to have a roofer estimate the age of the roof and condition.  Fortunately, my contractor also does roofs, so he is easily available. Flat shingles have about a 20 year life, architectural shingles about 30, metal Roofs about 50, and asbestos roofs can last 80 years.  You'll want to see what you might be getting into with the roof as far as any repairs or replacements. 

WINDOWS

These can be costly.  Look at the seals, seams and any frame damage that might have been caused by water entry.  If they are painted shut, old or dysfunctional, you might need to consider replacement.  This can get pricey.  Know what you are in for. 

SIDING

Check condition and type. Look for damaged sections that might need repair. Look for any wood rot as well. 

PLUMBING

Check that the water works, toilets flush, fixtures turn on and off.  Simple, but easy.  If you see a back up, you might want to investigate that.  I simply call my plumber and have him go after it and let me know what the issues might be.   In older homes, I am often relocating things like washers or hot water heaters.  That is the time to ask the plumber about my plans to make sure they are feasible. 

LANDSCAPE/OUTDOOR

Don't overlook this.  Cracked patios, broken steps, decks, walkways, pools, garages, sheds and other buildings can rather quickly add up in additional costs.  Note any issues you see and be sure you don't have any huge corrections to make.  Also note any yard maintenance issues that might need to be addressed.  Additionally, you will need to look at the trees - do they hit the house? Do they need trimming? Are any of them at risk for being too close to the house?  Take a good inventory of what needs to be done.

ASSESSMENT OF FINDINGS

Now it is time to look at everything and determine if the amount of repair or changes to the property that you have in mind is going to fit in your budget and keep the home in the end price range that you anticipated.  If the repair list is very long, you might consider asking the sellers to make repairs - or adjust the asking price.  If it isn't too high or you are getting the house at a good deal, you are doing well.  If the house is sold 'as-is', that means there are no repairs by the seller and you'll be stuck with all of them!

HOW DOES OUR NEW GREENLAND HOME STACK UP?

Great question.  We are ending our due diligence period soon.  Here are some things that I have called in my "people" for and this is the plan:

1. CRAWLSPACE: Floors have settled which is not uncommon in the historic homes and in the south's sandy and clay based soil. I wanted to be sure that things were not unstable underneath the house. Fortunately, we are in luck.  There has already been work underneath the house to reinforce the issue.  Perfect. Some of the floors will need repair on the inside of the home, but that is better than all the joists and foundation under the house too!

2. HVAC: HVAC system is 30 years old and somehow STILL working.  It's good...for now anyway, but we know a new one is on the horizon. Might have to move a few floor duct vents.  No biggie. 

3. ELECTRICAL: Kitchen needs a new layout and possibly need to move an electrical panel. I am going to created a laundry area and that will also move the water heater and washing machine.  My contractor, plumber, and electrician are all on board for changes.

4. FIREPLACE:  Fireplace has a lot of settling, but is stable.  I don't think it is safe for use - still need to find that out, but we usually don't allow them to be used in our leases due to safety.

5. ROOF: We will replace the roof.  Too many small areas need repair.  The roof is not that big on this 1000 square foot house, so we might as well replace it all. 

6. WINDOWS: It's time for new windows.  The original windows are lead weight windows, which are harder to remove.  This will be a J.O.B.  Sorry contractors :(

7. SIDING: Good condition with minor issues.  We'll probably leave it alone but make sure it gets a REALLY good bath!  Some areas of damage will need to be replaced.

8. PLUMBING: Ours sound for the most part, some newer updates, some are older, so we might need to make a few changes here and there.  The bathroom is a gut job.  The floor has water damage, but fortunately the joists below are still solid (THANK YOU OLD WOOD!!!) and there doesn't appear to be any mold growth or anything.

9. EXTERIOR: Still awaiting an estimate from my tree guy about trimming several trees and removing some dead trees.  This won't be anything too intense.  Mostly, just clean up here!

“Diligence is the mother of good fortune”

— Benjamin Disraeli

We are moving forward with our new home and will continue to plan on closing in a week.  There are repairs to make, but we knew that when making our offer.

What do you think? Have you ever had to pull out of a home purchase during the due diligence period?  What was your deal breaker? I'd love to know!

- Casey

OUR NEW PROJECT

YIPPEE!!  I am happy to announce that our next project is underway!  We are under contract for our next Haymount Home and could not be more excited to get the ball rolling on this historic charmer.  This home will be our smallest home, but we are planning to pack it full of charm and make a wonderful happy home!

There is a LOT to do with this home, so I figured I would give you all a little glimpse on my planning process at this stage in the game.  We are conducting our due diligence on this home (meaning we have a week to determine if it is more than we want to handle).  Once that window is complete, we are going forward with the contract.  Currently, we are set to close 2/1/18.  

The rehab work on this little gem is going to be slow and steady because we plan to save up money and pay for everything in cash as we go along.  In our efforts to avoid too much debt, we figured that it'd be better to take this approach with this darling little home.  Though it will take a little longer, it will be fun to have the time to really think through the decisions and try to optimize this home for it's next occupant. 

During this time period of due diligence, I usually do several things to determine what potential work is required for a home.  I figured illustrating my thought process might be helpful to someone in the same situation or looking to get into the rental market.  However, my brain tends to go all over the place, so just strap-in and take the ride! One disclaimer: Pictures are deceptive.  Although adorable, this little home home needs quite a bit of help.  The pictures don't fully illustrate that.  Once we have the home closed, I will be going through to take more detailed photographs for our projects and repairs needed.  For now, you'll have to trust me on these things!

Let's begin.

EXTERIOR

Siding - Pretty good shape. A couple of holes (repairable I hope)

Roof - Time for a new one

Front Porch - some rot - will either repair or replace

Front Porch Trim - damaged - needs replacing

Screen Door - rough.  either will clean up or it will get a new one

Front Door - hoping to preserve this with paint

Windows - yikes. Old and charming with pulley systems still in place. Super cool, but not that efficient and difficult to operate overall.  Poor painting in the past.  We'll see.  Either clean them up well and see what we have left, or replace.

Shutters - probably will paint. If need be, we'll replace.

Mailbox - Missing - needs one!

Porch Light - functional, so that will probably stay

Foundation - so far so good, but there are some soft spots inside the home, so I question some of the joists below.  I am going under the house on Sunday to inspect everything with a contractor friend.

Backyard is awesome - private and cute - needs some clean up (cannot really see from this photo)

Back Door - Jam is rotting out.  Will probably just replace the whole thing.  This house is on a hill and water likely heads that way.  We are going to have to consider some options for controlling that issue.

Rear Door Light - ugly and needs a new one

LIVING ROOM

Check out those hardwoods!  They are lovely however someone did a really bad patch on the side of the room.  I will photograph it later, but I am going to see if magic can happen and they can be repaired...then the entire house is desperately in need of refinishing.  I wonder what stain we should go with??

Replace Shoe Molding - for some reason, it was removed in this room.  Needs to go back!!

Fireplace - no clue if it works.  It is also sunken a bit on the right.  Not sure it is still sinking, but need to find out. Back to under the house.  Either way, it is still charming. 

How about that awesome window trim? Love the thickness and detail. probably will loose the window cornices though.

Walls all need some addressing. Ceilings need some crack repair.  Work.....

KITCHEN

Yikes.  Lots to do here.  This is just one side of it.  There is actually quite a bit of space for such a small home. Normally you find a lot of galley kitchens in homes like these, so I am excited to have a little room for play here. 

Flooring - going to be getting new flooring (unless the budget gets too tight)

Cabinets - replace. We need to add more and these have seen their time.  Time to go.

Sink - double stainless steel. Will likely keep unless I find a great deal on something amazing!

Faucet - old and boring. Could work but I would like a better one. 

Appliances - time to replace. They are actually nice functionally, but they are unattractive and I would like better ones.  Unless something gets crazy on the budget, I plan to replace.

Walls and Ceiling need some work.

This is going to add up in this room, but I cannot wait to see it happen!

DINING ROOM

Floors - again, refinish

Wall and Ceiling repair 

Definitely a new light fixture (something beautiful needs to happen here - it will be gorgeous then!)

Loose the window cornices 

BEDROOM ONE

Refinish Floors

Repair walls/ceilings

Clean up the closet

New Light fixture or Ceiling Fan

BEDROOM TWO

Same thing, clean it all up by doing the floors, cleaning up the closet, fix walls and ceiling, and then get a new light fixture or fan

BATHROOM

This has to be great for a one bathroom house to work well for anyone.  This one is going to be a bit pricey with all the needed work. 

Tub - lovely original porcelain tub. Might need a reglaze, but mostly it looks like it needs its own deep cleaning bath first.  We'll see. It stays for sure.

Tub surround - this is less appealing. If the budge allows for all new tile in the bathroom (walls and tub included), then I will go for it.  We'll have to see what the money looks like.  At a minimum, some things need repair. 

Vanity - functional, not that old. Might be repainted, but ideally, I will replace this.  I love pedestal sinks for beauty, but they do lack storage. We'll see.

Toilet - seems okay, but house is winterized so there is no plumbing to check.  It's not ugly though! Needs to be re-grouted at the base.

Mirror - dull.  We can do better.

Light - rusted. time for a new one. 

Closet - small inside but there - yay storage! Needs repainting.

Floor - OH MY.  Mostly rotted out. Not good - needs complete repair and replacement.  

BACK PORCH

Enclosed back porch. Loving that ceiling actually. Hating the paneling (what's new?)

Lots of potential on this, but needs to be thought through.  I am not sure it is wired and vented for heating and air, so I am meeting with my HVAC man on Sunday to look at options. 

If we can get this space heated and cooled, I want to make it an awesome laundry and mud room. I know it has great potential, but at what cost? That is the question.  The floor is a little angled away from the house to prevent water being an issue (remember the rotting door - that is at the back of this room).  I am wondering if we level the floor with concrete leveler (expensive) if it would elevate the floor more and prevent water issues.  Not sure.  I need to discuss the options with my contractors.  

This would also require re-routing water lines.  I would like the water heater and the washing machine (both currently in the kitchen), to find a new home out here.  That will require a new plumbing.  It will also require my electrician to complete some changes too. 

However, if we can finish off this space and make it "finished square footage", we will add nearly $10,000 or more to the value of the house.  Not bad, but it could cost a bit in the process.  We'll see.

OTHER CONSIDERATIONS

Hallway has need for floor repair and refinishing

Attic access is difficult and small.  I have no clue what shape it is in.  This house also lacks any storage building or garage, so my easiest place to claim the storage would be the attic.  I need to install an attic pull down and stairs in the hallway.  

Attic storage - going to likely have to floor part of the attic for storage and I anticipate there being almost no insulation left up there. I am just hoping it is not a disaster up there as who knows when it was last looked at. 

Access to wiring.  The house looks like it has been somewhat updated for wiring, but getting up to the attic will help further determine that.  It will also help create the ability to adjust the wiring in the future.  Clearly, we need to get into that attic!!

“Everything has beauty, but not everyone sees it.”

— Confucius

SHARE YOUR THOUGHTS!

Thanks for joining my home tour.  What are you thoughts? Have we lost or minds or does this little home have potential to be great? Would you take on a project like this? Does the idea scare you?  I would love to hear your thoughts!

I will keep you posted......

- Casey

FINDING A GREAT RENTER - PART ONE

Success in renting  home boils down to the ability to secure wonderful rental clients.  We have been blessed and amazed by the quality of people that have rented our homes.  We find these great people by looking for great people. The best way to find them, is knowing what they are wanting in a home, and making sure you provide that.  Renting a home is a lot less tricky when you know what your clients are looking for. 

This is the first in many posts I will make regarding things we have learned in managing our rental properties (and, quite frankly, learned from having rented homes ourselves!  We were very aware of what we wanted as renters too!).   The list is long, so I am breaking it up over several posts, so be sure to check back for more details!

We have always had the philosophy that if we took good care of our clients, they would take good care of us and our home.  The golden rule of life: do unto others as you would want done to you.  It naturally makes sense that you would then look to offer qualities in your rental home that prospective clients would want. Thus, it is good to have a global understanding of things that matter to lots of prospective clients so that you can be attractive to them and hopefully gain a great renter in the process!

SAFETY

Everyone wants to be safe.  According to recent market date, nearly 70% of prospective renters indicate their home safety as a top priority in their home rental decision.  Safety is a basic need in life.  When choosing rental properties as investments, choose homes in safe locations.  Homes that have access to fire hydrants, fire stations, and law enforcement offer inherent safety measures.  Neighborhoods that are well cared for with neighbors that look out  for one another increase the safety of homes.  Street lights and proper traffic signs, sidewalks, and crosswalks all factor in to improved safety measures.  If your client asks to install a home security system, by all means let them.  Provide fire extinguishers for their use, and change smoke detector batteries each time a new client moves in.  Offer proper exterior lighting to ensure safety outside the home, especially at night.  Inform them of community programs that are created to enhance their safety, including neighborhood watch, community briefings from law enforcement, and more.  Be helpful regarding safety and what measures they can take to be safe. 

ONLINE ACCESS

This is no surprise.  The number one way prospective clients look for a new home is through online searching.  There is no easier and more efficient way to look for homes, especially if they are making a long distance move.  Showcasing your property online is essential to making sure they can save time and energy in their search, as well as discover your property.  The more information you can provide them, the better.  Don't limit the information to just details about the home for rent.  Educate them in the community, neighborhood, schools and more.  Help make their distance move easier by answering any questions they might have.  If you want to go a step further, offer them the opportunity to transact online. If you can have electronic delivery of your rental documents, your forms, rental payments, and maintenance requests, that is even better.  Renting is moving to an online platform and you'll want to be a part of it for maximal success.

GOOD REPUTATION AND EXCELLENT COMMUNICATION

You need to be an excellent communicator to have excellent clients.  Try to respond to each request from a prospective client (and current renter) within one day.  I personally strive to respond within an hour if the request is made before 9 PM or after 7 AM.  Have you ever rented a home?  It is frustrating to have issues arise and to have to wait for them to be dealt with.  Even if you cannot solve the problem in that first contact point, acknowledging that you have received the problem is enough to help with your client's piece of mind.  Have you ever been searching for a rental home?  When you made inquiries about properties, you likely were more interested in the properties that had managers that responded more quickly. Your response rate is an indicator of priority.  If you respond quickly, you indicate that need is a priority and therefore your client is a top priority.  Personally, I am so thankful when our clients let me know there is an issue so that I can care for them AND care for our home.  I also love getting inquiries about our properties for rent.  It is my chance to educate them on the many offerings of the Haymount community. 

The shift to the dominance in online rental home research has also led to more people wanting reviews or testimonials about their prospective rental home.  Prospective clients want information on previous or current clients' rental experience.  This is not only in regard to the rental home itself, but it means how their experience renting from YOU or your company was.  Prospective clients not only want a beautiful home, but they want to be assured they will be taken care of too. As a former renter, I expected the same, and it is important to take care of your clients efficiently and with integrity.  If you can, offer these reviews to prospective clients. They will be happy you did.

“Earn your success based on service to others, not at the expense of others.”

— H. Jackson Brown, Jr.

The bottom line is, the better you are at offering what renters are looking for, the better your response from prospective clients will be.  Your goal is to engage quality individuals that will value a quality home and rental experience.  In order to do that, you need to provide that quality to them.  This is just the beginning of the list, but it is a good place to start.

Are you renting your home for the first time? Are you nervous about securing quality renters?  Have you had a good experience as a renter? What made it good for you? I'd love to hear from you!

- Casey

5 Reasons to Rent Out Your Home

Winter is here.  Spring is coming.  I sound like a Game of Thrones ad!

Seasons matter.  I love them all for various reasons - I love the freedom of summer, the crisp scents of fall, the cozy nights of winter, and the HOUSING MARKET in the spring.  

Okay, I also love the promise of new beginnings, budding flowers, and extra sunshine that spring brings.  However, I have to admit that I love the fun of house hunting in the spring.

Even if I am not moving or buying a house, I am always 'house hunting'.  I love doing market research and seeing what is for sale, what has or has not sold, and what is hitting the market.  This used to be an "inexpensive" way to window shop; I wasn't able to just "buy a house" with a click of the mouse. However, since we started renting homes, it has become a bit more risky because I tend to fall in love with homes and now have a business that supports buying them!

With every spring comes change.  People often move jobs and locations along the timeline of school seasons and semesters, so that means people start to offer their homes for sale in the spring in anticipation of moving in the summer.  Therefore, the housing market is most active in the spring and houses tend to sell most easily during this time period. 

Most people consider selling their home as their biggest obstacle in the their move, and that is for good reason.  It is a lot of work, time, and effort to sell your home.  There is a lot of mental and financial stress that goes along with all of that as well.  Obviously, there are lots of reasons to sell your home when you move, but some times, people overlook a great opportunity when they are moving.  That opportunity is a chance to rent out your current home.

The reasons to rent your home go far beyond this list and I will take the time to cover them in additional posts, but I wanted to share a few reasons that are often not even understood or known by the general public when it comes to renting your home.  There are some advantages that you might not have considered beyond the obvious ones that you probably have considered.  You can also create an opposing list of reasons to NOT rent your home.  That is also true.  However, that same thing can be said for any type of situation that has benefits and risks.  

So let's get down to it.  Here are five lesser known reasons to consider renting out your current home rather than selling it.  I hope you find this fun and a nice tool in considering whether or not to rent your home!

YOUR LOAN INTEREST RATE IS LIKELY BETTER

Interest rates on loans for primary residences are almost always cheaper than interest rates on investment loans.  This means that you can rent your home with less cost than if you were to invest in a different home to rent.  Using an example, let's say your primary home mortgage is $250,000 and your interest rate is 3.50% at 30 years.  That makes your monthly mortgage payment $1123/month.  If you were to purchase this same home as a rental investment (aka, in addition to your primary residence), you would likely have a loan that was structured more like $250,000 at 4.75% for 30 years.  This would make your payment $1304/month for the same house.  That is already a difference of $181/month in cash flow and you have not had to do anything different.  That amounts to $2172/year.  Not bad.

YOU ALREADY HAVE THE HOME

Securing financing for a rental home is time consuming.  Remember when you had to secure the loan to buy your home?  It's a pain, right?  Well, escalate that pain up a notch when you are buying an investment property.  There is even more paperwork, time and particulars involved, making the process fairly time consuming and more difficult.  If you already secured financing for your home (or even own your home outright), there is very little you need to do to change it to a rental home. 

YOU WILL LIKELY PAY LESS FOR INSURANCE

When you convert your primary home into a rental home, you change your homeowner's insurance policy to what is often referred to as a "fire policy".  This policy covers your home, the land, and the rebuilding cost of the structure.  You are no longer insuring your valuables inside the home (that will be the responsibility of the renter through their rental policy).  In our experience, a fire policy has generally been less expensive than a homeowner's policy.  That amounts to more money in your pocket again.

TAX ADVANTAGES

This topic is broad enough to fill entire books on the subject, so I will gloss over this and keep it brief.  However, there are substantial benefits to renting your home.  In a nutshell, when you start renting out your primary home (which will now not BE your primary home and you are allowed to obtain a new one with the same lower financing as before - yay!), you will start making income from your renters.  However, any income you obtain will be offset against expenses incurred in owning your home (care, maintenance, repairs, and more).  Any improvements you make and or large repairs you make (like a new roof), can be expended as a depreciation expense (meaning you will be able to deduct these costs over each year you rent the home up to the usable life of the item).  You even depreciate the cost of the house structure.  This is all overwhelming to discuss, but know this:  You will be getting to deduct a lot of things from the rental income you make while also reducing the amount you owe on your home.  Therefore, you are getting to offset a lot of the income you are making, and your debt on the house is still going down.  Your home is gaining equity and you get to do it without a large burden of tax impact. That is a good thing. 

LESS TIME ON THE MARKET SAVES YOU MONEY

In our experience, renting a home happens a lot faster than selling it.  You can complete the process in a day, in fact, we have often rented a home in a matter of hours.  That means, there is not a day that goes by that we spend money on utilities, mortgage payments, or property insurance or taxes in waste.  If your house sits vacant on the market while waiting to sell, you rack up costs pretty quickly in all these areas.  Renting a home is a less serious commitment for most people than buying one.  They are more readily willing to enter into an agreement and the coordination of the transaction is simpler.  Time is money.  Renting saves on that front.

“Money is only a tool. It will take you wherever you wish, but it will not replace you as the driver.”

— Ayn Rand

Hopefully this was interesting and helpful to you in the process of considering home rental.  There are so many factors that go into the decision to rent or sell your home, and this is only a smattering of them.  Knowing your advantages, including more obscure advantages, can be helpful when it comes to making the decision to rent or sell your home.

Have you ever rented out your primary residence? What made you decide to do so? Did you decide to sell instead? Were you happy with your choice?  I would love to know!

- Casey

WHY WASHINGTON WANTS YOU TO RENT A HOME

Sing with me: Fa La La La La, La La La....TAXES.  Happy 2018!

Like many of you, I spent the last two weeks of 2017 scrambling to understand the new lax code.  Not that I am complaining (okay, maybe I am), but hopefully next time we decide to complete a total overhaul of the tax code, maybe we could do it with a little more time on the tail end for the nation to react before the end of the year!  I felt so bad for the employees at tax firms, accounting and investing companies that were handling such a rapid increase in call volume and servicing right during the holidays.  However, all those wait times allowed me some extra research into the new tax laws for 2018. 

After a lot of reading, it has become pretty apparent that the new tax codes are favoring the rental market.  This is not a great surprise to me as the new code is likely designed with business in mind.  Though I am still a homeowner and plan to be in the future, I wanted to highlight a few areas in which the code is more attractive to renting homes.  Whether that means you are thinking of renting or buying a home, or if you are planning to pick up a property to rent, this post is just another consideration in your journey in either aspect.

One more disclaimer.  I am not an investment adviser, attorney, or accountant (though after reading through the tax code, I think any of these credentials would have been helpful!).  Therefore, this is just what I am sharing from my reading.  Little old me and my ideas.  Read this with a grain of salt.  Ok. There THAT is. 

Mortgage Interest Deductions Have Decreased

You cannot deduct as much interest on primary and secondary home mortgages as you did in the past.  Current loans that are in place prior to the new tax code are grandfathered in (meaning you can treat them as you did under the past tax code).  Moving forward, any new loans will be subject to new level of interest deduction.  This might affect you if you are looking for a larger or more expensive primary residence or considering a second mortgage for upgrading your home (or financing another thing like college using your a home equity loan).  You can now deduct the interest from a combined value of all home mortgages of $750,000, which is reduced from the prior code.

$10,000 Cap on Local and State Tax Deduction

If you have a home and work in the same state, your deduction for your property taxes (local) and state taxes (from your income), are now capped at $10,000.  This means if you pay $10,000 in property taxes every year, you can deduct them but no longer receive credit for the taxes you paid to your state in income.  If you paid $10,000 in state income taxes, you can no longer receive credit you paid for property taxes to your local government.  If you paid $15,000 in property taxes, you don't get to deduct that last $5k.  Same goes for your income tax.  Therefore, depending on your local and state tax rates, some of your previous deductions gained by owning a home, might be diminished.

Mortgage Interest and Property Taxes on Rental Properties are a Business Expense, not a Deduction

Looking at the first law, you might be nervous if you own several homes as rental properties.  I know I was. Upon further review, I remembered that the mortgage interest and property taxes of rental homes are taken as business expenses on the rentals, not as deduction on the taxes.  What this means is that the full amounts of interest and property taxes paid are a direct expense to the business and are not taken as a proportionate deduction on taxes.  Therefore, these new tax laws for home ownership are not the same for a business renting homes. Whew.

“Truth is ever to be found in simplicity, and not in the multiplicity and confusion of things.
”

— Sir Isaac Newton

Where does this leave us?  Owning a rental property is not a bad plan with the new tax code, even though it might seem scary at first.  If you are considering a jumbo mortgage, or a second mortgage, and are using property taxes and interest deductions as part of your rationale and computation, you need to consider the fact that those rules have changed.  That does not mean buying a home is a bad idea (not at all in my opinion), but when playing the game of home purchases, you better be sure you understand the rules.  

Are you going to buy a new home this year?  Does the new tax code change your thoughts on any of it?  Have you thought about buying a rental property this year?  I'd love to hear your thoughts!

- Casey

 

HOUSE HUNTING FOR HISTORIC HOMES

Do you ever dream of fixing up an older home with lots of character?  I dream about it all the time.  My friend told me that she "thinks I have a problem" or "might be addicted to houses".  She is probably right, but none the less, I continue to seek them out.  There is something about the idea of taking something that is rough and a little run down, and restoring it to its original beauty. 

So, my obsession continued and I went to look at this house with my realtor.  

Isn't it classic?  Built in 1947 and essentially untouched since then.  There were so many features that I loved.  The part I loved inside the home immediately was the foyer and the stairwell.  I could not pass up the details!!

Though these pictures don't show it, the ceiling above the stairwell is curved and just beautiful.  I love the solid wood trim, large steps and gorgeous windows above the door.  Did you note the heat register near the door?  This is upgraded from Radiant heat, but it is not central heating and air.  There is no central air in this house....which is about 30-40K to install, depending on the details of the systems.  Ouch. 

This dining room was beautiful and elegant.  I loved the large wainscoting and lovely light coming in the room!  This dining room does back into the kitchen on the left, so I always contemplate opening up that wall.  That can be really fun, but also really expensive, and when you start opening up walls that are nearly 100 years old, you can really find yourself some issues.  While I do like open concept, there is also something nice about keeping the integrity of the home and the rooms as themselves.  It is also a LOOOOTTT cheaper.

Ahh the kitchen!!  This is a 1940's charmer.  My mom said this brought back memories of her childhood and that was sweet to hear.  It obviously would be overhauled, but you have to love that it was maintained since the 40's.  How about that light filled window over the sink? Charming. 

This living room is beautiful!  Love the fireplace and awesome sun porch right off the wings.  I would loose the mirror over the mantel, but otherwise just some sanding and floor refinishing (through the entire house), needs to happen. That has a price tag of about 5-6k for that many square feet. 

This is one of three baths and they were all vintage fun.  Love the floor tile (would leave that), but the wall tile might be swapped, or possibly left depending.  I keep original iron tubs. They are amazing quality and can usually be re-glazed and end up looking nearly new!

This is the den. This paneling on the walls is wood....like actually wood.  The stuff is nearly an inch thick and is really solid.  Though it is very functional (and hides stains like a dream!), it does make the room really dark.  That stated, this is paneling that is actually the wall.  You don't just "take it down" like paneling that is put up over drywall.  This wood wall IS the wall. If you take it down, you have to sheet rock walls back up.  That adds up quick too.  So, jury would be out on this one.....

Pretty awesome attic.  I love the attic fan.  It's huge and still works.  When you turn it on, it pulls air through the entire house and circulates air through it.  Pretty amazing.  Also, pretty dangerous.  You have to be careful with these as they are huge, metal, and exposed.  Kids would need to be cautioned. I love the wood ceilings in this attic.  It feels like a storybook up there!!

Pretty amazing walkway from the house to the garage (which was a later addition to the home I am sure).  This was probably my favorite part of the house.  I loved the quality of the work and the amazing detail.  Just a gorgeous design and so well thought out.

Here's another view. Just beautiful!

So at the end of the day, we did not make an offer on this house.  I did not show you the four bedrooms, which were lovely and all had decent closets.  There was also a room off the kitchen, a brick patio in the back, a two car garage (very rare find in our neighborhood), and even a great over-sized walk out basement (also super rare in the South!).  The roof was asbestos tile, which can actually last 40-80 years, but is more costly than a regular roof to place because of asbestos  abatement that has to happen. 

Mostly, we passed because the house is on a busy street and we did not want to be on that street, even if we could get the house at a price we could work with.  We are not afraid of repairs, but you cannot change locations.  We want our four young kids to be able to have a little more freedom; too much traffic and chaos would be stressful for us.  

It's hard to look at homes that I know I could fall in love with, but my husband keeps me straight and focused.  The right house will come along, but for now, we stay put.

Have you considered a whole house renovation? Have you completed one?

-Casey

WHAT IS THE 50% RULE OF REAL ESTATE INVESTING?

The 50% rule is a easy way to estimate the year end cash flow of a property. Simply put, you can assume that over the average span of you owning and renting the home, 50% of your rental income will go towards expenses.  Those expenses can include maintenance, capital replacements (ie, new appliances, roofs etc), property taxes, insurance, and more.  You can quickly determine what your profit on a house would be by applying this 50% rule to any house you are considering. 

For example, if you are considering a $100,000 all in price on a home, we already know that the 1% rule would mean that you needed to be renting this home for $1,000/month.  If you had the home rented all 12 months, you would have a gross rental total of $12,000/year. Sounds lovely, right? Now we apply the 50% rule.  That $12,000, turns into $6,000/year once you apply costs.  Now, if you put 20% down on that same $100,000 house (which would be $20,000), that means in the first year, you'd earn $6,000 on your $20,000.  That's nearly a 30% return.  For this reason, many people advocate buying homes with loans because you can spread your investment over several houses, making your returns higher.  However, your risk also increases with debt.  We'll cover more on that topic later.

Applying the 50% rule means you are applying this math across the ownership duration of this house.  The first year, you might sneak by with only $4,000 in costs, meaning you are ahead. However, that next year, you might need a new roof, and your total is now $8,000 on the year.  The idea behind the 50% rule is that everything will average out over the course of time.  It is simply an easy way to judge what total profit you can claim from the home.

Clearly, this is a simple way to calculate profit.  Actual accounting is far more accurate and in depth.  However, this is a fast and easy way to size up the potential earnings on a home before you decide to buy it!

Have you ever considered the 50% rule when purchasing a home?

- Casey

STOMACHING REAL ESTATE

Having the patience and stomach for real estate is not for everyone.

After our offers, counter offers, and attempts at negotiating on this newest house, another offer was accepted.  We were frustrated by the fact that we were not even told another offer had been accepted, but rather found out on our own accord on the internet.

It's hard to be patient and disciplined. We had our budget, did not want to overspend, and also tried to make fair and reasonable offers.  This time it was not in the card for us and that is okay.  We have to trust in timing and what makes sense.

Of course, I get emotionally attached to each house I tour.  I see its potential and imagine what I could or would do if it became ours.  It is hard to walk away, but it is necessary to move on and trust that the next thing will happen as it should.

Trying to get a new home always motivates me to save, however.  Sometimes I lose focus, get lazy, and forget to keep my eye on the target.  Having money for houses and down payments is a lot easier when you set a target for it.  Falling off the wagon is easy when I am not focused on house hunting.

Whatever your timeline is for an investment, remember to keep your eye on the target and stick to your guns.  Sometimes it will fall into place and work out.  Sometimes it won't.  Know what you want and how you plan to get after it.  If you plan ahead, then you can make fast offers that make sense and fit your goals. 

Until then, I will keep my eyes open...and on target!

- Casey

SETTING A RENTAL RATE

650? 1000? 1500?

Utilities? Yard Care? Pet Rent?

Yikes! Where do you begin? 

Spinning from the last post about the 1% rule, we already know that the house needs to rent for approximately 1% of the total purchase price of the home.  So, using our last example, if the home was $100,000 to purchase, then the home needs to rent for $1000/month.

You have to understand your rental market to know if your home can command this price.  This is where you must become a student in your market.  You need to invest time researching your market.  There are plenty of rental sites to choose from.  One of my personal favorites, is zillow.com, but there are plenty of them to choose from.  Look around the area you are considering purchasing your home.  What are the going rates?

You'll quickly find that it is hard to compare.  Some homes will have the same number of bedrooms and bathrooms as yours, but yours might have additional rooms that offer more square footage.  Some homes have better or worse finishes than yours, such as granite verses laminate counters in the kitchen, or a master en suite bath verses a shared bathroom.  The list of comparisons can be daunting.

Comparing homes can be difficult, here are some fairly tried and true rules that I have learned that allow me to size up the market and the competition.

• Number of Bedrooms
• Number of Bathrooms
• Quality of the Kitchen and Bathrooms
• Overall Square Footage
• Yard
• Storage

Let me preface this by stating that we rent mostly historic homes.  These homes are in an area that particular streets are more desirable (less traffic) and yard size is often small (thus, more private, larger lots, matter).  Additionally, historic homes traditionally offer storage challenges, so when a historic home offers storage, this is a big advantage.

That stated, people overall care about having a nice space/street to live on, some place to store their holiday decorations, and enough space for their family.  They also care about the amount of bedrooms and bathrooms.  The price of the home is usually most dependent on the number of bedrooms, more than bathrooms, but no one will complain about having additional bathrooms!

People care about kitchens and bathrooms and the quality of the finishes.  Depending on your market, the level of quality can change.  However, across the board, attractive surfaces, cared for appliances, and nice flooring go a long way.

When you put this all together, you can start to compare homes on a more equal basis.  Perhaps you have a very nicely appointed two bedroom home that has 2 bathrooms, a fully remodeled and upgraded kitchen, and a private, fenced yard.  This might rent for the same price as a three bedroom, one bathroom house that has a standard grade kitchen and one less bathroom, on a busier street with a smaller yard.

It is not simply the size of the home that determines the rent, but as importantly, the quality of the home.  Some people will sacrifice more space for better finishes; others will want that extra bathroom. When pricing your home, consider the competition in your size range and determine if you were looking to rent, where would home fall amid the available competition on the market?  Would your home be as nice as the others? Nicer? Less nice?  If you were looking to rent, consider what price would make your home a "no brainer" or "I need to call quick before this house is gone?"  That is the price you want to consider.  Something that makes a potential client act so they don't lose out.

We'll cover more on this in the future, but hopefully this helps guide you in determining a rental price for your home. Once you know your market, you can better compare what your home has to offer a potential client, and you can more accurately determine the best price.

- Casey

HOW DO I KNOW A RENTAL HOME WILL BE PROFITABLE? EXPLAINING THE 1% RULE.

The 1% Rule.

Ever heard of it?

The 1% rule is a quick and easy way to determine if your rental home is going to make you money.  This rule helps you know if your property will cash flow (ie, will you make money after your mortgage, repairs, taxes, insurance, and other bills are paid?).  Will there be money left for profit?

Here is how the 1% rule works.  If you can rent the home out for 1% of the price of the home, then it will likely produce income.  When you consider the total price of the home, you need to consider your "all in" price.  If the home is ready to go, then the total price is the home price and any associated loan or closing costs.  If the home will require any renovations, then the price is the purchase price (including any loan/closing fees) + renovations = total home price.

Once you have determined your total home price (let's say for ease of math that the all in home price is $100,000), then you need to be able to rent that home for 1% of that price, or for this example, $1000/month.

If you can achieve that ratio, then you most likely will end up with a profitable rental home. 

Some people are more strict, and opt for a 2% rule to ensure a greater margin for profit.  Some rental markets are not as lucrative and 2% is harder to achieve.

What if your home doesn't meet the 1% rule?

Well, then you probably need to keep looking.  There are lots of reasons why, but let me give you the most obvious example that makes me strive to meet the 1% rule. 

Historically, a mutual fund in the stock market achieves about 7-8% returns annually.  When you invest in a mutual fund, you literally spend a few minutes making the transaction and then you move on.  You might spend a little time checking your investment, but essentially, it becomes a passive investment and does not cost you any additional time.

Therefore, if you are going to spend your time renovating, renting and managing a rental home, you should expect something more for your time than what you could otherwise achieve passively in the mutual fund.  You need to get paid for your extra effort and time.  If you can meet the 1% rule, you will likely see better returns on your money than what you'd see in good to average mutual fund.  You are rewarded for your additional work with additional returns.

This is just a brief overview into how the 1% rule comes into play.  There is a lot of additional math that does need to be considered, but usually the 1% rule is a fast and easy way to size up a property and see if it will work for you.  Many people are confused by the 1% rule because they don't understand why it matters; I hope that this helps break it down a little bit.

Have you purchased a home that meets the 1% rule?  Do you consider the rule when you are looking for rental homes?

- Casey

Quick evaluation of a potential rental property investment

One common question: What am I looking for when I tour a potential investment home? 

Good question.  There are lots of things to look at when you consider a purchase of a rental home, but let me give you my quick list that I have created for a fast evaluation of a property for purchase.

I tend to focus on the "big guns" first. I look at high dollar items that will quickly add a lot of cost to the transaction.  Here are the things I typically inspect:

ROOF

• How old does it appear? Most roofs last 15-30 years depending on the shingles
• What type of shingles are there? 15 year flat shingles? 20 year? 30 year architectural shingles?  The more expensive the shingle, the longer it usually lasts.
• Do the shingles appear well intact? Any dents? Any ruffles? How is the flashing?
• Roof angles and pitch - the simpler it is, the cheaper it is to redo.

WINDOWS

• Have they been replaced with vinyl?  On historic homes, old windows can be beautiful if in good condition. Equally, they can be a disaster if they are spent.  Drafty, high in cost to maintain, dysfunctional and difficult to use.  They are also fairly expensive to replace.
• How many windows? This can add up quick if there are a lot
• How big are the windows? You guessed it, the bigger they are, the more they cost to replace.

HVAC SYSTEM

• How old is it? Look for a date on the machine.  That date is usually the date it was made, not installed, but it gives you an idea.
• Older homes often have additions. Are they ducted for central heating and air, or are there window and electric heating units?  It costs money to re-duct systems, and often, there are difficulties with tight spaces to do so.
• Does it work? Check the thermostat and see what the response is.

FOUNDATION

• Do a quick round about look.  Do you see crumbling?  Shifting in the brick or blocks? Do you see "step cracks"?  These are cracks that follow the bring stacking line and zig zag up the brick.  These can be signs of serious issues.  Though anything can be repaired, the question becomes what the cost will be?

KITCHEN & BATH(S)

• Surfaces - what countertops are there and what are their condition?
• Appliances - condition, age, functionality, style?
• Shower and Toilet - condition, style, and function (make sure the water is on at the house before testing that)
• These are things that quickly add up to high spending if they are dated.

FLOORS

• Are there hardwoods?  Big bonus if there are. Hardwoods are expensive, but their condition matters too.
• Ceramic tile?  If well done, this material can outlast a lot of other floorings, but can also become dated fast.
• Are they level?  In older homes, you can expect some settling of the floors and this is forgiven.  However, some settling does not equate floors that are all over the map.  Usually, if you see very uneven floors in a home, there is a chance that the foundation is compromised or there has been a water incident in the home and there could be rotted joists beneath the floor. Both are very costly to deal with.

I hope that helps give you some insight in how to quickly sum up a property in terms of financial risk to invest.  Clearly, this is a minor overview, but it is my "go to" list to quickly tally what a house might take to make it a home for someone special.

Seize the day and we'll talk soon!

-Casey