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

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