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Think Ahead to Spring

If you are thinking that 2021 is the year to sell and move you need to be thinking ahead.  Spring, as I am sure you have heard, is a hot time for sellers and when the real estate market bursts to life.  2020 was a strong market all year long with interest rates being at near record lows.  Spring 2021 is expected to be a great real estate market for sellers. To have your home ready for market by spring, what should  you be doing to prepare?  It may not take as much time as you might think but it is good to prepare so that you are ready to go when the time comes.

The first step is to contact Lestel.  Have her do research on the market in the price range of your home.  You need to know how long it might take to sell your home.   As a seller you need to think backwards.  If it takes 45 days to sell your home and you want to be in your new home by June 1st. You will need to be putting your home on the market early to mid-April. 

Lestel can also tell you is if there are things that you should be doing to prepare your home for sale.  Should you be replacing the tired carpet, as an example, or does it look just fine given our current sellers’ market in most price ranges.  She will make suggestions that will help you maximize what you are able to sell your home for.  She will not suggest you spend money if you will not get more than the money back for improvements that you do. For example, she does suggest that you replace carpet.  That will cost $5,000.  She will make sure that you get at least $7,000 more for the expense and effort.  It is not worth it if your home would only be worth $5,000 more. Lestel can make some staging suggestions also.  This is not the full staging appointment that she does with you when you are ready to get the house on the market, but instead things that you can start doing to prepare like decluttering or furniture rearranging.

Next step is, by the mid to end of March, it will be important to have Lestel do a market analysis on your home.  The reason for waiting until just before you are ready to put your home on the market is so that you have the most up to date, accurate information on the market. Recent sale prices of homes that are similar to your will guide the pricing of your home. 

Preparing in advance of when you want your home on the market can minimize stress and maximize what you get for your home.  The extra time can make a big difference.

2021 Decorator Trends

If you are like most people you spent more time at home in 2020 than you ever have.  Depending on how you feel about your home that time spent could have added to your joy or taken from it.  You may be feeling like home is ready for a refresh in the new year.  A new year always means new decorator trends are announced.  Here are some 2021 decorator trends you may want to try.

Smart home trends continue to be hot for 2021.  Maybe it is time to try a nest thermostat or a ring door bell.  The trend has more to offer than just those basics.  Smart homes can automatically control lighting and smart appliances are expected to grow in popularity too. 

Rattan and wicker furniture is making a comeback.  They bring a beach vacation vibe to your home.  The materials blend well with existing decors which may also explain their popularity.

Light woods have come back.  If you have some of the dark wood floors that were popular several years ago, you understand why that trend faded so quickly.  The dark floors showed scratches and dust.  New lighter colored wood floors are more forgiving, neutral and go with everything.  White oak and maple are taking the lead. 

Curved shapes are in.  That means everything from round rugs, to round mirror and round bathroom sinks.  Curves respond to our need  for softness. 

Plantscapes are in and a new passion for many.  That is everything from hanging plants to terrariums.  Plants add a feeling of warmth to our spaces and as a bonus they clean the air in our home.  There are plenty of plants that are easy to grow if you have a brown thumb.

There are other decorator trends that are on the horizon.  They include:

  • Black Kitchens
  • Dark Bathrooms
  • Kitchen Cabinets Without Hardware
  • Large Format Porcelain Tiles
  • Painted Floors
  • Strict Minimalism
  • Colored Ceilings
  • Large Wall Murals

Some of these new trends may not seem so new at all.  The funny thing about decorator trends just like fashion they seem to circle back around.  You can decide what, if any of the new trends you would like to include in your home.  Here’s to 2021.  Enjoy your home!

So, You’ve Decided to Buy Your First Home

Congratulations!  You have decided to buy your first home.  That means you need to get connected to a great Realtor.  It is important that you get to know your agent and your agent gets to know you.  That means you should have a sit down meeting with the agent you are considering working with. Expect to be asked a lot of questions.  Like what you say? Here is an example of some questions that you might be ask.

  • Why do you want to buy know?
  • Are you working with a lender?
  • How many houses have you looked at?  What did you like and not like?
  • What would you do if we found the perfect house tomorrow?
  • What is your favorite room of your house?
  • How important is outdoor space?
  • Who will we be shopping for?  Do you have pets to consider?
  • How long do you think that you will live in this home?
  • What is your preferred method of communication?

When your agent gets the answers to these questions or questions like them, your agent will start to get a feel for you and what you feel is important.  This will help your agent find the home that is right for you.  Of course your agent will also be interested in the number of bedrooms, bathrooms and if you need a garage.  The more information you share with your agent the better. 

It is helpful for your agent to know what you love about where you live now.  If you hate everything about it, tell your agent that too! 

Now you are ready for the hunt for the perfect home for you.  Enjoy it!

Rent Vs. Buy Which is Better?

The Advantages Of Home Ownership:

  • It’s your place. You can decorate the way you want.
  • Homes typically increase in value and build equity. Owning a home is one of the best ways to build long term wealth.
  • Your costs are more stable then renting. Rent costs typically increase a minimum of 3% per year.
  • Interest and property taxes are tax deductible. Owning a home does offer many tax advantages that can save you money.

The Disadvantages Of Home Ownership:

  • You are responsible for maintenance of your home. This can be as simple as a toilet repair or as complex and expensive as a roof or furnace replacement.
  • Owning a home is a long term financial commitment.
  • Owning ties you to a location, it makes it hard to just pick up and move.

Let The Math Do The Talking
In most situations if you plan to stay in the area it is better to buy instead of rent. If you need to figure out
whether buying is best in your situation this rent vs buy calculator will help you decide.

You have learned what it takes to buy a home, now it is time to get ready to do so. Before doing anything else you must get your finances in order:

  1. Pay down your debt.
    • Pay off your credit cards, car loans etc. Your total debt should be no more than 38% of your income.
    • Once you pay off credit cards make a habit of paying them in full every month. Do not carry a balance on your cards.
  2. Get your down payment together.
    • Start saving.
    • Ask for a gift (talk to that rich uncle).
    • Pay yourself first. Deposit a predetermined percentage in your savings account, then live off the rest of your paycheck.
  3. Clean up your credit.
    • You generally need a credit score of 650 to get a mortgage. The higher your credit score the lower your interest rate will be. The lower your interest rate the lower your monthly mortgage payment
    • Repair bad credit, talk to your mortgage loan officer about how to do this.
    • Establish credit if you don’t have any. Talk to your mortgage loan officer for tips on how to establish credit.


Selling a House? Should You Worry About Capital Gains?

Capital gains occurs when you sell real estate for more than you paid for it. The difference between the original sales purchase price paid and the new sales price is the gain. In other words:

New sales price, minus purchase price of the property, minus the cost of sale = the amount of gain on the property.

This calculation can mean that most all sellers that are selling their home in Northern Colorado would show a gain on their property. Our market has seen nice appreciation of property values in recent years and this can lead to nice gain when it comes time to sell. It is great to sell your home for top dollar, but the IRS may want a piece of the gain that you receive.

When do you have to pay capital gains tax? The government allows you to exclude $250,000 in gain for an individual home seller and exclude $500,000 in gain for a married couple. For example, lets say that you bought a property 10 years ago for $250,000 and sold the property for $850,000. You are a married couple, filling your taxes jointly, selling your home that you have lived in the home for all of the last 10 years. You subtract the $250,000 from the $850,00 and the number is $600,000. You are allowed by the IRS to have $500,000 in gain so you will only pay taxes on the $100,000 which is over the $500,000. How bad might the taxes on that $100,000 in gain be. There are factors that the IRS takes into account when figuring but for a rough estimate the tax could be between 10 and 20 %.
In order to be able to exclude the gain, like in the example above you need to have:

  1. Lived in the home for at least 2 of the last 5 years.
  2. The home needs to have been your primary residence.
  3. You can not have claimed that you sold a primary residence in the last two year period.
  4. If you are selling your home in less than two years, but moving due to work, health or an unforeseeable event, you still might qualify!
  5. You also may be able to minimize your capital gains tax if you are able to show receipts for home improvements.
    If this sounds complicated it really might be. This might be the year to have a CPA do your taxes. The money spent to have a professional review your tax situation might be small in comparison to the amount you save in taxes paid.

I Want To Buy A Home, Where Do I Start?

If you are interested in beginning your home search, but you are either a first time home buyer, or someone who hasn’t bought a home in a while we want to shed some light on first steps and provide you with insight into the process. The very first step is to find a lender to work with. We have a couple of recommendations here.

Once you select a lender you will likely begin by filling out a loan application in order for your lender to be better able to understand your financial situation. You will answer a number of personal financial questions. The process might feel a little uncomfortable, but rest assured it is confidential and will stay between you and your lender. When complete your lender will be able to tell you how much you can spend on a home. It is always up to you to choose to spend less, but you cannot spend more.  This is because this number is tied to your debt to income ratio. This is the amount you earn vs the amount you owe on other liabilities like car payments.

Your lender might also need to do some credit repair in order to boost your credit score. They can tell you exactly which things should be paid off in which order and which accounts you might be better off closing for good. Once you begin this process do not buy a car, or close accounts without first discussing it with your home lender. This can completely derail the process and set you back to square one. For more information on what not to do, see our blog post 6 Don’ts When Applying for a Mortgage.

As soon as you have your number from your lender they can provide you with a lender letter that is required with any offer you submit. This letter acts as the proof that you can afford the home you want to buy. When you have this letter in hand you and your real estate agent, ideally us, can begin to look at homes and figure out what specifically you want and need. We can narrow it down together until we find the home you want to buy, and that is how you begin the home buying process.

What not to do When Applying for a Mortgage

I learned a long time ago that “common sense is NOT a common practice.” This is especially the case during the emotional time that surrounds buying a home, when people tend to do the same non-commonsensical things. Here are a few that I’ve seen through my career that have delayed (and even killed) deals:

  1. Don’t deposit cash into your bank accounts. Lenders need to source your money and cash is not really traceable. Small, explainable deposits are fine, but getting $10,000 from your parents as a gift in cash is not. Discuss the proper way to track your assets with your loan officer.
  2. Don’t make any large purchases like a new car or a bunch of new furniture. New debt comes with it, including new monthly obligations. New obligations create new qualifications. People with new debt have higher ratios… higher ratios make for riskier loans… and some qualified borrowers no longer qualify.
  3. Don’t co-sign other loans for anyone. When you co-sign, you are obligated. With that obligation comes higher ratios as well. Even if you swear you won’t be making payments, the lender will be counting the payment against you.
  4. Don’t change bank accounts. Remember, lenders need to source and track assets. That task is significantly easier when there is a consistency of accounts. Frankly, before you even transfer money between accounts, talk to your loan officer.
  5. Don’t apply for new credit. It doesn’t matter whether it’s a new credit card or a new car, when you have your credit report run by organizations in multiple financial channels (mortgage credit card, auto, etc.) your FICO score will be affected. Lower credit scores can determine your interest rate and maybe even your eligibility for approval.
  6. Don’t close any credit accounts. Many clients have erroneously believed that having less available credit makes them less risky and more approvable. WRONG. A major component of your score is your length and depth credit history (as opposed to just your payment history) and your total usage of credit as a percentage of available credit. Closing accounts has a negative impact on both those determinants of your score. The best advice is to fully disclose and discuss your plans with your loan officer before you do anything financial in nature. Any blip in income, assets, or credit should be reviewed and executed in a way to keep your application in the most positive light.

How About Buying a “Not so Big House”

Buying a smaller home can come with many benefits. A smaller home can be easier to maintain and furnish. A smaller home means less time spent cleaning and also less space to clutter. You can also splurge on higher quality finishes for your smaller space. But what are some other ways that buying small might enhance your life.

  • A small home can be cozy. When you think warm and cozy you probably are not thinking about big rooms and soaring ceilings. Smaller homes help families gather together.
  • A small home can feel spacious. Square footage is not what causes a home to feel big or small rather it is how the home is designed.
  • A smaller home leaves more room outdoors. If you dream of having a garden or outdoor entertaining space, a smaller footprint to your home can provide that space. A smaller home can also provide you with more space from neighbors.
  • A small home costs less to heat and cool. Simple math, more square footage, higher utility bills.
  • A smaller home is easier to furnish. You can spend money buying furnishings that you love, rather than stretching your money to fill big spaces and something for each room.
  • A small home can free up money for other things. Purchasing a smaller home can free up money for travel, or spending money on other things that you enjoy.
  • A small home allows you to splurge on higher quality finishes. When you have a small kitchen, that you are remodeling, you can splurge on the special counter top because the space is small and less materials are required. In a large space the cost of materials can really add up.
  • A small home takes less time to clean. I think this is an idea that we can all smile about. Less time cleaning means that you can have more time to enjoy your home.
  • A small home is easier on the environment. Smaller homes use less water, power and other resources. You can also add some of those energy saving features.
  • A small home is easier to maintain. From the roof to the yard and the parts in between it will cost less when there is less of it. This can lead to savings in time, energy and money over the long haul.

If you are ready to explore the idea of a smaller home, contact us and so we can visit about what your “Not so Big House” might look like.

Have You Ever Considered Being a Landlord?

Is becoming a Landlord something that you have ever thought about?  Perhaps the last time you meant with your financial planner he/she said to you that you should buy an investment property.  Or maybe it is time to move from your current home, it is just not working for you anymore.  You are finding it too small or the floor plan just isn’t right.  It is time to move and you do have money for the down payment for the next purchase.  It would be easy to keep the current home and turn it into a rental.  But you feel like this is something you know nothing about.  What do you do?  Why should you become a Landlord?  Lets go over some of the benefits of investing in real estate and answer some of those questions you have. 

The advantages for investing in real estate are numerous. Investors can enjoy predictable rental income from your tenants (cash flow), appreciation on their investment, tax benefits and the diversification that your financial planner was suggesting. You also have greater control over your investment.  Investing in real estate is less risky than investing money in the stock market.  Andrew Carnegie was one of the most successful businessmen ever.  At its peak his fortune was worth over 300 billion (in 2007 dollars).  He is attributed with saying that 90% of all millionaires become so through owning real estate.  He died in 1919. However real estate is currently on the list for the top-ten creators of billionaires. But you are looking at just owning a couple of properties. Data released in 2017 shows that 47% of rentals were owned by individual owners.  That is people like you! 

What does all of this mean?  It means that people just like you can own real estate and be successful as a Landlord.  You can build wealth and appreciate the benefits of owning rental property. 

Setting yourself up for success includes many little details.  It is time to meet with professionals that can help you.  Talk to a mortgage lender, your realtor and a good attorney. Ask lots of questions. How much do I need for down payment?  Is this a good area for appreciation?  Is this fixer-upper worth the investment and why?  How much can I charge for rent on this property?  What interest rate will I be charged on an investment property?   Armed yourself with information.  Research, research, research. 

Maintain a business mindset.  Your rental property is a business with legal obligations that you must follow. Learn how to manage the property effectively.  Create systems for handling maintenance requests. Have your list of professionals that you can call including a handyman, plumber, electrician, realtor, attorney and locksmith that are available for you.  Know your rights and understand the rental laws. Have a local attorney draw up your lease.  It is your most important document for your new rental business.  It will protect you and provide you and your tenants with a guide and expectations of both of you!

How To Use Your Current Home to Buy a Second Home

It’s called a cash our refinance and it could help you afford to turn your current home into an rental, or purchase a new income property. Here is how it works. Let’s say that you have owned your current property for several years. Chances are the market has pushed your home value higher and even though you can’t do anything with it, that added value belongs to you and this is where the cash out refinance comes into play. Right now millions of people are refinancing their homes because of historically low interest rates just to have a lower monthly payment. You can also refinance your home and pull out it’s increased value in return for the bank taking a larger ownership share in your home. Let’s say that you bought your home for $300,000 and now you believe it is worth $400,000. That is $100,000 in equity that is just sitting there. You could complete a cash out refinance and end up with a lower interest rate.

Many others may also be doing a cash out refinance as well, but they might only use that money to buy new cars or pay down other debt. Instead you could take that money and use it to secure an income property that you manage as a landlord and that results in the equivalent of a paycheck every month. With real estate values remaining strong investing in real estate represents some potential stability in your portfolio while stocks and other more traditional investment infrastructure like stocks seeing increased volatility. Contact us today to find out how to reinvest your homes equity and to receive in depth coaching on becoming a landlord. We would be happy to help you out.