Home Buyer Tips

Location

Like the old adage that we so often here, “location, location, location.”  It still rings true in today’s real estate market.  There are several factors that home buyers should consider when looking for a new home.  You (spouse or in-law, if applicable) should make a list of the following items that are important to you in your next home.  Remember to consider resale value when choosing the right location for your dream home.  Below is an example of items to consider:

• Commute time
• Public transportation
• Local schools or day care
• Shopping centers
• Gym or fitness club
• Busy street versus quiet street
• Commercial district versus residential neighborhood
• Condo versus single-family home
• Parks and recreation
• More than one story
• Number of bedrooms, bathrooms
• Square footage
• Condition of heating, plumbing, electrical
• List features that you would like in your home, such as: garage, fenced in yard, finished basement, master bathroom, etc.

Research your target area

Ask your real estate professional to get you the latest home sales data in your target areas.  This will give you an idea where homes and condos are selling at compared to their asking price.  Trulia and Zillow also have some great market statistics, but a real estate professional will have “real-time” market information.  You also want to see the current homes and condos on the market.  Foreclosures and REOs are another area to review, so you can see if there are discounted properties in your target area.

Most of us do not have a crystal ball in our closet, so it is tough to know what the future holds.  But, you should think about living in your new home for at least a few years.  If you cannot commit to living in the house and community for a few years, then maybe it is not the right house or town for you.  Transaction costs are significant when you purchasing and/or selling a home, so be aware your other costs associated with purchasing a new home.

Financing

If you are serious about purchasing a new home, it would behoove you to start talking to local and national banks, as well as mortgage brokers.  They can help you figure out what you can afford.  Click here for a calculator from Ginnie Mae to help you figure out how much you can afford.  Visit sites like Bankrate.com to get an idea of where rates are at today.  Once you have done some homework, it is time to get a pre-approval letter from the lender or mortgage broker. 


Don't forget closing costs.  Closing costs can vary depending on the loan and can be between 2 and 4 percent of the sales price for a home buyer.  Click here to visit the Realtor.com website with a link to a closing cost calculator.

Review your credit history by getting a free credit report from the many agencies out there that offer a limited time free credit report.  You want to clean up any outstanding debts that you possibly can and also look for blemishes on your report that you may have not known about.  There are ways to increase your score by a few points, which your lender may be able to help you with.

There are many types of mortgages out there, so review the many different offerings to find the one that best suits your needs.  Bankrate.com has a great article on the different types of fixed and adjustable rate mortgages.  Click here to go to Bankrate.com.

Build a team & get organized

Before you go out trouncing through open houses, ask your real estate professional for a checklist or create a spreadsheet to keep a log of the homes that you have seen.  Click here for a checklist that from HUD that I provide to clients for each home they see.  Incorporate some of the features that you require in your next home into the checklist.  Feel free to contact me for a Word version that you can personalize.

A home inspector is a crucial piece to the team of professionals that you need to help with the purchase of your new home.  A home inspector can give you a list of potential problem areas in the home, which is worth its weight in gold.  I would also recommend a real estate attorney, real estate broker/agent, insurance agent, and accountant to round out your team.  Click here for a link to the IRS for tax information for home buyers.

Making an Offer

Now that you are serious about purchasing a home or condo, it is time to start making offers to purchase.  Click here to read an article that I wrote with 8 tips to think about before making an offer.  Ask your real estate professional to see a blank copy of an offer to purchase, so you can familiarize yourself with the language of the contract.  Ask your real estate pro to review the contract with you.  Learn about the multiple contingencies that you can build into your offer, so you are protected if the inspection reveals something about the home that turns you off from moving forward.  At this point, I would also contact your real estate attorney and accountant.

Sources:

• Buying a home? These eight tips can help make your house-hunting experience positive and rewarding. By Marcie Geffner
• Top Things to Know. CNN Money
• Before You Buy Your First Home – Tips for a First-time Home Buyer By Elizabeth Weintraub, About.com Guide

Stellar Stapleton Home For Sale

Tips For Buying A Rental Home

With the volatile roller coaster ride on the tracks of the stock market, it might be time to diversify your portfolio with a rental home.  Rental property is not a buy and hold strategy, unless you hire a competent property manager to not only manage the day-to-day operations of your investment, but a property management service that can help manage and add value to your asset, aka rental home.  Not only can rental property provide monthly and long term income, but there are tax advantages to owning rental property.

The key to buying rental property for an investment may seem obvious, but is often misunderstood.  Buying a home not only at the right price, but positive cash flow is the crucial element. It is critical to learn about the real estate rental market, so you know what landlords are charging for rents near the subject property that you are considering buying.  Be conservative with your monthly rent numbers by going with the lower end of the spectrum with comparable home data.  A property manager and/or real estate professional can add value by providing rental comparables, as well as sales comparables.  Be sure to account for taxes, insurance, HOA (if applicable), water and sewer, and other expenses that are not normally passed along to the tenant in your area.  For example, in the Stapleton neighborhood of Denver, most landlords pay HOA fees; whereas landscaping, water, sewer and trash expenses vary from property to property.

Cash Flow

Research the rent and sales comparables with your real estate professional.  Take a look at Craigslist (be mindful of the scammers out there), local classifieds, Trulia.com, rentals.com and other home rental websites to get a feel for demand and pricing.  This will give you a barometer for the market.  Most major metropolitan newspapers will have archives of articles about the rental home market in your area.  In the Stapleton neighborhood, TJC Management has a good handle on pricing, as we manage over 150 homes in Stapleton, Park Hill, and Lowry.

Because property managers have an intimate understanding of the rental market pricing, they can immediately add value by providing you with a realistic monthly rental income for your investment property.  Should you not know the market and price your property too high, then you could be sitting on an empty home with no rental income for several weeks.  Should you price it too low,  you may leave money on the table.  Let a property manager do the day-to-day management, so you can enjoy the important things in life.  There is no reason you need to deal with lost keys, broken sprinklers, or any of the other minor issue tenants may need while renting your home.

A good rule of thumb for analyzing an investment property is by calculating monthly expenses, such as: mortgage payment, taxes, insurance, HOA, water & sewer, etc.  Subtract the expenses from the prospective monthly rental income and you should have at a minimum $300-$600 monthly cash flow.  This obviously depends on how much capital you put down to purchase the property and the terms of your mortgage.  If you paid a $100,000 for a property and are making $200 per month in positive cash flow, then you are probably in a good position.

Location...Location...Location

Like the old adage, location...location...location, still rings true.  Make sure you purchase a property in a neighborhood you understand and see rental rates increasing year over year.  Review local government websites to learn about the crime rate and school systems.  Who is the average tenant?  Is the property in a college town?  In Stapleton, there are several business and medical professionals that move into the area for short 1 to 2 year stints and move on.

State & Local Regulations

If you are considering buying an older home, make sure you know the local rental home regulations.  The last thing you want to do is buy a home that is considered a 4-bedroom for a homeowner, but legally the home can only be a 3-bedroom as a rental home.

The nuances of each municipality and state regulations vary, so do your homework or hire a property management professional that is well versed in the local regulations.  Make sure the rental property is up to current code, so you do not inherit some unwanted expenses.  Another important factor to consider is owning the rental property as an LLC to protect your personal assets.  Be sure to speak to a real estate attorney about ways to protect yourself and your assets.

Parking

Parking requirements vary for rental homes from state to state and town to town.  Be sure you understand the requirements of the township to avoid costly headaches.  Some townships require that each renter in the home must have an off-street parking space.  Other townships may demand a minimum number of parking spaces depending on the square footage or a specific number per property type.  Not only do you have to adhere to local regulations, but garage or off-street parking is very desirable for some rental homes.

Home Inspection & Safety Concerns

A home inspection is worth its wait in gold.  A licensed home inspector can provide insight into major issues and safety hazards.  A few of the major issues that a qualified home inspector can point out are the following: mold, radon, asbestos, and lead paint.  It would behoove any real estate investor to connect with a qualified and reputable home inspector.  Feel free to contact us for a list of a few home inspectors in the Stapleton area.

Below is a list of potential safety hazards that rental home owners should be on the look out for:

Carbon monoxide & smoke detectors

Broken railings and steps

Aging decks & patios

Gutters & downspouts that cause slippery walkways

Pools, fountains, and hot tubs without safety fences

Antiquated electrical, no GFI outlets

Home Design, Construction & Mechanical Systems

The style and architecture of a potential rental home should be considered before investing.  A good rule of thumb is to count the number of corners on the home.  A home with four corners will most likely be easier to maintain than a modern home with several corners.  A contemporary home with a spanish tile roof may peak your interest, but the cost to maintain and refurbish a home with high end exterior finishes and design accents may be cost prohibitive.  The ranch or colonial home in the same neighborhood with standard features will most likely be much easier on the wallet when it comes time to make repairs or add another bedroom.

Be sure to consider the layout, storage space, and amenities.  For example, a house built on a concrete slab versus a home with a basement, can cost you precious living space and storage.  A home built on a slab can be problematic, as the electrical and plumbing systems can chew up your square footage.  Even worse, plumbing and electrical lines could be buried in or below the slab.  This could prove costly if you have to repair the plumbing or electrical in the home.

Another factor to consider when analyzing an investment property is the mechanical systems: HVAC, plumbing, and electrical systems.  Are they updated?  Are the systems easy to access?  If the property is an older home, then you will most likely need to budget for additional costs associated with repairs.  Consider the lot and the landscaping.  If the property is on a big lot or has complicated features to the lawn, then you may want to reconsider the property as an investment.  Look for rental homes with lawns and flower beds that will be easy to manage.  Be sure to investigate the patio and deck to ensure they are safe and up to code.

In closing, take some time to create a business plan for your rental home investment.  Create a budget and run it by a real estate professional that knows the rental market, so you have accurate pro-forma income and expense numbers.  Make a plan for lost revenue due to vacancy and budget for unforeseen repairs that will need to be made.  Set aside several months of rental income each year, so you are prepared for issues and future improvements.

Daily Economic Update: New Home Sales

Source: NAR 

According to NAR, new home sales fell short to 295,000 homes. The low number of new home sales is due to the fact that builders are not buildings as many houses, because of the stringent construction loan requirements. One reason for the tighter construction loan originations is because the government does not back these loans. According to the data from NAR, the new home inventory is at 40-year lows. Currently, there are a mere 162,000 new homes on the market, compared to the inventory of 600,000 new homes during the boom in 2005 to the collapse, normal inventory for new homes is around 300,000. During a normal real estate market, which seems ludicrous to say, new home sales account for roughly 10 percent of total home sales. In today's real estate market, new home sales account for approximately 5 percent of total sales.

Daily Economic Update: New Home Sales

Stunning Stapleton Home For Sale

Stapleton Home Sales Through Mid-September

Old Stapleton Air Traffic Control Tower

The Stapleton Denver real estate market continued a positive trend with 10 homes sales through September 19, 2011.  There was one short sale at 3156 Dayton Street, two new builds sold, and one $1million plus home sold so far in September.  According to MLS, the average days on the market was 55 and the average sale price was $581,602.  There were only 6 sales in September 2010 versus the 10 transactions in September 2011.  The average days on market was 135 compared to 55 days in September 2010.

The Stapleton real estate market continues to strengthen.  The asking price and the sale price continues to narrow, as sellers are getting closer to what they want for their home.  Homes priced above $400,000 were a majority of the sales.  This is good news for the Stapleton real estate market, as the fundamentals continue to improve.

Below is a list of the mid-September home sales statistics from MLS.

Count 10 Avg Total DOM 55 Median Total DOM 49 YOC Oldest 2002 Median 2007 Newest 2011
	Original	List	Sold	Net Sold
Average Price	$564,689	$589,479	$581,602	$580,552
Median Price	$575,000	$575,000	$558,000	$558,000
Avg Price/SqFt	$215	$223	$220	$219
Avg Price/Fin SqFt	$195	$202	$200	$200
Avg Price/Acre	$868,302	$868,302	$822,857	$811,667
Avg Price/Avg List			98.66 %	98.49 %
Avg Price/Avg Orig			103.00 %	102.81 %
Median Price/Avg List			97.04 %	97.04 %
Median Price/Avg Orig			97.04 %	97.04 %
Lowest Price	$319,900	$319,900	$297,000	$294,000
Highest Price	$1,100,000	$1,127,803	$1,127,803	$1,127,803
High/Low Range	$780,100	$807,903	$830,803	$833,803
Mode Price
Volume Price	$5,646,890	$5,894,793	$5,816,028	$5,805,528

Stapleton Farmer's Market

• When: Sunday, September 18th 
• Where: 29th & Roslyn, Denver, CO 80238

The Stapleton Farmers Market is this Sunday from 8:30a.m.-12:30p.m. on The Green. Find fresh vegetables, fruits, and fabulous food trucks for a great breakfast noshing.  What a great way to support local farmers.  There are only a few more weekend farmers markets in Stapleton, so get out to get some fresh Colorado grown produce.