Archive for Central Texas Real Estate

American Dream

The American Dream of owning a home is still alive. People still want a place of their own; where they can raise their family; share with their friends; feel safe and secure. Homeownership creates emotional and financial benefits.

The government supports that dream by allowing deductions for mortgage and home equity interest as well as property taxes. The capital gains exclusion on profits from a home is incredibly generous and a low long-term capital gains tax rate applies to excess profits.

It’s reported that some of the social benefits of owning a home include higher voter participation, better physical health, higher student test scores, lower teen delinquency, neighborhood stability and pride in the community.

If for no other reason, the decision to buy a home should be considered when it costs much less to own a home than it does to rent. With the unusually low available mortgage rates, the payment is generally less than comparable rent. However, the decision becomes more obvious when the other benefits are considered like amortization, appreciation and tax savings.

It’s not uncommon for the net cost of housing to be half of the actual mortgage payment. In most cases, it is significantly more to rent than to own which could amount to more than the down payment in the first year alone.  Calculate your cost of Renting vs. Owning.

Insurance Deductibles

The purpose of insurance is to shift the risk of loss to a company in exchange for a premium. Most policies have a deductible which is an amount the insured pays out of pocket before the insurance starts covering the cost of the loss.

In the process of managing insurance premiums, policy holders often consider adjusting their deductibles. Lower deductibles mean less money out of pocket if a loss occurs but obviously, results in higher premiums. Higher deductibles result in lower premiums but require that the insured bear a larger amount of the first part of the loss.

A small fire in a $300,000 home that resulted in $2,500 of damage might not be covered because it is less than the 1% deductible. If the homeowner can afford to handle the cost of repairs in exchange for cheaper premiums, it might be worth it. On the other hand, if that loss would be difficult for the homeowner, a change in the deductible could be considered.

It is a good idea to review your deductible with your property insurance agent so that you’re familiar with the amount and make any changes that would be appropriate.

Single Family Rental Property

Single-family homes used for rental property have distinct advantages over other types of investments.

An investor can borrow 75-80% at fixed interest rates on appreciating assets with definite tax advantages and reasonable control. The financing alone is attractive compared to some investments that require 50% cash and have floating rates at prime plus for one or two years.

Home prices have adjusted 30-40% around the country, mortgage rates are incredibly low and rents have risen in the past two years due to more demand and shorter supply. Indicators like these point to a strong and sustained rental market.

Consider you bought a $125,000 home for cash that would rent for $1,250 per month. With $15,000 income and allowing for property taxes, insurance and maintenance, it is still reasonable to expect $10,000 net income. You’d have an 8% return on investment without considering tax savings or future appreciation compared with 5-year CDs paying less than 1.5% and a 10-year Treasury yield at 1.65%.

The reasonable control has a lot of appeal to many investors who find the volatility of the stock market unacceptable and don’t want the risk associated with some of the alternative investments. Please contact me if you’d like to know more about available opportunities.

Property Tax Valuations – UP-DOWN!

“Anyone may arrange his affairs so that his taxes shall be as low as possible…for nobody owes any public duty to pay more than the law demands.”
Judge Learned Hand

This opinion refers to federal income tax but the logic and spirit can easily be applied to any tax including property tax. Most property tax is based on a valuation called an assessment placed on the property by a government taxing authority.

When property values rise due to appreciation, the assessments usually rise. However, when values decline as they have done in many areas in the past few years, the assessments should follow accordingly.

If you don’t believe your assessment reflects market value, put together proof to support your position. Recent comparable sales, similar in size, condition and location are very persuasive. Check to see if the square footage on the assessment is accurate. If the home is not in good condition, take pictures to show that.

As your real estate professional, I can supply the comparables, filing deadlines and other pertinent information needed to make a challenge. Lowering your assessment will result in lower property taxes and more money in your pocket.

Before You Call the Repairman

Have you ever had a service company to your home to repair something and find out that it really wasn’t “broken”? It probably conjured up ambivalent feelings of joy that it wasn’t something serious and frustration that you had to pay a service call for something so simple.

Before you call the repairman next time, keep these things in mind to see if it is something simple:

  • Disposer not working – check to see if the reset button has been thrown. It is usually on the bottom of the disposer. If the disposer is making a humming sound, the blades may be stuck. While the disposer is turned off, use a wooden broom handle as a lever to gently rotate the blades. Remove the broom handle and turn on the disposer to see if it works properly.
  • Air conditioner not working – check to see if a breaker has thrown on your electric panel. You might need to flip the breaker completely off and flip it back on.
  • Electrical outlets not working – Electrical plugs in bathrooms or outside, especially on a porch or patio, are many times connected to a ground fault interrupter. The GFI will be a wall outlet and it may be located in the garage. Locate the outlet and reset the button that may have tripped.
  • Clogged drain – a simple way to correct a slow or clogged drain is to use the water pressure from a garden hose. You’ll need a helper to turn on the water full-blast once you have safely placed the hose in the drain and are holding a hand-towel around the hose to direct the water to the drain. Be prepared to tell your helper to turn off the water when needed.

Whether it’s preparing a home to market or arranging repairs required by the sale, REALTORS® know reputable, reasonable and reliable service contractors. We’re here to share our contacts with you to help make home ownership better.

Is Now the Right Time to Upgrade a Home?

Headlines touted the infamous line once again Friday that mortgage rates are at historic lows, inciting the bIf it all adds up it could be a great time to buy a new home if it makes financial senseurning question, “Is now the right time to upgrade my home to a bigger, better one?” Affordability is at an all-time high at many places throughout the Country and if one has the ability to acquire and secure a mortgage, the cost of buying a home is better than it has been in years. That being said, wanting to move up and being able to move up are two different things, and it is a great time to take a hard, honest look at what makes sense for your particular situation.

Finances. If your current mortgage is a stretch financially then you should hardly consider taking on more. If you have a solid steady income and can afford more, it is a great time to start looking for a housing upgrade. Affordability is seen as housing costs taking up 30% of a household’s monthly income, if a new mortgage will keep you there a new home makes sense.

Current home. Do you need to sell your current home to buy a new one? If you can hold on to your current home and rent it until the market is fully recovered, your investment can be sold at a bigger profit. This is especially wise if your current home can be rented for more than the mortgage payment every month.

It is not a wise idea to upgrade to a new home if it does not make financial sense for your future. If it does make financial sense there could never be a better time to jump into a new home. It is a great time to discuss a possible move with a financial advisor or a qualified real estate professional.

SourcedFrom Sourced from: Kinetic Content Library