HARRY'S BI-WEEKLY UPDATE 10.24.19
October 24, 2019
HARRY’S BI-WEEKLY UPDATE
A Current Look at the Colorado Springs Residential real estate Market
As part of my Unique Brand of Personal Service, it is my desire to share current real estate issues that will help to make you a more successful and profitable buyer or seller.
COLORADO SPRINGS RESIDENTIAL real estate STILL LOOKING GREAT
I spent last week in Boston at the annual Worldwide Employee relocation Conference as well as the Relocation Director’s Council Meeting and it simply reconfirmed what I already knew—Colorado Springs is THE place to be!
In comparing local real estate with that of my peers from around the country, there’s just no comparison. Across the country, median home prices of residential real estate are not escalating as well as ours. But, just like here, the insufficient supply is adding to the price increases and creating problems for first time buyers. Many young people and others are finding it difficult to qualify for a mortgage, either due to lack of credit, student loan debt or inability to qualify for homes that keep going up in price.
However, while the downward trend nationally is continuing, we are beginning to see more listings, possibly due to the historically low interest rates. Folks who thought they were too late to the game are finding out that rates are still low and even with higher prices, they are able to get back in the search for a new home. There’s no guarantee how long these rates will be around, but for now…it’s great news for all.
All the “top 10” lists Colorado Springs has been on in the past several years has helped keep our home prices higher. Fortunately, they are getting back to a more normal percentage increase which is allowing sales to remain strong. Obviously, if there were more homes listed, sales would be higher, and prices would stabilize even more. We’ve seen an influx of new companies and their employees moving here and those folks are all going to need a place to live. I’ve had the pleasure of helping a number of these families relocate and it’s not always easy to find them places to call home. We are still seeing homes going for over list price, short days on the market and multiple offers in a matter of hours. My investor clients are looking for as many properties as possible to rent out as rents continue their upward climb. Rental properties, too, are getting more and more difficult to find, but you know me—where there’s a will…I can find a way. It just may take a bit longer than in the past.
If you, a family member or co-worker are sifting through all the options…NOW is the time to give me a call. I can be reached at 593.1000 or email me at Harry@HarrySalzman.com and let’s see how together we can make all your residential real estate dreams come true. I can help you find answers for your particular needs, but you need to pick up your phone and call me first!
THREE MINOR UPGRADES THAT BOOST VALUE INSTANTLY
Realtor Mag, 10.8.19
Looking for a few quick fixes that can have a big impact when you’re ready to list your present home? Besides a fresh coat of paint, here are a couple of ideas:
- Update the door. real estate pros say that a new front door can be a cost-effective update that can make a big difference. Solid wood doors are always a classic and typically last longer than alternative materials. Also, front doors with inlaid glass can give the entryway more natural light.
- Modernize the lighting. To begin with, make certain that all interior lights have the same color temperature so it’s consistent throughout the home. According to a blog on Redfin, “updating your light fixtures, ceiling fans and even the hardware on doors and cabinets is an easy and cost-effective way of increasing perceived value of your home.” For example, replace dated brass light fixtures with more contemporary ones, like lights with a chrome or black finish. Look for fixtures that will add more light and brighten up your home.
- Upgrade your mailbox. It may sound trivial, but the look of the mailbox is all part of helping build a strong first impression from the street, and it’s also the easiest home improvement you can do. It could simply be a new mailbox that replaces the old, weathered one, or you could upgrade to a “next generation” mailbox that allows USPS to deliver large packages to your mailbox rather than your front door.
While these three upgrades can help boost your home’s visibility for sales purposes, they can also be quick fixes to enhance your present home even if you are not in the market to sell it at present. Why not enjoy them yourself until you’re ready to move?
WHAT TO EXPECT FROM YOUR HOME INSPECTION
Keeping current matters,
This is something I get asked almost daily and choosing a Home Inspector plays a big part in knowing that “what you see is what you get” so to speak. I can only recommend inspectors that I’ve used in the past based on their experience and knowledge, but you are the one to select the inspector so I thought it might help to put some good tips in writing.
- Qualifications. Find out what’s included in your inspection and if the age or location of your home may warrant specific certifications or specialties on the part of the inspector.
- Sample Reports. Ask for a sample inspection report so you can review how thoroughly they inspector will be in inspecting your dream home. In most cases, the more detailed the report, the better.
- References. Do your homework. Ask for phone number and names of past clients who you can call to discuss their experiences.
- Memberships. Not all inspectors belong to a national or state association of home inspectors and while membership in one of these organization should not be the only way to evaluate your choice, membership in one of these groups often means that continued education and training are required.
- Errors and Omission Insurance. Find out what the liability of the inspector or inspection company is once the inspection is over. Being only human, the inspector might miss something they should see.
Ask your inspector if it’s okay for you to be present during the inspection so they can point out anything that needs to be addressed or fixed. Don’t be surprised to see your inspector climbing on the roof or crawling around in the attic and on the floors. Their job is to protect your investment and find any issues with the home, including but not limited to: the roof, plumbing, electrical components, appliances, heating and air conditioning systems, ventilation, windows, fireplace and chimney, foundation and so much more.
It might be said that “ignorance is bliss” but not when making one of your largest investments. Work with a professional you can trust to give you the most information possible so you can make the best educated decision about your home purchase.
WHEN A SIX-FIGURE SALARY STILL CAN’T BUY A HOME
The Wall Street Journal, 10.16.19
This article in The Wall Street Journal last week specifically caught my eye as it was relating a recent situation in the Stapleton neighborhood in Denver. A couple with a child had moved there from Missouri, found the home of their dreams, and despite having a household income in the low six figures—they had to rent because a home like the one they sold in Missouri would cost about four times as much!
This family is just one of a growing group of high-earning Americans who are renting instead of buying homes. For a number of years, this was the norm in cities like New York or San Francisco where the price of real estate is sky high. However, these markets account for less than 20% of the new six-figure renters, according to an analysis by the Journal.
To accommodate well-off renters, developers are racing to build luxury apartments around city centers, like we’ve been seeing right here in our own backyard.
Investors, meanwhile, have bought hundreds of thousands of suburban homes nationally to turn into rentals and single-family homes are increasingly being built specifically aimed at well-heeled tenants.
While this is becoming a problem for buyers, especially those moving here from cities where home appreciation is not what ours is, it is a great opportunity for those looking for investment properties. I have a number of clients who are constantly searching for these properties and they are finding that the quality of their renters has changed drastically over the last several years, as more and more folks are being priced out of the market.
If investment property is something you’ve even considered in the past, NOW is a great time to explore it further. As most of you know, I put my money where my mouth is, and have been a landlord for most of my 47 years in the local real estate arena.
Call me today and I can give you insight into the pros and cons of rental properties and help in determining if this is something that could be right for you.
And on that note…
10 TIPS FOR BUYING RENTAL PROPERTY
The Gazette, 9.28.19
- It’s Not as Easy as It Looks. To make the most of income property requires an accountant’s eye for detail, a lawyer’s grasp of landlord-tenant laws, a fortuneteller’s foresight and should you choose to manage your rental property yourself, a landlord’s firm but friendly disposition. You need to decide in advance whether you have the time and skill to put into managing a rental.
- Success Requires a Long-Term Outlook. The way people get in trouble with investments is that they don’t hold on to them long enough. With rentals, if you break even on a cash-flow basis, that’s actually not too bad as you are paying down the principle and building equity. Then, hopefully, you’ll also see some appreciation. If you’re looking to make money in real estate, it’s important to think long-term.
- It’s Easy (and Costly) to Break the Law. State landlord-tenant laws are important to follow. Something as simple as a tenant security deposit involves specific bookkeeping for each tenant. There are laws for the amount of time you have to return a security deposit when tenancy ends, minus any expenses for cleaning or repair—which have to be itemized. This is just one of the many laws regarding landlord-tenant relationships that you must follow.
- Make Sure You’re Landlord Material. When you purchase a rental property, you need to decide whether to manage it yourself or pay 6-10% of your rental income to a management service. These companies do the background check, make sure the tenants sign the lease and that they pay their rent on time. They also make decisions concerning the repair or replacement of things that require this. There are definitely downsides to managing the property yourself. Among them are getting too close to the tenants which could affect decisions you make concerning their tenancy. A management company frees you up to manage your money, not your investment property or tenants.
- Analyze Whether Buying or Financing is Better. Some say that paying cash is the way to go, which many others say that leveraging (getting a mortgage) typically magnifies the returns on both the upside and downside. These decisions are best made after discussing it with your tax and financial advisors so that you know you are doing the right thing for your individual situation.
- Budget for the Unexpected. It’s a good idea to save about 20%-30% of your rental income for upkeep, maintenance and emergencies. If you are living off your total rental income, you could find yourself short when unexpected repairs or problems arise.
- Remember to Renew Your Leases. One of the problems of not using a management company is a failure to renew leases in a timely manner. It might seem like a good idea to not renew a lease and let it go month to month in case you want to get the tenant out, but you cannot raise the rent unless you have them sign a form changing the lease every year. If you let the lease renewal slide, it can be tough to get back on track.
- It’s All About Location, Location, Location—Sort of. I’m always talking about Location, Location, Location…but it takes an interesting turn when it comes to rental property. Sometimes the best locations with the most appreciation are where you will potentially have the worst cash flow. Why is that? Investors can earn a return in two ways: cash flow and appreciation. In some areas, investors might want higher cash flow in order to compensate for slower appreciation. However, if an investor expects an area to appreciate substantially, they might be willing to forgo some of the cash flow in order to enjoy that appreciation. Again…this is an area where discussions with your tax and financial advisors is crucial. Only they can help you determine which direction is best for your long-term financial plan.
- Want Long-term Tenants? Consider Section 8. Sudden vacancy is the bane of every landlord because each month a rental stand vacant you’re having to pay a mortgage, utilities, and more out of your pocket. Therefore, turnaround is one of the things you need to address quickly. A popular solution is to give Section 8 renters a try. Section 8, aka the Department of Housing and Urban Development’s Housing Choice Voucher Program, typically caps the rent for low-income Americans who qualify at 30% of their adjusted monthly income. While some landlords are skeptical of the paperwork and potential upkeep problems from some Section 8 renters, there are many older folks and persons with disabilities who make excellent tenants. They tend to take excellent care of the property and if they don’t pay their rent or ruin your home, they risk losing their Section 8 voucher.
- Don’t Forget Rental Property at Tax Time. There are a number of powerful tax benefits and investing returns in owning rental property, but again…it’s very important to ask your accountant how to take advantage of them.
Bottom Line? Rental property can be an excellent investment if it is approached in a business-like manner. It’s important to understand all the risks, as well as the advantages and to remember that it often requires a certain amount of time commitment. After discussing all of the above with your tax and financial advisors, give me a call. I can provide you with my own personal experiences as a landlord, in using a management company, and more. And….I can help you find the property that fits your needs as well.
NEW VA FUNDING EFFECTIVE JANUARY 1, 2020
The VA Funding Fee is increasing at the beginning of the year and the change is effective based on the closing date. Here is a copy of the new Funding Fee Chart for those considering VA as a mortgage option.
