Money Crashers » Real Estate

7 Home Improvements To Increase Its Value

Erik Folgate — Tue, 03 Nov 2009 04:39:34 +0000

For the most part, the real estate markets around the country have flattened out, and homeowners are breathing a tentative sigh of relief. So, where do homeowners go from here? It will be a while before we start to see home values appreciate on their own, because demand will need to drastically increase before that happens. So, if you want to increase the value of your home, you’ll need to do it the old-fashioned way. Here are seven ways to improve home’s value.

Remodel the Kitchen. Take into account the value of your home. If you have a $750,000 house, you should probably put $50,000 into a kitchen remodel. If you have a $250,000 house, you can get away with $5,000 to $10,000 in remodeling. Instead of replacing cabinets, try refinishing or re-facing them. New tile flooring, upgraded countertops, and a new sink are great things to update that don’t cost a ton of money.
Remodel the Bathrooms. This doesn’t need to be a lot. A new vanity, new flooring, a fresh coat of paint, and new fixtures can be done for less than $5,000.
Put up a privacy fence. You’ll get 100% return on your money by putting up a privacy fence, and when you go to sell the house, your house will appeal to people with children and pets.
Replace the windows. This is a great upgrade that many savvy buyers will look for when they are shopping for a house. New windows helps improve energy efficiency to the home.
Finish Your Basement. We don’t have basements in Florida, because 10 feet below us is water. But many of you do have basements that are not being used or collecting junk. You can drastically improve your finished living space by putting up drywall, paint, and some carpet or laminate flooring.
Replace the Roof. You drastically improve the re-sale value of your home if you roof is new. Not only can you sell it for more money, but your house will stand out above other houses when trying to sell it. If a buyer is torn between your house and another house, a new roof can seal the deal, because many buyers don’t want to deal with buying a new roof when they first move in.
Add a deck. EVERYONE loves wood decks. They never go out of style and they are great for entertaining. Decks are always a great selling feature. My advice would be to have your deck professionally installed, unless you are great with carpentry. No one wants an uneven deck.

There are many improvements you can make to your home, but only few of them will actually increase the value to your home. Also, make sure that you factor in where you live. You don’t want to put $100,000 into a house in a neighborhood full of $150,000 houses. Find the most expensive and the cheapeast homes in your neighborhood, then make improvements to put your value somewhere in between the median home prices and the most expensive prices.

Help A Reader: From Buying A House to Selling Wholesale Goods on eBay

Erik Folgate — Thu, 03 Sep 2009 20:49:23 +0000

I answer all of these questions with what I would do, so don’t take my word as gospel. Surround yourself with a team of professionals that you trust like a financial planner, accountant, good real estate agent, and attorney, before you make any final decisions such as these.

I am looking into purchasing a house for 80K. Payments are about 680 a month with insurance and taxes already included.

In order to tell you if I think buying this house would be a good idea, I’d need to know more information. If $680 a month would be no more than 25 to 30% of your take-home pay, then I think it’s a good deal. If not, then stay away from buying for now.

I have about 50K cash that I want to use for something with fast return. I was looking into duplex homes that require 25 to 30% down. My credit score is 750. I was also looking into buying some land here in Fort Worth, Texas and putting mobile homes there, but the cost to run electricity, plus the trailer home, plus plumbing, gas lines, and moving the used mobile home, may not be worth it. I was also researching bonds, stocks, and other avenues of investment.

I don’t believe in “fast returns”, and most investments that boast a “fast return” are scams. If you’re talking about generating immediate income from your $50k, then yes, a rental property would be the best way to go, but unless you can pay cash for a rental property, then it’s not worth it. Once you pay the mortgage, taxes, insurance, and maintenance expenses, there won’t be much left over for income in your pocket. The mobile home idea sounds like a really bad idea. Mobile homes go DOWN in value. Yes, you can rent them out and generate some income, but they are horrible investments.

If you’ve got $50k sitting in the bank, this is what I would do with it in this order:

Pay off any outstanding debts you have
Set aside an emergency fund of 3 to 6 months of expenses
Fully fund a retirement account like an IRA with growth stock mutual funds (about $5k a year)
Even before the retirement investment, once you’re debt free and have an emergency fund, I would put a chunk of that money towards the down payment on the house you are looking to buy.
If you’ve got anything left over after that, you can put it in growth mutual funds and index funds.

I am also looking into purchasing pallets of wholesale and sell on ebay. What do you think is the best thing to do?

As far as a quick return, I would definitely not go this route. There is a lot of risk involved with buying a wholesale lot of good to sell on eBay and Craigslist and actually turn a profit. Actually, you might have a better chance on Craigslist, because there are no selling fees to list on Craigslist. I once bought a lot of ipod replacement screens, because I saw them going for a lot of money on eBay. By the time I was able to put them up for sale on eBay, there was another line of iPods announce that were coming out and the value of them went down significantly. I definitely lost some money on that venture, and you will too if you’re not careful. I hate eBay now, because retailers came in and flooded the marketplace. Now, you have to literally give stuff away to compete on price.

That’s my two cents, take it for what it’s worth. Contact me again if you have follow up questions or shoot a comment below if you want to reveal your identity. Also, readers, please provide your input. I don’t claim to know it all, and many of you will have better ideas and thoughts than me!

When Should You Sell Your Home To Improve Your Financial Situation?

Erik Folgate — Tue, 25 Aug 2009 03:53:20 +0000

Owning a home can be a great blessing, but it can also be a great burden. There are many advantages to owning a home like building equity, the freedom to customize it, and various tax advantages. But, homes are not cheap and they come laden with expenses. You have homeowner’s insurance, property taxes, home maintenance, home improvements, and the list goes on. Some people buy homes at the wrong time in their life or they buy too much house than they could afford. When this happens, homes can be a real burden and so much that selling it may be the only option to getting ahead with your finances. Here are three signs to help you know when the house is the root of your financial problems.

Sign #1: When your monthly payment is 50% or more of your take-home pay.

If you bring in $4,000 a month and your mortgage payment is $2,000, you’re going to have a really hard time paying all of your bills and necessities, especially if you have a family to support. You might be able to make it work for a short amount of time, but it will catch up with you.

Sign #2: You can’t afford the utility bills and/or home maintenance bills

If you bought a house without an emergency fund, then one emergency like the water heater bursting would force you to pull out a credit card and get into debt. Buying a home means that you have enough money to take care of it. Also, you need to remember that the utility bills go up significantly, because your maintaining a larger area, you have grass to water, and many cities now charge for trash pick-up and stormwater drainage fees.

Sign #3: You cannot get ahead or achieve your financial goals.

If most of your income is going to your house, then you won’t have anything left over to pay down debt, invest for retirement, save for kid’s college, or pile up cash for other large purchases. If you find that it’s hard to achieve these goals and you have nothing left over at the end of the month, then you either have a mortgage payment that’s too high or your spending habits are out of control.

If all three of these signs apply to you, then you need to seriously consider selling your home. It has become a financial burden, and you’ll never get ahead with money if you keep the home. Your home should be the last resort. If the payment is in line with your income and it doesn’t cost too much to maintain, then find every other alternative to achieve your goals. But if you find that nothing is working, then it usually means that the house is the problem and you need to dump it. Related Posts:

When Should You Sell Your Home To Improve Your Financial Situation? is a post from: Money Crashers

How Stupid Could Credit Card Companies Be?

Erik Folgate — Tue, 21 Jul 2009 03:35:33 +0000

I don’t know what it is with credit card companies, but they do some awfully dumb things. Credit card issuers have automated the entire process of extending a line of credit. Even with the massive credit crunch this country has experienced, banks are still issuing credit cards to anyone, and when I say anyone, I mean ANYONE.

A Mother was shocked when she experimented with her 6 year old boy applying for a credit card. He filled out the entire application himself and filled out the application truthfully. He filled in $0 for his income, “other” for his residential status rather than owner/renter, and signed his name that looked exactly like a 6 year old’s handwriting. Come to find out a few weeks later, he was issued a $600 credit limit from the Bank of America. How did this happen? This happened, because Bank of America only screens about 3 or 4 out of 10 applications. The ones that aren’t looked at are automatically issued a credit card.

Think you spend a lot of money eating out? Think again. A guy from North Texas received his credit card bill and saw that the balance due was $23,148,855,308,184,500.00. No, I didn’t write that wrong. The credit card charged him 23 quadrillion dollars for his meal at Five Sixty, a fine dining restaurant owned by Wolfgang Puck. Now that’s a programming error. The error was properly corrected, of course. But that bill would ruin anyone’s day!

I am sure I could come up with hundreds of more of these stories, but we all know that credit card companies simply don’t care who they extend credit to. Not only do I think credit cards are dumb financial “tools”, this kind of stuff just makes me laugh at them. The very people that beg and plead to the federal government that they are being hit hard by the economy and they need a bailout, are the same ones that extend credit to kids, dogs, and dead people. It’s crazy. When will these credit card companies start taking their lending practices seriously? Credit cards have become a joke.
Related Posts:

How Stupid Could Credit Card Companies Be? is a post from: Money Crashers

Best Cities To Live From Money Magazine

Erik Folgate — Mon, 13 Jul 2009 18:37:02 +0000

Money Magazine has come out with their 2009 best cities to live around the United States. Here are the Top 10:

Louisville, CO

Chanhassen, MN

Papillion, NE

Middleton, WI

Milton, MA

Warren, NJ

Keller, TX

Peachtree City, GA

Lake St. Louis, MO

Mukilteo, WA

Keep in mind that Money Magazine picks small towns that are near large metropolitan areas. Most all of these towns are self-incorporated towns that are considered to be suburbs to locals of the large city they feed from. Money Magazine heavily weights employment rate, crime rate, median income, median price of housing, the overall real estate market, and school systems.

I live in Orlando, FL and the closest small city to rank in the top 100 was Lake Mary, Florida at #96. That was a little disappointing to see only one city near me that ranked in the top 100, but these lists aren’t an exact science, and they are very subjective. I am also not ignorant to the fact that Central Florida has been ravaged by unemployment, has higher crime rates than usual, and real estate prices have plummeted.
It’s easy to defend the place you live in, because it’s natural not to think that you live in a bad place. Plus, many of the writers that come up with these lists don’t even scratch the surface of traveling to different cities and towns. They rely on data, but the data doesn’t always tell the entire story.

So, what was your biggest decision to settle down in the city that you currently live in? For me and my wife, it was living closer to her family, job opportunities at the time, and being central to many other cities around Florida that we have friends and family. Plus, there is a ton of stuff to do in Orlando and Disney alone gives many friends and family incentive to come visit us. However, many people are skewed by the International Drive feel of the theme park areas, but the rest of Orlando is nothing like that. Winter Park, Florida is one of the most hip towns in Florida to live in, in my opinion, but you would never know it if your only impression of Orlando is the Disney scene.

Where do you live and what do you like, not like about it? What city would you like to live in if you could pick with no other considerations to think about?
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Best Cities To Live From Money Magazine is a post from: Money Crashers

Seth Green “Cribs” Personal Finance Spoof

Erik Folgate — Tue, 16 Jun 2009 02:17:43 +0000

I found this on the Dave Ramsey Facebook page, which by the way, I was really impressed by his Facebook page. It gave me a good laugh:

Un-Broke: The Seth Green Cribs Edition – watch more funny videos

How To Reverse The Debt Cycle

Erik Folgate — Tue, 05 May 2009 02:05:01 +0000

What is the debt cycle?

The process of spending more money than you make on a consistent basis that forces you to borrow money each month to reconcile the deficit.

How To Get Out Of The Debt Cycle

Cut up your credit cards. It’s the only way to stop using them. If you eliminate the temptation to use them, you will force yourself to find a way to pay your bills and expenses each month without using them.
Start a written budget. All you need to do is write down all of your fixed expenses and make a good guess at your variable expenses. Then, figure out all of your income for the month. If you didn’t overestimate your variable expenses and you see that you still don’t have enough income to support your expenses, then you might have an income problem. Read more about budgeting
Break your bad spending habits. Are you constantly eating out for lunch? Do you go overboard at the grocery store? Do you have more clothes than you know what to do with? Do you buy the latest gadgets when they first come out? Then, you could be a spend-a-holic. Print out your last three months of bank statements, and write down all of the purchases you made that you could have done without. This is not just a step to take. It’s a lifestyle and habit you must consciously work to change.
Ask For Help.

Seek out a couple, friend, or family member you know that is winning with money. Ask them to keep you accountable about stopping the debt cycle. It helps to know that someone is going to ask how you’re doing every week.

Stopping the debt cycle is the first step to getting out of debt. You need to stop the bleeding before you can think about your plan to get out of debt. Everyone has a turning point when it comes to winning with money, and getting mad about being trapped in the debt cycle is usually the beginning of that turning point.

Savings Tip: Eliminate Your Private Mortgage Insurance

Erik Folgate — Tue, 07 Apr 2009 18:54:27 +0000

There are a great deal of people who are paying private mortgage insurance premiums every month that don’t need to be paying them anymore. The market value of real estate has definitely gone down the past two years, but many of you still have 20% or more equity in your home, which qualifies you to remove the private mortgage insurance from your mortgage. If you think this might be you, do the following:

Purchase an appraisal from a certified housing appraiser.
Calculate your home’s equity based on the amount of the appraised value. Divide the balance of your mortgage by the appraised value. If this number is less than .81, then proceed to the next step.
Contact the bank or mortgage company that services your loan. Explain to them that you received an updated home appraisal which shows that you now have 20% or more equity in your home, and ask them to remove the private mortgage insurance from your monthly payment. They will ask for a copy of the appraisal and possibly other documents to support its value.

Remember, do not order an appraisal unless you are fairly confident that it will appraise to an amount that would put you in the 80% or less range. These reports cost anywhere from $250 to $500, so I don’t want you throwing away your money. Do your research before ordering a report. You can visit websites such as Zillow.com to see their market value estimate for your home, and it allows you to see what comparable properties are selling for in your neighborhood.

Getting your PMI removed can save you thousands of dollars per year and shed quite a few dollars off of your monthly mortgage payment.

Will Obama’s Housing Rescue Plan Work?

Erik Folgate — Thu, 05 Mar 2009 03:14:39 +0000

Obama is making an effort to rekindle the housing market, and here is a good article outlining his propose plan.

I think the housing market is the key to jumpstarting our economy again. Everyone is focusing on the financial services and auto industry, but I think the real estate industry is the key to an economic recovery. I don’t like the idea of bailing out people, not because I don’t have a heart, but because buying a home is a risk. Failure is not always such a bad thing. Anyway, we are going to bail them out, and we’ll see how Americans respond to this gift.

Who will ths plan help?

For the most part, it will help those who have already defaulted on their loans. Lenders will have the ability to restructure the loan by reducing the interest rate and possibly the principal amount. They will try to reduce your loan payment to 31% of your household income. Obama says that this plan will weed out helping those who could never afford owning a home in the first place, because they will not restructure a loan that offers no plausible way to make the payment affordable based on the borrower’s income.

The mortgage must have originated before Jan. 1, 2009, and the unpaid principal can amount to no more than $729,750 for a single family home (more for a home with two-to-four units). Borrowers with other debt, such as car loans and credit cards, exceeding 55% of their incomes, may still qualify for a modification, but they’ll be required to accept debt counseling in a HUD-certified program.

Obama also claims there will be relief for some people that are unable to refinance their home, because they are upside down on their mortgage. I think this will be the minority of people that get relief from this package, because they will allow a refinance up to 105% of the value of the home. I know that many people are about 10% to 15% upside down on their homes, so I am not sure how many people this will help.

Who is not eligible?

If your house value has dropped more than 5%, you are out of luck.

How Do You Get Help?

Start calling your lender. Explain to them that you want help restructuring your mortgage and go from there. If they give you a hard time, refer to Obama’s plan and explain that you qualify for help.

Is there a catch to all of this?

Kind of. The restructured loan payment amount will only last for about 5 years, and then the loan will revert back to the original loan terms after that.

The reduced payment would stay the same for five years and then gradually revert back to the conforming loan rates in place at the time of the modification, increasing by no more than 1% a year.

I hope this works, because if more people start making their payments and confidence is restored in the housing market, we will see the financial services industry and the real estate industry make a rebound over the next 12 to 18 months. Related Posts:

Will Obama’s Housing Rescue Plan Work? is a post from: Money Crashers

It’s A Great Time For Young People To Buy A House

Erik Folgate — Thu, 19 Feb 2009 02:07:52 +0000

If you have been contemplating becoming a homeowner for the first time, circle 2009 as the year that you’ll own a home. This is the perfect time for young people and other first-time home buyers to buy a house. Why? Because you have everything going your way. Here is a list of reasons why you should buy a house in 2009.

The price of homes continue to drop. I thought they would start leveling out at the beginning of the year, but apparently there is a little more fallout to come. Some areas have seen a spike in home sales, and this is because first-time buyers are realizing that this is a great time to get a deal on a house.
The bargaining power is in your hands. In this market, you can get the seller to pay for all of your closing costs, the appraisal, an inspection, and maybe even the outstanding property taxes.
The government has sweetened the pot for the first-time home buyers tax credit. Here are the details:

The tax credit is for first-time home buyers only.
The tax credit does not have to be repaid.
The tax credit is equal to 10 percent of the homeÃ¢â‚¬â„¢s purchase price up to a maximum of $8,000.
The credit is available for homes purchased on or after January 1, 2009 and before December 1, 2009.
Single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit.

Interest rates are still under 6 percent!
Banks will start lending again wiith less stringent requirements, because that’s how they make money. Banks make money by lending money, so they can’t be tight with their money for too long.

So, have I convinced you yet? Don’t go out and buy a house if you can’t afford it. That’s how we got in this economic mess in the first place. But, if you have a down payment saved, you aren’t swamped in debt, and you have a stable career, take advantage of these times to get a great house at a discounted price.