Have you ever considered becoming a short term rental host?
Nate and I have recently converted a few of our long term rental properties into short-term rentals.
They can be a highly lucrative investment and a really fun way to make money. Some of the advantages to managing a short-term rental property include:
1. Your tenants are generally excited to be at your vacation property and may not require as much attention as a long-term tenant.
2. You can collect one-time, up-front payments instead of keeping track of monthly or weekly payments.
3. Depending on the location and amenities of your property, you may make several thousand dollars per month per property.
4. Platforms such as Airbnb, VRBO, and Furnished Finder make it easy to set up a website to market your property. A short-term rental investment can be accomplished by purchasing a property to keep rented out or putting your own home up for rent when you travel.
Whichever course you take, here are some things to think about before you hang up that “vacancy” sign:
1. Managing short term rentals is not exactly passive income. There is quite a lot of work involved in marketing the property, keeping it maintained, and turning it around between tenants. Consider whether you have the time to keep up with it yourself or if you will need to hire a property manager, and how much that will cut into your profits.
2. Think beyond vacation rentals. Short term rentals don’t have to be on the beach or a ski slope. Other reasons why someone may need a rental in your neighborhood include job interviews, waiting to close on a home, renovating a home, visiting family, traveling with pets, college tours, traveling professionals, digital nomads, entertainment events occurring in the area, or having medical procedure done at a nearby hospital.
3.Do your due diligence when buying an investment property. You’ll want to assess the existing short-term rental market and find out what the going rates are and which areas are renting well. You should find out if there are HOA or condominium regulations that prohibit short-term rentals. Also inquire as to state, county, or city regulations and resort taxes.
4. Create a business plan. Many property owners wing it with their short-term rentals, but you will have more peace of mind and less surprises if you treat your rental as a business. Make a list of expenses, including insurance, mortgage payments, taxes, cleaning and handyman services, utilities, internet and TV, lawn care, snow removal, furnishings, consumables you will provide, and marketing costs.
5. Work with an agent who knows the area. Buying the right property at the right price takes some experience. Remember that the purchase of the property is the bigger investment than the rentals to follow.
Curious? Let’s talk about how I can help you get started making money with short-term rentals!
Real estate has long been considered a solid investment for many reasons. It is a relatively safe and easy way for people to build wealth beginning with a small amount of money. Here are some of the ways investing in property can help you build an investment portfolio.
1. Real estate investments can provide you with a reliable and steady cash flow. Investing in rental properties is relatively easy as expenses are predictable and if your properties remain occupied you know what to expect in terms of profit margin.
2. Real estate appreciates in value. Real estate consistently appreciates, even during economic downturns, making it one of the more reliable investments. On average, real estate in the US appreciates between 3-5% annually. The last two years far outpaced that average.
3. Real estate investments help you retire. If you have been paying on your mortgage throughout your working years, you will experience greater cash flow as you near the end of your mortgage term and the principal is paid off.
4. Real estate sales are taxed at a lower rate than other income. When you sell your property, you are taxed on short or long-term capital gains which are usually lower than income tax brackets.
5. Real estate equity can be leveraged. One of the most attractive reasons for investing in real estate is the ability to leverage your money. When you take out a mortgage to purchase property you reduce the amount of capital required. As you build up equity in the property, you borrow against the equity or refinance the original loan, freeing up cash to buy another property.
6. You have control to improve upon your asset. Unlike an investment in stock, where you have no control over how it performs, you can improve upon your real estate investment. Updating or upgrading systems, finishes, appliances, and landscaping helps build value in your investment.
7. Real estate gains taxes can be deferred. Under the 1031 exchange tax code, you can invest the gains from the sale in one property to the purchase of another property without paying taxes on the gains.
8. Real estate investments are depreciable. This is confusing, but you can legally claim a depreciation expense on an investment property even though the value of your investment property is actually appreciating. The depreciation deduction allows investors to generate a higher cash flow while reporting a lower income for tax purposes.
If you are interested in investing in real estate, we’d be happy to help you find the right properties. Reach out!
Equity represents the degree of ownership an individual or entity has in an asset after subtracting any debts against the asset. To say someone shares equity in a company means they would share in any assets remaining after all debts are accounted for.
For example, if your business has sold $500,000 worth of product this year, but you have rent, operating expenses, and a business loan payment totaling $400,000 for the year, you have $100,000 of equity in your business. Equity changes as the value of your assets and debts change.
Home equity works the same way. When you take out a mortgage to purchase a home, your home is collateral on the mortgage loan, so the outstanding mortgage principal must be deducted from the value of the home to determine your home equity.
In most cases, you make a down payment when you purchase your home. That down payment is your initial home equity. If you pay a 20% down payment on a $200,000 home, you have $40,000 equity when you close on your purchase.
As time goes on and you continue to pay down your mortgage principal, your equity grows. Usually, the longer your own your home, the more equity you gain because you are paying down your mortgage. However, any debts you take on using your home value as collateral, such as a second mortgage or home equity line of credit (HELOC) decrease your home equity.
The changing real estate market also influences your equity. If you paid $200,000 for your home, and two years later the homes in your neighborhood start selling in the $400,000 range, your theoretical equity increases. (Theoretical because you don’t realize your home equity until you sell your home and pay off all debts against it.) You can also lose equity if the market takes a dive, but be patient and it should recover in time.
Equity also grows if you make improvements on your home that increase its value. Let’s say you remodel the kitchen and put in all new appliances. You have increased the value of the home. Your equity doesn’t increase by the amount your spent on the improvements, but on the value you get upon resale. This is an important point when considering making improvements prior to putting your home on the market, and one that is often misunderstood.
Let’s say Joe spends $50,000 on upgrades to his home. He might tell his neighbor, “I have $50,000 in my home,” but when he goes to sell, the current market dictates how much he will actually get in return. If Joe ends up selling for $40,000 more than he originally paid, his $50,000 investment got him $40,000 in home equity.
Some things you can do to increase your home equity include:
1) Make a large down payment when you purchase your home. The more cash you put down, the more equity you begin with.
2) Make increased or extra payments on your mortgage principal. Adding to the principal portion only on your monthly payments, or making extra payments when you are able, helps chip away at your outstanding debt.
3) Be smart when making home improvements. Not all improvements build equity. Some improvements may be personal preferences that don’t necessarily add value for resale. Improvements such as a new HVAC system, new appliances, or a new roof are usually more reliable investments than a fountain in the front yard or surround sound speakers throughout the house.
4) Don’t borrow against your home equity unless you must. Home equity is often a homeowner’s biggest asset, and can help to build your retirement nest egg, but it can also come in handy if life throws you a curve ball and you need to borrow against it for an unforeseen emergency. Be careful not to borrow against your equity for frivolous purposes, so it will be there if you really need it.
5) Sell when the market is favorable. If you are counting on your home equity to help finance your next home, pay for your children’s education, or add to your retirement funds, try to sell during a seller’s market when inventory is needed in your area.
We LOVE working with first-time home buyers. Helping you find your first home, learn the home buying process, and guiding you from house-hunting to move-in day gives us the warm fuzzies. Here are three things you should know before you start looking.
1. Work with one real estate agent or team. It’s best to have one agent who is helping you with your search. Your agent will be dedicated to finding you the right property, and then negotiating on all the terms of your transaction on your behalf. You want that person to get to know you and your family’s needs and preferences, rather than starting over with someone new each time you go look at a house. Keep in mind that the agent who shows you a home is, ethically, the one who should continue the transaction. Also, when you call an agent from a yard sign or advertisement, you are dealing with the seller’s agent. While most real estate professionals are adept at handling both sides of a transaction professionally, it makes more sense to deal with someone you have already taken time to get to know and who has your best interests at heart as the buyer. You aren’t paying your agent; unless otherwise stated, he or she is paid by the seller upon closing. Still, you are hiring someone to work for you, so feel free to interview multiple agents and pick the one that you feel fits you best.
2. You need to be pre-approved for financing. Unless you are paying cash for your home, you do need to talk to a lender before you start looking at houses. One reason is that it helps you set an accurate price range for house hunting. Looking at homes that you can’t afford to make an offer on just leads to frustration. A mortgage lender will not only tell you what amount you can borrow, but also your projected monthly payment, your closing costs, and what you should or shouldn’t do with your finances to maintain your eligibility throughout the lending process. Another reason for having an up-to-date pre-approval in hand is so you don’t lose out to another buyer. If you find the perfect house, you will want to get an offer in before someone else gets it, and that pre-approval letter must accompany your offer. We would be happy to provide you with names of mortgage lenders in our area who have provided excellent service to our clients.
3. There are some up-front costs. When you find the right house, and you and the seller have agreed on the price and terms and have signed the contract, you will first need to make your escrow, or “good faith” deposit. This is money you are risking if you back out of the deal for reasons not protected in the contract. Usually it is around 1% of the sales price but can be more or less depending on what you and the seller agree to in the contract. Your agent will help you with this during negotiations. The escrow deposit counts towards the sales price and is applied to your down payment or costs at closing.
4. Next, you should have an inspection of the property done by a certified home inspector. This cost varies depending on the size, condition, age, and features of the home, but is usually a few hundred dollars. You will need to pay this at the time of service. You may elect to pay for other inspections based on the results of the initial inspection. For example, if the inspector notes an issue with the HVAC system, you may need to pay a service fee for an HVAC contractor to look at the system. You want to get as much information during your inspection period as you need to confidently move forward with the purchase.
5. An appraisal of the property will be ordered, and the cost can be negotiated between buyer and seller. Your lender may ask you to provide a credit card number to cover the cost of the appraisal during the transaction.
We would be delighted to guide you through all of these steps throughout your home buying journey. Ready to get started? Give us a call!
Did you know that 37% of contracts that fall through do so because of repair issues?
According to the NAR (that’s the National Association of REALTORs®), 37% of contracts fall through because of repair issues that sellers could have addressed before listing their property.
With that in mind – here’s a quick PSA : If you’re thinking of selling this spring, don’t let that happen to you!
1. Meet with a real estate professional who knows your neighborhood and zip code. Allowing them to do a quick walkthrough could save you piles of cash.
2. If recommended, schedule a pre-sale inspection. Then you’ll know precisely what needs to be addressed from a functional standpoint.
3. Invest in repairing the major systems first. Think HVAC, plumbing, roofing, foundation, or electrical issues. Most buyers aren’t interested in inheriting the previous owner’s problems.
4. Once your home’s major systems check out, move to aesthetics. Here’s where your agent’s advice is literally gold! When in doubt, always remember, if there’s one room that needs to impress buyers, it’s (still!) the kitchen.
5. If there’s time, money, and a little elbow grease left, freshen up the paint and lighting, and then zero in on curb appeal.
The good news is getting your home ready to list doesn’t have to be costly or overwhelming. It just takes knowing who to ask for help! Send us an email, and let’s set a time to chat. We always look forward to hearing from you!
We all want people to love our home as much as we do, but especially when you are trying to sell it!
While it’s impossible to please every buyer’s taste, there are several easy things you can do to make your home more appealing without spending a lot of money. Try some of these tricks and see if your showings cause buyers to swoon.
1. Check your curb appeal. Take an honest look from the curbside. What are buyers seeing first? If your home needs to be painted or pressure washed, consider making that investment. Clean up landscaping by trimming trees and bushes, planting some fresh annuals, and laying new mulch. Clean windows, repair sagging soffit or porch railings, and have any trip hazards on your driveway or front walk repaired. Finally, consider some attractive yet subtle decorations for your front porch.
2. Create an inviting entryway. When buyers step inside your front door, you want them to feel welcomed. If you have a foyer or front hall, it is easier to make an attractive entryway, but even if your front door opens right into your living room, you can create the feel of an entryway with a couple of simple tricks. Clear the area of clutter and things that tend to pile up at the front door, like backpacks, dog leashes, or shoes. Place a small table or bench beside the door with plants, candles, or another simple décor. A small area rug can help define the space as the entryway.
3. Let the light shine in. Take advantage of natural light as much as you can. Trimming any bushes or trees outside your windows can help immensely. Wash your windows inside and out and replace or remove any worn screens. Make sure to open blinds or curtains before all showings.
4. Add some fresh color. Painting is an easy and inexpensive way to make an older home look new and is especially important if your current wall color is dark or outdated. Choose a light neutral color like a warm grey or light beige and use the same color throughout the house. Our personal favorite is Valspar Homestead Resort Parlour Taupe – such a versatile “greigey” tone! If your home tends to be dark, this will help brighten it up.
5. Let storage spaces speak for themselves. Many sellers make the mistake of waiting until they have a contract to start cleaning out closets. Cleaning out clutter is part of getting ready to show, not just getting ready to move. You want buyers to perceive that there is ample storage in the home, and this doesn’t work if every drawer, cabinet, and closet is stuffed to the gills.
6. Eliminate distractions. Streamline your decorating so your buyers see the house and not your personal belongings. Go ahead and pack up collectibles and family photos and keep decorative touches to the minimum. Too many plants, magazines, or toys distract the buyers from seeing the home as their own.
7. Entice them with outdoor space. The back yard shouldn’t be an empty space of infinite possibility, nor should it be a storage area for neglected toys. Get rid of any eyesores you’ve been avoiding dealing with, spruce up your landscaping, and create an entertaining space with a patio set, or a backyard oasis with some potted plants and a hammock.
8. Make it easy for them. Taking care of minor repairs is another step you can take to help buyers see your home as an easy and comfortable move. You want them to be mentally arranging their furniture as they walk through, not making a list of nicked woodwork, torn window screens (local folks, Neighbors Windows and Doors can make custom replacements!), and leaky faucets. The less work involved, the easier it is to fall in love.
When we work with clients who are downsizing to a smaller home, one of the hardest chores they face is letting go of sentimental belongings they no longer have room for. Souvenirs collected during travels, family heirlooms, and your children’s keepsakes can be quite stressful to part with. It doesn’t matter whether the items have monetary value or not; in fact, often the most difficult items to let go of are worthless in terms of money, but priceless in sentimental value.
Here are some tips to help you part with belongings you are attached to but no longer want to keep.
1. Remember that our memories reside within us, not within our possessions. Psychologists say that letting go of sentimental items can be extremely therapeutic. When we keep things, the items occupy both physical and mental space in our lives. It’s healthier to focus on your memories and not the items that represent your memories.
2. Focus on the present. Letting go also helps to bring your focus to the present. Sometimes things are continual reminders of the past and hold us back from living in the present. Dwelling in the past can make one more prone to depression and can affect our ability to deal with stressful situations in our lives. Realize that while we can always cherish our memories, we don’t need the past to be happy in the present.
3. Let go of guilt. People often hold onto an item they don’t want or need because someone special gave it to them or it represents a special person. Learn to let go of the guilt associated with getting rid of gifts you can’t use. Appreciate the thoughtfulness of the giver or the special memory it represents but pass the item on to someone else who can use it or donate it to charity.
4. Don’t save it for your grown children. Times have changed and today more young adults are able to buy their own furnishings. And they aren’t as sentimental about family heirlooms as prior generations were. Talk to your kids now and find out if you are holding onto your china, crystal, and silver tea service for nothing.
5. Compromise with your spouse. It’s not uncommon for one spouse to resent the others’ favorite belongings while holding onto their own special stuff. It’s important to recognize that, while you may not understand your husband’s need to keep a ball cap for every MLB team he’s seen play, he may feel the same way about his hats that you do about keeping every book you have read. Decide together on a reasonable number to keep.
6. Start with the easy stuff. If you have a lot of belongings to sort through, start with the easier decisions and work from there. Often people find that once they get some momentum going it feels good to let go.
7. Write a family memoir. Hold onto your memories with words instead of things by writing your memoir or the story of your family. Writing your story can be very therapeutic and can help you release your hold on tangible items. If you need help, try a service like Storyworth.com.
Shout out the word “Zillow” in a mixed crowd and you may get several reactions: “I love it – I found my current home on Zillow!” “It says my house is worth $30,000 more than I paid for it two years ago.” “Ugh – you can’t trust it at all.”
I have my own perspective after working as a real estate agent the last few years. I don’t harbor any ill will toward the popular site that attempts to be profitable and serve up “zillions” of data points in a consumer-friendly package and that rhymes with “Pillow”, conjuring images of a cozy home. I do not personally receive any money or leads from Zillow and I am a paid subscriber of the Alaska Multiple Listing Service (MLS) which is the sole repository of the most accurate property information.
Here, I’ll document some of my experiences with Zillow and those of clients I’ve worked with. (Along with some of my favorite memes!)
As a home buyer you may like using Zillow because:
· It’s a super slick way to look for homes online anytime, anywhere and get to see photographs of homes both inside and out (did you know that these actually populate from the MLS automatically once a home is listed by an agent?)
· It gives a predictable summary of the property including nearby schools, an estimate of what Zillow thinks it may be worth, similar homes for sale in the area, any open houses coming up and how long it’s been listed for sale
· You can subscribe and favorite homes, see when prices change and read reviews of real estate agents you may want to work with
As an agent, I often have clients send me a Zillow link via text to research for them. It’s easy for me to look up the property in MLS and send them documents that really illuminate the condition of the property (all homes are required to have a “property disclosure” that a seller fills out with details about issues/improvements/fixes made to the home). Use Zillow for this – I love it!
Issues for buyers:
· The Zillow listing doesn’t tell you anything about the condition of the home
· Pictures alone may be deceptive – get to an open house or a private showing with your agent (The Switzer Team, right?) to better experience curb appeal, layout and features that weren’t photographed
· Details can be wildly incorrect – some “cross over” from MLS, but others are from outdated tax records or old descriptions entered by previous owners. Price information is often wrong and homes found on Zillow may no longer be on the market
My clients have sent me listings of homes listed as “pre-foreclosure” when they are not even for sale (Zillow has an algorithm that tries to guess when these homes may go for sale).
I’ve also had buyers call me from my for sale sign on a listing wondering why I was not yet there to show them the property. They had called an agent that appeared under the Zillow listing (a premier agent who pays to get these kinds of leads) who was supposed to meet them for a showing, but that agent never showed up. They gave me a phone number for the agent but it was a unique Zillow-generated number that only works for the consumer who clicks the link, so I couldn’t help them. Frustrating, right?
A current client found a home on Zillow and was “assigned” a Premier Agent to help her buy the home. The agent was unfamiliar with the area where the home was listed, and client and agent just didn’t seem to click, personality-wise. My client felt “let down” and then realized that she could pick her own agent to work with that wasn’t just trying to sell the first home she viewed in person.
Prospective home sellers love that Zillow provides a “Zestimate” that attempts to estimate what their home is worth in the current market, based on publicly available information (tax records, limited MLS data, etc.). Zillow tries to clarify that it is only an estimate and not an appraisal of what the home is worth.
Unfortunately for Zillow, Alaska is a non-disclosure state. In other words, municipalities and boroughs are not allowed access to final sales prices (these are only available in the MLS system). Zillow can only “guess” these values based on last available list prices it can “see” from data that MLS shares publicly.
In other words, Alaska’s data on Zillow may be slightly to wildly inaccurate.
Why sellers like Zillow
· They can “update” their Zillow listing, customize the “What I love about this home” description, and add personal photos taken of the home’s landscaping – as an agent, I manage all of this for my clients who list their homes with me to sell!
· Lots of exposure – anyone can see that a home is for sale and inquire digitally for more information.
· Anyone can see a video about the home, when open houses will take place, and other information that crosses over from Alaska’s MLS
· It’s exciting to see how many views your property has and how many people have “favorited” it
Things to watch out for as a seller
· The Zestimate is generally high and has no bearing on Alaska’s current real estate market – it can cause frustration when the home sells for thousands of dollars less.
· Lots of views can initially make sellers excited, but these views can be from browsers around the world and not actual interested potential buyers
· Home buyers want to see the home in person – your agent should write an accurate description and include professional photos that draw interested buyers into making a showing appointment – bad photos can work against you.
As agents working with you to sell your home, we have access to all sales and pricing history recorded in the MLS database and we use that to create a comparable market analysis (CMA) of your home. We take into consideration any upgrades you’ve made to your home since you’ve owned it. Conversely, we can see what similar homes sold for and how they differed from yours.
Zillow can be a great tool to work for buyers, sellers and their agents. Learn the secrets to make it work for you and not against you, and Zillow can be your friend and a tool to help your achieve your real estate goals!
Thanks for reading. Please contact me any time if you have any questions about your Zestimate or homes you find on Zillow! You can also set up your own customized search with us on OUR MLS-linked website, www.theswitzerteam.net. And sign up for our newsletter here.
Have you seen the cute “love questionnaire” floating around Facebook?
Several friends have posted it, and it’s an adorable way to get a little glimpse into a couple’s life. I thought I’d surprise Nate and ask him the questions… live on video. Because that’s just the kind of loving wife I am. Look at that preview – he’s smiling but he’s SCARED. Ha! Enjoy!
We have an awesome giveaway running on social media! If you haven’t entered, please like and follow The Switzer Team on Instagram and Facebook! Find the post with the heart shaped pizza, and tag your Valentine or a Palentine. Winner will be chosen by drawing a name on Friday, 2/14.