Housing

Proactive Home Maintenance Ideas- Save Even While You Spend

September 24, 2020 By Susan Paige Leave a Comment

As a homeowner, you would want your living space to be in great shape no matter how old it gets. Timely maintenance is important to keep the house looking good and add to its value. At the same time, it can save you from massive repair costs in the long run. Rather than taking a reactive approach, you must stay one step ahead of home maintenance. A proactive approach is all about addressing potential problems even before they arise and preventing them. Here are some ideas you can implement for saving even as you spend.

Stop sewer problems

A sewer blockage is the last thing that any homeowner would want to come across. Backed-up sewage spells trouble as it can make your place smell foul, cause inconvenience, and even make the residents sick. Let professional plumbers handle the issue at the slightest suspicion of a blockage. Avoid DIY because it can aggravate the problem, instead ensure that plumbers resolve it from the root.

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Insulate the attic

Proper insulation is one of the essential maintenance requirements for any home. Although there may not be any visible issues, inadequate insulation can cause a rise in energy bills. Get a professional inspection for your attic and see if it needs insulation to revamp. They may suggest remedial measures to ensure that the interiors stay at the right temperatures and you need not spend a fortune on air conditioning.

Clean the gutters

Fallen leaves and debris tend to clog and break gutters, which can cause water to overflow the trough and reach the foundation line of your home. This can lead to expensive problems, considering the massive Foundation Cost you will need to incur for the repair. Cleaning the gutters every few months is a good idea. In case you notice cracks in the foundation, have it addressed by experts immediately to prevent costly repairs.

Pay attention to the interiors

If you notice signs of the foundation crumbling, a closer look at the interiors is warranted. You should pay attention to warning signs even if there’s no problem with the foundation. Look for signs such as uneven floors, leaning walls, cracks in the ceiling or walls, and tilting chimneys. Leaks and puddles also indicate impending issues. Calling a contractor immediately is the right move. They will detect the reason for these problems and address them with the requisite measures.

Don’t forget the exteriors

While you may be attentive about the interiors, make sure that you don’t forget the exteriors of your house. Exterior caulking tends to lose its integrity over time and often begins crumbling and pulling away after a few years. Replacing it immediately is important otherwise it will let rain seep through the windows. You may end up facing expensive repairs or even replacement of rotten wood. A coat of fresh paint for the exteriors every couple of years should also be on your home maintenance checklist.

Your home is an investment, so it deserves to be looked after with good care. Timely action can save you dollars and prevent the inconvenience of massive repairs in the long run.

10 Ways to Renegotiate for a Rent Decrease

September 2, 2020 By Kathryn Vercillo Leave a Comment

I have lived in San Francisco for well over a decade. During that time, rents soared year upon year. Then COVID-19 hit. While it’s terrible to be in this pandemic, one silver lining is that rent prices have gone down significantly. I’ve never had to renegotiate a rent decrease before. It simply wasn’t an option here in the past. Now, however, I’m studying all that there is to know about the topic. Here are ten ways to renegotiate a rent decrease:

1. First, Simply Ask

If you are on good terms with your landlord then you might just come right out and ask for a rent reduction. This is particularly common during the coronavirus pandemic, when landlords certainly understand that people are facing economic hardship. This tends to work best in small buildings where you deal directly with the landlord rather than large complexes where you work with a property manager.

2. Write a Letter Explaining Your Case

Unfortunately, many people simply aren’t in the position to ask their landlord face to face to renegotiate a rent decrease. You may feel anxiety, not have a strong relationship with your landlord, or otherwise want to go through a more formal process. In this case, it’s smart to write a letter to your landlord. Here’s a sample template to get you started.

Generally speaking, you’ll want to include the following things in your letter:

A dated statement that you are writing to renegotiate a rent decrease.
Information about what the current market rate is for comparable housing.
Comparison of what you pay compared to that market rate.
Clear statement of the amount you wish to pay.
Examples of the ways you’ve been a good tenant (on-time payments, etc.)

During the current climate, you might also point out that approximately one-third of renters aren’t paying their rent during COVID-19. Emphasize that you have options such as eviction moratoriums but that you would rather work directly with the landlord to lower the price to something more manageable.

3. Ask for a Property Assessment

I’ve lived in my apartment for over a decade. The landlord has done little to nothing in that time to upgrade the apartment. Therefore, what was a good deal on my rent ten years ago isn’t such a good deal today. After all, everything from the appliances to the paint is ten years older. If someone else was going to move in, the landlord would have to invest money to bring the place up to date.

Therefore, one option is to request a property assessment. You might have an appraiser come in on your own or you might work with your landlord on this. The point is to highlight to the landlord all of the things that the apartment needs. Then offer to renegotiate a rent decrease instead of having the landlord make all of those improvements. Doing this allows the landlord to see that it’s to their benefit to reduce your rent.

4. Barter Services for Lower Rent

Are there things that you could do around the apartment building to make life easier, and perhaps cheaper, for your landlord? For example, we have some common areas in my building that need regular cleaning. Perhaps I could get some money taken off of my rent in exchange for maintaining those areas for the landlord. Property maintenance, painting, lawn care, marketing, showing other units to prospective renters, and other similar tasks may be worth it to your landlord.

5. Offer to Give Up Some Things

Maybe your apartment comes with a parking space but you don’t need or use it. Ask the landlord if you could give up the parking space (allowing them to rent it to someone else) for a rent reduction.

6. Offer Advance Payment

If you have some savings then you might be in a position to pay your rent in advance. Some landlords will accept a significantly reduced monthly rate if you pay three months, six months, or even twelve months in advance. While most of us aren’t currently in that position, it’s a great option to consider if you are.

7. Sign a New Lease

If you’re on a lease that’s coming up for renewal then that’s the perfect time to renegotiate a rent decrease. When your landlord sends the new lease, let them know that you won’t be signing it before you discuss the rent. This is when you can go step-by-step over the details.

Even if your landlord decides not to lower your rent, they might be willing to negotiate other terms of the lease to your benefit. For example, a landlord that previously didn’t allow pets might be flexible on that. Or they might agree to pay utilities if you keep your rent rate the same. Getting more for the same price is effectively a rent reduction.

Another thing to consider is extending your lease. If you typically sign a one-year lease, ask the landlord if they would consider lower rent if you commit to a two-year lease instead. Landlords like good tenants to stay put so this can be good incentive for them.

8. Suggest a Temporary Rent Reduction

Realtor.com explains that some landlords are willing to offer a temporary rent reduction for short periods of time. For example, if you’re facing financial hardship, have been a good tenant, and happen to be in the off-season for the landlord’s properties then there’s a good chance that you could renegotiate a rent decrease that lasts 3-6 months. It’s better than nothing and can help you save some money.

9. Ask What Would Help Lower Your Rent

Perhaps you’re not getting anywhere with your landlord. Sometimes it can help to put the ball in their court. Ask them what you can do to renegotiate a rent decrease.

This changes the narrative. Instead of you asking for a decrease and the landlord simply saying no, you give them the chance to get creative with what they would like to see happen to lower your rent.

The answers might surprise you. Your landlord might want you to reduce water waste in a place where they pay the water bill. Perhaps they’d charge less if you pay on the 25th of the previous month instead of paying on the 1st during the month rent is due. Ask, review their answer carefully, and decide if it’s the right choice for you.

10. Threaten to Leave

If your landlord isn’t budging on the rent, and the market is right for it, then you might want to consider moving. You shouldn’t threaten to do this unless you truly intend to. If you’re at this stage, you can begin looking at comparable apartments to move into. As you make those applications, you can keep your landlord abreast of the places you’re finding and where you might consider moving. Don’t be shy about sharing the (lower) rent offered at these places. When your landlord realizes that you are serious about moving, they might get more flexible about the amount of rent that you pay.

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How to Retire Well in California

August 5, 2020 By Tamila McDonald Leave a Comment

For many, retiring to California is the dream. You can enjoy the warm weather, expansive beaches, breathtaking wine country, and so much more of what the state has to offer. However, if you want to retire well in California. You have to be prepared. While there are numerous options for relaxation and entertainment, and solid access to critical amenities. California is pretty expensive. If you want to retire well in California. Here’s what you need to know.

Cost of Living

A cost of living score represents how expensive it is to live in a particular area. The United State’s national average is listed at 100. If a score is above that mark. It means it costs more to live there than the average. California’s score is 142.7.

In fact, California costs more than the average in every major cost of living category. The worst area is housing, where California has a score of 203.4. The average home value in California is over $578,000. But certain cities come up far higher. For example, San Francisco is nearly $1.2 million. While San Jose is over $877,000.

Now, some come in below the California average. For instance, Sacramento and Fresno both cost less, sitting at $299,200 and $212,700, respectively. Those are closer to the national average. That average is listed as just shy of $249,000.

But you won’t just pay more for housing. Food, transportation, and utilities all cost more, too. Even its lowest score, a 113.0 in the health category, isn’t a great sign. Essentially, heading to California means spending more than the average across the board.

Tax Considerations

California is known for its high taxes. While the state doesn’t tax Social Security, which is a boon for retirees, it does tax every other kind of retirement income. How much you’ll pay depends on your income level, though it will fall between 1 and 13.3 percent.

Additionally, sales tax can be incredibly high in California. The state charges 7.25 percent. Then, individual districts can take on more, ranging from an additional 0.10 and 1.00 percent. Certain areas even have several district taxes stacked on top of each other, making it even more expensive.

There are some potential property tax breaks available to seniors. However, they are not nearly as generous as some other states make available.

Part-Time Job Opportunities

Usually, part-time job opportunities for retirees in California are plentiful. However, the COVID-19 pandemic altered the landscape dramatically. California is experiencing prolonged business closures and limitations, making it hard for anyone to find jobs.

Until the pandemic resolves, employment is simply more difficult. However, if a recovery occurs, retirees can likely find plenty of options available.

Best Cities for Retirees in California

If you want to retire well in California, heading to the right cities is a must. Your money will go further in some areas, allowing you to enjoy more of what the state has to offer without financial hardship.

Fresno is an excellent choice for retirees, offering lower housing costs and an exceptional location near a variety of national parks. Modesto offers city living at an affordable price, while Sacramento is great for amenities and doesn’t require you to break the bank.

If you want to live beach side. Santa Barbara can be a less expensive choice. It offers warm sand and moderate temperatures. It also offers a slew of outdoor activity options. However, it isn’t necessarily cheap. It just costs less than some other coastal cities.

For wine lovers, Santa Rosa might be the right choice. It’s moderately priced (based on California standards), and has a reputation for being an enjoyable place to live. Especially for retirees.

How Much Money You Need to Retire Well in California

With its higher cost of living, it shouldn’t be a surprise that you’ll need more money to retire well in California. While precisely what you’ll want to have available varies depending on the city you choose. Plan for about $90,500 a year. That would cover your expenses and give you a buffer in many cases, allowing you to enjoy your retirement with greater ease.

Do you have any tips that can make it possible for someone to retire well in California without breaking the bank? Share your thoughts in the comments below.

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Should You Rent Or Own In Retirement?

August 1, 2020 By Doug Carey Leave a Comment

Many years ago, my grandparents chose coastal Florida as their retirement destination.

They were renters, but they were also owners. They kind of had the worst of both worlds.

I say that because they owned a modular home, which is almost always an asset that declines in value over time, but they also rented the lot it sat on. And rent only moves in one direction over time.

They could not say enough great things about where they lived. They loved the location and they loved their neighbors, and it’s tough to put a value on that. But a financial advisor (which they never had) might have tried to talk them out of this arrangement.

Over time, the demand for housing in the area increased substantially. That meant rents rose quickly. Some of my grandparents’ neighbors — who, like my grandparents were light on investments and largely living on Social Security and pensions — had to move.

My grandparents were able to stay put, but that was largely thanks to some pretty strict budgeting. They had great lives and died virtually broke, which is what a lot of people strive to do. But it was good fortune that allowed that to happen; they probably cut it too close for most people’s comfort.

As you approach retirement, you’ll want to make sure you’re not cutting it this close when it comes to housing costs. We’ll run through a few what-ifs and hopefully give you some food for thought for when it comes time to make this decision.

Owning: The Pros And Cons

There are pros and cons to each side of this issue.

Let’s start with purchasing a home.

The biggest plus to owning a home is that it’s yours. We’re stating the obvious here for sure. But it’s the details that matter. Those details include being able to customize the house to your satisfaction. Unlike renting, you can do whatever building codes will allow.

There’s also an intangible satisfaction of owning a home. It’s hard to put a value on this, but homeownership is a source of pride for many people.

Another positive: Your home is something of a savings or investment account. With each mortgage payment, you’re socking away money — assuming your home doesn’t decline in value, which of course can happen (more on that when we get to renting). If you’re not great at saving money to start with, owning a house is one way to ensure you do (as long as you don’t take out home equity loans, which are to be avoided as much as possible).

Finally, borrowing for a mortgage is really cheap right now. This means what you would be paying in interest will be quite reasonable compared to how much you might have paid in the past for a similar loan.

And now on to the cons.

Home maintenance is for real, and it can get out of control quickly if you buy a home where maintenance has been deferred or if you’re simply unlucky. If you own, the responsibility and cost are on you. If you rent, it’s generally not. Pretty straightforward.

Also, although we referred to a home as an investment earlier, it does not kick off cash flows as some equities do via dividends. A home is, hopefully, an investment, but it’s not the most liquid one. If you need the money that’s tied up in a home, it can be tough to get to.

Renting: The Pros And Cons

While owning gives you the freedom to do what you want with your home, renting gives you freedom period. Virtually on a whim, you can move.

This can be a big deal in retirement. The older you get, the less likely you’ll want to pack up and move. But there can be important reasons to do so. You might have a family — your children or your grandchildren — who you want to be near to. That family might have jobs that move them around the country or even the world. Renting gives you more flexibility to move as well if you like. If you owned, it would likely be more of a production.

Also, not that anyone wants to think about this, but if and when the time comes to move into some form of assisted living, the last thing you’ll want to be thinking about is selling your home. Plus, you might have to sell at an inopportune time, like during a bad spell for the housing market.

If you happen to be among the dwindling number of people who have owned their home for decades, this is when you’ll sell and cover the down payment at the assisted living facility. But if you’re later in life having sold your home earlier for one reason or another and are now renting, the transition will be easier. You will likely have already whittled down your belongings considerably as a renter, and will likely be more acclimated to living in a smaller dwelling.

On the negative side: What if you love where you rent but are forced to move? Maybe the owner wants to sell the place or move in themselves. That’s the most disruptive thing. You’re also not building any equity as a renter and might need to get permission to paint the walls or even hang up a picture.

Sorting Out the Money Side

There are so many factors to the decision that has nothing to do with money. We can’t help you with those, but should be able to help with the finance part of it.

The best way to approach this is to consider some scenarios that might apply to you, and then put them through their paces in a retirement planning software program.

Here’s one example of many (and we certainly can’t get to them all). Let’s say you own now but want to move and rent where one of your kids lives. You like the idea of renting while you scope out a place and see if you like it and want to commit to owning there.

In this case, most likely,

You have a mortgage
You’ll pay it off when you sell the home
You’ll have a new slug of cash in need of a place to go
You’ll need to account for rent payments in your retirement plan
You might want to model a home purchase some years after renting

The WealthTrace financial planning application can model all of those things. Here’s what that inflow from the home sale might look like in the program:

And that’s probably a tax-free transaction, just as it’s listed there. As a homeowner, you could have up to a $500K exemption on your capital gains as a couple.

Then you’ll want to model the outflows, which could go something like this:

Here, we’ve got rent for two years for our retiree (Michelle). Then in two years, when Michelle is 60, she buys a home with $50K as a down payment. She also picks up a mortgage payment, and then of course the inevitable property taxes that come with being a homeowner again.

Once all of those inflows and (especially) outflows are accounted for, the program can do its thing and figure out what the new items do to (or for) the retirement plan.

Permutations and Observations

This is one of many ways to slice the apple, of course. Depending on your assessment of the housing market where you’re moving to, you might instead just go straight to buying. Or you might want to consider renting out the home you already own for a while. (How would it fare as an Airbnb? You could leave some of the furnishings behind in that case instead of having to sell them or give them away.) You can model all of these possibilities with the right software. The bottom line is that, before deciding on which way to go, you owe it to yourself to make sure you understand the effects of all the buy-or-rent variations.

7 Hidden Costs of Home Ownership

July 31, 2020 By Tamila McDonald Leave a Comment

Many first-time home buyers experience a rude awakening. Often, they don’t anticipate many of the hidden costs of home ownership. Which is something that ultimately leaves them reeling if they aren’t financially prepared for emergencies. Luckily, it is possible to essentially learn from the experience of others. As many generations of home buyers before them have been down that road. With that in mind, here’s a look at seven hidden costs of home ownership that every prospective buyer needs to keep on their radar.

1. Property Taxes

While most home buyers understand that they’ll have to pay property taxes, only a few have an accurate idea of what that’ll look like. It isn’t uncommon to incorrectly estimate what you’ll owe. However, with a bit of diligence, it’s possible to track down a reasonably accurate number quickly. In many cases, you can find it in the MLS listing. Otherwise, most municipalities have a search tool that allows you to look it up.

Additionally, many don’t know that the cost of property taxes usually gets wrapped into your monthly mortgage payment. The lender uses that approach to help ensure you remain current, putting the money into your escrow account until it’s sent to the proper municipality, usually in two annual installments.

2. Lawn Care

If you previously lived in an apartment or in a rented property where the landscaping was handled by the owner, it’s easy to overlook how much lawn care can cost. Buying all of the necessary tools can set you back several hundred dollars at a minimum. If you opt to have it handled by a professional, routine maintenance may run $100 or more a month, while more in-depth upkeep could cost several hundred or more for a single appointment.

3. Pest Control

Another cost that renters don’t shoulder but homeowners often need to handle is pest control. Usually, preventative treatments are the best approach, as they stop potential infestations before any trouble can occur.

However, depending on the kinds of treatments involved and the size of the property, that can easily run several hundred dollars a year. While that is far less than the cost of dealing with an infestation and any resulting damage, it’s still a big bill that many new homeowners don’t expect.

4. Missing Appliances

When you buy a home, it isn’t uncommon for every appliance to be left in place except refrigerators, washers, and dryers. While you may be able to delay picking up a washer and dryer, living without a fridge isn’t necessarily an option.

Since a refrigerator can cost anywhere from a few hundred to several thousand dollars, it can be hard to squeeze into a budget after handling all of the home buying-related expenses. If you need a washer and dryer too, that could run an additional several hundred to more than $1,000, depending on what you buy.

5. HOA Fees

Purchasing a home that sits in a homeowners’ association (HOA) zone usually means paying monthly or yearly dues. These funds support the HOA’s operation as well as cares for various community assets or services.

HOA fees can run the gamut. Some may be a few hundred dollars a year, while others are several hundred dollars a month. That’s why knowing what they are in advance is essential. If you fall behind on your dues, there can be consequences, including a lawsuit against you or a lien on your property.

6. Repairs for Damage Due to Negligence

Even if you get a home inspection before you buy your house and no major issues are spotted, that doesn’t mean everything is squared away. Inspectors may not spot every problem, even if they are fairly diligent, as some are hidden from view.

While new homeowners might assume that certain kinds of damage are covered by their homeowners’ insurance, if the damage is due to negligence, it usually isn’t. That means, if the previous owners didn’t perform proper routine maintenance, your insurer might not have to foot the bill. Instead, it will be solely your responsibility.

7. Utilities

New homeowners usually understand that they’ll have to handle their own utility bills. However, it isn’t uncommon to underestimate their size. If your house is larger than your last rental property, you may not realize how expensive it is to heat, cool, or otherwise power. Similarly, if your rental property had water, sewer, and garbage costs included, you might not understand how much these usually run.

In some cases, you can get estimates by calling the utility company and inquiring about past data on the property, or averages in your neighborhood. However, these won’t be based on your level of use, so they can still be inaccurate.

Ultimately, it’s critical that homeowners understand the potential impact of all of the costs above, ideally before they move into a new house. That way, they can get accurate estimates when possible or, at least, understand that these expenses are part of the equation. Then, they can plan accordingly, ensuring a surprise cost doesn’t become a budget-buster. If you’re looking to buy a property as an investment you could always avoid all these costs of home ownership by investing in a service such as Roofstock.

Do you know of any other hidden costs of home ownership? Share your thoughts in the comments below.

Use These Tips to Pass Your House to Your Heirs Tax-Free

July 29, 2020 By Kathryn Vercillo Leave a Comment

You would like to pass a house tax-free to your heirs. After all, you want to give them a gift, not the burden of taxes. But how do you do that? Here are some key tips:

Tips to Pass a House Tax-Free Through a Will

When you do your estate planning, you can make a plan to pass your house tax-free to any heir(s) that you would like. For most people, this is the best way to make sure that you’re passing along the home with the least cost to anyone.

The most important thing is to consider the total value of your entire estate (not just your home). If the value is over $11.58 million (this is called the unified federal estate gift and estate tax exemption amount; the amount is as of 2020), then you’ll have estate taxes. If it’s under that amount, you won’t have taxes. Therefore, you can pass a house tax-free through a will if your assets are below that amount. Note this amount is federal; check with your state about local maximums to make sure that your heirs won’t owe any state taxes on the inheritance.

Things to consider:

Make sure you, and your heirs, understand the capital gains taxes that your heirs may have to pay when they sell the property. The great thing about using a will to pass a house tax-free is that it generally gives you the best option as far as this goes.
If you owe any money to Medicaid upon your death, they can place a lien on your property, which can impact your heirs

Use an Irrevocable Trust

If you do have an estate that exceeds the $11.58 million amount then you might want to consider putting the house into an irrevocable trust instead of simply including it in the estate will. Specifically, you might want to look into a qualified personal residence trust.

Once you pass away, the house will go to the heir(s) you’ve designated with the trust. However, if you sell the house, the money goes into the trust; it can’t be cashed out should circumstances change. (Hence, the term “irrevocable.) So, this is not a move to take lightly but it’s something to consider if you have a high-value estate and want to pass a house tax-free to your children or other heirs.

Tips to Pass a House Tax-Free As a Gift

You can gift a house to your children. Don’t you have to pay taxes on that? Not necessarily. If the value of your home is less than the $11.58 million mentioned above, then you probably won’t have to pay taxes on it nor do your children. You do, however, have to file a gift tax form when you do your annual taxes. As long as the value is below that amount, it should just be a matter of filing the piece of paper but not paying any fees.

Review the total value of your estate and your home.
File a gift tax form with the IRS in the year that you gift the home (unless the home is worth less than $15,000)
Offset the total amount of the gift by first using your annual gift-tax exclusion ($15000); note that this is per donee and per donor (so if you and your spouse jointly own the property and you gift it to multiple children then you can increase the exclusion amount accordingly.)
Again, make sure you and your heirs are both aware of the capital tax gains. If your child eventually plans to sell the home, they may pay more if you gift them the house than if you will it to them.
Do not apply for Medicaid within five years of gifting your home to your child. The details on this depend on exactly what your assets are worth but generally speaking there’s a transfer penalty if you gift assets just before applying for Medicaid.

Can You Sell the House and Gift the Money?

Some people really want to pass on their home to their children. And some children really want their childhood homes. But in many instances, it’s more about the money/value than about the home itself. If that’s the case in your family, then you might think about selling the house.

You can sell the home at current market value then gift that money to your child. You can gift it in a will or trust or give it to them directly.
Gift up to $5.49 million to one person are allowed without having to pay taxes on it. You will still need to file the aforementioned gift tax form with the IRS.
Another option is to sell the home to your child at a very low price. The plus side is that they get the house, then they can sell it themselves at a higher value when the time is right for them to do so. The downside is that they may have to pay higher taxes when they do.

Can You Sell The House to Your Child for $1?

This was a common practice for awhile. You technically sell the house, so it’s not a gift. However, this isn’t something that flies anymore, legally speaking. Of course, you could sell the house to your child for $1 if you wanted. But the rest of the value of the house is considered a gift. Therefore, the gift tax rules are still relevant. Moreover, if your child sells the house, they have to report that entire difference as a gain, which impacts taxes.

If you want to sell your house to your child, your best bet as far as taxes go is to sell it to them with a small down payment as a seller-financed sale. You’ll carry the note for the balance. Your adult child will make affordable payments. You can even offset what they pay you by gifting them up to $15,000 per year (which is low enough to not qualify for that gift tax.) Since you’ve sold the home, it’s no longer part of your estate, so you don’t have to worry about that come tax time.