Purchasing a first home is one of the privileges that come with entry into the "real world.” Homeownership also happens to be one of the best ways to build wealth and security for you and your family. Even if you’re not ready for this step right now, you can prepare for it. 

Since the majority of homeowners purchase a property with a 30-year mortgage, there is no such thing as starting to save too soon. As soon as you establish yourself in a career, why not start putting 10% or more of each paycheck into a housing fund? Your future self will most certainly thank you. 

Depending on where you live, a down payment can range between 0% and 20% of the purchase price. Find out if down payment assistance programs are available in neighborhoods where you are interested in buying a home. These programs allow the seller to cover a portion of the down payment, commonly up to 3% of the sales price.

It is never too early to learn what you need to do before you take the plunge into homeownership. Meet with a local real estate agent and a local loan officer to start the preparation process. They can help you establish goals and create plans for reaching them, even if your purchase will be a year or two down the road.

Once you are ready, the process of finding and purchasing a home can take anywhere from one month to a year, depending on local market conditions and availability. 

If you’ve been thinking of buying an investment property, here are some indications that you’re ready to take the next step:

• You own a primary residence and are familiar with homeownership.
• You have the 20% minimum for a down payment. 
• You have savings, typically enough for six months of living expenses, in case of unexpected life events.
• You understand that surprises happen—roofs leak, water heaters break, tenants relocate—and you can budget for potential repairs and vacancies. 
• You are prepared to manage the property yourself or to pay upwards of 8% of gross rents for a professional property manager to select tenants, collect rents, and handle maintenance requests.
• You are knowledgeable about key aspects of the community you are looking to invest in: rental rates, schools, services, and any pros and cons. 

Once you have met some, if not all, of the above criteria, the next step is to find an experienced real estate agent who specializes in investment properties and can help you locate and secure a great property. Then the fun begins: you start to build wealth while someone else pays off your mortgage on an appreciating asset. 

Happy investing! 

There are many advantages to owning a home with a guest house. A guest house can be used by family and friends when they visit, or by you as a private study or workshop. There are also financial advantages if you choose to rent it out: income toward your mortgage and taxes, tax benefits (a huge plus in today’s tax climate), the ability to switch homes should you need to lower your expenses, and a way to build wealth and save for the future. 

If you are considering buying a property with a guest house, you or your real estate professional will first want to look into a number of legal factors. Do local laws allow guest houses, and have all required permits been obtained? Can the guest house have a full kitchen, or is it limited to a hot plate and a microwave? Are there any local laws that could prevent you from renting out both homes, in case you have a job transfer and want to keep the property as an investment? Is there any restriction on the length of rentals—are both short-term and long-term rentals allowed? Finally, are there any rent control laws that you should be aware of? 

In short, a guest house can be a wonderful feature that brings both flexibility and financial benefits, as long as you do your legal research before purchasing.

The first step in buying a house is to sit down and make a budget. The budget should include how much cash you are willing to invest in the down payment, as well as the maximum amount you are willing to pay each month to own a home. 

Once you decide what your down payment and monthly payment comfort levels are, you’re ready to reach out to a local real estate professional, who can help you navigate the process of finding and purchasing a home. An experienced, local, and well trained real estate agent can educate you about the local market and help you determine your house-hunting goals. Take time to meet with the real estate agent upfront to discuss your wants, needs, and budget. Making sure that you’re on the same page from the start can save a lot of time in the long run. 

Keep your house-hunting plan in mind as you look at houses. Don't be afraid to be an active participant. If you have favorite neighborhoods or house styles, let your agent know. Be honest with yourself and your agent when you view homes. The more honest the feedback—positive and negative—the more efficient the search will be. 

Here are some additional tips for the house-hunting process: 

• Feel free to ask sellers and your agent questions. 

• Check with multiple lenders before accepting an interest rate. 

• Avoid making major purchases on credit or moving cash around. This will improve your chances of qualifying for a loan.

• When you find a house you like, drive by it at different times of the day to get a true round-the-clock feel for the neighborhood. 

• Ask the seller if there are any inspections or disclosures you should be aware of. Knowing about serious issues in advance can prevent disappointment and lost time. 

Finally, don’t forget to have fun! 

A second home can be an excellent investment as well as a source of supplemental income. If you are thinking about buying a second home, here are some questions to consider.

• What are the advantages of purchasing a second home? 

• How do I know if I can afford two mortgages?

• What are the expenses of owning a second home?

• How do investment properties differ from second homes?

• How can I find the right investment property?

Advantages of Second Homes

Financing of a second home typically carries an interest rate similar to that of a primary residence. This means you can take advantage of the current low-interest rates when purchasing a second piece of property. If your second home happens to be in a place you like to visit, you can potentially write off trips or vacations. Of course, whenever you are not using the second home yourself, you can rent it out on a short-term or long-term basis. The rental income will offset property expenses. 

Financing a Second Home

The requirements for financing a second home are stricter than they are for a primary or investment property. What does that mean? It means the lender will ensure that you are qualified to make all payments (including taxes, insurance, principal, and interest) on both properties without considering any potential rental income. In order to qualify, your total housing expenses must be under 45% of your gross income. 

Costs of Owning a Second Home 

Additional expenses will depend on the type of second home you purchase. A condo, high rise, or townhome may have HOA fees. If you are renting out the property on a short-term basis, there may be management fees, cleaning fees, utility costs, and maintenance expenses. 

Second Homes Versus Investment Properties

If you qualify for a second home mortgage, the interest rates will be reasonable. If you are purchasing the property strictly as an investment, plan to pay about .5% higher than the market rate. For example, a mortgage on a second home today is close to 4%. An investment loan interest rate will be around 4.5%. 

Finding the Right Investment Property

Before you begin your search, be crystal clear on what your goals are.  Are you looking to maximize your potential income? Are you interested in a property that is expected to appreciate? Prior to purchasing, research the area. Look into rental comps, which will give you information about the local rental market. Make sure you know the local rental laws. Finally, avoid buying a property in an area you have not visited or don't plan to visit. Why? If you don't check on the property at least once a year, you won’t know if your asset is being properly cared for. 

Remember, real estate can be a key to wealth. The right choice can fund your retirement while someone else pays off a property you own.

At Richardson Properties, our team networking is unparalleled – watch the video clip to see how!

At Richardson Properties, our team networking is unparalleled – watch the video clip to see how!

Home sellers have long grappled with the dilemma of whether to update worn, out-of-fashion features and make repairs before listing. In a recent Realtor.com survey of 1000 consumers who are planning to buy within the next year, 60 percent said they are willing to buy an imperfect home. Half of those who are open to renovation are willing to spend $20,000, and 28 percent are willing to spend $10,000. The study also found a strong "HGTV effect," with 60 percent of respondents who are willing to renovate saying they are influenced by home improvement shows and websites. Here are some questions sellers may have concerning renovations and my answers to them.

How do the Realtor.com survey findings compare to what you’ve seen as a realtor?

The survey results ring very true. It is not uncommon for buyers in our market to invest a significant amount after closing on improvements and upgrades. Even in brand-new communities, buyers are spending on average over $30,000 in extra upgrade fees to have floors, cabinets, and window treatments customized to their taste. At the luxury end of the market, buyers will invest as much as $500,000 to make a move-in-ready home their own, carrying out full kitchen, bath, flooring, or exterior upgrades. We are also seeing more and more buyers investing in the back yard. Whether they are adding a built-in fire pit, a second kitchen, a guest house, or a deck, many buyers are improving the outdoor space to make it an extension of the indoor space. 

Given the high interest in renovations/improvements among buyers, is it better for a seller to do them before listing a property or to leave them up to the buyer?

Buyers who are open to purchasing homes that need renovation often prefer to make their own selections when it comes to brands, colors, and quality. A seller may do better by offering a “decorating allowance” rather than running the risk of making the wrong choices by upgrading before listing. In San Luis Obispo, we have seen sellers spend money on painting and installing new carpets, only to have the buyers who closed on the properties take them down to the studs. As it turned out, the agents should have advised those sellers not to spend precious funds on upgrades that ended up being demolished after the keys were handed over. Buyers typically have “dream rooms” in mind. As long as they can see potential in a home, they would much rather finish it to their liking. 

How does the HGTV effect enter into the selection of a listing agent?

It’s important to ask these questions concerning updates and repairs when selecting a listing agent: What upgrades or repairs, if any, do you think I should consider doing prior to listing the property? What would the return on those investments be? Do buyers in this neighborhood prefer move-in-ready homes, or do they expect to add their own finishing touches to a house? Are there any reports or inspections I should obtain prior to listing?

Can repairs wait until after listing?

An experienced, skilled real estate agent will be familiar with the financing methods used by buyers in a neighborhood and may suggest repairs to expand the buyer pool. Some financing methods require that certain repairs be done for health and safety. Examples of such repairs are bracing and strapping the water heater, ensuring smoke detectors and carbon monoxide detectors are in place, removing any mold- or mildew-like substance, removing peeling paint, or correcting visible dry rot.  An agent who knows the area well can help a seller decide which of the potential repairs need to be made before a house goes on the market and alert them to requirements that may come up once an offer is accepted.

When a home needs work, will it still be marketable? 

With outdated elements, such as kitchen cabinetry or flooring, the seller can convey to buyers that they understand updates are needed, but the improvements are being left to the buyer so they can make their own style choices. Marketing materials can highlight the positive features of the property while letting buyers know that there is room for improvement.  For example, they can say that the property is "priced to sell" or has been "meticulously maintained" but is ready for “your finishing touches" or "your personal upgrades.”  Alternatively, if a seller is up for it, they may offer a redecorating allowance not to exceed a specified dollar amount. A great agent will help a seller develop a marketing plan that emphasizes the best aspects of a property and resonates with the buyers who are searching.  

New home buyers and sellers often have many questions. This article addresses two of the most common for buyers and sellers:

Buyer: What will lead to a successful home purchase?

Seller: Why would a seller accept the first offer?

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A successful home purchase requires financial preparation and wise practices. Adopting good financial habits can maximize your chances of a successful home purchase. Before starting to look for a house, do your best to live within your means. First, watch your credit card behavior. Avoid running up credit card debt, don’t use credit cards for large purchases (even if the interest rate is currently 0%), and keep credit card balances below 50% of the limits. You should also strive to be a habitual saver. Whether you’re putting away $50 or $5,000 a month, being a habitual saver will set you on the path toward successful homeownership. In addition to demonstrating a level of financial stability that a bank will want to see, it provides reserves for unexpected expenses. 

When it’s time to buy, make a list of your goals and priorities, and keep them in mind while house hunting. Separate the list into needs/must-haves and wants. Next, find an excellent local real estate agent who can educate you on market trends—including the best times of the year to purchase—and can create a custom plan to guide you. Finally, work with a local lender to get your loan not just pre-qualified, but pre-approved and submitted to underwriting, to increase the chances of an offer being accepted.  

Remember, while your purchase may not happen overnight, homeownership is one of the best investments you will ever make. Focus on your goal, and you will get there when you are ready. 

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There are a number of good reasons why a seller might decide that the first offer is right for them. It all boils down to how well the first offer meets their expectations and needs. 

Perhaps a seller’s agent has advised them that it’s a good offer and they’re unlikely to receive a higher one. In that case, accepting it could be the right choice. A seller may also have financial constraints. If they are in escrow on a contingency to purchase another home, the first offer can keep the purchase of a new home on track. A seller with financial needs may also appreciate terms such as all cash, a quick close, no contingencies, or perhaps a generous rent back. Relocation requirements can also impact the decision. A seller who must move to another area by a particular time, to start a new job or catch the beginning of a school year, may prefer a quick sale and closing.

The risk in accepting the first offer, particularly within the first 1-2 days that a house is on the market, is that the seller is potentially leaving money on the table. That's where a great agent can help, by letting the seller know if other, more desirable offers are likely to come in while keeping the seller’s needs in mind. Of course, the final decision is always up to the seller, but a great agent will make sure the seller understands all of their options prior to acceptance.