The first thing every homeowner needs to know about plumbing is how to turn the water off in case of an emergency. It’s like having a fire extinguisher; you hope you never need it but you want it just in case you do.

Generally, the cutoff is in the front of the home. There may be a separate cutoff box on the owner’s side of the meter. If not, the owner needs to be able to open the water meter and turn it off there. This will require a water meter key which can be found at a local home improvement store and a wrench. Once you have the key, practice opening the meter door and check out how the shutoff valve works. Then, put the key in a quick and easy place to find when you need it.

The second thing a homeowner needs is a recommendation of two good plumbers. Having a backup name is always good in case your first choice can’t make it when you need them.

Some homeowners prefer to go the do-it-yourself route. There are plenty of DIY videos on the Internet but having the name of a good plumber if the job gets out of hand can be the tool that saves the day.

Our business puts us in touch with some of the most reliable and reputable service providers and we’re willing to share their names with you. Regardless of whether you “do it or delegate it”, being familiar with the basics can be very helpful.

Appreciation, tax advantages, cash flow, leverage and equity build-up contribute to the rate of return on rental real estate. If that sounds confusing and it’s keeping you from investing in rentals, try looking at it a different way.

Consider this, look at only cash flow and equity build-up to determine whether to buy the property. They are easy to calculate and their outcomes are both reliable and predictable.

Most homeowners, based on their familiarity with their own home, should feel more comfortable with a rental than alternative investments. A conservative strategy is to purchase slightly below average price range homes in a predominantly owner-occupied neighborhood. Collect the rent, pay the bills and make necessary repairs.

A cash on cash rate of return is determined by dividing the cash flow before taxes by the cash invested in the property. It considers all of the “real world” income and expenses related to the property.

The equity build-up occurs from the normal process of amortization with an increasingly larger portion of each payment applied to reduce the principal loan amount.

In this hypothetical example, the combination of the Cash on Cash and the Equity Build-up is almost 12% which is considerably higher than certificates of deposit and bonds and nowhere near as volatile as stocks or mutual funds.

In most of today’s markets, rents are expected to continue to rise and due to a low inventory of homes for sale coupled with growing demand, prices will continue to rise. Even though there is value in appreciation, tax advantages and leverage, they could be considered an unexpected bonus to this basic rate of return.

An Automated Valuation Model, AVM, is a computer approach that looks at public records to make a determination based on square footage, comparable sales and other elements. It is as easy as putting your address in a blank but unfortunately, AVM results may only be accurate about 20% of the time.

A popular AVM, Zestimate®, states “It is considered a starting point at determining a home’s value.” While an AVM contains some of the same information as a comparable market analysis, it lacks a critical human factor.

Having a pair of experienced eyes consider aspects that are not easily quantified can make a big difference. A skilled professional can tell which properties are truly comparable. A knowledgeable expert can recognize features, floorplans and other things that can affect value but are difficult to quantify.

Even if a person isn’t ready to sell their investment, they like to know its value. It is easy to find the price of stocks or mutual funds on any given day but the value of a home is more difficult.

Regardless of whether you’re just curious as to how much your home is worth or are ready to monetize your equity, I’m available to give you that information without obligation. If you’re not ready now, just keep this letter for when you are.

Homeowners should recognize that the same trusted professional who helped them buy or sell their home can be a valuable resource while they own their home too.

Think of your REALTOR® as an indispensable homeowner’s resource who can make recommendations about a variety of services that homeowners will use throughout the tenure in their home. This experience far exceeds personal experience because of the day-to-day activities working in the industry.

• To recommend reputable and reasonable service providers.
• To offer information about your community, nearby businesses and local agencies.
• To solicit general homeowner knowledge such as protesting your property tax assessment, determining fair market value, determining the best improvements and other things.
• To assist with advice and suggestions about maintenance, protecting value and saving money.

Our goal is to have a long-term relationship with you. We want to help you be a better homeowner not only when you need to buy or sell but all of the year’s in-between. We want to earn a recommendation to your friends. We want you to consider us your REALTOR® for life.

A variety of factors have led to a shortage of rental units, especially single family homes, and as a result, rents have been steadily increasing nationwide. In most markets, it is considerably less to own than to rent.

In some cases, the total house payment is less than the rent for a similar size and condition home which supports a purchase. However, when you factor in some of the financial benefits like principal reduction, appreciation and tax savings, the difference becomes even more dramatic.

Let’s look at an example of a $250,000 home with 3.5% down payment and a 4.50% mortgage for 30 years. We’ll assume a 3% annual appreciation, 25% federal tax bracket, $1,200 annual maintenance and current rent of $2,100 a month.

The total house payment with property taxes, insurance and mortgage insurance premium would be $1,834 a month. Once the principal reduction, appreciation, tax savings and maintenance have been considered, the net cost of housing is about $673 a month. It costs a tenant over $1,400 more a month to rent than to own which would amount to $17,000 in the first year alone. That’s almost twice as much as the down payment to get into the home.

In this example, the down payment of $8,750 grows to almost $94,000 in seven years due to appreciation and amortization of the loan. Owning a home is one of the few investments available that allow these personal and financial benefits.

One of the obstacles in the past five to seven years has been a borrower’s inability to qualify for a mortgage but new programs and relaxed requirements have allowed more people to be eligible for mortgages. The important step is to talk to a trusted mortgage professional very early in the home search process. Your REALTOR® can make recommendations based on experience from actual closed transactions.

Use the Rent vs. Own calculator to see what the benefits might be in your price range.

Rental homes have several distinct advantages compared to alternative investments. These advantages coupled with the opportunity for a higher yield make it a clear choice for some investors.

1. Most investments must be paid for in cash. Stocks can be purchased with 50% cash but if the value goes down, more cash has to be used to keep the margin at 50%. Rentals can readily be financed with only 20-25% down payment.
2. Most loans made for business or investment purposes are at a floating interest rate compared to the prevalent fixed-rate mortgage on non-owner occupied real estate.
3. Terms for investment loans if possible are generally six months to a year with a possible renewal but real estate commonly has long term loans up to 30 years.
4. Real estate has a long-term history of appreciation.
5. Real estate enjoys tax advantages like long-term capital gains treatment, cost recovery and tax deferred exchanges that are not available to many other types of investments.
6. Single family homes and similar properties give the investor a reasonable amount of control to make improvements and manage the property which are limited to simply determining when to buy and sell for other investments.

The ins and outs of stocks, bonds, mutual funds, commodities and other investments are unfamiliar with most people. It is obviously possible for anyone to invest in them but the lack of knowledge about how they work could make it more difficult to have a successful outcome. On the other hand, homeowners can use their experiences to select, manage and sell with much more confidence using a single family home for rental purposes.

To find out more about investing in rental properties, contact your real estate professional.

Stop By, Say Hello and Grab a Pumpkin Before You Go

Open House Sunday, October 18 2015 @ 2 – 4 pm

If you can’t stop by today, but would like to schedule a private showing for this or any home for sale.. Please contact a member of Team Kipp today!