Should You Buy or Rent?

August 11, 2016

This is a question I recently got on our financial helpline and one that I’m struggling with myself right now. The conventional wisdom is that renting is “throwing money away,” but owning a home also involves throwing away a lot more money than it may seem. One way to see this is by using a “Buy vs Rent” calculator like this one from the NY Times. Not only are you paying interest on the mortgage, there’s also maintenance costs, taxes, the opportunity cost of not being able to invest any extra money you put towards buying, and the transaction costs of buying and selling. Here are some things to consider before making one of the biggest financial decisions of your life:

How long do you plan to stay? For most people, this is probably the single biggest deciding factor. The longer you stay, the more buying usually makes sense because it takes time for the financial benefits to outweigh closing costs and real estate agent commissions, not to mention the risk that the home could actually be worth less when you try to sell it. It’s generally better to rent if you plan to stay less than 3-5 years.

What mortgage rate can you qualify for? To get the best mortgage terms, you typically have to have a credit score of at least 750 and put down 20%. If your credit isn’t so great or if you can’t make much of a down payment, you may want to delay buying until your credit or savings is in better condition.

Where would you invest any extra savings? If you can save more by renting and earn a good return on those savings, renting may be better. For example, if you’re not contributing enough to max your employer’s match, or have high-interest debt to pay down, or are just an aggressive investor, the return on your savings can be quite high.

What’s your tax bracket? The higher your tax bracket is, the more you can save by deducting mortgage interest and property taxes. Just be aware that you only benefit to the extent that these itemized deductions exceed your standard deduction.

How handy are you? As a homeowner, you won’t be able to call the landlord anymore when something needs to be fixed. If you can keep maintenance costs down by doing a lot of your own work or even by being a savvy shopper, buying might be more beneficial.

I’ve been renting, but I’m now considering buying a home. I should be able to qualify for a good mortgage rate and I’m in a moderately high tax bracket. On the other hand, I think I can also earn a decent return on my savings if I rent, and I’m not the most handy person.

The tie-breaker might be how long I would plan to live in my next home, which is a tough call that involves a lot of big life decisions. In the end, the decision to buy or rent often comes down to an emotional one. There’s nothing wrong with that as long as you’re aware and okay with the financial consequences as well.

 

Why Homes Actually Tend Not To Be Disappointing Investments

July 28, 2016

One thing I often hear people say (except right after the crash in the real estate market), is that their home was the best investment they ever made. However, a New York Times article titled Why Land and Homes Actually Tend to Be Disappointing Investments points out that real estate has increased by only .6% a year in real terms from 1929 to 2015 compared to a 3.2% average annualized increase in GDP over that same time period. The problem is that comparing just increases in price ignores a lot of the financial benefits of home ownership:

You don’t have to pay rent. If you don’t buy a home, you’ll probably have to pay rent and unlike a mortgage payment, rent tends to go up at least as much as inflation and never goes away. In fact, one of the biggest factors I’ve noticed in whether people are on track for retirement is whether they will have a paid off home by the time they retire. This “imputed rent” (or income from your home in the form of not having to pay rent) is one of the main sources of return. If you’d like to see whether buying or renting makes more financial sense for you, you can see how all the factors come out with this NY Times Rent v Buy calculator.

Real estate allows you to use leverage. Let’s suppose you purchase a $100k home and put down 20% or $20k. If the home appreciates with inflation by 2%, it’s now worth $102k. That doesn’t sound so great until you realize that the $2k increase in your net worth is actually 10% of the $20k you put down.

Being able to borrow from your home can help you in other ways too. Once you have equity, you can generally get a revolving line of credit or a home equity loan against it with relatively low interest rates and deduct the interest from your taxes. This can be useful in an emergency or to pay off higher interest credit card debt. (In that case, be sure you can make the payments because your home will be on the line if you can’t.) When you reach age 62, you can also take a reverse mortgage that allows you to supplement your retirement income by borrowing from your equity without having to make payments as long as you live in the home.

You’re less likely to over-react to market downturns. One of the biggest mistakes people make with stocks is to stop buying or to even sell when an investment goes south, only to miss the recovery. It’s not as easy to stop making your mortgage payments and if anything, people are less likely to sell when their home value is down.

Don’t forget the tax advantages. Not only can you deduct the interest and property taxes, you can also sell it and pay no taxes on up to $250k of gain (or $500k if you own it jointly) as long as it was your primary residence for 2 out of the last 5 years. You can also defer the taxes if you immediately reinvest the sale proceeds in a new real estate property, and if you pass it on to your heirs, they can sell it without paying capital gains taxes on all the gains during your lifetime.

You can rent it out. While you live in it, you can rent out an extra bedroom to a long term tenant or possibly for shorter stays on sites like AirBnB. If you move out, you can also rent out the entire home as an investment property (which also allows you to deduct depreciation and other expenses from your taxes).

There’s an emotional return. Not every benefit can be measured precisely in dollar terms. Homeowners also benefit from knowing that their home is truly their own. They can make renovations as they want and don’t have to be concerned with being kicked out by a landlord.

When looking at real estate as investment, don’t just focus on historical appreciation. Be sure to understand all the pros and cons. Then maybe one day you’ll be saying it was your best investment too.

How Much is Your Rental Property Earning or Losing?

July 07, 2016

One of the benefits of investing in stocks, bonds, and mutual funds versus in direct real estate is that it’s a lot simpler. A good example is when it comes time to answer a key question: how much money am I actually making or losing in this investment? With stocks, bonds, and funds, this is relatively easy because it’s all spelled out for you on your statement. You can see how much you’ve collected in interest and dividends and how much the investment has gained or lost in value since you purchased it. With real estate, it’s not quite so simple.

After a couple of years of owning rental properties, including having a few big repairs, an eviction, and vacancies that lasted for months, I decided to sit down and calculate what I was really earning (or losing). The good news is that 4 out of my 5 properties have a positive cash flow of about $200/month over the last 6 months, which is about what I expected when I purchased them. The bad news is that the last property had a negative cash flow of about $500/month since it was vacant during most of that time. (Fortunately, I have a tenant there now.) This netted out to a positive cash flow of about $300 per month.

I was glad to see I wasn’t in the red even with a vacant property, but that still didn’t look very encouraging. However, when I annualized it as a percentage of what I spent on the properties, it came out to be a 5% positive cash flow. If you’ve seen interest and dividend rates lately, that’s not too bad. With the tenant in the 5th property, it would come to about a 17% return on cash. If you have rental properties or are thinking of investing in one, here are some of the factors to consider in determining the return on your investment:

Cost Basis: This is the upfront cost of purchasing the property (the down payment and closing costs) as well as the cost of any improvements you make. (Only some of the closing costs are included in the basis for tax purposes.)

Rental Income: This is the easiest part to measure. If you’re thinking about buying a property, assume a vacancy of at least one month per year.

Rental Expenses: This is the toughest part to measure and estimate. If you have a property, be sure to keep records so you can tally them up. Don’t forget to include the costs of advertising the property to prospective tenants and any property management fees in addition to the mortgage, property taxes, and insurance. You also need to separate maintenance/repairs from capital improvements since they affect your profitability (and taxes) differently. For prospective properties, maintenance costs tend to run 1-4% of the property value, depending on it’s condition.

Tax Breaks: In addition to non-improvement expenses, you can deduct mortgage interest, property taxes, and depreciation.

Cash Flow: Take your total rental income, subtract your expenses (including taxes on the rental income), and then add in your tax breaks. This is how much income you actually pocket.

Return on Cash: Take your annual cash flow and divide it by your cost basis. This is the cash return on your investment.

Total Return on Investment: Take your cash flow and add in any appreciation in the value of your property and reductions in the mortgage balance to get your total return. Then divide it by your costs basis to get your total return. This is the most fair comparison to your total return on other investments.

When you look at all the ways you can make money (rental income, tax breaks, and building equity), real estate can have some of the highest investment returns. (You can use this calculator to make the calculations above.) But with high returns, comes high risk. Sometimes those risks are obvious, but other times they come in the form of small costs that can add up to big losses over time. Make sure you do the math on any property to see if it makes financial sense to buy, hold, or sell.

 

 

Don’t Make My Moving Mistakes

April 08, 2016

After a long process (it started with my first offer in August) of looking for, making offers for and securing financing for a new place to live, I just finished moving. Whew, that was a process…While I’ve done it many times in my life, I always forget how tough it is and how many things come up and how they can be budget busters. I re-learned a few things and maybe you can learn from my mistakes and not commit similar ones.

Always expect things to cost more than estimated! When you pay for a home inspection,  your inspector will find issues that need to be fixed – either by the seller or by you as the new buyer. In my recent experience, the issues that I needed to fix always cost just a bit more than anticipated.

For instance, there was some very worn and stained carpeting on the stairs that I wanted to replace. I looked under one area during the inspection that was a bit easy to peek under and I saw a nice wooden step. My plan was to simply pull up the carpet, have nice wood steps and remember NOT to wear slippery socks when going up and down the stairs.

Well, when the carpeting was removed, there were only two or three steps (out of 10-12) that looked decent. The rest were marked, scarred, virtually non-existent (a simple plywood plank, not a finished wood step) and my “nice wood stairs” idea went up in smoke. I called a friend who is in the carpet business and had him come out to salvage the situation with a newly carpeted staircase. It ended well, but that was a check I hadn’t anticipated writing.

What you can learn from my mistake: On your next move, either do some research into the pricing of each product/service that you will need or add in a “fluff factor” of 10-20% for the unexpected. It’s a bit cliché to say “expect the unexpected”…but, expect it! And do a room by room walk through with a notepad and build a list of projects that need to be done so that you have as much information as you can get to make your ballpark costs as accurate as possible.

You will pay for things you didn’t think you’d need!  When I moved, I thought I did a pretty thorough job of listing everything that I needed to pay for. I had movers, boxes, packing supplies, home inspection, appraisal, etc.

But there were two things that completely escaped my list. I forgot all about “service change” costs with my gas/electric provider and my phone/cable/Internet service provider.  Because my new place had never been serviced by these providers before, there were some installation charges added to the service change fees. In all, there were a few hundred dollars that I had no idea I’d have to spend.

Plus, my move was in April – which last time I checked was in the spring – but in Baltimore, the spring can have some cold days (as evidenced by the snow flurries I saw this morning). I completely forgot that my oil tank would need to be filled and it took about 250 gallons to fill. That was another big unexpected charge. Adding in a few other things that I hadn’t added to my list (shower rod and shower curtain, bath mats, outdoor deck chairs) – there was over $1,000 that I didn’t expect to pay but ended up paying.

What you can learn from my mistake: When you are calling your service providers, do it well in advance and ask about waiving the change fees in exchange for you being a loyal long term customer.  Ask for discounts. Ask if there is any way to lower your bill so that after you move, you have an embedded savings. I was able to do that with Verizon Fios and added a couple movie channels for less than my prior package price.

Finally, walk through with someone who has complementary skill sets. I understand the structural and mechanical pieces so I would have been better served to walk through (with my notepad) with someone who has more of a decorative slant than I do! (I’ll never be considered to have fashion/style sense.)

Moving is expensive…and exhausting….and frustrating. My budget was a bit busted and I am going to have to cut back in some other areas (dining out, coffee shops) over the next year or so in order to recover from the damage that the move did to my finances. But after spending a few nights in my new place and adjusting to the new sounds, I have to say it was very much worth the headaches! It’s a small price to pay for all of the reasons I chose to move and take on the financial trauma that a move can do to my regular budget.

 

 

 

Quiz: Do You Have Landlord Potential?

March 21, 2016

[fusion_text]Online or on cable these days, you’ll find many self-described real estate experts who want to teach you their systems for finding and financing great real estate deals.  According to these self-described millionaires, people can make money in real estate if they think like an investor and have the right system. The temptations they offer are many: inflation-adjusted income, rising home prices, leverage and avoiding stock market risk.  I’m a rental property investor myself, so I know firsthand both the benefits and the challenges.

While single family homes, commercial properties and multi-family units may be good investments for some people, they are not for everyone. The truth is, rental real estate investing may seem safer than it really is. Each property investment has unique risks.  A rental real estate investment that remains vacant or results in large, unexpected maintenance costs could be financially devastating. 

Still, real estate evangelists aside, rental property investments can contribute to your income diversification, net worth and financial security if you choose wisely and at the right time. How will you know when you’re ready to be a landlord? Take this assessment to find out if you have landlord potential. Give yourself one point for each “yes” answer: 

My financial position:

____I have zero credit card and other high interest debt

____My credit score is 740 or higher.

____I have enough cash to put down 20% of the value of the property

____I have enough cash to pay for any necessary renovations

____I have enough cash to cover vacancies and maintenance on the target property for a year

____I am already contributing the maximum to my retirement plan at work ($18,000 plus $6,000 catch up contribution if 50 or older)

____I am already contributing the maximum to a Roth or Traditional IRA ($5,500 plus $1,000 catch up contribution if 50 or older)

____I am maxing out other work-sponsored employee benefits that fit my financial situation (e.g., HSA, FSA, etc.)

____I have enough other income to pay the rental property mortgage if there’s a sustained period of vacancy

____Total financial position score

Did you score 8 points or higher? Then you can move on to the next round. 

If you scored 7 or lower, you aren’t yet in a strong enough financial position to be a rental property investor. Without sufficient cash reserves, a real estate investment that turned out badly could send you into bankruptcy. If you carry balances on your credit cards, the most important investment you can make is paying them off. Before you even consider diversifying into individual rental properties, make sure you are on track to meet your retirement goals and maximize all your tax-advantaged benefits at work.

Real Estate Knowledge:

____I’ve read some basic guidebooks on rental real estate investing and landlording, such as Nolo’s First Time Landlord

____I’ve done a review of rentals in my target neighborhood and I know average rents, time on the market, crime and school statistics

____I have owned my own home for more than three years, so I have a very good idea of how much time is needed to take care of one

____I don’t yet own a home, but I plan to buy a multi-unit property and live in one unit

____I have enough time to manage the property myself

____I’ve run the numbers, and the gross monthly rent on my target property is 1% or more of the total property value

____I can afford a property manager and the investment is still profitable

____ I like to fix things and do home improvement work around the house

____I understand that one or a few properties in the same area are not a diversified investment and that means there is higher risk

____I have run income and expense projections for the property for a year, including worst case scenarios

____I have researched the pros and cons of different legal entities in my state to hold the property, such as a limited liability company

____I have spoken to a mortgage lender and am confident I’ll be approved for financing

If you scored at 8 on real estate knowledge and 8 on financial position, it looks like you have landlord potential. Happy property hunting!

If you scored 7 or lower, take some time to rethink this. Will this be a profitable investment? Do you have the time to manage the property yourself?  Are there risks you are not comfortable taking? What additional steps are needed before you move forward?

How did you do on the quiz? Do you have landlord potential? Email me at [email protected] or follow me on Twitter @cynthiameyer_FF. 

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Is It Better to Rent or Own?

February 09, 2016

One of the biggest questions I get when I talk to people is, “Is it better to rent or own?” I tell them that it is not as simple as a yes or no answer. The cost of living in your area, your area’s housing market, and your financial stability are all factors in deciding if renting or owning is the better decision. For some, renting temporarily is a better option but no matter what I say, I normally get the following rebuttals from those determined to buy a home now: Continue reading “Is It Better to Rent or Own?”

5 Things to Know About Applying for a Mortgage

December 09, 2015

Even though interest rates are likely to begin rising again (haven’t we been saying that for a couple years now?) mortgage rates are still reasonable, and buying a home these days is still cheaper than renting in most areas, providing you’re planning to stay for a bit. Buying a house is more than just a financial decision, but if after considering all the factors, you’ve decided that now is the time to buy, prepare yourself for the mortgage application process. And I mean gird yourself because it is a royal pain. Here’s what to expect: Continue reading “5 Things to Know About Applying for a Mortgage”

Don’t Let An Old Rule Drive You Broke

October 30, 2015

Within the last several months, I’ve been contemplating the purchase of a home and my sons are a big part of that contemplation. My ex-wife and I split up about 8-9 years ago and I have lived in a few places since the separation/divorce. I’m currently about 15 minutes from my old house (that she still owns) and it’s a quick, easy drive but with two teen boys with active social lives, it seems like that 15 minutes is resulting in 30, 60, 90 or 120 minutes on the Beltway (our version of a highway) on a regular basis.  Continue reading “Don’t Let An Old Rule Drive You Broke”

Is Smaller Better???

July 24, 2015

Have you watched HGTV recently? They have a show called Tiny House Hunters (spoiler alert – it’s not about termites looking for a new place to destroy) where people are on the hunt for ultra small houses. Most of the houses showcased are less than 200 square feet. That is smaller than the average US standard hotel room. I watched each episode with wonder, trying to imagine living in such a miniscule space.

A few buyers wanted to be free to move around. These tiny houses allowed their owners to move anywhere a truck could haul it. Others wanted to live more eco-friendly and have a small carbon footprint.

But the episode that really grabbed my attention was about a single woman who wanted to simplify her life and retire early. She figured out that she could afford to live in her dream location as long as she kept her housing costs under $60,000. So she quit her job, sold her lovely house in Colorado and set her sights on a tiny house on Hawaii’s Big Island.

So is this just a fad? While it is extreme, there is a definite movement towards smaller houses. Per this article, the National Association of Home Builders states that the average house size has shrunk from over 2,500 sq ft in 2007 to 2,152 in 2015. After decades of expanding house sizes, it looks like the days of the McMansion are waning.

What’s driving this trend? More Americans have decided that working 12 hour days plus an hour commute just to afford their big house isn’t worth the trade offs. Then there are the Baby Boomers – a large population of empty-nesters who don’t want the expensive and time-consuming maintenance required for their big houses and big yards. Lastly, millennials are demanding smaller, more eco-friendly homes in the urban areas. Home builders are listening and are building new single family houses that are smaller.

While I doubt I could live in a house smaller than the average dorm room, I am in the process of downsizing my life. My children are in college at Ohio State University so I sold the big suburban family home and bought a smaller single family house in the city. It’s large enough to comfortably accommodate them when they visit for the holidays but too big for just me.

A short term goal is to downsize even more in four years to a place with two bedrooms and water views and use the proceeds plus my savings to help fund my retirement. Every year, I check my plan with this retirement calculator to make sure I’m on track. Of course, life can throw curve balls but hopefully my plan to cut expenses now and even more in the future can help me dodge most problems.

I don’t know what drove the lady in Tiny House Hunters to retire in her mid-50s and pursue her dream of living in Hawaii. She bucked society’s norm by giving up her big house and fancy job to do something as radical as living in a tiny house. Extreme? Yes, but I admire her courage and dedication.

 

 

Protecting Your Dream

June 30, 2015

Years ago, I had a wonderful friend who grew up like me as an “apartment kid” in New York City. This fueled her desire as an adult to own her own home. With a lot of work and relocating to an area where the home prices aren’t ridiculous, she was able to live out her dream of home ownership. Like many of us, she got the homeowner’s policy she was given and never questioned the policy or asked questions. Continue reading “Protecting Your Dream”

Should You Buy or Rent a Home?

June 11, 2015

Summer is often a popular time for people to buy a home. In fact, I was recently talking to an employee who wanted to buy a place but she noted that the mortgage payment would be more than the rent for similar priced homes in the area she was looking at. However, after looking at the tax breaks and possible home appreciation, we discovered that owning would actually be cheaper for her. Continue reading “Should You Buy or Rent a Home?”

5 Lessons I Learned When I Downsized My Home

April 17, 2015

I am especially thankful this past Easter because I moved into my new house. The kids are away at college so I decided to downsize and move to the city. After almost a year of living in temporary housing, my newly renovated, 19th century row house was ready. Yeah! I was like a kid on Christmas morning as I watched the moving truck arrive and the movers bring in my belongings that were in storage for the past year.

Seven hours and a gazillion boxes later, I was feeling overwhelmed and exhausted. Was this all mine? Gosh, I didn’t remember having so much STUFF. I’ve spent the past three days unpacking and working very hard to turn what looks like a hoarder’s paradise into my home. Here are some lessons that I’ve learned as the boxes get unpacked:

Stuff multiplies in the dark. I decluttered my previous house before listing it for sale.  Then before the moving truck arrived, I donated countless bags of clothes, sold furniture on Craigslist, and then filled a dumpster with all the other things that I knew I couldn’t or wouldn’t use anymore. Still, I am overwhelmed with all the stuff that arrived this weekend and am convinced that it multiplied while in storage! How else can I explain the four identical cookie sheets, six baking dishes, and five black sweaters?

This house just can’t hold as much stuff so I’m re-packing boxes of gently used cookware, clothes and furniture for Goodwill. It’s a shame that I paid the moving company to pack, store for a year, haul 600 miles to my new house, then unpack a lot of things…all to give it away. That’s a lot of money spent on things that I didn’t need.

Protect the priceless.  I spent 24 years collecting things to provide a warm and inviting home for my family. We had countless sleepovers, family gatherings, and home cooked meals throughout the years and I loved those times. However, looking back, I know that I could have provided the same great times without all the household stuff that I acquired.

As I unpack, the things that moved my heart the most were the pictures. They triggered the memories that are truly priceless. However, they were just placed in regular boxes and the elements destroyed some of them. I will go through the stacks of pictures, throw away those that were bad shots, and make digital copies of the keepers. I will store the digital copies on free online sites like Google Drive or Dropbox or store them on an external hard drive.

When moving, pay for full value protection. I chose a national moving company because my move was across a few states and I wanted the convenience of having one contact during the entire process. This company came highly recommended by people that I trusted but I had a fair amount of damaged items. In particular, my buffet server and my grandmother’s cedar chest were badly broken.

I don’t have receipts for either. However, because I purchased full value protection insurance, I should be able to replace the buffet with something comparable. My grandmother’s cedar chest was nothing fancy, but it was priceless to me, and my claims agent has already reached out to see how it can possibly be repaired. Only time will tell, but this was insurance that I’m glad I bought.

Think very hard before buying anything else. Before the move, I’d been pretty good about staying out of the stores. I struggle with being inside Target or Bed, Bath & Beyond and making impulse purchases, but I need bath rugs, window coverings, and other miscellaneous (but expensive) things for the new house.

I will be very deliberate on what I buy this time around. I have a list and a budget in hand before I go. I also do my best to speed through the aisles and not linger. This way, I don’t happen to see some new, fancy thing-a-mo-bob and convince myself that I need it.

Keep the ibuprofen handy.  I absolutely love my row house except for the stairs. I have easily climbed 100 flights over the past few days and my legs are in serious pain.

Add the fact that I’ve carried boxes up and down those said flights, and it’s easy to understand why my back, shoulders and arms all feel like I’ve been hit by a truck. I think I’ll cancel my gym membership. Thankfully, I remembered to pull out the pain meds as well as other important items like my passport, prescription medications, bank account statements, jewelry, will and living will documents. Now if I can only find the box with the wine glasses….

 

 

Will You Be A “Boomerang Buyer”?

April 08, 2015

Since 2008, over 14 million homes have been lost to foreclosure. It may have been caused by a job loss, illness, or other heavy financial burden, but whatever the cause, losing a home can feel like a financial defeat….NOT SO! In 2014, roughly 10% of home purchases will be made by homeowners who lost their home to foreclosure or short sale between 2007 and 2013. These new homeowners, affectionately called “boomerang buyers,” did not give up on their desire to own a home and you shouldn’t either. Here are some steps you can take following a home loss to get back in a home of your own: Continue reading “Will You Be A “Boomerang Buyer”?”

Lessons Learned From A Home Ownership Dream Gone Sour

February 17, 2015

Recently, I was talking to a friend and she told me that she was selling her home because her American Dream of Home Ownership has become an American Horror Story. She then sighed and said if only she can go back and advise her former self. I asked her what she would say and she began sharing her lessons learned. Continue reading “Lessons Learned From A Home Ownership Dream Gone Sour”

The Importance Of Reading The Fine Print Of A Lease

February 06, 2015

My twin daughters are sophomores at Ohio State University and decided to move off campus for their junior year. This is a rite of passage for college students and my girls are very excited to live with four of their friends in a restored, old house about three blocks from campus. After a fast and furious search, all the kids fell in love with this house, verbally agreed to rent it, and some even signed the rental agreement on the spot.

My daughters called me in a panic and wanted me to sign the parental section “RIGHT NOW!” Hold up! We aren’t Congress –we are going to read the contract before signing it. Based on this experience, here are a few lessons that my daughters learned:

  1. Read the fine print.
  2. Get it in writing.
  3. If you don’t understand it, find help.
  4. Be prepared to walk away.

Read the fine print. Once I received a copy of the lease, I read a section buried in the middle that said,“The property must be show ready at all times.  If not, there will be a $50 fine. This means beds made, no clothes on the floor, no dishes in the sink and the grass cut.”

Wait, what? I can’t speak for the other four kids but I know my daughters can be complete slobs (in spite of their upbringing). I asked my daughters about this clause and neither one knew it was in there! What are the odds that six 20-year old college students are going to keep their place “show ready?” Which leads to the next point…

Get it in writing. I insisted that my daughters understand what that clause means. Does the landlord expect the place to be this way all the time or just when he’s trying to rent it out? Will he give notice before showing up? Will the fine be assessed per occasion or infraction?

For example, if someone left dishes in the sink and another person’s room looked like a tornado hit, does that cost $50 or $100? This wasn’t clear in the lease so they asked the landlord to clarify it in an addendum.  I also insisted that all the roommates understand this clause and how it will affect them. As unrealistic as I think this is, all the roommates agreed to this clause and signed an agreement among themselves that they will hold up their end of the bargain.

If you don’t understand it, find help. After my daughters saw that clause, they went back and truly read the lease. For the most part, it was self-explanatory, however they had several questions. Luckily, I’ve read my fair share of leases and other legal documents so I could explain the terms and walk my daughters’ through the meaning behind the legalese.

But what if I didn’t understand something? One resource is my company’s EAP which has a free legal service. I have the option of a free 30-minute consultation and if I need more specific help, I can be referred to a local attorney at a reduced rate.

Lastly, after reading the lease, I thought the kids should walk away and find another house to rent. They all felt differently and really believe this will be a great experience. Time will tell, but I see this as an important life lesson. My girls now realize that they must read and understand a document before they sign it. Soon they will learn that friends don’t always make good roommates, but that’s another story!

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Rent vs. Buy: Seven Factors to Consider Before Buying a Home

June 25, 2014

Owning your own home has long been considered part of the American dream but as the housing market starts to heat up in certain areas of the country, home ownership may not be the most economical solution to housing.  A recent article in The New York Times draws attention to several factors that must be considered when evaluating the financial benefits of home ownership and provides a link to a Rent v. Buy Calculator* that potential homeowners can use to quantify the tradeoff. Here are some guidelines you can use when considering each factor: Continue reading “Rent vs. Buy: Seven Factors to Consider Before Buying a Home”

Why I Rent

June 05, 2014

One of the things that probably most surprises people about me as a financial planner is that I rent. After all, we’ve always been taught that renting is “throwing money away” while home ownership is a good long term investment and the hallmark of adulthood and the middle class. In my case, the fact that I’m a renter may be particularly surprising given that I’m also a real estate investor. So here are some of the reasons I’ve chosen to rent: Continue reading “Why I Rent”

How to Use Real Estate to Supplement Your Retirement Income (Part I)

May 07, 2014

One of the most popular workshops we offer at Financial Finesse is our workshops on retirement planning. That’s probably because retirement is a financial goal common to just about anyone that works for a living. In order to enjoy a comfortable retirement, many financial experts recommend replacing 70-80% of your income in retirement, which begs the question “What are your retirement income sources?” Continue reading “How to Use Real Estate to Supplement Your Retirement Income (Part I)”

How Much Should You Put Down On a Home?

March 20, 2014

You know spring is in the air when people start thinking about home buying. I recently got questions from several people asking about buying  a home. One of the most common is how much to put down. Let’s look at a few things to consider: Continue reading “How Much Should You Put Down On a Home?”