Home Improvement Projects for Max Resale Value: Get Your Money Back

Home Improvement Projects for Max Resale Value: Get Your Money Back

Most homeowners have grand projects in mind for their homes; from shiny new bathrooms to additional finished space, there are many ways to turn an average house into your dream one. However, when the time inevitably comes to sell, many are disappointed when they find out that the costly projects they completed added little to no value to their property. When it comes to investing your hard-earned money into your house, it’s always a good idea to keep in mind which home improvements are the most likely to help when it comes time to sell.

Since not all home updates are created equal, we collected renovation projects that have the most attractive return on investment and are most likely to improve your resale value.

First Impression Is Priceless

When describing their dream home, a good number of homeowners tend to focus on the inside: granite countertops and stainless appliances in the kitchen, bedrooms on the same floor, lots of light, and so on. It seems logical to adopt their approach since you will spend most of your time at home indoors. However, when it comes to resale value, the importance of curb appeal takes on a new dimension. Usually, potential buyers drive by the properties they are interested in before deciding to visit it or not. House hunters immediately eliminate houses with a neglected exterior from their short-list.

Therefore, it’s not surprising to see that some of the home improvement projects with the highest return on investment (ROI) focus on the curb appeal of the property. Every year, Remodeling produces a study comparing the average cost of 22 remodeling projects with the value those projects retain at resale in 136 U.S. markets, taking into account the price range and the geographic location of the property. According to the 2019 report, you can recoup 97.5% of your money by upgrading your garage door. Updating the outside of your house by adding manufactured stone veneer elements will also help with the resale of your home, and you could regain nearly 95% of your renovation costs. Replacing your entry door with a steel model is also a good investment: you could recover almost 75% of your investment when selling the house. Although not accounted for in the report, regular yard maintenance—such as a recently mowed lawn, some flowers, and freshly-spread mulch—goes a long way to add curb appeal to your house at a minimal cost.

A lot of buyers put outdoor entertainment spaces high up on their wish lists. Hence, it is no surprise that you can recoup 75.6% of the cost of a wood deck, at resale. In comparison, composite decks and backyard patios, which serve the same function but are more expensive to build, have a cost-to-value ratio of 69.1% and 55.2% respectively.

Less Is More: A Sensible Rule for Home Improvement Projects

When starting a major renovation project (for example, remodeling a kitchen or a bathroom), many homeowners are tempted to go all-in and achieve their ‘Pinterest-fueled’ dreams of high-end finishes. However, if you plan to sell your house in the next couple of years and want to get the most bang for your bucks, you are better off sticking with smaller upgrades rather than a significant remodeling.

Kitchens and bathrooms are often selling points for homebuyers. To achieve a modern appearance that will make your house stand out without breaking the bank, you should consider some or all of the following for your home: a fresh coat of paint, new energy-efficient appliances, updated hardware, and midrange countertops. Minor kitchen remodels can help you recover over 80% of your investment compared to a major kitchen remodel, which has a cost-to-value ratio of 62.1%.

Also worth mentioning is how deferred maintenance may scare off buyers who are worried about the potential cost of significant repairs, including roof and siding. Besides, some of these maintenance issues can also harm an owner’s chance of benefitting from certain types of government-backed financing: VA, FHA, etc. Staying on top of house repairs may not be as glamorous as marble countertops, but it is a good use of your money. New windows have a cost-to-value ratio of 73.4% to 70.8%—depending on whether they are vinyl or wood—and you can recoup 75.6% of the price on vinyl siding replacement. Due to the overall cost of the project, replacing a metal roof has a cost-to-value ratio of 60.9%. Since metal roofs have a life expectancy of 50 years or longer, it may not be the best use of your money if you are planning on selling your property. On the other hand, you can salvage, at resale, close to 70% of the cost of an asphalt shingle roof replacement.

Home Improvement Projects You Should Avoid

It is possible to get carried away when renovating a house. As a result, many homeowners are surprised to find out that projects they thought would be an excellent investment are of little interest to likely homebuyers. When considering resale value, a good rule of thumb is to compare your property to the ones in the same neighborhood.

The worst home improvement projects for resale are the ones that make the house appear too fancy relative to the rest of your target market. If you over-improve your house by adding elements that are out of the price range of potential buyers—marble countertops in a midrange home, for example—you’ll be hard pressed to find a buyer willing to pay more money for something that is not a priority for him or her. Conversely, if all the other houses in your neighborhood have an element that your home is missing (e.g., an extra bathroom or bedroom), prospective homebuyers may choose a different property instead. High-end projects and extensive remodels tend to have a lower cost-to-value ratio than their lower-end, smaller-scale counterparts since these posh projects are more expensive. For instance, the cost-to-value ratio of a major kitchen remodel is 62.1%, while a minor one is 80.5%.

Another mistake you could make as a homeowner who intends to sell their house in the next couple of years is to spend too much money ‘personalizing’ your house. If a feature only appeals to a limited market, your chances of recouping the expenses of your home improvements are low. For example, the cost-to-value ratio of a universal design bathroom remodel (accessible to people with a handicap) is 62.5%. Another extravagant and impractical investment are swimming pools: they are expensive to build and maintain—although some may feel like they cannot live without one, it is a hassles and liability for others.

Improve Your House or Not? A Simple Guide

The bottom line of any home improvement project when it comes to resale is that you will rarely redeem 100% of your outlay. Some factors are entirely out of your hands, like the overall market trend: as the market slows down, so does the ROI of any home renovation.

A good rule of thumb when deciding whether to enhance your house is to consider how long you are planning to reside there. If you intend to inhabit it for many years and improving it will help you live better and stay longer, then you should proceed without necessarily prioritizing how much of your money you will get back during resale. Nevertheless, if you are considering selling your house within the next couple of years, you are better off keeping repairs to a minimum.

If you need to sell your house as quickly as possible and are not interested in expending more money on it, it is worth exploring selling it ‘as-is’ to a local investment company for a quick and hassle-free closing.

When buying a house, what are the improvements at the top of your wish list? What are the ones that will make you reconsider purchasing a property?

0 Comments/by

Short-Term Rentals in Residential Investment Properties: Analyzing the Latest Trend in Real Estate Market

Short-Term Rentals in Residential Investment Properties: Analyzing the Latest Trend in Real Estate Market

The definition of a residential rental property is changing. Until recent years, a residential property investor planned on tenants to stay 6 months or more. But the online marketplace has added the possibility of renting single-family homes as if these properties were hotels, on a weekly or even daily basis. Present-day rental property owners may wonder how this new trend affects their investments. So, should short-term rentals be explored by investors planning to buy properties? There are many factors to consider before answering this question.

Short Term Rentals in a Property You Own

As short-term rentals have become common, their impacts on neighborhoods, public safety, and hospitality tax receipts have received increasing attention. As a result, states and cities in the US are placing legal limitations on short-term rentals. Massachusetts now has a statute that specifically addresses short-term rentals; Boston also recently enacted laws for such rentals. Similarly, some homeowners’ associations and many managers of condominium projects regulate short-term rentals.

In Massachusetts, owners whose short-term rentals exceed 14 days in a given year must pay a 5.7% room tax. All short-term rental properties must be state-registered, and all must have liability insurance. The Boston ordinance is even stricter: only owner-occupants may offer short-term rentals and for only one unit per residential property. Owners must provide contact information to both the city and tenants, and they must notify owners of adjoining properties when these homeowners register for short-term rental.

Short-term rental in Boston, then, is not an option for a residential investor unless the investor plans to occupy that residence. The Boston ordinance also specifies that only an owner can rent all or part of his property on a short-term basis: long-term tenants cannot offer a property for short-term rent.

Other municipalities have different ordinances. Vacation communities tend to be more permissive towards short-term rentals by absentee landlords. Because short-term rental laws are new and evolving, it is critical that an investor-owner examines all applicable laws, ordinances, and regulations before offering his property to the short-term rental market.

Buying a Property for Short Term Rental: Exploring the Benefits and Limitations of an Enterprise

Once an investor has confirmed that short-term rentals are allowed in their target location, other factors will influence the purchase decision. What is the market demand in that location? Which is to say, how many visitors typically arrive in that area every season? The availability of rental units for supply is also essential. If there aren’t local registries for short-term rental units, an investor might check online listings to estimate the depth of supply.

Short-term rental units require more marketing and management than needed for long-term rentals. Units are perpetually listed for rent, and each rental reservation generates management and maintenance duties. Short-term rental is similar to hotel operation: attendants are hired for cleaning, repair, and customer contact. While daily lease rates are typically higher for short-term rentals, expenses are relatively steeper. Long-term rentals’ more passive management may well justify their lower unit rental rates.

Conclusion

The first and most important consideration in using an investment property for short term rental are the legal limitations. States, municipalities, and homeowners’ associations have implemented new rules for short term rentals. Such rentals may even be prohibited. In others, the number and duration of permissible rentals are strictly enforced. Successful short-term rental depends on a property’s location, design, and layout. An investor must know what the competition is for a potential short-term rental property. The investor must also be prepared for additional marketing, management, and maintenance expenses. Lastly, a well-informed investor may decide that long term rental is a better option.

0 Comments/by

Rent Concessions: What Are Other Rental Owners Offering in Your Market?

Rent Concessions: What Are Other Rental Owners Offering in Your Market?

The value of knowing what competing rental properties are offering tenants in your market cannot be understated. To remain competitive and ensure your building remains at a stable occupancy, rent concessions (also known as “leasing incentives”) can be a powerful tool because these incentives can attract new tenants to your building. In this post, we’ll discuss some basic details regarding rent concessions, including real market examples, sources for information on rent concessions, and identifying how to maximize your rental property’s earning potential.

What Are Rent Concessions?

A rent concession is any reduction in price or rent or any other benefit(s) provided to a tenant or buyer as an inducement to buy or lease. Put plainly, it’s when a landlord offers a (usually) short-term incentive to potential tenants to rent at the landlord’s property. Rent concessions may not be necessary in all markets at all times. Some markets with very low vacancy rates and high demand for multi-family rentals may not require incentives to attract new occupants. Boston’s vacancy rate is currently stable at below 4%. However, in markets where vacancy rates may be higher, where there’s an oversupply of rental units, or where there are many new units coming onto the market—as is the case in Boston—landlords will commonly offer rent concessions to potential (or even existing) tenants to compete with other similar properties in their market.

Common examples of concessions include initial rent reductions for one or more months, free rent for one or more months, free parking, extra services such as free internet or cable access, unit upgrades such as superior quality finishes or new home technology installation (think Google Home or Amazon Alexa), and social perks such as access to private events, a pool or gym facility. It is important to note that most properties tend to offer rent concessions as a short-term lease-up solution or one-time offers to new tenants, as long-term rent concessions can indicate instability in a property and appear as a red flag to lenders. Long-term rent concessions can impair the profitability of a rental property, so informed and astute accounting is required.

Sources for Information on Rent Concessions

Now, to obtain information about rent concessions in your designated market, you need local property management firms. These companies often conduct their own research or pay for data related to this topic; hence, they can be a great local resource for rental property owners. Another approach is to survey apartment listings on websites, such as craigslist.org under the “Housing” section, to determine what competing properties are doing in your market. A quick google search should reveal many other websites that perform similar role, and it should be easy to find several websites that serve your area.

Should You Offer Concessions at Your Rental Property?

After you’ve completed your initial investigation into your market’s current rent concession offerings, the next step will be to identify your rental’s competing properties and place within the market. To this end, you should ask some relevant questions. What’s your vacancy like? Is there a need to offer rent concessions? Are your rents above or below market rates? How much free rent can you afford to offer, if any? What services or amenities are competing properties offering? How is the condition of your property compared to others in your competitive market? Do you need to modernize or upgrade some elements of your rental property, or would a remodel or addition to your property constitute a superadequacy relative to your market? The information generated by the potential inquiries may seem like a lot to consider, but one of the best things you can do to address these questions is talk to local experts. Local real estate agents and leasing brokers will have a good understanding of the dynamics at play in your market and can best advise you on an appropriate course of action for your rental property.

For many small-scale or family-run rental properties, sometimes dealing with things like surveying the current market for rent concessions can seem burdensome and unnecessary. Yet failing to do so could put your property at a disadvantage and lead to a lower income stream. In some instances, if you find yourself unwilling or unable to keep up with the demands of your specific market, it might be a good decision to sell your property rather than deal with the highly competitive rental market. Selling your rental property to another investor could bring back a strong return on your initial investment and free up capital for you to reinvest in other ventures, or simply cash out and enjoy your profit. If you chose to take this route and sell, Boston Seller Solutions is always ready to assist you in the selling process.

Benefits of Possessing the Right Information

Being well informed and up to date on your local rent concessions market (or lack thereof) can give you an upper hand in ensuring your multifamily rental property remains competitive and profitable. While it can appear to be just another time-consuming step in the property management process, proper research into the matter can lead to a lower vacancy rate and low tenant turnover. A well-run rental property can offer its owner a reliable income stream for years on end, and surveying local rent concessions is an important element of a good property owner/manager’s market research.

0 Comments/by

4 Tips for Selling Your Home During the Fall Season?

4 Tips for Selling Your Home During the Fall Season?

Selling your home during the Fall season is always a challenge. Homeowners are moving around less and there’s generally less demand for housing during this time of year. This can mean longer than usual marketing times and lower sales prices. The market situation can also give buyers the advantage in negotiations.

What can you do to get the best value, despite these obstacles? Read on to learn more.

Check the Roof and Insulation

First and foremost, check the roof for leaks. If you know it leaks, get it fixed. Don’t wait or try to hide the issues. Home inspectors are very astute and will discover most water damage issues, and even if they don’t, you don’t want any legal conflicts with the buyer after closing. Due to the high cost of such repairs and the inconvenience and stress they cause, it’s critical to handle any issues with the roof before listing. If there’s a chance that your buyer’s loan may be funded with FHA, the property may not be approved if it has roof or other safety issues.

If you’re lucky enough to find a good buyer, you’ll want to take every measure not to lose the transaction. Even though you can remedy some of these things after the fact, delays in escrow while repairs are made can cause uncertainty in the buyer’s mind and lead to an increased risk of a rightful breach by the buyer.

Serious About Selling Your Home? Get it Inspected.

If you’re serious about getting it sold this Fall, pick up the phone and call for a home inspection. A home inspection is relatively inexpensive and doesn’t need to be paid out-of-pocket. An inspector will help you identify all the major and less-pressing maintenance issues that will improve marketability and minimize problems in escrow. They’ll also point out safety problems that will interfere with underwriting approval and certification by FHA or other insurers.

Before and after the inspection, consider including a home warranty in the sale of your home. With no upfront costs, you can reduce your legal risk significantly and eliminate any future headaches after closing when the buyer calls to complain about the heater malfunctioning or faulty ground wiring in the living room (buyers don’t like it when they can’t watch TV after moving in…been there).

Work with Buyer Inspection & Repair Requests

If you have a sensible and diligent buyer, they will certainly order a home inspection. Once the inspection and appraisal are completed, both parties will have a clear and objective idea of what work needs to be performed. Depending on market conditions, the agreed sales price, and any other concessions, you and the buyer will decide what work you or the buyer will pay for. It’s tempting to refuse or limit repair requests, but consider the perspective of the buyer: they don’t want to be burdened with repair and maintenance issues right after moving in. Make it easy for them to move in and get started with their new life, and they’ll be sure to work with you toward a successful closing.

Price it Right When Selling Your Home

The importance of proper pricing can’t be understated, even though it might sound like cliché Realtor-speak by now. No matter what the condition, location, or any other factor, there will be a buyer if you price it at what the market will bear. Unless you find a buyer that thinks your home is a diamond in the rough and has an emotional attachment to the property, it’s unlikely that they’ll pay more than any reasonable buyer would.

Look at the most recent sold and active comparables in the neighborhood with a similar year built, living area, condition, and location to get a good idea of what homes like yours are going for. If you need help determining the value of your home, enlist the help of a local agent or give us a call. We’ll help you evaluate the selling potential of your property and identify potential solutions to help you get what you want out of selling your home.

Reach out to us at (617) 250-7100 or click here for professional assistance.

0 Comments/by

How Will I Pay the Mortgage When I Retire?

How Will I Pay the Mortgage When I Retire?

Approaching retirement is an exciting time when we can look forward to an easier-going lifestyle, less stress, and more time to do the things you love. After all the years of hard work, you deserve to reap the benefits of your studious work ethic and determination to succeed.

Of course, it’s not all party. Giving up a long-term career and making a life transition creates concerns for all of us.

Those that have considerable passive income or that continue to plan on working, might not be as concerned, but even for the well-prepared, retirement brings financial challenges.

If we’ve been entrepreneurs, often our portfolio of businesses and rental properties is our retirement fund. After years of holding and letting tenants pay down the mortgage, the build-up of equity can be enough to fund a fulfilling retirement or start a new venture and spontaneously pursue unforeseen opportunities for adventure.

What’s your goal?

What is your goal in retirement? Do you just want to quit working and struggle to pay the mortgage? Or, do you want to make a change and explore skills and achievements in an entirely new endeavor?

If it’s the latter, you’re going to need funds for your dream (most cases…). Even if you’re not worried about not being able to pay the mortgage or service the debt on your rental properties, you’re not going to want to continue paying for maintenance, annual property taxes, insurance, and management on high-society properties that demand constant attention.

You’re going to want to save that money for helicopter sight-seeing tours over Hawaii, cruises across the Caribbean, Times Square taxi rides, and whatever else you imagine in your retirement-travel wishlist.

Considering Financing Options

Currently in the process of buying a home or rental, or refinancing? If so, watch out for adjustable rate mortgages (ARMs) and home equity lines of credit (HELOCs).

The disadvantage of both these loan types, while they offer the opportunity to pull out equity in the form of cash and the potential for low or no initial payments, is that after a predetermined amount of time, ARMs will adjust the rate and payment to match a predetermined market indices such as the one-year LIBOR. During periods of decreasing interest rate, this can be very favorable; however, when rates are steadily rising, such as now, adjustable rate loan instruments pose a significant threat to your future cashflow. HELOCs pose the potential to hit the borrower with payments that can double when the initial ‘draw’ period ends and the ‘repayment’ phase begins.

Whenever committing to new financing on real property, particularly with rates approaching 5%, seek loans that feature a fixed-rate and no balloon payment. Adjustable rates and cashflow don’t support each other well in fast-growth markets with rapidly increasing interest rates.

Building Your Cash Reserves

To pay the mortgage on-time every month without strain, deal with capital expenditures (major repairs), changing business structures, and potentially increasing payments and rates on your existing or future loan, be sure to retain 10-20% of your net operating income (NOI) as a contingency fund. This will also help if you experience personal cash flow issues entering retirement. Maintaining your property consistently over the long-term will also improve its value, appeal, and demand from tenants, contributing to strong cash flow for you personally and in your portfolio.

Generating Consistent Cashflow

In addition to having an ample cash reserve to deal with unexpected expenses and economic changes, it’s important to keep a strong positive cash flow from your rental properties if you’ll be losing a significant share of income from retiring from your long-term day job.

What if you could skip all the management and financial responsibilities associated with owning rental property, and pay less in capital gains taxes on the proceeds of the sale?

We have several viable options that can help you retain your passive investment income while only dealing with the management duties of holding and receiving payments on a well-performing note.

Pursuing New Opportunities & Freeing Up Your Time

If you’re done with the growth phase of your investment strategy, and it’s time to cash in your equity or convert your cash flow from rental income to debt income, they you may want to consider selling the property either for cash, under lease option, or with seller financing. You can structure your sale to provide tax-sheltering benefits, give you the cash you need now, and provide a consistent cash flow for years to come.

Call us at (617) 250-7100 or click here to learn more about ways to keep your cash flow golden through your golden years.

0 Comments/by

When is it the Right Time to Sell My House Fast in Massachusetts??

When is it the Right Time to Sell My House Fast in Massachusetts??

When is the right time? Now very may well be. The real estate market and broader economy are dynamic, and it takes a keen intuition to time your sale right.

Demand is high, prices are high, and interest rates are rising. Freddie Mac forecasts that rates will increase to over 5% in the next months. This is going to mean rising homeownership costs and reduced demand. What’s the best way to proceed?

If selling makes sense to you personally, then selling may also be a good decision from an economic standpoint. Read on to learn more about some considerations in selling your house fast in Massachusetts during this volatile market period.

How fast do you need to move?

If you need to sell quickly, now is a good time to consider selling. As we approach the top of the market, appreciation will slow, and interest rates will rise. Both of these situations are occurring now. With market values edging higher and interest rates approaching 5%, affordability is gradually declining. Fortunately, there’s still a lot of demand for housing and marketing times are relatively low, but this won’t be the case as we go into the next year and beyond.

If your move isn’t urgent or you’re not certain about moving, it may be still be a good time to sell as prices won’t be this high again for many years until after the next recession.

Tax Considerations

How recently did you buy the property? If it’s been more than two years and you’ve living in it full time, you’ll likely be exempt from capital gains tax on the sale of the property. The IRS provides an exemption on the first $250K for individuals and $500k for couples from the gain on the sale of a principal residence.

When the tax situation is not ideal for other income, liability, and asset-based reasons, some homeowners choose to rent the property, offer a lease option, or extend seller financing. This helps defer tax liability for gains until the year earned. This strategy can also help provide an interim cash flow to offset ownership and operational expenses. Please request an offer here and we’ll explain the choices you have in selling and structuring your profit from the sale.

Employment & School

How would a move line up with school schedules for student of levels in the household? For elementary, high school, and college students alike, making a big move can cause a lot of stress and interfere with study and course schedules. It’s not just students, everyone who works has a lot on their plate. In planning your move, consider everyone’s schedule and work it out ahead of time. With a little planning, coordination, and compromise, a successful move can be pulled off during the work and school season.

Work with a skilled investor, agent, loan officer, appraiser, and other quality real estate pros to guide you in selling your property and understanding how the market will influence the outcome of the transaction.

Available Inventory

If you move now, will there be a home for you to buy? There’s another good point here about possibly looking for an offer. Right now, inventory is low, but it’s still possible to find another property. As the market slows, inventory may increase, and it’ll be easier to get a good deal, but the price of your property will also be falling. Deciding to sell is an important decision, not an easy one, that must be made carefully.

Selling your rental? Inventory may not be as much of an issue if you’re selling your rental property and not needing a replacement residence. A rising inventory may mean falling home prices and reduced demand for rentals. Rental values are currently very strong throughout Massachusetts.

Considering Offers

If you haven’t conducted a CMA, or received an offer on your property recently, you may not be aware of the current market value. It’s worth your time to request an offer to get an idea of how much you could quickly walk away with by selling your property for cash to professional and credible investors (who are also licensed appraisers in Massachusetts). We’ll provide you with all the information you need to make an informed selling choice. Please read our ebook for more about the selling process.

0 Comments/by