taner-ardali-806-unsplash - Landlord

What Are Landlords Responsible For?

Many people rent rather than own their homes. If this is true for you, you depend on a landlord to maintain your residence in good working order. At a minimum, landlords are responsible for ensuring homes are habitable and safe.

The legal definition of habitable means the structure should be weather-tight with functioning heat, electricity, running water, and sewer or septic. In the middle of summer in Ukiah, you may believe that air conditioning is required to make a place habitable (I’m inclined to agree with you), but legally, air conditioning isn’t required.

Under a normal rental or lease agreement, responsibility for maintaining habitability cannot be passed on to the resident. It is the owner’s obligation not only to have everything in good working order when residents move in, but throughout the term of the lease.

This means landlords must attend to repairs in a timely manner; however, “timely” means different things to different people, and different situations call for different responses. Emergencies require immediate attention, while lesser problems can wait a day or two, or sometimes longer. This is where we employ the Prudent Man Rule (also known as the Common Sense Rule). What is prudent in this situation? What makes sense?

A slow drip in the bathroom on a Saturday night is an incredible annoyance, but probably doesn’t justify a 3:00 am call to the plumber. On the other hand, if sparks are flying from the breaker box, go ahead and make an emergency weekend call. (As a practical matter, the resident should know how to shut off electricity to the house.) The same logic goes for a broken gas line. Keeping in mind that the resident may have no way to contact the owner at 3:00 am, he or she must take some personal responsibility and address the gas leak immediately, then deal with the payment issue with the landlord later.

Who pays for emergency maintenance depends on two things: the cause of the problem and whether the issue was serious enough to warrant emergency action. One of my favorite sayings applies here: “Poor planning on your part does not constitute an emergency on mine.” If a gas line breaks because the resident backs his car into the meter, that’s on him. If a buried gas valve reaches the end of its serviceable life—which only seems to happen at the most inconvenient possible times—that’s the landlord’s responsibility.

The more details are spelled out in the lease agreement, the better. Who cares for the landscaping? Who is responsible for brush removal for fire safety? Many contracts call for appliance repair to be the responsibility of the resident, since appliances are not a habitability issue. If the contract isn’t explicit about who should maintain the appliances, maintenance falls to the landlord.

The type of the residence can also determine who is responsible for what. It may be perfectly reasonable to include landscaping upkeep as part of a lease agreement on a single family home with a small yard, but ridiculous to ask someone renting a small cabin on a 200-acre ranch to mow the whole property on a regular basis (unless the resident is compensated for that time with a reduced rental payment). As is always the case in these situations, it really helps if you read and understand the lease agreement BEFORE you sign it.

Although some maintenance issues are negotiable, safety issues are not. Landlords must install and maintain smoke detectors and carbon monoxide alarms. These are incredibly important (and inexpensive). Less immediate but also important are issues related to sewer or septic, mold, and dangerous but difficult-to-see hazards like small cracks inside the chimney. Landlords should inspect residences periodically for obvious and not-so-obvious threats.

Whether you’re a resident or a landlord, my best advice to you is to communicate to clarify expectations and avoid misunderstandings.

If you have questions about real estate or property management, please contact me at rselzer@selzerrealty.com or call (707) 462-4000. If you’d like to read previous articles, visit my blog at www.richardselzer.com. Dick Selzer is a real estate broker who has been in the business for more than 40 years.

 

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The Accidental Realtor

In a typical real estate transaction, buyers and sellers each have a licensed real estate agent to represent them. Realtors are legally obligated to work in the best interest of their clients, and when each party has a Realtor, everyone’s roles and loyalties are well established. Sometimes, however, one or both parties in a transaction (buyers and/or sellers) opt to represent themselves and forego the assistance of a Realtor. This can cause significant problems for everyone involved.

Unlike many industries, no written contract is required for a Realtor to represent a client. A verbal agreement between a buyer or seller and a Realtor is all it takes for a Realtor to become a client’s legal agent. In fact, even without an agreement, as soon as a Realtor starts giving advice about a real estate transaction, that Realtor can be considered a buyer or seller’s legal agent. Odd, but true. Once a Realtor is in the role of legal agent, he or she becomes responsible for many aspects of that client’s transaction, not just the ones advised upon.

This is why it is unfair to ask your friend who is a Realtor to advise you unless that friend is representing you in the transaction. Realtors are friendly by nature (or they don’t last very long in the real estate business). They want to help you, both because they’re nice and, candidly, because they’re probably hoping for future referrals. However, you are putting your friend in a terrible fix by asking for advice, because as soon as your friend advises you, he or she takes on economic and regulatory liability. Your friend can be sued or fined for giving advice if the transaction goes poorly.

Realtors who represent half of a transaction when the other party has no representation need to be really careful how they walk the tightrope between making a transaction go smoothly for their client and accidentally becoming the legal agent of the unrepresented party.

Here’s an example of how slippery the slope can be. If the unrepresented party asks a Realtor who they recommend to do a pest and fungus inspection and the Realtor provides three local contacts, the Realtor has not become that person’s legal agent. If instead the Realtor says, “Hey, I’ll see my favorite pest guy this afternoon, I’ll have him call you,” now we’re in a gray area. If the Realtor agrees to review the pest and fungus report with the unrepresented party once it’s done, the Realtor is clearly signing up to be that person’s legal agent.

Let’s consider the classic for-sale-by-owner (FSBO) situation. To avoid paying a Realtor’s fee, a homeowner puts his home on the market and plans to represent himself in the negotiation. Buyers who are represented by a Realtor fall in love with the property and make an offer. The Realtor representing the buyers wants everything to go smoothly for her clients, so she finds herself in an awkward position when the seller starts asking questions about the sales contract. It is in the best interest of her clients that the seller understands the offer, but as soon as the Realtor starts answering the seller’s questions, she may inadvertently be signing up to represent him as well as the buyers.

Realtors can also accidentally become legal property managers simply by being helpful. For example, if a property owner finds a tenant for her investment property and asks a Realtor for help negotiating the lease, that Realtor has legally become the property manager. If the property in question is later found to have black mold and the tenant gets sick, the Realtor could be liable for damages as a property manager who didn’t adhere to regulatory requirements.

If you’re a Realtor, protect yourself by educating friends and clients about your legal liability when it comes to giving real estate advice.

If you have questions about getting into real estate, please contact me at rselzer@selzerrealty.com or call (707) 462-4000. If you’d like to read previous articles, visit my blog at www.richardselzer.com. Dick Selzer is a real estate broker who has been in the business for more than 40 years.

 

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Tax Benefits of Investing in Real Estate

Whenever I discuss the tax benefits of investing in real estate, I start with this disclaimer: I am not a tax professional and I am not giving advice here. My goal is to provide ideas for you to discuss with your tax professional.

If you’re looking for a long-term investment, real estate is a great option. Do you have small children who may go to college someday? Purchase an investment property now and in 18 years, that property may go a long way toward paying for your child’s higher education.

A huge part of the tax benefit of investing in real estate is the ability to write off depreciation. Depreciation is the reduction in the value of an asset with the passage of time. So in real estate, it’s the ability to deduct a portion of the value of the improvements on a property. In real estate, “improvements” refer to how you’ve improved the bare land, things like structures, wells, and other additions nature did not provide.

Although the tax code changes periodically, right now the government allows you to depreciate improvements on a residential real estate property over the course of 27.5 years. This is straight-line depreciation, which means you deduct the same amount each year.

Depreciation shows up on tax returns as though it’s an expense you paid that year, even though you didn’t actually pay that money to anyone. Here’s how it works.

Let’s say you bought a duplex for $400,000 and 75 percent (or $300,000) of that value is attributed to improvements. Divide $300,000 by 27.5 years and you’ll see the annual depreciation is $10,900. If you have a break-even cash flow, meaning your rent covers expenses like fees, maintenance costs, and loan payments, then that depreciation is saving you anywhere from $3,500 to $5,000 a year in state and federal taxes. Unless you are a real estate professional, you are limited to rental losses of $25,000 per year.

Looking at the long-term benefits, let’s say you purchased the duplex with a down payment of $100,000. You have a break-even cash flow and a 3.5 – 5 percent after-tax return (the amount you saved by taking depreciation). This is in addition to the appreciation of the property value (if any). Although no one can guarantee future real estate values, the last five years have seen significant increases and the last 50 years have seen an average annual increase of more than 5 percent.

When it comes time to sell this little jewel, remember the reason for buying it was to send your kid to college. Eighteen years from now, let’s imagine you sell the duplex for $962,647—a 5 percent annual increase in value. During the 18 years you held the property, you realized $196,200 worth of depreciation. On that, you’ll pay 25-35 percent in recapture taxes (the government likes to recapture the depreciation). So, between brokerage fees and closing costs, your total costs are $62,647. Your net proceeds are therefore $900,000. (All of this is at today’s tax rates, so the numbers are estimates, of course.)

Unfortunately, we’re not quite done. Now we pay a capital gains tax on profit, which runs about $150,000 plus the recapture of $65,000. Also, you have to pay back the original $300,000 you borrowed to purchase the property. This will leave you with an after-tax amount of $385,000. Remember, you put $100,000 down, so that makes your profit $285,000 (plus the annual tax savings from depreciation of $3,500-5,000 each year for the past 18 years).

This is a conservative estimate, as it assumes you never raised the rent. It also assumes an appreciation of 5 percent. Earning $285,000 on a $100,000 investment over 18 years amounts to an annual compounded interest rate of 7.78 percent after taxes (or a pre-tax rate of 12 percent), and that doesn’t include the annual depreciation benefits.

All investing includes risk, but historically, real estate has been a good bet.

If you have questions about real estate or property management, please contact me at rselzer@selzerrealty.com or call (707) 462-4000. If you’d like to read previous articles, visit my blog at www.richardselzer.com. Dick Selzer is a real estate broker who has been in the business for more than 40 years.

 

Opportunity Zone

Opportunity Zones

Before I begin, please note I am not an attorney, nor am I an accountant, and the information currently available about the program I’m about to introduce is sketchy at best. Okay, with that disclaimer, let me tell you about something I recently discovered, something that sounds too good to be true, but from what I can tell, is completely legitimate.

In December 2017, the federal government passed a tax bill that paved the way for a new program called the Opportunity Zone program. Opportunity Zones correspond with census tracks and are designated by the state based on average income levels. It appears they are meant to replace the old Enterprise Zones.

Based on my initial research, the Opportunity Zone program offers tax incentives to encourage investment in low-income communities, and the map I’m looking at indicates that much of the Ukiah Valley is an Opportunity Zone. Here’s how I believe they work.

Let’s say I bought a rental property in Ukiah back in the 1970s for $15,000. Now it’s worth $300,000. If I sell it outright and use the proceeds to purchase another investment property that happens to be in an Opportunity Zone, I can defer the capital gains tax on that sale. If I hold that new property for a minimum of 10 years before selling it, I will pay no federal income tax on the whole transaction. The entire sale is federally tax-free. Incredible!

Let’s do the numbers. Using the example above, let’s say you’ve decided to sell that rental you purchased in 1973. You sell it for $300,000 and use the proceeds to purchase a commercial building in an Opportunity Zone for $1,000,000. You hold the commercial building for 10 years and then sell it for $1,350,000 (a 3 percent annual appreciation) (increase in value of an asset over time).

If I understand the Opportunity Zone program, here’s how much you’d save in taxes. The total depreciation (decrease in value due to the aging of an asset) on the original rental was $12,000. The total depreciation on the commercial building was $170,000. The total appreciation of the rental was $285,000 and total appreciation on the commercial building was $350,000.

If the commercial building were not in an Opportunity Zone, you’d pay 25 percent in recapture taxes on the depreciation of both properties (amounting to $45,500) and 20 percent in capital gains taxes on the appreciation of both properties (amounting to $127,000). However, when you sell the commercial building after owning it for ten years in an Opportunity Zone, from everything I’m reading, it appears you pay nada, zero, zilch in recapture or capital gains taxes for either property.

Because this program is based on the average income in each census track, the communities that qualify may have a blend of high-value and low-value real estate. I have sent inquiries to the IRS to get clarification on the specifics of this program (e.g., Does it include land or is it just residential or commercial properties?), but have yet to hear anything back. However, from what I can tell, the potential benefits of investing in Opportunity Zones is staggering. This is why I couldn’t wait to write about it. As I learn more, I’ll be sure to pass the information along. In the meantime, if you are interested in reinvesting income from the sale of your existing real estate, take a look at an Opportunity Zone map. Visit http://dof.ca.gov/Forecasting/Demographics/opportunity_zones/ and scroll to the bottom of the page for links to interactive maps and other resources. This could save you a bundle of money.

If you have questions about real estate or property management, please contact me at rselzer@selzerrealty.com or call (707) 462-4000. If you’d like to read previous articles, visit my blog at www.richardselzer.com. Dick Selzer is a real estate broker who has been in the business for more than 40 years.

Craftsman Kitchen

What’s Hot?

Style trends come and go, so it can be pricey to continually chase the latest fads, but if you’re interested in selling your home, it’s smart to know what sells. Right now, here’s what’s hot. Statistics about performance are from the Home&Wealth newsletter.

Barn Doors – but not on your barn. People are wild for barn doors to separate indoor living spaces. They affix a metal rod above a doorway and slide the interior barn door like a curtain between rooms. Listings with barn doors sold for 13.4 percent above expected values, 57 days faster than expected.

Shaker Cabinets – simple, well-made, minimalist cabinets. No curly cues or intricate engraving. Listings with shaker cabinets sold for 9.6 percent above expected values, 45 days faster than expected.

Farmhouse Sink – big, deep rectangular sinks like you see in old farmhouses. Usually, they’re porcelain, but you can find them in stainless steel. Listings sold for 7.9 percent above expected values, 58 days faster than expected.

Subway Tile – rectangular tile (about twice as wide as they are tall), often white. Listings sold for 6.9 percent above expected values, 63 days faster than expected.

Quartz – countertop materials come in and out of fashion faster than teenage slang. Right now, quartz is hot and it’s beautiful,. Listings with these countertops sold for 6 percent above expected values, 50 days faster than expected.

Craftsman – unlike countertops fads, Craftsman style homes and décor have stood the test of time. They are perennially popular. Famous architect Frank Lloyd Wright was a fan and built many such homes. Listings sold for 5.4 percent above expected values, 14 days faster than expected.

Exposed Brick – this only works if you have the brick to expose, typically in older homes. If you go into local restaurants Patrona or Saucy, they’ve used this style to great effect. Listings sold for 4.9 percent above expected values, 36 days faster than expected.

Pendant Light – these hang down on a wire or cord and have an exposed bulb under a small shade, often made of glass. They can be modern or traditional, depending on the shade, and they’ve been popular for a while. Schat’s Courthouse Bakery has them above their baked goods counter. Listings sold for 4.6 percent above expected values, 48 days faster than expected.

Frameless Shower – these have glass with beveled edges rather than encased in metal. Listings sold for 4.6 percent above expected values, 38 days faster than expected.

Heated Floors – instead of stepping on to cold bathroom tile with bare feet in the middle of winter, heated floors keep things nice and toasty. Listings sold for 4.3 percent above expected values, 28 days faster than expected.

Stainless Steel – stainless steel appliances have been popular for at least the last decade. I worry they’ll go the way of the avocado refrigerators from the 1970s, but for now, they remain very stylish. Listings sold for 4.2 percent above expected values, 42 days faster than expected.

Granite – like I said for quartz, countertop preferences come and go. Granite is beautiful, but not always easy to maintain. Listings sold for 4.1 percent above expected values, 38 days faster than expected.

Backsplash – the tile or countertop lip that protects the wall from kitchen messes. It’s especially nice to have behind the kitchen sink and stove. Listings sold for 4.1 percent above expected values, 46 days faster than expected.

Tankless Water Heater – I am a big fan of having instant hot water, and if not for my son, Dan, who actually has fallen asleep in the shower, my tankless water heater would save me money. Listings sold for 4 percent above expected values, 43 days faster than expected.

Outdoor Kitchen – especially in areas with temperate weather like ours, outdoor kitchens almost seem to expand the square footage of the house. Listings sold for 3.7 percent above expected values, 19 days faster than expected.

If you have questions about getting into real estate, please contact me at rselzer@selzerrealty.com or call (707) 462-4000. If you’d like to read previous articles, visit my blog at www.richardselzer.com. Dick Selzer is a real estate broker who has been in the business for more than 40 years.

realtyworldsign

Planning to Buy or Sell Real Estate? You’ll Need These Pros

If you’re planning to buy or sell real estate, it’s best to get help from the pros. Like anything in life, you’re better at it when you’ve done it before. Most people (outside the real estate industry) don’t buy or sell houses too often. And let me tell you, there’s more to it that sticking a sign in your front yard. Read on to find out who can help you.

REALTORS

While I may be biased on this one, everyone I know who is familiar with the real estate industry believes you’d be crazy to go through a real estate transaction without a Realtor.

On the selling side, a Realtor will give you an objective assessment of your property, determining its market value and bringing to light any issues that make it stand out. Realtors advertise your property locally, online, and via the Multiple Listing Service, reaching thousands of potential buyers. And remember, the Realtor doesn’t make a dime unless your house sells.

On the buying side, Realtors can save you a ton of time. As long as you are clear and specific about your needs, a Realtor can filter through all the properties for sale, so you only see ones of interest to you.

Whether you’re a buyer or seller, in negotiations, he who speaks first loses. However, when Realtors communicate, they can act as independent parties and provide you with information without giving away your position. Realtors can also help you understand the process of buying or selling property, and serve as your advocate until escrow closes.

ESCROW (TITLE) OFFICERS

If you don’t really know what you’re escrow officer has done for you because everything went off without a hitch, you should probably send that person a thank you card. Good escrow officers anticipate problems and resolve them before they get in the way of your transaction. They spot old deeds of trust that weren’t reconveyed or fraudulent deeds in the chain of title. When these problems are identified early, you can avoid delays. Delays can be inconvenient and expensive.

LOAN OFFICERS

Like your title officer, loan officers are unsung heroes. Good ones are organized and proactive. They don’t send 27 separate emails requesting information, but rather anticipate all the likely information they’ll need and ask for it up front. They’ll review your data and recommend the type of loan that makes the most sense for you.

INSURANCE AGENT

Having a good insurance agent can mean the difference between getting affordable homeowners insurance and not getting insurance at all. Right now, many insurance companies are becoming stricter about which properties they’ll insure, especially after last year’s fires.

HOME INSPECTORS

Inspectors who tell you the condition of various parts of the property.

  • Property inspectors scrutinize the structure. Although your brother-in-law may be a contractor, I’d still hire a property inspector who is used to looking for signs of problems that contractors often overlook.
  • Pest and fungus inspectors identify active infestations, signs of old infestations, and situations that could lead to infestations.
  • Heat/Air specialists can find things like a cracked heat exchanger, which could save your life and the lives of your children.
  • Well inspectors determine the condition and production capacity of the well, in addition to the water quality.
  • Engineers are only called in when buyers or sellers are concerned about structural integrity or maybe a retaining wall.

REAL ESTATE ATTORNEY

Realtors know a lot about real estate, including when to refer clients for legal advice. A Realtor can review everything in a contract; a real estate attorney can interpret and advise you about whether you should sign it. Most transactions do not require an attorney, but if your situation calls for legal advice, make sure you get it.

CERTIFIED PUBLIC ACCOUNTANT

Some real estate transactions can get incredibly complex from a tax perspective. Involve your CPA to be sure you’re maximizing tax benefits.

APPRAISER

You do not get to choose who appraises your property. The federal government requires a convoluted process whereby a lender submits a list of approved appraisers to a third party who then chooses the appraiser. Don’t get me started on unnecessary government regulation.

Your Realtor can help you find all the professionals you need to have a great real estate buying or selling experience.

If you have questions about real estate or property management, please contact me at rselzer@selzerrealty.com or call (707) 462-4000. If you’d like to read previous articles, visit my blog at www.richardselzer.com. Dick Selzer is a real estate broker who has been in the business for more than 40 years.

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How About a Career in Real Estate?

So you’ve graduated. Now what?!

If you’re a recent high school or college graduate with people skills and a strong work ethic and you’re looking for a career that offers flexibility and plenty of money, may I suggest becoming a real estate agent?

While a liberal arts degree in sociology or political science may have broadened your worldview, it may not be immediately clear to you how you can use that new degree to get a job. Although high school and college can teach you many important things, the information isn’t always directly applicable to the jobs listed on monster.com.

Especially in college, you learn to “adult.” You learn to work independently (since mom and dad are no longer there to look over your shoulder and prompt you to stop watching YouTube), to set goals, schedule your time, meet deadlines and, if all goes as planned, become responsible for yourself. If, in the process, you also learn to think logically and relate well to others, you might find that real estate can provide you with a rewarding career.

Most licensed agents can find a job within a day or two in almost any city in the nation. There are some requirements, of course. First, you must pass the state exam to get licensed. Then, you must have the wherewithal to run your own business, even if you’re working for a broker.

As with any startup, a new real estate business requires some capital, so you’ll need to figure out how to afford basic living expenses while also covering some business costs until your commission checks start rolling in. Although being a successful Realtor requires hard work and long hours, it also affords you the flexibility to schedule time off when you like and to be in control of your own financial future.

Many high school graduates living in Ukiah wonder how they can support themselves financially in such a small town, especially without a college degree. Becoming a Realtor does not require a college education.

When I’m trying to figure out if someone is a good fit for a job, I look at two things: whether they can learn the skills required and whether they have the right personality or character traits. Some things can be taught. Some can’t.

To be a successful realtor, the top requirement is that you be interested in meeting and working with people. In addition, you need to be a self-starter. Being a Realtor isn’t like having a regular office job where people notice (and care) if you aren’t there during regular business hours. You have to be disciplined enough to prioritize and schedule all your own activities.

Furthermore, it’s best if you enjoy solving problems, since that’s what you’ll do most of the time. As a Realtor, you’ll work on behalf of your clients to find homes, invest money, sell homes, borrow money, and lots of little details in between. Since a Realtor works on commission, your financial success depends on your ability to solve problems for your clients.

Real estate sales can be the lowest paying easy job or the highest paying tough job you’ll find. You can make $5,000 a year or $250,000 a year. Depending on the market, your income is largely up to you.

I graduated with a degree in business administration and immediately began a career in real estate. I’ve been doing this for more than 40 years and I cannot imagine doing anything else.

If you think this might be a good fit for you, come and talk with me or make an appointment with other brokers in town. We love what we do. When you think about it, you’ll spend a lot of time at work over the course of your life. Might as well pick something you’ll enjoy.

If you have questions about getting into real estate, please contact me at rselzer@selzerrealty.com or call (707) 462-4000. If you’d like to read previous articles, visit my blog at www.richardselzer.com. Dick Selzer is a real estate broker who has been in the business for more than 40 years.

From "If You Give a Mouse a Cookie" by Laura Numeroff, Illustrated by Felicia Bond

If-You-Give-a-Mouse-a-Cookie Renovations

There’s a wonderful children’s book series by Laura Numeroff, the first of which is If You Give a Mouse a Cookie. It goes through the problems of giving a mouse a cookie: if you give a mouse a cookie, he’ll probably want a glass of milk. If you give him milk, he’s likely to ask you for a straw. One thing leads to another, and the mouse needs a hair trim, a pillow for a nap, art supplies for an art project, and on and on. This is the book that came to mind during my recent conversation with our in-house contractor.

Our contractor informed me that parts of our building desperately need paint. Although the whole building doesn’t really need to be repainted, if we’re going to paint part of it, we may as well paint all of it. And if we’re going to paint we’ll have the cherry picker out, so we should probably re-do the gutters at the same time. When we’re outside looking at the gutters, we notice that the landscaping is outdated, so we consider replacing the lawn with more drought-resistant plants. As we discuss landscaping, we talk about the importance of making sure none of the landscaping tree roots can reach the parking lot and cause cracks in the asphalt. Speaking of asphalt, it’s probably about time to reseal the parking lot.

As we head back indoors, we can’t help but notice that the carpet is quite worn in a few spots. If we’re going to replace part of the carpet, we should probably just replace all the carpet. And the whole process begins again, this time for indoor repairs.

That’s the nature of home maintenance. As soon as you update or repair one part, the surrounding parts look old and worn by comparison. Maintenance is a never-ending cycle—sometimes it requires a major expense and sometimes just minor ones, but as a homeowner (or property owner of almost any type), you should plan on constant upkeep.

This is why we tell home buyers, especially first-time home buyers, to plan on spending about 3 percent of the value of the home annually on expenses (i.e., taxes, insurance and maintenance). That is to say, if your home is worth $300,000, plan to spend about $9,000 a year on home-related expenses. Most years you’ll spend less, others a bunch more. For example, you only need a new roof about every 30 years, but when that bill comes due, it’s a doozy. If you haven’t been saving for it, you’ll be sorry. For a few springtime maintenance projects to consider, visit www.richardselzer.com/2017/05/15/springtime-maintenance.

If you happen to be responsible for the upkeep of a business building, I highly recommend asking your employees about their preferences before launching into a big, expensive renovation that you believe they will appreciate. People have different tolerances for mess and inconvenience during the renovation phase, and people don’t always value the same types of renovations. We recently updated the bathrooms in our building, and although most everyone seems to appreciate the updated facilities, not everyone believes they were worth the inconvenience.

Last piece of advice for the day: if you think you may sell anytime in the near future and you plan to paint before then, I highly recommend choosing neutral colors. You can add wild splashes of color via the artwork you hang on the wall or accent pillows you throw on your couch, but not everyone will appreciate the chartreuse accent walls you adore.

If you have questions about real estate or property management, please contact me at rselzer@selzerrealty.com or call (707) 462-4000. If you’d like to read previous articles, visit my blog at www.richardselzer.com. Dick Selzer is a real estate broker who has been in the business for more than 40 years.

UkiahCityHall

Solving the California Housing Shortage in Ukiah

City leaders are currently discussing ways to address the local impacts of our statewide housing shortage. This is a complex problem, so I don’t envy their task. What I can offer is a perspective, one based on more than 40 years in the real estate business.

First, it’s important to gather accurate data. To that end, the City of Ukiah just completed a housing survey. Although the survey was flawed (the way information was collected skewed the results and the questions didn’t differentiate between homeowners and renters very well), some information is better than none.

Shortcomings aside, the City found that 70 percent of respondents—renters and owners—are unsatisfied with available housing. Forty percent said it took more than nine months to find a home they wanted. Most people cited the cost of housing as a primary barrier, while others said the lack of available housing options prevented them from moving into a more satisfactory home.

In the past decade, an average of 80,000 homes a year have been built in California, which is less than half the units needed to keep pace with population growth through 2025, according to a California Department of Housing and Community Development report. Ukiah has a similar problem. Since 2010, only 92 residential building permits have been pulled in the greater Ukiah Valley most of which were for middle to lower income subsidized homes). During that time, to keep up with population growth 420 new housing units should have been built.

Even with housing prices as high as they are, regulations prevent developers from investing here—it isn’t cost effective for them.

I was particularly disappointed to read Phil Baldwin’s ill-informed op-ed on this subject earlier this month. Baldwin clearly doesn’t understand the complexity of the housing market nor the basic laws of economics, but he is fairly good at spreading fear and distrust.

He noted that the Realty World Selzer Realty website listed 48 residential properties for sale and suggested that if there are that many properties for sale, we must not have a housing shortage. Based on the number of prospective buyers my Realtors are working with, there are about 200 active, qualified buyers in the Ukiah Valley. Even if 48 of the buyers were perfectly suited to buy the 48 homes for sale (whether those homes be mobile homes or million-dollar properties), we’d still have about three-quarters of the prospective buyers left with nothing to buy. And if you assume that many renters would also like to buy, the number of prospective buyers skyrockets. There is more demand than supply. This means we have a housing shortage.

Baldwin also rails against community leaders who support the Lover’s Lane development. He assures us that this development will cause urban sprawl and implies that when the free market determines the cost of these new homes, it is somehow evil. By the way, this development is on ag land that isn’t very productive, according to local farmers. By building market-rate housing, we’ll be able to keep the qualified professionals who want to serve our community but cannot find a place to live, the ones we are currently losing to other communities.

By building a new subdivision, we don’t prevent infill development. We have enough of a shortage to build a new subdivision and build on vacant lots throughout the city. As for the idea of creating a mixed-use, commercial/residential zone, we’ll have to see if there’s a market for it here. Baldwin cites the city of Windsor’s town square where people live in condos above retail space. In Ukiah, we didn’t allow that type of zoning for a long time, so now we’d have to rethink things.

The point is this: we have a housing shortage. Baldwin would have us only build subsidized housing for the poor and elderly. Price controls don’t work. Does anyone remember what happened with gas lines in the 1970s? Not pretty. Let’s reduce regulation, invite developers to build more housing at various price points, and go from there.

If you have questions about real estate or property management, please contact me at rselzer@selzerrealty.com or call (707) 462-4000. If you’d like to read previous articles, visit my blog at www.richardselzer.com. Dick Selzer is a real estate broker who has been in the business for more than 40 years.

alex-holyoake-lightbulb-expensive mistakes

Avoid These Expensive Mistakes on Home Furnishings and Maintenance

Owning a home can be costly in the best of times, so there’s no reason to waste money on expensive mistakes. Here are a few to avoid.

Using Incandescent Light Bulbs – Replace traditional light bulbs with compact fluorescents (CFLs) or light-emitting diode (LED) bulbs. LEDs especially may be more expensive to purchase, but they’ll save you money in the long run. Incandescent bulbs cost about a dollar per bulb and their average lifespan is about 1,200 hours. CFLs cost about $2 per bulb and go for about 8,000 hours. LEDs cost about $8 per bulb, which seems expensive until you realize their lifespan is about 25,000 hours. Let’s do the math: to get 25,000 hours of light, you’ll spend about $20 on incandescents, but only $6-8 on CFLs or LEDs. When you add in the cost of electricity used, it’s still a no-brainer. For every $100 you spend on light with incandescents, you’ll only spend $24 on CFLs or $19 on LEDs. You also save the hassle of changing bulbs.

In using CFLs and LEDs, you’ll need to figure out how much light you want. These bulbs aren’t sold by wattage (how much energy is used), but rather lumens (how much light is emitted). More lumens equals more brightness. To replace a 100-watt incandescent bulb, choose a bulb with about 1600 lumens. To replace a 75W bulb, choose a bulb with about 1100 lumens. To replace a 60W bulb, choose a bulb with about 800 lumens. To replace a 40W bulb, choose a bulb with about 450 lumens.

Ignoring Leaky Faucets – A leaky faucet that drips one drop per second can waste more than 3,000 gallons per year, which is enough water to take more than 180 showers. I recently had a leaky toilet valve that cost an additional $50 in just a couple months. I figured it out when the excess water caused a pretty green patch on the hillside next to my house where the leach lines for my septic tank drain.

Using the Wrong Air Filters or Forgetting to Replace Filters Regularly – If an air filter doesn’t fit properly or it gets too dirty, it can’t function well. This can not only increase your power bill, it can shorten the life of your furnace.

Not Adjusting Vents – In many offices, some areas are burning up while others are ice cold. Rather than having employees bring space heaters and fans, adjust vents to balance the temperature throughout the office.

Water Heater Temp Set Too High – Most of us have traditional water heaters that keep water hot 24/7. If you set the water temp too high, you’re wasting money (and putting family members at risk of getting scalded). In our rentals, we set the temperature to 120 degrees. You can turn this down in the summer.

Overwatering Your Lawn – Automatic sprinklers that come on early in the morning are great, unless you have a broken sprinkler head that is gushing water or misdirected so you’re watering the fence instead of your lawn. Periodically run your sprinklers during the day so you can see how they are performing when you’re not around.

Hiring a Handyman for Simple Repairs – If you have YouTube, you can probably figure out how to do most of the minor repairs in your house and save a lot of money. However, if you’re like me—not handy with tools—by all means, leave repairs to the experts. If you need a referral to a fix-it professional, from plumbers to electricians, ask your Realtor.

Ignoring Roof Repairs – If you see curled shingles or damaged flashing and mastic around roof penetrations (like chimneys, stove vents, or bathroom vents), do not ignore them. Water is really good at finding small flaws and making them bigger.

Houses are expensive enough without allowing these mistakes to bite into your pocketbook.

If you have questions about getting into real estate, please contact me at rselzer@selzerrealty.com or call (707) 462-4000. If you’d like to read previous articles, visit my blog at www.richardselzer.com. Dick Selzer is a real estate broker who has been in the business for more than 40 years.