Real Estate Investing – Part III

As the headline implies, this is the third column in a series about real estate investing. I started with single-family homes, moved to duplexes and four-plexes, and now I’m on to small apartment complexes (residential real estate with 5-12 units). Before I move on, however, I need to correct last week’s column. I said duplexes and four-plexes have a higher rent-to-income ratio, and I meant a higher rent-to cost ratio. Thanks to my trusty friend Ross Liberty for catching that so I could correct it!

Okay, on to small apartment complexes. These come with advantages and disadvantages; they have a better price-to-income ratio than the smaller investments, but they require different financing, for example.

Five units or more means you cross an invisible threshold where the trusty 30-year fixed rate loan is no longer available to you. You must now delve into commercial financing. With the 30-year fixed loan, many lenders buy and sell these. With a commercial loan on a small apartment complex, it is likely that the lender will not resell the loan. Typically, whoever makes the loan, keeps it in their portfolio. The commercial loan comes with a higher interest rate and a lower loan-to-value ratio, a shorter term, and/or a requirement that the rate be adjustable.

The commercial lender is unlikely to be the same lenders you’ve worked with on standard residential mortgages. A typical commercial loan has a loan-to-value ratio of 70 percent or less and interest rates that are one or two percentage points higher than a home loan. And, the interest rate is often adjustable based on some index. If not, it may have a balloon payment at the end of five or ten years. To make matters worse, when money is tight, even these loans become more difficult to find. This is offset by the economies of scale you get from owning a larger complex.

When you reach complexes of more than 16 units, things change again. First, you are required by law to have an on-site manager. The job description for the on-site manager can be fairly brief, but he or she must live on the premises. Our on-site managers show vacant units, maintain the pool and laundry room, do light yard work, and deal with that noisy tenant at 2:00 a.m.

While bigger complexes can lead to bigger revenues, they can also be harder to sell. Very large complexes, say more than 50 units, are actually easier to finance because different lenders get in the game. Large institutional lenders like insurance companies are not usually interested in $500,000 loans (small apartment complexes), but they are interested in $5 million loans (large apartment complexes).

Most of the pros and cons of investing in residential property apply to large complexes. The 20-year-old resident still thinks he can have a party until 3:00 a.m. and junior next door still wants to have a dog.

On the other hand, vacancies are filled more quickly and there are tax advantages for mulit-family residential real estate (as opposed to commercial real estate like office buildings or retail space). Commercial space usually requires a five-year lease and has more dependable tenants (far fewer 2:00 a.m. parties), but residential properties have a better price-to-income ratio. And, with apartment complexes, you benefit from economies of scale (per unit, your maintenance and management costs are less).

As I’ve said before, real estate investing isn’t for everyone, but if you look at the return on real estate as compared to other investments, it can be quite lucrative.

If you have questions about real estate or property management, feel free to contact me at HYPERLINK “mailto:rselzer@selzerrealty.com”rselzer@selzerrealty.com or visit our website at HYPERLINK “http://www.realtyworldselzer.com”www.realtyworldselzer.com. If I use your suggestion in a column, I’ll send you’re a $5.00 gift card to Schat’s Bakery. If you’d like to read previous articles, visit my blog at HYPERLINK “http://www.richardselzer.com”www.richardselzer.com. Dick Selzer is a real estate broker who has been in the business for more than 35 years.

Bring the Heat: Fireplaces, Inserts, Wood Stoves, Pellet Stoves, and More

I am happy to announce that I have to get back to Schat’s Bakery to pick up some more gift cards because I’m getting several excellent column ideas. Thank you!

Although I had planned to talk about rules for renters, this week I’m responding to a question about fireplaces. Spring in Ukiah can be chilly, especially in the mornings, so I think it’s still timely to share a little information on this topic. The reader asked what I recommend for a fireplace insert, and that question got me thinking of all kinds of options.

The classic fireplace is an open hearth, in which you place wood logs and enjoy the attractive ambience (if not a lot of heat). Open hearths are my personal favorite, even though they come with some drawbacks. Since cavemen huddled around a fire, people have gathered together for the warmth and camaraderie a fire can foster and I love the crackling sound, the look, and the warmth they provide.

However, if I pull out of the sentimental spot they hold for me, open hearths are hard to recommend. They are the highest maintenance, least efficient, dirtiest option. You have to bring wood in from outside, clean the ashes out of the fireplace, and feel guilty about the pollutants you’re releasing into the air. If you actually want a source of heat, open hearths are not the way to go. While I’m not an expert, I understand that about 90 percent of the heat goes up the chimney. And, since the fire requires oxygen to burn, it actually pulls the hot air from the house and releases a good portion of that heat up the chimney.

You also have to contend with firewood: acquiring it, storing it, and hauling it in. A cord of wood will set you back a few hundred dollars. Storing it requires space and can cause a bit of an eyesore; it can also bring unwanted critters like black widow spiders, rattle snakes, and powder post beetles (and the beetles can go from your wood pile into the siding of your home, providing an interesting note on the pest and fungus inspection you may need someday). I know of one case in which a fox took up residence in a woodpile. As cute as foxes are, a mother protecting her babies turns a woodpile into a den to defend—not too safe for the twelve-year-old who was supposed to bring the wood to the house. And, carrying dirty, splintery wood into your house is no picnic, either.

So, if you can live without the crackle and burn of a real wood fire, consider a fireplace insert. They are much more efficient and readily available to retrofit into your fireplace space.

The next best option is probably the wood stove. The wood stove was basically the market’s response to the inefficiency of the open-hearth fireplace. Wood stoves still come with all the downsides of dealing with wood as the fuel source; however, they burn a little cleaner and provide more heat.

Pellet stoves are relatively new, and the first significant technological advancement in home heating with a stove. Pellets are a processed wood product that burn efficiently. The pellet stove can be automated to maintain a certain temperature–a major innovation. Just fill a hopper with pellets, set the thermostat, and you’ll have a cozy home without the constant tending required by wood stoves and fireplaces.

If you want to go a step up on the easy-to-manage scale, choose a propane, natural gas, or electric artificial fireplace (stove). They are efficient, don’t require messy fuel storage, and you don’t have to worry about chimney fires. These stoves offer piped in gas or wired in electricity, far easier than fighting with your teenager about bringing the firewood around. They also pull oxygen in from outside, rather than pulling the warm air from the house, to feed the flame.

While we’re on the subject of chimneys, be sure to have yours cleaned and inspected every two years if you’re burning wood. Things happen. Bricks and mortar come lose. Critters build nests. And, if you don’t have one, be sure to get a spark arrester. If you can’t remember the last time your chimney was cleaned or inspected, you’re due NOW.

Next time I’ll write about spring cleaning. If there’s something you would like me to write about or if you have questions about real estate or property management, feel free to contact me at rselzer@selzerrealty.com or visit our website at www.realtyworldselzer.com. If I use your suggestion in a column, I’ll send you’re a $5.00 gift card to Schat’s Bakery. 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 35 years.

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Happy Earth Day!

April 22, 2014 is Earth Day. To celebrate, you may want to go green and save a little green in the process. You can help the planet while you save a little cash with energy efficient upgrades.

Improving energy efficiency can be done on any budget. Of course, larger improvements often yield larger savings. For example, high efficiency heating and cooling systems can save you a bundle, and appliances with good ENERGY STAR ratings use less electricity than older, less efficient models. According to energystar.gov, heating and cooling accounts for as much as half of the average home’s utility costs. A programmable heating, ventilation and air conditioning (HVAC) control can reduce energy consumption by up to 15 percent compared to traditional nonprogrammable thermostats. According to local business owner Mark Devereux of DevCo Heating & Air, today’s HVAC control systems use new technology to monitor a home’s HVAC patterns, including when the system is in use and for how long. The technology then creates an algorhythm (plan) to keep the house at a comfortable temperature based on that specific household’s usage; the system is only on when it has to be. “You can even hire a local contractor to link these systems to your smart phone so you can control your HVAC system remotely,” he said.

If you’re not in a position to spend a lot of money but would like to improve your home’s energy efficiency, consider replacing traditional incandescent light bulbs with fluorescent light bulbs. About 12 percent of your energy bill goes to lighting costs, and by replacing only five of your home’s most frequently used lights with energy efficient bulbs, you could save $75 – $100 a year (e.g., if you change five 75w bulbs to five 15w bulbs; five hours a day at $0.17 per kwh would yield $93 in savings per year). Compared with incandescent bulbs, compact fluorescent lamps (CFLs) can yield as much as 75 percent energy savings and last six times longer. So, unless the CFLs cost more than six times as much as incandescent ones, the CFLs actually costs less per hour of use. Light-emitting diodes (or LEDs) can save you even more energy and wasted heat.

Another inexpensive way to be more energy efficient is to change your HVAC filter regularly. Mark Devereux recommends checking the filter monthly and replacing it at least every three months. A dirty filter slows down air flow and makes the system work harder (wasting energy) to keep you warm during the winter or cool during summer. A clean filter also prevents dust and dirt from building up in the system, which can lead to expensive maintenance and/or early system failure.

A big energy waster that many people don’t consider is the ducting that moves air through your HVAC system. According to Mark, sealing and insulating ducts can improve the efficiency of your heating and cooling system by as much as 20 percent, especially in homes that are more than ten years old. “Building codes changed about ten years ago, so older homes typically don’t have ducting that’s as efficient as newer homes,” he said. Mark recommends first sealing ducts that run through the attic, crawlspace, unheated basement, or garage. After sealing the ducts in those spaces, wrap them in insulation to keep them from getting hot in the summer or cold in the winter.

Locally, the City of Ukiah/C&S Waste Solutions is offering a great new green program. If you live inside the city limits, you can sign up for a Pilot Residential Food Waste Recycling Program. It is provided at no cost to you for six months during the pilot period.

Simply call 707-234-6400 to sign up. I’ve been told it only takes about two minutes to do so. You are provided with the waste bin and a small kitchen waste bin for collection prior to transferring into the curbside bin. Better to recycle than to fill our landfills! They even provide a handy reference so you know what is food waste, and what isn’t.

Next time I’ll write about choosing a neighborhood. If there’s something you would like me to write about or if you have questions about real estate or property management, feel free to contact me at rselzer@selzerrealty.com or visit our website at www.realtyworldselzer.com. If I use your suggestion in a column, I’ll send you’re a $5.00 gift card to Schat’s Bakery. 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 35 years.

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How to Prepare for a Move

Moving can be exciting, but it tends to come with a few drawbacks (like getting all your earthly possessions from one location to another). So, this column is about some important steps to take to make your move as smooth as possible.

As I’ve mentioned before, if you’re selling your house, it is best to remove about a third of your furniture before you begin showing your house to potential buyers. Depending on where you’re going after you sell your house (e.g., out of the area, stepping up to a bigger place to accommodate a growing family or downsizing as the result of an empty nest), you will need to decide what to do with the furniture you removed. Is it coming with you or not?

If it is, you’ll need to store things for a while. If not, it may be time for the granddaddy of all garage sales. If you’re off to Hawaii to live in a small beach house, you’ll want to liquidate more than just a third of your furniture. Moving is a great time to start fresh. Throw away the old and begin anew. It can be very liberating.

Most of us know we’re moving long before we go. As soon as you know you’re moving, begin gathering the names, addresses, and phone numbers of people to inform of your move, both personal and service-related contacts. A good way to do this is to collect envelopes as you receive them in the mail. Simply put them in a folder (a year ahead of time, if you can), so you don’t forget Great Aunt Mathilda who sends your children Christmas cards each year.

If you want your house to sell sooner than later, I recommend taking care of any maintenance issues you’ve been avoiding (see www.richardselzer.com/2013/05/27/preparing-your-home-for-sale/).

Some vendors need a specific move-out date: utility companies (e.g., gas, electricity, water, sewer), the United States Post Office (USPS), your local newspaper, landscapers, cable/satellite service, and others. Be careful to orchestrate utilities with your realtor so utilities that need to be on to show the house are not turned off. At the same time, make sure they are turned off before the new occupants move in. You don’t want to be stuck paying the electricity bill for their new marijuana grow room.

As you move into your new home, the same cast of characters need to know you’re there: all your personal contacts, as well as your new utility companies, USPS, newspaper, etc. If you have school-aged children, you’ll need to enroll them in school. If you employ the services of housekeepers or landscapers, you’ll need to find new ones. Your realtor can be a great resource for recommendations.

One of the first things to do in your new home is to make a list of repairs and maintenance projects. Pull out those inspections you paid so dearly for, and decide which items are do-it-yourself projects and which ones will require professional help. Make a comprehensive list in priority order based on time, money, and urgency. For example, if you have a roof leak, it gets top billing.

Now that you’ve had a moment to breathe, and the USPS has your change-of-address order, you can start with Gr. Aunt Mathilda and send everyone a note to let them know you’ve moved. A fun way to do this is to take a family photo in front of your new home and send a photo postcard. Locally, Triple S Camera will give you 15 percent off a “We’ve Moved” postcard if you mention this column.

If you’re moving to a new area, ask your current realtor for a referral to a new realtor in that area. Your realtor will be happy to provide one and can even coordinate closing on your old home with the acquisition of your new one.

Next time I’ll write about Earth Day. If there’s something you would like me to write about or if you have questions about real estate or property management, feel free to contact me at rselzer@selzerrealty.com or visit our website at www.realtyworldselzer.com. If you make a suggestion I use, I’ll send you a $5.00 gift card to Schat’s Bakery & Café. 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 35 years.

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Consumer Confidence

Consumer confidence is a funny thing. As adults, we understand that wanting something doesn’t necessarily make it so (for example, no matter how much we want our favorite dessert to have zero calories, it doesn’t); however, with consumer confidence it’s the opposite. When enough people believe something, it becomes true. It’s not actually the belief, but rather the actions we all take as a result of our beliefs.

If we are confident that the economy is improving, that our jobs are secure, that good times are ahead; we’re more likely to spend more money. Spending primes the pump and keeps the economy moving, thus reinforcing our positive feelings about how things are going. If we are concerned that the economy is contracting, that our jobs are in jeopardy, that a decline is coming; we’re more likely to hold onto our money. Less money in the economy will slow growth and make all those negative predictions come true.

According to a recent HousingWire blog, a national survey indicates that 52 percent of Americans now believe it would be easy for them to get a home loan (as compared to 45 percent, who do not). This confidence is likely to bolster the ongoing housing recovery.

Even with poor job numbers in December and January, consumer attitudes toward the economy overall also improved, although people with a positive view are still in the minority (at about 40 percent).

The share of people who expect their personal financial situation to improve in the next year increased to 44 percent, continuing an upward trend since November 2013.

Other notable findings from the survey include:

  • Approximately 88 percent of people think home prices will either stay the same or go up in the next 12 months.
  • Only 55 percent of respondents say mortgage rates will go up in the next 12 months, and this number is on the decline.
  • About two-thirds of people think it is a good time to buy a house, which is down a couple percentage points from last month.
  • Those who say it is a good time to sell a house increased 5 percentage points from last month to 38 percent.

So, what does this all mean? Well, I think interest rates will continue to rise slowly. I also think real estate values will continue to rise. Even if we only see a 2 percent jump in prices this year, now is still a good time to buy because real estate is a leveraged purchase.

Let’s break it down. If you put 20 percent down on a $100,000 home, you’d pay $20,000. At the end of the year, that same home is now worth $102,000. It’s like money in the bank. If you add that $2,000 of value to the $20,000 you invested, you now have $22,000 of equity. The additional equity represents 10 percent of your original investment ($2,000 is 10 percent of $20,000), so you’ve increased your equity by 10 percent, even though values only went up 2 percent.

That’s all for this week. One of the things I like to do in my column is highlight local charity events. If you have one coming up, let me know and I’ll try to share the information here.

Next time I’ll write about all the things to think about before a move. If there’s something you would like me to write about or if you have questions about real estate or property management, feel free to contact me at rselzer@selzerrealty.com or visit our website at www.realtyworldselzer.com. If you make a suggestion I use, I’ll send you a $5.00 gift card to Schat’s Bakery & Café. 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 35 years.

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COSTCO: Blessing or a Curse?

COSTCO is coming! Before I get going, I want to disclose that Realty World Selzer Realty is the listing agent for the property COSTCO will build on. That doesn’t change what I’m about to write, but it’s always important to be up front.

Will COSTCO mean boom or bust for Ukiah? When you ask someone on the street, they say:

It’s great! It’ll bring new jobs that pay higher-than-average wages for our area. It will lower the cost of consumer goods and make a greater variety of goods available locally. It will help us keep retail dollars in Ukiah and the associated sales tax, too. It’ll make Ukiah a regional shopping hub, bringing shoppers from other local communities. Those visitors will purchase goods and services from others in Ukiah like restaurants or something from a local specialty store, bolstering our local economy. The additional tax revenue will strengthen government services like police and fire protection as well as road maintenance. The increased commercial activity at the Airport Boulevard Business Park will attract other commercial endeavors to the area and we’ll see a flourishing microcosm of commercial activity. People who currently drive to Santa Rosa will save the gas, thus reducing our carbon footprint. These benefits easily outweigh any negatives that COSTCO might bring.

The next person you ask about COSTCO will tell you it’s terrible! COSTCO’s just another big box store that will drive out local businesses, cause traffic congestion specifically at Talmage and Airport Boulevard as well as other intersections, move retail profits from local businesses to COSTCO’s corporate structure, create an ocean of asphalt that contributes to global warming, and add street lights that cause light pollution which will block our view of stars in the night sky. It will be a strain on local resources (e.g., water, sewer, road maintenance) and hurt the communities from which shoppers travel to come to COSTCO. You can’t buy one 12-ounce can of baked beans; you have to buy a gallon, so the money you supposedly save by buying in bulk actually encourages overbuying and waste. These negatives far outweigh any benefits COSTCO could bring.

And the killer is, they’re both right. Whether or not COSTCO is a net gain or loss depends in large part on your personal perspective.

However, objectively (I think), I believe that the average pay for COSTCO employees is higher than the average retail pay in Ukiah, which will bode well for the average working family as they climb the housing ladder, either in a home they wish to own or rent. Also, the commercial area around Airport Boulevard will likely see more activity, which will probably increase real estate prices in that area and bolster future development.

COSTCO is likely to promote an increase in development, which may or may not benefit you personally, but it is likely to lower the cost of shopping in Ukiah.

At the end of each column I always ask if you have a question you would like to see addressed in this article. Well, if you make a suggestion I use, you earn a $5.00 gift card at Schat’s Bakery & Cafe. So let’s hear them.

Next time I’ll write about roofing. If there’s something you would like me to write about or if you have questions about real estate or property management, feel free to contact me at rselzer@selzerrealty.com or visit our website at www.realtyworldselzer.com. 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 35 years.

 

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Why Invest in Real Estate?

If you are in the fortunate position of having a little money to invest, or if you are just curious about investing, here’s a bit on real estate as an investment. Before I get started, I’ll remind you that I am neither a financial advisor nor a tax professional. I am not advising any action; rather I am sharing my opinion and my rationale when I invest. This should not be your only education on investing before you go out to buy that 67-unit apartment complex. Take the time to learn about the pros and cons in more detail before you put up Junior’s college fund or your retirement.

Compared to other investment options with similar risk, real estate offers some excellent advantages. Real estate provides cash flow based on rent, and a tax shelter from depreciation. (A quick definition of depreciation is a measure of how much of an asset’s value has aged or has been used up.)

If you are the type to do your own improvements, maintenance, and repairs, you can spend relatively little to increase the market value of your investment property and/or the amount you can charge for rent. Even if you don’t do your own repairs, as long as you keep the investment property in good condition, real estate generally increases in value over time.

When I evaluate an investment property, I expect rents and market value to go up at about the same rate as inflation over the long term; bear in mind that real estate isn’t like trading stocks. Real estate comes with high transactions costs: you won’t find a broker willing to handle a real estate transaction for $39.95 and it also doesn’t happen this afternoon.

When I’m on the purchasing side of a transaction, I generally assume the transactions costs will be about two percent of the purchase price (i.e., loan fees, escrow fees, title insurance, and closing costs). If I’m on the selling side of the transaction, I expect to pay closer to seven percent of the sales price (i.e., brokerage fees and closing costs).

However, even with high transaction costs, I think real estate is a great investment. Once I own a property, I can leverage it (borrow a large percent of the purchase price). Rental income should be sufficient to cover the loan payments and other expenses including taxes, insurance, maintenance, utilities, and management fees. Depending on the property type, with a 20-30 percent down payment, you should be able to at least break even with cash flow.

Then, since depreciation is based on the   purchase price of “improvements” (a real estate term that refers to everything except the land for a given property, so I’m talking about any structures, paving, etc.), you should have a tax loss of about two percent of the purchase price. That taxable loss creates a tax savings that will probably provide at least a four percent after-tax positive cash flow. To put that another way: usually you have to spend money to reduce your taxable income, right? So, with real estate, you don’t have to spend money to reduce your taxable income because depreciation does it for you. No cash outlay, but reduced tax burden. Win/Win.

If you went to the bank and purchased a Certificate of Deposit (CD), your return would likely be a tiny percent of the same money invested for the same period in real estate. However, unlike the CD, the real estate investment provides you with no guarantees. We’re talking about the risk/return tradeoff: the higher the risk, the greater the potential return. There’s also a risk to not investing: the opportunity cost of giving up the potential income.

When it comes to investing, you have to think about lots of factors. Is this a short-term or long-term investment? If you need this money for Junior’s college fund next year, I wouldn’t invest in real estate. Real estate is not a “liquid” investment (you can’t turn it into cash easily).

If you are interested in a long-term investment and real estate appeals to you, talk to your financial advisor and/or tax professional. Every property is unique. Every transaction is unique, and every person’s financial situation is unique. Two investment opportunities that appear similar may have different financial structures, tax structures, maintenance requirements, risk factors, and more. Be a careful shopper.

If you’re interested in acquiring a list of potential investment properties, call your realtor. Trust me, your realtor will be happy to help you.

Next time I’ll write about 1031 Exchanges. If there’s something you would like me to write about or if you have questions about real estate or property management, feel free to contact me at rselzer@selzerrealty.com or visit our website at www.realtyworldselzer.com. 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 35 years.

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How to Hire a Lender

Last week, I talked about how to hire a realtor. This week, I thought I’d review the basics of hiring a lender.

A lender’s job is to find a loan with the best rate available for you. With the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, banks now have very little flexibility, so most lenders will quote you similar if not identical rates for the loans you qualify for.

If you’re not shopping for a lender based on rates, what are you shopping for? The quick answer is: someone you can work with.

From earlier columns, you may remember that loans vary. The loans available to you will depend on your income, credit history, employment, marital status, other property holdings, cash available, and other factors. The loan you need will also depend on whether you want a 15- or 30-year term, a variable or fixed rate, the type of property (i.e., land, residential or commercial), your plans for the money (e.g., construction loan), and more.

The lowest rates available are typically for someone buying an owner-occupied residential property who has excellent credit, a secure job, and enough cash for a 25 percent down payment.

So, how do you identify a good lender to help you find the loan you need at the best possible terms? First, ask your realtor. He or she is likely to be the most knowledgeable person you can find when it comes to people who understand your real estate needs as well as which lenders would be a good fit. You can also ask friends and neighbors, your insurance agent, your accountant and your attorney.

Conventional lenders include banks, savings and loans, credit unions, and mortgage brokers. Occasionally, borrowers work with hard money (private) lenders or sellers willing to carry a note (act as a lender). When I say “lender,” I’m talking about conventional lenders here.

Lenders are paid a percentage of the loan amount by the borrower or lending institution (or sometimes the seller). Because the industry is so competitive, there is little difference in costs. The best way to compare loans is get the terms as close as possible, then compare annual percentage rates (APRs). The APR is calculated after considering the prepaid finance charges (loan fee, lender charges, and escrow fee). APR is not something the average Joe (or even really bright Joe) can usually calculate. Your lender can and will calculate this for you.

Getting back to that original question, if you’re not choosing a lender based on rates, what are the criteria? Here’s a list of questions I recommend pondering.

  1. 1.     How much work will they take off of you? Buying a home is stressful enough without a lender who expects you to do a bunch of legwork. They can facilitate your efforts.
  2. 2.     Are they good communicators? Can they work well with you and your realtor? Even if you don’t have a finance background, you should feel confident that you understand what’s going on with your transaction.
  3. Do they tell you in advance all you need for the transaction or is there one more condition to meet each week? Clearly, in almost all transactions, unforeseen issues will arise; the need for additional information is not unusual. But a good lender will plan ahead and keep these issues to a minimum.
  4. Is your lender local? A local lender needs repeated referrals to be successful. This works in your favor. Internet lenders from Timbuktu who have never been to or heard of Ukiah don’t care if they ever get another loan from Ukiah. This does not work in your favor.

At Realty World Selzer Realty, and I expect at other real estate offices around town, we have a DO NOT USE list for difficult, incompetent, or unscrupulous vendors. Lenders can end up on that list. That’s why I say, the best person to ask about which lender to use is your realtor. realtors work with lenders all the time and know who they trust to do a good job.

Next time I’ll write about water. Yes, water. In addition to keeping us alive, it can also be a lifesaver for real estate. If there’s something you would like me to write about or if you have questions about real estate or property management, feel free to contact me at rselzer@selzerrealty.com or visit our website at www.realtyworldselzer.com. 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 35 years.

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Energy Improvements Outside – How to Save Money and Be More Comfortable

Last week I shared ideas about how to improve your home’s energy efficiency by making changes to your home’s interior (replacing old appliances, adding a whole-house fan, etc.). This week, I’ll share some thoughts on exterior improvements to reduce your costs and increase your comfort.

As with many things, improvements come in all shapes and sizes. Exterior improvements can include planting a shade tree on the west side of your home, installing climate-friendly landscaping with drip irrigation, putting solar panels on your roof, and more.

In Ukiah, our blazing summer sun can really pummel our homes. A big, deciduous (loses its leaves in winter) tree can provide shade that reduces the temperature of a home, allowing your air conditioner to do a little less work. Then, in winter when the leaves are gone, the weaker sun can provide some help in warming your home.

Another way to add shade is with eaves or awnings. What’s the difference? Eaves follow the roofline and go over everything; awnings go over windows (in case you were wondering). According to www.energy.gov, window awnings can reduce solar heat gain in the summer by up to 65% on south-facing windows and 77% on west-facing windows. You can use an awning to shade one window or have an awning custom-made to shade the entire side of your house.

In the past, awnings were typically made of metal or canvas, which need to be re-covered about every five years. Today, awnings are made from synthetic fabrics like acrylic and polyvinyl laminates that are water-repellent and treated to resist mildew and fading. Whatever the fabric, you should choose one that is opaque and tightly woven. A light-colored awning will reflect more sunlight.

Awnings require ventilation to keep hot air from becoming trapped around the window. Grommets (eyelets) or other openings along the tops and sides of an awning can provide ventilation. You can roll up adjustable or retractable awnings in the winter to let the sun warm the house.

Once your house has maximum shade, consider saving water by opting for landscaping designed to handle drought conditions. For gardens or other plants that require watering, use drip irrigation that goes right to the area in need. For details on how and when to water, ask your local nursery or landscaper. I understand that watering early in the morning allows the maximum water to reach your plants (before the sun evaporates it), while watering during the day can scorch some plants, and watering in the evening can cause mildew. I am way out of my league here, so ask a landscaper.

We’ve talked about reducing the sun’s impact during summer, but the sun can be a great source of energy, too. Solar panels can gather the sun’s rays to power all kinds of things, lowering your utility bill in the process. I found an interesting site online that provided a solar savings calculator: www.solar-estimate.org. According to some estimates, homeowners can expect a return on their solar power investment of 15 percent or more per year. Research has also shown that homes with solar panels on the roof sell more quickly.

If you’ve done what you can to improve energy efficiency with new appliances and landscaping, and you want to go to a whole new level, you could consider what I’d call extreme retrofits, like adding a windmill or hydro-generator to your property. If you have the right location and/or natural resources, you could win big if you go big. And, if you’re “off the grid” (generating all of your own energy), it’s even more important to be energy efficient, because pure energy generation is expensive – either in fuel or in capital investment.

Extreme retrofits aren’t for everyone. If you live in downtown Ukiah, a tall windmill (also called a wind turbine) may violate several codes. And, for hydro-generation, you need “hydro” – water pressure that will make your investment pay off.

For other great energy-saving ideas, go to www.houselogic.com or www.energy.gov.

Next time I’ll write about homeowner’s insurance. If there’s something you’d like me to write about or if you have questions about real estate or property management, feel free to contact me at rselzer@selzerrealty.com or visit our website at www.realtyworldselzer.com. If you’d like to read previous articles, visit my blog at www.richardselzer.com. Dick Selzer is a real estate broker who’s been in the business for more than 35 years.

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Energy Improvements – How to Save Money and Be More Comfortable

It’s a seller’s market, and if you’re thinking of selling, one way to be successful is to make your home more energy efficient. Even if you’re not thinking of selling, it’s nice to have your home remain comfortable without high utility bills.

In real estate lingo, the first “improvement” to a piece of property is adding a structure (your home). Once that’s done, improvements that make your home more energy efficient can reduce your costs and increase your comfort. From minor repairs to major retrofits, when you’re looking to lower your utility bills it’s important to evaluate whether the changes you make are worth the time and money.

Sometimes it’s easy to figure out. One of the cheapest and best ways to improve your home’s energy efficiency is to keep cool air in during summer and warm air in during the winter. So, if your home is poorly insulated, add insulation! Weather stripping doors and installing dual pane windows can also prevent you from air conditioning (or heating) the outdoors.

How do you know if your home is well insulated? If your home is more than 20 years old, consider hiring a licensed professional to check it out. If you’re not sure whom to call, get in touch with your realtor and they can recommend a reputable company. As for weather stripping, in winter if you feel a draft or have cold spots in your home, you probably need to caulk your windows and add weather stripping around your doors.

Improvements come in all shapes and sizes. On the interior, consider replacing old appliances that guzzle gas or electricity. New appliances are now marked with Energy Star ratings (www.energystar.gov), so you know if you’re getting a good one. High efficiency heating and cooling systems can also save you a bundle. Other indoor improvements include installing fluorescent lighting, low flow toilets, and on-demand water heaters. As with anything, there are pros and cons for each option.

Some people don’t like fluorescent lighting. Lighting can help set a mood, and fluorescents may not be your thing. Low-flow toilets and on-demand water heaters are pricey to install, but they pay for themselves over time. That is, unless you have a son like mine. After installing an on-demand water heater, I learned that my son used our old water heater as a timer for his shower. When the hot water ran out, he ended the shower. With the on-demand system, that kid can be in the shower all day. So, choose your energy upgrades wisely.

Whole-house fans, solar chimneys, and skylights are other excellent options. A whole-house the fan uses powerful suction to pull air from inside your home, creating cooling circulation and replacing hot, inside air with cooler outside air. A solar chimney (also called a thermal chimney) uses passive solar energy to similarly pull hot air out of the house and replace it will cooler outside air. Basically, you add a black vertical shaft with thermal mass (something that absorbs and retains heat – a chimney) to the outside of your home. During the hot part of the day, the sun heats the air inside the chimney. When the outside air is cooler, you can open the chimney vent, release the hot air, and pull cool air into the house. Skylights are wonderful for a couple reasons. In addition to using the sun rather than electricity to light your home, if you happen to have a three-story house, the tube-like skylights can double as mini-solar chimneys, sucking hot air out of the house at night. The downside of skylights is that a tube that lets in light can also allow hot/cold air to escape. So, be clear that the reduced electricity may be offset by the loss of insulation. As long as you are not putting in skylights for solely economic reasons, they’re great.

Next time I’ll write about exterior energy improvements. If there’s something you’d like me to write about or if you have questions about real estate or property management, feel free to contact me at rselzer@selzerrealty.com or visit our website at www.realtyworldselzer.com. If you’d like to read previous articles, visit my blog at www.richardselzer.com. Dick Selzer is a real estate broker who’s been in the business for more than 35 years.

 

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