Get Ready to Buy This Spring

Once you decide that this Spring you want to buy a new home — or your first house — the question is, “Where do we start?”

The answer lies in two sets of decisions:

#1. Start With Success: Begin by deciding what success means to you. Clarify what you really want and why, not just what’s “in” right now. Explore this practical side before viewing properties. What matters is not the number of homes you see, but zeroing in on genuine good matches. For instance, a couple who wanted to add a mortgage-paying basement suite to their next home, decided to search for houses with an existing basement bathroom since this would be the most expensive part of creating a rental unit.

#2. Who’s “We”?: The other essential to a good start is to decide who “we” is going to be:

  • Will friends or family come along to share their construction or real estate ownership expertise?
  • Will you have a contractor on-call to provide renovation-cost estimates to back up your offer price?
  • Who will you select as your local real estate professional to be sure you see all the best matches without being dragged through definite “nos.” For instance, a condominium specialist may not be the best match if you are intent on a detached house with rental suite potential. How much do you need to learn about real estate before you will be comfortable when it’s time to sign on the dotted line? If you have a steep learning curve, you’ll benefit from a real estate profession who is well equipped to inform as well as provide access to the best-fit real estate. Then there’s the professional negotiation skills you’ll want to tap into.

If you want to buy this Spring, when should you start?: How quickly you can find a home to buy and move into it depends on many factors:

  • The transition from searching for an ideal property to moving in can be condensed into a few weeks. This is often the pace for corporate relocation. Frenzied decision-making may not generate the best long-term results unless you are ultra-prepared and an experienced real estate buyer.
  • At the other extreme, stretching the search for that “perfect forever home” over many seasons or even years may work for those who want a specific location or type of property and are not displeased enough with their current home to accelerate the process.

Somewhere in between those extremes lies your ideal time line:

  • Buying within a market cycle, enables your real estate professional to identify specific properties that present the best return in that buyers’, sellers’, or flat market.
  • If you have a busy work and personal life, carving out time to consider listings, view properties, explore neighborhoods, investigate financing, and deal with all related details can be a stressful juggling act. Your priorities coupled with how quickly new listings sell will determine how you prioritize your home search. Consider how well you make major decisions when under stress.
  • When the goal is to enroll children at the start of school year or to arrive at a new job on time, back calculating with your real estate professional will reveal when the search should begin. When in doubt, start sooner, so you don’t end up faced with time-pressured decisions.
  • Hot real estate markets are the hardest to plan timing in. You may be eager to purchase, but lose out on property after property in multiple offers. Decide what your worst-case scenario would be and act accordingly.
  • Waiting for your local real estate market to change gears so prices drop is risky. Timing the real estate market is no easier than timing the stock market. The best advantage in any market lies in selecting ighly-knowledgeable, experienced professionals fully committed to working with your best interests as their top priority.
  • You may not be 100% certain this is the Spring for you to plunge into the market, but if you’re more sure than not sure, invest time finding the right professionals. If the timing is not right for you, that will become evident and you’ll discover what your options are and why.

Real estate professionals, committed to understanding market pace in areas they work, can help you manage timing. One thing they may suggest, is not to wait for the Spring Market, but to get ahead of the mass of spring buyers and jump into real estate now. For instance, sellers who are listed now are serious about selling and, depending how long their property has been on the market, they may be more receptive to negotiation.

Whether you decide to wait until Spring or jump in now, here are Five Savvy Buying Tips that ensure you’ll get the best property for your needs, at the best price, with the minimum amount of hassle and disappointment:

#1. Apply Smart Buying Rules: If you consider yourself a smart buyer when purchasing a car, a phone, or travel, apply that savvy to buying real estate. Understand what you need and why. Set a realistic budget. Learn how things work. With all these issues, the right professional should save you time, stress, and money.

#2. Ensure Location Overrules Features & Decor: Real estate is an immoveable object. That reality dictates that where you buy is the prime value concern. Smart buyers look for the least property in the best area, so their real estate improvements result in increased market value. Values within a neighborhood or community are not uniform. There are specific streets, even ends of streets, that represent the highest local value just as boundary streets and other locations may represent lower prices. Particularly in urban areas, proximity to the most highly-regarded schools, popular shopping areas, and sought-after local features like parks dictates price, as your real estate professional will explain.

#3. Maximize Move-In Timing: The more flexible your move-in date, the more room to negotiate with sellers. Agree to their ideal move date and that may generate concessions in price or inclusions. When you have a fixed move-in date, you may find yourself paying more to buy what you want, when you want it. Timing is a significant consideration when deciding whether to buy your next home before you have sold your current property, that is, taking the risk of paying on two mortgages at once. Since the market where you are selling may be different from that where you want to buy, timing decisions should involve the experience of a real estate professional or two.

#4. Own The Money Factor: Affordability encompasses costs ranging from purchase price (including legal fees and other costs), mortgage financing, and the cost of customizing the living space to including ongoing expenses like heating, cooling, commuting, and anything else that matters. With mortgage rates on the rise, reducing consumer (car) loans and credit card debt may open up borrowing room.Mortgage professionals can help you shop a wider range of lenders. These money experts can also explain why there is so much more to consider than just interest rate.

#5. Face Reality Head On: Compromises to your “must have” list can maximize value and returns.

  • You may want four bedrooms, but if two younger children share a large room until the eldest child goes to college, maybe that 3-bedroom with significantly-better location and greater appreciation potential will really work for your family.
  • If cosmetic or minor renovations don’t daunt you, this could also provide a location advantage and may even mean a larger home is affordable.
  • Compromising on location can also mean more living space, just be sure that commuting costs, including needing an extra car and possible lower appreciation rates, don’t swallow up that saving.
  • Your buying perspective is also an important consideration. Do you expect to stay until a second child appears or until all the kids finish school or are you in for the long haul? Shopping for a “forever home” is a popular approach. Just take care that projections are fact based and not fantasy that leaves you buying more home than you can comfortably afford in a rising interest-rate world.

—————————————————

Jon Mahoney

Director, Luxury Homes Division

Professional Financial Planner

Keller Williams, Santa Barbara

(805) 689-0532

BRE# 01269717

info@JonMahoney.com

www.JonMahoney.com

Another Happy Seller!

Annelie Russell

Without a doubt, Jon & Natalya are the best Realtors in town! We interviewed a number of other Realtors and they stood out amongst their peers. Jon & Natalya worked their magic and sold our home in 10 days! Their exceptionally knowledgeable, due diligence and hard work ethic comforted us throughout the entire process. They even interviewed a Realtor in the State we planned to move to and helped us find the home of our dreams. Thanks for all of your help. We couldn’t have done it without you.

 

Best Regards

James and Annelie Russell

Top Things To Consider Before You Buy a Condo

luxury-condo-with-ocean-views-santa-barbara-real-estate Condos were once thought of as homes that attracted singles or couples, often without children. But today, condos are growing in popularity and attracting families of all sizes.

Condos can be an excellent choice for the right buyers. Here are a few things that should considered before purchasing a condo. Most buyers start with the condo itself. That may be a good place to begin but, before they buy, buyers should also consider other factors outside of the condo.

Some developers are building condos that have a look and feel like single-family homes. These modern condos have great rooms and open, flowing floor plans that look and feel like a single-family home rather than an apartment or condo.

One of the major attractions of condos is the low maintenance. The community area is maintained by an association funded by the dues that homeowners pay into it.

That’s why buyers’ first consideration should be to explore the development and make sure they like the look and feel of the complex and surrounding community. There are codes and restrictions, often referred to as CC&Rs (covenants, codes, and restrictions) that buyers will have to abide by once they purchase a condo. Buyers should ask to review them before making an offer to purchase a condo. These regulations help ensure that the community maintains its general appearance and any necessary repairs of the external areas.

Review the association’s budget. It may be necessary to get the seller to provide this information because it may not be released to a non-owner who is only a potential buyer. However, in considering buying into a development, it’s almost like going into business with the neighbors in the complex. It’s important to make sure that the association is running properly and has enough of a reserve for necessary expenses and maintenance. The budget and CC&Rs will give an idea about how stable the association is and if increases in the homeowners’ association dues are likely each year.

Find out how many owners in the development are delinquent on their dues. A condo complex that has a high level of delinquencies can cause problems for buyers when it comes time to get a loan or sell the condo. Some loans are not approved if delinquency rates are higher than 15 percent.
Review the minutes from the association’s board meetings. They will reveal the day-to-day issues that occur each month and give an indication of how the development is run. For instance, lots of complaints and filings about noisy residents, loud parties, or dog droppings on the lawn reveal potential problems with neighbors. The minutes will also reveal if the development is engaged in any lawsuits.

Understand what your responsibilities are for the upkeep of the condo. Find out what the association takes care of and what the homeowners have to maintain. Look at the association’s property management team and see how many times the association has changed management companies. Find out why. This will may reveal how responsive the association will be should residents need its assistance.

Ultimately, buyers need to ensure that when they purchase a condo they’re not buying into any legal battles the association is in the middle of and that they will be able to live in their condo the way they want. Study the CC&Rs and do due diligence before buying.

————————————————————–

Jon Mahoney

Director, Luxury Homes Division

Professional Financial Planner

Keller Williams, Santa Barbara

(805) 689-0532

BRE# 01269717

info@JonMahoney.com

www.JonMahoney.com

Tips For The Prospective Landlord

Luxury-House-Design-Great-Room-Santa-Barbara-Real-Estate

Investing in rental real estate looks like a great idea on paper. You just buy a place in a nice area, find tenants and let the cash roll in. However, there are some matters you have to consider before buying a property and putting a “for rent” ad in the newspaper. Here is a rundown of the pros and cons of owning rental property and a few tips on how to turn a profit as a landlord.

Advantages of Rental Real Estate
The advantages of rental real estate are quite substantial. One that is not listed below is the fact that when you own rental real estate, you own a tangible asset. You can paint it when you’re happy with it and throw rocks at it when you’re not.

Many people who feel uncomfortable investing in financial instruments have no qualms about investing in real estate. This is a psychological distinction, as a bad stock and a bad rental property are equally capable of losing money, forcing you to sell for a loss. That said, here are the advantages that show up on paper:

Current Income – This refers to the rent money that is left over after the mortgage and related expenses have been paid. Current income is basically monthly cash that you did not have to work for – your property produces it for you.

Appreciation – This is the increase in value that properties generally experience as time passes. Appreciation is not guaranteed. However, if you own a property in a stable area (cities like Santa Barbara), the property will likely increase in value over the years. Even properties in sparsely populated and less desirable areas may appreciate due to general inflation.

Leverage – Rental properties can be purchased with borrowed funds. This means that you can purchase a rental property by putting down only a percentage of the total value. Essentially, you can control the whole property and the equity it holds while only paying a fraction of its total cost. Also, the property you purchase secures the debt rather than your other assets. You may lose the rental property, but you shouldn’t lose your own home.

Tax Advantages – Your rental income may be tax free if you do not receive net cash flow after expenses are deducted. This means that your mortgage is being paid down and you own more of the total value of the property (rather than just controlling it), but you do not pay taxes on the money that is doing this for you. In addition to this, you can also pull out tax-free money by refinancing your loan if the property appreciates and the interest rates have fallen. Lastly, you may be able to avoid paying taxes on the sale of a rental property if you sell it and reinvest the money in another property (called switching or tax-free exchange).

Disadvantages of Rental Real Estate
For every upside, there is a downside, and rental real estate is no different. Rental real estate may expose you to the following:

Liability – What happens if a stair breaks under your tenant’s feet? With the increase in frivolous lawsuits and the unquantifiable nature of “emotional distress”, liability can be a scary thing. Providing someone with shelter in return for money puts you and the tenant in a relationship where both parties bear responsibility. You have to be certain that the property you are renting out meets all government codes.

Unexpected Expenses – What do you do when you pull up the basement carpet and find a crack that opens onto the abyss? It is impossible to prepare for every expense related to owning rental property, so there are bound to be some unexpected ones. Things such as boilers, plumbing and fixtures often need to be replaced and are not prohibitively expensive. However, faulty wiring, bad foundations, compromised roofing and the like can be very expensive to repair. If you can’t find a way to pay for repairs, you will be left without a tenant and with the grim prospect of selling the property at a significant discount. Also, as building codes evolve over time, lead paint, asbestos, cedar roofing tiles and other materials that passed inspection in the past may be reevaluated to your disadvantage.

Bad Tenants – No one wants to have to use a collection agency to collect overdue rent. Unfortunately, almost every landlord has a story that involves police cars escorting his or her tenant out of the property – erasing all hopes of getting the five months’ worth of overdue rent. Bad tenants can also increase your unexpected expenses and even hit you with a lawsuit.

Vacancy – No money coming in means that you have to make the payments out of your own pocket. If you have an emergency fund for the rental property, you will be able to survive long vacancies with little trouble. If you don’t have one, you may find yourself scrambling to pay the rent to the harshest landlord of all – the bank.

Tips
Minimizing the disadvantages of owning real estate is actually quite simple. While you won’t be able to eliminate the pitfalls completely, following these guidelines will take the teeth out of their bite.

Keep Your Expectations Reasonable – Have the goal of positive cash flow, but don’t expect to be purchasing a new yacht at year’s end. If you keep your expectations in check, you won’t be tempted to jack up the rent and push out good tenants.

Find a Balance between Earnings and Effort – Are you “hands on”, or should you work with a property management firm? Current income doesn’t seem so great if you are putting in another full-time shift working on your rental property. There are property management firms that will run your rental property for a percentage of the rental income.

Know the Rules – Federal and state laws outline your responsibilities and liabilities, so you can’t claim ignorance when something happens. You will have to do some reading; nevertheless, it is better to spend 20 hours in the library than in the courtroom.

Have the Property Inspected – One of the best ways to avoid unexpected expenses is to have the property inspected by a professional before you buy it.

Make Sure Your Leases Are Legal – If you make a mistake on the lease, you will find it more difficult to litigate if a tenant violates the terms.

Take the Time To Call References and Run Credit Checks – Too many landlords rush to fill a vacancy rather than taking the time to make sure the prospective tenant is a better option than an empty property. If you have time, you may want to drive by a prospective tenant’s current living space – that is what your property will probably look like when that tenant lives there.

Join the Landlords’ Association in Your Area – Joining an association will provide you with a wealth of experience as well as sample leases, copies of laws and regulations, and lists of decent lawyers, contractors and inspectors. Some associations may even allow you to join before you buy a rental property.

Make Friends with a Lawyer, a Tax Professional and a Banker – If you find that you like owning rental properties, a network including these three professionals will be essential if you want to increase your holdings.

Make Sure You Have the Right Kind of Insurance – After learning the rules, you will need to buy insurance to cover your liability. You will need the help of an insurance professional to select the proper package for your type of rental property.

Create an Emergency Fund – This is essentially money earmarked for unexpected expenses that are not covered by insurance. There is no set amount for an emergency fund, some say 20% of the value of the property, but anything is better than nothing. If you are getting current income from a property, you can pool that money into an emergency fund.

Conclusion
Investing in a rental property can be an excellent decision if you go into it informed. Consider these words from Donald Trump: “It’s tangible. It’s solid. It’s beautiful. It’s artistic … I just love real estate.”

————————————————————–

Jon Mahoney

Director, Luxury Homes Division

Professional Financial Planner

Keller Williams, Santa Barbara

(805) 689-0532

BRE# 01269717

info@JonMahoney.com

Santa Barbara Comprehensive Real Estate Market Statistics – June 2014

Santa Barbara Compehensive Real Estate Market Statistics - June 2014Santa Barbara Comprehensive Real Estate Market Statistics – June 2014

51 page PDF Report | 3.2 mb

DOWNLOAD:

June 2014 – Santa Barbara Comprehensive Real Estate Market Statistics.pdf

————————————————————–

Jon Mahoney

Director, Luxury Homes Division

Professional Financial Planner

Keller Williams, Santa Barbara

(805) 689-0532

BRE# 01269717

info@JonMahoney.com

Vacation Home Tip Sheet

Here are 6 factors you need to consider when investing in a second home.

Santa-Barbara-Real-Estate-Vacation-Homes

You should understand the differences in making this type of purchase versus a primary residence. Here are six key criteria to assess vacation choices, whether for personal use or an investment.

1. Keep costs within the budget. Qualify for a loan before looking, unless you pay all cash. Then, figure out how much discretionary income you’ll need. For example, you’ll need at least $30,000 annually to afford a $500,000 home comfortably. Why so much? To cover the monthly mortgage, real estate taxes, assessments, regular maintenance, homeowners’ insurance, flood insurance, furnishings, a caretaker to watch the property if the owners don’t live nearby, an emergency fund for disasters and major repairs, and travel costs. Also critical is that you not use retirement funds to fund the home; there’s never a guarantee you’ll recoup your money by renting out the property to vacationers.

2. Determine the frequency of use. The amount of time you  will spend in your vacation home depends on the individual and family and the investment and rental potential.

Some think they need to go every weekend to justify the expenses, while others are fine just visiting in summer or winter. Distance will play a factor.  Some potential buyers may also hope their grown children and grandkids will visit for multigenerational gatherings.

3. Pick the right location. What makes one vacation locale more appealing to buyers than another largely depends on the buyers’ interests. In some counties, a typical buyer’s wish list includes a departure from the urban life that many commute from, along with mountain or vineyard views and room for guests. While in others, there are multiple attractions of water, beaches, wine trail, and proximity to many large cities.

4. Understand upkeep. A big lawn needs mowing, lots of square footage means more cleaning, a pool requires maintenance — make sure you have a realistic picture of the upkeep a property will require. Some communities are trying to remove some of the burden by offering landscape services through its homeowners’ association and by developing smaller, more efficient homes and condos.

5. Research rental potential and costs. If income is the prime motivation, you should know that demand and dollars fluctuate with the economy, weather, location, number of bedrooms and bathrooms, and amenities. Buyers need to remove emotion from their purchase choice and pick what appeals to the widest target market rather than what they want for themselves. Buyers also need to know whether their homeowners’ association permits renting out a property, what their own comfort level is about having children or pets in tow, and whether they’ll need to split proceeds with a rental service or property manager — sometimes by as much as 50 percent of the take. They’ll also need renter’s insurance.

6. Think about resale and changing needs. Research sales, prices, and trends. Family needs also change. Little kids may willingly head out with parents but teenagers less so, and multigenerational families often require more space.

Having a keen understanding of your second-home market coupled with meeting your individual needs will help you to find your dream vacation property.