Residential Real Estate Insights

Basic human needs (not wants) are widely considered to be food, shelter and clothing; with daily nutrition and  continuous cover from the weather demanding much more of a family’s income than clothing  has to.  Therefore, by becoming knowledgeable in the arenas of food & shelter an average income family can realistically expect to save tons of money, eat healthier and in time afford a more desirable dwelling.  My income source and the vast majority of my blog post are food related, however for about 30 years I spent the majority of my free time working to build sweat equity in our family home.  On several occasions over the years my wife and I  barrowed money with the intent of building equity in a potentially appreciating asset (our home).  I went unemployed for a while back in parts of “88” & “89” to build our current home.  Construction labor costs can be nearly as much as construction materials costs; so going mostly DIY was a major non-income taxed savings.  I didn’t pay my self with draws on our construction loan so I had no income.  Having sufficient employment income to repay loans and previously built up sweat equity to barrow against is a winning combination for securing more mainstream bank loans.  We have  had moderate success at building equity, plus we were still able to supply our 3 children with transportation, a college education and pay for 3 weddings.  Why sit in front of TV commercials being bombarded with junk food or other items that you weren’t out looking for; when you could be using some of those free time hours to build potentially none taxable home equity?  Married couples filing jointly are currently permitted to make up to a $500,000 net profit on the sale of their primary residence without incurring any capital gains tax liability.

Some might have to start out by learning how to work.  If you have the discipline to do weight lifting and/or practice for a sports team, you already have a good idea of what routine physical labor can potentially accomplish.  Many people that claim that they can’t do construction work could well be heartened by looking at the type of people that do it for a living.  “There ain’t anything to it but to want to do it.”  It’s really all about human will.

“Rome wasn’t built in a day.”  All those hour or twos daily spent working on your home can fairly quickly add up to some properly done building  equity accomplishments.  Another cool thing about construction is that you can always redo things if need be.  Relatedly, one’s learning curve tends to become quite steep when it’s their own money on the line.  When just starting out, asking advice while taking on after hours work as a part time construction laborer could help one learn everything from how-to, what is worthwhile purchasing, where to buy materials and when one might actually require highly skilled (well practiced) help.  How-to TV shows often leave out too much information to be of any practical educational help for their viewers because they routinely complete major builds or renovations in an hour or less.  Further, such show’s producers must be careful not to offend any of their current or potential future advertising sponsors.  And, that ethical dilemma  often causes the revealing of less than the whole truth.  Some YouTube videos contain intentional misinformation in an effort to keep work demand strong within a given trade; often making things look more complicated than they really are.  But, much more often, well intentioned amatures offer videos of varying quality .  A wise practice is to watch several  videos, on a given topic, until they form a consensus about what techniques are worth using.  Oh, and be wary of advice given by “Big Box” building supply store personnel.  Some of them have cost me a good bit of extra time and money over the years.  I love the volume pricing at Big Box stores, but not their average employee’s construction expertise.

How to prudently go about obtaining a piece of residential real estate worth working on:  As is often repeated, the most important 3 considerations in real estate are location, location and location.  That means finding an area that you want to live in; which has good potential to increase in value over time.  Historically, areas on the fringe of  growing regions, rebirth residential districts and the much sot after “worst house in the best neighborhood” have all offered good potential for property value appreciation.  A major factor affecting the desirability of a new growth or solidly rebounding residential area is how good the local school district is considered to be.  You may not have or want children, but the majority of potential home buyers do.  It’s very wise to have a plan for getting out of a property before you buy into it.  After a good region is chosen the search narrows to what most people are looking to buy.  The most commonly sold house is a 3 or sometimes 4 bedroom 2 1/2 bath located off the main roads in a sidewalked, coldesac subdivision (it’s all about the kids).  Bigger and more individualized homes can be neat to look at, but the pool of potential buyers is much smaller for such homes.  Also, the potential buyer draw can become extremely low for very unique homes and/or settings.  Another thing that most buyers are looking for is “move in ready” homes.  Understandably, “fixer uppers” normally end up selling at a comparatively lower cost; per square foot of living space. That fact can make both professional house flipping and DIY (build sweat equity while you live there) potentially lucrative.  Desirable kitchens and baths are two major buyer considerations.  When those rooms are in decent condition money can be made by primarily just redoing the “cosmetics” of carpeting and painting.  Other than staying off busy roads, things like railroad tracks, nearby commercial buildings, abutting multi-family units, lack of common utilities (such as water, sewer & natural gas), intrusive utility easements on the property, possible upcoming zoning changes and large expensive to remove trees should all be avoided due to being widely viewed as  less desirable.  Simply put “try not to make other people’s problems your problems” and “avoid costly financial entanglements.”  If you buy-in cheaper because of less desirable property attributes, you will also likely have to sell-out cheaper and should expect a comparatively longer selling time.  Time is definitely money in real estate transactions, just ask someone that has had to make double house payments after buying a different house and waiting for their old one to sell.  Selling first and renting storage units short term has worked for us in the past; while we were looking for a suitable new home.  Don’t get emotionally attached to the houses you view, for most of us there are always more workable deals to be had than there is money to spend.  The other side to the “buying the worst house the best neighborhood” coin is trying to sell the “best house in the neighborhood.”  Buyers look at “comparable” sales and so an overly nice house often ends up becoming a money loser for the seller.  That situation can work out reasonable well for the typical “move in ready” buyer.

Buying & selling real estate:  It’s has always been depressing for me to realize that relators take a 6% commission virtually every time a property changes hands.  It’s true that “they ain’t making any more land” and that demand for houses should remain strong over time as long as the human population continues growing, but that repeated 6% sales commission alone substantially cuts into one’s eventual profit potential.  Real estate commissions are said to be paid by the seller, but without that large commission a seller could afford to sell up to 6% cheaper ($6,000 per every $100’000 of the sales price).  Further, that 6% higher cost is often paid off over 30 years of amortized interest and so ends up being much higher in the end.  And, there are other big expenses incurred in real estate transactions, such as closing costs.  Grant it that it’s not at all easy to avoid realtors, but my wife and I have both bought and sold real estate in the past without using that big ticket commission sales enterprise.  Every real estate agent will tell you that you most likely aren’t going to find the exact house you have in mind.  Therefore, a workable property that’s a good financial deal makes even more sense.  Try buying from relatives, talking to people that live in the same neighborhood as people you know – that might want to sell etc.  By avoiding a realtor both the buyer and the seller can get better financial deals.  And, I know from experience that having a lawyer look over a real estate sales contract is several times cheaper than a real estate commission.  Besides, banks that issue real estate mortgage loans have lawyers to protect their financial interests as well.

Home inspection services can be a decent price negotiating tool.  But from my experiences, the advice of someone that is knowledgeable about the construction trades, and that you trust to be honest with you, is much more beneficial.  Real estate dealings are not a common occurrence for the average person and we then have years to work on making  basically sound deals better.

Nothing works until you do.

 

Written by George Wolfer

George Wolfer

Been associated with the meat industry pretty much since starting at a Vocational High school Meat Processing program in 1974. Like to learn and teach interesting and worthwhile livestock production, meat processing and marketing practices.

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