Peggy Dye Realty and More

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House-Hacking

House-hacking refers to buying a multifamily property on an owner-occupied mortgage, living in one unit and renting the others.  If you're thinking about becoming a rental mogul, starting early is an advantage.  Not only will you have longer to accumulate a larger portfolio, you can increase the leverage on the first acquisitions if they are owner-occupied.

Leverage is the use of other people's money to finance an investment.  The higher the loan-to-value, the greater the leverage which can increase the yield.

A $200,000 rental property with an 80% LTV at 4.5% for 30 years producing a 16.88% before-tax rate of return would increase to a 23% return on investment by increasing the mortgage to 90%.  A typical down payment on an investor property in today's market is 20-25% but, in some cases, a higher loan-to-value is possible.

Owner-occupied, multi-unit properties, two to four units, allow a borrower to occupy one of the units and rent the others out.  The cash flows from the rental units subsidize the cost of housing for the unit occupied by the owner.  VA will guarantee 100% of the mortgage for eligible veterans, while FHA will loan up to 96.5% for qualifying borrowers.

Consider a four-unit property was purchased as owner-occupied and the other three units were rented for $800 each.  If an FHA loan was obtained, the owner could live for roughly $355 a month after collecting the rent and paying the expenses.  Assume the owner lived in it for two years and then, rented out the fourth unit for the same $800 per month.  The cash flow would rise to $4,800 a year with a before-tax rate of return of 30% based on a 2% appreciation.

Occupy 1 unit

Rent all 4 units

Gross Scheduled Income @ $800 monthly each

$2,400

$3,200

Cash Flow Before Tax

$4,59

$4,861

Before Tax Rate of Return

20.77%

30.56%

Rental properties offer the investor to borrow large loan-to-value mortgages at fixed interest rates for up to 30 years on appreciating assets with tax advantages and reasonable control that many other investments don't enjoy.

Some people consider rental properties the IDEAL investment with each letter in the acronym standing for a benefit it provides.  It provides income from the rent which many investments do not have.  Depreciation is a non-cash deduction from income that increases cash flow.  Equity buildup occurs as each payment is made by reducing the principal owed.  Appreciation happens over time as the value of the property increases.  L stands for leverage that was explained earlier in this article.

You may be able to buy another four unit as an owner-occupant before you need to start using a normal investor's down payment.  In the meantime, you could have eight units that are increasing in value while the mortgage balance is decreasing with every payment made.  If there is sufficient equity in the properties by the time, you're ready to buy more, you may be able to take cash out of the existing ones to use for the down payments.

This can be a great way to turbocharge your net worth by becoming an owner and a real estate investor at the same time.  To learn more about rental properties, download the

Rental Income Properties

guide and/or contact me at [phone] to schedule an appointment to meet to discuss the possibilities.

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Staging Your Home to Sell

                   Staging your house can make you money. Seventy-seven percent of buyers’ agents said staging a home made it easier for a buyer to visualize the property as a future home according to the National Association of REALTORS® Profile of Home Staging.

Staging doesn’t guarantee you more money, but it can help you compete at the right price and sell your home faster. Below are 7 tips to staging your home. Pull out your note pad and pen and get ready to take some notes to improve your home staging process. 

7 Tips for Maximizing Your Home Staging Experience

Home Staging Tip #1 – Plan Ahead

Be prepared prior to staging your home. Do these items first:

Put yourself in the shoes of a buyer and walk through     each room in your home criticizing it from the buyer perspective.

Talk to your real estate agent for his or her advice.

Consider hiring a professional home inspector and WDO     Inspector to determine any needed repairs.

If major repairs are needed, hire a contractor to     handle them.

Repair cracks and holes in the walls and touch-up paint.     You can find drywall putty at a local home improvement store.

Paint interior walls with neutral colors, i.e. beige,     cream or light grey.

Consider getting an appraisal and/or survey of your lot.

Hold a yard sale. Sell, donate or trash anything you     don’t need. This will clear space and declutter.

You’ll be surprised how far a new paint job of the interior can go in improving a home’s appearance and freshness. Here is an example of how simply painting can improve the home appearance drastically.

 Home Before Painting

After Painting

Notice how the grey walls contrast nicely with the white trim. If you have hardwood floors in your house that are scratched or in rough condition like the photo above, you can have them refinished. Notice how nice the floors turned out after refinishing them.

 Home Staging Tip #2 – Clean, Declutter and De-personalize

A thorough cleaning can make the home appear brand new again:

Thoroughly clean the entire home, don’t forget the     windows!

Scrub tile in the kitchen and bathrooms to remove dirt,     grease, rust, etc. and make it appear new.

Clean hardwood floors or consider refinishing them if     heavily scratched (see above photos).

Steam clean carpets. Consider replacing carpet if     stains are severe.

Steam clean drapes and blinds.

Thoroughly dust your home, don’t forget the baseboards.

Use Magic Eraser to clean woodwork as needed.

Declutter to make home feel larger and maximize space.

Remove excess and oversized furniture to make space appear     larger.

Rearrange furniture to maximize space.

Organize room closets and store out-of-season clothes     to de-clutter the closet space.

Remove all small appliances, toys, magazines and pet     items.

Remove and store family photos, collectables and     medications.

Remove unnecessary items from the garage and store them     off site.

Secure valuable items: cash, jewelry and medicines.

Home Staging Tip #3 – Maximize Curb Appeal

First impression is everything in selling your home. One of the first times someone sees your house will be from the street as they drive by or pull in to your driveway on the day of a showing or open house.

Paint the home’s exterior, including trim, doors and     shutters.

Power wash the siding and concrete areas. Mold and     mildew removal via power washing will freshen up the siding’s appearance.

Inspect the roof for leaks and make repairs.

Clean the gutters and downspouts

Check front door, doorbell, lighting and welcome mat

Repair cracks in the driveway and sidewalks

Sweep the entryway and walkways

Mow, water and fertilize the lawn

Trim shrubs and trees and rake the leaves

Plant colorful flowers and shrubs

Store any toys or equipment lying on the yard

Clean up pet droppings (do this daily and before all     showings)

Home Staging Tip #4 – Clean, Repair, Update Kitchens and Bathrooms

The biggest money makers in your home are the kitchen and bathrooms. Making repairs to these two rooms can increase the value of your home and will be the major attractions to home buyers.

Mop and wax/polish the floors.

Clear the countertops.

Replace outdated hardware.

Clean appliances and fixtures.

Clean and organize the pantry, cabinets and drawers.

Replace old caulking around sinks and bathtubs.

Remove stains from sinks, toilets and bathtubs &     showers.

Keep all toilet seat lids closed.

Hang fresh towels.

If you plan to update the kitchen, consider the finishes of other homes in your neighborhood so you don’t overdo it and spend more money than needed.

Home Staging Tip #5 – Appeal to the Senses

Lighting will be a important sense to appeal to. It can make rooms appear more spacious and welcoming compared to dark rooms with poor lighting. It’s also important to appeal to smell by having plug-in air fresheners emitting fumes every hour to keep rooms smelling clean. Here are several steps to take to appeal to the senses:

Turn on soft music (jazz or classical) at a low volume.

Install higher wattage incandescent light bulbs to     brighten rooms.

Turn on all the lights.

Open curtains or blinds to let in natural light and show     off views.

Turn off TVs.

Relocate pets on the day of the open house.

Refrain from smoking in the home or cooking smelly     foods.

  Home Staging Tip #6 – Show Off Your Home’s Best Features

If you prepare your home properly, it can sell itself without much problem. The best features of your home should do most of the talking to buyers so make sure to show these off. Here are some tips to show off your home’s best features:

Remove rugs to show off hardwood floors.

Pull back drapes to showcase nice views.

Stage the front porch or deck with furniture and potted     plants.

Clean the backyard and pool area.

Remember that backyards are great family areas where families will picture their kids playing as well as having people over for parties and holidays. Landscaping, cleaning, and staging of this area can be a great bonus incentive.

 Home Staging Tip #7 – Prepare for the Open House

Inform family, friends, co-workers and neighbors of the date and time of your open house. Referrals from family or friends is another great way to increase the pool of buyers checking out your home for sale.

A good Realtor will put ads in local newspapers, real estate publications and on Web sites. The internet is where 90% of buyers start their search so make sure your home is listed for sale in multiple places on the internet.

Your Realtor will place “Open House” signs on the front lawn and at nearby intersections with directions to the house. This is a great method to draw in traffic from main streets with lots of daily traffic.

Lastly, keep the thermostat at a comfortable temperature; let the Buyers enjoy being in your beautifully staged home!

For more information about listing your home to sell, contact us at www.peggydyerealty.com