MIXED MESSAGES!

Who will forget the week of messages we just experienced!  First the (phony) message that set off innocent Hawaiians about ballistic missiles causing panic when instructed to  to seek immediate shelter!  Then football watchers at this Sunday’s Minnesota Viking game wearing Apple Watches being sent messages by their Apple Watch that they might have a heart issue which was actually caused by the excitement (and resulting increase of blood pressure) from the miracle play that resulted in the Vikings victory over the opposing Saints.  Messages people!!!  These events were one more reminder to me that STICKING TO THE PLAN is the only thing we can ever depend on.  This summer I was managing a single family remodeling project that was in its early stages.  An agent and a painter came over to look over the house and told me that I would be lucky to get around $525,000 when the house was finished.  I disagreed.  I told them that the house would be undergoing several floor plan changes that would re-create how the house could be used, thus giving it greater value.   Eyes would roll as you can imagine.  This didn’t deter me.  I was the one with plans in hand and after s

eeing how several similar remodeling projects had performed in the marketplace my plan was grounded reasonable expectations.  The target future value I held onto was $575k.  At times the project didn’t go well.  Work was slow because of the crushing summer heat and the workers just weren’t as productive as when temperatures were cooler.  Labor costs began to exceed budget.  It severely tried my patience.  But by the time the ‘heavy lifting’  was finished, opinions changed.  Agents and vendors alike remarked that $575k would be a good asking price.  Then, a nice break from the heat helped further advance progress so that hardwood flooring and kitchen cabinets could be installed.  The tide had turned.  In the end we finished over budget, with the house taking three months to sell and earning a $595k sales price at closing.  Sometimes you’ll work a project and you’ll field options that will differ from your plan.  If you’ve done your homework, those options are unqualified and should be disregarded as nothing more than a mixed message.  Mixed messages can cause chaos and confusion because they often lack clarity and grounding in facts!  My job was to maximize the value of the house so that when I finished the house it would have a value of at least $575k, potentially more.  When we sold the house above my target value it was one more reminder that STICKING TO THE PLAN is the only thing you can ever depend on.

PS.  I thought you would appreciate the before and after pictures this house project!

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NOT Slowing Down at the Holidays

Holidays

The holiday season is such a festive time of year.  December is full of events “all-things-social.”  Mix in holiday shopping, traveling, preparing to travel, packing to travel…life gets busy this time of year!  I recently called a good friend in Phoenix who told me three quarters of her real estate office is out of the office.  I asked “is the office having a holiday party?”  Her response was amusing.  “No, they are out.  Everyone’s coming back after the 1st.”  As we continued to talk I mentioned to her that real estate can slow down this time of year.  Without missing a beat she responded, “We slow down, but some of us have to get things done.  I’m having one of my best months right now with customers who need to close before year end.”  She made a really good point.  For some sellers, renters, exchangers the holiday season doesn’t give their obligations a break till after the New Year.  For example, I’m still getting calls from customers who really need a house rental by the 1st of January.  Add that two local agents contacted me recently with two new listings in which the sellers need to close quickly.  Then I was contacted by two loan officers who are featuring special loan deals this month including no money down and no document programs for new home buyers.  So much for taking a break at the in December!  The amazing thing that I have learned over the years about real estate at the holidays is this:  buyers and renters have so little competition they practically control the deal!  If you think about it, where are most people you may know today?  Online shopping?  Traveling?  Running down to the grocery store to pick up holiday food supplies and beverages for the big meal?  Getting ready for tonights party/concert/program?  One example I can share recently was on a new home lease listing in Inglewood.  After speaking with the owner he explained to me, that even with the house only on the market for 3 days he would be willing to drop the asking rent $100/mos.  just to get a renter in by year end.  3 days on market!  It takes AT LEAST one weekend and a full week for the public to find a new listing, let alone set up an appointment for a showing!  This rarely happens in the spring, summer or early fall in my market.  Another example is of a seller that I made an offer on a single family house that needed major remodeling work.  A real fixer upper as you can imagine it.  Needs everything.  I asked the seller for several concessions including a very delayed closing to allow the bank (which FOR SURE will be working slowly at the holidays) to fund the deal into early February if needed.  The seller’s response was very generous and said “this sounds fine to me.”  WHAT OTHER TIME OF YEAR WOULD THIS HAPPEN?!?!?  Ahhh the holidays.  Yes, even with the shopping, the parties, the meals, those oh-so-social events that make the spirit of the season so rich and festive, there is still work to be done and deals to be had.  Except this time of year, it can really feel like a one person audience.  I don’t know about you but I like the odds of getting deals closed at the holidays more than any other time of the year.  Happy Holidays everyone and a joyous New Year!

Need help getting your deal done?  Contact me at buyorrentmyhomes@hotmail.com!

Paul Krause is a licensed California Realtor #01835890 and General Contractor #1029575 and is based out of Los Angeles, California.

 

Housing Affordability Trends

Studio Apartment

California’s passing of SB1069 (link here: http://sd10.senate.ca.gov/news/2016-09-27-gov-brown-signs-wieckowskis-accessory-dwelling-units-bill-provide-more-affordable) took the old concept of renting out one’s garage/storage space and made it legal.  Although restrictions exist, the new law is one more sign that housing affordability is just as much a concern for Californians as housing availability.  Homeowners looking to reduce the cost of home ownership have always considered whether to rent out a room or make an illegal garage conversion.  With the law being put into effect it is likely to keep the residential fixer-upper contractors busy for a while.  There are 3 BIG advantages a garage conversion has over renting out a room in your main house.  My top three are:

PRIVACY – There is nothing more odd than sharing a space with a roommate in your home, if its your home and its been years since you have non0family roommates.  The occasional run in at the bathroom or refrigerator can be as meaningless or annoying as you make it out to be, but you have to prepare for it either way.  For some that will feel odd and even find yourself asking “why am I sharing this house with this person?  Oh yeah, that’s right – Because its the only way I can pay the mortgage and have enough money left over to have a life!”  The detached garage/storage space solution eliminates the social complexity of sharing space because everyone has their own space and well defined boundaries.

SCHEDULES NEVER CONFLICT – Come and go as you please in a detached garage/storage space situation but NOT so when you rent out a room.  If you have a renter that keeps off hours, to some extent so will you.  An owner really needs to focus on lifestyle questions in the renter interview process to better understand if a roommate will functionally “work out” or result in a toxic living environment.  Additionally, schedules can change.  A change in a persons job, profession, relationships, etc. can turn a once functional lifestyle arrangement into dysfunctional arrangement if both parties are not willing to make compromises.

PAYING YOUR FAIR SHARE – A detached garage/storage space arrangement makes it easier for the renter and the owner to determine what a fair rent is because the market can be compared much more easily for a converted garage.  Renting a room is almost impossible to find a comparable rent because no two houses are the same.  Additionally some owners do not want renters using in-home laundry facilities and would rather they go to the local laundromat to help keep utility usage down.  Splitting utility billing can also be tricky because renting a room (maybe 100 square feet) is not really renting a room but also the hallway, the living room, the family room, the kitchen, etc.  By going the converted garage/storage space route an owner and renter can agree more easily on what parts of the property will be included in the lease and which ones are not.

Thanks for reading!

 

NEW LISTING! Downey California!

This is a single family house project which I remodeled in Downey California.  I installed a new 3-ton Central Air Conditioning and forced air heat system, new electrical and sub panel, windows, bathrooms, a fully remodeled kitchen with new cabinets and appliances which features a very open floor plan!  Also includes a studio apartment attached to the 2-car garage which has its own 1-ton Air Conditioning system and forced air heat system so its IDEAL for OWNERSHIP AND INCOME POTENTIAL!  Available IMMEDIATELY, Take a look —->

Front EntraceFront Side yardKitchenKitchen 2Kitchen and Laundry roomDinging Room and living roomMaster BathroomMaster BedroomBedroom 1Bedroom 2Bedroom 3BathroomBathroom ShowerBack YardStudio ApartmentStudio KitchenetteStudio Full BathroomTwo Car Garage

What is the Most Important Job Skill?

Job Skills

This question was posed to me this weekend when my son asked me how I do my job.  Working in real estate I work with people from all walks of life.  More recently I engaged services with graduate student name Maria (hiding her real identity).  Maria is a full time working professionals seeking a graduate degrees through night school and online learning classes.  Maria was very concerned about how the deferral of her student loans would impact her affording a new home.  This is not uncommon.  The government has reported student loan debt well into the trillions of dollars (https://www.forbes.com/sites/zackfriedman/2017/02/21/student-loan-debt-statistics-2017/).  When I asked about her plan to pay off her loans she answered that; “…hopefully when I graduate I will be able to apply for a higher paying job.”  This leant me to think about my conversation with my son.  In the 80’s an important job skill was resume writing.  In the 90’s job interviewing.  In the early 2000’s it was networking.  Although these all have importance I am learning that financially independent people learn how to creatively financially engineer every aspect of their lives.  New technologies with crowdsourcing in order to finance real estate, movie, even business acquisition and start up projects is only one example of creative financing.  Let’s also not overlook job skills as a fair “trade” to acquire a service or asset.  One example would be to take an equity position in the purchase of a house in exchange for providing services to remodel and oversee the construction of the house.  One partner buys the house and provides funding for the rehab costs while the other does all the work.  This is a strategy I recently used for a house purchase of a single-family remodeling project in southern California.  With my skills in sourcing materials and labor, my partner can focus on finding funding sources that ensure this project can be completed.  Over the next two weeks I will be discussing additional creative solutions to financially engineer real estate transactions.

New Remodeling Project: Downey!

This is a great 4-bedroom 2-bathroom house in Downey that I recently closed.  I wanted to get the BEFORE video done right away so you can see the condition we bought it in.  This is going to be a beauty!  My goal is to complete the job in 8 weeks and under my projected budget — Take a look —–>

What This Single Mom Did To Keep Her House

House

You arrive home tired and exhausted from a long day at work only to find the house is empty and very quiet.  An envelope addressed to you is left in the usual place where you usually place your things when you arrive home.  Opening the letter you find a one page note:

I’M SORRY BUT I JUST CAN’T HERE ANY LONGER.  I’M MOVING BACK HOME TO SORT THINGS OUT.  TELL THE KIDS I LOVE THEM.

Can you imagine coming home from a long day at work to this letter?!?!  Neither can I!

But for Norah this is exactly what happened.  This was a serious problem.  The spouse, father and income-contributor of the family had just deserted a family that very much depended on him.  Norah had to make some hard choices over the next few weeks.  Because she had made the purchased the home she was living in prior to getting married, her primary residence was in her name only.  After sorting out her situation Norah had approached my colleague with the idea of selling the house for $375,000.  She would then downsize into a less expensive apartment that she and her 2 young children could start over.  Norah felt she had enough equity to cover two years of rent but still had sizable monthly bills.  One of the largest bills was her automobile loan, a stiff $400/month.  Norah still owed $9000.00 on the auto loan so the debt wasn’t going away anytime soon.  After learning about Norah’s circumstance my colleague could see she was in a tough position. Not just because of her bills, but because of her life circumstance.  Loosing the financial and emotional support of her spouse, uprooting her 2 young children, selling the house, moving into new surroundings and into a new apartment.  This would be a lot.  My colleague sat down with Norah and looked at her monthly budget.  There was no question that she earned a good living, but the auto loan was expensive.  Looking deeper into the details my colleague found that Norah had the money to cover the mortgage.  She just didn’t have much left over after paying all her bills.  To provide a solution she suggested that she would be willing to buy the house from Norah with a 5 year option.  As part of her down payment, which would be non-refundable she paid off the car note to the bank.  She then originated a promissory note with Norah in which Norah would pay her $137/month for the next 5 years.  My colleague agreed to reduced the auto loan by $1000 and then deduct it against the Option purchase price she offered.  This would keep the monthly auto payment down.  Even better, she told Norah that if during or at the end of the 5 years she wanted to buy out the option from my colleague, she could purchase the house back at a price they would agree to, or a 10% increase whichever was less.  They agreed to the deal.  Norah had to agree to not miss any payments on auto loan and maintain the property(repairs), taxes and insurance.  So what did this accomplish for both parties?

-Norah was able to continue to live in her house and keep the children in the same school district.

-Norah was able to sell her house at $375,000 without hassle by accepting the option.

-For the next 5 years Norah can sort out her financial goals without the pressure of moving and starting all over again.

-Norah will still be paying down her mortgage debt so if she sells the house in 5 years she will still have received 5 years of mortgage interest deductions on her taxes.

-For the next 5 years if Norah’s financial situation improves she may buy out the option and repurchase the house – thus never moving.

-Norah reduced her monthly expenses by refinancing the auto-loan with the Option buyer at a more affordable payment which will leave her with more money in her pocket at the end of the month.

– The buyer’s option guaranteed a minimum of a 10% increase on the purchase price if Norah were to buy out the option.  A 32% return on investment after paying $9000 to pay off the original auto loan.

-Even if Norah doesn’t buy out the option she agreed to continue to maintain the property (repairs), pay the mortgage, taxes and insurance so the buyer has zero property management issues to deal with.

Although Norah could have sold her home, this solution gave Norah favorable options in which to stabilize her life circumstances to give her the confidence to face her financial challenges from a position of strength.

Don’t overlook WIN-WIN scenarios.  The obvious isn’t always the best solution.

Contact me if your looking for solutions to your housing needs!

buyorrentmyhomes@hotmail.com