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Buying a Fixer-Upper as Your First Home

5/16/2019

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Empty house  Photo via Pxhere
Photo via Pxhere
​If you are fortunate enough to find yourself in a position where you think you can afford to own property, you then have to deal with making the biggest and most complicated purchase of your life. For some, adding to the complication of a major renovation seems like madness. But for others, fixer-upper homes are the most achievable way to get the house of their dreams. If you have been considering joining the fixer-upper club, here’s what you’ll need to think about.
 
The Buying Process
The first thing you need to do is determine your budget. In the case of a fixer-upper, this has to include both the price of the house and the renovation costs, but it is easier for you to think of them together for the time being. Good indicators to establish a budget include your annual income, money saved for a down payment, monthly spending, loan type, and current average APR. Don’t forget that there are plenty of hidden ongoing costs to owning a home, so you also need to take things like insurance, taxes, and maintenance into account.
 
The next step for most homeowners is to get to know their local market and see what kind of home they can buy in the area with said budget. Nolo.com suggests that the best way to know how much to offer on a fixer-upper is to figure out the value of the home if it was fixed, calculating the cost of the work, and then subtracting one from the other.
 
Once you find the fixer-upper of your dreams (and budget), there are a few additional steps you need to cover before making an offer. Get a full home inspection, which will highlight any repair work you may have missed during your visit, and re-adjust your offer accordingly. If a house you love has severe structural issues that would cost a fortune to repair, it may not be worth it.
 
As you look into financing your purchase, research the types of loans that will work best for your situation. For example, if you’re a veteran with so-so credit and not a lot socked away, you are eligible for a VA loan, which can help when it comes to finding decent interest rates, plus there won’t be any mortgage insurance. On the other hand, if the home needs serious work, you can look into an FHA 203(k) loan. These loans provide funding for the home and the necessary renovations, in addition for funding that covers the time you can’t live in the home.


The Renovation
When it comes to renovating your new home, planning is the most important thing you can do. It may be tempting to throw yourself headfirst into the first DIY project you can think of, but this is not the most efficient way to proceed.
 
Make a full list of everything that needs to be done, and sort tasks by priority. At the top, place anything that is necessary to make the house livable, such as electrical work, plumbing, or structural issues. Then address changes needed to make the house attractive. Finally, finishing decorative touches go last.
 
A full renovation schedule is important, but it is by no means the only thing you need to consider. Real Homes has a detailed checklist of things you need to do before you start renovating, covering everything from securing the building site to learning about your home’s architectural features. And if you haven’t already, invest some cash into some quality power tools such as drills or saws to make those DIY projects a little easier.
 
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The Resale
There is an accepted idea in society that your first house is a “starter home” and that you will eventually trade up to a bigger and better one. National statistics say the average first-time buyer stays in that house for 11 years before moving on to another home. However, there is also evidence that many first-time buyers, particularly young millennials, are skipping the starter home altogether. Instead, they are choosing to wait longer and put in more effort to buy a home that is right for them for the long haul.
 
Whether you choose to re-sell your fixer-upper will ultimately depend on two factors: firstly, whether you bought the house with the long-term in mind, and secondly, how much value you have added through your renovations. Do bear in mind, however, that experts recommend living in a home for a minimum of five years before selling.
 
Buying a fixer-upper for your first home doesn’t have to be a terrifying and intimidating prospect. As long as you are reasonable with your budget and expectations and do your homework, your fixer-upper can either end up being your dream home or a great first step on your way up the property ladder.
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Property Management in Reno

1/11/2018

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How to Upgrade from Tenant to Homeowner

9/18/2017

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The dictionary defines the word “tenant” as one who has temporary rights to occupy a property. The key word here is “temporary”.  With today’s historically low interest rates, more tenants are looking for ways to become a homeowner. Dreams of homeownership can become a reality in just 6 simple steps! Even in markets where the inventory of homes is in short supply, a tenant can apply these steps and realize the benefits of home ownership.

  1. Check your credit score. The higher your score, the more options you will have to move to homeownership. Using resources such as CreditKarma or freecreditreport can tell your score at no cost or impact to your actual score. If your score is lower than 660 you may need to work on repairing past poor credit. However, a lower score is not always a “knock out” factor. It just means you may have fewer home financing options. Look for future articles on how to improve your credit score.
  2. Calculate your affordability.  Most loan programs require that housing costs and other long term debt (like car payments, student loans, credit card payments) not exceed 40% of your gross monthly income. For example, if your combined monthly income is $60,000 per year, it means your gross monthly income is $5,000. 40% of that is $2,000.
  3. Consider “must haves” vs. “nice to have.”  Most tenants have either never owned a home or have recently sold a home and are renting until life changing circumstances have settled. (Like job relocation, divorce, becoming empty nesters, etc.) Once you know your affordability, you can have a serious discussion about what is important to you in meeting your housing needs and wants. For example, a house with a pool might be on your “want” list, but it may not be a “must have” item. Other options to consider include, garage, fireplace, multiple bathrooms, number of bedrooms, size of lot, proximity to work/school/church, etc. Once you have determined your “must haves” you can start looking at what is available in the price range of your affordability that have most of those features. When you contact a real estate agent, it is important to have this discussion with him/her so they don’t waste your time showing you homes that don’t have your desired features. The lower your affordability and credit score, the more flexible you should be regarding those “must haves” as the number of homes you can buy will be less
  4. Count your cash. Most loan programs, including seller financing, require some down payment from the buyer. Some first time home buyer programs offer down payment assistance and allow a higher loan to sales price percentage. Down payments can also come in the form of a gift from a friend or relative as long as the gift has no strings attached. In other words, it doesn’t expect to be repaid. Other sources of down payment include money in a retirement plan (always check with your plan provider and get qualified tax advice before taking money from a 401K or IRA or similar type of account).  Government insured loans such as FHA or VA loans are available with small down payments from 0% -5% of the sales price. Oftentimes, sellers are willing to pay the buyer’s closing costs to help keep the cash needed to a minimum. This must be negotiated in the purchase agreement up front.
  5. Call a qualified real estate agent. Not all real estate agents are the same. Find out whether they have a track record of helping tenants become home owners. Ask questions: Are you full time in the business? Will you look for homes in my price range that have as many of the “must haves” as I want? Will you show me homes that are listed with other companies as well as your own? How many other prospective buyers are you helping now with the same or similar guidelines? (you want someone that is willing to give you some undivided attention). Who would you recommend as a lender that can help me become pre-qualified? Will you help me move my hide-a bed into my new home? (Just kidding)
  6. Contact a creative lender. The products offered can vary from lender to lender. Mortgage Brokers typically offer products that will be sold into the secondary market which may limit the options available. However, they are often more motivated to get your loan closed because their income is based on the loans they close. Community banks usually offer secondary market loans as well as “in house” products that can be tailored to meet the needs and qualifications of the buyer. In today’s competitive market, most home sellers like to see that a buyer has already met with and been pre-qualified for a loan that would be required to complete the sale. Be prepared to provide the lender your current employment status with a current paystub, tax returns from the last 2 years and statements showing any cash accounts you have including retirement accounts.
$5,000 monthly income
X 40%
$2,000
-$375 car payment
-   $50 credit card payment
- $100 student loan payment
$1,475 available for house payment (including property tax, homeowners insurance and association dues, if any)
-120 monthly cost of homeowner’s insurance
-155 monthly cost of property taxes
$1,200 available for a home loan
 
At today’s interest rates for a 30 year mortgage, a $1,200 monthly payment gives you a $250,000 mortgage. *
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Health, Wealth & Happiness in your Home for the New Year

12/30/2014

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Reno Property Management
Clark Real Estate, Investments and Property Management offers a few fun tips for reaching your health, wealth and happiness goals for the New Year by making a few adjustments with your home!

1. Clear the Distractions: Have you ever noticed you get a boost of creativity or physical energy when you go on vacation? What if it's not because of the long day at the beach, but because of the clutter-free hotel room? The beds are made, the floor is clean, none of the usual paperwork is laying around. You're free to think and move about! When you make plans, you can go do it--without tripping over your kid's homework or frantically searching the house for something to wear.

What if your home always functioned this way?

Start with one distracting room or closet, and rethink it like you're going on vacation: If I was going on a 30 day trip, which items would I need to take with me? Pull those few items, and then move the rest. You can experiment by packing unnecessary items in your suitcase or in a distant closet or the garage to see if life is more enjoyable without the clutter. Or just move the items out of your every day line of sight. If you're feeling extremely bold and are ready for a complete change in your life, donate items to a Shelter or Thrift Store.

Continue to go through each room of your home each week or month. The more you clear, the easier it will be--as you'll start to feel the positive effects of a distraction-free home.

2. Live in your Investment: Robert Kiyosaki (Author of Rich Dad, Poor Dad) talks about how your home is a liability, because you're spending more on it than you're making from it. Many Americans assume that because their home may be increasing in value, it's automatically a good investment. Unfortunately, the math doesn't quite work that way! The Reno area is in an exciting growth period, and those who have invested in rental properties are going to be reaching those Wealth Resolutions sooner rather than later.

You can turn your home into an investment by finding a way to make money from it. Hrmm, how? If you own your home, you're free to rent out a room, or even your garage as a storage space. Tools like AirBnB allow everyday homeowners to make some extra income from their empty guest room or den.

If you're not comfortable with sharing your space, let's schedule a consultation to review the possibilities of purchasing your own income-generating property.

If you're renting the home you live in, there may be ways to generate income from it, as well. Please be sure to run any ideas by our office to ensure it is in compliance with your lease agreement!

Please feel free to call us when you're debating remodeling projects; we can help determine which projects will return the most value down the road if you choose to sell or rent out your home.


3. Tune In: Take a day to just observe your thoughts and feelings when you wake up, walk through your home, leave the driveway, and return. What parts of your home made you smile? What was frustrating? What can you fix, and what can you let go of? When our homes are in disrepair for extended periods of time, it can negatively affect our day, and wreak havoc on the property. Is there a strange smell in the cupboard? A crack in the wall? A dim light bulb? Let's get those things addressed right away! If you're just feeling resentment toward your home, it might not be a maintenance issue, it might be time to upgrade!

We are here to connect the right tenants with the right properties, and the right investors with the right investment properties. If you are feeling unsatisfied with your home, let's talk! We have a growing inventory of options just for you!
 
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Are you thankful for your home?

11/23/2014

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Gratitude is the first thing we like to decorate our homes with during the holiday season. The simple act of reviewing what we're thankful for is the fastest and easiest way to make your space brighter. Here is a list to get you started:

I am thankful for
-the roof over my head
-the heater
-a place to eat
-a place to sleep
-a place to put my things
-a place to connect with family and friends

And what else?
What are the special features of your home that make it unique? What furnishings and appliances make your life easier? What decor makes you feel special and luxurious?

Take a walk through your home reviewing each and every thing that you're thankful for.

Are you finding that you're frustrated, and can't find anything good about your home?
That's where we come in! We've found that the best place to start if you're frustrated with your home is to list off what you WANT your home to FEEL like.

When you walk in and kick off your shoes, do you want to feel relaxed or energized? Warm or cool? When you wake up in the morning do you want to see the sun shining through, or do you want those extra hours of sleep in a darkened room?

Let's review your wishlist so we can get you into a home that fits! Whether you want to rent or buy, Clark Real Estate wants you to be thankful for your home--and we'll work hard to make it happen!

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    Reno Property Management
    Clark Real Estate
    305 W. Moana Ste C
    Reno, NV 89509
    (775) 828-3355
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    Please see our current listings!

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