Condo or a House? Tough Question For Some

What are you in the market for? A House or Condo. Specifically for first time buyers, this can be a hard question because each choice has its advantages and disadvantages. To help you establish what’s best for you, laid out some ‘average’ happy condominium and happy home owner. Although the circumstances I put together are derived on an average, I hope they will help you determine on the option best for you.

James is looking at buying a condominium

James is a on the go professional who has been renting an condominium for a couple of years after moving out of the nest. Many of his friends still rent, but some have gotten into lasting relationships which led to bigger condominiums and even homeownership for them. Now most of his comrades are moving on, his home is feeling restrictive and boring. What James is looking for is the chance to have more room, decorate, acquire new furniture for something that is his own. Cutting back on travelling for usual trips such as shopping, going out, visiting is imperative to James as he works long hours. James doesn’t have any hobbies that require a lot of scope – in fact, he really doesn’t want a very massive space that he has to spend time and money caring for. Somewhere to put clothes and a large wall for his TV are his needs. He adores clean lines and new fixtures. Tending to an outdoor area is not something he wants to do.

A low maintenance, all included home with a maintenance person to call on is another condition. James gets on well with other people but he’s not all about building lifelong bonds with his neighbours; he’s fine keeping to himself. He’s affable and doesn’t mind some racket now and then – it’s part of existence. But he draws the line at personal safety – that’s why he really likes knowing that the condominium building he’s considering is patrolled and monitored 24 hours a day. Fitness is imperative and a condominium that has included facilities of a gym and/or pool would be an added reward. Looking to the years ahead, a parking space would add investment value to the property. He needs to consider the years ahead as there is always a time when someone moves on. Who knows what the years ahead holds? Condo life is the reasonable conclusion for a person at this level in their lives.

Jenny wishes to live a house

Jenny likes her personal space. From the her time in college, she still remembers how it felt having only a single wall between her and her neighbours, and doesn’t want any of this anymore. Jenny only wants to have her privacy and enough space, and she doesn’t mind having to spend a bit more time for travelling to work. Also shopping has to be done weekly, but it is no problem for her to take her MiniVan to the supermarket and load it up. Nothing means more to Jenny than her two children, and she wants them to be able to play around the yard like she did when she was a child. Jenny and her family also live in a neighbourhood where they know the other families around which is really useful, because there is always someone at hand to give advice about the best babysitters, school sports or the new off-leash park. And though Jenny and her husband Harvey haven’t really thought about expanding their family, it’s just an option that in the future they might have another baby, or maybe Harvey’s mother might need to move in with them later in life. Thus having enough space for the possible family expansion is a must for them.

Also the family members have different hobbies – Harvey works on his vintage car in the garage and their daughter Morgan plays the drums, which would be impossible to do in an apartment – it is loud enough in the basement, so Jenny is thinking about getting it soundproofed and building in a bathroom, then they would have a perfect teen retreat. During the weekends, Jenny’s hobby is tooling around in her garden, which she really loves and is proud of – nothing compares to picking fresh vegetables for a salad while Harvey prepares stuff for a barbecue. The fact that she owns the land they live on is super important: even if the roof leaks, like it did last year after all those storms, it’s still Susie’s roof and she had cash set aside for repairs. Occasional house repairs just come with the territory. Jenny and Harvey have divided all the maintenance tasks up and each of them knows what his/her responsibility is – for Harvey, it’s cutting the grass, whereas Jenny prepares the recycling for Harvey to take out to the curb. They just don’t mind this work, it’s a part of their life. As for security, Jenny’s confident that the new system they just installed will keep the burglars out, plus there’s a residents’ association to keep an eye on stuff. In this safe area, she is just satisfied and wants to put down her “forever” roots.

Which profile resonated with you the most – James story or Jenny’s story? Maybe you don’t completely match either one – in which case, you may enjoy the benefits of living in a condo town house, which can combine a lot of the advantages of both condos and houses.

If you ascertained that a condominium could be a better fit, never let the monthly condominium fees, combined with property taxes, mortgage and insurance, go above 30% of your monthly income. Find our whether building damages are covered in your fees or whether you have to make extra or one off payments. What is made available in your fees? If there are extra facilities included do you really require them? Make sure your proposed building is pet-friendly if that is an concern for you, and find out the approximated utility costs for anything not covered in the condominium fees (i.e. heat, water and/or gas). Extra bills could enlarge your monthly expenses acutely if they are not included in your fees.

If you decide to go for a house, my advice is that you shouldn’t pay more than 25 per cent of your monthly income for the mortgage plus the property taxes. Just remeber, you will be responsible for all the maintenance  and up keep of house. Consider the cost of maintenance and your own ability to keep up with the repairs – the fact that the responsibility for everything, from a leaky faucet to a flooded basement, will stay with you. Also the financial and physical costs of commuting is important to be considered, as it will probably grow, especially if your new house is in a suburb. Make sure that you examine a recent home inspection to prevent any surprise problems with the home’s mechanical systems, from wreaking havoc with your budget. For example, a fixer-upper with an ancient furnace, old wiring and insufficient insulation will demand a more or less immediate cash infusion just to make the house livable.

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If you have any questions, please call me

9am - 7pm, 7 days

Dante Walker - Posh Realty

(323) 642-7674. I'm here to help you!

Questions to Ask Yourself Before Buying a Home

In most parts of the country, the housing market is good (or great!) for buyers right now - interest rates are bizarrely low, lots of inventory means lots to choose from, and the cost of renting has increased in a lot of markets. But just because the market’s good doesn’t mean it’s the right time for everyone to buy. The decision whether to buy a home is a very personal one; you need to carefully examine your own situation to determine whether it’s right for you.

So, what are the questions you need to answer in deciding whether you’re ready to buy? Here are some of the big ones:

1. Do I have enough money for a down payment?
And how much, exactly, is “enough?”  Today’s minimum down payment requirements range from 3.5 percent on an FHA loan to 10 or even 20 percent for conventional loans. That means coming up with anywhere from $7,000 to $40,000 on a typical $200,000 house. While there are still programs that can give you a down payment assist, much of the heavy lifting here will need to come from you - in the form of saving up your hard earned cash. And keep in mind there are also closing costs you’ll probably have to pay in cash, which can run as high as 3-6% of your total purchase price.

Talk with a real estate pro and a mortgage broker in your areas to start wrapping your head around how much “cash to close” (i.e., down payment + closing costs) will run, approximately, on a local property that would meet your needs. Can your savings cover this? If not, where will you get the money - what’s your plan for coming up with it?   Putting down as much as you can a) makes you more attractive to lenders, so you might qualify you for better loan terms and b) gives you additional purchasing power, either decreasing your monthly mortgage payment or increasing your purchase price limit for a home.

2. Can I handle the not-so-glamorous aspects of home ownership?
If you can’t even fathom the prospect of having a home maintenance crisis without having a landlord to call to fix it, you might want to reconsider home ownership - or at the very least, buy a lower maintenance condo or townhouse in great condition, and make sure you get a home warranty!  As a home owner, after all, you essentially are your own landlord. Pipe bursts in the middle of the night? Guess who’ll be up fixing it or calling (and paying) the plumber? (Hint: you.)

There are also some less-than-glamorous bills you’ll have to deal with in your new role as a homeowner that you never laid eyes on as a renter: property taxes and hazard insurance, to name two. When you go from renter to owner, you also need to account for the cost of appliances and maintaining the property’s roof, windows, and landscaping, among other things.

3. How long do I intend to stay in the house?
If you think you might move out of the area next year, then you really shouldn’t be thinking about buying a house (unless of course, you want to play landlord and rent it out after you leave - a prospect which requires its own risk/rewards analysis). For your home purchase to pencil out as a good deal, financially, you’ll shouldn’t buy unless you’re comfortable staying in the house at least 5-7 years - even longer, if you’re buying a home in a foreclosure hot spot or an area with a sluggish job market.. This gives you some time to build up equity and make up for the costs of buying, selling and moving.

4. Are my job and finances stable?
Maybe you just went through a major career change and are in the process of working your way back up from the top. Or maybe you work in a field that has been hit really hard by layoffs and cutbacks. The worst case scenario is to find yourself in a spot with mortgage payment you have no way to make, when you could have avoided that by seeing the writing on the wall. If you feel like there’s a real chance you could lose your job or income tomorrow, you may want to hold off on buying a house - that has the added bonus of giving you the geographic freedom to move, if needed, to get a new job.

Is there really such a thing as 100 percent job security in today’s economy? Probably not. But the best practice is to be confident that your finances could handle a temporary loss of income and still make your mortgage payments, before you buy. One way to do this is to have enough money in the bank to cover 4-6 months’ worth of living expenses, calculating them to include your mortgage payment - before you deem yourself ready to buy. That way, even if you lose your job with no warning at all, you’ll at least have a reasonable window of time to find a new one without digging yourself into a hole - or worse, losing your home altogether.

5. What are my real reasons for buying?
Buying a home is a long-term commitment that will have massive impacts on your lifestyle, your family and your finances. In other words, don’t do it unless you’re really sure you want to and are ready for the lifestyle change - don’t let someone else talk you into it. Worthy reasons renters with home owning readiness give for their decision to buy include some or all of the following:

• You want to build equity instead of paying a landlord. Fact is, if you get a fixed rate mortgage and make the payments for the full term of the loan, you'll eventually pay it off. That's not possible when you're renting.
• You want a place to call your own, where you can paint a wall blue, add a pool loft/studio or build your man cave (oops - that's my reason for home ownership!), because it's your prerogative.
• You want the tax advantages of home ownership.
• You want a stable place you and your family can live for as long as you'd like.

Ask yourself these questions, and be honest with your answers. If you really want to buy, but your answers to these questions today don’t weigh in that direction, it doesn’t mean you’ll never own a home. It’s usually just a matter of strategically timing your purchase out a year or two when your savings, your career and your lifestyle are in alignment with the implications of ownership - consider working closely with a real estate broker and a mortgage professional to get an action plan in place and start working that plan.

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If you have any questions, please call me

9am - 7pm, 7 days

Dante Walker - Posh Realty

(323) 642-7674. I'm here to help you!

5 Secret Sources of Down Payment Money

Coming up with a down payment often seems like an obstacle that we must overcome, as it is the biggest test of our ability to save money and it’s a test that stands between us and our ability to become a homeowner.

I think it’s time to flip the script on how we think about down payments. What if we looked at it as less as an obstacle, and more as an opportunity? Saving and collecting a down payment takes time, discipline and financial planning. It forces us into creating and practicing sound money management skills and habits, and into making clear choices about what’s important to us - things that will help us in our tenure as home owners. To boot, the more money we have to put down, the more choice we have in terms of our purchase price range and the more control we have over our monthly payment.

All that said, down payments can be take years to save for, and some buyers are concerned they might miss a good market opportunity by continuing to wait. If you count yourself in that number, here are a handful of less-well known sources for boosting your down payment stockpile:

1. Your City.  Most of us remember the days of the zero-down loan, the federal home buyer tax credit era, and even have memories of when we could use tax credit funds toward our down payment and closing cost requirements. The keyword here is ‘memories’ - those days are long gone, as are the times when there were nationwide programs that allowed a home’s seller to ‘gift’ the buyer a down payment from the overall purchase price of the home.

Where have all the down payment assistance programs gone? Local, that’s where.

The best programs of this sort are now largely operated by local governments, primarily cities and counties. As such, the rules vary widely. Some are exclusively operated for buyers with low or moderate incomes. Others are dedicated to helping first-time home buyers, usually defined as someone who hasn’t owned a home in the past 3 years. Many of these programs have a limited pool of funds that may run out over the course of the fiscal or calendar year, and almost all of them require buyers to jump some major hoops in terms of:

• bringing their own funds to the table
• picking a home that meets certain minimum condition criteria and/or
• completing a course of homeowner education classes

in order to qualify for the funds.  Some state and local programs in areas which were particularly hard hit by the recession also offer big-time bonuses for buyers who agree to purchase a bank-owned home or a property in a designated economic recovery zone.

To find these programs, just run a series of Google searches to find your city, county and state websites.  Most will have a link for Residents, Housing, Homebuyer Assistance or some similar category of resources. And here’s a hint - make sure you’re on a site that ends in .gov - scammers posing as governmental agencies abound.  Also, talk with your trusted, local real estate agent or mortgage broker; they often know the ins and outs of the local programs that can help a home buyer out.

2. Your Parents, Family and Friends.  Many more home buyers than you might think get by with a little help from their friends (and relatives). Most mortgage programs will allow for some portion of your down payment to come in the form of ‘gift money,’ which is exactly what it sounds like: money someone gives you to help you buy a home. Check in with your trusted, local real estate agent or mortgage pro about how much of your down payment needs you can satisfy with gift money - guidelines varies widely based on how much of your own cash you have to put down and what loan programs you’re applying for.

While gift money sounds great, it’s far from a panacea to the problem of coming up with a down payment. Taking gift money from a relative may create relationship issues or come with emotional strings attached, something you should consider and evaluate before you even have conversations about it with your potential benefactors.

And gift money generally also comes with lender strings attached, as well. Namely, lenders almost always require that gift money be contributed along with a gift letter that states that the giver is a relative and that the money is a gift, not a loan. The lender may also require to see a bank account statement from the giver showing that the money was theirs to give - just to be sure they didn’t go out and get some sort of loan that they expect you to help them repay.

Most insiders think of gift money as large gifts exclusively allowable in the context of a familial relationship, but at least one program I know of allows any general well-wisher to contribute any amount to your cause, whether or not they are a relative. The FHA Bridal Registry program allows couples to open a down payment registry account with their lender, and to deposit checks into that account from anyone who wants to give any amount to help them become home owners. Talk to your FHA mortgage broker for more information on how to open such a registry account.

3. Your Employer.  Universities and the municipal agencies that employ first responders like police and fire personnel frequently make available down payment and other home buying assistance programs to their staffers. So do some large employers or even smaller companies who are seeking to lure top-level recruits, in the form of relocation assistance programs. Check in with your employers’ Human Resource division to explore whether any such assistance is available - and if you happen to find yourself a hot prospect on the job market, consider trying to negotiate relocation or down payment assistance into your offer package.

4. Your Income.  This is not about cutting out a cup of coffee here or there. These measures are just too hard to keep up for the months or years you're trying to save for a down payment. Rather, the idea is to get gut-level real with yourself about what’s really important to you. And if the answer is buying a home, then it’s time to go through your spending with a fine tooth comb and look for the leakage you can store up  - cash you can redirect to your down payment savings.  

If you spend $20 a workday on oatmeal and coffee at breakfast and your takeout lunch, that’s $400 per month - almost $5000 a year, you can save by simply bringing these things from home (not to mention the health and other benefits you’ll gain). And those numbers are not inflated, if you work in a big city.  Nor is the $100/month cable bill, the $15 yoga class or the $2,000 vacation.

Fact is, you can have much of the enjoyment of these things for much, much less than you’re used to spending - at least while you’re in down payment-saving mode. Stream TV shows and movies online at Netflix, Hulu or Amazon - you can also find great workout videos on some of these channels for 10 percent of what you’d pay to go to a class! Bring the staycation back, or cut hotel costs by renting a private room or small apartment on a site like VRBO or Airbnb (you might be surprised at how nice the experience is if you stick with the vacation rentals that have rave reviews - I certainly was.)  

Redirecting the dollars you would normally spend - whether intentionally or on autopilot - for some of these big-ticket items back into your down payment savings account is like pressing fast forward on your home buying timeline. The key is to click out of money-spending autopilot and to transfer the saved money, asap, into a  separate down payment savings account - ideally one that is online, so you have to think hard and wait a few days before pulling money out.

5. Your Assets.  Some retirement accounts allow you to borrow against or pull out funds, penalty-free, to apply them toward your down payment on a home. Is it advisable for everyone, in every situation to deplete their 401K or IRA to plug that cash into a house?  Absolutely not. But there are situations in which it may make sense to get your down payment up to 20%, say, by borrowing a few thousand dollars from yourself.

If getting your down payment to the 20 percent mark by borrowing from your 401K gets your mortgage interest rate down and allows you to repay that cash to your own retirement account (vs. to your mortgage lender) with interest, you and your financial advisor might agree that this move is the right move for you.  Or not - this is a highly personal decision that must be made strategically, but some home buyers should at least explore whether their retirement accounts are a sensible source of some portion of their down payment funds.

And these aren’t the only assets that can help fund your down payment. I know a young family who has given themselves a complete financial makeover over the last few years by getting rid of unnecessary belongings and selling them at flea markets, yard sales and online. Don’t underestimate what reselling your stuff can yield; my own wife has had a few four-figure yard sales over the years!

Do you have ‘stuff’ you don’t need or use that someone else would love? Consider liquidating it online or taking it to a consignment store, and using the cash to fluff your down payment savings.  Side benefit: you’ll have less to move when you’re ready to move into your new home!

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If you have any questions, please call me

9am - 7pm, 7 days

Dante Walker - Posh Realty

(323) 642-7674. I'm here to help you!

7 Steps for Avoiding a DIY Disaster

Tight budgets and hours of home improvement television watching, shelter magazine perusing and YouTube DIY videos have stirred up the jones to do-it-yourself in many a homeowner.The widespread perceptions that contractors charge exorbitant amounts and are difficult to manage have only increased the sense that doing home improvement projects ourselves seem like the way to go.

The fact is, there are many home project that are fun and smart for a home owner to try their hand at. But DIY projects can by no means be the no-brainer way to get every type of home project checked off your to-do list. In fact, a bad project can turn your experience of your home from an exciting project to a mortifying money-pit in the blink of an eye. Fortunately, whether your home improvement project goes swimmingly or scarily is well within your control from the very beginning - and hinges largely on making the right decision for a given project about whether to hire a contractor or go it on your own.


Here are seven questions to ask yourself as part of that decision-making process, in order to avoid a DIY disaster:

1.  What's the project?  Define the project, in writing, as completely as possible. This will equip you from the very start to outsource some or all of a project that is beyond your skill set, rather than running to a contractor in a panic in the middle of a project (when you’d certainly be charged a panic premium price). Depending on your aptitude level and the time you have, what seems at first glance to be a highly DIY-able room refresh with paint and new wood floors can snowball beyond the realm of reasonable DIY-dom if you add in a lighting or plumbing project.

To do this, sit with your project, your magazines or your YouTube videos for a few days, weeks or even months, keeping a running list of the things you want included in your project as you live in your house and your desired post-project lifestyle changes come to mind.

2.  Does it require permits?  Generally speaking, electrical, plumbing, major renovations, erecting new walls and structures and adding square footage are all projects highly likely to require permits. Hint: if you use the word “gut” when describing what you’re planning to your friends and relatives, chances are good you’ll need a permit. If you’re not sure, a quick website visit or phone call to your City’s Building Services or Building Permits Division should clear things up.

Building code requirements can be exceedingly arcane, and the process of applying for and obtaining permits if you’re not well versed in them can be tedious, stressful and time-consuming. It can also be full of unsuspected pitfalls, like doing one home improvement that triggers a City requirement to add a slew of new outlets or a new sewer line.

Call the city and/or talk to a couple of licensed contractors as soon as you’ve fully defined your project - but before you’ve started any work - and get a good sense for whether it will require permits to stay in good graces with the City.

Cities are required to grant permits to homeowners, but the more complicated the permitting process gets for a given project, the more sensible it becomes to have a professional contractor or at least a professional permit expediter involved to avoid running afoul of the city, incurring penalties for unpermitted work and to maximize your
ability to get an increased resale value for your home as a result of the upgrades.

3.  Are there health and safety issues?  I’m a big believer that high decks (i.e., decks, balconies and similar structures that are tall enough that a collapse would cause injuries to those standing on it), additions and gas/electrical work are things home owners should rarely do on their own. Now, I’m not saying you can’t install track lights or change a light switch to a dimmer. Rather, I’m cautioning that that if you’re doing work in these categories beyond that level, calling a contractor can avoid a disastrous outcome.

4.  What are the relative hard costs? “ANYONE can paint a room,” I’ve heard time and time again. I’ve done it, so I know this to be true. But I also know that from the first time I got actual paint bids from my trusty neighborhood handyman, I have never painted a room since! In my humble opinion, the money I’ve spent was well worth the time and other resources I saved (see #5, below), and I’m certain they’ve done a better job than I could or would have. Just because you can do a project DIY, doesn’t mean that it’s necessarily the smart thing to do. It also doesn't mean that the hard, financial costs of doing it yourself are necessarily much cheaper than hiring a professional.

Don’t automatically assume that doing a job yourself is the cheap route to go, or that it will save you scads of cash. Until you’ve actually gotten 3 bids from reputable contractors or vendors, based on the full scope of the job, and have compared that with the cash you’d spend to DIY, you cannot know for certain which is the less expensive way to go. They might qualify for bulk discounts on materials that you can’t get, and you might have to rent a truck, equipment or tools that they already own. In any event, calling contractors out can be educational in terms of understanding every element of the job and troubleshooting things you might not otherwise have anticipated.  

So, unless you’re uber-handy and just love to do projects, or know for certain the project will be uber-cheap for you to do, I’d strongly urge you to get a few pros to come out and give you real bids for what it would cost (including supplies, labor, any subcontracting, permits - soup-to-nuts), and compare that to your own DIY cost estimate.  (Hint: I’d also encourage you to add a little buffer on the top of all the estimates - theirs and yours - for unforeseen costs that might arise.)

5.  What are the relative soft costs? Cash is just the beginning of the resources required to get a home improvement project done. They also take time - which some might see as opportunity costs. Ask yourself the question: what could I do with the time I’ll have to spend on this project?  

There are also the energetic and emotional resources involved.  Some people simply have sharp mechanical and logistical aptitudes, have the spare time and love to use it bettering their homes and have infinite patience for figuring out workarounds when the project doesn’t go as planned.  And then there are people like me! So, if you’re like me, you should definitely account for that when you’re deciding whether to do-it-yourself or whether to hire your home improvement projects out.

6.  Is it really DIY-able? Remember, the ‘Y’ in DIY stands for YOURself.  The decision whether to DIY or call a contractor in for a job is not based on whether your Dad, your neighbor down the street or Bob Vila made a similar project look simple. Rather, it needs to be made based on your own, personal:

• skill and experience level
• aptitude for whatever sort of work you’re completing
• patience level
• frustrate-ability
• spare time available for the job, etc.

If you're not excited about the prospect of doing the project, and you can afford to have someone else do it, don't let the wanna-be handypeople in your life talk you into biting off more than you can chew.

7. What could go wrong?  If your project is uber-simple, like replacing a toilet or painting a wall, there are a limited number of worst-case scenarios which might be annoying and inconvenient, but are far from the end of the world. The kitty-cat wallpaper might be harder to get off than you thought - that sort of thing. But as the project grows larger in scope or more complex, the more potentially disastrous your worst-case scenarios are - and the more costly calling someone in to fix a DIY-gone-wrong will be.

Generally speaking, I’m not one to advocate worst-case scenario thinking. But when it comes to home improvement projects, the many moving pieces and relative inexperience of the average home owner suggest that an abundance of caution is just plain old smart. If your project’s DIY worst-case scenarios conjure up visions of bodily harm to your family members, buckets catching the rain or virtually anything caving in think long and hard before you take it on yourself, versus calling in a pro.

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