Getting Financially Organized
Trading Up
Before you set out to trade in your current house for a "better" one, you need to take a good look at your overall budget and determine how much more, if any, of your monthly spending can go toward increased housing costs.
How do you figure out where all your money goes each month? Get out your checkbook register, credit card statements, paycheck stub, most recent year's tax return, and anything else that documents where you've been spending your money over the past six to twelve months. You may also need to do some tracking or estimating of cash purchases that don't leave a paper trail. Estimating your housing budget.
Knowing how you spend your money now on housing and other items is only half the picture. You also need to know how much you will spend after buying your next home. The following expenses are probably going to change the most if you sell your current house and buy a new home:
Unless you've been squirreling away extra savings while living in your current house, the total amount you're borrowing through your mortgage (and, therefore, your monthly mortgage payment) will probably increase if you trade up.
In most communities, the annual property taxes you pay on your next home purchase are initially set at a percentage of the property value. To find out the property tax rate in the area where you plan to purchase your new home, simply call the local tax collector, assessor, or other taxing authority. Don't base your property tax estimate on the amount that the seller of the home you're interested in buying is currently paying or on the amount you're paying on your present house. When you trade up, the taxes on the home you buy are usually reassessed upwards.
If you're trading up, some of your utility bills may stay the same, whereas others will change. Until you have a specific home in mind to buy, you can't request hard numbers on utility usage. In the interim, make some educated estimates. For example, if you're planning on moving into a larger home in your area with, say, 30 percent more square footage, you can estimate that your heating and electric bills will increase by about 30 percent. However, if you're moving from an old, energy-inefficient home into a newer and more efficient one, the new home may not cost you more in utilities even if it's a bit larger.
If you buy a larger home, you'll have more space to fill, so you're probably going to spend more money on furnishings. Make a reasonable estimate of how much you expect to spend on new furnishings.
If you're buying a more expensive home, you're probably also going to spend more on maintenance, even if the home isn't a fixer-upper. A good way to estimate your annual maintenance costs is to multiply the purchase price of the home by 1 percent (use 1.25 percent of the purchase price for older and more run-down properties).
If you buy a more expensive home and have larger mortgage payments and property taxes, your income tax bill will probably go down. Mortgage interest and property taxes are deductible expenses on Schedule A of your federal income tax Form 1040 and on most state returns.
If you buy a more expensive home, your homeowners insurance premiums will probably increase. In the absence of a specific quote for a property you're interested in buying, you can estimate that your homeowners insurance costs will increase in proportion to the increased size (square footage) of your home. Because land isn't insured, ignore the extra land that may come with your next home.
Thursday, July 26, 2007
Real Estate Advice & Tips
Getting Comfortable with Trading Houses
Entrusting Your Home to Strangers
Overview
So you want to trade houses but are somewhat apprehensive about entrusting your home to strangers found via the Internet.
"What if they steal our valuables? What if they break something? What if they leave our home a mess?"
In all our years involved with home exchanging we've never had a reported theft and have only had a few reports of damage.
If you speak to experienced home exchangers, you often hear them say "we've traded houses over a dozen times and have never had a bad experience".
The idea that someone would travel across the country to steal your television set is highly unlikely. After all, you know where they live! But yes, accidents happen and someone may unintentionally break that sentimental wedding gift china.
So other than taking a leap of faith, how do you get comfortable with the concept of trading house?
Experienced home exchangers will tell you that the reciprocity of the deal is all the reassurance they need. But if you are new to home exchanging you may not find that sufficiently re-assuring.
So we've compiled a list of common sense tips to help ensure that your house trading holiday is a positive experience.
Trade Properties: Tips 1 - 5
1. Get to know the family you will be exchanging with before committing. Communicate extensively via e-mail and telephone.
If you considering a long term property exchange, 6 months or more, you may want to invite the other family to visit for a few days.
2. Ask for references. You can e-mail the references but it is probably best to call.
3. Validate that the information you receive is accurate. The Internet provides an easy and accessible medium for you to validate basic information. For example, you can easily verify a person's address.
Here's a list of some popular white pages:
* White Pages USA and Canada
* White Pages Australia
* UK White Pages
* White Pages Europe
4. Let your insurance company know. Your insurance company may have some specific requirements such as the need to see a copy of your guest's driver's license.
Your homeowner's policy likely covers accidental damage caused by guests. In some cases, your insurer may request an additional fee - especially if it is a long term exchange. It is best to check with your insurer about the specifics of your contract.
Many property exchanges include the use of a car, and your insurer will usually cover accidents. If your policy does not cover a third party using your automobile, you may be able to add this coverage. All policies are different and vary from state to state, province to province and country to country. Most policies are subject to some type of restriction and limits. If the damage resulting from an accident exceeds those caps then you may be responsible for the excess. There may also be legal costs to consider. If you are planning to exchange your car, it is best to call your insurer to discuss the details.
5. Try to meet the family you will be exchanging with. For example, you may want to welcome them and spend a few days together in your home before leaving to stay in theirs.
Part of what makes trading homes unique is the opportunity to build relationships that you may not normally establish with a conventional holiday.
You'll often hear home exchangers talk about how they've made some great friends via a home trading holiday or how they wished they had had an opportunity to meet the people they were swapping with.
Trade Properties: Tips 6 - 11
6. If you cannot meet, have a family member, friend, or neighbour pick them up at the airport. This provides for a local contact who they have already met in case something goes wrong.
7. Have the family member, friend, or neighbour drop by occasionally (once a week is acceptable) to see how your guests are getting along. This is yet another opportunity to make sure all is well. You can also arrange for friends to take them out one night.
8. Exchange your housekeeper, especially if this is a trusted person. This allows you to have someone visit the entire house and ensure that all is well. It also has the added benefit of finding your home in the same state of cleanliness that you are accustomed to.
9. If you're uncomfortable leaving fragile belongings out, place them in an closet or cabinet that you can lock. Frequent home exchangers have learned that a note on the cupboard that says something like Please don't use these glasses is usually good enough.
10. Use e-mail and the telephone to stay in touch while you are away.
11. If you really feel there is a need, you can draw up a contract detailing who covers damages. But keep in mind that it may not be worth the time/effort/money to chase someone in Australia for $300 if you are living in the US.
And don't forget, while they're staying in your house, you're staying in theirs. They likely have the same concerns about their home as you have about yours.
Thursday, July 5, 2007
Global property warnings also apply to Dubai!
Take heed of the warnings about cooling global real estate markets that have now reached Spain and India. Meanwhile, there were 4.2 million unsold homes in the US at the end of April, and the annualized rate of second-hand home sales fell by 2.6 per cent to 5.99 million in April, enough to worry the Wall Street bulls.
'The consensus view is almost unanimous that property prices are set to fall. Transaction volumes are drying up, higher interest rates and prices have damaged affordability, developers are suffering a regulatory and capital markets squeeze, supply is impending,' wrote Citigroup about the market in India.
However, the same global economic forces that are impacting property markets in countries as diverse as the US, Spain and India are present in Dubai where most of the remarks made about India by Citigroup could also be applied.
Dubai real estate agents report lower transaction volumes this year, with higher prices and higher mortgage costs impacting local affordability. Developers have also been finding it more difficult to raise capital, although the success of the Deyaar initial public offering might encourage others into the local equity market.
Oversupply
And the impending oversupply of the Dubai real estate market is generally acknowledged by market experts like EFG Hermes and Standard Chartered Bank. It is only a series of construction delays that is holding back supply from the market, and this is not likely to be an indefinite phenomenon.
Indeed, there has been a worldwide boom in property prices driven by the slashing of interest rates in the early 2000s to counter the impact of the US dot-com crash. But interest rates have now swung back to more normal long term average levels, and the very high levels of property prices are no longer supported by low borrowing costs.
Typically higher interest rates slow and then reverse a property boom, and this cycle of expansion on the back of easy credit and then a correction after credit becomes tighter is one of the most easily understood capital cycles in the global economy.
Higher interest rates
However, the reaction of the market to higher interest rates does carry a time lag as it takes a period for investor enthusiasm to calm down and for them to appreciate the change in circumstances.
All the same, the Dubai property market is only five years old and judging what will happen in a downturn in such a new market is particularly difficult as there is no local precedent to follow.
Indeed, it would be fair to conclude that the Dubai property price boom first reflected a degree of catching up with rival foreign markets, and that only the second phase is perhaps out of kilter with changing global economic circumstances, i.e. higher interest rates.
For a large Dubai villa can still cost less than a one-bedroom apartment in London, despite the high tax-free salaries for some expatriates in the emirate these days, and the arbitrage between these anomalies may not yet be done.
Saturday, March 31, 2007
City bonuses create new London hotspots
Cash-ready buyers are ready to put a chunk of the estimated £8.8 billion City bonuses into the London housing market, according to haart estate agents. As a result, there is expected to be vastly increased demand for large family homes priced over £800,000 and high-spec one- to two-bedroom flats.
haart has recorded a 25 per cent increase in registered buyers in the prime areas of London, where City workers are primed to spend their windfall. Prestigious family properties in the capital are in high demand and as a result prices for family homes are set to continue to soar in locations such as Bedford Park in Chiswick, the Peterborough Estate in Fulham and‘Between the Commons’ in Clapham. Canary Wharf will also see increased market action, as its location combined with its ready supply of high-end, low-maintenance apartments in exclusive developments such as Pan Peninsula, are just what the banker ordered.
The Olympic Village area is also set to soar, with the Icona development, due for completion in 2008, emerging as the area’s most sought-after investment opportunity.
Russell Jervis, managing director of haart estate agents, says, ‘There has already been a higher than usual number of buyers registered for this time of year as a result of the expected bonus bonanza. City bonuses have commonly been invested in bricks and mortar and we expect it to be no different this year. However, the flood of extra money will have a direct impact on the value of properties, particularly the properties ideal for buy-to-let investment, which command high rental yields, and grand family homes.’
