FEBRUARY 12, 2020 • Volume 15 • Issue 7
RE WEEKLY RESIDENTIAL • ACREAGE • FARM • COMMERCIAL • AREA DEVELOPMENT 515-233-3299 • 317 5th Street, Ames • All REALTOR® ads within are REALTORS® licensed in the State of Iowa
Page RE2 • REAL ESTATE WEEKLY • Wednesday, February 12, 2020
DEAR MONTY
Pros and cons of owning a second home they could take over the house, and the payments.
R
RICHARD MONTGOMERY
eader question: What are the pros and cons of owning a second home? My wife and I have the opportunity to purchase a second home. I’ve spoken with the homeowner, who is a friend of mine. He stated that he would like to get about $200,000 out of the sale. We are thinking of renting out the house, possibly for a couple of years. The intention that one or both of our daughters upon graduating college will find gainful employment. At which time
Monty’s answer: A second home and a rental property are different. It sounds like the goal is to buy it and rent it out for two years and sell it to your daughters. Two young people still in school suggests that a lot can change in two years. What if your daughters don’t want to live there? Or don’t want to own a house? What if they relocate to another state or another part of the country? What if a tenant stiffs you for six months’ rent? There are many variables in real estate, and specifically, with your stated goal, it may be challenging to reach a quality conclusion.
Pros and cons
Pros: • Availability: When the mood hits,
you can do it last minute. No need for reservations. • Travel light: You have everything you need there, including a lawnmower. • Lend it to friends and family: A long weekend or longer is one of the more memorable gifts. • An excellent family destination: Keep in touch with your children and grandchildren. • Appreciation: This is not a given. More likely, if you buy it right, care for it, and own it long enough. • A change of scenery: When you have vacation time, different weather, or need a break. • Interest on the second home loan is deductible: There are qualifications so get tax advice. • A capital gain exclusion: If you have a gain — but not structured like the sale of a primary residence.
• Added responsibility to maintain, insure, repair. • Higher turnover rates in second home communities which suggests ownership gets stale. • Many second homeowners lose the ability to vacation elsewhere as it ties you one location. • The financial resource commitment diverts capital for other uses. • The time invested in maintaining, insuring, repair and travel divert from other activities. Proceed with caution. Richard Montgomery is the author of “House Money - An Insider’s Secrets to Saving Thousands When You Buy or Sell a Home.” He is a real estate industry veteran who advocates industry reform and offers readers unbiased real estate advice. Find him at DearMonty.com.
Cons:
HOME HELP TIP OF THE WEEK
HOME BUYING
GARDENING
HOW TO AFFORD YOUR NEXT HOME PROJECT
TIPS FOR MILLENNIALS TO CONSIDER
IDEAS AND INSPIRATION FOR THE WEEK
For homeowners, it’s not a question of when you’ll need to repair or want to renovate, but when. Queen of Free has some tips for affording such projects or emergencies.
During an interview with WHTM/ABC27 in Harrisburg, Pennsylvania, Chase Financial Education Ambassador Farnoosh Torabi provided tips for millennials buying their first homes.
Need gardening ideas or inspiration this week? Here are some things to do from the St. Louis Post-Dispatch:
• Before going to the hardware store, make sure you know what you want to accomplish. Visit websites like Pinterest, This Old House or BobVila.com for inspiration and to keep you on track. • Don’t spend money you don’t have. Taking out a loan or putting the entire project on credit can cost you significantly more.
Don’t rush into homeownership. Give yourself time to fully understand all the costs. Use home-buying calculators and ensure your home costs will not exceed 20% of your takehome pay. Torabi suggests imagining that your mortgage payment exists today, then ask yourself how you would have to change your expenses. You might consider saving up that payment every month to use toward a down payment and closing costs.
• Check leftover seed viability. Wrap 10 leftover vegetable or flower seeds in a damp paper towel. Keep them warm and moist, then check in a week for germination. It’s time to order new seed if fewer than half sprout. • Store wood ashes in containers that are watertight and fireproof. A single dusting of ashes can be applied to lawns and plants that prefer alkaline. Be careful not to apply too much. Excessive amounts of ash can raise soil pH to unhealthy levels. More Content Now
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Fix it or walk?
When it’s worth solving home inspection problems By Laura Firszt
More Content Now
S
hould you get a home inspection before you buy a house? Definitely. In fact, most real estate agents recommend making your offer to purchase contingent on home inspection, right up there with appraisal and financing approval. If your home inspector gives the property two thumbs up, great! But what if your dream home turns out to be in less than tip-top shape? Do you walk away from the deal with your earnest money intact, or might it be worth hanging in there and solving the issues? KEEP IN MIND: Any substantial problems can be used as a bargaining chip to renegotiate price. Or the real estate seller may shoulder the burden of getting them repaired. Read about seven of the most common home inspection problems and find the average cost to fix each one.
1. Outdated and/or dangerous wiring
Faulty wiring tops the list of problematic (not to mention dangerous) home inspection findings. If your inspector finds: A) the electrical power is supplied by an out-of-date system such as knob-and-tube wiring or B) there are indications of dangerous wires, you might need to hire an electrician to rewire the whole house, a major undertaking. When you just have to replace a few outlets — for example substituting GFI outlet receptacles for the standard variety — the
fix will require much less time and money. AVERAGE: • Cost to rewire entire house (1200 sq ft): $5,750 • Cost to upgrade electrical panel from 60 to 200 amps: $2,150 • Cost to professionally install a GFI outlet: $50-100 per hour, plus parts
2. Damp basement
Untreated dampness in the basement will lead to mildew and unhealthy indoor air quality. There are several potential methods to channel outdoor moisture away from the house: A) get the yard properly graded, B) have French drains installed, or C) ensure that all gutters and downspouts are in good shape and correctly positioned. AVERAGE: • Cost to grade a yard: $1,960 • Cost to install exterior backyard French drains: $450 • Cost to repair gutters: $345
3. Roof damage
A damaged or aging roof may have blown-off, curling or brittle shingles. Its flashings might be cracked or is missing. Either of these situations is a red flag for future roof leaks (if there is not an active leak already), which in turn eventually result in water damage to the home’s interior. AVERAGE: • Cost to repair a roof: $845
4. Foundation warning signs A house foundation in trouble
Most real estate agents recommend making your offer to purchase a home contingent on a home inspection. [Liz Roll/Wikimedia Commons/Public domain]
shows distinct warning signs, which only get worse if left unattended. Your home inspector can interpret whether these signals mean, “Beware!” (diagonal cracking, crumbling mortar, bulging walls, sinking) or “This is something you might want to cope with” (vertical crack less than 1⁄16 inches wide, puddles adjacent to the foundation — see problem 2 above). For an expert second opinion, consider a consultation with a professional engineer. AVERAGE: • Cost to hire a structural engineer: $490 • Cost to repair minor foundation cracks: $500 • Cost of major foundation work: potentially $10,000+
5. Plumbing malfunctions
How might home plumbing go wrong? Let me count the ways. They often start small and turn into a huge headache (and strain on your wallet) over time. Dripping faucets, clogged drains, overly high or low water pressure, a damaged washing machine hose, and any sort of plumbing leak will have to be fixed to make the house truly habitable.
from uncomfortable to downright dangerous. A few common examples are: malfunctioning thermostat, heating or cooling running constantly, noisy system, furnace pilot light that goes out continually, and cracked heat exchanger or chimney liner causing carbon monoxide leakage. AVERAGE: • Cost to repair heat exchanger: $150 • Cost to repair a furnace: $285 • Cost to repair air conditioning: $355 • Cost to replace chimney flue liner: $2,500
7. Inefficient ventilation
Poor ventilation (such as a vent hood that merely removes kitchen odors and doesn’t vent steam outside) raises the indoor relative humidity level. This leads to condensation on windows, and eventually fungi and molds throughout the house. Combined with uber-enthusiastic insulation (seller’s DIY project, perhaps?), it also makes the attic overly hot, which is both energy-INefficient and very hard on the roof.
AVERAGE: • Cost to fix plumbing problems: $315 per visit, or $122 per hour for multiple repairs • Cost to replace a water heater: $1,150
AVERAGE: • Cost to install/replace kitchen or bathroom ventilation Fan: $385 • Cost to add roof vents: $475 • Cost to install heat recovery ventilation system: $2050
6. HVAC hassles
Laura Firszt writes for networx.com.
HVAC systems are also subject to a large number of troubles, which range
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