Finance housing update 2013 8 14

Your Home Housing Update 2013:

What to know before you buy, sell, or rent a home this year

By Janine Boldrin

Want to Buy? Check this out before making your final decision Owning a home is a part of the American dream, but for military families home ownership can turn into a nightmare. If you’re thinking of buying at your new duty station, find out how your military service should influence your decision and if buying is right for your mobile lifestyle.

Before you buy, be sure to:

#1: Take Your Time The amount of research that should go into deciding on a home is often skipped by service members who feel rushed into finding a place to live. It is essential to learn about the local community to include researching the schools, neighborhoods, and economy before deciding on a home.

Other military families who have bought or sold a home in the area can be a good source of information. Take a drive around the community to spot homes with overgrown lawns (foreclosures), new construction (competition for your future sale), and drive the distance from the home to your installation during the high volume traffic times to get a good idea of the commute time. Understand the local real estate market by consulting the local newspaper, talking to real estate agents, and going online to get the latest information on how houses are selling in the area.

If you don’t have a lot of time to do research, you may want to consider renting until you are able to better understand the community so you don’t make a hasty and possibly regrettable decision.

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#2: Acknowledge your circumstances

Whether you are active duty or reserve, being a part of the military has certain lifestyle implications. Some service members do not expect to move very often while others know that orders routinely come every two to three years. Deployments are another factor in many service members’ lives.

“Let’s face it, the mobility of the military lifestyle is unique, and in my mind that’s where the issues surrounding home ownership spring from,” says J.J. Montanaro, a Certified Financial Planner with USAA. “A civilian who is lucky enough to have a good steady job can wait out any ripples, or even huge waves, in the market. On the other hand, that’s not going to be the case if you get PCS orders.”

A home is a long term asset, says Montanaro, and military families frequently have a short-term time horizon. Before you buy, determine whether you can financially handle an expected or unexpected move if you cannot sell your home for the amount you desire. Will you rent? Do you have the money to handle months of a home being vacant? Or do you even want to stay at the location if deployment orders arrive?

“Walk through all of the ‘bad’ things that could happen and be prepared,” says Montanaro.

#3: Build your team Find trusted people to give you information so you can make the best possible housing decision. Begin by talking with your financial institution to determine whether buying a home fits your financial goals. Speak with a financial advisor who has experience with the military community so they can figure in your lifestyle and loan options. continued on page 10

Your Home continued from page 8

“Crunch the numbers. Calculate the total cost of home ownership, purchase price, interest, taxes, insurance, maintenance, HOA fees, etc.,” says Montanaro. “Research and consider a VA loan.

This is a great benefit around which there are a lot of misconceptions.”

An experienced financial advisor who is neutral on whether or not you buy can help you learn about all of the aspects of homeownership that you may not have considered. And a good, local real estate agent can tell you about the market and help you find a home that has better odds to sell or rent when you leave.

“It is hard to understand a new area and find a house especially if you are doing it from a long distance,” says Jon Vaughn, a real estate agent with The Vaughn Team, a real estate agency that is a part of Better Homes and Gardens Real Estate Hometown Connection. Vaughn is located in Clarksville, TN and works extensively with military families who are stationed at Fort Campbell, KY. Ask your agent specific questions about the community, including where houses historically sell better and inquire on planned construction to understand the dynamics of the area before falling in love with a house.

Ask about selling timelines and get a rough percentage of military that end up renting because they can’t sell.

“In a few years, a neighborhood could look completely different,” says Vaughn. “Learn about the county where you are moving.

How much of it is military or transient? What area is more established?”

#4: Start planning for the day you sell/rent

Whether or not you expect to move again as a military family, orders can put you on the road to another location with months of buying your new home. Unless you are retiring and know that you are purchasing your forever home, start planning for the day you will have to sell or rent before you even buy your house.

“The markets around military bases are cut throat,” says Vaughn. “Make sure your home will be able to sell by finding out about the local schools even if you don’t have kids because odds are Two Costly Mistakes the ones buying will have kids.

Military Homeowners Make Check crime reports which are available locally.”

Painting each room a unique color. Dark reds might be popu-

lar for living rooms and a vibrant pink may be your daughter’s desire, but if you have to you move out of the home before you sell, you need to find a painter and paint the walls back to a neutral color. “Once you pull furniture out and have those deep colors, then it is a hard sell,” says Vaughn who recommends asking your real estate agent for recommendations for a professional painter who can get the job done well for a good price.

Making expensive upgrades. From granite coun-

When looking at homes, think about the construction that is occurring in the area where you want to buy.

“Builders have a lot of options for closing costs and extras that homeowners can’t do,” says Vaughn, who recommends buying into a subdivision that will be finished building by the time you go to sell.

tertops and high dollar alarm systems, to central vacuum systems and water softeners, if you’re not planning on living in the house forever, there can be little to no return on investment, says Vaughn. Installing pricey countertops in a $170,000 house or putting awnings up that only you will really love, doesn’t make sense in a short term investment.

“Don’t do a whole lot of upgrading until you retire and you’re going to live there for awhile,” adds Vaughn.

These questions will help you to understand the challenges you may face as a homeowner and potential landlord in that location.

If you plan to rent your home when you leave the location, understand what renters in the area want instead of focusing solely on your present desires. “At Fort Campbell, a lot of military are concerned about the distance to the highway and to post,” says Vaughn who points out that officers and enlisted soldiers may have different requirements to consider.

Picking a home that appeals to the majority of the market will allow you to rent quicker when you leave and continue to consistently rent until you sell. continued on page 12

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Setting the Stage

Where possible, leave your property furnished so it looks more like a “home” than just a “house.” Home stagers can help you with this by bringing in rental furniture and accessories to create the right environment to set your house apart from the competition in your location and price range.

Make your home ready for a quick sale From Permanent Change of Station (PCS) orders to an upcoming deployment, most military homeowners face selling their home in a short period of time. Making your home attractive to many buyers is essential to ensuring a quick sale. Read our interview with Debra Gould, President of StagingDiva. com, who has staged millions of dollars worth of real estate and appears on HGTV, to learn how staging can help when you go to sell your home.

AF: For those people not familiar with staging, what is it and how does staging help sell a home?

Gould: Most people dress up for a first date, or detail a car before they sell it. Yet, too many people don’t give the same consideration to the appearance of their most important asset when it’s time to sell! In a competitive real estate market it’s important to make sure your home stands out from the rest.

Worried staging is expensive?

Staging doesn’t have to be expensive, especially if you just hire a home stager to give you detailed advice on what to do on your own, says Gould. A home staging consultation can range anywhere from $200 to $1,000 depending on the experience of the stager, where you live (major cities are more expensive), and how much time they spend with you. If you’re having furniture and accessories brought in, the fees can be anywhere from a few hundred dollars to several thousand.

When a potential buyer falls in love with your property they are motivated to make an offer before someone else does, and they’re also likely to offer you a higher price. Decorating to sell, or home staging as it’s also called, showcases your home’s best features. The goal is making your home more desirable to the right buyers and creating the best first impression.

AF: Many of our families leave vacant homes when they must move for the military. Does having furniture in a home help sell it versus leaving a “clean and empty” home for showings?

Gould: If you’re forced to leave your house empty to sell it, make sure it’s sparkling clean from top to bottom and that all the minor (and major) repairs have been attended to. The problem with an empty house is it looks abandoned and communicates you’re desperate to sell.

There’s nothing there to romance potential buyers with the lifestyle they could enjoy in your home and all they have to focus on is the flaws.

AF: What are some of the key mistakes people make when it comes to setting up their home for a showing?

Gould: A common mistake is furniture and accessories that are in the wrong place so the room doesn’t show nearly as well as it could. Or too much furniture so the room looks small.

Excess clutter and personal items also distract buyers. On the other hand, too little makes the house look vandalized and doesn’t have the needed warmth to attract buyers. Effective home staging shouldn’t be obvious. You’re just trying to get people to walk in and feel, “I love this, it feels like home.” You do not want them to think, “Oh this house was staged.”

AF: What should someone look for when they go to hire a person to stage their home?

Gould: Home staging is an unregulated field and there’s no such thing as an official “certification” or “accreditation,” despite what some claim. The first thing you should look for is someone who understands your local real estate market. If they don’t know what a house in your price range is supposed to look like, or who the likely buyer will be, then they can’t do as effective a job. It’s important to look at their portfolio of before and after pictures. Ask questions about their specific projects to ensure they are actually the work of that stager. Anyone you hire should be able to confidently talk about what they do, clearly explain their rates and what the benefits to you are of hiring them. Don’t just look for the lowest price unless you don’t care about the end result.

For low cost tips on how you can stage your own home, visit Gould’s website at www.stagingdiva.com/ freehomestagingtips.html.

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Your Home

Stories from the Rental Homefront

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#5: Expect the

unexpected

There are many stories of the service members who bought homes only to face unexpected orders soon after closing.

“Build a cash cushion before you buy. Thanks to Servicemembers’ Civil Relief Act if you rent and get orders, bam, you’re out of there no strings attached. That’s not the case with home ownership,” says Montanaro. “So, whether you’re talking about having money available for big repairs, or for a vacant rental, home ownership demands that you heed the old adage of having a robust emergency fund.”

Even if you don’t want to become a landlord, make a plan in case you must become one.

Montanaro says his spoke with many military families who have unable to sell their homes and have become accidental landlords to try to limit the financial damage.

Sealing the Deal With a good deal of research and planning, a number of service members have made home buying work for them.

“I’ve talked with a lot of families who have made the decision to buy with the intent of returning to the home or renting it out,” says Montanaro. “Even if they are initially only in the house for a few years, they are making the purchase with the intent of owning the home for the long haul. This is good.”

In fact, some service members have made home purchases part of their long term plan for postretirement income. Vaughn has met military who have bought a house each place they’ve moved, lived in it a few years, and put it with a property management company. “Now that is what they do for a living,” says Vaughn. “They have houses that are paid for, producing income as rentals, and then they collect a check.”

While most military may not be looking to go into property management, everyone needs to have a solid plan in place when they go to buy a home. Don’t rush into making such a large purchase without solid research. And, as Montanaro frequently advises, when in doubt, rent instead of buy.

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When orders come and a house won’t sell, many service members opt to rent out their home. Here’s what some military landlords have to say about their experiences: “The biggest struggle we face is the fact that the rent for the house does not cover the mortgage since the rental market became saturated with homes. It’s mentally hard getting repair costs for the house on top of that because I know that we could fix many of those things for much less. We also have to save in the event that the house goes unrented so that we can cover the mortgage.”

— Karen M., who has been renting their military family’s home in Harker Heights, Texas, for the past five years after her husband received unexpected orders to PCS. “I think the main struggle is really relying on good faith when it comes to repairs. We’ve had several minor and some not-so-minor issues over the years. Several trees have come down, a window was broken, the air conditioning unit needed to be serviced. We use a property management company and they usually have repair services they recommend. But it’s hard to know if you are getting the best deal. One bit of advice: shop around for a good property management group.”

— Dana W., who has been renting their home in Clarksville, Tenn., for the past 10 years after they decided to move onto post during a deployment.

“We have had numerous tenants and all have been military. We have managed it ourselves, hired a property manager, fired a property manager and are back to managing it on our own the help of family who live nearby. Biggest lessons learned are to collect separate deposits for pets and include a non refundable pet fee.

Also, schedule clean outs and take it out of the security deposit. This eliminates stress on both ends and we have a reasonable cleaner that has done several for us.”

— Cathy B., who has been renting their home for the past 10 years in addition to buying a home in Alaska that they plan on renting when they PCS. “You must have strong instincts, first of all, in terms of location, rentability and the market. That being said, I am not in the business of flipping, I’m in it for the long haul. Mapping out your financial health is critical. Having reserves to cover mortgage payments during unoccupied months is a must. And prepare financially for the water heater and other major appliances to give out on you at least once. I don’t recommend renting to close friends.

I’ve heard horror stories from people who are renting from friends. The backyard floods and the owner refuses to pay for the repairs. Boom, the friendship is over.”

— Molly B., whose military family has, over time, purchased five homes they rent out as long distance landlords.

Your Home

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The Inside Scoop on Property Management

By Janine Boldrin A leaky dishwasher at your rental home is a huge headache when you live hundreds of miles away. Enter the property manager. While many landlords manage their properties themselves, others turn to hiring a local company to handle upkeep and repairs.

What does a property manager do?

They provide services that help a landlord manage their property including screening tenants, lease contracting, and handling maintenance of the home. A property manager can be the boots on the ground for landlords who live a long distance from the home, including service members who are deployed.

How can I find a good company?

Do your research before you move and make sure the company has a good reputation. Mark Westerbeck, owner of Marine Property Management Inc., in Virginia recommends comparing a couple of property management companies including their services and fees, and asking for referrals from other service members. “Make sure the company you choose understands the military lifestyle,” adds Westerbeck.

Are property managers expensive?

Prices vary by company and level of service required. “Look closely at all the fees and services provided,” says Westerbeck. “Pay particular attention to hidden fees.”

Some in the military buy with the aim of moving back into the home if they get stationed again at the same location. But remember: the home you buy as an E3 may not be the home you want to live in as an E7, so plan accordingly.

Why can’t I just manage my property myself?

If you have the time and resources, you can manage your own property — but there may be challenges. If you run into trouble after you’ve moved, finding a reliable property management company can be harder, especially if you are in a rush and aren’t able to meet with them in person. If you chose not to hire a property manager, establish relationships with reliable repair services prior to leaving so you aren’t left scrambling when something goes wrong with your home.

Here’s a tip from Mark Westerbeck, owner of Marine Property Management Inc., whose company works with many service members: Before you move, make sure your house is in working order and physically appealing. Have two to three months worth of mortgage payments set aside just in case your home does not rent immediately or if your tenants do not pay their rent. You will also need that money to handle unexpected, often costly repairs, such as a failure of a heating and air conditioning system.

Janine Boldrin is a freelance writer and author of The Thinking Spouse’s Guide to Military Life.. She lives near Fort Campbell, KY with her active duty husband and three children.

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