When Is the Right Time To Buy A Home?

Someday, my 27-year-old daughter would like to own her own home. But right now, she’s happy sharing a rented townhouse with a friend. She says, “I am trying to make sure I can afford it before making that leap”. “I don’t want to be house poor.” 

There’s no question that owning a home is a desirable goal, and low interest rates in recent years have made it possible for millions of Americans to buy their first houses, invest in income property or trade up to a larger home. For many others, though, there are good reasons to continue to rent. You really need to assess your overall expenditures, not just your housing expenditures, and ask yourself if you really can afford to buy.

Home buying is not for everyone and certainly not for everyone at every point in their lives. For young people like my daughter, it’s not a bad strategy to get one’s financial life in order before taking on the kind of debt required to buy even a modest condominium or starter house. My daughter, who works at a local hospital, said she is focusing on paying off her college debt, then will turn her attention to accumulating money for a down payment on a house. She said that she’s wary of moving too fast because she’s seen friends struggle when they were financially unprepared to buy.

“Some have had trouble keeping up with their mortgage payments,” she said. “Or a condo association will raise fees and they can’t afford their place anymore. Home prices are still so high and rents are so low that many find it advantageous to rent. “But, of course, renters are missing out on the appreciation of a home,” she said. “There are renters who say they could put money aside, invest it smart and get that kind of appreciation — but most people don’t do that.”

There are also times when it doesn’t make sense to own. We see older people who have large houses that they’re selling. In some cases, given their age and lifestyle, it doesn’t pay to for them to buy a smaller house. But buying can also be a problem for young people who think they’ll have to move frequently for their jobs.

Residential real estate has relatively huge transaction costs like brokers’ fees, closing costs, registration fees and other expenses associated with the purchase of a home. To buy and later resell, figure it at about 15 percent of the home’s value. That’s huge, and it means you have to stay put, ideally for at least five years, to recoup that 15 percent.”

The key to making the move from renting to buying is cash flow. People need to make sure they have the money not only for the mortgage but for other expenses that come with ownership including real estate taxes, insurance, and repair and maintenance costs.

Most people need to buy property at some point in their lives. It gives you your own little piece of the American dream,it’s something that’s all yours. And, from a financial point of view, it’s also a good long-term investment. It’s an appreciating asset that will behave very differently from stocks and bonds, especially over a 30-year window.

The How, Why, And Who Of Home Remodeling And Dealing With Contractors

Image by The Library of Congress via FlickrAt sometime in the life of a home owner you decide it's time to remodel. The most common remodels are in the kitchen with new or resurfaced cabinets. The next on the list would be a deck or landscaping. Followed by a bathroom remodel. Being in the building business I found these three the most common requests.

When remodeling it's good to start with a budgeted amount you want to spend. Sticking to this budget is tough because you may underestimate what the projects cost or you go all wacky and want gold fixtures. Your spending a lot of money it's good to go slow in the planning and cost stage of the project.

You must keep in mind that when remodeling your home the money you spend must yield that amount when or if you ever sell. Putting extraordinary or opulent  additions to your home will never be monetarily  realized when you sell. In plain English it means, don't over build for your neighborhood. Keep the final product within the price level of the other homes around you.

Normal and practical additions include:

• Bathroom remodeling
• Master bedroom remodeling
• Bathroom remodeling or addition
• Family Room addition
• Roof Replacement
• Window replacement

Dealing with a contractor can be a pleasure or a nightmare. I am a licensed building contractor, and being around other contractors you learn the ones that do a professional thorough job are a rare breed. It's imperative to hire one that has been recommend by someone. It's a good idea to actually go see the work that was done by the contractor. When I hired a cabinet contractor my wife and I went to a customers house to check out the work.

• Get at least three written estimates
• Check references, including past clients
• Call the local chamber of commerce and Better Business Bureau to check for complaints
• Make sure the contract is clear and specifies what the job entails, including time frame, price and unforeseen changes
• Never pay in full, make a small down payment only if asked, preferable not. (Good contractors won't ask for earnest money)
• If Payment is not upon completion. Set up payments to coincide with work completed. Always hold the final payment till 100% job completion. No if's and's or but's.
• Make sure the contract has a 3-day rescission clause to protect you should you change your mind.
• Ask if the contractor will do the work or will it be sub-contracted
• Check all permits, licenses and insurance needs are meet by the contractor. Check and double check these.
• Make sure inspections are carried out by proper building department people.
• Hold the contractor responsible for cleanup and any damages that should occur during construction
• Make sure materials called for are used.

I have a pet peeve with contractors so I always scrutinize them carefully when working with them. It reminds me in the movie "The Naked Gun", at the end of the movie the bad guy is caught and asked the question, "How can you be so evil?". The bad guy responds, "Don't forget, I spent three years as a building contractor." This always cracks me up because I know so many bad contractors.

Reader: What's your experience with remodeling and contractors?

10 Great Tips When Looking for a Home to Buy

Shopping for a home can be an exhilarating or dreadful thing to do, depending on your personality. The applying for financing, the realtor's, the multiple homes to view, it's a lot of work. It's such a big decision that if done incorrectly, will have results that you must live with for a long time. I have compiled a helpful list of ten tips to get you started.

1. Never be the one who makes the first offer on a home. If the home is in your price range let someone else bid on it first. You may lose the bidding. But you will see what others think the house is worth.

2. On paper comparable houses look the same. Don't be in a hurry, because with a lengthy inspection you may find it has better views, parking or amenities. Take your time.

3.Realtors have a list of inspectors whose job it is to notice the worst details of the home. Skip the inspectors and get a seasoned building contractor who has seen it all. They will tell you where the dead bodies are buried. They have seen what damages can occur in a home and what it takes to repair them.

4. Never ever make an offer on a house that is broken or needs repairs. The seller may have the work done but will it be done correctly? There's a world of trouble that comes from shoddy work that may take months to show up.

5. The important thing when you select a house, is to be able to see what can be changed and what can't. For instance, you can change the rugs, repaint the walls, remodel bathrooms and kitchens. You can't change the road system, the neighborhood, the climate, or the schools.

6. Have a walk thru before closing. Turn on all the faucets. Check under the sinks. Turn on all appliances. The hot water heater,A/C, furnace, sump-pumps, sprinklers, etc. Do a thorough walk thru.

7. You need to look at your house closely and not get caught up in stupid things like granite counter tops or paint color. Look at doors and trim to see if they are cheap or solid, fixtures, kitchen drawers, closet space. Does the basement seem musty? Really take your time to look at the house you are buying.

8. Make sure that you really want to be a homeowner, especially of a house. There are hours of raking, painting, and other maintenance issues, plus no super to call when things break (and they will break). Owning a house takes more time, energy, and money than you expect.

9. Ask your homeowner friends for a list of expenses, so you know what you are getting into. Consider both ongoing expenses and big things out of nowhere like the roof needing replacing. Expect one big thing a year. Consider utilities, insurance, property tax, any assessments such as for sewers.

10. Spend some time in the neighborhood in the daytime and at night during the week and on weekends. Perhaps there is an incredibly noisy bar around the corner or a neighbor who plays his stereo at 2 am. Or neon signs that blink into the windows all night.

Spending some extra time, it will give you the confidence you are making the right decision.

Use these tips to access the compatibility of the home to your life style. Don't have house fever. People get caught up in the process. Remember take your time.

Related articles

• Important Tips for First Time Home Buyers (doorfly.com)
• Buying a Second Home - Tax Tips for Homeowners (turbotax.intuit.com)
• 40 Essential First Time Home Buyer Blogs (doorfly.com)
• Seven Monthly Bills Most People Have, and Seven Ways to Reduce Each Bill (thesimpledollar.com)

The True Value Of Improvements To Your Home

Image via Wikipedia
Since you can't get a dollar-for-dollar return on your home improvement, it's important to weigh the other advantages. In addition to creating a more enjoyable space, these may include:

Future goals

First impressions are everything. According to the National Association of Realtors, more than 77% of new home buyers start their search for a new house online, but they won't go near the property if the exterior doesn't look nice. So if you want or need to sell your current house, investing in "curb appeal" improvements that enhance the exterior condition of your home can be especially worthwhile. These types of updates may also help you move the property faster and secure a better resale price.

I often tell homeowners that although they may not see investing in a property 'facelift' as a high priority in terms of their own needs, when it comes time to sell, this type of improvement can bring in big dividends simply by increasing traffic to the homes. More eyes mean a faster sale and a better price — especially if the interior matches or exceeds the curb appeal of the exterior.

"Green" benefits

Some improvements create a return on investment that isn't seen in the property value but rather energy efficiency. Such improvements may also benefit the environment — especially if you have a home that's nearly three decades old.

According to the Joint Center for Housing Studies at Harvard, existing housing stock built prior to 1983 constitutes over 20% of annual CO2 emissions from fossil fuel combustion. Certain upgrades can help improve the efficiencies of these and other homes. For example, qualified dual- or triple-paned windows can help save as much as 15% to 20% on energy bills. Foam-backed siding can provide an insulation boost and also reduce sound transmission, which may enhance quality of life. And upgraded Energy Star appliances, HVAC systems and electronics can serve as "mini remodels" that pay for themselves by reducing utility costs, thus improving cash flow.

Now is an especially appealing time to complete these types of upgrades because of the tax credits available through the American Recovery and Reinvestment Act (ARRA) of 2009. The Act offers $4.3 billion in tax credits to homeowners who purchase Energy Star qualified appliances, including central air conditioners, furnaces (oil and gas), heat pumps (air source and geothermal), water heaters and more.

Other considerations

You need to weigh all of the pros and cons of a remodeling project — and have a game plan for financing — before you start. Here are some of the main things to consider:
Longer-term costs .... and benefits

Some projects may have additional future costs, while others can actually save you money. For example, if you're building an addition, you will have to pay the structural costs of the initial outlay and you will also need to furnish the new space, and heat and cool it year-round. Make sure to add these costs into your budget.

One thing I encourage people to do is to spend part of their remodeling budget on making the existing structure more energy efficient. First, I recommend an energy audit (usually around $500-600 for an average home), which shows the homeowner which energy-efficiency upgrades they could benefit from. Then they can choose the most beneficial upgrades for their home and implement them over time as budget allows.

Often the upgrades pay for themselves in only two or three years because the home is less expensive to maintain. Plus, the efficiencies gained from the upgrades will continue for the lifetime of the house, benefiting future homeowners, too.

Property taxes

If the project requires a permit, you can expect the tax adjuster to take an interest in your project. This could lead to a value reassessment and, potentially, increased property taxes.

Time frame

Quality of life is important, but you will also want to balance the reality of life events and consider whether you'll have time to enjoy the improvements. You may also have other higher-priority expenses that will need to take precedence. Your financial advisor can help you evaluate your situation so you can determine what's best for you.
Home equity line of credit

One option to consider to help pay for your remodeling costs is a home equity line of credit. This type of loan may be especially attractive right now considering today's lower interest rates. Your financial advisor can help you explore this option.

Do it yourself (DIY)

Are you handy? Or do you have time to learn some new skills? A major trend in home remodeling is for the homeowner to take on a large portion of the labor on a project. With labor costs typically running around 30% per project, doing the work yourself could significantly lower your overall costs. Or if you're not comfortable completing all of the work (e.g., electrical, plumbing), consider hiring out only those parts of the job. Also, you may want to be your own contractor to further reduce your costs and increase your return on investment.

Property conversion

Here's an interesting option to consider today: Instead of making improvements to your house, rent it out to someone else and purchase a new property that already includes everything you want at a dramatic discount. Many builders and homeowners are trapped with properties that are brand new, but aren't selling in today's buyer's market. You can take advantage of this property abundance, as well as lower interest rates, if you have good credit and are able to manage the expense. Once your tenants start paying rent, you can pay the mortgage and may even be able to take in some extra income.
What to ponder before you pound that nail

Ask yourself these questions to help you determine whether a remodeling project makes sense for you:
What makes my house feel like home to me?
What improvements would I need to make to enhance my quality of my life in this home?
Am I willing to invest the time and energy to do the work myself or do I need to hire an expert?
Am I prepared to be inconvenienced while the improvements are made?
How will I cover the costs?

If you have a clear vision, then it may be time to take on that remodeling project. That means it's time to meet with a minimum of three remodeling contractors to obtain cost and time estimates. And it also means it's time to talk with your advisor about your financing options and how a remodeling project fits into your long-term goals.

In the end, a home improvement may increase your home value for when it's time to sell. But one of the most valuable benefits of this type of investment today may simply be to make your home more enjoyable for you and your family.
"There's a direct relationship between how your house makes you feel and your perceived quality of life. When a home is beautiful as well as functional, you are far more likely to feel at home in your life. In our world today, that's a value that can't be quantified.

Related articles

• DIY Home Energy Assessment (lifegoggles.com)
• Real Estate Weekly: The best bang for your remodeling buck (marketwatch.com)
• 8 reasons to invest in your home (money.cnn.com)
• Builders' Show: Remodeling activity poised for a comeback in 2011 (blogs.consumerreports.org)

File Your Tax Return For Free - Here's Where to do it

It's time to get busy on your tax return. There are several ways you can accomplish this. You can have a professional do it, I have my accountant do mine because it's quite lengthy and I don't mind paying someone to. If yours is very complicated I recommend you do the same. Some people buy a piece of software and do it that way. But the newest way to do it is online.

For simple to average complexity tax returns the online process is the way to go. Best part is that it could at no charge. There are requirements of course. Firstly you can't have an adjusted gross income of more than $58,000. There are other requirements which the individual website will state.

If you have never tried to file your taxes online, don't worry because during the whole process they make it so easy and the price is free, what do you have to lose. Give it a try.

I have compiled a list of the IRS’s Free File Alliance providers. These are providers that have met rigid standards to participate.

As you use the service of these websites you will be asked many times to upgrade to the paying side of the service. For simple to average tax returns this is not necessary. But if you have some out of the ordinary tax deductions you may have to. 

Being that these sites are free you can try more than one or if you have trouble with on there is always another to go to. Don't worry your data during the process is incrypted and safe.

Here's the list:

Free TaxACT: Free federal online tax return preparation and e-file if your adjusted gross income (AGI) is $58,000 or less and you are age 19 through 55. This federal offer is valid in all states. Free extensions.

TaxSimple: Free federal online tax return preparation and e-file if your adjusted gross income (AGI) is $58,000 or less and you are age 66 or younger and you live in one of the following states: AL, AR, AZ, CA, CO, CT, DC, DE, HI, GA, IA, ID, IL, IN, KS, KY, LA, MA, MD, ME, MI, MN, MO, MS, MT, NC, ND, NE, NH, NJ, NM, NY, OH, OK, OR, PA, RI, SC, SD, TN, UT, VA, VT, WI, WV or WY. Free extensions.

OnlineTaxPros.com: Free federal online tax return preparation and e-file if your adjusted gross income (AGI) is between $4,000 and $58,000 and you live in one of the following states: AL, AR, AZ, CA, CO, CT, DE, GA, HI, IA, ID, IL, IN, KS, KY, LA, MA, MD, ME, MI, MN, MO, MS, MT, NC, ND, NE, NJ, NM, NY, OH, OK, OR, PA, RI, SC, UT, VA, VT, WI or WV. Free extensions.

H&R Block Free File: Free federal online tax return preparation and e-file if your adjusted gross income (AGI) is $58,000 or less and you are age 51 or younger. This federal offer is valid in all states.

eSmart Tax powered by CompleteTax: Free federal online tax return preparation and e-file if your adjusted gross income (AGI) is $32,000 or less. This federal offer is valid in all states. Free extensions.

123 Easy Tax Filing, LLC: Free federal online tax return preparation and e-file if your adjusted gross income (AGI) is $58,000 or less and you are age 70 or younger and you live in one of the following states: AK, AR, AZ, CA, CO, CT, GA, IA, ID, IL, KS, KY, MA, MD, ME, MI, MN, MO, NC, ND, NE, NJ, NM, NY, OH, OK, PA, RI, SC, SD, UT, VA, VT, WI, WV or WY. Free extensions.

FreeTaxUSA® IRS Free File Edition: Free federal online tax return preparation and e-file if your adjusted gross income (AGI) is $58,000 or less and you are age 22 through 64 years old. This federal offer is valid in all states. Free extensions.

Free1040TaxReturns.com: Free federal online tax return preparation and e-file if your adjusted gross income (AGI) is $58,000 or less and you are age 72 or younger and you live in one of the following states: AK, AL, AR, AZ, CA, CO, CT, DC, DE, HI, GA, IA, ID, IL, IN, KS, KY, LA, MA, MD, MI, MN, MO, MS, NC, NE, NJ, NM, NY, OH, OK, OR, PA, RI, SC, UT, VA, WI or WV. Free extensions.

EfileTaxReturns.com: Free federal online tax return preparation and e-file if your adjusted gross income (AGI) is between $4,000 and $58,000 and you live in one of the following states: AL, AR, AZ, CA, CO, CT, DC, DE, GA, HI, IA, ID, IL, IN, KS, KY, LA, MA, MD, ME, MI, MN, MO, MS, MT, NC, ND, NE, NH, NJ, NM, NY, OH, OK, OR, PA, RI, SC, SD, UT, VA, VT, WI or WV.

ezTaxReturn.com: Free federal online tax return preparation and e-file if your adjusted gross income (AGI) is $58,000 or less and you live in one of the following states: AL, AR, AZ, CA, GA, IL, LA, MA, MI, MS, NC, NJ, NY, OH, PA, VA or WI.

TaxSlayer: Free federal online tax return preparation and e-file if your adjusted gross income (AGI) is $58,000 or less and you are age 25 or younger, or age 65 or older. Free for all Active Military with AGI of $58,00 or less. Also your return is free if you qualify for Earn Income Tax Credit or if your AGI is 10,000 or less regardless of age. This federal offer is valid if you live in one of the following states: AL, AZ, AR, GA, ID, IA, KY, MI, MN, MS, NY, NC, ND, OK, OR, RI, SC, UT, VT, VA and WV. Free extensions.

Online Taxes at OLT.com: Free federal online tax return preparation and e-file if your adjusted gross income (AGI) is $58,000 or less and you are age 51 or younger. This federal offer is valid in all states. Free extensions.

1040NOW.NET: Free federal online tax return preparation and e-file if your adjusted gross income (AGI) is $58,000 or less and you are age 64 or younger and you live in one of the following states: AL, AR, AZ, CA, CO, CT, DC, DE, GA, HI, IA, ID, IL, IN, KS, KY, LA, MA, MD, ME, MI, MN, MO, MS, MT, NC, ND, NE, NJ, NM, NY, OH, OK, OR, PA, RI, SC, UT, VA, VT, WI or WV. Free for all Active Military with an AGI of $58,000 or less. Also qualify if your AGI is 9,000 or less and you live in one of the following states: AK, FL, NV, SD, TX, WA or WY.

ICANFREEFILE: Free federal online tax return preparation and e-file if your adjusted gross income (AGI) is $31,000 or less or if you qualify for the Earned Income Tax Credit. This federal offer is valid in all states. Free extensions.

TurboTax® Freedom Edition: Free federal online tax return preparation and e-file if your adjusted gross income (AGI) is $31,000 or less or if you are active military with an AGI of $58,000 or less or you qualify for the Earned Income Tax Credit. This federal offer is valid in all states. Free extensions.

FileYourTaxes.com: Free federal online tax return preparation and e-file if your adjusted gross income (AGI) is between $10,000 and $58,000 and you live in one of the following states: AL, AR, AZ, CA, CO, CT, DC, DE, FL, GA, HI, IA, ID, IL, IN, KS, KY, LA, MA, MD, ME, MI, MO, MS, MT, NC, ND, NE, NJ, NM, NY, OH, OK, OR, PA, RI, SC, SD, TN, TX, UT, VA, VT, WI, WV or WY. Free extensions.

Before you begin...

• Free File companies have their own eligibility criteria, but none offer Free File to taxpayers with an adjusted gross income of more than $58,000.
• Other eligibility criteria may include your: age, state, eligibility for the Earned Income Tax Credit, and military status.
• Check the company's website for details because the companies' offers may differ. For example, some companies charge a fee for state tax returns and some may not support a particular form you need to file.
• Remember to begin your Free File return on IRS.gov or you may be charged a fee or asked to buy additional products and services.

Related articles

• Unmarried First-Time Homebuyers: Who Gets the Credit for a 2010 Purchase? (turbotax.intuit.com)
• The Basics of a Traditional IRA (turbotax.intuit.com)
• Two Unmarried People Purchase a Home -- Who Gets the New $8,000 Homebuyer Credit? (turbotax.intuit.com)
• Video: What is My Adjusted Gross Income (AGI)? (turbotax.intuit.com)

How To: Create A Budget

Image by Casey Serin via Flickr
As we go through life if we don't have a plan we make mistakes. Just like taking a road trip, if we don't have a 

map we could get lost. That's what a budget is, a financial map for our money.

Ben Franklin said,

"Buy failing to prepare, you are preparing to fail."

 Because we have a natural tendency to spend all we have, we all need a budget. It doesn't matter what age, stage of life, or if we're rich or poor. The most important part of the budget is it helps us coordinate our spending with our priorities. Here are three budgeting forms: Online Budget Form , Printable Budget Form and Spreadsheet Budget Forms.
 
Step 1 Start the budget by entering your income at the top. This will should include all income. Whether it's salary, pension, social security, investment income, or other. 
 
Step 2 
Now we go to the expense section. Here we list the fixed expenses first like the mortgage/rent, car loans, and home equity loans. Also your student loans and credit card payments. 
 
Step 3 
List the amounts that you are saving for. They could be college, emergency, vacation funds. Don't forget to enter your monthly amount for investing. 
 
Step 4 
Then comes the variable expenses. These would be your electricity, gas, telephone, water, household repairs, childcare, clothing, food and dining out. Also personal care(haircuts), medical/dental, and charities. 
 
As you adjust the numbers you will see how the changes affect your ability to save more or less. The chart will also have a section where you can add the actual numbers so you can compare and adjust for next month. Don't forget that this is not your first and last budget. This has to be done every month for it to help you organize and stay organized. 
 

John Maxwell says,

" a budget is telling your money where to go instead of wondering where it went" 

 
The goals of budgeting are you will see where your money is going. If you see where it's going your more able to adjust spending and plan better. 
 
Don't worry if your doing it all right at the beginning. It takes time to get it right. But with time you will get better and better. For the items that occur that are unforeseen, that you can't budget for, that's what the emergency fund is for.