‘Home renovations on a budget’ isn’t an oxymoron. It can be done with these 5 tips.
When Kelly Whalen demolished her built-in bookshelves as part of a living room DIY, she found it gave the room some much-needed space. Unfortunately, she also found a hidden subfloor made from asbestos(!) tiles. She hadn’t budgeted for a new subfloor — or for the removal of a toxic substance. Yikes.
And there were more surprises. “When we pulled up the tiling, we found we also had to pull out two layers of wall paneling just to get to the edges of the room,” says the Exton, Penn., native. The paneling fix led to a need for new insulation and drywall. What started as a small project quickly ballooned — and so did Whalen’s expenses.
Almost four out of 10 homeowners go over budget when doing a remodel, according to a 2014 report from home improvement site Houzz. Another stat that’ll make you think: Only one in five comes in under budget. Protect your bottom line with these five tips:
1. Reconsider DIY
DIY is cheaper, right? Not necessarily, says Philadelphia-based interior architecture and design expert Glenna Stone. Depending on the project, amateurs beware.
“If you don’t have the expertise, you could end up paying between 10% and 40% more,” Stone says.
Why? While your DIY labor is technically free, your lack of know-how can be costly.
And then there’s hiring and scheduling. A task like moving a wall could mean hiring an engineer and an architect, not to mention coordinating permits. A general contractor knows who’ll do the best work for the best price, and they’ll know when to schedule them to avoid wasting dollars on inefficient use of time.
“If the plumber comes out before you’re ready for him, they’ll charge you for that visit, and then to come out again,” says Stone.
Finally, a contractor is more likely to get it right the first time. There’s nothing like having to buy stuff twice because you messed up. Stone recommends hiring a general contractor for most medium- to large-scale jobs.
Takeaway: Don’t DIY unless you really know what you’re doing. Mistakes cost more than hiring a pro the first time.
2. Hire the Right Experts
If you decide to forgo the general contractor route and hire individual workers yourself, it’s best to get at least three quotes for each service performed. Talking to professionals isn’t just about finding the most competitive price. It’s also an opportunity to figure out what services each individual contractor includes within his fee.
In fact, the least expensive contractor may be a warning sign for inferior construction quality or subpar building materials. A bid worth reviewing should include a line item for every charge.
“‘Everything’ means every detail, from [the] exact kind of sink fixture to brand of roof shingles,” says Dean Bennett, president of Dean Bennett Design and Construction in Castle Rock, Colo. Even the color of the outlets in each room should be included in the bid, he adds.
Takeaway: The more detail that’s in the bid, the more likely you’ll come in on budget.
3. Map Out the Project Step by Step (So You Don’t Miss Anything)
So, you’re planning to put up a backsplash. What do you need to put into your budget? The tile and adhesive, right? And that’s about it?
Try again. Big project or small, the more detailed your plan, the better prepared you’ll be for both the expected and unexpected costs that can (more like will) arise.
When estimating the cost of your project, consider the large expenses, like that tile and adhesive, but also remember the little items like sales tax, delivery charges, shipping charges, the float, caulking, cleaning materials, and more. For bigger projects, you’ll need to estimate engineering costs, interest costs, permit fees, and sewer and water tap fees, says Bennett. The more you can plan to expect, the better.
Takeaway: Don’t forget the “small” costs. Like pennies, they might not seem like much at first, but they sure do add up.
4. Know Where You’re Willing to Cut Corners — and Where You’re Going to Invest
Before setting a project budget, consider what features are most important to you. When it comes to allocating funds, ancillary desires should take second place to your overall project goals.
If, for example, your primary goal is to expand your cabinet space, how vital are custom cabinets or high-end finishes to that goal? “If you’re … OK with using stock sizes, you can save about 20% to 30% on your budget,” says Stone. So if your bottom line is to increase kitchen storage space, stay on budget by sticking with stock cabinets instead of paying more for custom.
On the flip side, if your goal is to gain more glam than storage space, custom cabinets may be where you want to splurge.
Takeaway: Let your goals drive your budget decisions.
5. Pad Your Budget
“For any large renovation, you have to plan for the unexpected,” says Stone. You could open a wall and find electrical work needs to be done. You could find that your chosen tile is on back order and your second choice comes at a higher cost. Stone suggests building a 10% buffer into the budget. Some experts suggest more — up to 25% for those with older homes. According to Stone, that cash cushion is used more often than not.
When the unexpected does arise, it can pay to keep a level head. “Even if you feel pressed for time, give yourself at least 24 hours to make an unexpected decision,” says Stone. When people are reaching their threshold for how long and to what degree they’ve had their house torn apart, “they rush into a decision,” she says. “They regret it almost 100% of the time.”
Written by Jimmy Moncrief
Most people want to invest in real estate and own rental property to increase their passive income and net worth.
What holds people back is that they feel as if they don’t have enough money to get started investing in real estate.
Most people have heard of the old saying “It takes money to make money”, but I challenge you to reconsider that belief.
Here are seven strategies to help you get started the rental property business.
1. “War Zones”
You can buy houses in Detroit all day for between $25,000 and $35,000. These properties generally rent somewhere between $600 and $800 a month.
The downside: These properties generally have maintenance issues.
I know, however, at least five investors who started with less than $20,000 and now own over 100 rental properties after buying in “war zones.”
2. Tax Liens
When you don’t pay property taxes for a year, your house can get foreclosed on by the local county government (or whoever is in charge of collecting property taxes). Generally speaking, counties don’t foreclose unless there is at least three years of unpaid taxes.
You buy the lien in this investment strategy (not the property). If the owner pays the lien, you get the money you paid for the lien back plus interest. If they don’t pay, you own the property after a year.
Sound too good to be true? It’s not. I know several people who have done this and have made some decent money.
The downside: There’s a lot of time involved with analyzing the liens and going through the process of taking ownership of the land. You also need to make sure you’re researching any title issues with the property. Most properties are tear-downs or land that is not build-able.
If you pursue tax liens, you might have better luck in rural areas. Major investors focus on large metropolitan areas and bid up the price to make the returns uneconomical.
3. Tax-Delinquent List
This strategy has you finding motivated sellers by searching your county property’s website for delinquent taxes. Here, you can even focus on high-end properties.
Every county is different, and some counties don’t even have a website, but here is typically how you’d go about your search:
- Find several streets in an area where you want to live.
- Search the county’s assessor of property website for those specific streets.
- Put in a spreadsheet of properties that were over two years behind on taxes.
- Write a letter to all the owners.
The downside: People who live in million dollar houses might be dismissive of you. Many might call you back, but it’s probably unlikely that most will want to address the property tax issue directly with you.
4. HUD Homes for Sale
You can search foreclosed homes on HUD’s website.
But how are you supposed to buy these homes with $10,000?
Here are two ways:
- Get a private loan for the rehab and the purchase. You can get private loans from a variety of sources, such as people you know and/or people who lend on individual real estate properties.
- Use bank financing and order the appraisal subject to completion. If the appraisal shows that you will build a significant amount of sweat equity, then the $10,000 down will probably be enough at closing. This depends on the purchase price and the lender.
The downside: There is a fair amount of paperwork and a lot of technical paperwork when buying a HUD foreclosure. And there is generally a lot of repairs to be made on these properties.
5. Eviction List
This is an underused source for deals. Going to eviction court is a great way to meet landlords who have had enough of the rental business. They are likely to sell using seller-financing. There are a lot of benefits with this strategy, as you can craft your own financing terms. Additionally, you likely have a very motivated seller, so you can purchase the property at a discounted price.
6. Property Management Companies
Property management companies are another source of deals. The property managers know owners’ intentions and whether they plan on selling. Additionally, they generally know how “motivated” sellers are.
Look on property management company websites. If they have a vacant property, particularly one that’s been vacant for a long time, look up who the owner is and call the owner or call the property manager to ask about the property.
This strategy allows you to go big early on. Maybe you know four people who can contribute $22,500, which gets you $90,000.
You contribute $10,000 for a grand total of $100,000.
Put the money in a LLC. Each person will own 20% of the company. The reason you didn’t have to contribute as much as the investors is that is you charged a deal fee for finding the deal and structuring all the work on the front end (finding the property, doing due diligence, financing with banks, and setting up a legal organization).
Many large multifamily investors use this strategy and charge the LLC a property management fee.
You can now buy a $500,000 apartment building with the $100,000 you raised by getting a $400,000 bank loan. Structure the bank loan so the property is able to cash flow with you being able to pay the loan to zero within 10 years.
Assuming zero appreciation and cash flow, in year 10, you will turn that $10,000 into a value of $50,000. Plus, you will have passive income from the apartments.
Credit to Jimmy Moncrief
Jimmy is a multifamily real estate investor and bank credit officer. He has written a complimentary bank negotiating guide on how to get around the 80% LTV rule
Written by Chris Deziel
Hardwood floor maintenance is a snap, and easier than up-keeping carpet. If fact, a minimalist approach is not only easier for you, it’s actually better for the floor.
Whether your floors are real hardwood or laminate, it’s important to keep them free from gritty dirt that can scratch the finish. Beyond that, your floor should need only an occasional wipe down to keep it as shiny as the day you moved in.
Floor maintenance is critical if you expect to get your full security deposit back at the end of your lease. If your floors that have been finished with some type of polyurethane — which is most of them — they do not need waxing.
Here are six ways to protect and maintain hardwood floors.
1. Clean the Finish — Not the Wood
It’s rare to come across floors that have been finished with shellac or alkyd varnish, but if the floor in your rental unit is one of them, get specific cleaning instructions from the landlord when you move in.
In most cases, you’re cleaning polyurethane, an inert layer of durable plastic that’s water- and stain-resistant. Polyurethane, however, is vulnerable to microscopic scratches from dirt ground in by foot traffic.
2. Vacuum Regularly; Mop Occasionally
Even if you observe a shoes-off protocol, it’s a good idea to vacuum at least once a week. Use a soft vacuuming attachment, and leave the beater bar off. (The beater bar, while great for carpets, scratches floor finishes.) Don’t cut corners: lift the floor mats — otherwise knows as gritty dirt magnets — and vacuum underneath them.
Water is a universal solvent that dissolves scuff marks and stains, but it’s an enemy to hardwood floors. If left standing, it can dull the finish and create spots. Even worse, it can seep between the boards and wreak havoc on the wood, causing the boards to warp.
A microfiber string or pad mop with most of the water wrung out is best. Dry the floor with a non-abrasive cloth after mopping.
3. Use a DIY Floor Cleaner
Commercial hardwood floor cleaners are safe and effective, especially if you use one recommended by the manufacturer of your flooring. You probably don’t need one, though, because you can make a pH-neutral cleaner that does the job.
To make floor cleaner, mix the following ingredients in a bucket:
- 2 gallons warm water
- 1 ounce dish detergent
- 1/2 cup vinegar
Vinegar is slightly acidic, which is why it’s a good cleaner. But not every floor manufacturer recommends using it because it could dull the finish. Minimize that from happening by applying the cleaning solution with a damp mop, rinsing with clear water, and drying the floor immediately after mopping.
4. Get Rid of Stains on Hardwood Floors
If you have pets and kids, your floor will likely wind up with super stains, stains so powerful that an all-purpose cleaner can’t even remove them. The trick to handling tough stains is to find a solvent that can dissolve them without damaging the floor finish. Here are three:
- Isopropyl alcohol (rubbing alcohol): removes juice and wine stains. Moisten a rag and dab or rub. Stop immediately if the finish turns soft. That means it’s shellac, and you need those cleaning instructions from your landlord.
- Acetone (or nail polish remover): the go-to solvent for paint and lacquer stains. It will also handle some juice stains. Pour it on a rag — never directly on the floor — and dab.
- Hydrogen peroxide: rids your floor of some pet urine stains and the resulting blackening of the wood (as long as the spots are fairly small). Moisten a rag and leave it on the stain for a couple of hours.
Got white spots caused by standing water? Cover them with petroleum jelly, olive oil or mayonnaise. Then put a paper towel over the stain and wait overnight. The oils will seep into the finish and replace the water. In the morning, the white discoloration should be gone.
5. Avoid Sun Damage
Direct sunlight fades floor finishes and darkens the wood. If you get lots of sunlight through the windows, change the positions of your rugs and the furniture periodically to avoid transition lines caused by sun exposure. If the sun shines on a particular area of the floor every day, use curtains or shades to block it.
6. Try DIY Restoration
Refinishing the floor or restoring the finish is usually a job for the landlord. If your floors need this treatment when you move out, you could lose your security deposit if you damaged the floors more than simple wear and tear.
It’s possible to do a quick restore yourself using a floor restoration product. The procedure is simple: clean the floor and spread the product according to the directions.
But if that doesn’t work, and you damaged the floor, the money to fix it will probably come from your security deposit.
Credit to Chris Deziel
Chris has owned and managed 4 rental properties in Santa Cruz, CA, and Salida, CO and is a DIY handyman expert for popular sites like RedBeacon.
One of the basic principles of universal design, also called ageless design, is that it makes homes more practical and safer for everyone — not just the elderly or people with limited mobility.
These days, universal design features are an everyday fact of life for many households, with architects and other professional designers adding universal design ideas as a matter of course.
You don’t have to be a pro designer to incorporate this smart thinking into your own home. If you’re remodeling or simply adding a few upgrades, be sure to keep universal design features in mind. There are lots of resources that’ll give you some great starting points.
As we remodel our 1972 ranch-style house (we’re on the multi-year, budget-as-you-go plan), my wife and I have incorporated several low-cost, easy-to-do UD features. A few of our favorites:
1. Switch out doorknobs for lever-style handles. Doorknobs require lots of dexterity and torque to open; with levers you simply press and go.
Makes sense for folks with arthritis, of course, but think about an emergency situation when everyone, including small kids, needs to exit fast: A lever handle is a safe, foolproof way to open a door.
A big plus: Levers are good-looking and can contribute to the value of your home. A standard interior passage door lever in a satin nickel finish costs $12 to $25; you’ll pay $25 to $50 for a lockable lever set for your bath or bedroom. Replacing door hardware is an easy DIY job.
2. Replace toggle light switches with rocker-style switches. Rocker switches feature a big on/off plate that you can operate with a finger, a knuckle, or even your elbow when you’re laden with bags of groceries.
Rocker switches are sleek and good-looking, too. Ever notice how conventional toggle switches get dirt and grime embedded in them after a couple of years? No more! You’ll pay $3 for a single-pole rocker switch, up to $25 for a set of three-way switches.
3. Anti-scald devices for your bathroom prevent water from reaching unsafe temps. An anti-scald shower head ($15 to $50) reduces water flow to a trickle if the water gets too hot. An anti-scald faucet device ($30 to $50) replaces your faucet aerator and also reduces hot water flow.
Anti-scald valves — also known as pressure-balancing valves — prevent changes in water pressure from creating sudden bursts of hot or cold water. An anti-scald valve ($80 to $170) installs on plumbing pipes inside your walls. If you don’t have DIY skills, you’ll pay a plumber $100 to $200 for installation.
4. Motion sensor light controls add light when you need it. They come in a variety of styles and simple technologies. I like the plug-in sensors ($10 to $15). You simply stick them into existing receptacles, then plug your table or floor lamps into them. When the sensor detects motion, it turns on the light.
They’re great for 2 a.m. snacking, or if your young kids are at that age when they migrate into your bed in the middle of the night. The lights turn off after about 10 minutes if no more motion is detected.
Credit to John Riha
John Riha has written seven books on home improvement and hundreds of articles on home-related topics. He’s been a residential builder, the editorial director of the Black & Decker Home Improvement Library, and the executive editor of Better Homes and Gardens magazine.
In examining how the Internet of Things will change the way people buy, sell, and manage property over the next few years, it’s clear that the universe of Internet-enabled devices and beacon technology could also change the way the industry organizes itself.
In case you missed our print feature examining the Internet of Things (or IoT) and real estate, here’s a quick recap of how this technology works: Smart devices record and transmit data in a variety of ways, and many of these devices are focused on improving consumers’ interactions with homes and businesses. One familiar example is the Nest thermostat (created by a company recently purchased by Google). This device allows users to control the HVAC system of a home remotely, using a smartphone. But for a device to be truly “smart,” it needs to be more than a glorified remote control. The Nest learns a household’s schedule and programs itself based on its owners’ habits. Individual users can set baselines about how much water or electricity they want to use, but the device can also coordinate these commands with data from the National Weather Service or a city’s electrical grid to help conserve energy and save money. Beacon technology is another facet of the IoT world. These small devices, usually powered by Bluetooth low-energy technology, can be mounted virtually anywhere and transmit information about the environment to nearby receptors (usually to mobile devices via app software).
Organizations can also use this emerging technology to better serve members and event attendees. Beacon technology has already been used to enhance trade show and meeting experiences at the Las Vegas and San Diego convention centers, among others. Beacons can deliver location-based information to visitors, gather audience feedback in real time, and offer smarter, faster ways to register for and network at large gatherings.
Just as increased information about homes captured by Internet-enabled devices can help listing agents market properties better, and just as environmental data captured by municipal smart devices can help buyer’s agents determine the best neighborhoods for their clients, so can IoT help associations improve the member experience. The California Association of REALTORS® is building a warehouse of sorts that will merge some of the more traditional member information, such as designations and committee involvement, with data that tracks member behavior, like interactions with webinars, e-mails, and zipForms. The association hopes to use the data to help them make more informed, strategic decisions about member benefits and engagement.
“This year, we’re going to start looking at correlations between behaviors and trying to determine what we can learn about that in order to make our investments more effective,” says Josh Sharfman, CAR’s chief technology officer. “What can we do to make members more productive?”
Sharfman sees the potential in using beacon technology to proctor educational courses. Beacons can be set up to record when particular people enter and exit a room, allowing associations to set up a check-in process during a board of directors meeting or continuing education class.
“Of course, there is a creepiness factor to being able to follow a person around at all times. But when it comes to a committee member, who is being paid for their time, being able to account for whether or not that person is in the room when they say they are is a pretty reasonable use of the technology,” says Sharfman.
Technology experts at the National Association of REALTORS® are also watching these developments closely.
“I think NAR will get into the IoT game in the near future,” says Chad Curry, managing director of NAR’s Center for REALTOR® Technology. “It has the potential to improve member experience and value.”
Curry adds that IoT data could someday augment the research department at NAR or other associations. By using predictive analytics carefully, the tracking of industry trends could benefit from information gathered in real time by Internet-enabled devices.
“We might be able to see a recession coming faster if we notice that there’s less traffic on Michigan Avenue,” Curry says, referring to the iconic stretch of high-end retail known as the Magnificent Mile in Chicago. “Maybe there’s a specific store, even, that signals that.”
Making Listing Data More Valuable
Though beacon technology is still new, it’s already being used to augment home tours. Avid Ratings, a customer loyalty management firm for homebuilders based in Madison, Wis., launched an updated version of its home tour software at the International Builders’ Show in Las Vegas this January. Called GoTour Onsite, the new version uses beacon technology to enable house hunters to tour a model home on their mobile device. As they enter each room, customers can immediately access floor plans, options for customization, and videos that provide in-depth information about hidden aspects of the home, such as building materials and HVAC systems.
Folding this type of data into a multiple listing service feed could be game-changing. MLS listings could be augmented with data feeds from outside sources, perhaps allowing buyers who gaze out a “smart” window to see up-to-date municipal information about how much traffic goes by, or to have the area’s Walkscore pop up on their mobile device when they’re standing on the front porch. Sharfman says he sees this technology as an opportunity for MLSs to add real value to the home tour experience, especially for the luxury market in California. Such smart home tours could even be produced using information pulled directly from an MLS listing, making the home marketing task a bit simpler for individual real estate pros.
The data flow could theoretically go in both directions; while MLSs could provide and package new information about for-sale properties, they could also collect information about transactions that could prove to be useful for MLS members. An MLS could use beacons or Internet-enabled lockboxes to record how much time house hunters spend in each room, helping listing agents better position a property for sale based on real-time feedback from buyers. By having this data on all homes in the MLS, members could get an idea of how many minutes of attention their listing has gotten compared to other homes on the market.
Of course, the development of such complex data-sharing systems may be awhile off, depending on the pace of development both within the technology sector and in associations and MLSs.
“It’s going to take effort and investment to make it work on all sides of the deal. It requires a sophisticated real estate professional to add in data streams, as well as some of the narrative information about what it’s like to actually live there that sellers may tell the listing agent,” says Sharfman. “But it also requires a dedicated MLS to make sure all these data streams work together and feed up information in a useful way that home buyers will actually enjoy interacting with, rather than seeing it as a distraction.”
Todd Carpenter, NAR’s managing director of data analytics, also views this as a way to shift the value proposition for real estate professionals in the future.
“The piece of the pie that is MLS data is getting smaller,” Carpenter says. “If you’re selling yourself, you can say ‘I’m the one who can help you decipher this expanding data,’ instead of ‘I am the one who can show it to you.’ The person who only has the keys to the MLS is not going to be successful in the future.”
While the complexity of the task ahead is great, so too may be the rewards. Curry agrees that the Internet of Things is ripe for organizational investment. “This is a beautiful time to be working on this. Listing data is almost passé right now [and] home performance data and behavioral data are going to become key,” Curry says. “If the MLSs and the associations and portals were to get into this market, it could be a real boon for the industry.”
Meg White is the managing editor of REALTOR® Magazine
With 20+ years working in the real estate sector, most of my best (and favorite) clients have been the result of someone else’s referral.
In any given year, 85% – 90% of my business is directly attributed to referrals. Imagine what your business would be like if every day your phone rang or your inbox received new messages from people who already trusted you because they heard great things about you?
It’s called building a referral-based business and it’s easier than you might think! Here are 3 tips that have helped me build a referral-based business that thrives.
Tip 1: The Relationship
The relationships you build with your clients are vital to your business. Most agents and investors tend to focus more on the transaction rather than the relationship with the other parties involved with the deal. Transactions come and go, but relationships can last for an entire career and beyond.
Building trust, keeping the client’s best interest at heart and doing the right thing is the foundation for building a lasting relationship. It’s easy to feel compelled to get the latest tool or gadget that will solve all of your lead-generation problems. The issue with this approach is that most real estate professionals fail to develop lifelong relationships that can result in far greater business success over the long term. While many buyers go online to search for properties, the majority of them will be happy to continue working with the person who provided them a great service and opportunity in the past, not a stranger who electronically reached out to form an e-relationship.
Tip 2: Build a Reputation People Can Count On.
When someone refers a friend, family member or colleague to you, they need to be assured you are going to provide the level of care that they were promised – so it’s important that you build your reputation around what you can deliver.
Building a reputation can be as easy as just doing what you say you’ll do. When you commit to a task and follow through, it builds trust. It is important to note that you must be consistent and don’t over-promise. If you commit to something, you must see it through or risk losing trust. Most people are quicker to share a bad experience than a good one, so you must understand your capabilities and act in accordance with them. If you’re not able to help, offer them a solution or refer them to someone who can.
Tip 3: Stop Prospecting and Start Cultivating
How should you spend your marketing time and effort? The answer is simple: build relationships, serve your customers and ask for referrals.
When you focus your attention on your relationships, generating leads is more fun too! You’ll look forward to picking up the phone to chat with them and you’ll enjoy taking them to lunch. Lead-generation won’t be a chore, but an opportunity to connect with some of your favorite people. What better way to replicate your best clients than by spending time with them? Here are some ways I have found success in generating referrals:
- Make the call. Sometimes there is a specific reason for a follow-up call with a past client, but often you are just calling to check in and talk about the market or a home you saw on caravan. So many times I’ve made impromptu calls and heard them say, “I was just thinking about you, my friend is planning on selling”. It is a win-win and I am more than happy to take the information and follow-up. The important thing is that you are calling to remind them you are still there. If someone doesn’t hear from you, they’ll assume you’ve moved on. It’s the single most important reason for the call.
- Write a hand-written note. Set a goal for how many notes you want to write each day and write your daily notes before you check your email. A good hand-written note only needs to be two or three quick sentences… simple phrases like “Thinking of you today” or “It was nice talking with you” will suffice! Everybody appreciates a handwritten note.
- A short visit to your key referral sources. For example, in the autumn season, you can drop by with a pumpkin carving kit. Over the Fourth of July, you can bring a BBQ item or an American flag. The point is for you to get face-to-face time with your current and potential clients and when you’re working by referral, face-to-face communication is the best by far.
So there you go – 3 tips that can help you build a business that levels out the peaks and valleys of real estate sales. Before I sign off, I will say that it is important to set goals and stay at it. Implementing a referral-based business takes time, so track your activities and be consistent with your prospecting. These efforts will help you achieve your goals and before you realize it, daily lead-generation, client calls and handwritten notes will become part of your subconscious.
Credit to Kathleen Finnegan
Kathleen Finnegan brings more than twenty years of selling real estate, office management and investment ownership to her role as real estate agent at Berkshire Hathaway Home Services in Calabasas.