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5 Key Issues for Keeping Your New-Build Budget on Track


Five practical areas to discuss with your designer or to keep in mind when plan shopping for your new home project. Here they are and not in any particular order.

Roofline

The steeper the roof the more the cost in most cases. If you have noticed lately, there are allot of new home developments where the roof of the home is quite high and large. This is usually because the home itself is a smaller square footage and the roof makes it look bigger. Always remember that the roof area equates to more sheets of plywood, more shingles and more labor. Gable roofs are less expensive than hip or cottage roofs. I suggest a 6/12 roof slope or less to keep the roof cost on budget. You might want to discuss this with your designer.

Windows/doors

This is a crucial part of design. Let’s look at a few things that effect overall cost. Obviously the amount of windows, size of the windows, whether they open or not, as well as rounded top glass will effect your budget. The average home usually has 12-15 windows. Opening or venting windows cost more than a fixed or picture window. Rounded glass can cost as much as double the cost of an average window so use them sparingly. Wood windows usually cost more than conventional vinyl (PVC) windows. A door example is a double French exterior door is more expensive than a standard patio door.

Wall heights

The trend in the new home building industry today is to design and build with 9 foot walls and ceilings. This gives a home larger feel vs. a traditional 8′ wall height. This will affect the cost of the finished home as there is more wall area for drywall, siding, etc. In a 1500 square foot home or less, I would recommend 9′ ceilings to take advantage of the space. Two story walls, referred to as balloon framing, really adds to the cost of framing.

Vaulted ceilings

This is a raised ceiling in the home, usually going to a peak. It is a great idea to integrate into the design if you want the cost of standard 8 foot high walls with the higher vaulted ceilings giving the perception of a lager space. There are typically two types of vaulted trusses used in a new home design. The first on is the Scissor truss vault which gives a gentler raised ceiling and is less expensive, and the second is a cathedral vault which typically is a full height vault with a ridge beam. You see these allot in a Chalet style cabin. (steeper vault)

Foundation

A full concrete foundation (8 foot basement) in most cases will cost more than a crawlspace or slab foundation. If you don’t have allot of storage designed into the home, a full foundation may be required and is also a great re-sale feature. A sloped lot may accommodate a day-lite or walkout basement option as well. Basement development, as well as extra space over a garage, are the least expensive ways to add square feet to a home.

So if you are about to get plans designed for your new home or just looking for a plan online, keep this five points in mind. Your wallet will thank you.

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2008 07 01 Mark Owning property
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Santa Fe Real Estate

Santa Fe New MexicoWhile we’re currently seeing a nationwide decline in real estate values, and a much cooler market than just 6 months ago, Santa Fe in New Mexico is still going strong. I find this a bit surprising, but the city has some great things going for it.

There’s a lot of culture available, and with New Mexico getting plenty of Southern California professionals moving there after retirement, the number of cultural events and venues is always increasing.

For the same reason, the job market is holding up pretty well. Yes, most of the jobs are in the service industries (to serve all those retirees, no doubt) but also plenty of telecommuting and professional jobs are available.

Somewhat affordable housing. The bubble didn’t quite break the affordability barrier in Santa Fe, so while it hasn’t fallen as far back as many other areas, it never got all that stratospheric either. Combine that with Santa Fe NM land being reasonably cheap, and it looks to stay that way for a while. Although there are new planning regulations in the works, which will cut sprawl and likely send housing costs soaring, so get in to that market now.

Buying real estate in Santa Fe doesn’t even have to be taxing, as there are a number of very professional real estate agents in the city. I’ve been in touch with a number of Santa Fe New Mexico MLS agents by now, and my impressions are good. So far, I’ve not found the right investment for me, but I’m keeping my eyes open for opportunities.

There’re plenty of both commercial and domestic real estate on the agents’ books at the moment, including some repossessions, so do check with the local estate agents now.

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2008 05 22 Mark Buying property
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Purchasing International Real Estate

Interested in investing somewhere other than your back yard?

Management companies have made it as easy to have a revenue property across the world as it is to have it across the street. You don’t want to be collecting rents and plunging the toilets no matter where it is!

Different laws in different countries means some research is definitely in order. Some countries don’t allow you to own the land, you have to lease it. Check on title insurance to make sure you really own it.

And just as people have bought swamp land in the United States, you need to actually visit your property - look at it, make sure that it is in a good area, and looks to be a good investment.

Pictures can be very deceiving, and if your lot is next to the city dump, for example - it’ll be hard to make a profit on it! Put at least as much effort into buying a $200,000 piece of real estate as you would into buying a $10,000 used car. You’d definitely want to see it, inspect it closely, go for a spin around the block and see how it performs on the highway. Okay, that’s tough to do with a piece of land, but take a walk around, get in an inspector, ask the neighbours what they think.

Probably the most important aspect of buying a property in another country is the managment company. If it is rented out, and rents rise, over time, the property will pay for itself, and pay off the mortage. In other words, with rising rents, you basically get revenue properties for free, over time. The renters pay your mortgage.

But…

If you have tenant troubles, people moving in and out and big costs for re-renting, repair and renovation on an ongoing basis, let alone outright destruction - you may never see that happy day when the mortgage is paid off and some appreciation has occurred. The management company is either really good, concerned about your investment, or it is careless. Over time, this is the most crucial part of your investment, and should be very closely looked at. Talking to other clients is a quick way to get a read on their performance, and you should ask for these types of references.

Any real estate investment needs to be held on a long term basis to allow rising rents and rising property values to almost automatically make you money. A short term hold goes against these trends, especially when you factor in realtor fees, and development company profits if it is new construction. Make sure that it will truly be a “hands off” investment, and hopefully it will yield some headache free profits!

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2008 05 15 Mark Buy to let
Buying property
Foreign property
Owning property
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How to Decrease the Value of Your Own House

Owning a house is part of the American Dream. Depending on where you live in the US - home ownership can be around 70%. That means that 70% of people own their own home. That is very high compared to other countries. Owning a home is usually a nice piece of independence and also part of building a nest egg for retirement. Home ownership is considered an investment. But then it is surprising how many home owners treat their own home as if it would be something they don’t own.

Imagine the case of a lady in Highlands Ranch, Colorado. She bought a ranch-style home in late 2004 for $265,000.00 - mainly financed through a mortgage. She owes about 95% of the house value to a mortgage company. Highlands Ranch, Colorado is a covenant controlled neighborhood. Strict rules are in place of how to maintain a certain level of landscaping and to keep the property in shape (+ many more things). The covenant rules give a development a more standard appearance, and control some of the activities that take place within its boundaries. When enforced, covenants protect property values. When buying a house in Highlands Ranch the new owner agrees to obey the covenant rules by contract.

The lady from our example above decided to let maintenance of her landscaping slip. The grass was growing out of control. Then summer came along and as she did not have an automated sprinkler system for her yard no watering was done at all. This took care of the fast growing grass in a certain way. The grass started dying in the dry Colorado summer. The outside appearance of the former $265,000 home took a toll. Currently a real estate agent estimates the value of this house in question at $250,000.

The lady from our example took her home and did not treat it as an investment. If she would have to sell her home now she will have difficulties to receive her invested money back. If she would continue to treat her home not as an investment she will eventually turn the investment into a liability and risk her credit history. Especially as her home is in a covenant controlled area she faces extra cost associated with her house. The covenant community association can even put a lien on her home and enforce the covenant rules by sending in a landscaping company to fix the problem - at the owners expense.

In our example the Highlands Ranch Community Association has started the initial process of getting the property back on track. A dated notification has been send to the home owner to bring the property back into compliance with the rules.

Overall - if investing money and letting interest in maintaining the investment slip, means the person involved is throwing money out of the window. If you have enough cash this is not a problem but who has enough cash to do this? Buying a house means to take on the burden to maintain it. Failing to do basic maintenance means to lower the value of the property.

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2008 05 11 Mark Home staging
Owning property
Real estate investment
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Real Estate Investment Options

Real estate investments come through a variety of different options. However, whether it is a vacation property, a first home, an early retirement house, or a rental property that you find appealing, real estate investments are all the rage, and are still one of the safest investments available, especially in our less-than-perfect economy.

One of the most accessible investments for the average American is more common than most residents realize. A first home offers a lot of advantages over renting. Building up home equity, utilizing tax advantages, and appreciation in home value are only some of the things that make common homes into great investment opportunities. The best market to look for when buying a home is a stable one, with average rates of appreciation. A stable market will provide a safe investment a few years down the line.

Vacation properties or second homes provide an excellent investment opportunity for individuals with the extra income to spend on another property. However, vacation home buying is often fraught with mistakes when it comes to the investment value:

  • It is a common error to believe that locations with extreme demand and skyrocketing rates of appreciation are the best for investment. Don’t allow yourself to be fooled. Markets with unreasonable demand and unaffordable home prices like these will be unable to sustain this type of growth. Unstable markets run the risk of leveling out, or worse yet, crashing. Your best option is a stable market with average rates of appreciation, roughly around 5%.
  • Buyers of vacation homes often pay above market value for the property. While this relates directly to the markets where vacation homes are most popular where the competition drives prices far above listing price, it is still something within the hands of the buyer. Choose an area with less of a seller’s market, and never pay above market value if you hope to make an investment out of your property.

Buying a rental property is often a real estate investment for an entirely different reason. While most properties become an investment through the resale value, rental properties generate income for the owner during the period of ownership. The same guidelines apply as with buying other realty properties, but also remember that the best rental property owner is one with the time to invest. Experts warn that you should only buy a property when you are willing to put years into your new rental property. It is also important that you have extra funding when going into the deal. You will probably need to make renovations, updates, and repairs as time goes on.

Regardless of your reasons for deciding to purchase an investment property, the options are numerous, and opportunities are growing with time. Of course, it is important that any prospective buyer consult with a real estate professional, finding a qualified buyers agent can save an individual from making the costly errors often forgotten when purchasing a real estate investment property. Of course, the best reason to buy such a property is because you have the time and desire to enjoy, and the desire to make an average house into a great home.

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2008 05 07 Mark Buying property
Property finance
Real estate investment
Real estate marketing
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Follow-Up - The Key To Closing Successfully

If everyone always did everything they said they’d do, we’d all be a lot richer. Unfortunately, tasks are overlooked, and the ball is often dropped. If you want to have successful closings, you must have strong “follow-up” skills to catch problems early in the process. Follow-up on everyone and everything.

I can’t begin to tell you the number of closings that almost fell apart, or would have fallen apart had I not kept a watchful eye on the entire process to make sure that everything was completed when it needed to be.

Here’s a typical scenario: you’re wholesaling a house and you have just 30 days to get it closed before the contract with the seller expires. You find a buyer who can get a loan and close before the expiration.

Then a few days before closing you find out that the loan isn’t ready and closing must be delayed two weeks, but the seller already has another buyer ready to pay more than your price, so they refuse to extend your contract. You just lost the deal.

So what is follow-up?

I used to think it meant staying in touch with the buyer to make sure that everything was completed for the loan. Then I learned that the buyer is often a newbie and clueless of what needs to be done. Mortgage brokers just usually respond “Everything looks great” until they can’t close the loan. So the real trick to following-up is to speak to the final decision maker for each step. This works whether you’re selling a retail house or a wholesale house, or even if you are the buyer/borrower. The goal is to close without delays.

Assuming that you have already received a pre-qualification letter from the lender, and ensured that the lender will loan on the deal (i.e. no issues with title seasoning, assignment fees, inhabitability of the property), the first step is to follow-up with the broker/lender that all of the application paperwork was submitted, and have they forwarded it to the lender?

If not, what is still required? Determine if the lender requires a termite letter, appraisal, and a survey (most lenders do). If so, have they all been ordered? When is each to be completed? Keep following-up until you verify that each has been delivered. You also want to verify that the appraisal was sufficient for the loan.

If I don’t already own the house, I order a title report as soon as I go under contract with the seller to discover any defects early in the process, and begin resolving them. Closing attorneys usually do not order the title report until just before closing to receive as current information as possible. But if they find problems, it could delay your closing. It is well worth the $125 to run title ahead of time, and eliminate delays.

Once the broker has forwarded the paperwork to the lender, the next step is to verify the loan has gone to underwriting.

If not, what is the delay? If so, was the loan approved? Do any conditions need to be met? What are they and who is handling them?

Make sure that once the conditions are met, the loan is returned to underwriting and approved.

Verify that the closing has been scheduled with the attorney, and that they have cleared title. Find out if and when the loan package will be forwarded to the attorney. Then remind all of the players of the date and time of closing, to bring a picture ID to closing, and to bring any funds required in a certified check.

This seems like a lot of work that should be handled by other people, but the reality is that often times something is overlooked. Through your diligent follow-up efforts, problems will be detected early and corrected, allowing your closing to occur flawlessly and on schedule.

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2008 05 03 Mark Buying property
Real estate investment
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