In light of the Thanksgiving season, today I want to send you a simple message of gratitude. My team and I have had the pleasure of working with many great people in 2019, and we want to thank you from the bottom of our hearts. We wish you a happy Thanksgiving, a happy holiday season, and all the best for the new year. As always, if there’s anything we can do for you—whether it’s helping you with your real estate needs or providing a recommendation—don’t hesitate to reach out to us.
Accessory dwelling units (ADUs) have been a hot topic in the real estate world lately.
Since the passing of Senate Bill 1069 in September 2018, there are more opportunities for people to add ADUs (granny flats, in-law quarters, etc.) to their properties and to do so legally. This is a huge benefit considering our current housing crisis.
What is an ADU, though? Specifically, it’s a converted space on an existing property—such as a basement, attic, garage, or an attached room with separate entrances—or a separate detached unit built onto that property. Each property has different requirements, and each area within that property has different requirements too. Furthermore, each city or county may put specific restrictions on ADUs. Right now, though, these restrictions are very much in flux, and we expect that to be the case for the next three to five years.
If you’re thinking of building an ADU on an existing property, there are a few requirements you still need to be aware of.
The first is that the homeowner must live in one of the two units on the property—either the accessory unit or the primary home. Next, keep in mind that some areas do not allow short-term rentals. Additionally, the state mandates that the build size can only be between 1,200 and 1,500 square feet.
There’s no set value in terms of how much an ADU can increase your property’s worth.
Other factors to consider include:
What kind of fees are being charged—some cities look at ADUs as a way to make more money
If you live near the beach and whether or not there are any coastal restrictions
Parking requirements
The fact that, generally, your ADU can't be more than 50% of the size of the primary home
Before you start building, you should also ask yourself what your goals are. Are you looking for extra income, or to have a family member live with you but not under the same roof? Are you planning on building the unit for yourself as something to eventually downsize into?
If you’re looking to buy a property to convert instead of converting an existing one, there are a different set of variables to keep in mind. First of all, you need to make sure the property is zoned for single-family homes. Next, look at what type of garage it has. A garage is one of the easiest and least-expensive conversions you can do to create an ADU. Some areas that have parking restrictions don’t allow garage conversions, but otherwise, this type of conversion typically costs between $90,000 and $100,000.
Also, check whether or not you have enough lot space to build your ADU. And how about the neighborhood in general? Is it walkable? Is it close to easy transportation and commerce centers? Obviously, the nicer the neighborhood, the more you’ll be able to charge if you plan on renting your unit.
Depending on your specific requirements, a standalone unit will cost you upwards of $150,000, but there’s no set value in terms of how much an ADU can increase your property’s worth because there aren’t a lot of properties out there to compare it to. That should change as the years go by, though, and in any case, the real return on investment comes from the rental income you can derive from it.
If you have any questions about this topic or you’re interested in finding a property that has great ADU potential, don’t hesitate to reach out to me. I’d love to help you.
During the winter months, we saw a rapid decline in the number of pending sales and listings, in general, on our market. This also led to a drop in the average sales price, a development that starkly contrasted with the peak we saw last year.
Now that we’ve reached spring, though, conditions have started to recover. Prices still haven’t risen to the $771,000 peak we saw in 2018, but they have at least climbed back to an average of $729,000. Of course, it’s important to keep in mind that conditions vary by area. So the market trends in your neighborhood may be slightly different from what’s described here.
2019 is going to be a great time to make a move, whatever your real estate goals may be.
Moving on, we’re still waiting for inventory to pick back up. Per the usual seasonal cycle our market follows, however, we can expect a boost later this month or sometime soon after. With that said, now is a great time to list if you’ve been thinking of doing so. By putting your home on the market before inventory increases, you’ll have a better opportunity to stand out and earn top dollar.
Overall, despite the fact that our market has remained very similar to what we saw during winter, small improvements have taken place. Homes are spending an average of just 26 days on the market, and are selling for an average 96% of their list price.
The bottom line is that our market this year is set to stay relatively flat. After all, much of the reason for plummeting prices in months past was the spike in interest rates that occurred over that time, but rates are holding steady now. This is great news for buyers, who will be able to leverage this higher affordability to secure a home at slightly higher prices.
All in all, 2019 is going to be a great time to make a move, whatever your real estate goals may be.
If you have any other questions or would like more information, feel free to give me a call or send me an email. I look forward to hearing from you soon.
Though we’re in a softening market, here are five tips you can still use to help get your home sold quickly:
1. Price it competitively. This will open the market up instead of narrowing it. You’ll receive more viewers coming through your home, and the more people coming through your home, the better the chances someone will fall in love with it and write an offer. You might even generate several offers!
2. Make pricing adjustments fairly quickly (if your home is already on the market but you’re not getting any offers). Don’t let your home languish on the market, because as each month passes, prices will drop even further. If one of your neighbors needs to sell their home quickly and they have to drop their price, for instance, you won’t have any control over that. Don’t just drop the price by $5,000, either. If you’re not getting any showings or offers, you’re generally between 3% to 5% overpriced.
The more available your home is for showings, the higher the number of buyers who can see it in person.
3. Declutter and depersonalize it. If you haven’t already, take some time to put away the extra items lying around your house. That kind of stuff can distract buyers and make your home seem smaller. You want buyers to be able to visualize themselves living in your home, and decluttering and depersonalizing will do the trick.
4. Make sure it’s available for showings. The more available your home is for showings, the higher the number of buyers who can see it in person. If you can’t show it at certain times, make sure to let your agent know so they can plan accordingly.
5. Offer incentives. You could include closing cost credits or offer furniture or appliances you won’t be taking to your next home, for example. If you live in an HOA neighborhood, you could also offer to pay your homeowners association dues for the first year. Don’t be afraid to get creative.
If you have any more questions about how to sell your home in our current market or you have any other real estate needs I can take care of, don’t hesitate to reach out to me. I’d love to help you.
For today’s video, I’ve invited Jeanette Coffey of Sunrun to join me to discuss the benefits of installing solar panels on your home and what your purchasing options for them are.
First, from a real estate perspective, you need to keep in mind that solar panels only add value to your home if you own the solar panels. Many solar companies, for example, will try to convince you to use HERO or PACE loan programs to buy solar energy, and these loans come with hidden costs. While they don’t require any money up front, they do end up getting added to your tax bill. Also, interest rates are extremely high for these loans, so when the time comes to sell your property, you’ll have paid a lot more than what you expected.
One of the main benefits of using solar panels is they provide you with clean, affordable, long-lasting energy. Again, as long as you own the solar panels, that makes them a great investment option if you’re looking to add value to your home. That’s why if you’re considering buying a home that has solar panels, you need to know whether you would own the panels after purchasing or you’d only be leasing them.
If your electric bill is $80 to $100 per month on average, you should consider buying solar panels.
As we’ve already stated, you can either purchase or lease your solar panels. If you use financing to purchase, instead of paying a monthly utility bill, you’d make a monthly loan payment. That way, every time you make a payment, you’re investing in your home instead of paying a utility company. In this case, you’d pay zero money down and own the solar panels.
You can also lease your solar panels with zero-down financing. In this case, you pay the solar company for the power and the energy output is customized and controlled so you know exactly what you’ll pay on a monthly basis.
According to Jeanette, the best time to buy solar energy is as soon as possible. Whether you’re better off purchasing or leasing that energy depends on your situation, but if your electric bill is $80 to $100 per month on average, you should consider buying solar panels.
If you have any more questions for Jeanette about solar panels or you’re interested in purchasing them for your home, you can call her at (562) 221-1802 or visit her Facebook page “Solar Jeanette.”
As always, if you have any real estate questions for me, feel free to call or email me. I’d love to help you.
When it comes to renting out a property, there’s a big difference between just being that property’s owner and being a successful landlord.
If you want to be a rental property owner but you don’t want to deal with managing the property, you may want to consider hiring a property manager, because being a landlord involves more than just sitting at home and collecting rent checks. A good landlord knows how to communicate effectively with their tenants and sense their problems before they become problems.
That being said, here are the nine traits that commonly make a good landlord:
1. Organization. No tenant wants to hear that their landlord has lost their rental agreement, or worse, their rent payment. A good landlord is well-organized and can access and reference any documents they need to whenever necessary.
2. Being able to keep timely maintenance. Obviously, repairs will need to be made from time to time, so getting them done quickly and doing preventative maintenance is essential to being a good landlord. Maintenance issues are one of the most common complaints tenants make, so you need to stay on top of them. If your work schedule is too busy, it might not be in your best interest to manage your property yourself.
3. Respectfulness. Obviously, no tenant likes a landlord who’s rude, condescending, or judgemental. A good landlord cultivates an atmosphere of respect by acting with complete professionalism, keeping their distance, and being kind and honest.
A good landlord has mastered the art of communication.
4. Trustworthiness. Tenants aren’t stupid; they’ll be able to tell if you cut corners. They have to be able to trust what you say, and likewise, you have to show that you trust them. You can’t be constantly checking whether they’ll pay their rent on time or doing what they’re supposed to do. It’s not naive to think that at some point someone may try to take advantage of you, but you have to trust your tenants.
5. Reliability. A solid presence is way more important than you realize. Many landlords end up becoming absentee landlords, and that’s when their properties become run-down. Your tenants need to know that they can rely on you, so answer the phone when they call and remember to call back if you’re unable to. Also, remember to follow through when you make a promise.
6. Transparency. Tenants should always be aware of what’s going on with your property, so don’t try and hide things from them. If there’s a mold or pest infestation, they have a right to know. If this kind of thing happens, just explain what’s going on and how you’ll fix the problem. No one likes to hear that their home has a problem, but they’ll respect your honesty and integrity by trying to solve the problem quickly.
7. Being able to keep an appropriate distance. Your new tenant is not your new best friend, so keep an appropriate and respectful distance from their lives. Even if you share the same space as them, it doesn’t mean you need to be nosy or micromanage their actions. Nobody likes a landlord peeking over their shoulders all the time, so you should only intervene if there’s a pressing problem or the tenants ask you to get involved.
8. Flexibility. It’s important to stick to your contract and hold your tenants accountable to the rules, but that doesn’t mean you can’t also be a little flexible. We’re all human, and a little compassion goes a long way. If you have a renter with a good payment history who suddenly misses a payment because of a family emergency or a lost job, cut them a little slack until they’re back on their feet.
9. Communication. A good landlord has mastered the art of communication, so answer questions quickly, address concerns thoroughly, and inform tenants of important dates and maintenance work being done. Keeping tenants in the loop makes it easier to establish good relationships and keep them happy.
If you’re still unsure whether you’d make a good landlord or not, feel free to give me a call or send me an email so we can talk more about this subject and help you decide if it’s something you want to do.
As always, if you have any other real estate questions, don’t hesitate to reach out to me as well. I’d be glad to help you.
I’ve run into a couple of situations recently where a parent transferred a property to their child prior to passing away.
For a property to be transferred this way, there is specific paperwork that must be filled out. This paperwork is needed to exclude the property from additional taxes.
Let’s say I plan to transfer a property to a friend, and I bought that property back in 1990. This property is worth much more today than it was at the time of the purchase. If I transfer this property to my friend, even if I give it to them for just $1, the new tax base would still be reassessed at the current estimated value of the property.
If this same scenario were to occur between a parent and child, or between a grandparent and child, there is an exclusion which can be applied to ensure the child has the same tax base their parent or grandparent had at the time of purchase.
This process allows people to transfer property without the use of a trust.
The required paperwork for this process can be obtained from the county assessor’s office.
This process allows people to transfer property without the use of a trust. A trust can, however, be a good way to meet the same goals while avoiding certain costs and tax ramifications.
Take the following scenario as an example of when a trust might be preferable: If a property being transferred is not a primary residence, it may be counted as an income property. This would make the property subject to capital gains tax if it were ever to be sold.
Before you make the decision to transfer a property, it’s important that you discuss all of your options with a professional.
As always, if you have any other questions or would like more information, feel free to give me a call or send me an email. I look forward to hearing from you soon.
How are refinances affected by the new tax laws?
Recently, I was sitting down with a family member discussing whether they should move into a new home that was already fixed up or if they should refinance and take money out to fix up their house. In their particular case, it may make sense to stay where they are, but if you’re in a similar situation, I’d be happy to sit down with you and go through the information and see what your options are.
One of the things The Tax Cuts and Jobs Act changes is how the mortgage interest deduction is affected. It is still possible to refinance and pull cash out of your home if you’re making significant improvements to your home and you write off the mortgage interest.
You can no longer deduct the mortgage interest on cash-out refinances unless it’s being paid out to make significant improvements on your home.
If you’re just looking to consolidate some debt or pay off some credit cards or medical bills, you can absolutely still do a cash-out refinance on your home and pull that money out. Chances are that the interest rate is going to be lower for the debt you’re paying down. However, you can no longer deduct the mortgage interest on cash-out refinances unless it’s being paid for to make significant improvements on your home.
Let’s say that you have a mortgage for $400,000 and you want to pull out $100,000. $50,000 of that will go toward paying off some debts, and the other half will go toward fixing up your home. In this situation, you’d only be able to write off that $450,000 mortgage interest, not the additional $50,000.
It can get a little bit complicated, so be sure to check with your accountant or CPA when you’re doing your taxes to make sure that you’re doing it correctly.
If you have any questions or want to see if either refinancing your home to make repairs or making a move is the better option for you, feel free to reach out to me. I’d be happy to look at those numbers for you.
Have you heard about recent laws that passed requiring certain water conserving features in single-family homes here in California? Here's how they might affect you.
Some new laws have recently gone into effect relating to water conservation here in Southern California. Today I wanted to talk a little bit about these laws and some features you can use to help conserve water.
You may not have heard of this law, but it was recently passed and states that every home built before 1994 in California must have water conserving features. To comply with this, single-family homes should have these features.
Many people have had questions about this and how it could affect their home sale. For example, some sellers are wondering if there are any special disclosures they must make. Technically, the law requires you to disclose if there are any non-compliant plumbing fixtures in the house. If you're unsure, you definitely want to check with a plumber or licensed professional.
The new law requires every home built before 1994 to have water conserving features.
Another question I get a lot is whether a homeowner has to install any of these features if they're selling their house. The good news is that you can sell your house as-is, but technically, you are in violation of the law by not installing those features. In that case, it could become a negotiation point during the selling process.
If you want to install these features to make sure you're in compliance with this law, reach out to a local plumber or contractor, or go online and find out the exact specifications of these features so you can do it yourself if you're a handy person.
If you have any questions about this law or you're thinking about buying or selling a home in our local market, give me a call or send me an email. I'd be happy to help!
Today I’m joined again by Greg Cash of Greg Cash Tax Plus to answer the question, “How much of an impact can the mortgage interest deduction really make on your monthly payment and how much will you come home with every month?”
First, what’s the main difference between a renter and a homeowner? When you’re renting, all your money is benefiting the landlord and you’re not getting anything in return. You’re probably paying as much for rent as you would for a house payment, so it might not be a bad idea to think about becoming a homeowner and converting that rent payment into a house payment.
Now, let’s lay out a hypothetical scenario to answer our question of the day and let you see how it works.
Let’s say a person was going to buy a $500,000 house. For added context, let’s say this person was single and earning $100,000 a year at their job, which would put them in the 25% to 28% tax bracket. In buying this house, they’re going to put down 20%, or $100,000. At a 4.5% interest rate for a 30-year loan, their monthly payment would equate to roughly $2,000 a month. The interest they would pay in the first year would be almost $18,000, or close to $1,500 a month.
Buying a home opens up a whole new world of tax deductions and benefits.
If you’re in this specific tax bracket, how much could you potentially reduce your taxes if you bought a home? Depending on where you’re at with your holdings, you could save $5,000 to $10,000 in the tax liability itself as a result of the mortgage interest and all the other deductions you’re now able to take. Lowering your taxes by $10,000 over the course of the year equates to about $800 a month. That reduces your $2,000 a month payment down to $1,200 a month.
There’s a whole world that opens up as far as deductions when you buy a home. Because you’re responsible for your own property taxes, those can be deducted. If you previously had to do the standard deduction amount on your tax returns, you can now include any charitable donations, any possible medical expenses if you’re not covered by insurance, and your vehicle license expense.
You may have heard a few radio commercials lately explaining how you can write off hero loans and pace loans. According to Greg, despite the fact that these loans are wrapped into your property taxes, they are not deductible. Don’t believe the hype.
A special thanks to Greg for joining us once again today. If you need any more information about this topic from him, you can email him at greg@gregcash.com or give him at call at (562) 597-4300. If he’s not available, you can call his assistant Matt Coulombe at (562) 597-4600.
If you have any other real estate-related questions, feel free to give me a call or shoot me an email. I’d be happy to help!
Today I’m joined by Greg Cash from Greg Cash Tax Plus to talk a little bit about the most common tax deductions people miss out on when they’re buying or selling a home.
As far as buyers go, one of the most common write-offs that get neglected are loan origination fees. They usually miss out on this deduction because they associate loan origination fees with the closing costs. As long as they’re not a part of the amortization of your mortgage payments, however, they are deduction.
Two more deductions for buyers that usually get passed over are the prorated interest that might be included in the HUD form and the property taxes allocated between the time of purchase and the time of payment. In selling the home, a seller may include a percentage of what they paid for property taxes on the HUD statement as part of what you had to pay them back. You get to take that as a deduction on top of the property taxes that you would ordinarily take as a result of the purchase of the home.
As far as sellers go, any costs you incur in preparing the property for sale (painting, upgrades, repairs, etc.) are deductible. If you’re a single person, you get a Section 121 exclusion of up to $250,000. For married couples, that amount goes up to $500,000. In deciding whether to include those costs in the sale of your home, it’s important to examine whether or not it’s really going to impact you as far as being able to take that exclusion from your capital gain income.
If you’re a seller, any costs you incur in preparing your home for sale are deductible.
If you’re a single person and fixing up your house to be sold and you want to lower your gain, you can take that $250,000 plus repairs or just the $250,000. The $250,000 is what’s automatically excluded. If your capital gain exceeds $250,000, you definitely want to make sure you capture all of those additional costs that are incurred with the sale of the property. As we all know, sellers are typically responsible for the payment of the commissions, so that’s usually a very large amount of money you can deduct as part of the cost of sale.
Additionally, there is no time limit in which you’re required to reinvest this money from one primary residence to another. This rule changed a couple decades ago because people weren’t accurately accounting for the actual basis of their homes when calculating their capital gains. Before that, the trend was to buy upward so you could avoid any current year gains.
Now, gains for all properties are recognized in the year of sale. You don’t have to worry about purchasing up or down because it’s all based on your purchase price plus adjustments (or improvements to the home), and the difference between the basis of your home and what you sell for will determine what that actual gain is.
If you have any other tax-related questions, you can call Greg’s assistant Matt Coulombe at (562) 597-4600 or call Greg directly at (562) 597-4300.
As always, if you have any real estate-related questions, don’t hesitate to give me a call or shoot me an email. I’d be happy to help!
As we reflect back on the past year, we want to thank you—our past clients, friends, and family—who have referred us all our business. Thanks to you, we were able to help more than 50 families buy and sell homes. Our business relies on you, and we wouldn’t be where we are without you.
We hope all your wishes come true in 2017.
On behalf of myself, Kerry Castillo, Angie Middough, Dawn Brooks, and the rest of us at the Elmer Team, we want to wish you and your loved ones Happy Holidays. We hope all your wishes come true in 2017. If there’s anything at all we can do for you real estate-wise, let us know. Just give me a call or shoot me an email, and I’d be happy to help. Have a great, safe, and wonderful holiday season!
I’m joined today by Bart DeLio of Farmers Insurance thatinsuranceguy@yahoo.com to talk a little bit about what to look for in a homeowners insurance policy and what these policies generally cover. In many cases, your home is the most expensive thing you’ll ever own, so it’s worth it to make sure that you’re covered.
What does your homeowners insurance actually cover? Bart says that at its most basic, homeowners insurance covers the building itself. For this reason, you’ll want to make sure that your insurance company is using a replacement cost program with a rough idea of what the replacement cost would be for your home.
Bart cautions that in California, the land is usually worth more than the buildings themselves, so sometimes homeowners may find themselves paying upwards of $1 million for their property, only to find out that the house itself is worth less than $400,000 to replace.
Valuables like guns, jewelry, and collectibles should be covered separately.
Homeowners insurance also covers personal property, which is typically 55% to 75% of what is on the home-building section of your policy. There are certain limits that come with this, however. Bart defines “personal property” as essentially anything that falls out of the home if you were to turn it upside down, which may include clothes, silverware, and furniture. Valuables like guns, jewelry, and collectibles should be covered separately. Theft, fire damage, and water damage are some of the most common occurrences that are covered as well.
Something else that homeowners insurance policies cover is loss of use. What this means is that if you are not able to use your house due to a covered claim, like fire or water damage, your insurance will pay for you to stay somewhere else. This is an invaluable part of homeowners insurance coverage because even minor claims could cause you to have to leave your house for months at a time which could potentially cost you thousands of dollars.
Liability is also included in a homeowner’s insurance policy, which will cover bodily injury and property damage to other parties anywhere in the world. Bart explains that if you were to run somebody’s foot over with a shopping cart, for example, your homeowners insurance would cover it.
Bart advises reviewing your homeowners insurance policy with your agent, especially if you decide to make any improvements or renovations to it that could change its value.
If you have any other questions about homeowners insurance and what it covers, give Bart a call at 562-433-0300 or send him an email at thatinsuranceguy@yahoo.com. If you have any other questions about buying or selling a home in our market, don’t hesitate to reach out to me as well. I’d be happy to help you!
A lot of clients have asked me about Airbnb, which has become very popular these days. It's important to consider the insurance implications of vacation rental services like Airbnb, so I've brought in an expert.
Today I wanted to talk about the pros and cons of Airbnb. I'm joined by Bart DeLio of Farmer's Insurance for this topic. For example, I've had many people asking me about buying condos and if they can rent them out on Airbnb. Many condos actually prohibit it. Insurance-wise, there are some things you need to watch out for. As Bart says, your home is probably the biggest thing you'll ever own. As soon as you put your house up as a vacation rental, you're turning it into a business. You need to look at it as a business in terms of taxes and reporting the income you'll get from it. You also need to modify your insurance accordingly. Your regular homeowners insurance policy does not cover business pursuits. There are policies that will cover you for this, but they have certain limitations. It's difficult to get coverage for single units, like a single rented room, for example. Airbnb has something called Host Protections Insurance, which is a program that Bart likes because it fills in some of the loopholes we see in policies for condos or other rented units. It doesn't eliminate all condo issues, though.
Consider all the risks before renting your home to a stranger.
The Airbnb policy covers things like bodily injury and property damage to a third party. The biggest thing that it doesn't cover is loss of use. If you have a fire at your house, for example, and you can't use the house for six months, your regular insurance policy will pay for you to stay somewhere else for six months. Airbnb does not cover that loss of use. Just like any business, there are risks involved that you need to consider carefully before you rent your home to someone you don't know. If you have any insurance questions, you can reach out to Bart at 562-433-0300 or thatinsuranceguy@yahoo.com, or you can visit his website. As always, if you have any questions for me, give me a call or send me an email. We would be happy to help you!
When we die, someone has to take over our property. It's not a fun thing to think about, but it's necessary.
Looking to buy or sell a home in South LA County or North Orange County?Click here to perform a full home search, or if you're thinking of selling your home, click here for a FREE Home Price Evaluation so you know what buyers will pay for your home in today's market. You may also call us at (562) 316-2915 for a FREE home buying or selling advice.
When we all die, somebody has to manage the property that we own. I know this isn't the most pleasant thing to think about, but it's important. This is especially true now because California is introducing a new Deed System. A Deed Upon Death will automatically transfer your property to a person that you designated before your death. This allows you to bypass the probate process and your property will automatically be transferred.
There is a little more that I will have to tell you about this alternative, but I would love to speak with you about it. Probate can get very tough sometimes, so I suggest exploring this option! I look forward to speaking with you.
