. . . or soon will be.

We used to live in one of the coldest areas of the country. Our heating bills for a 1,200 square foot house ranged from $225 and $275 a month during the winter. We now live in a state with a more mild winter and our heating bill never really goes over $100 in a month. Needless to say, in our former home, we did everything possible to hold costs down and even though our current heating expenses are not as great, we still take measures to reduce heat loss.

Here are a few of our tricks. Some are worth more than others and many of you will probably be able to add to the list. I will start things off:

• Lock all windows. Leaving a window unlocked will allow more cold air to flow around it. Locking windows was a part of my routine in late fall and will even improve the performance of modern, gas-filled, double-paned windows.
• Make sure that glass pane on storm doors is closed. During warm weather months, we sometimes get in the habit of leaving the solid panes open in order to take advantage of the breeze that flows through the screen. I often see homes where the owners have forgotten to close the pane when the heat is turned on.
• Doors present one of the most difficult insulating problems for modern homes. Put a “draft snake” in front of doors leading to the outside – especially doors that are not used often. If the “snake” is in the way or kids constantly move it or play with it, close it in between the door and the screen door. It will serve the same purpose and be invisible to anyone in the interior of the home.
• We used to turn the heat off when we left the house – with two caveat’s. There are instances when more heat is used in the warm-up after you return home than if you had let the furnace maintain the temperature in the home while you were gone. Secondly, make sure that you do not have any pipes that might be easily frozen. We never had frozen pipes in our old home, even though we regularly turned the heat down to 50 degrees F when it was -20 and -30 outside.
• In our old house, the whole family slept upstairs, so there was no point in heating the first floor. This will not work for everyone, but we turned the house heat way down – usually under 60 degrees – and used space heaters upstairs to make up the difference. The sleeping area upstairs was quite cozy.There are some low cost heaters that are quite safe, but you need to experiment and make sure that the space heater is not using more energy than the furnace would use.
• It is amazing the difference that a few more clothes can make – slippers, a sweatshirt, etc. My personal favorite is a long sleeve t-shirt.
• Again, might not work for everyone, but the more people who sleep in the same room, the warmer they will stay. Not just because of the extra body heat, but because it reduces the number of rooms that have to be heated. In our old home, our family of five slept in two rooms. Mostly because that is all the rooms we had, but we only had to heat those two rooms .
• Closing drapes and shades will help to insulate a house, keeping warmth inside and cold outside.
• A lot of old homes have doors in places where they are no longer needed. In our old home, we had one such door and I placed a 3 inch sheet of styrofoam insulation between the two doors. We never used that entrance and the styrophoam made the space almost as airtight as the rest of the wall.
• Insulate, insulate, insulate! Between floor joists, in walls, more fill in the attic, on top of the basement wall, around the dryer vent, there are all kinds of little nooks and crannies that could use a squirt of Great Stuff foam sealant or a few tufts of fiberglass insulation.

Do you have any more tips to add?

Article by Stew

Photo by ansik

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I was talking with a co-worker recently who was preparing to purchase his first home.  He recently got married, and has been renting for a few years.  He felt that he had a good down payment and with the economic stimulus benefits for new home buyers, now was the time.  I couldn’t disagree with him, for him it was time.

Now is a great time to buy a house, but there are some very common new home mistakes that I shared with him and will share with you as well:

Get Pre-Approved

Most new home buyers don’t understand the difference between being pre-qualified vs. pre-approved.  A pre-qualification is just a mathematical formula that mortgage companies use that serve as  guide to how much home you can afford.  It is in no way a commitment that you can actually get that amount of money.  A pre-approval is just that, a commitment from the mortgage company that they will loan you the money.  Being pre-approved will not only allow you to focus on the homes you can actually afford and are approved for, but can often give you more negotiating power as well.  It’s similar to purchasing a car and bringing cash with.  Something about having cash in hand sure can motivate a seller to negotiate!

Closing Costs

We made this mistake too.  Everyone always focuses on the purchase price and down payment, and seems to forgot how expensive closing costs can be.  Beyond the down payment, you will need extra funds to pay your lawyer’s fees, property taxes, land transfer taxes, etc.  There is a ton of little fees and costs that most new home buyers don’t consider.  Your real estate agent can give you a very close approximation of what the costs will be.  Once you make the offer and begin the purchase process, your lending company will provide all of the actual costs for you.  Just don’t forget these additional costs, and make sure you have the cash available so you can close.

Shop around

The mortgage business is very competitive and by shopping around you can often save yourself a significant amount of money through lower rates or even deals where the mortgage company will pay your closing costs.  Many first time home buyers to to their bank, take the first deal that’s offered.  Don’t make that mistake.  Shop around.  Use the internet to find available deals and competitive rates.  Call the various local banks and ask them for their rate.  Have a lower quote from another bank or mortgage company?  Ask them to beat it.  Just like anything else, a little negotiation can go a long way and on a 30-year mortgage a few interest rate points can save you a significant amount of money.

Think about resale now

I know it’s difficult to think about right now, but you will sell your home someday.  Given this is your first home, statistics show you’ll sell it in about 4-5 years which isn’t long.  Make sure you don’t fall in love with what you think to be the perfect house, only to turn around a few years from now and be upside down on the value.   Consider the potential resale value of your home in 5 years and make sure you’ll either break even, or better yet profit from the sale.  This will enable  you to purchase an even nicer home next time.  Again, a good real estate agent can help you determine the potential resale value.

Use a buyer broker

We made this mistake.  We purchased our first home in a new development and the selling agent worked for the builder.  We worked directly with that agent as our buying agent as well.  Lesson learned the hardway.  In this scenario, the agent is not working for you, but for the builder.  They won’t act in your best interest, and frankly we were border lined scammed on a few things.

When buying your first home, find a buyer’s broker.  This will be  real estate agent that will sign an agreement to work in your best interest.  A good and ethical agent will truely do this as well, even at the cost of their own commission.

Skipping the home inspection

Here’s another mistake we’ve made: skipping the home inspection.  Regardless of whether the house you intend to purchase is new or used, have it inspected by an independent and licensed inspector.  Again, your real estate agent can recommend someone.  While it will be expensive (ours was around $500 on the home we now live in), it was worth the weight in gold.  He found a number of items in the home that we made the sellers repair before moving in.  The inspection also provided us with tremendous piece of mind that the home we were buying didn’t have any significant, hidden issues.

Photo by: Nadia308

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We’re going to Disneyland!

Okay, not quite, but the prospect of facing the next month without a house payment, insurance premium, property tax, gas bill, water bill, heating bill, softwater rental bill and other miscellaneous maintenance costs sounds like a trip to paradise – or at least a couple of days off.

Last week, we closed on the home that we have not lived in for sixteen months. The closing documents were overnighted to us earlier in the week and Mrs. Stew and I signed the papers, had them notarized and then sent them back across the country with our fingers crossed and our hearts in prayer.

I am looking forward to completely revamping our family budget and finding some positive numbers at the end of the month. I actually have fallen behind in keeping track of our budget, the news was just too grim. Next week I will know the final numbers on the damage that this episode has done to our finances. We are definitely in the red, but things are not nearly as bad as they could have been after sixteen months of owning a home in one state while renting in another. Some reasons for thankfulness:

• We were never late on a payment of any kind.
• We never bounced a check.
• We are only about $6,000 in the red on our overall annual budget.
• Our credit score is still quite healthy.
• No foreclosure, no default, no bankruptcy, no short sale.

I have started to reorganize our system for keeping track of our finances and setting priorities for the next couple of years. Here are our financial priorities beginning next month – this is assuming that my wife takes the job opportunity that has developed.

First Priority: 0% APR Balance Transfer

One of the ways that we have made ends meet since we ran out of money in March is by virtue of a 0% balance transfer onto one of our credit cards. This money is interest free until March of 2010. We want to completely pay off that debt before interest starts to accrue. The total debt is around $15,000, we currently have approximately $10,000 on hand. This is a risky strategy that I do not recommend to anyone even thought it seems to be working out for us. If our house had not sold . . . if my wife does not work . . . if I lose my job . . . we could be “up a crick” as they say.

Priority #2: Emergency Fund

We have exhausted all of our emergency fund, savings, cash, etc. The only liquid money we have left is the balance transfer money. This needs to change – quickly! My goal is to have a three month emergency fund saved up before we start to attack our other outstanding debt in earnest.

Priority #3: Retirement

Some of you may remember that we cashed out about two thirds of our small retirement savings back in March. This fall, both my wife and I plan to max out our employee matching opportunities at work. My employer will match up to 5% and my wife’s job will match up to 3%. Lord willing, we will catch up on our retirement savings in a hurry.

Priority #4: Debt Reduction

Beyond the balance transfer we have a number of debts that I consider “bad” debt. I hope to pay off what remains of our home equity loan first, then we will go after our car loan, then my wife’s student debt.

We do not plan to enter into another mortgage for a long time. What is your #1 financial priority?

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Someday, I hope to own another home, but not until I am good and ready. We are quite happy with our rental situation at the moment.

When we purchased our first home, after a year of marriage, everyone told us what a great decision we had made – “It’s the best investment you can make . . . we were married for ten years before we could afford our own home.” I am not opposed to home ownership. Under the right conditions, I think it is a great idea, however, it is important to recognize that as a culture we have been conditioned to think that owning your own home is the pinnacle of human existence. The problem is that in the past, when a person owned a home, they truly owned it – now the definition of home ownership has become “living in a building owned by a bank”. And that building, owned by the bank always seemed to cost us just a little more.There were many things that I did not understand when I signed the documents that committed me to live in and care for the bank’s home for the last eight years. The biggest factor that I did not completely grasp was the true cost of home ownership. I soon came to realize that owning a home costs just a little bit more.

Loan Approval and Shopping for a Home

When you go to the bank for loan approval, the monthly payments always seem to be a few dollars higher than you were originally told. The realtor will always show you homes that are just a little bit more than what you think you can afford.

Mortgage

Understand all of the components of your mortgage payment – everyone knows about principle and interest, but make sure you know if you are subject to private mortgage insurance or PMI. PMI can add anywhere from $20 to $100 per month to your monthly payment. Your broker will tell you “it’s just a little bit more“.

Closing Costs

Yes, they were all there on the little sheet, the whole list, but when we bought our first home, I never really looked at the entire picture. I saw all the relatively small amounts – $50 here, $250 there, $75 again, but each one was just a little more out of pocket cash or making my monthly mortgage payment just a little higher.

Property taxes

Property taxes are a major deal killer in my book. In the state where we lived, our taxes were almost double the amount that they would have been in any other state. Be sure to use this in figuring the cost of home ownership. Taxes are always just a little bit more.

Insurance

I think my homeowner’s insurance was reasonable. I think we were getting a good value for our money, but sometimes insurance is not always something that new homeowner’s think about critically. To them it’s just a little bit more.

Maintenance

I really underestimated how much money we would spend on maintenance costs when we became “home owners”. There are so many things that the house needs, things break, improvements are needed and it’s all just a little bit more.

Utilities

We did everything we could to reduce utility costs in our home, but we never seemed to be under budget. Cold winters, hot summers and everything in between all served to squeeze just a little more money out of us.

Here is the point, new, potential homebuyers need to look at ever single expense as a lump sum before making the decision to buy. I do not believe that my wife and I would have become home owners eight months into our marriage if we had added the following costs:

• Principle
• Interest
• Private Mortgage Insurance
• Homeowner’s Insurance
• Soft water softener rental
• Heating bill
• Electric bill
• Water bill
• Maintenance costs – lawn care, exterior, interior, systems repair, cleaning

Add that stuff up, look at that number and if you still think you want to buy the house – great! But be sure to add just a little bit more.

Photo by jamiejohndavies

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I am on the road once again and my internet is a little shaky, so I am not going to run the post that I had originally planned for today. Furthermore, Sheila asked for a housing update on this post and since there have been some developments, I thought I would write about our house once again.

As most of you know, we have been trying to sell our house in another state for 15 months without success. A month ago, I was trying to decide what to do. My attempts to ask our second mortgage holder to release the lien on the home in order to allow it to sell in exchange for my promise to still repay the money were unsuccessful. It seemed like we were going to have to stop making payments and suffer the consequences.

Offer still pending

At the last minute, we recieved an offer – not for the amount of money that we owe on the property, but an offer none-the-less. We requested a short sale from our second mortgage holder, asking them to settle the debt for approximately one third of what we owe them, but it seemed like they were not interested in anything less than the full amount. I then learned that the mortgage holder had insurance on the note that would only pay out if there was a short sale, a default or a foreclosure. Those were all options that I have been trying to avoid. We have good credit and I want to keep it that way.

Short sale or no short sale?

In order to avoid a true short sale, we would have had to come up with approximately $12,000 out-of-pocket on the date of the closing. I was making preparations to do this via a 0% APR balance transfer. A risky strategy, certainly, but I could not afford to risk losing a potential buyer while the mortgage company dragged its feet making a decision.

Falling into place

And then, out of the blue, the company holding the second mortgage called me and agreed to accept the short sale amount on the date of the closing AND allow me to repay the balance of the loan over time.

This will allow us to protect our credit from the effect of  short sale or default and allow us to sell our home – exactly what I had asked for originally!

Still hanging on

I have scraped together enough money to keep all of our payments, insurance, taxes, etc. current through July in order to not jeopardize the proceedings. I have had to incur some debt as a result, but it will be worth it if the house is finally sold. You might recall that we had planned to stop making payments in June. If this offer to purchase falls through, we will be in worse shape than before.

So, we are on pins and needles while the buyer lines up financing, conducts the final house inspection and bank appraisals. We are praying and hoping that things proceed according to the plan that has been laid out and we hope to conclude this matter three weeks from now.

We covet your prayers.

Photo by L.Marcio_Ramalho

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We haven’t fully given up selling our house, but we’ve entered into a contract with a property management company.  Our old house is for sale and for rent at the same time.  The really good news is that we have a potential tenant already and if all goes well, they should sign a lease this week.  No more stressing about two mortgages!

Property Management Companies

Property management companies are companies that take care of  “land lording” and marketing your rental house for you.  They do this in exchange for a % of your monthly rent, and depending on the company they may charge additional fees as well.  Here are just some of the services provided by typical property management companies:

• Marketing of your for rent home
• Tenant screening, including background and credit checks
• Rental contract enforcement, including handling any required legal action
• Providing 24×7 support and maintenance (although you’ll pay maintenance fees)
• Collecting monthly rent
• Dealing with problems and home owners association issues
• Holding the deposit

Basically, a property management company becomes the landlord for your rental property or properties in exchange for a portion of your monthly rent.  Some will also charge additional finders fees for marketing your home, and some will offload various fees to you such as legal fees, background checks, etc.

Reasons to consider a property management company include 1) just not wanting to deal with the headaches and overhead of being a landlord and 2) you live far enough away from the home that managing it and keeping up with it will be difficult.  Reason #2 is why I went with a management company.  I didn’t want to get a call at 3:00am that the water line broke and needed to be fixed NOW.  Nor did I want to deal with a tenant that wouldn’t pay their rent when I live 3 hours away.

How to choose a property management company

When selecting a property management company, it pays to shop around.  I called about 10 different companies before selecting the one we went with.  Here are just a few things to consider:

• How long have they been in business? – You want a company that’s been around for a while and knows the market and has good relationships with real estate agents in the area.
• Are they insured? – The answer to this will drive how much and what types of insurance you may need.  For example, what if a tenant sues the management company?  Could you be held liable?
• Are they experienced managing your type of property? – If you have a home, and the company does nothing but commercial property management, they are probably not the best option for you.
• If a tenant doesn’t pay, what do you do? – The company you are talking to should give you a very clear and specific response to this indicating they have procedures they follow.  These should include eviction notices and involving the Sheriff to forcefully evict if necessary.  Understand who pays these fees if that occurs.
• How do you select tenants, what is your screening process? – You want good reliable and safe tenants.  The management companies screening process will drive the type of tenants you get.  Again, they should have a good clear process that includes meeting personally with the tenants.
• Understand the charges by asking what types of charges are involved? – Of course you want to minimize your charges/expenses, but not at the risk of the company not doing a good job.  After all, nothing is free right?
• How do you handle maintenance and repairs? A good company should have a set of companies they work with and/or have on retainer.  This should include a general “handy-man”, plumber, electrician, and HVAC service company.  Make sure there are reputable people.  Understand how the charges will be handled and if you have the option of having the service done yourself by either you or someone else.
• How do you advertise? – The company should have a very clear marketing plan for you home and should even be able to tell you what works and what doesn’t.  Advertising should include both print media and internet marketing.
• Do you have references I can call? – This is critical.  The company should have a decent list of references and I strongly advise you to call them ask about what they like, what they dislike, have they had any problems, were they resolved, etc.

How I selected our company

I actually received 3 different property management company referrals.  One from my real estate agent, and one from another agent we were friends with in the neighborhood, and one from a friend at work that uses a company to manage his properties.  I also pulled a handful of companies out of the phone book.  I called each of them and had planned to meet the ones that passed the phone screen in person at my old home.  After the phone screens, I only found one company that I liked.  The others had too many fees, didn’t seem interested, or just seemed like “mom and pop” shops that did it part time.  Not what I wanted.

I met the owner of the company I went with at the house, he walked around, took pictures, and then we sat down and walked through the whole process.  He gave me a list of references which was 3 pages long.  The list included the mayor of the city we lived in, two famous Nascar drivers, several prominent lawyers and doctors, some other prominent public officials, and numerous other people.   We talked for a long time.  He walked through the contract in detail and discussed how various situations would be handled.

I called a few references the next day, including one of the Nascar drivers and received nothing but good reports.  No, I didn’t speak to the Nascar driver himself, but to his personal assistant…oh well.  I only got one complaint and that issue had been resolved and turned out to be a mis-communication.  I also did a quick check on any complaints to the better business bureau…none.  I signed the lease papers the next morning.

Property Management Company Fees

My property management company charges 10% of the monthly rent.  That’s it.  No finders fees, no surcharges, nothing.  Just 10%.  If I find the tenant, they reduce that to 8%.  I am responsible for eviction and sheriff fees if needed and any maintenance costs.   For a court situation, I am responsible for court cost only.  The legal fees are handled by the management company by a lawyer they employee.  The company manages over 600 properties in the area we lived, and also is a licensed real estate broker as well.

I returned home from the mountains very happy with my decision.  If all goes well today, I’ll have a signed 1-year lease for our home that covers our mortgage and all expenses.  I won’t be getting rich, but at least my out of pocket expenses are covered!

Have any of you used a property managmeent company?  If so, any tips for a n00b like me?  What is your primary selection criteria.  Share your thoughts and story, add a comment!

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Back in September, I wrote an article providing tips on how to sell your home fast in a buyer’s market.  These tips and suggestions were not only things I had personally done to the home we’re trying to sell, but also tips and suggestions from multiple real estate agents, friends, family and a significant amount of research and reading that I did on the internet.

While I still think these are excellent tips and things that really must be done in order to sell your home in the current stale market, they weren’t enough.  We listed our home in early August and haven’t received a single offer yet.  Right before school started was a fairly active time.  We were receiving on average 2-3 showings a week.  The problem was that we listed the home before we had done any of the things I suggested in my article.  Once school started, showings went down to about 1 per week and then continued to slow as we moved closer to the election and the Holiday season.

No showings in 3 weeks

As of today, we haven’t had a single showing in 3 weeks.  Our home is pristine: New carpet all around, complete exterior repainting and repairs, complete interior repainting, everything works and it’s clean.  Not only is it clean, it’s empty.  Now granted, maybe that might hurt it a bit, but only if people were seeing it, which they aren’t.

Is my agent not doing her job?

My first though was to question my selling agents ability and experience.  After all, she is new.  We discussed the lack of showings and I was surprised to find out that her entire office hasn’t had a single showing in two weeks.   This isn’t a small little office either, it’s Remax and they have more than 10 agents.  Talking to a few friends that are also trying to sell their homes, they haven’t had any showings either.

The market hasn’t slowed, the market has stopped.  Granted it is close to the holiday season and real estate sales tend to slow way up anyway, even in a good market.  But with our current market, it’s just not moving at all.

Alternatives to selling

Considering I am not able to sell, we’re looking now at renting.  This is something I had seriously considered before, but frankly chose not to as I just didn’t want to deal with the hassle.  I’m not really interested in real estate form an investment perspective, or should I say I wasn’t until recently.  Now?  Well, given the fact I can’t move my current home and I’m having to pay two mortgage payments, two sets of electric bills, twice the home owners insurance, and property taxes on two homes…I think it’s time to branch out my investing options.

Another option  would be to wait and sell later.  Even under the best of circumstances, it’s not a good time to sell: Winter time is generally slower and the holiday season is slower.  I could certainly financially afford to wait, but I just feel like I am literally burning money each month paying for a home I’m not using.

If you’ve been wondering about whether or not all of the nightly news features about the down housing market are true.  Wonder no more, they are dead on.  Houses just aren’t selling right now because there just aren’t any buyers.

I guess I’ll be calling my agent later this afternoon to discuss renting.  But, let’s look on the bright side: 1) I might be able to sell in a year or two and get far more for my home and 2) I’ll have something new to write about here on Gather Little by Little!

Have any suggestions or helpful tips for me about renting?  Are you trying to sell your home and feeling my pain?  Add a comment!

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As I sit here in my favorite easy chair, typing away on my laptop in the cool quiet morning, I’m surrounded by cardboard.  All of our belongings are safely packed away in various sized cardboard boxes.  Our shelves are bare, cabinets empty, and surprisingly there are no toys on the floor.  It’s all so weird.  We’ve lived in this house for more than 11 years.  We’ve brought 4 of our 6 children home to this house to raise them.  We’ve watched them grow here inside these walls.  Over those 11 years, this physical wooden box we call a house has managed to become a part of us.  A place of safety and security.  A place of laughter, sadness, of good times and bad.

Today we’ll be leaving that home.  I thought it wouldn’t impact me.  After all it’s just a house right?  Dave Ramsey always advises his audience and readers to never get emotionally attached to house.  I’m not sure that’s possible, at least for me.  I’ve put a great deal of time and sweat into this home to make it just the way we wanted it.  I know this house and know it well.  I could turn off our lights to the point of not being able to see at all and safely walk to any place in it with little hesitation.  I know it.

But in less than 3 hours, all of the boxes and furniture will slowly be moved out and into a truck to be taken to our new house some 3+ hours away.  We’ll be leaving our home behind and it’s sad.  Don’t get me wrong, I’m excited about our move and look forward to living in our new home in the mountains, but leaving this home behind is emotionally tough.  Leaving it behind feels like we’re leaving a part of our family behind.  I know that sounds a bit silly, but it’s the way I feel.  Maybe I’ve just become too comfortable here.

Since my financial epiphany and since beginning to listen to Dave Ramsey, I’ve always tried to look at our house as nothing more than an asset.  A large timber box on some property that provides us shelter and adds to my overall Net Worth.  Sitting here in the still of the morning, knowing that this is the last time I’ll writing an article in this home, I realize this house is far more than just a shelter.  This house far more than a timber box, but a small part of our family.  It’s our home.

We have tons of wonderful memories here.  Memories that will go with us to our new home, where I know we’ll create new memories, but that doesn’t really make me feel better this morning.  Leaving this home is though.  Far tougher than I thought it would be.

Don’t be fooled.  If you live in a house, it quickly becomes a home.  Once a home, it’s far more than an asset, an investment, or a wooden box.  Your home becomes a part of you and you a part of it.  I once heard someone say that an empty house has no soul.  I fully understand that saying now.

Good bye house.  You’ve been a good loyal friend.  We’ll miss you.  Please be as good to the new family that moves in as you have to us.  Shelter them, protect them, and give them good memories.  We’ll never forgot you.

Photo by: Menage a Moi

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What surprised me was that our mortgage company didn’t require an inspection, only an appraisal.  I went ahead and ordered the inspection anyway.  In the current housing market, the last thing I wanted to do is move into a home that might potentially have serious problems I wasn’t aware of.

The inspection

The inspection was done by a local housing inspector that lives in the area.  The report was created and placed online where I could read it and easily share it with others.  The report was full of detail, including tips and suggestions our inspector had for areas that weren’t really problems, but areas or items he felt needed repair anyway.

The report was broken down into multiple sections which I’ll detail below.

Roofing

We visited our new home a few times prior to making an offer.  I’m no inspector, but I’ve been around the block enough to know a little about what to look for.  During our visits, I paid particular attention to the roof, looking for signs of damage or water leaks.  I didn’t see any issues.  Our inspector checked out our roof as well.  He found it in very good condition and saw no signs of leaks or problems.

The only thing he did find was that in addition to the current satellite TV receiver, there had previously been another.  Rather than removing the brackets, the home owners had just left them there.  They are sealed and our inspector assured me they would leak, just having the extra brackets there bugs me.  I probably won’t have the sellers remove it, but at some point I’ll remove them.

Looks like the receiver that’s on there now is DirectTV.  Any concerns or feedback on DirectTV?

Exterior

The inspector verified all exterior components of the house, including vegetation and surrounding trees.  He specifically looked our the doors, windows, decks, steps, railings, driveway, retaining walls and anything else outside.  He only found a few minor issues.  The vent cover on the master bathroom vent cover is missing.  This would allow insects to potentially get into the house.  Given my fear of bees, I’ve requested that be fixed before we move in!

The grading of the driveway is decent, but where it meets the garage is a little high.  Our inspector said it wouldn’t be a problem unless we received a very heavy rain, but the potential exists for water to run into the garage.  He looked for signs of it having occurred in the past but didn’t find anything.  Again, another very easy fix and one we can do ourselves.

The only other issue, and this shows how thorough our inspector was, is that one of the deck posts isn’t secured enough.  This is a big issue as our deck is a good 10 feet off the ground (as you can see in the top picture).  I thought about asking the sellers to fix this, but honestly for the safety of my kids, I’ll fix this issue myself.

He even tested the garage door opener and verified the garage door seals where in good shape.

Interior

The interior section of the report was full of pictures.  Again, he was very thorough checking out ceilings, walls, floors, stairs, railings, counters, doors and windows.  Once again, problems found were very minor.  The counter top in the upstairs bathroom was never attached to the cabinet.  I’m guessing the home owner just forgot.  I’ll fix this one too, as it’s really easy.

The one issue he did find that I’ve requested the sellers replace is a cracked window in one of the bedrooms.

The inspector pointed out a number of other things that weren’t problems at all, but just things he wanted us to be aware of.  For example, upstairs the sellers installed a drop ceiling.  The inspector said it was installed too close to the ceiling joists and made the tiles hard to remove.  He recommended replacing it with a true dry wall ceiling for a nicer look.  I agree and we had planned to do that already.

He also pointed out a few doors that needed adjusting as well as they weren’t hitting the striker plates correctly .  Easy enough to fix!

He said all of the flooring, walls and ceilings were in excellent shape.  I was glad to hear the flooring was good.  The flooring is hardwood and could be expensive to fix if there was a problem.

The kitchen was also in great shape, with all the appliances working correctly and all of the improvements meeting local building codes.

Structure

The structure of the house is in very good condition.  A few of the basement cinder blocks have cracked, but the inspector assured me that this was very normal.  He suggested we apply some mortar to the cracks to fill them in and keep them from expanding further.  I’ll do this right after we move in.  The basement of the house is very dry (unlike the previous house we looked at).  Other structural components of the house were fine and had no issues.

Plumbing/Electrical/Gas systems

Again, no significant issues reported.  The sellers must have not finished their job to finishing off the upstairs area as many of the light covers and light fixtures were never installed.  Our inspector highly recommended having the sellers put covers on all of the switches, electrical outlets and junction boxes for light fixtures (or install light fixtures).  This is something we’ve asked the owners to do.

Plumbing was in great shape with the inspector only noting that one of the facets doesn’t stop appropriately and can be continuously turned from hot to cold and back to hot.  Again, no problem, just something he wanted us to be aware of.  He even took a picture of the water cut-off valve so we would know where it was at when we moved in!

The biggest issue with the whole inspection is the gas line that is ran to the gas fireplace.  Our inspector said it didn’t meet gas company standards.  He said it was safe, but if we ever wanted larger tanks beyond the small propane tanks currently connected that we would need to have the gas line re-installed.  You can see in the picture to the right how the line isn’t properly secured to the house.  We plan to use the gas logs in the winter, probably very frequently and had planned to have a bigger tank installed.  Repairing of the gas line is something we’ve asked the sellers to have repaired.

By the way, note the extra deck supporting on the end?  Can you say “future hot-tub” ???? 

Heating, AC, insulation, appliances

The heating / Central Air Conditioning system, insulation and appliances all checked out with no issues.  The only thing he did note was that the air handler for the heat pump system was difficult to access due to a wall the seller’s had built around it.  Again, not an issue just something our inspector found odd and wanted to mention.

Overall

Overall, we were very happy with the report.  There were no significant issues at all, and our home inspector was friendly, professional and put together a really great report for us.   The peace of mind alone was well worth the $325 for the inspection.  Things are finally coming together for us.  We are just awaiting the final appraisal now.  Assuming that comes back correctly, we’re good to close on October 23rd.  Yeah!

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This is a guest article by HIB who blogs at Happiness is Better about personal finance, real estate investing, early retirement, and being happy.  If you enjoy this article, make sure you head over and subscribe to his blog.

Real estate investing is a relatively simple business. It requires a lot of hard work – unlike how it is portrayed on television. Just like anything else, once you have a system in place everything gets a lot easier. The same can be said for any business venture or project whether it’s a blog or a McDonald’s franchise. It’s all about having a system.  What follows are some tips and strategies to help you get started.  Real estate investing 101 if you will.

Set some goals

One of the first things you want to do prior to investing a lot of your time and energy is to define some goals. In real estate investing, are you in it for the quick buck or are you looking for long term income? Perhaps you enjoy fixing up homes. Maybe you just see real estate investing as a means to an end. It’s taken me a while to figure out what I wanted. I’ve learned a lot, but because I did not set up goals, I didn’t know where I was going and I was easily distracted. During this process, to my dismay, I have quit and started real estate investing three times within the past 2 years.

Avoid the late night “gurus”

So, before you start making goals, DO NOT buy anything from a late night guru. If you want an honest opinion of a particular guru, go to www.johntreed.com. If you are really intrigued by a program, go to ebay and purchase it for a fraction of the guru’s cost.

Once you have NOT purchased a late night guru’s fluff, you need to set goals.

For this article, I’m going to assume that you would like to buy and hold a house as a rental. I will also assume that you are very busy with your career and do not have the time or money to market. A sensible goal for your first year is to purchase 1 property. I’ve chosen the “buy and hold” method because frankly, as of August 2008, it’s tough to sell a house unless you are owner financing the property. People are having a difficult time getting approved for loans right now. If people can’t buy a house, many of them still want to live in a house, so they choose to rent. Rental rates are on the rise which is making this goal all the more appealing (and realistic).

Purchase using a Realtor

The most time and money “efficient” way I know to purchase property to hold as a rental is to purchase using a Realtor. So, what should you look for in a Realtor? There are typically Realtors that work with investors and Realtors that do not. Obviously, you want to find the former. Two subgroups within Realtors that work with investors are Realtors that list houses and those that represent the buyer known as a “buyer’s agent”. Realtors that list houses have the best interest of the seller at heart. Those that represent the buyer, such as an investor, are required to represent the buyer and keep the buyer’s wishes a priority. In my opinion, it’s good to work with both. Networking is king. For more information on what to look for in a Realtor, take a look at a recent post, 13 Questions For Your Next Realtor.

As a new investor, when you begin working with a realtor, please be honest about your experience. If you’ve never done a deal, tell them that. If you aren’t sure what area to invest in, seek their advice. If you are not pre-qualified by a source of financing, you need to do so before working with a realtor. Also, realtors are professionals that earn a living by HELPING you buy and sell houses. Do not waste their time. Treat them like gold and they will reward you with more deals than you can handle.

Market analysts think the sky is falling in the real estate market. When I hear people talk like that, I know NOW is the time to buy. Now is when people build long term wealth. I’m in Texas so our market did not experience the enormous spike in appreciation that other markets did, but in the Texas market, now is the time to BUY BUY BUY!

Photo by Jef Poskanzer

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