Lee Morof's Real Estate Blog

Don’t panic, a looming recession may be good news for those wanting to sell their homes. The experts say this recession may happen in 2020, so there is still plenty of time to make plans for how to deal with a potential economic downturn.

In many parts of America, especially in popular cities, the real estate markets are super hot for sellers. Home sales are coming in at prices that are record highs. For sellers in these hot markets, it might be time to sell. For buyers, able to wait until next year, the prices may come down.

What The ‘Experts’ Say

A Pulsenomics survey of 100 real estate market experts says that the pressures on the economy, which are negative, are not coming from the housing market this time. In fact, the Federal Reserve announced it will not make any changes until 2021, so the financial market supporting home loans will be coasting along pretty much as it is now.

The damage to the U.S. economy is coming from the delayed effects of the tariffs. Whether one agrees or disagrees with the tariffs is not the issue. The tariff changes that already went into effect, will have an economic impact next year or the year after.

Economists use the analogy of observing a big, slow-moving tidal wave. Scientists can see it coming from miles away. If those potentially affected by the danger pay attention to the warnings soon enough, they may have a chance to get out of the way.

Half the experts see the tariffs having a significant impact in 2020. Most of the other half see it coming in 2021. Nobody thinks the recession will hit before the end of 2019.

Summer 2019 – Selling Time

Home sales toward the end of summer are usually the strongest when compared to other times of the year. After returning from vacation, and before school starts, it is a popular time to look for a home when the weather is still nice outside.

Next Year 2020 – Buying Time

If a recession hits in 2020, then home sales prices may go down due to lowered demand. Again, this may be helpful for buyers who wait until next year to buy a home.

Conclusion

It is interesting to see that any possible recession will not be caused by the housing market this time. Real estate experts think that the housing market will price-in the effect of the recession up to one year ahead of when it hits.

If there are plans to sell a home, such as going into retirement and wanting to downsize or buy an RV for a happy retirement traveling, now may be an opportune time to consider selling.

If there are plans to buy a home and there is no rush, just take the time to work with your real estate agent to get a good deal and wait for a possible overall economic slowdown to get a better price. And be sure to contact your trusted home mortgage professional to discuss your financing options.

Moving takes a certain amount of adjustment. Kids of all ages may need a little help getting used to the new environment. Help kids adjust to the move by keeping the following in mind. 

Kids Are Resilient

Don’t overly worry about how your kids will adjust to the move. Kids are resilient. They tend to acclimate to new situations fairly quickly. It may even be that your kids get used to the move before you do!

Make Friends With Other Parents

You could facilitate your kids’ making new friends by making friends with parents of kids the same age as your child. To do this, attend any school functions and meetings that come up. Make a point of seeking out other parents and perhaps inviting them and their kids over to your house for lunch.

Add Bonuses To The Move

Help get your kids excited about the move by adding some bonuses they didn’t have before. Has your daughter always wanted to take ballerina lessons? Has your son always wanted to try horseback riding? Consider paying for some local lessons in your new area. This will incentivize your child and help them see how moving is a beginning, not an end.

Cut Them Some Slack

In the beginning, your child’s grades may slip at their new school. Be patient and allow them this period of adjustment until they get used to the new routines. Your child may also undergo some mood changes after the move. Let them know that you’re ready to listen whenever they want to talk about what they’re feeling about the move.

Help Them Fit In

Fitting in is very important for most kids. At their new school, kids will likely be into different things than at your child’s previous school. Even the trendy fashion may be different. Do what you can to help your child fit in with a few new outfits or a different style of shoes. Although you know how little material things matter in life, these things can make a huge difference in how comfortable your child feels as school.

Let Them Help

One reason kids feel afraid about moving is the lack of control. When you let kids help with the move, they regain some control. Let kids help with choosing new furnishings, packing belongings or other small tasks.

It’s likely that one reason you’re moving is for better opportunities for you and your children. Once your kids adjust to the move, you’ll be able to see for yourself how they are thriving in the new environment. 

If you are in the market for a new home or interested in listing your current property, be sure to contact your trusted real estate professional.

Flipping homes is popular once again. It took about eight years after the Great Recession that started in 2006 for home prices to rebound to the levels seen before the recession. Then, by 2016, in many areas, home prices started to rapidly increase.

The increases in home prices caused more flipping activity due to the potential profits. CNN reports the average gross profit on a flipped home sold during the past three years was about 50%.

In 2017, one real estate speculator took nearly one million dollars ($985,00) in cash and bought a home in an “as-is” condition, sight-unseen. That is what Mr. Lin He did, hoping to make some easy profit.

The Math

Flipping properties successfully is math with a bit of luck mixed in. Mr. He had good luck with his purchase in that it was in Malibu, California. He bought the home at a price well below its market value. The home was a foreclosure that listed for sale at $1.39 million. There were no buyers at that price, so the home went up for auction in 2017. Mr. He was the high bidder at $985,000.

That price was irresistible. Simple math meant that there was about $400,000 in potential profits between the purchase price and the value of the home, once the home was back in a nice condition.

Mr. He was very happy to buy the home for that low price. Then, he went to visit the property.

The Mess

The house was a disaster. The previous owner, who lost the house to the bank, was obviously angry about the foreclosure and intentionally broke as much as possible. The condition of this home, made the most-wrecked fixer-upper look like a palace compared to the mess bought by Mr. He.

After he saw the home in person, Mr. He admits the home was in even worse condition than he expected. On top of that, there was an extended delay caused by the local building department, which took six months to issue the building permit needed for the construction. Then, renovations cost $300,000 and the comprehensive remodeling work went on for three full months after it started.

The Result

In early 2019, the home was ready and beautifully prepared for sale with expert staging. It listed with a very successful real estate agent in the Malibu area who marketed the property well as a featured listing.

The listing price was $1.97 million, which was double the price paid by Mr. He to buy the home. In less than three weeks, it sold for the full listing price, giving Mr. He about $400,000 in gross profits after the renovation expenses.

Mr. He was very lucky that the home prices rose so quickly that he got the $400,000 profit he thought was in the deal when he bought the home, even though he had to invest $300,000 in the renovation work.

Summary

With 50% average gross returns potentially possible, flipping is attractive to many; however, as Mr. He says, “It is not as easy as it looks on television.”

If you are interested in finding a property to flip, be sure to consult with your trusted real estate professional.

When viewing a potential home, how much consideration should you give to the surrounding land?

In many ways, the land should be carefully regarded, since land is the thing that is hardest to alter. You can rip up carpet, paint walls and even knock down walls, but it takes a lot more effort to change land. 

Mature Landscaping 

Mature landscaping is typically cited as a benefit, but what if you’re the type who enjoys looking out at wide open spaces? It could also be that the mature landscaping – older trees – are situated dangerously near the house.

Weakened trees could lose heavy branches in storms and cause damage your roof. Mature trees also have vast root systems that can damage or destroy septic lines.

Downward Slope

It’s charming to stand at the top of the street and look down upon your future home. In the winter, your kids could have a front yard sledding hill. But if torrential rains come, your valley home will likely be prone to flooding. Even if you’re not in a designated flood zone, you should probably carry flood insurance in a case like this.

Upward Slope

Everyone envies the owner who lives atop the hill. Your home will look impressive to anyone passing by. But bear in mind that the lawn mowing will be especially tricky because you’ll be navigating that steep slant in your landscaping. 

Rocky Lawn

If you’re looking forward to starting your own home garden, pay attention to the quality of the soil surrounding your home. If it’s overly rocky, you’ll likely need to have raised beds or potted plants for your garden to thrive. Also, consider if the land around the home is very shady. If it is, you may need to remove some trees in order to capture enough sunlight for your plants.

Poor Quality Lawn

If the lawn isn’t lush green and instead it’s kind of a mottled greenish-brown, just realize that you’ll need to invest time and money to bring it back into good condition. A land treatment company can help you with this, but it will take some time before you see results.

The nature of the land around a potential home is important. But there are always steps you can take to resolve land issues. While it’s important to note the condition of the land, don’t let it stop you from making and offer on a truly awesome new home.

If you are in the market for a new home or interested in listing your current property, be sure to contact your trusted real estate professional.

It’s more likely that someone will incur an injury on moving day than on an ordinary day. The reason is that people are moving in ways that they don’t normally move, loads can be heavy, and accidents do happen. However, most injuries on moving day can be prevented by taking a few simple precautions.

Use A Dolly

Instead of trying to move more than one box by hand, use a dolly or a hand truck. This inexpensive tool can safely move multiple boxes without you having to lift anything at all. Keep in mind that all the boxes should be of equal size; don’t attempt to stack uneven boxes because they may shift and fall, causing an injury.

Take Breaks

Moving day is stressful because there is often a time constraint involved. Everything has to be moved into the truck by a certain time in order to remain on schedule. However, this is the kind of pressure that can lead to injuries. Being overtired leads to carelessness and that’s when accidents occur. Take multiple 10-minute rest breaks throughout the day so your body and mind have a chance to recuperate.

Don’t Overload Boxes

One of the most common moving day injuries happens when someone tries to lift a box that ends up being excessively heavy. Be mindful of the weigh of each box as you pack it. It’s better to keep the weight reasonable and stuff the box with filler than to overload boxes. You don’t have to weigh each box, but just give it a gentle lift to monitor how heavy it’s getting as you pack it.

Send Smaller Kids Packing

If you have smaller kids, the best option is to send them to the parents’ house, or to a babysitter’s until everything is in the truck. Smaller kids may run around and trip you up, distract your attention or otherwise get injured.  

Even the backyard is not a great idea, because they may wander near the truck out of curiosity. For their safety and yours, consider having someone care for them for the day off the premises.

Finally, if you do feel a twinge in your back or get overly exerted, stop what you’re doing and sit or lay down for a few minutes. Don’t try to “push through” the pain; it’s not worth it. Moving day injuries can be minimized or prevented when you take these simple steps. 

If you are in the market for a new home or interested in listing your current property, be sure to contact your trusted real estate professional.

The average size of an American home has been increasing since the 1970s. The American Enterprise Institute (AEI) reports that, in 1973, the median size for a new home in the United States was 1,660 square feet.

Over the past 45 years or so, this increased by more than 1,000 square feet. The median size of a new home is now 2,687 square feet.

The Problem With Big Houses

At first, a big house is appealing until one tries to clean it or pay the utility bills. Many baby boomers, who are now nearing retirement age, are downsizing, especially if their children have all moved away.

Moreover, Millennials are the first generation of Americans to experience a reduced standard of living when compared to their parents.

Many millennials see big houses as wasteful, environmentally destructive, and not sustainable. Also, with the challenge of paying off massive student debt, these young adults are delaying buying a home or may remain renters for their rest of their lives, foregoing the chance to have their own home.

One solution for the problems with big houses is to make homes smaller.

The Tiny House Movement

There are strong motivators for the social trend called “The Tiny House Movement.” Many want a smaller space to live in, which they can more easily maintain and afford. Tiny houses are no more than 400 square feet. That is like living in a compact studio apartment.

TheTinyLife says that tiny houses are being built all over the country. They come in almost any style imaginable. The median price for a quality tiny house is about $40,000, although do-it-yourself types can build one for a lot less.

Some are built on a trailer bed that makes them portable. Others are built to function properly in off-grid locations using solar power. There are even tiny houses that have been printed using 3-D printing technology.

Tiny houses can be luxurious, or they can be built to provide inexpensive solutions for housing that helps the homeless.

The Denver Tiny House Community

Denver is trying an experiment with a group of tiny houses called The Beloved Community Village. This is a group of private one-room units that share a communal kitchen and bathrooms. They started with 11 units and plan to expand to 20.

The challenges they experienced were not necessarily construction related. They needed to change the zoning and occupant density rules to allow the development.

Summary

People make a conscious choice to simplify their lifestyle for the freedom that a minimalistic philosophy brings. It is quite possible to live well while also living with less. Tiny houses may even be part of the solution for the approximately half a million homeless people living on the streets in America as the successful tiny house community village in Denver is now demonstrating.

If you are interested in a new home or in listing your current property, be sure to contact your trusted real estate professional.

What can be done with a house that is just perfect but it is in a bad neighborhood or a dangerous spot? Think about homes that are in decent condition; yet, too close to the water. America is experiencing flooding now that is not supposed to happen in 500 years.

That cute little beach bungalow could easily get wiped out in the next hurricane. It might be time to think about moving those homes to a safer area or higher ground.

The International Association of Structural Movers says that around 8,000 homes are moved each year in America. Relocation may be due to hazards, such as the erosion of an oceanfront or cliffside lot. Others relocate for their historical value.

What It Takes To Move A Home

There are five main considerations for moving a home, which are:

1. Legal Issues: Moving the home and transporting it must be allowed by law.
2. Strength: A home must be strong enough to stay together when disconnected from its foundation.
3. Lift and Transport: It must be possible to lift the home and transport it to the new location.
4. Access: Access to the home’s new location must be unimpaired on the route to get there and on the site when the home arrives.
5. Cost: The cost to move a home may be shockingly prohibitive.

Legal Issues

The legal issues can be very challenging. Do not give up easily, if the idea of moving a home is blocked at first because it may be possible to get a one-time waiver from the regulations.

Strength

Some homes are not strong enough to move. However, it is surprising what is possible if the home and/or lot is very valuable.

There are home-moving projects that lifted Victorian-style homes built over one hundred years ago in the most valuable parts of San Francisco. These homes only moved upwards. They stayed on their lots. The moving project raised them 15-feet higher to allow a garage to be built underneath. These well-built wooden homes survived the 1906 earthquake. They were carefully raised without damaging them.

Lift And Transport

Experts use many techniques to lift a home and prepare it for transport. Homes may be transported by strong flat-bed trucks, by industrial, heavy-lifting helicopters, and on barges in the river or ocean. Homes can be disassembled partially to make moving them easier.

Access

When moving a home, even if separated in pieces, the pieces may be very large. The entire transport route needs to be carefully checked by an engineer for proper clearance heights, enough turning radius when needed, and sufficient width for passage.

Cost

While many homes are movable, the cost may be too high to make it worthwhile. However, the cost to move a multi-million dollar mansion falling off a cliff may be far less than the home’s value, which might otherwise be lost.

Summary

If there is a beautiful heritage home sitting on a cliff’s edge overlooking the ocean and teetering on the edge of collapse, there is a new way to think about it. It may make perfect sense to move it to a lot that is down the street and further away from the edge.

Your trusted real estate agent is ready to help youfind the perfect home. Give them a call today!

It’s often harder to make friends as an adult than it is when you’re a child. It’s even more challenging to make adult friends when you move into a new neighborhood. You may feel like people already have their own group of friends and aren’t looking to include newcomers. Of course, that’s just an illusion.

Here are some easy ways to implement tips for making friends in your new neighborhood.

Put Out The Welcome Mat

Make your front door inviting to the neighbors. Place some cheery flower pots near the porch and buy a nice welcome mat for the front door. Be sure to put fresh light bulbs in the porch lanterns, too. These small touches will show neighbors you’re setting a friendly tone.

Have Coffee And Lunch Out

Make a point of having your coffee breaks and lunch at the nearby cafes as often as possible. Mention to the servers or owner that you’re new in town and this is your first time trying out their menu. They’ll likely take an interest in you and ask what house you bought, and so on. As you continue returning, you’ll be on a first-name basis, which will probably lead to some casual introductions to other locals who are stopping in for coffee.

Host A Housewarming Party

Housewarming parties are a fantastic way to welcome old friends and meet new ones. They are also a great excuse to knock on your neighbors’ doors and personally let them know they’re invited. If you feel uncomfortable having strangers in your new home, make it a backyard BBQ housewarming. In no time at all, you’ll have a new collection of local friends and acquaintances.

Join The Local Clubs

Membership clubs offer a natural way to meet new people without appearing overtly friendly. Look for some local clubs you’re interested in, such as gardening, exercise and book clubs. When you start attending on a routine basis, friendships will organically begin to develop.

Volunteer

If you have an extra hour or two in the week, consider volunteering as a way to help the community and to make new friends. Places that typically need volunteers include theaters, schools and athletic programs.

Making friends in your new neighborhood will enable you and your family to feel more at home sooner. One or more of the above-mentioned tips is likely to work for your personality and preferences.  And don’t forget your real estate and mortgage professionals! They’d be happy to help get you connected as well!

Many baby boomers are reaching retirement age. If they set up their financial planning well, while younger, they should have accumulated enough wealth to have some discretionary money available for making investments.

Others, who may be just starting out, have some investment capital but not necessarily enough to buy a piece of commercial real estate on their own. These investors might enjoy a real estate investment pool, also called an investors’ club.

Pooling Resources

One way to get some investment participation in real estate is to pool investment funds needed to have enough for the down payment on a piece of real estate.

For example, if the down payment for acquiring a single-family rental home is $40,000 and four investors chip in, this means the contribution by each one will be $10,000. Each investor will own 25% of the deal. Many can come up with $10,000 for investment but it may not be as easy to find a spare $40,000.

Real Estate Investment Clubs

An investment club is where people get together to review the summary of a real estate deal to discuss its merits as a group investment.

To find a local group there is a nice system called Meetup online, which is a good resource. If there is no real estate investment club in a particular local area, consider forming a new one through that system.

Legal Structure

For real estate purchased by an investors’ pool, the best legal structure is to acquire the property by a newly-formed limited liability company (LLC). An LLC is very easy to create online. The LLC structure limits the liability of its owners (members) to the amount they each invest in the LLC.

It is best to set up a new LLC for each closing of a real estate acquisition. In this way, the owners can be different and to separate the deal from the successes or losses in other deals. Investors in an LLC buy units of the LLC, not shares.

When an LLC starts, it is authorized to issue a certain number of units. Each investment gets a proportional percentage ownership share of the LLC. The investor gets the number of units that represents the percentage value of the investment compared to the total investment.

Work with a real estate agent to help find deals. Use competent legal counsel and a professional accounting firm to set up and manage the LLC properly.

Summary

Investment clubs can be very fun. There may be considerable discussion and disagreement about each potential deal. This is a welcome thing. It is excellent practice to learn how to conduct proper due diligence.

Investors who are just learning about what to look for in a real estate deal gain insights from more experienced investors. Experienced investors stay active and get a chance to pass on their knowledge to the less-experienced ones. Everyone enjoys socializing together and that is a nice extra reward.

A hot market in real estate is identified by a few things, which include higher prices, lower amounts of unsold inventory, and desirable neighborhoods. Neighborhoods can increase in value because of having an excellent location, high-paying jobs, quality schools, and a variety of attractive amenities.

Hot Markets Are After The Fact

Properties in a hot market may sell faster, for higher prices, and without needing to be in perfect condition or staged for sale. Real estate investors do not necessarily benefit from learning about a hot market unless they already own property in that market area.

It is nice to be an owner with a property for sale in a hot market. However, more success may come from identifying a market as potentially valuable before it becomes a hot market.

Hot Market Trends Before The Fact

Gentrification is a pattern that may start out slowly and then build until a market goes from cold to hot. With gentrification, renovation of rundown neighborhoods attracts new, wealthier residents. Many cities encourage the gentrification of deteriorating urban areas.

Streets with abandoned storefronts may convert into pedestrian-only shopping promenades. Old wharf warehouses may turn into a riverfront boardwalk. Artist types may move into a bad neighborhood because of the low rent and then turn it into an eclectic, hip area with art galleries, coffee shops, boutiques, and street murals.

One way to benefit from gentrification possibilities is to follow the long-term development plans of a community and be an early investor in those plans. Invest in property just on the outskirts of a planned gentrification zone.

Be careful to note any physical barricades, such as a wide street, which may stop gentrification from progressing further. A wide street may prevent gentrification from moving across it to the rundown area on the other side.

A similar pattern shows up when investing in real estate that is on the outskirts of a growing area or adjacent to a desirable neighborhood. Over time, if the growth continues, these outlying areas may become a nicely profitable investment for those who are patient.

Getting Out Of A Hot Market At The Right Time

It is important to know when to sell properties in a hot market and move on to find a different one. Continuing to re-invest in a hot market may ultimately disappoint when there is a market correction to the downside. Try to avoid this if possible.

Market indicators to watch include:

• Year-over-year increases in listing prices compared to historical figures for the same area.
• The percentage of listings showing a price reduction.
• The average time a property is listed before being sold.
• A comparison between the listing price and the sales price for sold properties.

Conclusion

Studying market growth and guessing the direction of growth helps identify a potentially strong market before it gets hot.

It is time to sell and move on, if the listing prices are not increasing each year or if price reductions are increasing. Other strong indicators that a market is cooling down are when the average listing time is increasing and the average difference between the listing price and sale price is widening.

If you’re in the market for a new home or interested in listing your current property, be sure to set up a consult with your trusted real estate professional.