Today’s post, “Five Home Upgrades Almost Guaranteed to Lose Money,” was contributed by Anum Yoon, the founder and editor of Current on Currency, a site devoted making personal finance more approachable for 20 somethings and international students.
Five Home Upgrades Almost Guaranteed to Lose Money
Just because you upgrade your home doesn’t mean you will get a higher selling price, because not all upgrades and home improvements are worth the investment. You may be surprised to learn some of the home upgrades you should forget about, including these five.
Adding a Pool or Hot Tub
You may think adding a pool or hot tub would greatly increase the value of your home, but that is not true. Why? Pools and hot tubs are expensive to maintain, they raise taxes and, if problems arise, the cost to fix them can be enormous. You should also consider the impact it can have on homeowners insurance.
Just because you like purple walls or a bird mural on the ceiling doesn’t mean potential buyers will. While it’s fine to add a fresh coat of paint to increase your home’s appeal, it is not a good idea to use unusual colors or customize to match your unique style.
Though the new owner can make changes, potential buyers would rather buy a home that doesn’t have to be changed right away. Choose neutral colors to paint rooms and ordinary design schemes. This way the potential buyer can take their time in repainting, not forced to cover up something that doesn’t suit their tastes at all.
Converting Rooms Into New Functions
Room conversion is a home upgrade that doesn’t always pay off. For example, it may seem like a great idea to convert your garage into a den or a small bedroom into a home office or walk-in closet, but these improvements aren’t always the best decision.
Making changes like these can actually reduce the value of your home. Consider the neighborhood and the size of your home. Would a bedroom be more practical than a walk-in closet? Most likely the answer is yes. In most cases, room conversions and luxury home upgrades are a just a bad idea.
Major Landscape Upgrades
You may think bigger is better, but that’s not always the case when it comes to outdoor landscaping. Creating a backyard oasis complete with pond or gazebo sounds nice, but it’s costly and usually doesn’t add any value to your home.
If you want to spruce up the backyard or front walkway, that’s fine. You can add more value for less cost by planting flowers or bushes near the entryway or investing in lawn maintenance to ensure your grass is green and inviting.
Adding a Deck or Sunroom
Sunrooms and decks can be a fun gathering place, but they are not always a smart investment. It costs nearly $80,000 for the average sunroom addition, for example, and you get barely half that back in value. Decks are also costly and add little value to the home.
These two projects require a lot of materials, labor and other costs to complete. They also need upkeep, which some potential buyers may not want to burden themselves with.
Home Upgrades Worth Pursuing
While this list may surprise you, keep in mind this general theme: when it comes to home upgrades, overdoing anything is not a good idea. The best improvements for the home are those that add value, such as improving efficiency and fixing problems that may lead to costly repairs later.
Simple improvements, such as adding fresh paint and improving the look of the home outside, are your best way to go. Don’t go overboard and try to make your home into a showplace.
Instead, focus on creating a clean, uncluttered inviting home. Keep upgrades standard and simple. This way, you can be confident that your chosen home upgrades will be a wise investment for years to come.
Anum Yoon is a millennial money expert and runs Current on Currency. Sign up for her weekly money newsletter here if you want to read more of her posts!
This “Guide to Planning a Home Renovation From Start to Finish” post is underwritten by Hearth. Hearth specializes in educating consumers regarding home renovation products and helping them find the best offers to avoid overpaying for renovation projects. All opinions expressed are mine.
The process of renovating your home can be one of the most stressful and overwhelming experiences as a homeowner. Decisions regarding paint colors, decor, flooring, and themes are challenging in their own ways, but larger projects introduce new sets of challenges and excitement.
You may be excited about renovating your home, or it may be your only option if you purchased your home at a higher price point than what you could sell it for today. Either way, a reasonably priced and well-executed renovation project could be just what you need to make your home more enjoyable and livable for your family.
In the past year, my wife and I experienced the home renovation process when we opted to finish our 800 square-foot basement. We were fortunate that our project went according to plan and stayed on budget.
The sad truth is that many people have a worse experience when starting and completing home renovation project. Selecting a space, creating design ideas, determining a budget, hiring a contractor, and completing a project can be incredibly stressful and costly.
Even in the age of HGTV, the average consumer is poorly-equipped to make smart decisions when it comes to home renovation projects. This is especially true for millennials.
This guide is designed to help you navigate the home renovation process from start to finish and make the process smooth and enjoyable. Whether you’re new to home ownership or a longtime homeowner, this guide will help you avoid costly home renovation mistakes every step of the way.
Starting Your Renovation Project
According to a recent study by Hearth, 45% of millennials surveyed expressed a strong desire to renovate their homes. Starting a renovation, not just as a millennial, is often the biggest hurdle to leap based on several factors:
Existing debt obligations (student loans, auto loans, credit card debt)
Lack of basic financial literacy
Little understanding of which renovation projects will maximize return on investment
Fortunately, a wealth of resources is available for anyone considering a renovation. The National Association of the Remodeling Industry (NARI) recommends consumers consider their reasons for remodeling and develop a vision for how their completed project will add value to their lives in the future.
Highest Value Renovation Projects
Understanding your potential return on investment is critical before starting a new renovation project. The simple reality is that few projects instantly increase the value of your home in proportion to their cost, but many projects lead to increased values and high returns on investment over a period of just a few years.
According to a Realtor.com article, the following projects feature high returns on investment:
Fiberglass insulation in attic
Steel entry door
Stone veneer (manufactured or real)
Universal bathroom redesign/remodel
Determining What You Can Afford
One of the most critical components of any home renovation plan is a budget. The sad reality is that many people skip this stage entirely and rush into their project without a plan to pay for it.
As a result, many people exhaust their cash resources and take on high APR credit card debt in order to complete their projects. The previously mentioned study by Hearth revealed that an alarming 16% of millennials are likely to refinance a home renovation project using credit cards.
Credit cards are admittedly convenient, and 0 percent APR financing offers can be alluring. However, financing large home renovation projects using credit cards can trigger unexpected high payments and crippling interest charges once promotional offers expire in 6 to 12 months.
A wise rule of thumb when planning a renovation budget lies in estimating total project costs and adding 15-20%. My wife and I used this technique when planning our basement renovation, and it helped us to determine how much cash we could afford to spend (without exposing ourselves to financial emergency) and whether we would need to seek affordable financing to complete the project.
Ultimately, we qualified for a small loan with low payments at an interest rate which was lower than our current mortgage interest rate.
Considering Financing Options
Once armed with knowledge of how much you need to borrow, it is best to research financing options from a variety of sources. One common renovation mistake is applying for a loan with only one lender and accepting their offer right away.
Many borrowers fear that applying for multiple credit offers is too time consuming, damaging to their credit score, and exposes them to identify theft. These worries may have been relevant in the past to varying degrees, but today’s processes have largely eliminated these worries.
The Hearth Advantage
For example, a borrower who is seeking attractive financing options for a home renovation project can receive multiple personalized offers just by filling out a secure 60 second form with Hearth.
Hearth’s process is quick, won’t impact your credit score, doesn’t require fees or collateral, and will provide personalized rates from leading companies like SoFi, LendingClub, Prosper, and BestEgg.
Unlike other companies, Hearth is not a lender. They work with lenders on behalf of borrowers to gather pre-qualified offers for personal loans. Collecting these offers does not require a hard credit pull until the final stage of application, which is why the initial process does not affect your credit score.
Once your offers have been gathered, Hearth simplifies the process of considering your options by helping you compare interest rates, fees, total interest cost, monthly payments, and more. Unlike other companies, the core of Hearth’s service lies in educating consumers to make wise decisions.
All offers gathered by Hearth are sent directly to your email inbox and are valid for 30 days. Applying for one of these loans is as simple as one click. At this time, you will need to provide further information to your chosen lender to complete your application. Assuming you provided accurate information from the start, the final terms and rates offered by your lender are likely to be similar or the same to those quoted initially by Hearth.
Once your application is complete and approved, funds are typically dispersed in 1 to 14 days. This is important, as quick access to cash can often be a difference maker when securing a contractor.
If you’re not sure whether you’re ready to dive into your renovation project, Hearth has created a useful quiz to help you determine your readiness for your remodel. It asks important questions about your project plans and provides actionable advice based upon your responses.
Starting Your Home Renovation Project
As in nearly every industry, money talks and cash is king. When starting your home renovation project and selecting a contractor, having cash in hand can help you compete for top contractors in your area, many of whom would rather be paid in cash than on credit.
The process of choosing a contractor to oversee and complete your project is far less stressful when financial concerns have been removed from the equation. With a funded loan and cash in your account, you are in better position to take your time interviewing multiple contractors, check their references, compare bids, and check reviews with the Better Business Bureau.
Before choosing a contractor, be sure he/she is licensed in your area and has appropriate liability and worker’s compensation insurance (for subcontractors). Any history of complaints or unethical behaviors are cause for concern.
You will be working with your contractor for the length of the project, so it is also important your personalities mesh well. You want to work with a contractor who is an excellent communicator and is able to show you in-depth plans and timelines for completing your project.
Make Your Renovation as Smooth as Possible
Home renovation projects can be very exciting, but the truth is that they can be scary and stressful. At a basic level, any remodeling project involves trust, as a relative stranger is redesigning a huge part of your life.
The best way to make your renovation as smooth as possible is to minimize your risk exposure from the very beginning. You can avoid contractor conflict, running out of cash, and taking on high interest credit card debt, and risking foreclosure thanks to home equity issues when you take advantage of sensible lower interest personal loans.
Despite sensationalist headlines to the contrary, the American Dream of home ownership is alive and well – and it doesn’t end when you buy a home! Making your house a home may require changes. Simply put, home renovation decisions can have a lasting financial impact for years -even decades- to come.
If you’re serious about making your renovation process as smooth as possible for yourself and your contractor, start by making the right decision about how to pay for it. You can review your options and make the most-informed decision by planning your project well, considering responsible lending options with Hearth, and selecting a well-reviewed contractor.
Disclaimer: Shogun Enterprises Inc D/B/A Hearth is not a lender, does not broker loans to lenders and does not make personal loans or credit decisions. This article does not constitute an offer or solicitation to lend. Hearth will submit the information you provide to a lender. Providing your information to Hearth does not guarantee that you will be approved for a personal loan. Hearth is not an agent, representative or broker of any lender and does not endorse or charge you for any service or product. For more information, please visit https://www.gethearth.com/terms/ and https://www.gethearth.com/disclosures/
This article is not intended to provide legal or financial advice is purely provided for entertainment and informational purposes only. All opinions contained herein are the property of FinanceSuperhero.com.
When my wife and I bought our current home in May 2013, we were ecstatic. The house was beautiful, even if the landscaping needed some help. We lived with the sad state of the yard for one season and gradually made improvements each month. I resurrected the lawn, tamed the overgrown shrubbery, and even planted a few rose bushes. This was fun, but my mind was on one grand idea from the start: I wanted to build a paver patio. 100% DIY. With my bare hands.
I did my research and learned the project could be very budget friendly if I selected quality, affordable materials and went with a basic design. The techniques seemed simple enough as well, even for someone who isn’t very handy – like me.
A Step-By-Step Guide to Build a Paver Patio
After months of planning, scheming at Menards and Home Depot, and buying several pallets of materials, I got started on my patio project on the first day of summer vacation. If a teacher like me – with modest DIY skills – can build his own paver patio in a matter of days, you can, too. Follow my step by step guide below to build a paver patio and begin enjoying your own backyard oasis this spring.
Step 1: Purchase Tools, Calculate Materials Needed, and Apply For a Permit (if required)
Good news – you won’t need too many tools to build a paver patio. Make a list of the following tools, check out your inventory in the garage, and buy the rest.
Celebratory beverages of your choice (Summer Shandy worked for me)
Paver stones (*Note: I chose tumbled Belgian pavers for aesthetic reasons.)
1 inch PVC pipe, cut to length of widest walkway (Quantity will vary – minimum 2 recommended)
Paver leveling sand
Paver locking sand
Paver sealant (optional, but highly recommended to preserve your hard work)
Paver edging and/or paver edging stones
2”x4” wood joist (cut to appropriate length)
Full transparency – the materials calculation can be the most difficult part of building your paver patio. I fully recommended visiting your local Home Depot, Menards, Lowes, or other home improvement store to seek out their assistance. Provide a drawing/blueprint of your intended design, and they will be able to help you calculate the number of cubic yards of paver base and leveling sand you require. Calculating the number of paver stones needed will depend heavily on your design. I recommend purchasing an additional 10% over your minimum calculated needs to protect yourself from extra trips when pavers inevitably break or have color inconsistencies.
Guidance on Permits and Dealing with HOAs
If you live in a non-HOA neighborhood and have an understanding and easy-going local government, congratulations! The rest of us officially hate you, but you’re one lucky guy/gal. Youre ready to build a paver patio, so move on to Step 2!
For the rest of you: my best advice is to be patient. Your HOA and local building department will ask you to jump through hoop after hoop after hoop before they’ll give you a permit. Contact them well in advance of the date you plan to start your project, and play nice with them at every step of the way. You will get your permit if you follow the rules.
Step 2: Choose and Prepare the Area
When I decided to build a paver patio, I had a few possibilities for its location. In the end, I decided to build it adjacent to an existing concrete patio. This choice helped me determine the dimensions of the area which I needed to prepare. With my dimensions decided, I marked the area using a tape measure, landscaping stakes, and line marking spray paint.
PRO TIP: If the area you plan to build upon is currently covered with grass, use your lawn mower to cut the area as short as possible after measuring.
You will need to remove additional grass and soil beyond the eventual boarder of your patio, so be sure to include an additional 12-16” on all sides of the dimensions as you mark them.
Step 3: Remove Grass, Sod, and Soil
With your measurements complete and construction area prepped, you are ready to remove the grass and soil. Depending upon your soil type, you may be able to complete this step using hand powered landscaping tools and lots of elbow grease. Using a sharpened garden spade, I recommend removing square foot sections of sod by outlining sections and lifting them individually into your wheel barrow – in my case I also used a trustworthy Red Flyer wagon.
PRO TIP:If you have unusually dry soil or, as in my case, find yourself dealing with rocky and dry clay, run a sprinkler for 30 minutes the evening prior to excavating the grass and soil. It will make it easier to loosen the sod.
With all of the grass/sod removed, you are ready to remove an adequate amount of soil. Depending upon your local building requirements, you may have to remove up to 12” of soil to allow for adequate space for paver base in the next step. Especially if you live in a cold climate, you will want to be sure to provide a base which more than adequately supports your patio.
As your soil allows, aim to remove soil in a manner consistent with the desired grade of your planned patio. Contrary to popular belief, it is usually best to design your patio with a very slight pitch angled away from the foundation of your home to ensure that water runs away from the foundation of your home – a level patio is only desirable in rare circumstances.
Step 4: Add Paver Base
If you purchased bags of paver base, move them into the now excavated area using your wheelbarrow. Dump the base in consistent, even layers throughout the entire area and rake the base to spread it evenly. Periodically pause and use your hand tamper to ensure that the paver base is tight and compact. You will also went to lightly wet the area as you tamp it.
I saved a significant amount of money by using a hand tamper rather than renting a plate compactor, but my forearms and biceps paid dearly for this decision. If you are using a hand tamper, I recommend tamping each square foot of your base approximately 100 times to ensure that your base is firm and secure. Need I remind you about the man who built his house on shifting sands?
PRO TIP: When your base is secure, measure, cut, and place your landscaping fabric over the top of the base. Secure it using landscaping nails. This step is optional, but it will greatly cut down on weed intrusion in the future.
Step 5: Add and Level Paver Sand
Place your pre-cut 1 inch PVC pipes on top of your firmly tamped paver base. Carefully pour leveling sand in between the PVC pipes and on all sides in two to three feet increments. Then place your 2”x4” on the PVC pipes and screed, or drag, the board across the pipes gently to level the paver sand. While you can access the area, gently lift out the PVC pipes, fill and level those voids with leveling sand, and replace the pipes along the path. Continue this process until the entire patio area is covered with paver leveling sand.
Step 6: Place the Paver Stones Individually
Prior to placing your paver stones, pick a corner or side to start in and very lightly mist the paver leveling sand. Begin laying the paver stones according to pattern you designed while being careful not to drag the stones across the leveling sand. Set adjacent paver stones to be snug against neighboring stones. I recommend gently tapping them into place using a rubber mallet.
If you’re looking to build a paver patio featuring an easy design, a basket weave or herringbone pattern is classic and timeless. These designs are also time-savers, as they don’t require any cutting. I went with a modified basket weave pattern (see picture to the right) to add character. Continue following your design pattern until all stones are in place while ensuring that you lightly sections of leveling sand before continuing. It is also very helpful to have another person hand you stones of varying colors while you complete this step.
When all of your paver stones are in place, step back and be sure that you did not make any errors with your pattern. When you’re ready to move on, add edging stones or other edging materials to ensure that your paver patio retains its shape. Secure them using landscaping nails.
Step 7: Finish the Job!
When all of your paver stones are in place and edging is completed, you are ready to secure the paver stones in place. Pour a fine layer of paver locking sand on top of your patio and use a push broom to fill all of the gaps between adjacent paver stones. When all of the gaps are filled, gently sweep away excess paver locking sand. Then spray a very, very light mist of water over the patio. The water will activate the paver locking sand and help your patio retains its form.
Repeat the procedure above again when the paver locking sand joints appear to be dry. You may need to perform this step several times until all the gaps are filled. If you’ve rented a plate compactor, gently run the compactor across the patio service. Make a single pass in each direction to uniformly compact the paver stones.
It’s time to bask in glory! Grab a beverage of your choice, pull up a chair, and celebrate. You just built a paver patio!
Step 8: Seal Your Paver Patio
This step is optional but highly recommended if you’ve taken the time to build a paver patio. Using a commercially-available concrete or paver stone sealant will add many years to the life of your paver patio. All products will come with slightly different instructions, and it is best to follow them precisely. I applied my sealant using an all-purpose roller and have since re-applied once each year. Nearly four years later, my paver patio still looks new!
After you have finished this step, you will want to ornament the patio with soil, small annuals, mulch, and perennials (see above). This extra touch will complete the process of transforming your drab backyard into a new outdoor oasis!
Now that you know how easy it is to build a paver patio – even if you have limited DIY skills – it’s time to start planning your project. With the right amount of patience, planning, and preparation, you can transform your boring backyard into an outdoor oasis!
Could your backyard use a face lift? What’s holding you back from building your own paver patio?
According to the National Association of Realtors, there are approximately 2 million active real estate professionals in the United States. Real estate is a multi-billion dollar business, and buying a home is an important transaction. The pressure understandably gives pause to both buyers and sellers. In fact, a reported 68% of Americans surveyed do not trust their realtor, according to a 2013 survey by Choice Home Warranty. Why? The average buyer or seller has been led to believe that there are things your realtor won’t tell you.
While this is somewhat true – for example, there are certain things that your realtor cannot legally tell you – your typical realtor is an honest, hard-working individual who is trained and committed to look out for their client’s best interests. In fact, in any real estate transaction, a realtor is responsible to provide superior service by following the Code of Ethics. The Code, as it is often called, requires the following:
Realtors must promote their clients’ interests while treating all parties fairly
Realtors must not discriminate based upon race, color, religion, sex, handicap, familial status, national origin, or sexual orientation
Realtors must remain truthful in all advertising and marketing, including when listing a home for sale
SPILLING THE TRUTH – The Top 9 Things Your Realtor Won’t Tell You
The Code has done wonders to tame the previous Wild-Wild-West nature of real estate, but as previous statistics showed, people still have their doubts. Can you really trust your realtor? Or is he or she just looking to collect a commission check and head for the hills?
As a part-time realtor who loves serving buyers, sellers, and renters, I will outline 9 things your realtor won’t tell you – but I will!
1. You Should Interview Your Realtor
Before you choose a realtor, whether as a buyer or seller, It is important to know the following about a realtor:
How many buyers and sellers with which they typically work at a given time
Whether they work as a part of a team
How well they personally know and understand the areas you have targeted (if you’re a buyer)
To be transparent, no realtor wants to be interviewed by their potential clients! It can be intimidating and even feel a bit unnatural, but it is vital to ask the right questions. The purchase or sale of a home is one of the largest financial transactions you will ever make, and it is important to have a knowledgeable, committed, and available adviser in your corner.
2. Zillow Is Actually Useful
Inevitably, if you gather a group of realtors together, it’s only a matter of time before they start complaining about clients who rely on Zillow as if it were The Gospel. Truthfully, though most realtors tend to pour out hate on Zillow, it can be helpful.
For example, when I begin working with a buyer who has spent time searching on Zillow, I know that they have likely developed an idea of what they are looking for in a new home. By looking at hundreds of homes and thousands of pictures, it becomes easier to create a wish list, even if it may not be 100% realistic at this stage.
Zillow is also a good tool for casual buyers who are just interested in window shopping. However, Zillow data should not be trusted in most cases. It is often outdated (in some cases by nearly two weeks), inaccurate, and sometimes hilarious, as any realtor who has viewed an absurd “Zestimate” can tell you.
So keep using Zillow for window shopping, but when you get serious about buying, don’t bother. The data your agent pulls from the local Multiple Listing Service (MLS) is the only data you can trust.
3. Pre-approval Is Everything
If you’re a buyer and one of the first questions your agent asks is “Do you have pre-approval?” you have found yourself a winner! By asking this question, your agent is protecting his time and best interests, but he is also doing the same for you.
Written and signed notice of pre-approval from your lender is must if you want to be taken seriously, especially in a hot market. Without pre-approval in place, you could waste your time viewing homes which you cannot afford, find a home only to have another buyer’s offer accepted because they were pre-approved and you were not, or worse – you could discover that your credit history or debt to income ratio makes you ineligible for a mortgage!
Before you seek pre-approval, it is important to review your credit history. I recommend that you pull a free credit report to be sure no surprises or errors ruin your chances for a timely pre-approval. I recommend MyFreeScoreNow.com for this purpose, and they are – you guessed it – FREE!
When you are ready to seek pre-approval, it is advisable to gather multiple quotes from a variety of lenders. Don’t worry – this will not damage your credit! I recommend Lending Tree as an option for my buyers because they provide personalized rates with a variety of options to meet a buyer’s lending needs. They have facilitated over 55 million loan requests, and they work quickly to get buyers pre-approved.
I have also had buyers who had good luck with SoFi. If you have good credit (700+ credit score), you may be able to save money with them. Contrary to what many realtors will tell you, SoFi works with buyers who have down payments as small as 10%.
4. This isn’t HGTV – it’s Real Life!
Touring a home like people do on HGTV doesn’t cut it. Most of those people are actors! Even if they’re not pros, they are being coached to say certain things and ask certain questions.
I like HGTV as much as anyone, but you must remember that it is all about entertainment value. When you are a serious buyer, you aren’t looking at houses to be entertained – this is important, so act like it!
Open closets and cupboards, check out the unfinished basement and look for cracks, and go walk around the yard. You’re not a professional home inspector, but you can save yourself a lot of stress, heartache, and money if you perform a DIY mini-home inspection prior to the true inspection.
5. You Can Request Multiple Showings of a Home
Yes, it is true: you can ask to see a home a second, third, or fourth, time. And, yes, it is equally true: your agent won’t like this. But you should do it if you’re at all on the fence. The additional 15-30 minutes of time are worthwhile for everyone, so don’t be afraid to advocate for yourself and tell your realtor what you want.
Among the things your realtor won’t tell you, this item is fairly inconsequential, but it is good to know that you’re not out of line in this request.
6. There Are No Stupid Questions
In real estate and in life, there are no stupid questions – other than the ones you don’t ask.
In short: ASK QUESTIONS! Your realtor is an expert on the home buying and selling processes. If you don’t ask questions, you won’t receive the best possible service.
No, realtors don’t always have all of the answers. If you are asking good questions, most of the time we will have to get back to you.
7. You Will Learn As You Go
The process of buying a home is a learning experience. While you should determine needs vs. wants before your first home tour, we know that you will probably still be feeling out this process during the first several tours. It is a good practice to keep a check list of features that you desire and review it while touring homes.
8. It’s OK to Buy the First House You See – Sometimes
A good buyer agent shouldn’t push you into a quick offer, but if the home meets your expectations, is priced right, and is in a hot market with lots of competition, you should move fast.
Our team hates to see clients walk into the house of their dreams and decide to “wait it out” for more options because it often leads to disappointment. It happens far too often all because buyers haven’t reached a point of emotional readiness needed to buy.
9. Your Attorney is More Important Than Your Realtor
In most states, your attorney is more important than your realtor. While your realtor is there to advise your search process, complete offers using fillable form contracts provided by their local professional associations, and negotiate on your behalf, your attorney holds far more power. He or she is your last line of defense in protecting your legal options, modifying transaction documents, and in some cases, facilitating the closing process.
Your realtor is always happy to recommend a quality attorney who will facilitate a smooth closing, but virtually any experienced real estate attorney would be a wise choice.
YOUR NEXT MOVE
If you’re planning to buy or sell a home, you need a committed, available, and connected realtor on your side. With nearly 2 million real estate professionals currently working in the United States, you’re sure to have your choice among many quality realtors. With pre-approval in hand and in the guidance of a good realtor, the home search can be a pleasant process.
Throughout the process of hiring a realtor and buying or selling, put your trust in your realtor. Though there are things your realtor won’t tell you, he or she has your best interests in mind and wants to make the process as smooth as possible.
Readers, do you have a realtor you can trust? Have you had any poor experiences with a realtor?
Tax refund. Next to the words “pay day” and “debt free,” these are my two favorite finance-related words. Whether my annual tax refund is a modest sum or a mid-size windfall, I am always happy to see my refund directly-deposited into my checking account. Once you know it is on its way, knowing how to make the most of your tax refund can be a daunting task.
The FinanceSuperhero Guide to Taxes – Make the Most of Your Tax Refund
Assuming you have a tax refund coming your way, you could be on the verge of changing your financial picture.With great opportunity comes great responsibility!The following advice will help you to make the most of your tax refund and make significant progress on your financial journey. I recommend following the steps in numerical order.
1. Give a Portion of Your Tax Refund to a Charitable Organization
Longtime readers will not be surprised that I am suggesting giving as the first step to make the most of your tax refund. As previously mentioned, Mrs. Superhero and I have placed Giving at the top of our monthly budget. Giving aligns with our values, and helping others provides us with much more satisfaction and enjoyment than buying more stuff or eating delicious food.
I strongly believe that giving 10% is the best way that we can make a charitable contribution prior to reaching financial independence (at which time we will significantly increase our giving). We have always done this, dating back to the time when we faced a mountain of debt, and we continue to do so today, even though we are only a few months away from carrying no debt other than our mortgage.
Why? As I mentioned, we believe helping others is both a calling and the most satisfying use of our money. Giving is also a strong reminder that money is not something to be hoarded out of greed. We want to value money and practice good stewardship, but we also want to remain far removed from the love of money.
Many people reject giving in favor of keeping their money strictly to themselves. Ironically, it is usually these same people who senselessly give their money to big banks and other financiers in the form of outlandish interest payments on cars, boats, and other stuff.
Personally, I would rather give in a meaningful way. Even if you give 1% of your tax refund, you will help others and begin to change the way you view money.
2. Increase Your Savings and/or Emergency Fund
After supporting societal progress by giving, use your tax refund proceeds to improve your liquid savings. Unless you are an extremely high income earner or have a stable passive income stream, you absolutely must have an Emergency Fund. If you do not have one, consider this a full-blown, alarm-sounding crisis that must be addressed immediately! Statistically-speaking, there is close to a 100% chance that you will experience some form of an emergency within the next decade, so be ready!
While I recommend maintaining an Emergency Fund of at least 3-6 months of minimum living expenses, you may also wish to establish an additional Opportunity Fund. I do not specifically recommend amounts or figures for this fund, and you may wish to skip it entirely in favor of moving onto Step 3. However, an Opportunity Fund could allow you to make a fun, somewhat impulsive decision without any accompanying feelings of guilt or regret.
3. Get out of Debt – Once and For All!
After you have given and increased your security via your Emergency Fund, you are fully-prepared to take on the primary barrier standing in the way of Financial Independence: Debt.
The sooner you eliminate your non-mortgage debts, the sooner you free a significant portion of your monthly income and simultaneously gain the freedom to invest in tax-advantaged retirement accounts. Both the Snowball and Avalanche methods are valid means to achieve debt freedom. For the purposes of this post, I am less-concerned with the method you implement to eliminate your debt; just get it done. You may get the push you need if you make the most of your tax refund in this way!
4. Invest in Tax-Advantaged Investments
The real fun begins when you no longer have non-mortgage debt. If you are free from the shackles of debt, the next optimal use for your tax refund is to maximize your retirement contributions. For the purposes of this limited space, ensure you are maximizing employer-offered plans, specifically if they offer a match, and then move onto your Roth IRA.
Compared to other platforms, the Betterment portfolio is designed to achieve optimal returns at every level of risk. Through diversification, automated rebalancing, better behavior, and lower fees, the Betterment approach to investing can help you generate 2.9% higher returns than a typical DIY investor.
If you do not have children, skip ahead to Step 6. If you have children, you need to learn the nuances of the Coverdell ESA (Education Savings Account, also nicknamed the Education IRA) and 429 plan. The ESA has income and contribution limits (currently $2,000 per year), but I recommend you start with the ESA in most circumstances, if eligible.
The important thing to understand is that minimal contributions to these vehicles will place you in a position to send your children to college without the burden of student loans if you begin early.
Related Post: Escape From Student Loans: How Two Educators Paid Off $17,831.65 in 54 Days
What could you do with an extra $1,000 per month? $2,500? $5,000? I just felt an overwhelming sense of excitement and peace typing these words. The next time I visit my doctor and have my blood-pressure checked, I am going to visualize the wonders of a mortgage-free life to improve my numbers.
For the average family, mortgage interest represents the second-largest expense that they will pay in their entire lifetime. In some cases, total mortgage interest paid on a 30 year mortgage can be approximately 75-80% of total principal, even at today’s advantageous interest rates! Make the most of your tax refund to accomplish progress on an annual basis and you could shave several years off your mortgage, especially if you are already paying extra on principal on a monthly basis.
7. Invest in Non-Retirement Funds and/or Real Estate
If you have made it to Step 7, please allow me to offer my congratulations. With no debt whatsoever, healthy savings, and kids’ college covered, you are poised to generate significant wealth. At this stage, you may have achieved Financial Independence, depending upon your lifestyle.
I recommend using tax refund money to invest in simple index funds at this stage. A modest tax refund sum is enough to get you started with many index funds. Adopt a long-term approach, relax, and watch your money grow.
Similarly, this is the time to invest in real estate, if interested. Becoming a landlord isn’t for everyone, and paying a property manager could eat into your net profit from owning a rental property. However, a rental property can yield some of the highest annual investment returns if managed well and purchased at prices below market value.
Fortunately, today’s investors can invest in real estate without the hassle of becoming a landlord or hiring a property manager. Fundrise offers real estate investment options with low entry costs.. As of February 2017, they offer three eREITs for new investors: the West Cost eREIT, the Heartland eREIT, and the East Cost eREIT. It is amazing that technology has brought common investors like you and me the opportunity to invest in multi-million dollar buildings half way around the country!
At this stage, true fun begins. When you are financially well-poised for the future, a tax refund represents an opportunity to both invest and add joy to your life simultaneously. This is the time to make improvements around your home which increase your happiness and feature a high return on investment.
Good Investments: new front door, landscaping, deck or patio, kitchen or bath remodel, walkway lighting
Bad Investments: swimming pools, utility sheds
9. Build Sinking Funds for Bucket List Items
Last, but not least, comes additional saving for specific purchases. If you make it down to Step 9 when determining how to implement your tax refund, you are an authentic Superhero. I recommend establishing separate sinking funds for a variety of priorities, such as vacations, new car purchases, secondary homes, or major home additions.
The purpose of a sinking fund is to plan for future purchases which are far off in the future. At this stage, you do not want to be fooled into getting back into debt or be caught off guard by large, necessary expenses. With a sinking fund, you won’t be financially caught off guard when your house needs a new roof, your furnace fails, or your vehicle sputters and dies.
Are You Ready to Make the Most of Your Tax Refund?
A tax refund is a great opportunity to get ahead in your finances. I am confident that you will not fail to cover all of your bases by following these steps. Depending upon where you are in your journey toward Restoring Order to Your World of Finances, you may wish to skip steps or modify the order. For example, renters may wish to place saving for a home down payment in the Steps.
If you haven’t yet filed your 2016 tax returns, be sure to check out E-File.com or LibertyTax today. Either way, careful consideration of your circumstances will put you on the path to make the most of your tax refund this year!
Readers, did you receive a tax refund this year? Are you currently awaiting a refund? How do you plan to make the most of your tax refund?
In today’s internet-driven world, home buyers have become more savvy than previous generations. Zillow, Trulia, Realtor.com, and a dozen or so other websites have made the process of window shopping for homes much easier. Pictures, virtual tours, and a wealth of data are available with the click of a mouse. And the average buyer can net plenty of experience living vicariously through other buyers’ experiences as showcased on the DIY Network and HGTV. Shows like Holmes Inspection have even inspired buyers to conduct their own DIY home inspection.
Yet the average realtor, myself included, can share countless stories of buyers who look at all of the wrong things when touring a home the first (or second . . . or even third!) time. I have had clients tell me that they were not interested in a home due to objections over carpet, basic landscaping, and even paint color. Other clients have happily fallen in love with homes once they mark off the “non-negotiables” on their list: granite counter tops, stainless steel appliances, and an open concept. I understand exactly what it must be like to host House Hunters or Property Virgins.
As a realtor, I am bound by a code of ethics which was designed long ago to protect consumers. I do my best to educate them regarding what to look for when touring a home, and I am quick to point out both obvious and subtle defects, as well as signs of possible latent defects. Most realtors who wish to protect their clients will do the same, especially if they want to keep a job long-term. However, not all realtors are so honest, as selling you a home as quickly as possible may determine whether or not they are able to pay their mortgage premium next month.
For the buyer who is represented by this kind of realtor, the process often goes something like this:
-Tour home, fall in love with aesthetic properties, develop emotional attachment to the home.
-Discuss pricing and comparable sales, make an offer, conclude negotiations and sign the contract.
-Schedule a home inspection with a professional home inspector.
-Begin picking out furniture, paint colors, carpet, etc., for the new home.
-Attend (sometimes) the home inspection with inspector, discover a lengthy list of problems which must be addressed.
-Enter state of sadness/depression/panic, question why the realtor did not notice or disclose all of the problems diagnosed by the home inspector.
-Either A) negotiate with the seller regarding necessary repairs or price concessions or B) cancel the transaction.
Sometimes the process goes much more smoothly. Sometimes it goes much, much worse, especially if the home buyers foolishly opt to skip a professional home inspection.
Avoid Home Buying Heartbreak and Hassle: Perform a DIY Home Inspection
In any real estate transaction, the most critical parties are typically the home inspector and the attorneys. As a buyer, they are your last lines of legal defense; they serve to protect you from danger and hours of stress and hassle.
To be clear, I would never, ever recommend that a client skip out on an independent, third-party, professional home inspection, even when buying a brand-new home through a builder. With that said, I believe a prospective buyer can save himself a great deal of time and money by looking out for the following problems and defects in advance of the home inspection by performing a DIY home inspection during a home tour.
The following DIY home inspection tips are not an exhaustive list. They may not apply to every home and location, and should be considered on a case by case basis. Again, do not skip a professional, independent home inspection in an effort to save money!
1. Take in the big picture
When Mrs. Superhero and I were searching for our first home, I was still a real estate amateur. We fell in love with a home which we had toured on a weeknight in February, so it was naturally dark during our tour. When we arrived for the inspection a week later, we met the inspector at the edge of the driveway. After introducing himself, the inspector said, “So, you know you’ll need a brand new roof ASAP, right?” Ouch.
Examining the full exterior of the home during daylight hours is an easy DIY home inspection tip. Look for damage to the roof (missing shingles, bowed eaves, rotting soffits, missing gutters), siding (missing or damaged shingles, encroaching landscaping), and the entire yard. Do not neglect to examine the same components in the garage, whether it is attached or detached. Also, examine the driveway for large cracks, potholes, etc. Note concerns on a checklist and document them with pictures on your phone or camera so you can address them during a possible future home inspection.
2. Test the garage door
It can be a bit uncomfortable to operate a garage door which does not belong to you, but this is an easy check that everyone should perform unless explicitly instructed not to do so by your realtor or the homeowner. Yes, your inspector will check it, too, but it is wise to check for problems yourself.
3. Open and close all interior and exterior doors
During your tour, you are naturally going to enter and exit all rooms in the home. While you’re doing so, opening and closing all doors is a simple step that some home inspectors may overlook from time to time. If you catch a malfunctioning door which requires re-hanging, you may save yourself money at the closing table.
4. Inspect the furnace, air conditioner, and water heater
When examining these items, look for evidence of maintenance dates on the exterior of the appliances. Inspect for any signs of leaking or irregular noises. If the furnace or air conditioner are not running during your tour, it is usually acceptable to temporarily adjust the thermostat to evaluate their level of functioning. Note: Do not attempt to turn on an air conditioner unit during the winter.
5. Examine all ceilings and walls for water damage
Admittedly, looking for water damage may be one of the toughest DIY home inspection tasks on this list. However, savvy homeowners are becoming increasingly skilled at hiding signs of water damage rather than rectifying the underlying problems. Any signs of discoloration, sagging, or unexplained lines near joints where dry wall may have been taped should be noted and addressed with the home inspector.
6. Check out the basement
More and more homeowners are searching for basements, in my experience. Yet many of them don’t check out the basement when touring a home if they learn that it is unfinished. You should examine the foundation for any major structural concerns, such as cracks, as well as examine the basement ceiling for obvious issues. If a basement is finished, you should ask your realtor to inquire as to whether the work was performed with permits. This may seem like no big deal to many people, but depending upon your city or village ordinances, a buyer could be on the hook for any un-permitted mechanical, electrical, structural, or plumbing work completed without a permit.
7. Examine the grade around all exterior walls
In the past five years, flooding has occurred in all 50 states, according to FloodSmart.gov. This cannot always be prevented, yet many home floods are caused by improper grading around a home’s exterior. Examine exterior walls to ensure that the soil is graded in an appropriate manner (slopes downward away from the home). Also ensure that downspouts are adequately extended away from the home’s foundation.
8. Test all light switches
This is an easy DIY home inspection item to cross off your list, and you’ll be glad to know if any light switches are wired improperly.
9. Inspect windows for signs of moisture
If you see fogging or condensation on windows, this is a sign that the windows may require replacement or repair. These items can be very costly, so you will want to be sure that your home inspector addresses them in his report.
10. Test all sinks and toilets
Invariably, home buyers feel uncomfortable evaluating the function of sinks and toilets. When you’re preparing to make arguably the largest purchase of your lifetime, pushing past some discomfort is a must! Begin by running all sinks individually for 3-4 minutes; this will reveal any draining problems. Also, check under vanities to ensure that drains are properly vented. Lastly, flush toilets in all washrooms while the sink is still running and listen for any odd sounds in the plumbing.
11. Evaluate Your Surroundings
I have heard countless horror stories from buyers who fell in love with a home only to face some harsh realities on moving day. One buyer discovered unappealing power lines running through their side yard. Another buyer shared that they hadn’t noticed a large water tower in their backyard because it had been digitally removed from all marketing photos online. And another buyer did not notice that a train ran right behind their backyard and shook the entire house several times a day. Be on the lookout for these unsightly hazards and more!
12. Visit Local Schools
While the value of a professional home inspector cannot be emphasized enough, buyers must inspect local schools themselves. Do not simply rely on reputation, recommendations from well-meaning friends, or scores from third party websites. Review state report cards, attend a school board meeting, and arrange for a brief tour of the school. In most areas, your property taxes largely go toward funding local public schools, so you want to be sure your investment is worthwhile.
13. Talk to Potential Neighbors
During your examination of the home’s exterior and yard, aim to strike up a conversation with your potential neighbors if they are also outdoors. Ask about their impressions of the neighborhood, schools, and neighborhood and community amenities. If you’re feeling brave, ask, “Would you buy your home again today if you were given the chance to do so?” Any major red flags revealed during this conversation may lead you to reconsider the home purchase (or seek a closing credit to build a bigger fence!).
Don’t Take the Home Buying Process Lightly!
For most people, a home is the largest purchase they will ever make. Do not enter into such an important decision without careful consideration of the condition of your potential new home! Review your notes from you DIY home inspection and compare them to the report provided by your professional home inspector. With careful consideration, you will avoid hassle and heartbreak and find the home of your dreams.
What additional home inspection tips do you suggest?