Getting Ready to Sell

There are some items to take care of when getting ready to list your house for sale. Taking care of these tasks up front can help your house sell faster, make packing easier, and attract the most prospective buyers.

De-clutter

This is the most important thing that you can do. You are planning on moving, so why not get a head start on packing? Start by removing any personal items from your home. We want buyers to imagine their family and personal items when they visit your home, not see your items and think about someone else who is living there. Also, pack up any non-essentials. The less clutter in your home, the larger it will look. We don't want buyers focusing on the items in your home, but the home itself. Along with this, make sure to secure any valuables that may be out. You will have strangers coming through your home, so try not to leave anything of significant value in plain site. They will be accompanied by an agent, but they could sneak off and it is better to be safe than sorry.

Staging

After you clean up your home, it might be time to move some furniture, do a little light redecorating, or possibly change some paint colors or flooring. One of the services I offer is having a professional staging company come through and make some suggestions of what can be done to make your home show better. Sometimes it is as easy as changing light bulbs, but could also include new wall colors.

Prepare for Photographs

Over 85% of buyers first view a home online, so your photographs are of utmost importance. Cell phone pictures will not cut it. These have to be done professionally, which is another service I include for my listings. Make sure the house is ready for the photos to be taken by taking care of the items mentioned above, opening curtains, and have all lights turned on.

When your house is listed, it is recommended that you keep it as close to the condition in the photos as possible. When leaving prior to a showing, make sure lights are turned on, blinds are opened, AC is set nice and cool, and if possible, play some light music in the background. The goal is to make the potential buyer as comfortable as possible when they view your home so they can see themselves living there!

Navigating the Current Seller's Market

There is no question that we are currently experiencing a seller's market right now in the Charlotte area. Homes in desirable areas are coming on the market and going under contract with multiple offers in a matter of hours. It is definitely a great time to sell, but if you are selling, where are you going? You are just going to have to buy into that same seller's market, right? Yes, you will, but depending on the price point you are selling at and the price point you are buying in, it may work out to your advantage.

Market Shift?

I have been hearing rumblings that the $350,000 plus market is showing a shift in recent months to actually lean towards a buyer market. While it might be shifting slightly, this isn't quite the case yet. In that range, we are still under six months supply (six months supply is considered a stable market). The key to our current market is that even though the $350,000 plus market is still slightly a sellers market, the $100,000 to $200,000 range and $200,000 to $350,000 range are in a super sellers market, territory that has not been seen in the time for which Charlotte MLS data is available (January 2004 on).

Months Supply

This first image shows the number of months of housing supply there is currently on the market. Months of house supply are determined by dividing the number of homes per sale by the number of homes sold per month.

As stated earlier, these are levels not seen before in the period for which data is available. While we have been in a steady decline recently, the previous trough for months supply of the $100,000 to $200,000 range and $200,000 to $350,000 range both occurred in December 2006 and was 3.8 and 4.5 months supply, respectively. We currently have over three times less supply in this lower range!

Percent of Asking Price

Here we can see the percent of original asking price to sale price. Again, we run into results that have not been seen in the time period for which we have data.

As we can see, the lower priced houses are selling (on average) for 100% of the original asking price. And this is for the entire Charlotte MLS, meaning that some areas are higher, some are lower.

Days On Market

Here are the average number of days on market for for each of the different price ranges. These numbers speak for themselves.

What Does It All Mean?

While it may seem daunting or like a long shot to find a great property to buy in this market, having the right realtor who understands the market and how to create strong offers is of utmost importance. Also, if you are looking to make a move up, this is a great time. While you would not exactly be buying into a buyer's market, moving up provides an excellent opportunity to sell in an extreme seller's market and purchase into one that is quite a bit less competitive.

Also, with the current interest rates, locking one of those in for thirty years at historically rock bottom rates is a great idea.

Debt, Leverage, and Wealth Building

When I Googled "debt" looking for an image to put on this article, it wasn't surprising that I could not find a single one that showed debt in a positive light. Every image was of scissors cutting debt, people being crushed by debt, erasing the word debt, and other similar themes. We have been lead to believe that debt is evil, debt will crush you, and debt will never allow you to grow financially. Has debt become the worst four letter word in the English language? It certainly seems that way.

What do we think of when we hear about debt? Credit card bills, student loans, medical bills, car payments, and mortgage payments for the most part. These are all things we want to pay off as quickly as possible so we can start accumulating wealth, right? In my opinion, not exactly. Not everyone will agree with me here, but that is OK.

Debt can be a great tool to actually helping you build wealth, if it is the right kind of debt. The debt I am talking about is debt that is acquired to invest in income producing and appreciating assets. Of the debt items I listed above, the only one that fits this criteria would be mortgage payments. Certainly credit card debt, student loans, medical bills, and car payments are not going to help you build wealth, those will only take wealth away and should all be avoided to the greatest extent possible.

Good debt allows you to leverage your assets in order to produce greater returns on your investments. Let's take a look at assets and how we can leverage them.

Cash

Cash is not leveraged at all. This is money sitting in the bank making a measly 0.5% interest if you are lucky. Not much to talk about here. It is always good to have some cash on hand though to cover unexpected expenses. If you want to be really safe, have six months worth of expenses in cash or other liquid assets.

Stocks

These can be leverages if you have a margin account. A typical margin account will allow you to trade two times your cash deposit, or if you have over $25,000 and you qualify as a pattern day trader (make more than four round trip transactions per week), they will allow you to trade four times your cash deposit. If we use a hypothetical 6% annual return on your investment, you stand to actually gain 12-24% on your outlay. These are great returns but we should not forget the risk that is involved with the stock market and they will require a great deal of research and time spent managing.

Real Estate - Investor

If you are an investor, banks will let you leverage your money about 5 to 1 (20% down on a mortgage). This means if you purchase an income producing asset, not only are you producing monthly positive cash flow, you are also having a tenant pay down your mortgage, which increases your equity position, as well as your asset most likely appreciating as well. If your property appreciates 5% this translates into a 25% gain on your investment, not including your cash flow and debt payoff. These will typically boost your return another 10-15%.

Can this be true? Let's look at some hypothetical numbers. You purchase a $100,000 house. You put 20% down ($20,000). The house appreciates 5% to $105,000, so your $20,000 investment is now worth $25,000, a 25% increase. On top of that, you earn $200 per month of positive cash flow. This is an additional $2,400 that year, or another 12% of your investment. In this scenario your $20,000 earned you $7,400 in the first year, a total return of 34%. Other than the time spent initially finding the home, this investment is pretty much hands off.

The beauty of it too, the longer you hold the property, the more rents increase, the more equity your tenants pay down (by covering your mortgage payments), and the higher the property will tend to appreciate, statistically speaking.

Real Estate - Home Owner

This is where we can see the greatest gains. As a homeowner, there are currently programs that will allow you to purchase a home for as little as 3% down. That's right, that means you are able to leverage your investment by OVER 30%. In this scenario, what you would typically pay in rent is paying down the cost of your home, and if you think about it you are fixing your rent for a long period of time. Instead of experiencing the typical 5% increase annually in rent, your payment will remain virtually the same for 30 years!

If we consider this scenario with our hypothetical house above where you invest $3,000 to purchase your $100,000 house and it increases in value to $105,000, your initial investment is now worth $8,000. That $5,000 gain on a $3,000 investment is a gain of 167%!! I don't know of any other investment vehicle that will allow you to make gains like that, do you?

For these reasons, it is no surprise that it is estimated that home owners have an average net worth of $225,000 while renters have an average of about $5,000. Home owners are investing using leverage to allow the growth of their assets create exponential growth in their net worth.

I truly wish I could have found an image of a man standing on a mountain of debt to show my opinion of the power of debt and the ability to create great wealth based on a solid foundation of properly used debt.

Paying for College

One thing that is certain is that costs of college education is on the rise. It has been for a while now and is anticipated to continue to do so. Parents should start to consider the burden of this cost when their child is born. Delaying planning for these costs can cause a great deal of stress for both parents and their children. I'm sure no parent wants their child to begin their adult life under a massive pile of debt, but many times that is the case in the society we live in.

If we look at the anticipated cost of college in 2030 (which is only 13 years away now), expectations are an increase of 5-6% annually. This leads to annual costs for public and private schools as shown here:

 

This means a four year public school degree will cost roughly $200,000, while a private university degree will be pushing $450,000. If those dollar amounts aren't a tough pill to swallow, I envy you.

So how can we help plan for and pay for this education? At the average rate of return of 6% for 529 college savings plans, parents would have to invest $140,000 at the birth of their child in order to afford this $400,000 education. If you choose to invest over a period of 18 years, your contributions will have to be in excess of the $140,000. Again, a tough pill to swallow.

What if there were another way? Well, there is. We can use real estate!

Suppose you were to make an investment in a rental property when your child was born. I know, a new child comes with many new expenses, but bear with me for a minute. We will use a hypothetical $150,000 property, purchased with 20% down with a 15 year mortgage, financed at 4.75% interest. This property will rent for $1,350 per month.

If we run this scenario with the property appreciating at a modest 4% per year (and rents and taxes increase annually at the same rate), here are the numbers for annual property value, rent, expenses, and cash flow.

 

Let your cash accumulate in this scenario. After 15 years, the property is paid off and your cash flow increases dramatically. At the end of our 18 year period, between equity in the property and cash proceeds, you will have accumulated almost $405,000 total. All for the initial investment of $30,000. This represents a 15.5% annual return on your investment, better than you will see from your typical 529 savings plan. The other great thing, is you re-invest your cash returns and pay down the mortgage sooner, your returns will increase further.

So, long story short, having a plan in place for your child's education from the time they are born, you will have the ability to allow them to go to pretty much any school they choose without you or them worrying about the cost. What greater gift can you give your graduating senior 18 years down the road?

If you have any questions about how you can make this happen for you and your family, do not hesitate to reach out to me. I would be more than happy to turn this hypothetical property into your reality!

Do I Really Need an Agent?

When buying or selling a home, many people feel it is a venture that they can pursue on their own. In reality, there are many complexities in the transaction process that an individual who buys or sells a handful of times in their life does not need to know, and really shouldn't waste their time learning. You will probably get as many cavities in your life as real estate transactions. Does it make sense to try to fill them on your own? It doesn't to me.

When buying a home, using an agent is a no-brainer. The agent's commission is paid by the seller of the home. The buyer agent works with you to walk you through the transaction, assist with coordinating financing, inspections, repairs, and closing, all after the process of helping you find and select your perfect home. Again, let me restate the most important part for a buyer... it costs you nothing!!!

Most of the time, those that try to accomplish the task on their own are home sellers. "All an agent does is stick a sign in the yard and take some pictures. As simple as that!" This is far from the truth. Some of the things an agent provides are assistance with staging, pricing, professional photos, open houses, marketing, paperwork, helping negotiate, and, probably most important, safety (more on this later)!

Surveys show that For Sale By Owner properties used the following marketing strategies:

• Yard sign: 33%
• Friends, relatives, or neighbors: 21%
• Online classified advertisements: 10%
• Open house: 21%
• For-sale-by-owner websites: 7%
• Social networking websites (e.g. Facebook, Twitter, etc.): 9%
• Multiple Listing Service (MLS) website: 13%
• Print newspaper advertisement: 3%
• Direct mail (flyers, postcards, etc.): 2%
• Video: 1%
• None: Did not actively market home: 41%

I am not even sure we can consider that last 41% as for sale.

Regardless, a great agent will use all of the above methods for every property. The more exposure your property gets, the more offers you will likely receive, and the faster they will come in.

Back to the comment I made earlier about agents providing safety. If you are selling your home by yourself, how do you qualify, verify, or screen the strangers that are coming into your house? Will they be able to buy your house? Do you really know who they are? Can you trust them?

An agent is going to have your home locked with a box that records who comes in, when they come, and how long they stayed. Your home will be shown by other agents who know their clients and verify their ability to purchase. Trust me, the last thing an agent wants to do is show potential buyers a property that they have no ability to buy. It is a waste of everyone's time.

If you are thinking of buying or selling, please reach out to me with any questions you may have. I am always available to help!