DID YOU RECENTLY INHERIT PROPERTY? WHAT DO YOU DO NOW?

A Real estate transaction, even under the best circumstances, is an emotional time for most people. When you add making decisions over a recently departed loved one, a real estate transaction can be especially stressful. There may be mixed emotions, confusion, and even disputes between multiple heirs that could potentially make the whole process take longer than necessary. 

Below are a a few tips that may help guide you if you have recently inherited a property.

  1. Educate yourself on the existing property.

Learn the terms of the existing mortgage for that can help you determine a time frame in which you should or need to make your decision. For example, a non-family member who inherits a property with a due-on-sale clause may need to sell quickly to cover the cost of the loan whereas a client who inherits a property with a reverse mortgage may have more time. Generally speaking, they will have about six months to decide whether to sell the home or get a new loan to pay off the existing mortgage. 

2. If there are multiple heirs, know your options. 

If there are multiple stakeholders in the property issues may arrive when an agreement on how to handle the property cannot be reached. It is best to know your options and try to reach an amicable solution. For example, if one client wants to keep the home but the other wants to sell, options include an immediate buyout or a long-term promissory note. Another option could be that the clients may be interested in renting or selling the property and splitting the profits. Whichever choice is made, it is best to know what the options are before confrontation occurs. 

3. Perform a Comparative Market Analysis (CMA) and an appraisal. 

It is extremely important to know and establish the value of the home at the time of the owner’s death for probate inventory purposes. It is typically required by the IRS to get an appraisal of the property for assessing capital gains or inheritance taxes. There is no inheritance tax in Arizona but If you have a loved one who lives in another state, you should check the local laws.

4. Decide to sell, rent or move into the property and what comes with that decision. 

Each option comes with its own costs that should be reviewed and understood. The following are just a few of the options and related costs:

  • Selling — Listing, staging, and closing costs
  • Renting — Property management and maintenance costs.
  • Moving In — Maintenance and HOA fees.

Each option discussed also comes with potential state, federal and capital gains taxes. Know your options and educate yourself. At Team TLC we are here to help guide you and give you the best possible advice when dealing with matters of property ownership. 

Questions?

Which One Best Suits You? Single-family house, Townhouse, or Condo ​

Which One Best Suits You?

Single-family house, Townhouse, or Condo

Interested in purchasing a new home? Do you know what type of home best suits you and your lifestyle? Below is a quick pros and cons guide of each property type. Factors such as location, privacy, lifestyle considerations and more are compared to give you an idea of which could best suit your needs.

When thinking about homeownership or purchasing a home, the first thing that likely comes to mind is a Single-family house. One of the largest advantages of owning a single-family house is that you have total control over the property. You do not need the consent of others to make any sort of changes or remodel. That is of course assuming you do not have an HOA or that you respect the rules of an HOA if you purchase a house with one. Briefly, the pros and cons of a single-family home compared to a Condo or Townhouse are laid out below:

Single-family house

Pros

  • Highest amount of privacy
  • Most available space
  • More outdoor space
  • Greater ability and freedom to customize
  • Most convenient for pets and pet owners
  • Higher likelihood of garage availability and storage space

Cons

  • Home maintenance and repairs may potentially be unpredictable and costly
  • Yard work and outdoor maintenance costs
  • Higher initial purchase cost
  • Potential HOA fees
  • Likely to have fewer amenities

Townhouses tend to be the middle ground between a house and a condo. The owner of a townhouse may also own the land on which the townhouse sits, unless it is part of a condominium or homeowner’s association (HOA). They are generally smaller than a single-family home and are attached on one side or another by a common wall to another unit. They usually have exterior access and a small yard area that may be used by the unit’s residents or the entire community, depending on the situation.

Townhouse

Pros
  • More affordable purchase cost 
  • Plenty of space for the amount invested
  • Yard work and outdoor maintenance is often handled by HOA
  • Most likely to have an attached garage

Cons

  • Likely to come with HOA fees
  • Provides less privacy with shared walls
  • Includes costs of homeownership, such as maintenance and repair fees

If you are looking for more of a hands-off, low-maintenance type of living especially in a more urban setting – then a Condo may be just what you are looking for. Condos are units within a condominium complex.

Condo

Pros

  • More readily available in prime downtown locations
  • Maintenance and repairs often covered 
  • No yard work or outdoor maintenance needed
  • Convenient amenities, such as a pool, gym and entertainment areas are generally provided
  • Most affordable in comparable locations
  • Sense of community

Cons

  • Higher HOA fees
  • More HOA rules and restrictions (less freedoms)
  • Least amount of privacy due to shared walls
  • Lack of ownership of outdoor space
  • Possibility of high parking costs
  • May require an extensive application process

House vs. Townhouse
A single-family home and a townhouse may have a lot in common, but also have some very important differences that should be taken into account when choosing between the two. Single-family homes are detached houses that are built on their own lots. Traditionally, a detached home offers more privacy than a townhouse and may have fewer restrictions, depending on its location.

Space: When it comes to the amount of space offered, you can generally find more space within a single-family home in comparison to a townhouse. You may also find a wider variety in floorpans and layouts with single-family homes than in townhomes.

Privacy: When it comes to privacy, nothing really beats the single-family home. Since they are detached structures, they will hold the upper edge since they do not share any walls with neighbors and tend to have more space between homes. Townhouses generally share a wall with at least one neighbor but you have way more privacy than lets say apartment living. You wont have anyone above or below you which is always a plus.

Location: Single-family homes generally tend to be found outside of urban areas. If living closer to the city or within the downtown area is important to you than a townhouse may be just what you are looking for. You may still find a townhouse in a more suburban area by other single family homes but they tend to be more commonly found closer to a more metropolitan atmosphere.

Maintenance: When it comes to home maintenance, owing a single-family home and a townhouse are very similar. Both homes require the owner to be responsible for the houses upkeep, repairs, and associated costs. The difference is that townhouses have very little yard upkeep and are generally covered but the HOA that is paid for within your monthly dues. 

Lifestyle: Single family houses and townhouses may accommodate similar lifestyles. However, the single-family home with the amount of space offered and the location choices tend to make them more appealing to families. The location of townhouses in more urban areas in addition to their lack of  required outdoor maintenance generally makes them more appealing to young professionals wanting to live closer to the downtown area or individuals that are looking to downsize and would rather not deal with exterior maintenance.

House vs. Condo
These two options vary the most from one another. A single-family house provides the most space, privacy, and overall freedom as well as the highest level of responsibility and maintenance. Homeowners purchase the house and the land it sits on, whereas condo ownership is limited to the living space inside the condo unit and only a portion of the common areas. Condos tend to offer housing in prime urban areas and provide of more hands-off approach to homeownership that may appeal to a wide number of individuals. 

Space: Single-family houses typically provide more space than condos. Not only do houses offer more space for indoor living but they also offer more of an outdoor living space that you wouldn’t be able to get with a Condo. 

Privacy: Since Condos tend to share walls with multiple neighbors, single-family detached homes will obviously offer more privacy. Condos often share walls on multiple sides and may share both the ceiling and floor with additional units similar to apartment style living. This setup may be too close for comfort for some but others may like having that closer community of individuals to interact with on a daily basis. On that note, condo communities usually have communal living spaces where they host activities for the owners to interact socially. 

Location: Single-family houses can be found located just outside urban areas, in the the suburbs, or rural areas whereas Condos tend to be found in the heart of urban areas. Condo’s tend to be perfect for individuals who prefer to be either near their work or the downtown area. They may also enjoy the nightlife or utilize public transportation.

Maintenance: With a single-family home you will have the maximum amount of responsibility when it comes to fixing or maintaining your property. You are responsible for everything from the interior to the exterior, the windows, the roof, the yard maintenance and everything in between. In contrast, condo owners do not have yard maintenance or exterior maintenance such as painting or roof work. Of course this comes as a cost in your HOA fees, but for many this is worth it to not have to invest their own time into correcting those issues.

Lifestyle: Houses tend to accommodate families or individuals with additional hobbies that require the excess space or distance. Condos tend to accommodate individuals who crave a more flexible lifestyle that requires little to no maintenance. Condo owners also tend to be attracted to prime locations that keep their upkeep to a minimum and be able to easily go out and enjoy the close proximity of their favorite places. 

Condo vs. Townhouse
Condos and townhouses tend to provide similar benefits and are more alike the the previous comparisons. They both offer a more hands-off approach to home ownership than traditional single-family residences, and they’re more likely to be available in similar areas such as the downtown area. There are differences to consider even with two choices that may seem so similar.

Space:Townhouses will generally offer more space than that of a Condo. They may even offer more of an outdoor living space if that is an important factor. Condos generally offer a smaller outdoor living space if any. 

Privacy: Townhouses will provide more privacy since they tend to only share a wall with one neighbor opposed to potentially being surrounded on all sides. Different condos will offer different levels of privacy where some resemble townhouse setups and others resemble apartment style living. 

Location: If you are looking to move into the heart of the downtown area then a Condo will be more readily available at a more affordable price point. There may be some options of townhouses in or near the area but they will be a lot a more limited and much pricier in comparison. If you don’t mind moving more towards a suburban area than a townhouse will be more readily available and at a more affordable price point than one in the downtown area.

Maintenance: When it comes to lowest maintenance, condos are the way to go. Generally, the only maintenance that a condo owner is responsible for is anything that falls within the four main walls of your residence. Any maintenance will be laid out by your HOA and some may even have additional perks such as replacing lightbulbs for you. The downside is that some of these HOA fees can be expensive and may increase with additional maintenance issues regarding the building. Townhouse maintenance depends on if your community has an HOA or not. If the townhouse does have an HOA than you will usually be paying into having outdoor maintenance and not have to keep up with that yourself. 

Lifestyle: Townhouses are very versatile and can be a great fit for an array of lifestyles. They can be a more affordable option for families than that of a traditional house or even a great option for individuals that are looking to downsize their space and be responsible for less maintenance around the house. These options are especially great if they are looking to get closer to the city or downtown area. Condos are popular for those looking to live in a more lively, tighter community that is close to prime downtown locations. These people would also want to be responsible for the least amount of maintenance and remain flexible with their free time. Perfect for busy individuals or individuals on the go!

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February 2019: Thinking about Investing in a Rental Property?

If you are thinking about investing in a rental property, there are a few things you may want to consider before jumping in head first. Investing in a rental property isn’t something you want to take lightly and can be quite challenging. However, with adequate due diligence and proper guidance it can be extremely rewarding.

As a beginning investor in rental properties it is important to learn how to assess the value of properties, choose the right location, understand the market conditions and most importantly, find great tenants. The ability to execute the previous criteria can better prepare you to benefit from owning a rental property. 

Benefits of Renting:

    • A Passive Income Source: When people think of investing in a rental property one of the biggest benefits that comes to mind is generating a passive income. Reoccurring income that requires little effort to maintain sounds like a dream to anyone! Rental income is also taxed differently than employment income which may be of interest to some. You will want to work out all the financials ahead of time to make sure that investing in a rental property is going to be profitable for you by factoring in all the expenses and calculating potential income on the property before making the purchase. 
    • Sense of Security:

      Whether through inheritance or temporary work relocation, many people find themselves with additional property. Renting that property to good tenants provides a higher sense of security than allowing it to sit vacant for extended periods of time. Vacant homes are more susceptible to vandalism, squatters, and potential maintenance issues that could go unnoticed and turn into a larger issue. By having renters, you have someone on the property that can keep on eye out for those potential threats towards your investment and give you a greater peace of mind and a greater sense of security.

    • Flexibility: Owning a rental property may give you the flexibility to move into a home that is better suited for you and your family. If the market conditions are not the best, rather than selling your current property, you could rent it out until the market is more favorable to your situation. Renting out your property gives you the flexibility to sell when you are able to make a profit. Likewise, If you need to make a move due to a job relocation or a financial situation, you may be able to rent out your property and know that you will still have a place when you return! 
    • Appreciation: Going along with a few previous points, renting out your property lets you told hold onto it and allows it to gain appreciation and property value. This lets you have the freedom to sell the property once it has reached a point that you are comfortable selling. If you are looking to purchase a property to rent out, looking into neighborhoods and researching the potential for it to appreciate may be of some interest to you.  
    • Diversification: Hopefully you have money invested in a 401k, in the stock market, or just put into savings and slowly watching it grow. Owning a rental property gives you a more diversification of investments. You know the saying, don’t put all your eggs in one basket! Having an array of investments creates a certain level of protection against risk and simultaneously help you take advantage of a positive market flux. 

If the benefits of investing in a rental property are what you are seeking, it is important know which features will help you make a profit. There are several features that you may want to consider in order to boost your chances of finding great tenants and help make your rental stand out from the rest. 

What to look for when investing in a rental property:

    • Start Small: If this is your first investment property, keep it small and affordable such as a single unit or home, not an entire apartment building. As a suggestion, try to avoid properties that need significant repairs that could cause you to overextend yourself and your budget. You also may want to consider using a property manager until you feel more comfortable with the process. 
    • Location: As mentioned previously in benefits of owning a rental property, a good location is key for long-term equity growth. You will want to research rents in the area in multiple conditions, as-is or with repairs and improvements, so you can cater to more people and be in higher demand. Location can often impact the quality of tenant that you attract which translates into overall revenue. Try to find a place that has desirable qualities to the type of renters you are trying to attract. For example, school and neighborhood, walkability to shopping, parks, or hiking, proximity of potential employers or major employers. In Arizona there are many high profile events to take into consideration as well. People tend to travel to spring training and the Phoenix open and could potentially be a great source of revenue if you are looking for more periodic renters.
    • Transportation: You may want to consider investing in a property that is close to public transportation and/or major highways. Many people prefer direct access to routes that get them to desired locations such as work, shopping, and entertainment. Likewise, pay considerable attention to parking arrangements and try to acquire a property with off-street parking or if in an urban environment, a property within relatively close proximity to a parking garage. 
    • Utilities: If looking at a multi-unit building, it is more convenient if there are separate utilities associated with each unit. This will help break down the cost per unit and aide in managing how each renter is charged. This will also give you a better idea at the costs and breakdowns so you are not taking on those additional fees. This is where running the numbers over and over again comes in handy. It is important to know your property in order to make it a good investment. Your monthly expenses may not only include the mortgage or debt service, taxes, and insurance but also lawn and pool maintenance, property management (optional) and insurance. Keep in mind vacancies, turnovers and evictions for those are real circumstances every landlord deals with. It is safe to assume at least one month’s loss of rent annually. 
    • Property improvements/repairs: After investing in a rental property it is best not to over improve the property with all the best upgrades. It is wise to keep your cash flow at optimal levels and to not spend too much on upgrades for a rental property that you will most likely need to spend on routine maintenance and repairs throughout the year as well as during turnovers. Keep in mind large maintenance issues that may arise such as roofing, air conditioning, heating, plumbing and piping or electrical.  Remember that repairs on rentals may be expensive and unexpected so it is prudent to keep a an emergency fund from the profits you make to handle any situation that you may encounter.
    • Renters/Tenants: Choose your tenants wisely! A lot of damage can happen in a short amount of time. A good way to prevent something like that from happening is to visit your property frequently and be careful when selecting tenants. Cherish good renters and make savvy business decisions. One great renter may be worth more to you than an increase cost of rent if they have proven to care for your property as if it were their own. Having that peace of mind might just be worth the raise in rent. A great tenant will tend to require less repairs throughout their lease and will leave less wear and tear on your property when they eventually move out.

As you can see, investing in a rental property has many benefits as long as you are prepared to take on the challenge. There are many risks that may come with a real estate investment but there are also many ways to help mitigate those risks. One of those risks is renting to a bad tenant. The best thing you can do to protect yourself and your property is to implement a thorough screening process by checking their credit as well as their criminal and eviction history. This will give you a better idea at who they are and how risky of a business move it would be to rent to them. There are multiple agencies that offer in depth reports and reliable tenant screening processes to help you pick great tenants for your property. 

Of course these are just the basics and there is so much more to look into as an investor and potential landlord. This is why we would advise you not to try to learn things the hard way and to ask your trusted realtor who has the experience and knowledge to help you succeed! 

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