Lessons Learned – The Value of Leveraging with Real Estate

The probability that in San Juan county property values will rise before the island economy recovers is something islanders should consider if they are thinking of purchasing a home.

The real estate market in the San Juan islands is a bit different than most other small communities. On the mainland the local economy typically drives the local real estate market.

The San Juan islands differ in that a significant number of properties are second or vacation homes for people who work and live in other parts of the country. These homeowners are using income generated elsewhere for their purchase. Therefore the island economy plays a smaller role in the decision to purchase.SalePending3

What might an island resident do to achieve their American dream of homeownership in this situation? One possible option is to “play the market”. Invest now into something small and affordable or in need of cosmetic fixing. As prices begin to rise you gain equity. Use that equity by selling the small home and purchasing a larger home.

Remember the big down cycle in the real estate market in the late 1980’s? While it wasn’t a crash as deep and long as the current cycle it did present some excellent opportunities to buy into real estate.  Once recovery began many places saw their values recover in less than one year.

If you are looking to achieve your dream of ownership think about getting ahead of the pack. Make your investment now and ride the market upward. You may have to lower your expectations. Instead of owning a dream home, make it your goal to ‘just get your foot in the real estate door’. If you aren’t handy enough to invest in a ‘fixer’, purchase small. If you are handy, consider a ‘fixer’. There is a lot to be said for sweat equity. Either way the plan is to hold onto the property long enough to build equity. Equity is used to leverage into a ‘better’ home as the market improves.

LyonsThink about this. Real estate is one of the few areas of investing where you can leverage into an investment. Let’s say you have $10,000 in the bank and have a stable job and good credit. You invest that $10,000 in a $100,000 house. Now assume the market recovers at a conservative 3% in the next year.

If you left the $10,000 in the bank do you think you’d receive a 3% interest rate? Probably not. Even if you were lucky your $10,000 would have earned only $300. Now say you invest that $10,000 in a $100,000 home. Your equity will be closer to $3,000 or ten times more than you’d earn from the bank.

If you’d like to discuss how you might leverage your savings into home-ownership give me a call. I’m here to help.

Lessons Learned – The Importance of Inspections

In my last post I talked about how to take advantage of the physical inspection report. In this and the next few posts I’ll talk a little more about the various types of inspections and the value they bring to the purchase process. If I could share only one lesson I’ve learned from the home-buying process it would be the importance of inspections. Inspections help to prevent the purchase of a “money-pit”. They help to support the value. And they provide a sense of security.

A properly drafted purchase contract will give the buyer the right to fully investigate the property. Typically they have a specified period of time in which to complete inspections. Inspections educate the buyer about existing issues providing them with a better picture of the condition or value of the property. The reports give the buyer documentation to support a request to the seller for a repair to a preexisting problem. And the report provides the new owner with a checklist which can be used to prioritize on-going preventative maintenance.

While the physical inspection report may be one of the first and more valuable investments you make in your new home there are other inspections to consider. The purchase contract and inspection contingency form point out some of the other areas to inspect.  The physical inspection report may call for additional inspections. And the disclosures may bring to light a potential issue. Review all of these and discuss with your Realtor® the cost and timing to have specialists perform an in-depth inspection.

SOLD by Roxy
SOLD by Roxy

Other inspections commonly performed within San Juan County are those for the septic, well and wood-destroying organisms. My next few blog posts will talk about these inspections in a little more detail. If you’d like to learn more please feel free to call or text me at my anywhere number 619.224.9015 or e-mail Roxy@RoxyMarck.com

Lessons Learned – Take Advantage of Your Inspection Report

For many having a home inspection completed before closing escrow is a bit like purchasing insurance. If everything is in working order it seems like a waste of money. You can’t hold onto or cuddle-up with or even resell “peace of mind” which makes the primary reason for an inspection a bit difficult to embrace. For most of us the value is found only when a major defect is discovered and we have the option to cancel the purchase or make a price adjustment.

crow_vale_barn_webYet there is more to a home inspection. These inspections also provide the would-be home-owner a basis for maintenance planning. One of the best ways to retain or improve your home’s value is to keep it in good repair. For example, the report discloses missing or damaged flashing at the chimney. There is no visible evidence of water intrusion. Yet water is and has been slowly seeping into a roofing truss. As time passes a minor repair issue grows into a major repair which lowers the value of the home.

Water, electricity and propane are expensive on the island. Homes in good repair save money every single day in the form of less waste of these resources. Having a professional inspector’s written report highlights existing or developing problems and gives a homeowner the ability to make minor repairs which result in savings on the cost of these items.IMG_4226

At some point, usually ofter closing escrow, it is a good idea to review your inspection report and create a spreadsheet listing the the major components of your home such as heating, plumbing, electrical, roof and foundation. The inspection report usually breaks down your home into these components. From the report note the age and condition and any notations or suggestions into separate columns. If the report doesn’t give you an approximate age and life expectancy you’ll have a little resdream_girl_webearch to perform before you enter that information.

Lesson learned, Orcas Island is a small community where you may run into tradesmen on the ferry, in the local hardware store or in line at the grocery store. The good tradesmen on the island are usually busy. Those who love their trade also love to talk about their service. Whether you hang-out in the store or volunteer with one of the many organizations, go out and meet the locals. Like all small communities people are more willing to give priority to a neighbor over a total stranger. Can you think of a better way to kill an hour long ferry ride than talking to a professional about work you may need to have done at your new home?

If you want to become “a local” and need a place to start, call me at 619.224.9015. We will find you the perfect home while discussing the method of networking which best meets your needs.

Lessons Learned – Buying Orcas II

Back again! It’s now September of 2001 and I’m off to Orcas Island to hunt for property. Let’s take a moment to talk about a few things I should have thought about before I started looking.

Orcas, as you’ve probably already figured out, is located in the Pacific Northwest. Summer days are long and warm.  As a summer visitor from San Diego one tends to forget the flip side of that benefit, the short, cold days of winter. Orcas is mountainous. During the winter the north sides of Mount Constitution, Pickett, Entrance, Willard, Turtleback, Buck, etc. receive significantly less light than the south sides.

Mount Baker
Mount Baker

There are a large number of tall trees growing on the island. These factors should be considered when planning to purchase a home in which you intend to live during the winter. I’m not suggesting that you eliminate a home on the north side of a mountain. But it could be a consideration if you are trying to decide between two homes.

The economy on Orcas is tourist-based. If you plan to rent out the house when you aren’t vacationing, expect very little income. You might consider turning the property into a vacation rental but there is a down-side to that also. I’ll talk a little more about renting in a future blog post.

Okay, back to Orcas and hunting for property versus sitting on a log at North Beach drinking in the view.

North Beach
North Beach

I’ve found a couple of vacation rental condos available in Eastsound. They have a fabulous view of the water, a live-in property manager to handle all the details of renting and are well within my budget. The market analysis indicates rising values. Everything looks attractive except the limitation on how much I can use the place myself.

While I agonize over my decision it is brought to my attention that a certain family member will be heartbroken if I don’t at least look at the home they have for sale. The price is a smidgen above my comfort price but well within my qualification. I figure it wouldn’t hurt to at least look at the place.

And now we come to my first mistake. I fell in love with the view. I’m certain that I was manipulated into a visit at sunset. The sky was a palette of color ranging from deep blue to gold to bright orange. I could see sail boats off the northwest shore and the Canadian Rockies in the distance. In front of this was a perfect view of one of my favorite places on the island, Madrona Point.

Who wouldn't fall in love with this view?
Who wouldn’t fall in love with this view?

What color was the carpet? Don’t know, wasn’t installed yet. Did the roof leak? Don’t know, wasn’t finished. Decks were in the process of being built. You could not inspect the foundation because the crawl space was filled with junk. Appliances were sitting ready there ready to install. Lesson learned, make sure the work is complete before you close escrow. And have a second inspection to be sure the work is completed properly.

I wrote the offer anyway. I thought that since this was a purchase from a family member I was reasonably assured that the work would be completed with good attention to detail so I skipped the second inspection. Unfortunately the contractor they hired didn’t install a critical flashing. Years later I faced an expensive repair. Oh and maybe you should spend a little time looking at the house instead of the view. Just a thought.

Stay tuned for things I’ve learned about home inspections. Or if you are ready to start your property-hunting adventure call me at 619.224.9015 and we’ll get started.

Lessons Learned – Buying Orcas

This is the first post in a series about the home-buying process on Orcas Island. Falling in love with the island happens to many visitors. If you are a repeated visitor the itch to own can become a burning desire. This is my story.

Let’s start with a little background. I spent part of my childhood on Orcas. Within a month of my eighteenth birthday I fled “Orcastraz” for the mainland. At that time Orcas was a little light on engaging activities. Sailing, boating, and watching door knobs rust were about it. I needed more.

I landed in San Diego where I have spent most of my adult life, the last twenty-five years as a Realtor.

Let’s dial the time machine back to November of 2000. I’m sitting in my car in the parking lot known as “the I-5” staring vacantly at the license plate on the car in front of me, ICURF8. The hot, harsh reality of day-to-day living in southern California has blown away the memories of my idyllic late-summer vacation on Orcas Island. It’s about a hundred and five degrees outside. Oh, how I wish I could just be sitting on a log at North Beach. That’s when I asked myself, “Why not?”.

San Diego’s real estate market was rocketing toward the bubble. I had loads of equity along with a stable income, two of the more important ingredients in the home-buying process. As a licensed agent I have access to like a million loan officers. I call my favorite to learn that I’m pre-qualified for a fairly large loan. Big whoop, right? Pre-qualifying for a loan simply meant that I could fog a mirror and talk to a loan officer.

I am a fairly conservative person and did not want to overextend myself. So I took the next step and completed a loan application with a knowledgable lender familiar with financing on Orcas. After they checked my credit, income and expense reports and tax returns I received conditional loan approval. Conditional? Yes, conditional approval meant that as a borrower I had the income, credit and reserves necessary to finance the purchase of a property. The condition was that I find a property that would qualify for financing. At that time this simply meant that the property actually existed and was still standing.

Time to start hunting for the perfect property. I arranged to spend a little extra time on island my next visit to look at the housing inventory. Stay tuned for my next post when I discuss some of the things I learned about the house-hunting process on Orcas. Or if you have equity or savings, a stable job and are ready to start hunting for your new home call me at 619.224.9015. I’m here to help.

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