Real Estate Archives

Negotiate the Price of Your Professional Services for your Home.

houseGetting a roof replaced, your house painted, windows installed, or a dead tree removed from your yard? Be sure to get multiple quotes and negotiate your price.  This is one tip that can save you $100’s if not $1000’s of dollars over the course of your home. Let me give you a couple of examples of when I negotiate.

I myself had a dead tree in my yard that had to be taken down. My neighbor kindly suggested a person to me she knew that would do the job. She told she had two small trees removed by them for $1200 (I think $1200, to be honest I can’t remember the exact number, but whatever it was – it scared me). Being a new homeowner I thought – there is no way it can really cost $600 or more for a single tree!

I got on the phone and got 5 quotes from local tree removal services – $1100 (Should be arrested), $800, $800, $750, “can’t say for sure but at least $700.” Gasp.

At this point I look like Charlie Brown getting hit by the baseball after he pitches.

I think to myself – time for Craigslist. I get two people interested – both shooting for around $500 (but would have to see to be certain.) I decide to give it a couple of days to think about it.

Meanwhile I get an e-mail interested in an air conditioning unit (window unit) that I have on craigslist. I go to sell the window unit, and when I meet the person – He just so happens to be a landscaping professional. I think to myself – should I negotiate the A/C or sell and then negotiate. I decide to sell first – ($200 cash). I turn the to guy and say,

“So do you cut down trees as well?”
“Yeah I do”
”Bonded in Insured?”
”Yes I am”
”Cut down a Tree for $300? that is only 2 miles from here?”
“I don’t think I could do it that cheap unless it was small, lets go check it out”

Get home – Sure enough he starts saying how large the tree is and how dangerous it is to do the job. I ask him how much to cut it down and haul it away – $500 he quotes me. “How much just to drop it?” I ask – “$350” – “how about $300” I reply. Deal. I had intentions of simply posting “Free Firewood” on Craigslist to get the tree removed by someone in need with chainsaw and a truck, but my neighbor wanted it instead. $300 and it was done. Far less than half the cost of the initial quotes and the guy gave me a copy of his drivers license (returned at end of job) and insurance and bond information.

Another time I got quotes for installing an air conditioner into my home – I had quotes all over the place from $1,900– $2,500 (All for the SAME UNIT!) – Until I found a guy willing to do it for … get this, $1,600. Had all of the paperwork and licenses to do it and also agreed to giving me a copy of his drivers license and company information.

It pays to get multiple quotes and to flat out tell them you need a better price. Even if they give 5% off, on some of these large items for homes – that can be $100s of savings.

People like heating and cooling professionals, roof installers, and other services often have huge margins – and are often desperate for work (especially in this market). Everyone has to make a living, but trust me when I say – A lot of them over-quote you. If a job costs you $1,500 to do and takes 1 day and the price is $1,750 (Net $250/day), that is relatively fair. What happens though is the job costs them $1,500 and they quote you $2,250 (Net $750/day) – which nets them 3 jobs in 1!

Let me be honest right now, if I was a heating and cooling or roofer – I would over-quote my customers a little too – What’s an extra $200 on a quote that is already $2600.


Reasons Not to Pay Down Your Mortgage

mrTypically personal finance bloggers would tell you the joys of living mortgage free, but I’m here to show you why there are times you do not want to pay down your mortgage.

1) You are borrowing money at a low rate (30 year is currently around 4.25%), to throw all of your spare cash against your mortgage would be admitting you cannot earn a better return than your mortgage’s incredibly low rate (which is effectively even lower because of reason 2).

2) Mortgage interest is deductible and qualifies you for itemizing.

3) You could be investing in yourself with the extra money.  Maybe it would be better to improve your wardrobe or go back to college for a more lucrative or enjoyable career.

4) At times you have to “live in the now.” Do you really want to be a 32 year old that virtually threw away living from age 25 to 32 to pay down his 30-year mortgage in 7 years?

5) Make memories. Instead of throwing that extra $4,000 a year into your mortgage – take a trip of a lifetime with your spouse or a family member and gain memories that are priceless. Life is short.

6) If the housing market does have another downward trend – you might lose all of the additional equity, that you took from your savings and put into your mortgage. Now you possibly lost your deduction and your savings and have none of reasons 3 through 5 to show for it.

Think before you pay your mortgage down. I know it can be all so tempting to pay an extra 15% to effectively make a double payment – but remain opened minded to your options with that extra 15%.

Some finance bloggers talk about being a landlord as if it is very easy, but is it?

A lot of people are searching for ways to increase their income and many people find investing in rental real estate and being a landlord as a viable way of increasing wealth over the long term. The idea is simple and easy for most people to understand, so it’s natural that so many people are being a landlord now a days.

Real estate is what I enjoy to research. First I want to look at real estate in my nearby area, particularly a single family home. I live in a better suburb of Cincinnati, OH. The taxes are reasonable (slightly higher than other areas of Cincinnati, but overall fairly cheap).

Putting a Pencil to it First:

Single Family Home – Listed $69,900, Annual Taxes: $2251, Insurance $700
Assume a 20% down payment, lets say you buy the property for $65,000 after all fees and closing.

Owning Rental PropertyMortgage Payment: $349.33
Monthly Taxes: $187.58
Monthly Insurance: $58.33
Maintenance Cost: $50
Disaster Fund
($1000 a year / 12) = $83.33 – Roof, A/C, Furnace, Water Problems, Deductible, Etc.
Lets call these two items: $130

Total Cost: $725.24 a month
How much can you rent it for – This is a debate. Lets say you can get $950 for this home. It is in good condition, but not in the best place within the good suburb. Also I want to state this is the cheapest single family home within the area.

So now lets talk about what you get out of this:

Deduction: You can depreciate the value of the Structure, but not the land. Lets be favorable and say you can deduct $50,000 of the $65,000 over 27.5 years (what is current permitted). That is $1818 a year. We will come back to this.

You financed your home – $52,000 worth of financing in Fact. How much equity are you building with a standard 30-year mortgage at 4.25% with no additional payments:

Year 1 $877
Year 2 $914
Year 3 $955
Year 4 $995
Year 5 $1039



What about occupancy rate. Are you planning on having this rented 12 out of 12 months? Sure, but that’s not realistic. You make get a tenant that lives there 30 years straight, but more likely than not you should plan at least 5-11% vacancy. Lets call it 1 month a year (8.3% vacancy). Note: Rehab and Repairs can increase this greatly.

Renting Versus Buying a Home

rentorownRenting versus Buying, one of the most debated topics you will ever see. I would like to offer my experience.

First off let me disclose that I am a 25-year-old home owner. I purchased a house for $126k in a Cincinnati, OH suburb. The school district is solid and the commute is manageable downtown.

Lets talk about my house a bit. Right off the bat – I put about $25k into rehabbing the house. I also received the $8,000 housing credit from the government, so lets just say I’m $126 + 25 – 8k = $143,000 into my home.

I currently owe about $118k on the house. I had it appraised in Sept 2011 for $160,000. I’ll come back to this more later, but for now lets move onto Renting versus Buying!

Lets talk about monthly costs.

My Home:
$889, taxes, insurance, and mortgage
$60 a month to maintain

Lets say I have to put $5000 into this every 5 years for a disaster, or new windows, or a new furnace, etc. – $5000 / 60 months = $83.3 a month. I know this is a bit grey, but I’m going to call it $80 a month.

Lets say a fix cost $1029, or $1030 a month

What do I get out of it:

Equity: $165.33 a month
Interest Deduction: Year 1: $118000 * 4.25% = $5015 interest expense.

Lets talk about itemizing.

A whole new world opens to you when you itemize, but you lose your standard deduction when you itemize. It is one or the other. Sadly because I have a low interest rate my itemized was only about $3400 over what a standard deduction would have been. Because I am taxed at 25% that is about $850 a year or $70.83 a month. Let’s call it $70 a month savings.

Disclaimer: Always contact a tax professional for filing a tax-return or tax advice. I am no way shape or form offering any tax advise.

So lets add up owning for me.

$1030 a month – $165.33 Equity – $70 Deduction Savings = $794.67 a month in net cost.

That’s $795 for a 3-bedroom, 2.5 bathroom 1600 square foot home with a 2 car garage and a laundry. Also a beautiful Island Kitchen.


Renting a home this size would run about $1000 – $1300 in the area. You can find cheaper places, but I have to believe you are talking a minimum of $1000.  You could however downgrade to an apartment or condo in my area for $599 (1 bedroom) – $800 (3 bedroom apartment), Condos run anywhere from $750 – $1000. My point here is, it’s definitely a little cheaper than renting if you want to live in a house.

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