MONEY home improvement

Which Areas Will Spend the Most on Home Improvements This Year?

The homebuilders association estimated home improvement spending for this year. Porch adjusted the numbers to take cost of living into account. So who will spend the most?

We talk a lot at Porch about how much money is spent on home improvements, but the National Association of Home Builders’ estimates of 2014 spending on improvements by zip code is a good breakdown of just how much money is being spent, even all the way down to your local neighborhood.

According to the NAHB, the average zip code in America will see over $5 million spent on home improvement this year. That’s a lot of new roofs, landscaping, and remodels.

On average, total spending on improvements in a zip code is projected to be about $5.1 million in 2014. The top 5 total-spending zip codes are all in Maryland, Texas, or Illinois. Each of these top 5 zips contains at least 15,000 owner-occupied homes and home owners who average at least $145,000 in income and are 60 percent or more college educated. Most of these top 5 zips don’t have an unusually large share of homes in the key vintage for remodeling (homes built from 1960 to 1979), except for the zip at the very top of the list—#20854 in Maryland, a close-in suburb of Washington DC. 20854 is the only zip where over $60 million in spending on improvements is projected for 2014, and over half the owner-occupied homes in that zip were built 1960-1979.

See NAHB’s heat map of average remodeling spend per home by zip code. Lots of heavy activity in the northeast, Colorado, SoCal, and San Francisco Bay Area.

Here’s the NAHB’s list for all 50 states plus the District of Columbia. Read on to see how I adjusted these figures for cost-of-living.

NAHB 2014 Spending Projections by State

RANK STATE HOMES SPENDING (M) PER HOME
1 District of Columbia 110,668 $299.6 $2,707
2 Connecticut 913,482 $1,961.7 $2,147
3 New Jersey 2,099,380 $4,471.1 $2,130
4 Maryland 1,459,393 $3,106.4 $2,129
5 Massachusetts 1,583,170 $3,351.2 $2,117
6 California 6,863,765 $14,053.1 $2,047
7 Hawaii 260,435 $529.5 $2,033
8 Colorado 1,320,302 $2,659.0 $2,014
9 Virginia 2,059,305 $4,136.8 $2,009
10 Alaska 161,691 $315.9 $1,954
11 New Hampshire 372,053 $723.4 $1,944
12 New York 3,894,151 $7,569.7 $1,944
13 Washington 1,690,642 $3,203.4 $1,895
14 Rhode Island 248,947 $470.3 $1,889
15 Minnesota 1,536,021 $2,840.5 $1,849
16 Vermont 185,244 $340.5 $1,838
17 Illinois 3,195,820 $5,866.9 $1,836
18 Utah 653,230 $1,189.1 $1,820
19 Oregon 953,810 $1,735.2 $1,819
20 North Dakota 199,492 $362.5 $1,817
21 Texas 5,825,370 $10,288.5 $1,766
22 Delaware 249,624 $436.2 $1,747
23 Nebraska 498,327 $861.8 $1,729
24 Kansas 750,703 $1,295.5 $1,726
25 Montana 278,602 $478.7 $1,718
26 Arizona 1,555,284 $2,669.8 $1,717
27 Georgia 2,310,104 $3,953.1 $1,711
28 Wisconsin 1,558,251 $2,628.8 $1,687
29 Pennsylvania 3,444,645 $5,805.0 $1,685
30 Florida 4,867,931 $8,165.4 $1,677
31 Wyoming 158,372 $265.6 $1,677
32 New Mexico 526,208 $864.4 $1,643
33 Oklahoma 986,719 $1,619.6 $1,641
34 Missouri 1,614,450 $2,636.4 $1,633
35 Ohio 3,045,022 $4,969.2 $1,632
36 North Carolina 2,534,475 $4,132.5 $1,631
37 Nevada 580,080 $942.8 $1,625
38 South Dakota 224,676 $363.2 $1,617
39 Idaho 415,126 $670.6 $1,615
40 Iowa 898,866 $1,451.5 $1,615
41 Michigan 2,739,690 $4,420.4 $1,613
42 Louisiana 1,161,174 $1,873.1 $1,613
43 Maine 402,697 $646.4 $1,605
44 Tennessee 1,694,955 $2,684.2 $1,584
45 South Carolina 1,264,229 $1,997.5 $1,580
46 Alabama 1,292,936 $2,017.3 $1,560
47 Indiana 1,747,919 $2,697.0 $1,543
48 Kentucky 1,159,697 $1,787.3 $1,541
49 Arkansas 771,194 $1,178.6 $1,528
50 Mississippi 755,676 $1,131.7 $1,498
51 West Virginia 538,188 $782.4 $1,454

In general, the states at the top of the list are mostly high-cost areas, and those at the bottom are lower-cost areas. So I adjusted the list based on first quarter 2014 cost of living data to get a better sense of which states are going to be doing more home improvement in 2014.

NAHB 2014 Spending Projections Adjusted for Cost of Living

RANK STATE COST OF LIVING ADJ. PER HOME
1 Virginia 97.0 $2,071
2 Colorado 100.4 $2,006
3 Utah 93.0 $1,957
4 District of Columbia 139.6 $1,939
5 Illinois 95.5 $1,922
6 Texas 92.8 $1,903
7 Kansas 91.3 $1,890
8 Nebraska 91.7 $1,886
9 Washington 102.6 $1,847
10 Georgia 92.7 $1,846
11 Minnesota 101.8 $1,817
12 Oklahoma 90.4 $1,816
13 North Dakota 100.4 $1,810
14 Maryland 117.7 $1,808
15 Wyoming 93.2 $1,799
16 Tennessee 89.7 $1,765
17 New Mexico 93.4 $1,759
18 Iowa 92.5 $1,746
19 Massachusetts 121.3 $1,745
20 Missouri 93.7 $1,743
21 Montana 98.6 $1,743
22 Ohio 94.1 $1,734
23 Michigan 93.9 $1,718
24 Connecticut 125.2 $1,715
25 Idaho 94.2 $1,715
26 Kentucky 90.0 $1,712
27 Wisconsin 98.8 $1,708
28 Mississippi 87.8 $1,706
29 Indiana 90.7 $1,701
30 Louisiana 95.3 $1,693
31 Alabama 92.4 $1,689
32 Arizona 101.8 $1,686
33 Florida 99.7 $1,682
34 New Hampshire 116.1 $1,675
35 New Jersey 127.6 $1,669
36 North Carolina 97.8 $1,667
37 Pennsylvania 101.6 $1,659
38 Delaware 105.7 $1,653
39 Arkansas 92.5 $1,652
40 South Dakota 98.3 $1,645
41 South Carolina 96.1 $1,644
42 Nevada 100.2 $1,622
43 California 127.1 $1,611
44 Vermont 117.2 $1,568
45 Rhode Island 120.9 $1,563
46 Oregon 121.7 $1,495
47 Alaska 131.8 $1,482
48 West Virginia 98.6 $1,474
49 New York 132.2 $1,470
50 Maine 109.7 $1,463
51 Hawaii 162.9 $1,248

After adjusting for by how expensive each state is, the top five for home improvement activity in 2014 are Virginia, Colorado, Utah, the District of Columbia, and Illinois. The bottom five are Alaska, West Virginia, New York, Maine, and Hawaii.

Bottom line: If you live in a state near the top of the list, don’t expect that you’ll have a lot of flexibility on schedule or price when working with a pro for your home improvement project since lots of your neighbors are probably planning similar projects, too. If you’re in a state near the bottom of the list, you might have a little more leeway.

More from Porch:
Tips to Conserve Water in Your Home
Should You DIY Your Bedroom Remodel?
These 5 States Love Pianos Almost as Much as TVs

Tim Ellis is a data journalist for home improvement website Porch.

MONEY Housing Market

The Housing Market Won’t Be Undervalued Much Longer

Trulia's latest analysis shows homes in three-fourths of major U.S. cities are still undervalued, while seven are more than 10% overvalued (most in California). Even there, prices are no where near boom frothiness.

Trulia’s Bubble Watch reveals whether home prices are overvalued or undervalued relative to their fundamental value by comparing prices today with historical prices, incomes, and rents. The more prices are overvalued relative to fundamentals, the closer we are to a housing bubble – and the bigger the risk of a future price crash.

Sharply rising prices aren’t necessarily a sign of a bubble; a bubble is when prices look high relative to fundamentals. Bubble watching is as much an art as it is a science because there’s no definitive measure of fundamental value. To try to put numbers on it, we look at the price-to-income ratio, the price-to-rent ratio, and prices relative to their long-term trends using multiple data sources, including the Trulia Price Monitor as a leading indicator of where home prices are heading. We then combine these various measures of fundamental value rather than relying on a single factor, because no one measure is perfect. Trulia’s first Bubble Watch report, from May 2013, explains our methodology in detail. Here’s what we found.

Home Prices are 3% Undervalued Nationally We estimate that home prices nationally are 3% undervalued in the second quarter of 2014 (2014 Q2), which is far from bubble territory. During last decade’s housing bubble, home prices soared to a level that was 39% overvalued in 2006 Q1, then dropped to being 15% undervalued in 2011 Q4. One quarter ago (2014 Q1), prices looked 5% undervalued, and one year ago (2013 Q2) prices looked 8% undervalued. This chart shows how far current prices are from a bubble:

At this pace, home prices nationally should be in line with long-term fundamentals – i.e., neither over- or undervalued – by the last quarter of 2014 or the first quarter of 2015. The good news for bubblephobes is that price gains are now slowing down while prices still look (slightly) undervalued. We’d be at greater risk of heading toward a bubble if price gains were still accelerating, but they’re not.

Even in the Bubbliest Markets, It’s Not 2006 All Over Again Eight of the 10 most overvalued housing markets are in California, with Orange County, Los Angeles, and Riverside-San Bernardino in the top four. However, they are not seeing the return of last decade’s bubble. These California markets are much less overvalued than they were at the height of the bubble. Orange County, today’s frothiest market, is just 17% overvalued now versus being 71% overvalued in 2006 Q1. Among the most overvalued markets today, only Austin looks more overvalued now (13%) than in 2006 Q1 (8%) – and that’s because Austin (and Texas generally) avoided the worst of last decade’s bubble and bust.

Top 10 Metros Where Home Prices Are Most Overvalued
# U.S. Metro Home prices relative to fundamentals, 2014 Q2 Home prices relative to fundamentals, 2006 Q1 Year-over-year change in asking prices, May 2014
1 Orange County, CA +17% +71% 9.6%
2 Honolulu, HI +15% +41% 5.3%
3 Los Angeles, CA +15% +79% 12.7%
4 Riverside-San Bernardino, CA +13% +92% 18.8%
5 Austin, TX +13% +8% 9.7%
6 San Jose, CA +11% +58% 10.4%
7 Oakland, CA +10% +72% 14.8%
8 Ventura County, CA +9% +73% 12.6%
9 San Diego, CA +7% +69% 11.2%
10 San Francisco, CA +6% +51% 11.6%
Note: positive numbers indicate overvalued prices; negative numbers indicate undervalued, among the 100 largest metros. Click here to see the price valuation for all 100 metros: Excel or PDF.

 

Only in Akron and Cleveland are prices undervalued by more than 20%. Furthermore, in those two markets, home prices are rising below the national average of 8.0%. But in several of the most undervalued markets, including Detroit and Chicago, prices are now rising year-over-year in the double digits. But those markets are unlikely to stay on the most-undervalued list for many more quarters.

Top 10 Metros Where Home Prices Are Most Undervalued
# U.S. Metro Home prices relative to fundamentals, 2014 Q2 Home prices relative to fundamentals, 2006 Q1 Year-over-year change in asking prices, May 2014
1 Akron, OH -21% +18% 4.7%
2 Cleveland, OH -21% +18% 6.3%
3 Detroit, MI -19% +38% 15.2%
4 Dayton, OH -16% +13% 12.1%
5 Worcester, MA -15% +43% 4.4%
6 Memphis, TN-MS-AR -14% +11% 3.2%
7 Toledo, OH -14% +22% 10.0%
8 Chicago, IL -14% +36% 13.5%
9 Lakeland-Winter Haven, FL -14% +54% 3.8%
10 Providence, RI-MA -14% +52% 2.9%
Note: positive numbers indicate overvalued prices; negative numbers indicate undervalued, among the 100 largest metros. Click here to see the price valuation for all 100 metros: Excel or PDF.

 

Three-Fourths of Markets Still Undervalued Of the 100 largest metros, home prices in 76 of them look undervalued. But the number of overvalued markets – 24 – has climbed up from 19 last quarter (2014 Q1) and just 5 last year (2013 Q2). Most of the 24 overvalued markets are overvalued just a bit, with 17 overvalued by less than 10% and 7 overvalued by more than 10%. While the number of overvalued markets is rising, there remains little reason to worry about a new, widespread bubble forming. The last two years of strong price gains have been from a relatively low level and still haven’t pushed home prices nationally above our best guess of their long-term fundamental value.

See the original article with complete charts here.

Jed Kolko is the chief economist of Trulia.

MONEY Ask the Expert

How does a quitclaim deed work?

140605_AskExpert_illo
Robert A. Di Ieso, Jr.

Q: What are the tax implications of using a quitclaim deed to transfer my home? – Danny Chang, Los Angeles

A: A quitclaim deed reflects a transfer of property, and is often used when transferring property between family members (when parents give property to a child, or when homeowners divorce).

About those taxes: Let’s say parents use a quitclaim to give the home they bought for $200,000 to a child. The transfer is a gift, not a taxable sale. So it does not trigger a tax-deductible loss (even if the child paid $1 for the property) because losses on transfers to “related parties” are not tax-deductible, says accountant and attorney G. Scott Haislet of Lafayette, Calif.

Mom and Dad don’t report the gift on their income tax return; neither does the child (gifts from parents are income tax-free).

The parents would have to file a gift tax return (IRS form 709), including an appraisal documenting the value of the home at the time of the gift. The transfer will likely not trigger a gift tax, Haislet says, but may affect the parents’ estate tax at death. Caveat: If the home is mortgaged, and the recipient of the property takes over the mortgage, that may be considered income to you. In that case, the transaction would be considered “part sale, part gift,” Haislet says. Consult your own CPA.

Money 101: Will I pay income taxes on the sale of my home?

MONEY Housing Market

Why Median Home Prices Are Rising: It’s More Than Just the Values

Home prices keep rising, but not just because they're worth more. Sales of higher-end homes are skewing that median home price figure upward.

The median home price rose 5.1% to $213,400 from a year ago, the National Association of Realtors announced yesterday.

RealtyTrac’s numbers out today, which include foreclosures sales not covered by the NAR report, have median prices up 13% year-over-year.

So does that mean your home value rose 13%?

Of course not, and not just because those figures cover the entire United States. Clearly home values vary widely based on the characteristics of your local market – employment growth, the pace of new construction, incomes, type of home, all sorts of things.

The median home price is shaped by other factors having nothing to do with any particular home or market but, rather, the specific mix of homes sold in that month.

One of the trends we’ve been seeing for a while now is that more higher-priced homes are selling than lower-priced homes. That’s for two reasons:

First, the volume of bargain-priced foreclosures continues to shrink. RealtyTrac’s report says foreclosures and short sales accounted for 14.3% of home sales in May, down from 15.9% a year ago. Consider that the median price of distressed homes was $120,000 versus $190,000 for non-distressed and you can see how simply having fewer troubled properties in the mix would be a powerful pricing boost.

Second, move-up buyers, the ones buying the $500,000-plus homes, are in better financial shape. They have the credit scores to qualify for a mortgage. They also have, more than likely, equity in their current home they can use for a new down payment as well as investments.

See what’s happening at RealtyTrac’s chart of home sales by price tier:

Price Range Share of Sales YoY Change
$50k-$100k 13% -22%
$100k-$200k 33% -5%
$200k-$300k 20% 6%
$300k-$400k 12% 11%
$400k-$500k 7% 17%
$500k-$750k 7% 15%
$750k-$1M 2% 23%
$1M-$2M 2% 24%

Other highlights from RealtyTrac’s report:

Metropolitan areas with sales declines from a year ago include Boston (-23%), Fresno (-22%), Orlando (-18%), Los Angeles (-16%) and Phoenix (-13%).

Areas with the highest share of foreclosures and short sales were Las Vegas (27%), Lakeland, Fla. (33%), Modesto, Calif. (32%), Jacksonville, Fla. (32%) and the Riverside region of southern California (29%).

MONEY buying a home

Single and Thinking of Buying a Home? Here’s Some Advice

140623_REA_SingleBuying_1
Shutterstock

Fewer singles are buying, thanks to crimped finances and tougher lending standards. Before you take the plunge, consider whether you'll be able to handle the costs on your own.

The transition from renter to homeowner proved more complicated than expected for 26-year-old Kimberly Watson. As a single buyer with imperfect credit and without a long job history, she faced several hurdles throughout the lending process before eventually finding and closing on a condo in Hollywood, Fla.

Buying a home is hardly simple for anyone, but navigating the process can be particularly challenging for single buyers, who have only their own income to rely on to pay the bills. Tightened lending standards help explain why the percentage of single buyers declined slightly between 2010 and 2013: 16% of homebuyers were single females and 9% were single males in 2013, according to the National Association of Realtors, compared to 20% and 12% respectively in 2010. A weak job market and debt burdens also explain why singles have stayed away from the housing market, says NAR economist Ken Fears.

Banks are not allowed to discriminate based on marital status, but tighter lending standards can potentially pose a challenge to single buyers because they only have their own income to qualify for a loan.

Some of the tips below can make the process more manageable:

Ask, can you really afford to buy?
Scrutinize your finances carefully and evaluate whether buying a home is even feasible. You won’t have help from a partner to pay the bills, and you don’t want to be “house poor.” Review your credit record, clean up any mistakes, and pay down debt.

Money 101: Get Your Finances In Order Before Buying a Home

Be sure to consider all the recurring expenses associated with homeownership beyond the purchase price and mortgage closing costs. From association fees and property taxes to utilities and lawn care, the bills add up. Take into account maintenance and insurance when setting a budget.

“You’ve got a nice house, but now you’re eaten alive in expenses,” says Doug Lebda, CEO of LendingTree. “Factor in the total cost of homeownership.”

Think long term, says Emma Johnson, creator of WealthySingleMommy.com. You want to be able to afford and keep your home — so it’s wise to have a bigger savings account than you would if you were buying as a couple.

Watson found that to be true after moving in to her condo. She discovered a bad case of mold in her bathroom, and had to spend $10,000 on a gut remodel.

“I thought I would move in, and everything would be as is, and it would be fine,” she says. “Definitely have some extra money on hand.” Our advice: Total the estimated monthly household costs and set aside the difference between that amount and your current rent, or payment. If you’re struggling to make budget, you probably need to wait longer before buying.

Money 101: Should I Rent or Buy a Home?

Save on mortgage costs with special programs
Singles getting a mortgage with only one income should look at FHA loans, which offer lower interest rates and require lower credit scores to qualify. First-time buyers, which includes those who haven’t owned a home for three years, can make a down payment as low as 3.5% of the purchase price. FHA loans require more underwriting and more documentation, Lebda says, so lenders may not offer the program at first; be sure to ask.

If you do go the FHA route, the Homeowners Armed with Knowledge (HAWK) program will cut you a break on mortgage insurance costs if you go through housing counseling.

Not a first-time buyer? You may still be able to save even with conventional loans. TD Bank’s Right Step program, for example, offers a 3% down-payment option without private mortgage insurance (PMI), which is usually required for loans with less than 20% down, says Malcolm Hollensteiner, the bank’s director of retail lending products & services. The program also requires a housing education class.

On any loan, compare costs carefully, and not just rates. A lower rate may mean a higher lender’s fee, said Dean Vlamis, vice president of mortgage lending at Guaranteed Rate.

Money 101: How Much Will Closing Costs Be?

Don’t house hunt alone
Buying a home is an exciting milestone. It’s also a major investment, so don’t let emotions cloud your decisions.

Keep one or two trustworthy people involved in the process as a sounding board. “It’s important to have some sort of voice of reason,” says Jessica Edwards, a Coldwell Banker agent based in North Carolina.

Plan for the future
As you search for homes, consider what happens if you find a partner, or have to relocate for a job. Edwards says she’s seen many singles have to move sooner than they expected because their life circumstances changed. Think about that possibility as you’re searching: “There are a lot more single buyers that are looking at it as a primary residence that they can later turn into an investment,” she said.

Homeownership is a big investment and a lifestyle change — so it’s crucial to make sure you’re financially prepared and have done your homework. It’s better to wait than to find yourself over-stretched after committing to the major purchase. “We’re so inundated with the message that we need to own a house,” says Johnson. “It’s a wonderful thing, but it’s not right for everyone at every point in their life.”

MONEY Housing Market

The Housing Number That Really Matters: 2.28 Million

140623_REA_LatestinHomeSales_1
Wiskerke / Alamy

The number of homes on the market increased enough to slow down surging price gains and make it a little bit easier for buyers. Bidding wars aren't going away, though.

Home buyers worried they will be stuck in bidding wars for a scarce number of homes can relax a little bit. The number of homes for sale in May is up 6% over last year, to 2.28 million, reported the National Association of Realtors.

At the current pace, it would take 5.6 months to sell all the homes on the market. Six months is considered a healthy balance between buyers and sellers. The 5.6 number means it’s still, on average, more of a sellers’ market, but far better than late 2012 and early 2013, when there was less than a five-month supply of homes.

For May, sales continued to strengthen after a “lackluster” first quarter, said NAR economist Lawrence Yun. The median price of existing homes for the country, which includes condos, was $213,400, up 5.1% over a year ago.

But let’s get back to inventory, which has been driving much of what’s been happening in housing.

Around late 2011, buyers began tiptoeing back into the market, eating into the oversupply of distressed properties that had swelled post-bust. A year later, more confident buyers and an investor boom pushed the pendulum toward housing shortage. This chart shows that trend and how it’s been easing so far this year.

 

Source: National Association of Realtors

This is great news, because in some cities buyers have become so frustrated by the scarce choices that they’ve given up. Especially in hot cities (Denver, all the big cities in Texas, southern California) and in the best neighborhoods in most cities, buying a home has become about how to win a bidding war.

Even now, homes are still selling relatively quickly—the median number of days a home spent on the market in May was 47. But at least that’s six days more than a year ago, giving buyers some room to breathe.

That in turn means a slowdown in the hefty price gains that have marked the last 18 months or so of the housing recovery, but the market needs more, Yun says. “Rising inventory bodes well for slower price growth and greater affordability,” he said in a statement. But “new home construction is still needed to keep prices and housing supply healthy in the long run.”

New construction is a bit wobbly, however. Yes, builders are building more homes, but they are mostly apartments (the rental market is still going gangbusters). Builders have been slow to commit, worried about the financial health of buyers. Economist Brad Hunter of MetroStudy, which analyzes the new home industry, says consumers are still skittish, but traffic through builders’ showrooms continues to improve. So sales should rise soon, he says.

As with everything real estate, it’s all local. Construction is healthy in southern California, Texas and Florida, while Arizona and Nevada are down, Hunter notes.

And, it matters where you fall on the income spectrum. That’s another key aspect of the current housing market: Pricier homes are selling better, while the market for first-time home buyers is depressed. The percentage of first-time home buyers in the existing-home space fell again in May, to 27%, according to NAR.

In new construction, builders have begun targeting young buyers with lower-priced homes, but Hunter sees too many obstacles: high student loan debt and low employment among millennials.

Another obstacle: lending standards. The credit score needed to get a mortgage has been trending down, but very slowly. Real Estate Economy Watch, writing about an Ellie Mae report, said 32% of closed loans had an average credit score of under 700 in May, compared with 27% a year ago. The median credit score for purchases (not refinances): 755.

The median scores for FHA loans fell to 684 from 695 last year–FHA loans are favored by first-time buyers because of low down payment requirements.

The trend should draw more potential buyers off the fence, says Cameron Findlay, chief economist for Discover Home Loans. “When everyone’s talking about how difficult it is, if you’re a borrower on the cusp, you don’t bother going through the hoops and trying to apply, you just stay back,” he says. “Now they’re saying, ‘Let me see.’”

MONEY Investing

The Top 5 Ways to Make More Money on Your Rental Properties

If you own rental property, be sure to maximize your profits on your current investments before rushing out to buy new ones.

Rather than just acquiring as many properties as possible, let’s take a step back and think about whether the best way to make more money is to focus on your current portfolio.

1. Decrease Vacancy

The best way to minimize vacancies is to find a long-term tenant so that you don’t have to deal with turnover. This is covered separately by my next point because it is not the only way to keep your property occupied.

In the event that your tenant must move, vacancy can also be minimized by keeping turnaround time to a minimum. A friend of mine owns a condo in the D.C. area that is rented to 3 individual roommates. Although multiple tenants have moved on, he has kept occupancy at essentially 100% by posting ads the minute he learns of the move. Demand in the area is so high that he will have immediate interest and line up a new tenant to move in on the coattails of the old one.

You might think, “how does that apply to my property in an area with lower demand?” The thing is, nearly every property in every neighborhood has solid demand at a price. If your vacancies are consistently high, you may be doing it to yourself and need to think about your price point.

Every month of vacancy costs you 8.3% of your potential yearly revenue, so you would be better off renting every property one month faster for 5% less rent, two months faster for 10% less rent, and so on.

Another way to think about vacancy is this. If a property does not have some characteristic that sets it apart from the rest and sells itself such as a prime location or a to-die-for kitchen, you can give it one by providing the best value in town.

Related: The Biggest Threats To Your Real Estate Investment Property And What You Can Do To Stop Them

2. Minimize Turnover

Turnover costs money in multiple ways. There are advertising costs, the cost of patching and painting walls and replacing flooring that your previous tenant would have lived with, and, of course, vacancy. It’s a little counterintuitive, but this is another area where relatively lower rent may have the tendency to increase revenue.

One of your goals should be to find quality tenants that take care of your property and pay consistently. When you find these people, do what you can to keep them!

Some people will inevitably leave because they are moving across the country or buying a home, but the last thing that you want is to lose your best tenants to the landlord down the street, dealing with the expense of acquiring a new tenant and lost revenue in the vacancy.

The price of rent is not the only factor involved in tenant retention. The other key is customer service. Whether you personally manage your properties or have a property manager, make sure your tenants are treated with respect and professionalism, their concerns are valued, and matters are dealt with urgently and to their satisfaction. A good tenant/landlord relationship keeps tenants from thinking about moving.

To assess whether your property manager is performing in a way that fosters good tenant/landlord relationships, send a postcard soliciting feedback from your tenants, letting them know their opinion is valued and they can contact you directly if they are dissatisfied with their manager.

3. Increase Rent Strategically

Now, after telling you that lower rents can lead to higher revenue, I will proceed to advise increasing your rents on your longer-term tenants. This is really not a contradiction at all. Rather, it is a delicate balance that requires knowledge of your property’s value relative to your competition.

As I mentioned, tenants may be more loyal if they can’t find lower rent elsewhere. But this doesn’t mean that you should never raise rents when you have good reason to do so. Moving costs tenants money too. If the value of their current rental is significantly better than the value of a new rental plus the cost of moving, you still have the upper hand.

Make sure you know the rents in the area, researching sites such as Zillow, Rentometer, Craigslist, and the MLS if you have access. You may find there is plenty of room to increase your revenue a small amount each year (1%-3%) while remaining competitive.

Two tactics I use to increase rents: Communicate an offset to new costs such as increased HOA fees, which cover utilities and amenities that they enjoy, and have them coincide with an upgrade to the rental. For instance, I may plan to paint the exterior of the home or upgrade old windows from single to dual pane anyway, but I will schedule the work to coincide with a lease renewal and the tenant feels they are getting something out of the deal.

I may even ask them if there is anything that would make them more comfortable and select items from this list that will justify rent increases while increasing the market value of the home. In other words, make improvements that are necessary for maintenance or have immediate return on investment.

4. Be Diligent on Late Fees

Showing kindness and respect to your tenants does not mean being a pushover when it comes to rent collection and late fees. Collections are not the most enjoyable part of being a landlord, but are essential to running a profitable business. Make sure your tenants understand that this is a business, they have signed a contract, and it is your job to complete this transaction, following the contract and all applicable laws (including eviction proceedings if necessary).

Related: 6 Sure Ways To Never Be The Bearer Of That “Worst Tenant” Story

If you allow tenants to get away with paying late without the appropriate fees, you are leaving money on the table. And, your tenants may try to get away with late payments several more times, causing you extra work and stress.

If your tenant sends you a late check without including the late fees, politely explain that rent is not considered paid until all fees are collected, and that unfortunately you cannot accept this payment until all fees are paid. If you hold firm, they will quickly learn that you cannot be taken advantage of and will most likely comply.

More from BiggerPockets:
Wicked Cool Ways to Finance Your Next House Flip
10 Renovation Tips That Will Save You Time and Money
Video: Protect Yourself When Purchasing a Property As-Is

5. Add Revenue Streams

In multi-family properties, look for the opportunity to add services like coin-operated laundry and vending machines, which will not only provide revenue but will add resale value by raising the property’s return on asset value, or capitalization rate.

In single-family homes, offer extra house cleaning and landscaping services to tenants when they sign the lease. They may be happy to pay extra to avoid responsibilities they’d otherwise take on. You can negotiate the rates of independent landscaping and cleaning services, contract them out, and collect a fee as the contractor. For instance, if a cleaner agrees on a $75/month fee, you may offer the service to your tenant for $85/month, increasing your annual revenue by $120.

Overall, you may find that you can reach your business goals not only through acquiring a large number of properties but by operating a smaller number of properties more intelligently.

This article originally appeared on BiggerPockets, the real estate investing social network. © 2014 BiggerPockets Inc.

MONEY home improvement

Swimming Pools: Valuable Home Upgrade or Just a Pain in the Wallet?

Is Lisa Gibbs' pool a valuable upgrade or just annoying? She says "both."

The average inground pool costs about $22,000. Worth it? Yeah, but not because it will increase your resale value.

That lovely patio and pool you see in this photo is my Fort Lauderdale backyard. As summer steams in, maybe you’re dreaming of a similar view.

Before you call the contractor and start picking out float toys, let’s make sure you know what you’re getting into.

The average in-ground swimming pool costs $21,919, according to home improvement site Fixr. And that’s for a pretty basic 32’ by 16’ model. (Eleven years ago, we spent about $24,000 on our pool plus that pavered patio.)

But that’s just to build the thing. Then you have to take care of it.

Not only are we basically lazy people, my husband and I learned that keeping a pool clean and clear is actually tricky business. After a few too many “Ooh, why is your pool water green” comments (we have a salt pool, so no algae-killing chlorine), we gave in and 911-ed the pool service company.

Cost: $85 a month, plus an extra $1,000 or so a year for annual maintenance items (new filters, etc.) Then there’s the pool vacuum we had to replace last year ($600) and now we’re dealing with frequent leaks. At 11 years old, our pool needs resurfacing—that’ll be $2,500 please.

Oh yeah, and then there’s the patio furniture we need to replace (the Florida heat, storms and salty air is hell on outdoor surfaces), the new layer of sand we need to throw on the patio every year or so and the outdoor sound system we “had to have.” Finally, a pool pump and, if you go that way, a heating system will absolutely up your utility bill, and it will almost certainly bump up your homeowner insurance premiums because of the increased exposure to liability.

But at least we’ll get our money back when we sell our home, right?

Well, not so fast.

Remodeling surveys and real estate agents seem to agree: A swimming pool is probably a wash in terms of cost vs. value, and it depends on the area.

In sunny states like where I live, a pool is practically standard equipment for any family-size home. If every house on the block has a pool, the lack of one will subtract from a buyer’s perception of value.

That said, even in Florida, some buyers are wary either of safety issues—especially if they have very young children—and the maintenance costs. Massachusetts agent Kimberly Kent sums up the annoying ambiguity of it: “A pool is a great selling feature for those buyers who want one, and a major detractor for those who are absolutely against one.” See other agent comments on this Zillow thread.

In northern climes, a pool is a tougher sell. As agent and Zillow consumer expert Brendon DeSimone told me, it’s “too specific.” Meaning, it’s uncommon enough that buyers don’t expect it and are more likely to run away from the costs and effort.

One sign of a pool’s popularity in your area may be the sheer number of pool service companies: Check out Porch’s take on the top and bottom “pool-loving states.” A few of them are a bit head-scratching: Wyoming? Really?

Clearly, “value” goes beyond money recouped in a home sale.

When we put in the pool, our kids were 7 and 5 years old, respectively. The pool provided a lot of easy entertainment on a lot of slow summer days, not just for the two of them but for their gazillion closest friends. Now that they’re surly teens, guess how many times they’ve gone in the pool lately? Yeah, exactly zero. Still, we got years of pleasure out of it and still do.

Nothing beats being able to splash in my pool at the end of a hot day (well, at least after the afternoon thunderstorm passes) and, at the very least, my lovely backyard provides a nice mental oasis to stare at when I need a break from my office and the incessant demands of my slavedriver bosses.

I’m confident that my own thousands of dollars has been money well spent. But I’m also looking forward to the day when I can stop paying the pool guy and just do my swimming in places like these: World’s Coolest Hotel Pools

MONEY home improvement

Remodeling Your Deck: When to DIY, When to Hire a Pro

Large Back Deck
Chuck Schmidt—Getty Images

Before attempting a DIY deck remodel, consider the risks and rewards. You may want to hire a pro instead.

Remodeling your wood deck can be a great way to rejuvenate your outdoor living space and update your home’s whole look. Instructions for tackling your own deck remodel without the help of professionals are readily available. But why go DIY? Labor constitutes 50%-60% of typical project costs, so remodeling your deck yourself can certainly save money in the short term. However, depending upon your exact deck needs, attempting to remodel your deck yourself could cost you more than you think it will. Before you attempt a DIY deck remodel, consider all of the factors.

Understand your deck remodel plan

First, think about your needs and wants. Does your deck require a full remodel, an addition or just a bit of maintenance? Would you like to update your deck’s look to keep up with changing styles? Or do you love your deck as it is, but just want it to look new again?

Understanding your deck remodel plan is the first step in knowing whether it’s a better choice to go DIY or to leave your project to a professional. Check out projects in your neighborhood on Porch to get inspired and see what’s feasible within your budget. Having a very clear understanding of the scope of the project will enable you to decide who should do the work.

Prepare for a time commitment

A deck remodel may sound like a fun weekend project, but even a simple-looking wood deck can be deceptively complex.Homedecks.com estimates that just a 12 x 24 foot elevated deck with a staircase and railing will take an experienced professional and a laborer one to three weeks to build.

A qualified deck-building professional has the experience necessary to remodel a deck using the correct materials and building it to code. A pro will provide you with a project timeline, and will have access to the resources necessary to keep things on schedule. In addition, a pro will have experience in handling project hiccups, such as uncovering dry rot or discovering sinking deck footing, without letting the timeline get too far off track. If common problems like these arise, having a professional on the job could mean the difference between having finished deck in time for summer and having a money pit that gets stalled until the following year.

Deck remodel permits

If your remodel constitutes anything more major than a simple sanding and refinishing, you may need a construction permit to do it legally. Obtaining a permit involves calling your local building department or municipal offices to learn which permit or permits your project will require. Then you’ll need to fill out your permit applications and submit them to the building department, along with a copy of your construction plans, a property survey, and a filing fee. You’ll need to accomplish all of this before you begin your project. You could do this yourself and struggle over that learning curve, or you can leave it to a pro who’s already well familiar with the process.

Superficial flaws vs. underlying issues

If your deck is solidly built but the surfaces are dull, weathered, or dirty, then a pressure-washing and refinishing treatment could transform your deck’s look, making it feel like new without a pricey remodel. These procedures can be undertaken by a homeowner and can generally be completed over a weekend. Check your local home improvement store for renting or purchasing equipment and supplies (such as pressure washers, power sanders, varnishes, oils, and application tools) that you’ll need to finish your project.

However, if your deck is showing signs of wear like wobbly stairs, soft wood or separating planks, there’s a possibility that it’s also become structurally unsound. In fact, the existing deck structure may not have been legally constructed to begin with. To fully assess the structural integrity of the deck, hire a professional. A licensed deck building professional will be able to quickly identify problems such as rot, improper construction, or a sinking foundation, so that you can target your efforts and avoid wasting money on a deck remodel that fails to correct major structural problems.

Safety is a must with deck remodels

Hiring a pro to do your deck remodel can help you avoid or fix many common DIY deck-building problems that will make even a new deck unsafe, such as improperly spaced railings or insufficient drainage systems. Even a deck that was originally constructed by a pro should be professionally screened every year for safety and code requirements. Rain, sun, wind, and other environmental stressors can take their toll on even a well-made deck and cause serious problems. This could lead to anything from a sagging platform to a full collapse. In fact, data collected from the Consumer Products Safety Commission shows that thousands of injuries occur every year which result from wooden deck failures.

Check out NADRA.org for deck safety tips, including a helpful Check Your Deck consumer checklist. Then use Porch to find a professional who can ensure that your deck remodel will meet you and your family’s needs for decades to come.

Anne Reagan is the editor-in-chief of home improvement website Porch.com.

MONEY home improvement

8 Ways to Make Your Home a Staycation Paradise

140618_REA_Staycation_1
Alamy

Staying home this summer doesn't have to be a bummer. Use these pro tips to maximize your outdoor space and create a spectacular retreat.

Longing to escape? Summertime entertainment and relaxation doesn’t have to mean taking a trip away from home. The most enjoyable outdoor retreats incorporate basic, and familiar, elements: earth (landscaping, container gardens), water (fountains, swimming pools), and fire (firepit, candles). Add to that quality outdoor furniture, some fun elements and thoughtful design, and your deck, balcony, porch, or patio can easily become a destination. Designing outdoor entertaining areas in your home takes a bit of planning, but these tips can help turn your basic backyard into a staycation paradise.

Before you begin, be sure your outdoor areas are safe and in good condition. Call a decking contractor if you feel your deck might need reinforcement or repair. Cracks in the patio can be hazardous; fill them in or replace the damaged sections. Prepping your outdoor area is no different than preparing your interior rooms. Start with a good clean slate you can enjoy all summer long.

1. Establish your entertaining zones

Maximize your outdoor space by setting up specific zones or areas. Think of your outside space like the inside of your home: Do you want space for cooking and eating as well as a bar? Do you want special seating for lounging or hosting guests? Do you want everyone to face a particular view? Even if your outdoor area is small, you can still create various “zones” by arranging the furniture or containers. Help define the different areas by adding outdoor throw rugs, using containers as “room” dividers, or letting an arbor or gazebo create a separate space. Don’t forget that even the farthest areas can be focal points. A distant tree is a perfect place for a bench, a small hill can be a spot for a birdbath.

Pro tip: Even the smallest of outdoor spaces can have zones. If you only have a small balcony, consider creating good transition spaces from the indoor to outdoor areas. If you want to grill on the deck but need to eat inside, make sure that the transition between the two feels connected. Or simply reserve the balcony for a cozy post-dinner spot.

2. Give the eye a place to rest

Not every home has a million-dollar view, but even an undesirable background can be made to feel pretty. Looking at natural greenery and giving our eyes a chance to rest upon nature is a great way to make a space feel larger. Arrange your outdoor zones so that guests face a trellis “wall” of ivy or fast-growing bamboo. Or add a small fountain, birdbath or pretty ceramic container as a focal point. Tall objects, like trees, arbors or fences, make the eye travel upwards, creating a larger sense of space.

Pro tip: If your space allows, think about arranging your outdoor furniture zones around focal points. For example, lounge chairs could be grouped around a fire pit, or the dining table could be placed so that the guests view a beautiful tree or outdoor swing.

3. Maximize usable space

Clear and trim away low hanging branches to open up the view, sweep away leftover spring debris, power-wash hard surfaces, and organize storage areas. Not only will cleaning and clearing the outdoor space make it usable, it will make it safer to walk around and play outside, even when the sun goes down. Make sure to leave enough room around high traffic areas like doorways and grills. If you’ve been thinking about extending the patio with paving stones, call in an expert to level the area and add drainage. Now is the time to make your outdoor areas available for entertaining and fun!

Pro tip: Landscaping crews can be hired to do a summertime cleanup of your yard, including power washing, trimming and hauling away debris. You can also ask neighbors to organize a front yard clean-up event so that the whole neighborhood benefits from an upgrade.

Related: Make a Landscaping Budget You Can Stick To

4. Add color to create movement

Believe it or not, as our eyes travel around a space, the mind is tricked into thinking that the space is larger than it is. Create a larger-than-life entertaining area by adding pops of color that force the eye to travel throughout the yard. A collection of flowers in colorful containers, decorative pillows on the seating, or strategically placed garden whimsey will create movement as well as style. Whether you prefer a monochromatic color scheme or want a multi-hued yard, variation creates movement and depth that will make the area feel spacious and retreat-like.

Pro tip: Having trouble choosing outdoor colors? Head to your closet! We tend to wear colors we love so if you gravitate towards blues or purples, consider adding those hues to the yard. Warmer tones like red, orange or pink also coordinate well with lots of greenery.

5. Play interior decorator

The most desirable outdoor spaces look and feel as though a professional designed them. Many professionals like landscape designers, interior designers, and even home stagers, can be hired for a consultation. Their advice might be just the help you need to get your outdoor retreat started. If you want to DIY this project, much of this work can be achieved by simply taking the time to think about your outdoor space as you do your indoor space. If your outdoor space is subject to the elements, start with high-quality outdoor furniture that is designed to last, and purchase a fitted protective cover. If you like to change your colors each season, purchase cushions from a source that will allow you to buy covers separately – this way you can be assured of a good fit from summer to summer. Don’t be afraid of adding patterns or colors; the expansive sky outside allows a lot of room for bold designs.

Pro tip: The best time to find trendy outdoor decor is in the spring. But even old pieces can be given new life with a fresh coat of paint. Scrub away moss and dirt and be sure to use spray paint in a well ventilated area. Experiment with stencils or painter’s tape to create unique designs from season to season.

6. Bring inside elements out

Anytime you can bring your favorite indoor designs outside, it creates an environment that feels tailor-made and unique. Adding an outdoor chandelier, laying down an outdoor-safe rug, or setting the table with quality linens and real silverware will help make your outdoor space feel inviting. Outdoor buffet tables or console tables are not only functional, they make outdoor entertaining easy and the space feel customized.

Pro tip: Do not use an indoor-rated lamp outside. It’s not sealed against moisture and may corrode, possibly causing electrical hazards. Outdoor-rated pendants are easy to find. Keep in mind you can always spray paint to the desired color or use a candle chandelier for added elegance.

7. Just add water and fire

A true destination not only allows us to escape, it draws us in and makes us feel welcome. Both fire and water elements instantly transform an outdoor space into something really exclusive. People have always gathered around a fire for warmth, safety and food. Large outdoor fireplaces or small tabletop versions create an immediate gravitational pull. Candles or outdoor string lighting can help create a similar ambience. Group them en masse to create a stronger affect. Similarly, not every outdoor space can have a swimming pool, water feature, or pond. But a bubbling water fountain can be a great substitute and can be found in a variety of sizes and prices.

Pro tip: It’s easy to build your own water feature. You’ll need a container or receptacle that can hold water as well as a small pump (like this submersible pond pump, available for $15). Decorate the water feature with water plants, rocks or water-safe pond lights. You’ll need to place the fountain close to an exterior outlet and be sure to add anti-mosquito drops to the fountain to keep it bug-free.

8. Mimic your favorite vacation spot

If you desire a true paradise in your own backyard, go ahead and add elements that remind you of your favorite retreats. Love the beach? A grass umbrella, beach chair, fluffy towels and seashells can make you feel like you’ve escaped. Is your ideal vacation filled with quiet reading time while submersed in nature? Style a cozy reading nook next to a bubbling water fountain and scented plants like rosemary or lavender. Adding reminders of your favorite hotel or vacation spots can help you extend your holiday time without leaving the home.

Pro tip: Want to incorporate elements of your favorite hotel or spa? Make a list of the top 10 items that remind you of that place: the scenery, the scents, the view, the colors, particular designs…you can probably find replicas of these pieces and add them to your outdoor area.

More from Porch:
Who Builds More Decks: Boston or Dallas?
Tiny Yard? Best Tips for Creating a Big Garden

Anne Reagan is the editor-in-chief of home improvement website Porch.com.

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