If you’ve ever been to Washington DC, you’ll understand why thousands of people continue to flock there. It’s a beautiful city, with a rich history and all the amenities residents could wish for. And for the first time in over a decade, property in the nation’s capital is selling as fast as it can be listed. Property values are on the rise in Washington, D.C., and don’t show any sign of stopping.
The reason for the increase in property values is simple: high demand and short supply. There are more buyers looking for property than homeowners selling. When the demand is high, prices go up. Even homes valued in the millions are selling quickly, a strong indicator of the desirability of the area. Houses and condos that are listed in the region are off the market in an average of 18 days. With property selling so fast, buyers need to be ready to make an offer immediately, and many sellers are enjoying bidding wars, which can drive up their selling price significantly.
With so many buyers looking for a place to call home, new construction and development is expected to increase as well. Developers can sell these new houses and condos at a premium, since many homeowners don’t want to have to deal with renovations and repairs. Buyers in today’s market want their house to be move in ready, looking like the properties they see on T.V. and in magazines. These conditions in the D.C. real estate market are all coming together to create the perfect scene for increased property values.
Washington, D.C., and its surrounding areas, have long been one of the most stable real estate markets in the country. The region continues to enjoy an influx of residents, and the rising property values reflect the high demand for housing, with no signs of slowing!
Depending on the state you live in, school taxes, which all homeowners have to pay, may be directly related to the value of the home. Homes located within more desirable districts tend to have a higher value than comparable homes in other districts. Before you put in an offer, let’s take a look at the relationship between school districts and home values and what you need to consider.
School District and Home Values
Better performing school districts are often surrounded by higher valued homes. There is no way to definitively determine whether the houses are more expensive because of the performance of the school district, or that more affluent families can afford these houses and seek to live in better school districts. The schools’ performance may be due to families with higher education who encourage high performance from their children. The more money and education a community’s residents have, the higher performing the school district.
If a great school district is what you’re looking for when considering your next home, make sure to do the research. Education records for public schools is public record. You can find out the teacher salaries, demographics of the schools, student test scores, rankings, and how many students are receiving free lunch. Schools with a higher teacher to student ratio and with higher percentages of students on free lunch programs tend to perform worse than districts with lower numbers.
When a district is doing well, home values tend to increase. More people want to live in these neighborhoods and the demand drives the price of the properties up. With increased values, taxes increase, and many families can no longer afford to consider purchasing one of these homes. When you’re searching for a home to buy, make sure you take a look at the school district. Even if you don’t have children, the performance of the schools in the Maryland location, Virginia location, and Washington DC location will affect you as a homeowner.
When it comes to owning a house, there are some benefits homeowners may see when they do their annual taxes. Along with other expenses related to your home that may be deducted, homeowners can deduct the cost of their property taxes and mortgage interest from their federal taxable income.
Mortgage interest is the amount of money homeowners pay in interest on their mortgage. Since interest rates vary depending on the terms of each individual mortgage, this number is different for every homeowner, and many rates will change throughout the life of the loan. When it’s time to prepare annual taxes, the amount of money that was paid in interest on a mortgage can be deducted from total income.
Property taxes are determined by the county in which you live. These taxes can include different taxes such as school, and city government taxes, combined into one payment. The county sets the property tax percent and the amount a homeowner pays depends on the value of their home. For example, if the property tax is 3%, a house worth $100,000 will pay $3,000 per year, while a house valued at $300,000 will pay $9,000. The taxes paid can vary if a home increases in value, or vice versa.
When you do your taxes, the money you paid for mortgage insurance and property taxes can be deducted from your total taxable income. If your taxable income is $50,000, and you paid $5,000 in insurance and taxes, you new taxable income is $45,000. The more deductions you have, the lower the taxable income is, and the more money you may potentially receive in a tax refund. Your accountant will know what can and cannot be deducted, so the best course of action is to keep track of all interest, taxes, and monies spent on your home.
Finding the right tenants in the Maryland location, Virginia location, or Washington DC location is essential to having a good renting experience. Your property is an asset and you need to be able to trust your tenants to take good care of it. Approaching the search for tenants in a businesslike way is the key to finding the right people. Here are some tips to help you fill your rental with good tenants.
Know the Law
Every state, town, and county has its own rental laws. Make sure you understand the laws for the location your property is in. This will help you create a lease document that is lawful and fair for both you as the landlord, and your tenants.
Advertising your open property is a must to finding the right tenants, but be selective where you post your listing. There are sites such as rentals.com or zillow.com that may charge you a fee for your post, but will bring you better results than free sites such as Craigslist. Put up a sign in the window or lawn of the property, and advertise locally in stores or newspapers. Provide details and the rent to get responses from people who are actually interested.
Always have a rental application asking for names, social security numbers, income, and previous landlord references. Run a background check on potential tenants. Many renters expect to pay for this, so you can charge a one time fee to do so.
Strong Lease Agreement
Spend the time before you look for tenants drawing up a strong lease agreement that clearly details the responsibilities of both the landlord and the tenants, late rent fees, occupants, and terms for evictions. Even if something seems obvious, spell it out in the lease.
Set the Bar High
Just because ten people have applied doesn’t mean you have to choose one of them. Don’t lower your standards for a tenant just to get your property rented. Keep looking until you find a tenant you feel good about.
When it comes to renting a house in the Maryland location, every state has its own laws laid out for both landlords and tenants. These laws protect both parties in various situations and provide the framework for rental agreements. If you’re looking to rent a house in Maryland, here are a few of the most important laws you need to know.
Maryland law puts a limit on how much money a landlord can require for a security deposit. A landlord cannot hold more than two months’ rent as a deposit and is required to return money owed within 45 days of the tenant vacating the property. A landlord who asks for more than the total of two months’ rent is breaking the law.
Did you know that in some cases, it is within your rights to withhold your rent? A rental agreement between a tenant and landlord lays out all the responsibilities of both parties. If the landlord does not uphold their end of the bargain, you can hold your rent money until they do. For instance, if a landlord refuses to take care of an imperative repair, such as a broken water heater, you can keep your rent until they do.
A number of laws are specifically geared toward protecting the tenant. One example a law that protect tenants from retaliation of the landlord when practicing their legal rights. If a tenant complains to the authorities about unsafe living conditions, landlords are not allowed to take action against them. Evictions, handling abandoned property, and fair housing rights are also all covered through Maryland laws.
In addition to state and federal laws, Maryland cities or counties could have their own laws as well. When looking for property to rent in Maryland, take the time to read tenant/landlord laws for the state as well as the county and town you’re looking to move to.
Whether you’re planning to build an addition to your home, finally finish that basement, or add some bigger upgrades to boost your home’s value, home renovation projects can sometimes seem like nothing more than huge headaches.
But, no matter what your renovation needs are, if you’re properly prepared ahead of time with a smart home renovation plan, then your renovation project can go smoothly!
Design a Project Budget
Before you do anything else, create a project budget!
If you’re taking out a loan to pay for your renovation, decide what type of loan, how much to borrow, and how long it will take you to pay back so you can judge whether your renovation ideas are financially responsible or whether they’re a bit overambitious.
Make sure to plan an “emergency funds” section into your budget in case of any unpleasant surprises discovered during renovation!
Decide What You’re Doing Yourself
While home improvement shows may glamorize DIY renovations, look at your plans realistically before deciding to take on any tasks in your renovation.
Hiring a professional contractor might be a better financial decision than taking a week off of work to mini projects yourself.
Do Your Local Research
Before making any major changes to your home, check your local bylaws to see if there are any specific fees or other surprises you might run into after renovation. Checking with the building code and municipal bylaws of your area may also help you decide on a plan that further increases your home’s value by taking into account the neighborhood value.
Prepare for Life During the Renovation
Renovations can take a while, and can be quite loud and uncomfortable! Make a game plan for how you’ll adapt to your living quarters being transformed into a construction zone while the renovation is going on, or plan to move out temporarily!
Next time you’re thinking about that big renovation project, don’t dismiss the idea! With good planning and preparing, a major home renovation project can be a success!
While we can’t ever predict the fluctuations of the market with absolute accuracy, it’s always a good idea to explore ways to be prepared for the next possible real estate market crash!
So, how can you protect yourself and your investments to weather the next real estate storm?
BE CAREFUL TAKING OUT LOANS
Buying a home is an investment. For many, it’s the single most expensive thing they’ll buy in their lives. But, in an unstable market, it’s much more difficult to judge whether your home with appreciate with time or not. It’s always smart to only take out a loan for what you can reasonably pay.
DIVERSIFY YOUR INVESTMENT PORTFOLIO
Don’t put all your eggs in one basket, as the saying goes! If you want to be prepared for a housing market downturn, you may want to diversify your portfolio with stocks, bonds, as well as with home equity.
CREATE A SAVING PLAN
To be better prepared for a sudden market downturn, it’s best to start saving for it. Build up an emergency savings account. You should save enough money for 3 to 6 months’ mortgage payments so you don’t need to worry as much about defaulting or a foreclosure.
LOCATION OVER DESIGN
If you’re worried you won’t be able to sell your home when the market crashes in the Maryland location, Virginia location, Washington DC location, or anywhere else, remember this simple phrase: “location over design.” Even when the housing market turns sour, people still need to buy homes. Good neighborhoods won’t suffer in a market downturn as much as bad neighborhoods.
GET A FIXED-RATE MORTGAGE
This is possibly the most important piece of advice to take away from this article. Fixed-rate mortgages give you a huge amount of security because, if the market goes down, your mortgage won’t go up. This is something worth sacrificing a bit of square footage over!
If you’re bettered prepared for the next housing market downturn, you can ride out the storm in relative security and comfort even while others scramble to sell their depreciated homes and try to find a way to pay their rising mortgages.
If you’re working with a real estate agent in the Maryland location, Virginia, location, Baltimore location, or Washington DC location, you may have wondered how your realtor will be paid. For those buying a home, it’s a surprise to learn that your realtor’s commission comes from the seller’s end of the table. Let’s take a look at how commissions break down and how realtors earn their living.
If you’re unfamiliar with this term, a person who works on commissions is paid a percentage of the final sale price. For realtors, this means that all those hours they put in to help you buy or sell your home are not covered by an hourly wage. If your house fails to close, they don’t get paid for the work they put in. While commissions are negotiable, the standard rate for realtors is 6%. At this percentage, if a house closes at $250,000, the commission is $15,000.
The commission for agents comes from the seller’s proceeds at the close of their sale. As a buyer, if you work with an agent, their fee is also part of that commission. Using the previous example, if the commission is $15,000, that amount is split between the listing and buyer agents at whatever percentage they’ve negotiated. Most often the commission is split evenly with each agent earning 3%, but it can be negotiated differently. Agents work with buyers knowing that they might not see a paycheck because they hope that when it’s time for you to sell, you’ll choose to work with them again.
If you’ve worked with a real estate agent, you’ll know the amount of time, energy, and work they put into each and every house. Realtors know that unless your home closes, they won’t get paid. It’s why they do everything they can to help you find the home you love and close the deal.
Choosing a real estate agent may be the most important step towards selling your house in the Maryland location, Virginia location, Baltimore location, and Washington DC location successfully. With so many companies and names out there, how do you choose the best agent for you? Here are our top dos and don’ts for finding the perfect real estate agent to list your home!
Don’t just pick up the phone book and choose the first name that you see. Search online for local realtors and read the reviews. Come up with a short list of promising agents and then interview three or four of these. You need to choose a realtor you can work with because selling your home may not be a short process.
DON’T Hire Family Just Because They’re Family
If you have a family member that’s a realtor, you don’t have to hire them. Sure, there may be some pressure to do so, but if you’re uncomfortable with having them represent your home, go with your instincts! If you’re considering hiring them, interview them with your other realtors and see if their skills match what you need. Make sure that whatever happens with your home, you’ll be able to maintain your relationship with your family member.
DO Hire Locally
Realtors need to show your home, neighborhood, and community in the best light possible. To do this, you need a realtor who is from that community and knows it like you do. They’ll have the information buyers want about schools, restaurants, community activities, etc.
DON’T Choose an Agent Based on Commission
Often, choosing an agent comes down to money. If you have three agents you’re considering and one offers you a much lower commission rate, ask yourself why. How hard is an agent going to work for less than standard market commission? And what buyer agent is going to want to take their clients to see your home? A good realtor is worth their fee.
When you sell your house in the Maryland location, Virginia location, Washington DC location, or Baltimore location, any profits you make are subject to capital gains or recapture taxes. To avoid paying those taxes, you can reinvest the profits in a new property under 1031 exchange. To do this correctly, you’ll have to have a properly structured exchange.
There is a timeline for completing this exchange and you have just 45 days to find a property of similar or greater value than the one sold. You only have 180 days total to complete the purchase of the new property. This timeline is a bit tight if you want to take your time to shop around.
Another restriction on the 1031 exchange is the type of property purchased. You can’t sell your business property and buy a house, or vice versa. The property that is sold must be of like-kind to the property purchased. They don’t have to be exact though. You could sell a business and buy a business, or sell land and buy an apartment complex.
Debt and Equity
The 1031 exchange needs to be 100% in order to defer the taxes. This means that the equity or profit from selling the property needs to be reinvested 100%. If you make $50,000 on the sale of your house, you need to put that full amount back into the new property. If you owed $200,000 on the property, you need to replace that same amount of debt as well. You are exchanging the equity and the debt of one property for another.
Hire a Professional
Unless tax law and real estate are areas you considered yourself to be an expert in, you may want to consult a professional when looking at a 1031 exchange. There are risks involved and if not done properly, you’ll still have to pay the taxes you’re trying to defer. This is a great option for many people selling and buying a home, but to find out if it’s right for you, take the time to really learn the ins and outs of 1031 exchanges.