In the simplest sense, developed land has been fully prepared for home building while undeveloped land has not. Each has advantages and disadvantages. If you’re thinking about building your home on undeveloped land, be sure to consider the additional work and expenses. Are We There Yet? One of the most important things that a developer does with raw land is bring roads onto the site and connect those roads to the public right-of-way. Lots are usually located adjacent to the new road and have direct access to it. If the subdivision remains private, the homeowners will maintain the roads but often they’re deeded to the city and maintained by the municipal service department. Vehicular access to undeveloped land can be more difficult, although isolation might be one of your primary goals in choosing a rural location. You’ll almost certainly spend much more to build an access road back into the site (I can recall several “driveways” that are more than one-third of a mile long) and you won’t have city snowplows to clear it for you. Red Tape and Green Paper Buying a lot in a subdivision means buying into additional layers of government regulation including building departments and homeowner associations. Both groups will have a say about the size, location, design, types of exterior finishes, and maintenance of your house. Municipal building departments usually hold builders to a higher standard of construction quality than rural departments – a definite benefit to the homeowner – but that can mean higher construction costs, too. Subdivisions also usually have minimum house size requirements, so your home might even end up being larger than you want. On a rural property you’ll have much greater freedom to decide what your home looks like, what it’s made of, and how it’s arranged on the land. And with that design freedom comes more control over the costs of construction. Because the options are far less limited, undeveloped land is where most truly unique custom home designs are built. Power to the People The development of a lot in a new subdivision typically includes bringing all utilities onto the site, where the new house is easily connected to them. Electricity, gas, water, and sanitary sewer services are available at the edge of the property, ready to be used. Undeveloped property won’t have water and sewer taps on site. In fact, there may be no utilities anywhere nearby. Building on undeveloped land usually means providing your own private septic system and water well, installing a propane storage tank for gas appliances, and bringing electric service lines in from a distance – maybe a very long distance. Can You Dig It? By the time a subdivision is ready for construction, the developer’s engineers have tested the soil and graded the land for proper drainage. You’ll have access to information about the possibility of sub-surface conditions that might affect your construction plans and in many cases the developer will take some responsibility for the site’s suitability for building. If you want the same information about your rural property, you’ll have to order and pay for it yourself. Your county extension service can provide some of this information but it may not be recent, or specific to your site. If you discover bad soil or underground rock in your building area, you’ll have no avenue for redress except your own pocketbook. More Than One Kind of Value A house in a subdivision may have a temporary price advantage over a “stand-alone” home, since its value will be related to the selling prices of other homes in the area. If you value predictable price appreciation, closer neighbors, and want less “hands-on” involvement in the creation of your house, you’ll probably find your dream home in a development. The majority of American home buyers do just that. Building on undeveloped land will require more from you, your architect, and your builder. But if you’re willing to assume the risks of undeveloped land; if you’re interested in a truly custom home design; if you want to be more involved in the creation of your home, you might find your piece of paradise somewhere a little further outside of town. On Point Homevestments
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One of the first questions for people entering the landlord game is whether to hire a property manager or manage the new rental themselves. As with everything in life, there are positives and negatives to each strategy. So let’s run through the issues that go into making this decision. Renovations? First, the property you buy will most likely need some renovations. You’re going to have to be in charge of this yourself and get bids, shop for materials, make decisions, etc. And it will cost more than you think — probably a lot more — and it will take longer than you think, probably a lot longer. Before you purchase — and this is best to do during your home inspection — try to get an experienced investment property owner to come with you, and maybe a contractor, to get a better estimate on those costs. Provide a healthy contingency of cost, like 50 percent, and a time contingency of 100 percent in your schedule. Better to be safe, than surprised. Pros and cons of managing Once you get the property closer to rent-ready status, you’ll need to make some decisions on whether you manage the property yourself, or hire someone to manage it. Pros – Managing the property yourself allows you to keep the best control of your tenants, service their issues, keep good relations with them, and keep a better watch on the property. It will also save you somewhere between 8-and-10 percent of rental income and probably dramatically increase the chances that you will keep it occupied. No management company has anywhere near the incentive that you do to keep it rented and to keep your tenants long-term. You’ll learn quickly that when faced with a vacancy, you’ll jump to get it rented. You will also save yourself one-half month or a full month’s rent in fees for handling the re-leasing process yourself. But … you will also learn it is a lot of work! Cons – The negatives about managing the property yourself are best seen in three separate scenarios: Renting it when it is vacant; what it takes in terms of monthly management; dealing with more serious issues when they arise.
It’s a lot of work! Once the tenant is in place If you put your property in good condition for rental, this part of the process is the easiest. Some properties and tenants are a breeze, but I’d guess that you’ll have to deal with about 3 to 5 minor issues per year (like the neighbor’s dog is barking). Figure on at least one more major issue, like calling a plumber or electrician. Overall, this process is not too taxing — if the property is in good shape and you follow the advice that follows. Here are some tips to ensure things go well:
If you follow those tips, it should lower the hassle of owning rental properties. Major issues can occur, too. So if your tenant stops paying, or there’s a major flood, or fire, you have to deal with it regardless of whether you have a property management company. And it’s going to be a lot of work and time involved, especially if the property is far away. Overall, learning the management side will probably best teach you the ins and outs of owning real estate, save you some money, and probably make your properties more profitable because you’ll treat tenants respectfully and keep the units occupied. Property management company handling the issues There are many quality property management companies that can do a great job for you. As noted above, they probably charge 8-to-10 percent and a half month’s rent for re-leasing. They will handle the above issues for you, except when major issues require your input — or checkbook! But the most important first step is to interview several rental companies. Call references, get copies of their insurance and make sure they have the proper type and adequate insurance in place. Once you make the decision on which property management company to hire, keep on a friendly and professional basis with your manager. Things will go wrong but just because you are paying for management doesn’t mean you can blame the property management company. Part of your role is to inspire them to help handle the issue and obtain the best possible outcome. If you’re super busy with your regular life, but own property or properties, a management company could be a good idea. You’ll still be pretty involved, if for no other reason except to maximize your value and keep those nice, consistent rental checks coming to pay the bills! Keep in touch with the management company, the tenants, inspect the properties every once in a while, and do your best to help get it rented when there’s a turnover in tenants. On Point HomevestmentsGreat home design always starts with the site – a truly special home is never designed first, then placed on the property. How do you evaluate a site for your house? How do you find the right part of the site to build on? Start with the four “S’s” – Slope, Sun, Soil, and Sewer. Slope The slope of the property can have a big effect on the cost of your project – a house placed on a slope will most definitely cost more to build than a house on a flat lot. Does your house have to be placed on the slope? Perhaps it can be placed at the top or bottom – taking advantage of the views from the slope but not incurring the costs of building there. Many owners of sloping lots want to take advantage of that situation by including a “walk-out” basement in the design. It’s one way to increase the space in your house for a relatively small cost. The steepness of the slope will partly determine how much excavation and/or fill is necessary to create the walkout. Homes on sloped lots often require more (read: costly) gravel backfill material at the foundation; they might need expensive retaining walls to create a flat area for a driveway or hold back soil at the walk-out; and they usually have a full basement – whether you want it or not. Here’s the bottom line – carefully analyze (with the help of your design professional) the impact that your sloped lot may have on your design; design a house that’s appropriate for the lot without unreasonably expensive construction techniques. Sun Many homes are designed with the primary family living spaces at the back (kitchen, breakfast room, family room). These are the rooms you want sunlight in; the rooms with all the expensive windows. And you’ll get that sunlight through those windows, too – if the back of the house faces more or less south. That’s where the sun is, remember? If your lot is on the south side of the street, great. But what if your lot is on the north side? All that living space, all that glass, isn’t going to get any direct sunlight at all. Or worse, your lot faces east, and the afternoon sun pours through that wall of west-facing glass like a blast furnace – heating up the house and fading the furniture and carpeting. Since we’re talking about sunlight, now’s a good time to bring up the subject of energy consumption. Houses are designed to keep heat in, or to keep heat out, depending on the season. The easiest and least expensive way to keep heat out of the house is with proper orientation of the windows and doors. The easiest way to keep heat in is to reduce the number of windows. So, pay close attention to the number and location of windows in your design. A properly oriented plan can save you a lot in fuel bills and give you a lot more enjoyment of your house and your building site. Soil It’s amazing, every time a backhoe starts a new house foundation, how different soils can vary from one building site to another. From loose sand to solid rock and everything in between, and sometimes all on the same site! Soil type can have a big impact on the cost of construction. Even if you know a lot about the underground conditions on your site, it’s a good idea to keep a little cash in reserve to deal with potential surprises lurking under the turf. How much do you know about the soils on your home site? It’s relatively easy to learn the basic characteristics from your County Extension Service or local building department. You might also contact builders and excavators with experience in the area and ask them what they’ve encountered on other projects they’ve built near you. Some types of foundation systems that are popular in one region are unheard of in others. Typical practice in many areas is poured concrete walls — a potentially expensive option if your plans call for concrete block. It’s important to know what foundation systems are common where you’re building. But even a house with the proper type of foundation for your site may need to be specifically engineered to accommodate the local soils, and the local building department. Soils drain and retain water differently, and soils have vastly differently capacities to bear structural loads. In most areas, you’ll have to show the building department that your foundation is designed for the local soil conditions. Sewer The Plumber’s Credo – “everything flows downhill” is extremely important to remember when designing your home. On a developed lot, the municipal sanitary sewer line is buried near the front (usually) of the lot. The height of this pipe will determine the depth below grade of the basement slab since the effluent from the house must “flow downhill” to the sewer line. An undeveloped lot is one where the utilities – electricity, water, gas, and public sewer – aren’t brought from the street to the buildable area of the lot. On larger undeveloped properties there may not be any public sanitary sewer to connect to at all. On such a lot, you’ll need some type of private sanitation system. Several types of private sanitation systems are in use today including the traditional septic tank and leach field, aeration systems, and “mound” systems. They can vary widely in cost, and not all health districts allow all types. The choice of system will also be heavily weighted by the soil type and slope of the lot, and the available area(s) for the system. A typical leach field system will require a large clear area for a primary and second field. Since a private sanitation system is more expensive than connecting to a public system, the cost isn’t typically considered in the “base” cost of building a house. A private sanitation system is usually an “extra.” Slope, Sun, Soil, and Sewer – keep these in mind when selecting a property to build on and when designing your home and you’ll have a more successful project! On Point HomevestmentsA pocket listing is an unofficial, off-market listingOver the past year or so, “pocket listings” have become a more mainstream option for quietly marketing a home. If you haven’t heard this real estate term before, you probably will. Here is what today’s homebuyers and sellers need to know about pocket listings. Also known as a “quiet” or “off-market” listing, a pocket listing is a property that an agent keeps tucked away in his or her “pocket.” Though the seller has a signed listing agreement with a real estate agent, the property for sale isn’t officially listed in the MLS. Other traditional forms of marketing may be downplayed, too. Pocket listings started many years ago as a way for high-profile people or expensive homes to be quietly marketed. They were seen as exclusive because they were listed under the radar of mainstream agents, buyers and even the press. Pocket listings are growing in popularity As the real estate market has become more challenging, pocket listings have become more mainstream. In many markets, there are few good properties and low inventories, coupled with buyers who are motivated to see more homes. You’d think that would be a perfect reason to push homes on to the market. And yet, there are sellers who have been interested in selling but aren’t comfortable with current home values. These sellers may sit on the sidelines and will only sell if they can get the price they want. As soon as a home is listed in the MLS, the infamous “days on market” clock starts ticking. The longer your home sits on the market, the more “stale” it becomes and the less money you’re likely to be offered. Buyers, seeing that a home has been for sale for 30 or 60 days or even longer, will inevitably make low-ball offers. And so, instead of going on the market, a seller who wants a certain price may engage their real estate agent and put the listing out there as a “pocket” listing. Pocket listings let sellers test the market With a pocket listing, a seller and their agent can quietly test the market without adding it to the MLS. They can gauge reaction to the price they’re asking and see what kind of traffic they get and how the market receives the property without the MLS clock ticking. The agent can get the word out about the home using various marketing methods except the MLS — maybe even holding a small open house, doing a private broker’s tour, and stimulating word of mouth with other agents. Sometimes, pocket listings eventually get entered into the MLS. But in other cases they’re sold without ever making it into the database. Pocket listings have become a secondary home market In some markets, there are entire websites devoted to pocket listings or networking opportunities with other agents about upcoming listings and properties. What started as a way to get the word out about future listings has turned into a secondary market of homes for sale for well-connected real estate agents. While sellers may agree to a pocket listing and dictate how the information about their home is disseminated, many boards of Realtors have procedures and rules for how listings are to be input into the local MLS. Those rules include fines for agents who don’t input their listing within a certain time period. Time will tell if pocket listings are here to stay or just a direct result of our current real estate market. What pocket listings mean for sellers and buyers If you’re a seller, you should consider testing the waters with a pocket listing, even if it’s just for a week or two. You’ve got nothing to lose. For buyers, it’s important to work with a local agent who has established relationships with other agents in the community. That way, you can be certain that you’ll be made aware of all potential homes for sale. On Point Homevestments |
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