Is a Condominium Better than a Single Family Home?
The answer is it depends mostly on your needs. But, with condominiums, one must do more research and understand what is being bought (a community of multiple residences that share common area spaces) to determine if it really is better.
So, what’s important to look at when it comes to a condominium? First and foremost is to make sure that the Home Owners’ Association (HOA) is strong financially and management wise. The key is to read the HOA documents package from cover to cover and get some additional feedback from your real estate agent. Do a deep title search on the property to see if there are any liens or lawsuits.
Interview the property management company to see what they do, if there are many issues with late home owner dues, how much money is in the reserve fund, when was the last time they did a
reserve study, and what kind of insurance they having including liability, workman’s compensation, earthquake, etc.
Next, make sure you read the “Covenants and Conditions and Restrictions” package (CC+Rs) that is prepared and provided by law by the HOA. This package will reinforce your research. Additionally, it includes bylaws, Articles of Incorporation, the operating budget, reserve funding and schedule, insurance information, the minutes of the meetings and newsletters, memos, etc. You also might want to have an attorney that specializes in reviewing these documents read them and give you an opinion. It will be well worth the fee.
From first time homebuyers attracted to the affordability of a condo to the empty nester that is looking for hassle free living, a condominium is exactly the right answer. Additionally, some condominiums have amenities like 24-hour doorman service, pools, spas, gym facilities, etc. that provide extra benefits. Just make sure that you do your homework. You want to buy in a strong, well run, and adequately financed condominium.
Sometimes everything works out how you want it to!
Recently I worked with a client who was committed to finding the right property that she could afford and also fit into her long-term plans. When she came in looking for an investment property of multiple units, with low down payment, low monthly payments, and in a good rental market near San Francisco I thought that she may just be asking too much.
She interviewed a lot of people, asked questions, listened to their advice and did her own investigations and then, when she felt comfortable she acted decisively and heeded the advice of the professionals working for her. We were able to find her a great four-unit building with only a 3.5% down payment. And, believe it or not, the property even has a positive cash flow with her living for free in one of the units!
The market right now is so varied that even some of the most difficult to find situations have a chance to found. It’s important to know what you’re looking for and to recognize when you’re asking for too much, but always take a chance on finding just the right place because it happens!
Use your discounts!
When comparing your insurance premiums you need to make sure you are looking at the whole picture rather than looking at one mono-policy compared to another. Often the various discounts available through a multiline carrier will make your overall insurance cost less than if you just compared one mono-line policy to another.
For example, your auto/renters discount can save you so much on the auto premium that it can pay for the Renters policy. In other words, you can get two car insurance policies and a Renters, for the same total cost as two auto insurance policies.
Discounts you want to look for are the: Multi Line Discount, Good Driver Discount, Multi Car Discount, Persistency Discount, Safe Driving Discount, Business or Professional Group Discount, Anti-Theft Discount, Passive Restraint Discounts,AntiLock Brake Discount,Alternative Fuel Discount,Senior Defensive Driver Discount,Good Student Discount,Inexperienced Driver Training Discount,and the Electronic Stability Control Discount.
Be sure to compare the cost of the total household insurance premium cost rather than a mono line comparison. That way you can be sure you are getting the best value for your insurance cost!
If you would like a free, objective review, please call me at 650-355-5396!
Mortgage Protection Insurance
Buying a home brings many responsibilities in addition to providing the income to cover the mortgage, and maintain the residence. Along with your Homeowners insurance you also need to consider having Mortgage insurance.
Some Mortgage insurance is called PMI (Private Mortgage insurance) which the lender tacks on to the loan as an additional fee (if you put less than 20% down). This generally protects the lenders from the loan defaulting.
But Mortgage insurance can also be provided by purchasing a Life Insurance policy on one, or both, of the spouses in the household. This protects the families financial future should something happen to either of you.
If a working spouse were to pass away the financial hardship that would put on the household will only compound the emotional hardship. At the very least, Life insurance gives the family time. Time to readjust to the loss of a loved one, and reassess their financial situation.
Ideally it would provide sufficent income to maintain their lifestyle. But, while many families have morbidly joked about being worth more dead than alive, the ultimate factor in calculating sufficient Life Insurance is its affordability.
A non-working spouse’s economic contribution to the household has been calculated to be $30,000 a year. That is what a basic housecleaner, errand runner, baby sitter would cost conservatively. To replace that you need to have enough coverage to conservatively generate that amount of income. At a 5% return that would mean $600,000 in Life insurance.
This is easiest to obtain with a 20 Year Term policy which would cover this expense for the time the children are young and the mortgage is large. And a multi line carrier should provide discounts on your personal lines which will also help defray the cost!
Contact me today and we can discuss how we can be sure your family is sufficiently covered! 650-355-5396, or ctrowbridge@farmersagent.com.
A Smarter way to buy Group Health Insurance
Health Insurance premiums are a topic all over the news these days! Their annual increases have shocked the buying public into demanding some kind of action from the government. What kind of change that will take is somewhat in the air, as the government has put off the effective date several years into the future, and who knows what will end up actually being incorporated into the rules and regulations? But, there is a strategy that you can take advantage of right now, that can lower your premium by 30%!
This strategy takes into account the actuarial knowledge gleaned from years of experience and thousands of different types of customers. It is based on the reality that only 4-7% of your employees will max out their deductibles in a given year, and 50-70% of your employees will not use their health insurance, or will use it so little as to have little effect on its costs.
It entails using a high deductible plan, from any of the main carriers in the market today, and using the impressive savings they produce to pay for the actual deductibles used through a pooled company owned savings account (not an HSA which is individually owned). After deductibles, and a small fee to the TPA to administer and coordinate the plan, the net effect is a 30% savings off what the typical plan costs.
This strategy is currently being used by over three thousand companies, in all different types of businesses. I call it a “Smarter” way to buy your group health insurance as it is geared more towards paying for what you are actually using.
Your carrier is not motivated to tell you about this because the 50-70% of employees who are currently not using their health insurance are pure profit to them. And, your Broker may not have told you about this because 1) they are not aware of it, or 2) they don’t want to rock the boat and lower their commissions by 30% when they have a good thing going! I just did because I want to earn your business! All your business, including your Business Owners Policy. Workers Comp, Group Life, 401k, etc…
If you would like to see how this works I need to show you a side by side comparison to what you are currently paying. All I need is a census (DOB, Home Zip, Dependent Status and Carrier Plan) along with a copy of a recent bill from each carrier. This is probably your largest overhead expense, after salaries!
Contact me today! 650-355-5396, or ctrowbridge@farmersagent.com.
Understanding the New Taxes Coming in 2013
The health care bill that passed in March 2010 has two new taxes starting in 2013 to help pay for it – an extra 0.9% levy on wages for couples earning more than $250,000 ($200,000 for singles) and a new 3.8% tax on investment income, which in effect adds a “payroll” tax on unearned income.
How does the 0.9% tax work? If a couple earns $350,000 under current rules, they owe 1.45% or $5,075 and their employer owes a matching amount (Medicare tax due). In 2013, the couple will owe an extra 0.9% on any wages above $250,000. For this example couple, that is 0.9% of$100,000 or $900. Their employers pay nothing extra.
How does the 3.8% tax on net investment income work? It is keyed to the “modified adjusted gross income” with a threshold of $250,000 for couples and $200,000 for singles. For example, a couple has $400,000 of adjusted gross income — $200,000 in wages and $200,000 in investment income. Thus, they have $150,000 of income above the $250,000 threshold and they would owe an extra $5,700 in taxes.
To better understand this tax, you need to understand what is considered investment income. Interest, except municipal bond interest, dividends, rents, royalties, capital gains, insurance annuity payouts, passive income, and even gains on the sale of a home above $250,000 (single) or $500,000 (couple) counts. The 3.8% will also be put on trusts and estates.
What is not taxed will be regular and Roth IRAs, retirement accounts, Social Security, life insurance proceeds, and veterans’ benefits.
What steps can you take to minimize these benefits? Examine both your regular and investment income. Look at a Roth IRA conversion as Roth withdrawals don’t raise A&I and aren’t considered investment income.
If you have a small business, consider a defined pension plan, as their payouts don’t count as investment income. If you are selling assets, consider an installment sale as it spreads out the income.
Lastly, life insurance may become more attractive as proceeds at death are not subject to this tax. That means that a taxpayer could buy a policy, borrow from it, and then settle up at death thus avoiding income tax on investment gains.
So, get ready for these new taxes in 2013.
How Much Insurance is the Right Amount of Insurance to Have?
Homeowners may not realize it, but it is their responsibility to make certain they have sufficient coverage to replace their home (if it were to burn down)! Insurance carriers do not offer “Gauranteed Replacement” coverage anymore. They offer “Extended Replacement” coverage. This adds an amount over the rated Dwelling amount to take care of any discrepancies. Typically this is 25-50% over the rated amount.
But, the base amount needed is the responsibility of the Policy holder. Thats not to say a good agent will not be able to give you a good idea of what would be appropriate for the area. But, many people rely on their carriers to tell them, and there is no assurance the voice on the other end of the phone is anything more than an order taker.
The right amount of Dwelling insurance is easily calculated. Just take the square footage of the home, and multiply it by the local construction cost per square foot.
Also, don’t skimp when t comes to liability coverage as you can have a lot more to loose than the cost to rebuild your home if you become involved in hostile litigation. Remember, your Liability coverage protects you from people suing you for monetary damages.
Since the likelyhood of you having someone over who would sue you is not high this coverage is a real bargin, and should be enough to cover your “assets at risk”, (these equal your Equity in property, savings and investments, and 4Xyour annual income).
You face most of your Liability exposure in your car so make certain that your Bodily Injury, and Property damage coverages are sufficent to cover your “Assets at Risk”. Since most homeowners have considerable “Assets at Risk” they may want to consider an Umbrella Policy. That is, a seperate Liability policy, that goes on top of the underlying Liability coverages found in your home, auto and boat policies. They come in increments of $500,000 to $1,000,000 and are exremely cheap considering the peace of mind they provide.
Pay attention to this part of your Insurance policy or you may discover, painfully, that you didn’t have the right amount of insurance coverage. What a miserable way to learn that the cheap insurance you were paying for is insufficient to protect you when you really need it.
Contact your agent today to confirm you have the protection you are paying your hard earned money for? Or, call me, Corrin Trowbridge at 650-355-5396, for a FREE REVIEW!
What makes Burlingame special? How is the market there now?
Burlingame is what I refer to as a destination market. This means it’s a place you want to live, not somewhere you settle for until you can afford where you want to live! It’s a place to stay. We see young couples doing everything to squeeze themselves into the cheapest home on the market just to be in the area!
We also see people moving up from the nice 3 bedroom to the grand home of their dreams, but still within Burlingame! Retired couples will bite the bullet on property taxes so that they can remain in the area they want to be in rather than somewhere cheaper- all to stay in Burlingame! So that begs the question, why Burlingame?
They come for the schools, the community and the family involvement in these schools. There’s shopping, weekend mornings at the local coffee shop, the history of the area too! And, on top of all this, there’s the convenience of it’s proximity to San Francisco and Silicon Valley.
But mostly, what makes Burlingame special and makes it a place people want to stay are the amazing people who make up the community. They make this city a beautiful place to live.
More on Tax Credits
Tax expenditures are spending programs disguised as tax cuts that are directed to “help” specific groups. They cost an estimated $1.1 trillion this year and are the largest single part of the federal budget. They equal nearly as much as the $1.3 trillion deficit. They range from subsidies for housing and healthcare as well as anti-poverty programs.
Let’s look at an example involving the Pentagon and how they purchase planes. Instead of a $1 billion check for a new plane, the Pentagon often gives a company like Boeing a $1 billion tax credit. It looks like we are saving $1 billion in spending and simultaneously reducing taxes by $1 billion. But, in reality, the economic consequences are exactly the same as if we had written a check. Doing it this way, however, makes it look like the Pentagon spent less money however.
Here are some details on the top tax credits.
The Top Four Tax Credits
Tax credits given to employees for employer paid health insurance ($177 billion)
Mortgage interest deductions ($104 billion)
The earned income tax credit, which is a direct payment program for the working poor ($57 billion)
Corporate Tax Credits
Special Blue Cross / Blue Shield deductions ($690 million)
Oil and gas credits to oil companies ($1.18 billion)
Credits to railroads for maintaining railroad tracks ($70 million)
Capital gain exclusions for small businesses ($170 million)
Tax Breaks for Social Programs
Tax incentives for the preservation of historic structures ($470 million)
Deductions for endangered species recovery programs ($20 million)
Deductions for charitable contributions– not including health and education ($43.8 billion)
Exclusion for foster care payments ($400 million)
Tax Breaks for General Items
Exclusion of reimbursed employee parking expenses ($3.1 billion)
Exclusion for employer provided transit passes ($530 million)
Tax Breaks for Select Groups
Exclusion for disability compensation and veteran death benefits ($4.37 billion)
Additional deductions for the elderly ($2.6 billion)
Credit for child care ($2.2 billion)
Special deduction for teacher expenses ($160 million)
Exclusion of parsonage allowances ($620 million)
The tax credits amount to quite a large number. Cutting them by just 1/3 would reduce the national debt significantly.
Sources: Office of Management and Budget; Joint Tax Committee
The First Offer, the Counter Offer – What Works, What Doesn’t
In today’s real estate market, counter offers are pretty much the norm. Usually, the first offer is not the offer the seller is looking for and so they will issue a counter offer detailing the terms and conditions they want in the contract.
The first key is to understand whether you are in a negotiating environment, where you can set the terms and conditions, or a competing environment, where the highest and best offer wins. The type of environment makes a big difference in how you structure the first offer and subsequent counter offers.
The best approach is for your real estate agent to work with you in advance to determine what the environment is like (one or multiple offers), what your first price offer will be, and then what type of back up offers you are willing to make. That way you are prepared. Once you put in a first offer, be patient and wait until the seller counters.
Sometimes, it becomes a cat and mouse game and if the seller does not respond right away, it is okay to take a breather. In fact, sometimes it is best to let the listing sit on the market for a while and then put in another offer later. If you do this, make sure that you know that there are no other offers and that the risk to this approach is that another buyer could enter the picture who is willing to pay the seller’s price.
If you are trying to avoid a counter offer situation, be strong on the first offer – get a pre-approval letter, include your FICO score, and put in less terms and conditions with your offer. Include a letter to the seller thanking them for the opportunity to present the bid and tell them about yourself, your family, and what you like about their property. Show your financial strength with proof of funds for the down payment and your ability to close.
If there are multiple offers, remember that the seller can only accept one offer in primary position. Multiple offers are occurring today – even in the still correcting, low-inventory, high-demand markets like Palo Alto, Cupertino, some parts of San Francisco, parts of San Jose, Burlingame, Novato, Fremont, Richmond, Hayward, Gilroy, Sacramento, San Luis Obispo, Carmel, etc.
You will be able to pin point these areas via your real estate agent who will look at inventory levels, days on the market, recent sales, price to listing ratios, and finding out how many offers were placed on recently sold properties.
If it will be a multiple offer situation, you need to make your first offer your best offer and in an effort to protect yourself against having to bid too high, you might want to include an appraisal contingency in your purchase offer.
Generally, an appraisal contingency allows you to withdraw from your purchase contract if the property does not appraise for the purchase price. At the same time, remember that banks are very conservative today on appraised valuations, so if the property does not appraise for the purchase price, you may need to increase your cash contribution or down payment if you still want to purchase the property.
Expect that there will be two or three go arounds in a regular transaction and if it is a short sale or foreclosure property, it could take 2-3 months or more and many counter offer rounds to get to a common agreement over price and terms. In today’s market, values are still moving – some higher and some lower, so paying the right price is more complex and requires more time.
That is not bad or good. It is just a reflection of current market conditions. And, on the positive side, interest rates are the lowest in the last 58 years and valuations are on average 26% lower than in the peak in 2006.
