Relax...There's an Alternative

Is the stock market keeping you up at night?  Are you consuming more antacids than ever before?  Are the ups and downs causing more stress than you want or need?  There is a simple alternative in rental real estate.

Single family homes for rental purposes offer an excellent rate of return in an investment that most people understand better than other investments.  The concept is simple: stay with predominantly owner-occupied homes in a slightly below average price range.  In most areas, tenants are easy to find and they’ll usually stay two to three years or more.

For the person who doesn’t want to be bothered with calls from tenants, professional management is available and commonly won’t dramatically affect the rate of return.  Managers can achieve economies of scale that individuals can’t due to managing multiple properties and having good connections with the best workmen.

Unlike most commercial property, single family homes are much more liquid because of the higher demand for residential property.  Single family homes offer the investor the opportunity to borrow high loan-to-value mortgages at fixed interest rates, for long periods of time on appreciating assets with tax advantages while providing the investor a higher than normal level of control.

Spend an hour investigating the benefits and you might sleep better at night, eat less antacids and find yourself more mellow than you’ve been in years.

Save Interest, Build Equity & Shorten the Term

If you invest in a savings account, you’ll make less than 1% and would have to pay income tax on the earnings. On the other hand, contribute something extra to your house payment and you’ll earn at the mortgage interest rate which is certain to be more than you are earning in the bank.

Making additional principal contributions on your mortgage will save interest, build equity and shorten the term. An extra $100 a month in the example shown will save thousands in interest and shorten the term of the mortgage as well.

Reducing your cost of housing is another way to improve the investment in your home. Becoming debt free is a worthy goal that is achieved with discipline and good decisions. Suggestions like this are part of my commitment to help people be better homeowners when they buy, sell and all the years in between.

Check out what would happen if you were to make additional payments on your mortgage.

Enjoy Your Improvements and Profit by Them

Homeowners can raise the basis or cost in their home by money spent on capital improvements. The benefit is that it will lower their gain and may save them taxes when they sell their home.

Improvements must add value to your home, prolong its useful life or adapt it to new uses. Repairs are routine in nature to maintain the value and keep the property in an ordinary, operating condition.

Additions of decks, pools, fences and landscaping add value to a home as well as new floor covering, counter-tops and other updates. Replacing a roof, appliances or heating and cooling systems would be considered to extend the useful life of the home. Completing an unfinished basement or converting a garage to living space are common examples of adapting a portion of the home to a new use.

Other items that can raise the basis in your home are special assessments for local improvements like sidewalks or curbs and money spent to restore damage from casualty losses not covered by insurance.

Here’s a simple idea that could save you money years from now.

Every time you spend money on your home other than the house payment and the utilities, put the receipt or canceled check in an envelope labeled “Home Improvements.” Regardless of whether you know if the money would be classified as maintenance or improvements, the receipt or cancelled check goes in the envelope.

Years from now, when you’ve sold your home and you need to report the gain on the property, you or your accountant can go through the envelope and determine which of the expenditures will be adjustments to your basis.

Some people disregard this idea because of the generous exclusion allowed on principal residences. At the unknown point in the future when you sell your home, circumstances may have changed and the proof of these expenditures will be valuable. The tax laws could lower the exclusion amount or eliminate it altogether. Your marital status may change because of death or divorce. The market value of your home may skyrocket.

Since the future is unknown, it is better to keep track of the improvements as they are made and how much is spent on them. Download an Improvement Register and examples or read more in Publication 523 on Increases to Basis.

This Is Why I LOVE Brookside - Houses with Size & Character - 5715 Central, Kansas City, MO $285,000

One of my favorite historic neighborhoods and areas of Kansas City is "Brookside", while there is not an exact cut off on where this area runs East, West, North or South - if you ask someone they can tell you where we are talking about.  The heart of Brookside is most likely centered at the Brookside shops on 63rd / Meyer Boulevard and Brookside Boulevard.  For a bit more information on the shops, check here:  The Brookside Shops in Kansas City

While talking about the Brookside shops and before I get into telling you about this fabulous home for sale we have in the area I would encourage you to check out to restaurants that we have had fabulous dining experiences at in the last couple of weeks.

• JulianKC - where celebrity chef Celina Tio has created a great small bistro restaurant where the menu changes daily and the food is TOP NOTCH!  On a recent visit we had the Pork Belly BLT sandwich, fresh homemade hush puppies & the lobster bisque.  It was a great lunch and with the bright flavors you felt comfortably full, but not stuffed.  I would highly recommend Julian to anyone in the area!  Located in the Brookside Shops.

• Bella Napoli - Wow, this place is a true hidden treasure, 1/3rd luxury food market, 1/3 restaurant, and 1/3rd great wine / local bar... you could feed yourself for every meal from this location.  The Italian food was authentic and delicious, the wine prices were good and on Tuesday nights you have half off bottles of wine to help out even more.  This one made it to our go-to list for Italian in KC.  The homemade pastas, wood fired pizzas & sliced meat . cheese trays are worth buying for sure!  Check them out when you get a chance, located in the Brookside shops.

Now on to our featured listing - 5715 Central, Kansas City, MO 64113.  This beautiful home was built in 1929 and has outstanding finishes and character throughout that will pull you back to the classic style while living in the comfort of today's technology.  Starting with the commanding pillars out front and moving on to the coveted central hall floor plan you will love the feel of this home.  Possibly the best thing yet about this home, the price - just reduced $5,000 you can get into this outstanding block of homes from 250K to 500K for only $285,000!

This home just had all of the hardwood floors refinished throughout the home in a dark wood color and the large formal dining room, living room and kitchen with a half bath on the main level make it a great circular flowing plan.  Three large bedrooms with a sun-room in the master on the 2nd floor and a remodeled full bath are roomy and move-in-ready.  In the basement (unlike many Brookside basements that worry about water issues) this basement is dry and has a bonus finished room with an extra bath that for convenience.  

The backyard features a large deck for entertaining and a privacy fence.  Finish off this lovely setup with a location just a short walk away from Loose Park, The Trolley Trail, The Crestwood Shops, The Country Club Plaza & The Brookside Shops and you are nestled in a neighborhood that people move into and never move out of.  You will love having your own private drive and a large 2 car garage to take care of your vehicles.  I know that the right Brookside buyer is going to fall in love with the character of 5715 Central, KC, MO 64113.

If you have trouble accessing the link above for more information about this property go to:  5715 Central - The Bubb Cribb Team $285,000

Read more here: http://www.kansascity.com/living/star-magazine/article302401/Fifty-things-every-Kansas-Citian-should-know.html#storylink=cpyThe American Royal, a cause very near and dear to The Bubb Cribb Team is an every-autumn-since-1899 horse and livestock show, it was originally first known as the National Hereford Show. It picked up a new name, the story goes, after an Iowa State ag school dean returned from the British Royal Agricultural Fair and declared that the KC show compared favorably with the Brits’. The American Royal, meanwhile, is also at least part of the reason our major league baseball team is known as the Kansas City Royals.  The American Royal also holds the world's largest BBQ, theAmerican Royal World Series of Barbequeevery year in October, a great time and place to bring people from out of town to experience Kansas City at a great time of year and focus on our BBQ culinary expertise.  The economic impact of this great Fall event in Kansas City at last estimate was around $70 Million Dollars per year!

Read more here: http://www.kansascity.com/living/star-magazine/article302401/Fifty-things-every-Kansas-Citian-should-know.html#storylink=cpy

Read more here: http://www.kansascity.com/living/star-magazine/article302401/Fifty-things-every-Kansas-Citian-should-know.html#storylink=cpy

If you are looking to sell and list your home or to put an offer in on a new home, now is the time and the Bubb Cribb Team would love to help you!

The Bubb Cribb Team at ReeceNichols would love to be your neighborhood experts in buying or selling your home in any part of Kansas City.  We have great area specialists in Union Hill, Hyde Park, Brookside, Sunset Hills, Waldo, Mission Hills, Prairie Village, Overland Park, Fairway, Leawood, Kansas City North, Lees' Summit and more; please contact Christopher Cribb, Megan Bubb Cribb or Eric Bubb for assistance!

Christopher Cribb - The Bubb Cribb Team 
ReeceNichols - StateLine / Southgate - Direct Line 913.239.2023

Opportunity Costs

Sometimes, there are costs associated with not taking a particular action.  If a person left their money in a certificate of deposit earning 2% when they could have made an investment that earned 8%, the difference is the opportunity costs associated to not taking action.

If a couple has a down payment and good credit, locking in a low interest rate mortgage for 30 years could easily provide their lowest cost of housing.  If that couple waits three years to purchase a home, the price would probably be higher as would the mortgage rate.

However, assuming the price and interest rate remained constant, look at what the opportunity costs might be compared to doing nothing.

If their money was invested in a certificate of deposit at 2.00%, in two years their $8,750 would have grown to $9,104.  They would have earned $354 and had to pay ordinary income tax on the interest.

If their money was invested in the stock market that had increased 7%, in two years they would have a profit of $1,268 which would be subject to long-term capital gains tax.

On the other hand, it the same investment was used to buy a home that increased in value at 3% annually, the equity would be $31,938 or an increase of $23,188. Tax would not be triggered until the home is sold and may not be due then based on their homeowner’s principal residence exclusion.

The home goes up in value due to appreciation and the unpaid balance goes down because of amortization.  The dramatic difference in growth in the equity of the home is effected by leverage: the use of borrowed funds controlling the asset.

A home is a place of your own where you can feel safe and secure, to enjoy with your family and friends and in many instances, a very good investment.  It is difficult to measure the opportunity costs of intangibles but not necessarily money.

Make your own projections with Your Best Investment.