appreciation

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By Peter Anderson 35 Comments – The content of this website often contains affiliate links and I may be compensated if you buy through those links (at no cost to you!). Learn more about how we make money. Last edited May 6, 2019.

Christmas time is one of the most joyous times of the year at our house, but if you’re not careful it can also be one of the most expensive times of year. If you’re trying to cut down on spending, like we are at our house, it can become a challenge to find creative gifts to give.

Today I thought I would try to put together a list of ideas for some good frugal gifts that you can give this Christmas. (The frugality of the gifts vary from gift to gift, but I’ve linked some possibilities on Amazon.  You can probably find some cheaper ways to put these things together yourself if you try.)

Check out the newly expanded list: 100 Frugal Christmas Gifts

50 Frugal Gifts

  1. Baked goods: I don’t know any guy who wouldn’t love to get a box full of cookies, banana bread and pastries!   (Hint: not good for someone on a diet)
  2. If you’ve got an old laptop, make a frugal digital picture frame out of it!:   At 14-15″ it’ll be bigger than most you buy at the stores, and cheaper since you’ll be using old parts!
  3. Personalized Calendars:  Most photo processing places will have these personalized calendars you can buy, or pick up pre-made ones in Target’s dollar bins.  Get photos of you and the person you’re giving the gift to in each season, and place them in the appropriate month/season of the year!
  4. Themed gift baskets: Give a themed gift basket.  For example, a movie night theme basket with microwave popcorn, a movie or two, and some cheapo popcorn buckets from Target dollar bin.
  5. Custom t-shirts: Create your own custom t-shirt for a family member on Cafepress. It’s cheaper than you might think!
  6. Scrapbooks: Make a scrapbook for a close friend showng moments you’ve shared together. My wife did this for a friend’s wedding.  Very meaningful.
  7. Donation to a local charity:  Give to a local charity in someone’s name.  Make sure it’s a charity that they would actually give to.
  8. Handmade Christmas ornaments: make personalized Christmas ornaments for your friends and family!
  9. Board Games: buy a board game, a gift that gets the family together and keeps on giving all year long! Even better, if you can find some board games at garage sales or on ebay, create a themed game night gift basket (see above)!
  10. Family history DVD:  Put together a family history DVD with photos, writtten family histories, video and anything else you can think of.
  11. Framed family picture:  Take a picture at a family event, frame it, and give it as a gift!
  12. Coupon Books: Make a personalized coupon book with such favorite coupons as “back rub”, “dinner” or “clean the house”.
  13. Make a blanket: make a nice fleece blanket.   Instructions here.
  14. Make some custom painted wine glasses: Make some custom painted wine glasses, and then give them along with a bottle of wine.  Instructions here.
  15. Give a magazine subscription:  My brother loves reading National Geographic and the Economist.  We gave him subscriptions as a gift.
  16. Romantic evening gift set: Candles and fake flower petals! Cheap and fun!
  17. Keeping warm gift set: Give a gift set of hat, scarf and gloves.  Add long underwear as well if you wish!
  18. Leatherbound journal:  buy a nice leatherbound journal at your local Borders or Barnes and Noble.  They make for a nice gift.  Add a nice pen if you want to pay a little more.
  19. Craft Kit:  Put together a crafting kit with things like markers, glitter, scissors, clay, crayons, glue, paper, etc.
  20. Photo Collage: If you’re handy with Photoshop or another image editing software, create a photo collage/montage, print it out and frame it!  Or if you don’t have Photoshop, print separate pictures and create a collage.
  21. Movie Tickets: Buy a pair of movie passes or a movie gift card for someone to go see a movie. Not as cheap as it used to be :).
  22. Buy a single stock:  Buy a family member a single stock to get them started, and give them a copy of a finance book like Dave Ramsey’s Total Money Makeover (although you may want to stress that you’re giving it because it has helped you.  People can get touchy about money related gifts)
  23. Flannel Sheets and PJs:  Buy a keeping comfy gift pack with flannel sheets and pajamas!
  24. Coffee Lovers Gift Pack:  Buy some gourmet coffee and a personalized coffee cup for the coffee lover on your list.
  25. Set of soaps, towels and soap dish: Put together a nice matching set of hand towel and soap dish, and then give some handmade soaps.
  26. Big breakfast gift pack: Put together a gift pack with pancake mix, batter dispenser, syrup and pancake mix-ins.
  27. Puzzle day:  Give a gift pack of a puzzle and snacks to eat while you do the puzzle!
  28. BBQ Kit: Get some BBQ sauce from local source, and add it to a nice BBQ Utensil kit.
  29. Basket of spices and seasonings: Put together a basket of seasonings and spices from a local spice or grocery store.  Make sure to get a good mix for cooking, BBQs, etc.
  30. Netflix subscription: Pay for someone to have netflix for a couple of months.  If they have a connected device, they can even stream movies!
  31. Deck of cards and book of card games: Buy a cheap pack of cards, and a book listing the rules of different card games. Good for hours of fun!
  32. Cheap keychain digital picture viewer: Buy someone a cheap digital picture viewer keychain (around $20?) and fill it with pictures.
  33. Bath time gift pack:  Buy a nice wash clothe, some bath oils/beads and even some lotions at your local bath store.
  34. Mix tape:  Make  a mix CD from Itunes with some of the person’s favorite music on it.
  35. Botanicals:  buy a nice low maintenance plant to brighten up their day, along with a small watering can.
  36. Make a recipe box: If you’re good with wood, make a nice recipe box, and fill it with blank recipe cards.
  37. An appreciation book:  Get a nice journal, and write in it to the person about how much you appreciate them, things you love about them,  shared moments and experiences and general encouragement.  Even add a few photos.
  38. Book gift pack:  Find some books on your own shelf that you’ve already read, and put together a gift pack of books
  39. Chocolate attack!: Put together a gift pack with all kinds of chocolate. Hot chocolate, chocolate bars, truffles, etc.
  40. Car wash kit:  Put together a kit for washing the car.  Can include things like sponge, tire brush, bug remover, car soap, etc.
  41. Regifted items:  Did you get a 2nd crock pot last Christmas that you haven’t used?  Give it away this Christmas (to someone other than who you received it from)
  42. “That’s a spicy meatball” gift pack: Give them a nice italian dinner with a pasta bowl, pasta, strainer, fancy olive oil, pasta utensils and even some sauce.
  43. Give your service:  Good at cooking? Offer to come over and cook a gourment meal.  Are you a designer?  Offer your design services for free.  Good with computers? Offer free tech support. You get the idea.
  44. Wine and cheese gift pack:  Buy a variety of specialty cheeses, crackers and a bottle of wine.  Put it together and you have one gourment evening!
  45. Picnic pack:  Put together a picnic pack with a blanket, a basket, some cheap utensils and plates.
  46. Sewing Kit & lessons: put together all the sewing essentials (thread, needles, pins, etc) and then give the person lessons on how to sew.
  47. Gardening gift pack: Buy the person gardening gloves, gardening tools and some seeds. Put them all in a small bucket or waterging can.
  48. Handmade jewelry:  Make a handmade necklace or bracelet at a local bead or craft store.  Give it as a meaningful gift.
  49. Music lover’s delight: give an itunes gift card, along with a book about their favorite artist or band
  50. Beer afficionado gift pack:  Give a beer mug, snacks and gift card from a local brew pub.
  51. A Birdhouse: Give your loved one of these bluebird houses so they can relax on the porch and watch the colorful avians.

Now that I’ve given you some ideas for some frugal Christmas gifts, why don’t you give us your own ideas! Leave a comment with your idea for a good frugal Christmas gift below!

More Ideas

50 ideas not enough?  Here’s some more ideas for a frugal Christmas!

Related Posts

Source: biblemoneymatters.com

Apache is functioning normally

During the first quarter, only 25 percent of those who refinanced took cash out, according to the latest quarterly survey from mortgage financier Freddie Mac.

The company noted that the average cash-out refinance share over the past 25 years was a staggering 62 percent.

Clearly times have changed.

Nowadays, most homeowners are happy just to get the chance to do a rate and term refinance to a lower mortgage rate, and thus a lower mortgage payment, thanks to tighter underwriting guidelines and issues like negative equity.

In fact, 75 percent of homeowners who refinanced their first mortgages either kept roughly the same loan amount or lowered their principal balance by paying-in additional money at the closing table (cash-in refinance).

Broken down, 54 percent maintained the same loan amount, the highest share since 1985, when Freddie began keeping records on such trends, while 21 percent of refinancing homeowners reduced their principal balance.

Average Refinance Lowered Mortgage Rate by 1.2%

The median interest rate reduction on the popular 30-year fixed-rate mortgage was about 1.2 percentage points, or a savings of roughly 20 percent in interest costs. That’s pretty huge.

It certainly exceeds what most people would refer to as the refinance rule of thumb, whereby you need to lower your existing interest rate by at least one percent.

Over the first year of the refinance loan, such borrowers will save more than $1,800 in interest payments on a $200,000 loan. That’s roughly $150 per month.

Wondering why fewer borrowers cashed-out?

Well, the median home price appreciation of the collateral property was a negative six percent over the median prior loan life of five years.

And that’s actually pretty good compared to the Freddie Mac House Price Index, which showed a 21 percent decline in its U.S. series between the end of 2005 and end of 2010.

In other words, most folks don’t have much equity to tap, and with lenders skittish, a lower rate alone is a win.

Tip: How to pay off the mortgage early.

Source: thetruthaboutmortgage.com

Apache is functioning normally

If you’ve heard that the housing market crashed, consider this.

Nearly 40% of markets nationwide have returned to peak home prices on a seasonally
adjusted basis, per a new report from Black Knight.

These markets are primarily located in the Midwest and Northeast, along with Southern Florida.

And another six markets are within 1% of last year’s peak, meaning about half the country is still around all-time highs.

Of course, there are some markets on the opposite end of the spectrum as well.

The Housing Market Hasn’t Crashed Yet

While the housing bears are licking their chops at any tidbit of potential bad news, the data continues to tell a different story.

Black Knight’s latest Mortgage Monitor revealed that home prices rose during the month of March on both a non-adjusted and seasonally adjusted basis.

Property values increased a seasonally adjusted 0.45% in March (+1.38% non-adjusted), marking the third consecutive month of increases.

And 92% of housing markets nationwide saw prices increase during the month.

However, prices increased just 1.0% on a year-over-year basis, as the rate of appreciation (which was clearly unsustainable) continues to slow.

This rate of appreciation has been falling by about 1.3-1.4% each month since the start of 2023, per Black Knight.

A few months ago, home prices were falling month-to-month on a seasonally adjusted in 92% of U.S. metros.

In March, home prices were climbing in 92% of markets from a month earlier, a veritable 180.

But the company expects the annual growth rate in home prices to hit “roughly 0% by April.”

Low Supply Is Driving Home Prices Higher and Limiting the Downside

The housing market narrative continues to be one driven by inventory, or a lack thereof. The bears argue that home prices are unaffordable.

And while they’re not necessarily wrong, the lack of supply has allowed home prices to remain at lofty levels and even eek out some monthly gains.

This same lack of supply is limiting downside movement, with the supply of active for-sale listings falling for the sixth straight month.

It’s now at its lowest level since April of last year, driven by 30% fewer new listings hitting the market in March compared to pre-pandemic norms.

That puts current available inventory at mere 2.6 months of supply on a seasonally adjusted basis, which Black Knight says tips “the scale back toward sellers.”

So the buyer’s market we saw in 2022 might have already come and gone, though it could return if mortgage rates remain elevated and supply increases as the year goes on.

Where Home Prices Remain at Their Peak

First, at the national level, home prices are just 1.7% off their June 2022 peak (seasonally adjusted).

That’s an improvement from the -2.6% decline seen back in December.

But amazingly, about 40% of the nation’s housing markets are at their peak levels, this in spite of mortgage rates near 7%.

And Birmingham, Detroit, Houston, Orlando, New York, and the District of Columbia are all within 1% of their all-time highs.

Even more impressive, some metros are still chalking near-double-digit home price increases annually.

Take Miami, where home prices are up 9.5% from a year earlier, or Hartford, CT (+7.7%), Kansas City, MO (+5.5%), Cincinnati, OH (+5.2%), and Virginia Beach, VA (+5.0%).

Pretty incredible to see these types of year-over-year gains given the fact that the 30-year fixed climbed from ~3% to around 6.5% today.

Where Home Prices Are Falling the Most

Of course, it’s not all good news. And real estate is always going to be local. On the other end of things, home prices are off 11.6% in San Jose compared to a year ago.

Similar declines can be seen in Austin, TX (-11.2%), San Francisco, CA (-11.1%), and Seattle, WA (-10.8%).

Property values have also been hit in once-hot metros like Sacramento, Phoenix, Las Vegas, Salt Lake City, San Diego, and Los Angeles.

The city of Austin, Texas has had it the worst, with home prices now down 15.5% from their 2022 peak.

This might explain the negative sentiment from housing bears in that region of the country.

Double-digit declines can also be seen in San Jose, San Francisco, Seattle, Phoenix, and Las Vegas.

But given how much home prices increased in these metros, especially in such a short period of time, it’s not a major surprise.

For this same reason, the shift in prices feels more like a correction than a crash given the massive gains prior to the fall.

To sum things up, real estate is local. Some markets are still thriving, others are correcting.

And the housing market is weathering the mortgage rate storm thanks to continued lack of supply.

If and when that changes, the narrative might change as well.

Source: thetruthaboutmortgage.com

Apache is functioning normally

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Sustainable fabrics that are taking over home décor   – Luxebook


Sustainable fabrics that are taking over home décor   – Luxebook


Home Lifestyle Sustainable fabrics that are taking over home décor  

By Arushi Sakhuja  
With sustainability being the need of the hour, many luxury brands are continuously trying to show new and innovative ways to reduce their carbon footprint. With the coming up of thrift stores, new fabrics (such as organic cotton and vegan leather), producing zero waste, cruelty-free manufacturing processes and reduced water technology, and renewable energy sources, as well as adopting a transparent supply chain; brands are working hard to adopt more eco-friendly modes of production. According to Saachi Bahl’s, Founder Saahra and #ConsciousEffort Design Show and Conclave, one must acknowledge that there is no unilateral, linear, or perfect formula to be ‘sustainable’. She says….. “It is a complex process, and many times strategies are dependent upon the context of the business, its production and utility. Therefore, we must be receptive to more people in the industry approaching the subject and give them the scope to continually improve their efforts as there is no one size fits all.” 
It is worth bearing in mind that practices like repairing old weaves, recycling or upscaling can go a long way in giving back to the planet. And sustainable fabrics have come a long way, one must acknowledge that sustainable products do not lack lustre and finesse anymore. Rather, there is a rise in the innovation of new fabrics increasingly used by luxury brands such as Gucci, Stella McCartney, Tommy Hilfiger and Bottega Veneta. Décor brands like Kar Conscious Living focusses on the importance of Indian textiles through raw fabrics and subtle designs, showcasing the essence of their weaves.  More and more home décor brands are using materials like organic bio-washed cotton and handwoven wool. 
Selecting the right fabric 
Saachi Bahl
It’s always good to check what goes into the making of our home décor pieces. We’re still a long way from reducing our consumption to optimum levels, so the least we can do is make eco-friendly shopping decisions. That includes digging into the environmental practices of the brands you love and finding out how ethical they truly are in their production and manufacturing processes. “Decor and fashion have always been sectors that other industries look to for ‘what’s next’. Fashion designers have an incredible opportunity to not only reach but consciously influence consumers and other industries by choosing to create with the end in mind, choosing a material like ECONYL® nylon that can help brands close the loop,” said Giulio Bonazzi Chairman and CEO at Aquafil Group.   
Trend-related shopping cycles take a toll on the environment. Home furnishing-related individual buying decisions can also play a crucial role in our carbon footprint. Globally, the furniture market is worth approximately $ 575 billion. Manufacturers deploy vast amounts of resources to meet high demands, including trees, plastic, cotton, fibre and toxic chemicals, and hence the rise of fast furniture further complicates the sustainability dilemma. Contrary to what is believed, creating a home with the planet in mind does not require sacrificing comfort, style or budget. We can curate spaces by choosing earth-friendly materials and optimising sunlight, airflow and ventilation to reduce our daily impact. 
How are materials sustainable?  
You most likely would have encountered a few new terms like  Econyl, Cupro and Lyocell. You know they’re good for the environment because that is the information we are given. But what exactly are these so-called sustainable fabrics that are taking over our world? Luxury labels are shifting their focus to vegan leather and recycled materials. And the fabrics you grew up with simply don’t cut it anymore. “There is a plethora of new materials that designers and textile manufacturers are working with to make fashion more sustainable. Bamboo and banana fibre, leathers made from plant-based materials, and even sustainable silk are being devised. Along with all these innovations, it is vital to remember to buy from accountable and transparent brands, buy less and buy better, and re-wear, repeat and repair your clothes,” believes fashion designer Nachiket Barve. Saachi Bahl’s Saahra Sustain offers womenswear classics handcrafted in GOTS-certified cotton or peace silk, shoes from plant-based bio-leather called Pinatex, collections made from Econyl and even bags made from cork.  On the design side of things, brands are using reclaimed and waste materials that have led to the creation of unique products and the design world is excited to further explore this avenue. Redefining this space, sustainable home decor brands and designers show us the beauty of old is gold.  
ECONYL
Econyl   
Econyl is making its presence strongly felt in the market. The fabric was pioneered by the Italian company Aquafil in 2011 and is a recycled nylon fibre that is regenerated from plastic trash in the ocean, such as fishing nets, discarded bottles and industrial waste. Aquafil cleans and shreds this waste through a chemical purification process to extract pure nylon. That means that the resulting fibre, Econyl, is no different from virgin nylon. Giulio Bonazzi Chairman and CEO at Aquafil Group gets his passion for sustainability from his native place, a beautiful area in the middle of the mountains of Italy (Dolomites and Alps) near Garda Lake. The place taught him to love, value and respect the beauty that surrounds you. We spoke exclusively to Maestro himself to know more about the material. “ECONYL® is regenerated nylon 100% with a different story. It comes from nylon waste such as fishing nets, fabric scraps from mills and carpets destined for landfills. It is used for apparel, carpets, and other interior design products. And it has exactly the same performance as fossil-based nylon.” 
Aquafil econyl
The pace at which brands are adapting to the material is impressive and currently, Aquafil, with ECONYL®, collaborates with more than 2500 brands in the world. “As consumers continue to stay aware of material ingredients, it’s important that brands choose supply chain transparency. This will not only empower the consumer, but will also invite designers to tap into a new level of innovation and creativity. And this is why brands are choosing sustainable ingredients like ECONYL® nylon for their collection,” shared Bonazzi. ECONYL is mostly known by customers due to pieces offered by Adidas in its 2017 collaboration with Parley, Prada’s line of bags made with the fabric in 2019 — Re-Nylon and Gucci and Burberry have also used Econyl in their outerwear pieces and accessories, including the latter’s iconic trench coat. “Brands are using Econyl across different product categories like swim/resort to luxury. It is coming with the functionality of a virgin material making it good for fashion and the planet,” said Saachi Bahl.   
ECONYL is also used for home décor by brands such as Noho, a New Zealand-based eco-chic brand that creates durable and dynamic chairs made with materials from discarded waste. Alcarol in nature creates functional home décor pieces while preserving the natural materials as they would appear in their respective habitats. From the dining room and coffee tables to consoles and shelving, each creation replicates a distinctive landscape, bringing depth, perspective and beauty into your living spaces. Finally, Rols, a Spanish carpet manufacturing brand since 1917, integrates ecological materials such as wool or jute, and ECONYL® regenerated nylon into their designs, believing that ‘quality goes hand-in-hand with treating the earth with respect’. 
Rols
Cupro 
Another sustainable fabric that is fast gaining popularity is cuprammonium rayon, also known as Cupro. This is a plant-based fabric made from cotton linter, which is a waste product of cotton that’s often discarded. It can also be derived from recycled cotton garments, especially T-shirts. Cupro as a fabric is fine, sheer, smooth, soft to the touch, hypoallergenic, stretch-resistant, durable and dries quickly. Some even call this fabric Vegan Silk. Amouve procures organic cotton directly from Indian farmers and this practice has also led to less usage of water as compared to regular cotton. The brand offers a range of products comprising organic cotton bedsheets, towels, pillows, organic kapok mattresses and waffle blankets among others. 
Kar Conscious Living
Amouve
Lyocell 
Ethical bedding
Lyocell (also known as Tencel) is a plant-based fibre that was introduced 30 years ago and is mostly derived from eucalyptus wood, and sometimes oak and birch wood. To create the material, the wood is ground into a pulp and chemically purified to extract raw cellulose. The liquid is then pumped through spinnerets into Lyocell fibres, which are spun into yarn and woven into fabric. Lyocell fabric is soft, breathable, hypoallergenic, and more absorbent than cotton. Eucalyptus trees grow quickly without the use of pesticides, fertilisers or irrigation, making Lyocell much more eco-friendly and completely biodegradable. The material is a great alternative to viscose and makes it great for athleisure, activewear, and everyday basics. Ethical Bedding, a UK-based brand turns organic eucalyptus and bamboo into timeless silky bedding. 
How to make home décor sustainable 
Rug Republic Hestia
Nand Kishore Chaudhary, Chairman and Managing Director, Jaipur Rugs Group throws light on how the carpet industry uses sustainability in its design. “We believe sustainability in the design isn’t just a trend; it’s our responsibility.”. Chaudhary goes on to explain the process followed at Jaipur Rugs. “We prioritize sustainability in every aspect of our carpet design process, from materials to production. To achieve this, we utilize leftover hand-spun yarn to create unique and creative designs, reducing textile waste. Additionally, we use low-impact dyes that are obtained from GOTS-certified and eco-friendly raw materials, making our rugs long-lasting and beautiful while minimizing the environmental impact of the production process. By using sustainable materials and working with ethical partners, we create high-quality handmade rugs that not only enhance the beauty of any space but also promote a healthier planet for future generations.”   
Another brand that champions sustainability is Rug Republic. Their new collection of Floral Rugs is created with recycled materials, colours, designs and textures.  “The demand for sustainable and ethically made products has led to an increase in the appreciation for handmade rugs as well, as people like to spend on products that align with their thought process and values. Having said that, the timeless beauty and craftsmanship of floral rugs have further contributed to their enduring popularity, making them a valuable addition to any home,” says Raghav Gupta, Director of E-commerce at The Rug Republic. 
With climate change knocking on our front door there are three key methods to make a home more sustainable. Firstly, making the switch to regenerated nylon with the use of artisan rugs and furniture made from recycled materials, such as old carpets, abandoned fishing nets and industrial scraps can minimize waste that would otherwise pollute the earth. For example, for every 10,000 tons of ECONYL® raw material, we can save 70,000 barrels of crude oil and avoid 65,100 tonnes of CO2 equivalent emissions from being released into the air. From Jaipur Rugs and other trendy pieces like these Zanotta pouffes pick your products.  
Secondly, shift to Bamboo furniture. It is a sustainable alternative to wood, and is highly versatile for furniture, flooring and light fittings, giving your humble abode a modern and eco-conscious twist. Pick a rattan table from Fleck or Orange Tree’s rattan hanging lamp.  
Orange Tree Canna Hanging Lamp Double
Lastly, switch to bio-glass meaning home décor made from discarded bottles and jars, this material requires less energy and raw materials to manufacture. Bio-glass can transform kitchen countertops, bathroom sinks, walls, and windows into beautiful and unique pieces, adding charm and sophistication to your home. Renjini Thampi from Kerela upcycles glass bottles to make a variety of home decor items and Nicobar’s recycled glass section makes a strong case as well.  
Nicobar recycled glass collection
“India is certainly the country that will have the most spectacular development in the coming decades. And it seems very clear not only to me that the Indian culture as well as the Indian Government and Indian consumers have a strong interest and great attention towards the conservation of the planet and in doing and thinking step by step to find the best solution. Therefore, aiming for India, I think is one of the most strategic and correct actions to take,” believes Bonazzi. To conclude Bahl believes, “the innovative material industry is evolving at such a fast pace, that it’s just fascinating the type of recyclability and plant-based materials that are available in the market.” 
To conclude, daily habits such as composting food waste, cleaning with natural products, and installing solar panels, underfloor heating or double-glazed windows all contribute towards greener living.
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Source: luxebook.in

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Last Updated on August 23, 2022 by Mark Ferguson

My wife and I just got back from Turks and Caicos, which is an incredibly beautiful island in the Caribbean. While there, we were tempted to buy a vacation rental. It seems like every time we go on vacation we think about buying a vacation house, but this time we gave it more thought. Turks and Caicos was the favorite place we have ever been too and the prices were relatively affordable.

We thought about buying a vacation house because we loved the island and plan to go back again and again. At first, buying a vacation rental appears to be a wise decision if you visit the same destination enough. The plan would be to buy a house or condo on the beach, stay there a few times a year and rent out the place when we are not staying there. But when you look at the pros and cons of vacation homes from an investing perspective, we were reminded why it is not always a wise financial decision. The expenses are extraordinarily high on vacation rentals and are you really saving money when you stay there on vacation?

Why was Turks and Caicos so amazing?

Before I get started with an analysis of vacation houses, I want to discuss Turk’s and Caicos. TCI, as it is called locally, is a chain of islands in the Caribbean between the Bahamas and the Dominican Republic. We choose to vacation there, because the water looked crystal clear and had that amazing blue-green color my wife and I love. We have been to Mexico, St Martin, Dominican Republic, and taken a cruise to a few more destinations in the Caribbean. We enjoyed those destinations, but we heard TCI was better, had fewer people and was worth the extra money (it is expensive). We were not disappointed in Turks and Caicos as the water was gorgeous, the beaches were soft white sand and there was a reef right outside our resort that we snorkeled at every day. We saw a giant ray, sea turtles, many tropical fish, a large barracuda, corals and much more.

The island is not as busy as many other places we have visited and everyone was very friendly. My wife also has many food allergies including gluten, soy, dairy, eggs, and the grocery stores were extremely well stocked in allergy-friendly and organic food. There are 40 islands in the country, most of them uninhabited with the same perfect water and beaches. The main island, Providenciales was expensive as most are but was well worth it.

What are the pros and cons of vacation homes?

We enjoyed the island so much, that we looked at buying a vacation house or condo there. The prices actually seemed somewhat affordable for oceanfront property compared to other places we have been like Florida. We stayed at the Coral Gardens and although there is a rather ugly half-finished resort next to it, it was a lovely resort.

The resort next door (The Toscana) was supposed to be a high-end Italian style resort that was started in 2008. The island was hit very hard economically in 2008 thanks to two hurricanes and the global economic meltdown. The building of the Toscana stopped dead in 2008 and the site has been an eyesore ever since, although I found it fascinating. It turns out the original company that started construction ran out of money and went under after taking many deposits for the complex from future owners. The bank that took it over tried to auction the property off multiple times without success, but recently the owners of the penthouses got together and have agreed to finish the project themselves.

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Staying on the island is very expensive and our one-bedroom condo goes for $400 to $500 a night. It had direct ocean views, a balcony, two baths, and a full kitchen. You can buy similar condos in the same building we were in for under $400,000. On the surface that looks like a great return on your money. Buy a place for $400,000 and rent it for $12,000 a month. That blows the 2 percent rule out of the water and is a lot higher rent to value ratio than I get on my 13 rental properties. The properties I buy in Colorado rent for $1,200 to $1,500 and I bought them from $80,000 to $135,000.

Can you make money?

One reason I was intrigued by Turks and Caicos real estate is the rent to value ratios. We stayed in Florida on the gulf coast a couple of times in the last few years. On our last trip, we paid $2,400 for a week in a three-bedroom, oceanfront house. That house was recently for sale for 1.6 million dollars and I guessed it was worth $1.5 million. The rent was less on the beach house in Florida, but the value was over three times as much as the Turks and Caicos condo.

The problem with vacation rentals is the cost to manage and maintain them. I pay 8 percent of my rents to have my rental properties managed by a property manager. The cost for a property manager on vacation rentals is 30 to 50 percent of the rents! The management fees on the Coral Gardens units that we looked at were 40 percent.

There will also be many more vacancies on short-term rentals than on long-term rentals. There are also high and low seasons for vacation rentals and you can’t expect to see peak income year-round. The total income for 2014 on one unit in TCI was $72,000 and another $62,000. These units were identical and right next to each other, but these income differences show the volatility with vacation rentals. It also shows that you can’t count on $400 a night every night. Weekly rates will be lower, many nights will be vacant and rates will be much lower in the off-season.

The actual income is not $12,000 a month, but closer to $6,000 a month once you factor in the vacancies and off-season rates. Now we are getting closer to the returns we see on my rental properties in Colorado. However, we have not considered the management fees.

Why are management fees so high on vacation rentals?

I pay 8 percent for someone on my team to manage my rental properties. I used to manage them myself, but once I got to seven rentals I started to run out of time to manage my properties, flip houses, run a real estate team and write this blog! With a property manager, my properties have become almost completely passive, except when I first buy them.

I own single-family rentals that take very little management. The tenants tend to stay for long periods of time, the houses are repaired after I buy them so little maintenance is needed. We occasionally have problems, but for the most part, our tenants pay on time and take good care of the properties. The tenants pay all the utilities and are on long-term leases.

When you manage a vacation rental, it is an entirely different situation. Vacation rentals take much more marketing, much more active management, have more inquiries from renters, need more cleaning and are more like a hotel. Managers need to be able to check people in at all times of the day and night and even be a concierge in some cases. More responsibilities and work means you have to pay much higher fees as sometimes the manager will need to hire from services like Tidy TN due to time restraints of their duties.

Just the property management fees on the Turks and Caicos condos are $20,000 to $30,000 per year! We have not even talked about the other expenses that come with a vacation house.

What expenses will you have?

When you invest in condos you also have to consider HOA or maintenance fees. On beach front condos the HOA fees can be very expensive. There is a pool, maid service, parking lot, towels and properties close to the beach that have extra expenses. The beach has to be maintained and buildings weather faster due to salt and winds. The occasional hurricane can really cause problems. HOA fees on beachfront condos can easily run $1,000 a month or more.

Vacation rentals must be furnished, have plates, silverware, linens, televisions and everything someone would need while staying there. Over time these items would have to be replaced and upgraded to keep the rental unit desirable. If you are charging $400 a night, it better be very nice.

Vacation rental owners will have to pay for all the utilities as well. The electric, gas, cable, water, internet all are added expenses and will most likely cost more in exotic places like the Caribbean islands. Fresh water comes from rain and desalinization, not wells or rivers. Internet, cable, electric all cost more.

If you want an oceanfront property it is almost guaranteed to be in a flood zone. You will have to get flood insurance, which is much more expensive than regular insurance.

Here are the total costs per month of a vacation rental on the beach compared to a regular single-family rental (assuming they rent for the same amount, or you have multiple single-family rentals that rent for the same as one vacation rental):

Vacation House                      Single-family Rental

Rents received                       $5,833                                              $5,833

HOA fees                                  $1,000                                                  0

Management                           $2,333                                                $467

Utilities                                     $60                                                        0

Credit card fees                       $200                                                     0

Travel agent fees                    $300                                                      0

Maintenance                           $600                                                   $600

Taxes                                        $0                                                        $416

Insurance                                $500                                                   $400

Total Costs             $4,993                         $1,883

These are not all the costs but are meant to show the huge differences between a long-term rental and a short-term vacation rental. I did not include vacancies, because the rents I used for the vacation rental are actual returns. Keep in mind with a single-family rental property you will have much fewer vacancies than a vacation rental. There are also a few more costs I did not discuss yet on the vacation rental.

  • If you are renting vacation rentals most people will book with a credit card and you have to pay credit card fees to accept credit cards.
  • Travel agents also get paid a commission if they book a vacation rental for you.
  • The insurance number could vary greatly. I am assuming 5 single-family rentals were needed to create that income, but its insurance could be higher or lower based on the number of properties. Flood insurance is much higher per property.
  • Taxes are very skewed in this scenario on the vacation rental. In TCI there are no property taxes, but there is a 15 percent tax on all property purchases. You would have to add $60,000 to the purchase price of $400,000 for taxes when you bought the condo. Over five years that would average out to $1,000 a month.

The utilities on the condos we looked at were not very high, because the HOA took care of the water, electric and cable. The HOA takes care of the exterior maintenance, but not the interior maintenance. You can see that almost all of the income is used up by the expenses on the vacation rental. If you consider the huge initial tax bill all the income is used up on the vacation rental and you don’t have any loan costs!

Do you save money?

The reason most people consider a vacation rental is they think buying a vacation house will save them money. Even though you are actually losing money on this particular vacation condo, maybe it makes sense to buy it if you stay there enough. You will save thousands on every vacation, right? The problem is every time you stay at your vacation rental you are taking it off the rental market. You could be renting the property to someone else and you are losing rental income.

Is it really an advantage to own a vacation house if you are staying there a week or two every year? Will you also feel obligated to go on vacation every year to the same spot? What if you have a wedding, graduation, a family reunion, a funeral or another occasion you have to use your vacation time on? Most people do not use their vacation properties as much as they think. This is one reason timeshares are such a horrible investment, but that deserves another article.

Loans on vacation houses

All of the numbers I have used so far have assumed you are paying cash for a vacation rental and you are still losing money! If you get a loan it will lose even more money and do you want to tie up $400,000 plus in a vacation rental that you use a couple of times a year? That much money would make me over $7,000 a month in rental income because I can use that money with financing and still make money each month. That $7,000 a month would more than pay for a couple of vacations a year in some really nice places! Not to mention it is not easy to get financing in another country or even another state.

When would it make sense to buy a vacation rental?

There are a few instances when it would make sense to buy a vacation rental, but they can still be very risky.

  • If you wanted to invest strictly for appreciation it might make sense to buy a vacation rental. I never invest for appreciation, because I cannot predict the market. Prices can go down on vacation properties just like other houses.
  • If you were going to live in a vacation house for months out of the year, it might make sense.
  • If you were going to manage the property yourself you could make money with vacation rentals. However, you have to spend a lot of time on marketing and management.

Even in these scenarios, there are other risks like beach erosion, natural disasters, political changes in other countries, insurance changes and giant half-finished resorts next to your condo!

Conclusion

On the surface, vacation house may seem like a great investment. They aren’t making any more ocean and there is only so much beachfront property. However, if you have to tie up huge sums of cash to buy the property and you still lose money every month is it worth it? For me, it is not worth the risk, the money it would take and I would lose flexibility with my vacation choices. I love Turks and Caicos, but that does not mean I want to spend every vacation for the rest of my life there.

Build a Rental Property Empire

Categories Rental Properties

Source: investfourmore.com

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Life goes by quickly. One minute you’re walking into your first day in kindergarten, the next you are getting ready to leave the workforce and enter retirement. If you are one of the 30 percent of Americans who are almost at retirement age with no savings to speak of, it’s time to act. As intimidating as it may seem to start saving when everyone around is shaking their head and saying it’s too late…a start is better than nothing at all. In fact, with a bit of careful planning and a lot of hard work, you may find yourself in a position to retire comfortably in less time than you thought.

1. Tighten your purse strings – hard

Before retirement comes and you find yourself holding up grocery lines so you can count out change, you need to take long look at your spending habits. Start a diary of your expenses, either by writing them down or using online resources. This will help you to better understand where your money goes every month. You may find that a lot of what you buy can be downsized or even reduced entirely.

2. Stop being so generous

Studies have shown that the majority of people of retirement age are still supporting either children or parents. It’s time for tough love. Try to avoid handouts by gently letting your loved ones know that you are preparing to retire and need to start looking out for yourself. Or, if you do continue to support family members, make it clear that you simply can’t continue helping out forever.

3. Think smaller

You can save a great deal of money by moving to a smaller home in a different area. After building equity in your home and enjoying where you’re situated, moving to a tiny space in a less than desirable neighborhood can be a heavy sacrifice. However, the money you can earn through wise real estate decisions can do a great deal to alleviate sentimental pangs.

4. Don’t count on your home

You may have decided that all you need to retire on is the equity in your home. Sadly, this is one of the biggest mistakes people make. The real estate market is highly volatile. What may be worth over half a million one year can be reduced to less than a third the next. Do not consider your home to be your safety net. The best advice is to ignore its worth entirely and focus more on saving wisely and reducing your expenses.

5. Cut up your cards

Carrying debt into a time in your life where you will have little or no income is financial poison. Before you retire, you must do everything you can do rid yourself of your credit card debt. If you are being careful with your spending, you should be able to start to make lump payments that will allow you to happily slice up any cards that might tempt you in the future.

6. Set up a meeting with your boss

If you’ve realized that you simply cannot afford to take all the necessary steps to retirement, and you believe that you deserve it, it may be time to ask for a raise. Plan your meeting with your boss by preparing a list of accomplishments and contributions that you can present, sing your own praises and hopefully your employer will show their appreciation by increasing your income.

7. Get some on the side

Was the door shut in your face when you asked for a raise? It may be time to consider clocking some extra hours to increase your monthly income. If you‘re not interested in working outside the home, there are plenty of online opportunities to supplement your income. Many sites offer freelance positions such as essay writing, data entry or blogging. Although the pay isn’t stellar to begin, with a little effort you can certainly make a decent wage.

8.Stuff your retirement savings accounts

Ideally, people should start contributing to 401K and IRA savings before their mid thirties. The reality is that most people are too busy starting families and deciding on a career at that crucial stage in their lives. As a result, there are many people over 50 who have absolutely no savings in preparation for retirement. If you see yourself in this group, you need to start making these accounts a priority. Start small and remember, money not seen is money not spent.

9. Look at your assets

One of the best ways to build your retirement fund is through investment. Playing the market is an art however, and you always run the risk of losing more than gaining. Conversely, being too prudent can cause just as much damage. Therefore, your portfolio needs to be well diversified. Consider domestic stocks and international bonds, which are fairly secure but give a reliable and often lucrative return. Make sure you avoid the safety of fixed income stocks and focus instead of creating a portfolio of many different stocks from a variety of sources.

10.Get Help

Getting the help of a trained financial advisor or stockbroker can make a world of difference when it comes to planning for your retirement. There is no shame in asking for help. Employing a qualified advisor to help you make the most of your money can mean the difference between celebrating your retirement on a cruise ship or opening up a can on ham and sticking a candle on it.

Life is full of important milestones. From an early age, we start to anticipate these major shifts and how our lives will change. . Perhaps the biggest shift is into retirement. It is prudent to prepare yourself, both emotionally and financially for this switch. As dull as it may seem now, you’ll be glad to make the preparations you did.

This post was written by the Frugal Dad. FrugalDad.com is a personal finance site that offers coupons & deals to help consumers save money.

Related Posts

Source: biblemoneymatters.com

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After living in our first home for almost five years, we were ready to upgrade. With a second child on the way (and at least a third in the not too distant future) we needed more space, so we knew it was time for a larger house. We took a bit of a different approach in that instead of buying a bigger home, we opted to build our dream home. Are you considering an upgrade to a bigger home? If so, I’ve asked Miranda to offer her take on whether an upgrading to a bigger house makes good financial cents for your situation.

Today’s low home prices and low interest rates are making home ownership more attractive to many. And, while first time home buyers are getting in on the act, they aren’t the only would-be buyers interested in making a home purchase. Plenty of current home owners are considering upgrading to a larger home.

In many markets, home owners are looking at homes in the next price range up as good buys, since foreclosures and a slow market are resulting in good deals. But, as tempting as it is to upgrade to a larger home, is it really a good idea? Here are some things to consider before upgrading to a larger home:

Why Do You Want to Make the Move to a Larger House?

Consider your situation. Sure, a bigger, nicer house is a plus, but is your decision based on some sort of notion of status? If your main motivation is to impress others with your bigger home, it may not be the best reason. However, if your family is starting to outgrow your current home, or if you believe that you would enjoy a better quality of life in a nicer home, then it might worth considering making the move.

What’s the Situation with Your Current Home?

The biggest issue with upgrading to a larger house is that you still have to sell your current home. Consider the market in your area. How long is the home likely to be on the market? Are you getting a good enough deal on the larger home to make up for any price cuts you will have to make to sell your current home in a timely manner? Another concern is that your current home may not yield enough of a down payment, due to its own home value issues. If your current home is underwater, or if getting approved for the newer home depends on selling your current house, you may not even have the option of upgrading to a larger house.

Are You Prepared for the Costs of Moving Up?

Before you decide to upgrade to a larger home, consider the additional costs. Not only do you have to think about an increased mortgage payment, but your home insurance and property taxes will increase your costs as well. On top of that, there are costs associated with moving, and you may need to buy more furniture, or make changes to the home. Utilities in larger homes are more expensive, as is yard care and home maintenance. If the home has been foreclosed on, there may be some home repairs necessary. You may not be prepared for the additional costs associated with a bigger home.

Can You Handle the Home if it Doesn’t Appreciate?

Taking on extra debt is always something to be approached with caution — especially if you are planning on upgrading to a larger home. Many people feel that a larger home would get more bang for the leveraged buck, since the appreciation would make up for it. But, even if you buy at the bottom of the market, there is no guaranty that your home will appreciate in value at the rate you expect. As we saw not too long ago, the real estate market crashes, just like everything else. If you are banking too much on a larger home as an investment, you might be disappointed. Consider upgrading as a purchase, rather than an investment likely to yield big returns.

Bottom line

If you can handle the costs, and you think that moving into a larger home will improve your quality of life, it might be a good time to upgrade. However, make sure you are prepared for what comes with a larger home, and understand that you might end up with a big purchase, rather than a good investment.

This is a guest post by Miranda Marquit. Miranda is a journalistically trained freelance writer and professional blogger working from home. She is a contributor for Mainstreet.com, Personal Dividends and several other sites. Miranda is not affiliated or endorsed by LPL Financial. The opinions voiced in this material are for general information and are not intended to provide specific advice and/or recommendations for any individual.

Source: goodfinancialcents.com

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Last Updated on March 29, 2023 by Mark Ferguson

It takes a lot of hard work to save $100,000 or you have to be very lucky for $100,000 to fall into your lap. Once you have $100,000 it can be even harder to commit to investing it and not blowing it on material goods. If I had an extra $100,000 to invest I know exactly what I would do with it; invest it in real estate. In fact I invest all of my money into real estate. Whether I invested in fix and flips or rental properties would depend on my current situation.

For others there are a number of factors that determine how and when you should invest $100,000. My specialty is investing in real estate because of the awesome returns rentals and flipping can produce. I am a real estate agent and I have a big advantage over many new real estate investors. This article will describe why I think real estate is such a great investment for me and if it would be for you as well.

Why is real estate my top choice for investing $100,000?

There are many ways to invest money into real estate and that is one reason why I love to buy houses. The main reason I love real estate is the great returns you can get if you are willing to do some work. I own 13 rental properties and fix and flip about 10 houses a year. On my rentals I tend to get 20 percent cash on cash returns or more. On my flips I average over a $30,000 profit on each one.

It is not easy to get those returns on rentals and make that much money on each flip. It helps that I am a real estate agent and I have been investing for many years. That doesn’t mean a novice or beginning investor cannot make great money with real estate if they do their homework, work hard and are patient. When investing money in the stock market it is very hard to get the returns I get and there are even more advantages to investing in real estate that blow the stock market away.

What is the best way to invest $100,000 in real estate?

There are many ways to invest in real estate. Besides flipping and rental properties, there is private money investing, REITs, notes and more. Choosing the best option is not easy, because everyone has different goals and everyone is willing to spend varying amounts of time to learn to invest and complete the investments. Here is a quick break down of the most popular ways to invest in real estate.

  • Flipping: flipping houses takes a lot of work and a lot of experience to make money. A flip is buying a house very cheap, fixing it up and selling it for a profit. Flipping is more of a job than investing and it usually takes a lot of capital to get started.
  • Rental properties: rental property investing can be very involved or very hands off. I like to buy properties below market value and then make repairs, which takes time and money. The cheaper I buy properties the more cash flow I am able to create. If you are looking for an easier way to buy rental properties; turn key rentals take very little time and are mostly hands off.
  • Private money: private money is when one investor lends money to another investor for the purpose of investing in real estate. Private money can be very hands off once you find a great investor. Finding the great investor can take time and if the investor does not follow trough on their promises, private money investing can turn into a nightmare.
  • Notes: buying notes is also mostly hands off, because you are not buying a property. Buying notes involves buying a mortgage and becoming the bank. However if the borrower stops making their payments you may have to foreclose on the home which becomes very hands on.
  • REITs: REITs are more like investing in the stock market than investing in real estate. You buy shares of a REIT, which give you a piece of a real estate trust. With a REIT the management is taken care of by a large company and don’t have to worry about taking responsibly for a property. However, you give up all control of the investment and have to hope you picked a good manager.

Even though there are many ways to invest in real estate, this article is going to focus on investing $100,000 into rental properties and fix and flips, because I think they provide the best returns. They also take the most work which I think is a good thing. If you are investing for your future retirement and livelihood I think it should take some work!

Why are rental properties how I would invest $100,000?

Figuring out the best investment for you depends on how much time you have to learn and implement. The more time you have, usually the more money you can make and the better returns you will get. I think rental properties are the best investment if you have the money and time to learn the correct way to invest in them. Once you buy your rentals and get them set up with great renters or property managers, they take very little work.

I spend about $30,000 to $35,000 in cash on each rental I buy. I finance my rentals with 20 percent down and make repairs to add value. Rentals in my area produce about $500 a month in cash flow which equals $6,000 a year. I buy my properties from $80,000 to $135,000 and rent them from $1,200 to $1,500 a month. A 20 percent cash on cash return is pretty awesome, but it is getting harder and harder to find these types of deals in my area. However, even with much lower returns rentals properties have many advantages besides the cash on cash return.

  • Rentals have great tax advantages.
  • Properties will most likely appreciate over time.
  • I am paying off loans and gaining equity every month.
  • Rents will most likely go up over time.
  • Rentals can be bought below market value giving you instant equity.

To see all the advantages of rental properties I will show you the numbers on rental property 7, which I bought two years ago. I bought this house as a short sale and it was a smoking deal.

  • Purchase price                       $113,000
  • Repairs                                    $8,000
  • Closing costs out of pocket $500      (seller paid $2,000)
  • Down payment                      $22,600
  • Commission I made             -$3,000
  • Total cash spent                    $28,100

I rented this house for $1,400 a month shortly after the repairs were made and it has been rented to the same tenants for almost two years.

Not only am I making over 20 percent on the cash I invested from rent, but I bought the home below market and added value with repairs. The home recently appraised for $195,000 and I was able to take out $52,000 in a cash out refinance. Even after the refinance the house cash flows every month (it does make less than $500 a month now).

Many circumstances came together to make this a great rental. These deals are not easy to find and not readily available in every market. However, getting half the return I did would still be a great deal for most people. Here is a look at the total return I have seen in two years on this property.

Returns from buying the home below market

Value of home when purchased and after repairs: $155,000.

Repairs and purchase price plus closing costs: $121,500

Value gained $33,500 which equals 59.6 percent return per year.

Returns from appreciation

Current value of home based on appraisal: $195,000

Appreciation of house over two years: $40,000.

That is a 71 percent return per year over two years.

Returns from rental income received

Rent income per year: $16,800.

Expenses per year: $8,440 (mortgage, taxes, insurance, property management and maintenance)

Profit from the renal property income: $8,360, which equates to a 29.7 percent return.

This number is misleading, because I have been very lucky with these tenants and had no out-of-pocket maintenance, except for the deductible on an insurance claim. We had a major hail storm that damaged the roof, some siding and windows, but my expense was only $500. When I figure cash flow for the future I include much higher expenses for vacancies and maintenance.

What are the total returns of this rental property?

Those returns equal a 160.3 percent return on the initial money I invested each of the first two years. But to be honest, the returns are not that high because you would have selling costs if you sold the house. There are costs to refinance as well when you take cash out. If I sold the house I would have to pay about 6 percent of the selling price in real estate commissions and closing costs (10 percent if I was not a real estate agent). The returns would also go down over time, because the initial benefit of buying below market value would be spread out over more years and we can’t count on 20 percent appreciation each year. A word of warning, I never invest strictly for appreciation.

If you never sell or refinance the property, you will not see those returns from appreciation or buying below market. They would be paper returns which would make your net worth look awesome, but the actual gains would be just the cash on cash returns. Even if you don’t sell or refinance having a lot of equity in homes looks great to banks if you want to get more loans.

When I refinanced the property I had to pay closing costs, which were about $5,000. I will get some of that money back, because the bank collected escrow amounts for taxes and insurance. I already had money in my escrow accounts for my previous loan which I will get back. I also skip one payment with the new loan, which will save me $800. I spent $28,100 buying this property and took out over $52,000 when I refinanced. I still have 25 percent equity since the maximum I can refinance with my lender is 75% of the appraisal. As you can see buying below market coupled with appreciation can make for some great returns when you refinance.

Having said all of that, let’s get back to the entire point of this article. How would I invest $100,000 into real estate? I would buy rental properties, but I would not spend all the money on rentals.

Why do you need to have money in reserves for rental properties?

I may not have had any vacancies or maintenance needed on rental property number 7, but that doesn’t mean I never will or I haven’t had those costs on other rentals. If you are going to buy rentals, you will have to fix things, you will have vacant properties and you will have tenants who don’t pay rent. If you have no money to handle these situations, you will run into some very tough times.

A good rule of thumb is to have at least six months of mortgage payments, taxes and insurance per property in savings. Banks will require this amount as well when you try to get a new loan on a property.

If you bought two rentals using $35,000 cash for each property, you would have $30,000 in cash left. You might be tempted to buy another property with that cash, but you would have no money left for reserves. If you had two rentals and a personal residence, you would need at least $16,000 in reserves assuming you had two $600 payments and a personal house payment of $1,500.

With $100,000 to invest, you could buy two rental properties which would give you great returns on $70,000 of your money. Some may argue the stock market is a better investment because you could invest all $100,000, but no matter what you invest in you should have an emergency fund or safety net. It is more important to have a safety net with rentals because you may have to put more money into then for repairs or to make mortgage payments. Where the stock market you would not need more money, unless you are buying on margin (one of the few advantages of the stock market).

How your goals and personal situation will affect investing the $100,000

There is more to consider then just the $100,000 investment you have. How did you get the money? How much do you save? How old are you? Are you investing from an IRA?

If you make $500,000 a year and it is not difficult to save $100,000, then maybe you are okay taking more risk and buying three rentals. If you make $50,000 a year and it took ten years to save $100,000 maybe you only want two or even one rental. If you are retiring in five years maybe one rental paid with all cash would make you more comfortable. Personally I think leverage is the way to with rental properties as long as they cash flow and I explain why here. If you are in a market with more expensive houses it will also affect how you invest and how much money you need.

If you happened to inherit $100,000 and have no prospect for saving more money, be very careful when investing in anything! It is vitally important you have reserves in savings if you buy rentals.

How much time you have to invest will also play a big role in how you spend the money. If you have no extra time to learn about rentals and buy properties, my strategy will not work well. You have to know your market well, be patient to find great deals, and take time to hire great managers and contractors. Turn-key rentals are a better option for those with no time, but will not provide nearly the same results.

If you have a lot of time to invest, you might even consider flipping to boost your rental property purchasing! If you want help with learning how to invest in rentals, I offer a great program to get you jump started.

How can fix and flipping increase the returns on $100,000?

Fix and flipping can provide a great income, but will take a lot of direct involvement. It is more of a job, because once you sell the property it will no longer make you any money. It takes a lot of money to get started flipping unless you use hard money or have a partner. Having $100,000 to start a flipping business would be a great start,but you are taking on a lot of risk. I love to use flipping to make more money to invest in my rentals.

This article is already way too long to start going into the details of flipping, but here is a great article that describes the process and how much money you can make.

Conclusion

I have invested much more than $100,000 into rental properties and fix and flips. My investments have built up over time and I was not able to put a large chunk of money into the investments in the beginning. If you have $100,000 or $50,000 or one million to invest, don’t dump it all into the business at once. Make sure you know what you are doing, have done the proper research and have a safety net. The returns I show in this article are not typical, but show the incredible power rentals can have. If you have questions or comments for me, be sure to check out the discussion forums!

Build a Rental Property Empire

Categories Real Estate

Source: investfourmore.com

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Mortgage crisis Q&A: “What is an underwater mortgage?”

I have no idea why I never touched on this topic before…perhaps I thought it was too simple of a concept, but clearly it could use a proper explanation seeing that millions of mortgages are now underwater nationwide.

Put simply, an “underwater mortgage” is defined as a home loan with an outstanding balance that exceeds the value of the associated property.

An underwater mortgage can also be referred to as an “upside-down mortgage” or a “negative equity mortgage.”

Let’s look at an example of an underwater mortgage to illustrate:

Current mortgage balance: $500,000
Current house value: $400,000
Home equity: -$100,000 (negative equity)

In this rather common scenario, the borrower would be $100,000 underwater on their mortgage because they currently owe $500,000, yet the home is now only worth $400,000.

Typically, you’d see the opposite in a healthy real estate market.  The homeowner might have a mortgage balance of $500,000 and a property value of $600,000 thanks to regular mortgage payments and home price appreciation.

If that were the case, the homeowner would have $100,000 in home equity, and it would put their loan-to-value ratio (LTV ratio) at roughly 83%.

In the underwater mortgage example, the borrower would have an LTV ratio of 125% (the lower the number the better here folks).

An LTV above 100% implies negative equity, or underwater status.  It’s not good!

Why are mortgages underwater?

  • Borrowers owe more than their homes are worth
  • Because many took out zero down mortgages
  • And made interest-only payments or let their mortgage negatively amortize
  • Then home prices took a big dive

The underwater mortgage example above is actually pretty common nowadays for several reasons.

No, there wasn’t a great flood…nor was there any water damage.

During the housing boom, home prices were very inflated, no one will argue that. At the same time, scores of borrowers took out no money down mortgages, aka 100 percent financing, to qualify.

Essentially, because home prices were so high, new entrants to the market were basically forced to finance their too-expensive homes with risky types of financing, as it was the only way they could afford the properties in question.

And they probably also chose these risky types of loans simply simply because they could.

After all, why put a bunch of money down if you don’t need to, especially if you think home prices are going to rise. That was the fatal flaw.

When home prices abruptly tanked, those who started out with no equity (100% financing) quickly fell into a so-called “underwater” position, especially since most were only making interest-only mortgage payments at best.

This problem was further exacerbated for those who opted to take out option arm mortgages, which allowed for negative amortization.

Yes, at the time there were mortgages that permitted homeowners to pay less than the total amount of interest due each month, and were even designed to allow borrowers to fall into underwater positions.

But everyone assumed home prices would keep rocketing to the moon, so no one gave it much thought.

Even homeowners who made their mortgage payment in full each month fell into underwater positions thanks to the grossly inflated home prices and precipitous declines that followed.

This also explains strategic default, where homeowners choose to walk away from their mortgages because they’re so far underwater they never expect to recoup the lost equity.

Or simply feel they can start out fresh with a mortgage balance more closely aligned with today’s home prices.

[Underwater Mortgage Insurance: Yes, It Exists Now]

What to do if you’ve got an underwater mortgage…

  • There are options for borrowers with underwater mortgages
  • Namely the Home Affordable Refinance Program (HARP)
  • Which allows homeowners to refinance with no LTV constraints
  • But you need to be current on payments
  • And your loan needs to be owned by Fannie Mae or Freddie Mac
  • If you have an FHA loan, a streamline refinance may also be an option

While the options aren’t great for those with underwater mortgages, there are certainly more and more programs being unveiled that deal with them.

You may have heard about a certain government loan modification program aimed at those with underwater mortgages that allows refinancing up to 125 percent LTV…it’s no coincidence.

And recently the government launched a program to help homeowners with underwater mortgages refinance, regardless of how deeply underwater they are.

Unfortunately, this program, known as HARP Phase II, is only available to those with Fannie Mae and Freddie Mac backed mortgages.

However, similar options are available to those with FHA loans and VA loans, so don’t fret.

If you have an underwater mortgage, it’d be wise to contact your mortgage lender and/or loan servicer to see what options are available for you.

You may be surprised to find that there are refinance options available to snag lower mortgage rates and even principal reduction in some cases.

Of course, there are going to be cases where borrowers are so deeply underwater that the best option could actually be walking away.

Simply put, if a borrower is so underwater that it will take a decade or longer just to break even, the argument is there.

It may be better to walk away, rent for a few years, and buy again when you’re ready to do.

That way you won’t be waiting years for your mortgage to get back above water.

Just be sure to weigh all your options and come up with a long-term plan first. It’s a major decision and should be treated as such.

Read more: How to refinance an underwater mortgage.

Source: thetruthaboutmortgage.com