appreciation

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Last Updated on February 25, 2022 by Mark Ferguson

Finding a great rental property can be tough. In many markets, prices are increasing and being able to make money on a single-family house or multifamily building is difficult. One option is to buy the cheapest homes you can in your area and make them a rental. You can also buy a townhouse or condo and turn into a rental property since they are typically less expensive than a single-family detached home.

I think a townhouse or condo can be great investments, but you must look at the numbers closely. There are many costs associated with condos like HOA fees. The appreciation also may not be as much on condos and there are some very scary issues that can cause a great condo or townhouse investment to become a nightmare.

Why are condos and townhouses so much cheaper than houses?

Before I get into the pros and cons of condo and townhouse investments, I want to be clear on what a townhouse or condo is. A condo is a unit within a large complex of apartments or other condos. There may be units beside you, above or below you. You rarely have any yard except a shared space with other units.

A townhouse might have a small yard and may have neighbors beside the unit, but not above or below. Townhouses are typically worth more than condos because they have less connected neighbors and some land.

Both condos and townhouses are worth less than a single-family home that is otherwise similar.

How does an HOA work on a townhouse or condo?

Almost every townhouse and condo will have an HOA. The HOA takes care of the shared land in the complex and most HOAs take care of the exterior maintenance and landscaping. Many HOAs also pay for the water on a condo or townhouse and they may provide common amenities like a swimming pool, clubhouse or tennis courts. Some single-family neighborhoods have detached homes that are in an HOA as well. The HOA fees are usually much higher on a condo or townhouse because the HOA takes care of many more things. Here is a list of many things an HOA takes care of on a single-family detached home, patio home, and a condo or townhouse.

——————-Condo/Townhouse                 Patio Home               Single-Family

Common Amen.            Yes                                   Yes                           Yes

Landscaping                  Yes                                   Yes                            No

Water                              Yes                                   No                             No

Exterior maintenance  Yes                                   No                             No

Exterior Insurance        Yes                                  No                             No

Clubhouse/pool             Yes                                  Maybe                      Maybe

Trash/snow removal     Yes                                 Maybe                      No

If you are wondering what a patio home is, that is usually a single-family detached home that has an HOA that maintains the lawn. The condo and townhouses have much more involved HOAs, which makes them much more expensive.

In my area in Northern Colorado, I see HOA fees for most single-family detached homes $400 or less a year (if they have an HOA). HOAs on condos or townhouses can are usually at least $100 a month and in some cases $400 a month. HOA fees can be even higher in larger cities with complexes that have security and many more amenities. Only one of my rental properties has an HOA and it is $300 a year.

Is it a bad thing to have an HOA on a rental property?

I have no problem with having an HOA on one of my rentals. The HOA takes care of the common amenities in the neighborhood and I have never had a problem with them. The only other job of this HOA is to make sure all the homes in the neighborhood are in compliance with the rules and regulations of the HOA. Many HOAs don’t allow work trucks to be parked outside, or excessive junk to be stored in the yard. For many people, this is a good thing and for others a bad thing. As a landlord, I think of it as another set of eyes on the property and I think it is a good thing to know if the tenants have junk everywhere or are not mowing the yard.

I don’t think having a small HOA with few responsibilities is a bad thing. A larger HOA will provide many benefits as well. Even though a larger HOA will be more expensive, it will lower many costs for a landlord. The HOA will pay for exterior insurance and maintenance, which will reduce the landlord’s expenses. The HOA will handle yard maintenance and snow removal, which can lower the landlord’s expenses as well. In my case, I invest in single-family homes and I have the tenants take care of the lawn and pay all utilities themselves so that does not save me much money.

HOA special assessments

The problem with a large HOA is they can create special assessments if they need more money for any major repairs or financial problems. I know of a couple of landlords who had their HOA fees increase greatly in a one-year span because the HOA had to repaint the exterior of the entire complex. The HOA fees went from just over $100 a month to $200 a month for every condo in the complex. Another HOA imposed a $30,000 special assessment on every single condo in a complex to pay for improvements. This particular landlord was planning on flipping the condo and all his profit disappeared with this assessment.

The HOA cannot impose a special assessment or raise the HOA fees without agreement from the HOA members, but in many cases, the members don’t show up to HOA meetings to oppose the changes. If you are buying a condo or a townhouse that has a fixed HOA fee, that does not mean it cannot be raised or a special assessment is levied upon the property.

Will the HOA allow rental properties?

Another problem that can come up with HOAs and rental properties is that some HOAs may not allow rental properties! My office recently had a home listed that was in an HOA and the HOA decided they would no longer allow rentals. The property was used as a rental property so the owners decided to sell it. Then the tenants decided to stop paying due to covid and it was a nightmare for the owners.

Be aware that HOAs can decide to ban rentals although it is rare.

Will condos or townhouses appreciate as much as detached homes?

Another factor to consider when buying a condo or a townhouse is the value of the property. Condos and townhouses are cheaper than detached homes because they are cheaper to build and demand is higher for single-family homes. You also own more land and have lower HOA fees with a single-family house. When you have an HOA fee that also reduces how much a borrower can qualify for when they get a loan. Usually, the condos and townhouses with the highest HOA fees will be worth less than similar condos or townhouses with lower HOA fees, because more buyers can afford them. A $100/month HOA fee could reduce the amount a buyer can qualify for by as much as $20,000.

I don’t invest for appreciation, I invest for cash flow when I buy rental properties. That does not mean I do not consider possible appreciation or depreciation on the properties I buy. There are some people who prefer a condo to a detached home, but most people want a detached house. In my area condos are the first to start losing value in a down market and the last to increase in value in an appreciating market. While condos and townhouses can appreciate and often do, single-family detached homes tend to appreciate more. It is the land that is causing the appreciation and detached homes have much more valuable land.

How can FHA rules affect condo prices?

FHA will loan on condos and townhouses, but they have very strict rules. FHA will not allow a buyer to use an FHA loan to purchase a condo in a complex if there are too many investors in that complex. If there are more than 50 percent investors in a particular complex FHA won’t lend to anyone in that complex. FHA is a very popular loan and it can greatly decrease values in a complex if the units cannot be sold using FHA. Here are some more requirements for FHA loans being used on condos. Even though conventional loans do not have to abide by FHA rules, some banks will also have guidelines similar to FHA to lend on a condo.

Is it smart to buy a condo or townhouse for a rental property?

As you can see there are many factors you must consider when investing in a condo or a townhouse. The number one factor should be cash flow and how much money you will make. You have to remember to factor in the HOA fees and the possibility that they may increase in the future. If you buy a condo in a complex that is older and will need work soon, you may see a huge increase in HOA fees or a special assessment. If many investors decide to buy units in a complex it could greatly lower the value of every unit due to FHA rules and don’t expect as much appreciation.

I think you can make money with condos, but given similar returns between a condo or townhouse and a single-family detached home, I will take the detached home every time.

My book, Build a Rental Property Empire, goes over my personal rental property strategy in depth. It covers how to find deals, finance rentals, manage them, and much more! It is available as a paperback and ebook on Amazon or as an audiobook on Audible.

Build a Rental Property Empire

Categories Rental Properties

Source: investfourmore.com

Apache is functioning normally

A new analysis from Zillow reveals that many homes would actually be worth a lot more today had there been no housing bubble back in the early 2000s.

The basic premise is that historic home price growth year after year would have amounted to better overall gains than a few boom years followed by a bust and then a partial recovery.

Of course, home prices don’t just climb steadily over time. They ebb and flow, dip and peak, just like the stock market. So it matters when you buy, though as I’ve mentioned before, time tends to heal all wounds if you stick with real estate long term.

However, you might just be better off investing in stocks, which have gained 40% since the bust.

Imagine No Housing Bubble

  • While just about everyone complains about bubbles
  • Home prices would actually be higher without them
  • If you’re an opportunist
  • You can use bubbles to your advantage to find attractive entry points

Let’s pretend the housing bubble never happened. Instead, let’s assume home prices increased at historic rates year after year. The median home in the United States would actually be worth 26% more today than where it currently stands.

Using 1985-1999 home price growth rates, Zillow discovered that the U.S. median home price would be nearly $235,000 today, instead of the actual $187,000.

But that’s not how history played out. Instead, home prices surged between 2000 and 2006, and by the first quarter of 2007 the median price was 22.4% higher than its historic growth norms would indicate.

That was great news for those who sold at the top, but terrible news for those who purchased a home around that time (or decided to cash out all their equity with an option arm).

We all know what happened next – home prices tanked, pushing them well below levels they would have reached had they just appreciated in line with historic norms.

Thanks to the subsequent bust, 2000-2016 appreciation averaged just 2.8% nationwide, compared to annual home price growth of 4.2% from 1985-1999. So slow and steady does indeed win the race, it’s just a lot less exciting.

Some Metros Are Still Outpacing Historic Norms

  • In some particularly hot regions of the country
  • Home prices are exceeding expectations
  • Which could point to overheated markets
  • And a possible correction sometime in the near future

While 20 of the 30 largest metros in the nation would have higher home prices sans housing bubble, there are 10 that have shaken off the bubble carnage and surged higher.

For example, the median home price in Los Angeles was $572,400 as of the second quarter according to Zillow. Had we avoided a bubble and just stayed on trend, home prices would be closer to $476,000.

The same is true for Washington DC, where home prices are currently around $368,700, but should be around $331,700.

Other housing markets that may have overextended themselves include Baltimore, Dallas, Miami, Orlando, Phoenix, Riverside, San Diego, and Tampa.

Conversely, some metros that are red hot and seemingly overvalued are actually still well below where they would be had we avoided a major boom.

Examples include San Francisco and San Jose, where the median price was $812,300 and $957,900 in the second quarter, respectively.

Using historic annual home price appreciation rates of 5.6% and 5.5%, prices should be closer to $935,000 and $1,281,300.

The same goes for Denver, where home prices are a staggering 45% above peak levels seen in 2007. The median was $338,500 in the second quarter but should be as high as $374,300.

In Chicago, home prices are nearly half what they should be, at just $198,200 versus the $368,100 had they just stayed the course.

In Detroit, they’re nearly a quarter of what they should be, just $127,300 versus the $388,000 projection based on historic appreciation.

But things don’t operate in a vacuum, nor do home price appreciation rates remain static. Things can change dramatically, as we’ve seen in some hard-hit areas of the country. The economics of certain metros can go through vast and painful transformations.

So that doesn’t mean you can just look at where home prices should be and then buy accordingly to turn a profit.

Still, home prices nationwide remain 4.9% below peak levels seen in 2007, and are expected to hit pre-Great Recession levels around the end of 2017. Factor in ten years of inflation and record low mortgage rates and it might seem like a decent time to buy a home.

(photo: jmorgan90)

Source: thetruthaboutmortgage.com

Apache is functioning normally

Last Updated on March 29, 2023 by Mark Ferguson

I strongly believe that real estate is one of the best ways to achieve wealth. Rental properties, in particular, are an awesome way to build net worth and create passive income.

I own a real estate brokerage, have been an agent for 17 years, and flip houses as well. My strategy is to make as much money as I can by selling houses as an agent or flipping houses and investing that money into rentals. Real estate has made me quite a bit more than a millionaire and anyone with a work ethic can do it. If you become a millionaire, it may not mean what it once did thanks to inflation and the cost of living. However, being a millionaire is still a big deal, and only 5 percent of American households have a net worth of one million dollars or more.

Why is real estate a great way to become a millionaire?

Real estate is one of the best ways to build wealth with or without a lot of money. I am not saying you don’t need any money or that it is easy, but it is possible. One of the main reasons real estate is a great vehicle for wealth is the ability to use leverage. Leverage is basically using loans or other people’s money. You can get loans relatively easy on real estate because it is a hard asset. The more money you have the easier it is to make money in real estate. While it is possible to get started with nothing or next to nothing, it is much easier if you have money to invest.

While you can borrow money to invest in other businesses, it is usually not as easy as it is to borrow against real estate. Banks love to lend on houses and commercial properties because they have an asset backing the loan. If banks lend on stocks or businesses and they go under the bank has nothing. If they loan against a house and the borrower can’t make payments the bank can take the house.

Because banks like to lend on real estate you can get some of the best loan terms available. Real estate also has amazing tax advantages that are not available with other investments. You can buy and sell a primary house, make $200,000 and pay zero taxes on that profit in certain scenarios. Not tax-deferred, no tax at all, ever. You can also force appreciation with real estate; you do not have wait for it to go up in value. I flipped 26 houses last year and all of them I bought for much less than they were actually worth. You can also make improvements to a property to increase the value. All of this can occur while you are making money on it every month after paying expenses including the mortgage.

It is also possible to take money out of your real estate investments by refinancing properties. You can use that money to buy more and more properties. This is what I have done in my career and one of my only regrets is that I did not start sooner!

Is a primary house an investment?

I want to start with the question of whether a primary residence is an investment. Many people talk about how it is dumb to buy a house and smart investors rent. I disagree. I think a primary residence can build a lot of wealth. I have increased my net worth buying and selling houses that I lived in over and over.

I bought my first house when I was 22 years old. I paid $190,000 for the house, which was full retail value for it. I lived there for 7 years and spent at least $10,000 on materials to remodel the home. That money does not count the time I personally spent updating bathrooms, painting, installing fixtures and fixing many other small things. I sold the house for $180,000 after doing all that work! It did not help that the market dropped, but I could have done much better if I would have been patient and waited for an awesome deal. Not every personal house is a great investment but I also did not have to pay rent, I was not forced to move when the landlord decided he wanted to sell, I could have pets, and I could change the houses however I saw fit. I did much better financially with my second house.

I bought my second house from the foreclosure sale for $215,000 in 2009, put less money into it for repairs, and sold it for $343,000 three years later. I bought the house with money I borrowed from my sister and father in law because I had to pay cash at the foreclosure sale. I was able to refinance all of that money out with a conventional bank a couple of months later. The awesome part about making so much money on that house was that it was tax-free. When you live in a house for 2 out of the last 5 years the money you make is usually tax-free! I sold the house to my friend so I had no real estate commissions to pay. We spent less than $10,000 on the house while we owned it and we did not even have to change the carpet.

I took the money I made from that house and used it for a down payment on a house I purchased for $560,000 in 2013. I have owned that house since and it is worth more than $850,000 now. I was lucky that our market has taken off, but I also focus on getting great deals on all the houses I buy. My loan on my personal house is less than $400,000, which means I have created $450,000 in net worth through my personal residences. that money is tax-free if I ever decide to sell the house I am in now. They limit your tax-free gain to $250,000 for an individual or $500,000 for a couple. I can also get a line of credit or refinance the house to pull money out tax-free and use it to invest.

I have not become a millionaire through these houses, but they have definitely helped to grow my net worth. When you buy a house as an owner occupant you can put very little money down. Because you are putting little money into the deal, the returns can huge if you got a great deal or values increase. If you do not have a lot of money to invest in rental properties, buying a personal residence is a great way to start. When you gain equity in the house or buy below market value, you can get a line of credit, pull any money you invested out plus some and use that money to invest. I bought my first rental property by refinancing the second primary house I had.

Why are rentals a great source of wealth?

The biggest increase to my net worth came from rental properties. I always buy properties below market value, which creates instant equity. When I buy a rental property for $120,000, it may be worth $160,000 or more after spending $15,000 to fix it up. When I buy that property and fix it up, I add $25,000 to my net worth. I have 20 rental properties now and all of them have added money to my net worth in multiple ways:

Buy below market value

You can buy below market value in many different ways. You do not have to be a professional investor to do it. There are deals on the MLS, on auctions, and even on Facebook! Buying below market value allows investors to use the BRRRR strategy which in turn can get you into rentals with very little money. Every house I buy adds $20,000 to $50,000 to my net worth because of the great deals I get.

Appreciation

I never count on appreciation but it is a nice bonus. I buy rentals that will make money today without prices increasing. However, my rentals have seen huge increases in prices. I started buying rentals in 2010 and spent about $1.3 million on 13 residential properties ( I also have commercial). Those rentals are worth over $3 million dollars today. Part of that is appreciation and part of it buying below market. The cool part is I spent very little money buying them after refinancing a few.

Cash flow

My rentals make me about $12,000 a month in passive income every month. I have property management who takes care of them for me and it takes very little work once I buy and renovate the property if needed. That money will keep coming in as long as I own the properties and will increase over time as rents go up with inflation. I love rentals because of the steady money they bring in.

Equity pay down

I have mortgages on all of my properties and my tenants are slowly paying them off for me. Every month my net worth increases because the mortgage balances on my properties decrease. This is on top of the cash flow I make every month.

All of these factors have increased my net worth directly or given me more cash, which allowed me to invest in more properties and add to my net worth. Rentals did not make me a millionaire overnight, but they have been an awesome investment and made me a millionaire a few years after I started buying them. Making a lot of income is great, but people can make hundreds of thousands of dollars a year with nothing to show for it if they spend it all.

How can you make money flipping houses?

One way I make a high income is by flipping houses. I flipped 93 houses in the last five years but started doing one or two a year with my father many years ago. Flipping houses is not as glamorous as they make it out to be on TV, but it can be a lot of fun as well as lucrative. I typically buy a house for $150,000 to $250,000, spend $20,000 to $50,000 fixing it up, spend another $20,000 to $30,000 on other costs, and sell for $250,000 to $350,000. We try to make $30,000 on each flip we do. Sometimes we do and sometimes we don’t.

I have used the money I make from flipping to buy more rentals and buy more and more flips every year. I would love to have more rentals but it is actually harder to find good rentals than good flips!

Below is a video of one of my flips.

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How much money can you make being a real estate agent?

I have also made very good money being a real estate agent. I use to be an REO and HUD broker which meant I sold foreclosures for banks. I had multiple years that I made well over $100,000 a year after expenses from being an agent. I now own my own real estate brokerage but focus on the flips more than selling houses.

Not only is being an agent a great way to earn income that you can invest, but it is a game changer for my flipping and rental property businesses. I am able to find more deals and pay less in commissions because I am an agent.

How long did it take me to accumulate one million dollars in net worth?

I bought my first rental property at the end of 2010 when I figure my net worth was about $180,000. I had been a real estate agent for 8 years, and flipping houses with my father for many years, but had not accumulated a huge amount of money. I invested money in the stock market, but most of my net worth was in my personal house.

I hit one million dollars in net worth in 2013. At the time I had seven rental properties, which had contributed greatly to my net worth. Not only did buying below market value, and appreciation increase my net worth, but I was saving as much money as I could to buy rentals. I put 20 or 25 percent down on each property and made repairs to most of them. Here is what a typical rental looked like:

  • Buy for $100,000
  • Put down $20,000
  • Spend $15,000 on repairs
  • When I was done the house was worth $150,000 to $160,000

After buying and fixing up the rental I had a house that was worth $160,000 with a loan that was $80,000. After a couple of years that house increased to $180,000 in value and my loan balance decreased to about $77,000. For each of my rentals, I gained $100,000 or more of net worth after a few years of ownership. On some of my houses, I built much more net worth because I got really great deals on the property. That does not count the cash flow I earned each month, which was about $500 per month, per property.

Some of my net worth was from my personal residence and other investments, but most of it was from rentals. It took me about four years to accumulate a net worth of one million dollars from just rentals. While it took cash to buy those properties, it forced me to save money as well. I know I would not have saved as much had I not been buying rentals.

What if you don’t make a lot of money?

My story may not be relative to many people. I have a successful real estate sales team, a successful fix and flipping business, and a blog that makes money as well. I have had extra money to invest in rentals to increase my net worth. Even if you don’t have a lot of cash to invest, you can buy real estate. You can buy houses with little money down as an owner occupant, and with many other strategies. You could turn owner-occupied houses into rentals or sell them, collect tax-free profits, and re-invest it into more properties.

You may not be able to buy as many rentals as I did as fast, but you can definitely start building wealth. How fast it takes you to reach one million dollars in net worth depends on many factors like:

  • How much cash you have to invest
  • How good of a deal you get
  • How many houses you buy
  • How fast your market appreciates or possibly depreciates
  • What strategies you use you to accelerate growth like refinancing, house hacking, or the BRRRR method.

Conclusion

It is possible to build a net worth of one million dollars in a couple of years with real estate. It also may take five years, ten years, or even fifteen years. Only five percent of households are millionaires so even if it takes a while you will be ahead of the pack. It may be tough to get your first property, but the more you buy the easier it gets and the more money you will make.

Build a Rental Property Empire

Categories Real Estate

Source: investfourmore.com

Apache is functioning normally

Last Updated on March 29, 2023 by Mark Ferguson

I am a huge believer in setting goals to help myself achieve more in life and in business. I love to make big real estate goals that are tough to achieve because I know they will help me accomplish more. Because I set really big goals, I do not always accomplish everything I set out too, but that is okay. I know I am still farther ahead not accomplishing big goals than I would be accomplishing small and easy goals. 2015 was a good year, but not as good as I hoped. I ran into many roadblocks (some of the same as 2014), but I also had many successes. Even though things did not go exactly as I planned, I had a great year, I have big plans for the future and I am going to challenge myself even more in 2016.

My goal articles for other years

Why do I like big real estate goals?

Before I get into exactly what happened and did not happen in 2015, I want to discuss goals. I overlooked goals when I was younger and it was a huge mistake. I thought goals were a waste of time and I never even tried to set any meaningful goals. When my career and life really started to turn around was when I accidentally set some goals as a real estate agent. I wrote out a very detailed plan on how many houses I would have to sell to make what I thought was decent money back in 2005. I gave that plan to my dad, who I was working with at the time to show him how unfair my commission split was. He didn’t change the split I was getting, but I did end up selling that many houses a couple of years later. When I wrote that plan, I thought it was an incredibly ridiculous number (100 houses a year). I know I would not have sold that many houses as a real estate agent if I had not written out that plan, even if it was by accident.

I started to make good money and I realized I wanted to make even more. So I started reading every book I could on goal setting, self-improvement and even “how to get rich”. I even took Jack Canfield coaching, which helped my career tremendously. Along the way, I learned a lot about myself, about habits I needed to have to be successful and how to continuously improve. Many people with life would get easier and are looking forward to a time when they can relax. I learned that challenges are fun, and solving problems is fun. Being bored with no challenges and an easy ride is not fun. I love Jim Rohn’s quote:

“Don’t wish life were easier, wish you were better.”

I started to realize I was in control of my life. If things weren’t going how I wanted them to go, I could change things by changing the way I did things. That may remind you of the saying:

“The definition of insanity is doing the same thing over and over again, but expecting different results.”

Honestly, this saying is one of my biggest pet peeves. First off, many people attribute this saying to Albert Einstein, but there is no record of him ever saying it. Second if this were true, 95 percent of the population would be insane. Sometimes doing the same thing over and over does change the results, if you do the same thing better and better every time you do it. While I think the saying sends a good message about trying new things if something is not working, it still bugs me that it is used so much and wrongly quoted to Eisenstein.

Making big goals is one reason I have accomplished so much. One of my biggest goals is to buy 100 rental properties by 2023. When I first starting buying rental properties I thought a good goal would be to buy 30 properties. I based this goal on my trend of buying 3 properties a year and thought I could continue that trend for ten years. After learning about goals and how to best use them, I knew I had to make my goal bigger. If I knew I could achieve my goal without changing much, I knew my goal was too small. I changed my goal to purchase 100 properties in the next ten years. That goal would challenge me to make more money, find new ways to buy properties or discover other ways to get more properties than I thought I could. While I am a little behind on my plan to reach 100 rentals, I am much farther ahead than my original goal to buy 30 houses.

What were my rental property, fix and flips, team and blog goals for 2015?

2015 rental property goals?

At the end of 2014, I wrote a goal article about what I had accomplished in 2014 and my goals for 2015. Below you will find the goals I set for 2015 and comments on how I did.

  • I want to get back on track buying as many rental properties as I can. I am going to flip fewer homes, which will give me more capital to buy rentals. I am also refining my direct marketing campaign, which should bring me more deals (I will have an upcoming article to discuss my direct marketing). I want to buy at least seven rentals in 2015 and that should put me closer to my goals of 100 rentals by 2023.

I only bought five rentals in 2015, which was less than my goal, but more than I bought in 2014. However, I am thinking about turning a couple of my flips into rentals, which would put me at my goal. I have one flip that I intended to sell quickly unless the tenants wanted to stay. The home was rented for $1,100 a month and I bought it for about $100,000. The tenants wanted to stay and we just upped their rent to $1,300 a month and they still want to stay. I have not done any work to the property and I think I may try to sell it as-is for $150,000 as with the tenants in place or I might keep it as a rental. My hesitation about keeping it as a rental is the location is a little different from most of my rentals.

I have another flip that I may turn into a rental as well because it is in a great location and could have a basement apartment. If I decide to make those properties rentals I would have met my 2015 goals. In fact, I may have surpassed them if you look at units because both of the new rentals would be 2 unit properties and one of the five other rentals I bought in 2015 was a 2 unit property as well. 

To learn how to use mindset and attitude to make yourself more successful, check out: How to Change Your Mindset to Achieve Huge Success: Why your attitude and daily habits have more to do with making more money and having more freedom than anything else. A 200-page book available as an eBook or paperback on Amazon.

2015 fix and flip goals?

  • For 2015 I am not going to be as ambitious on my flipping goals. My goal for 2015 is to flip 10 houses and wholesale 5 to 10 more. I have 8 flips right now so reaching ten should not be a problem, but I might sell a couple I have now as wholesale deals. If anyone is interested in some Northern Colorado deals, let me know! There are a number of reasons I don’t want to flip 15 houses in 2015.
    • It takes too much babysitting of contractors and I would need to add at least a couple more.
    • It takes a lot of capital to fund all those flips and the repairs. I think all the flipping made it harder to buy rentals.
    • I can still buy as many properties, but instead of flip them myself, I could wholesale the properties.

In 2015 I will flip 9 houses. This is less than the ten I wanted to flip and I should have flipped many more. The biggest problem was I could not get houses fixed fast enough. I even hired a project manager full-time to get things done faster and it has not changed anything. I love flipping houses and I have realized that I am addicted to buying houses. I did wholesale two properties in 2015, which was nice. On both deals, I made close to $20,000 without doing any work at all. I would still be open to wholesaling more properties if the opportunity arises, but those were unique properties. One was in a very small town that was perfect to wholesale because it was 45 minutes away from me and the other was a college rental that needed a ton of work. 

2015 real estate team goals?

  • For 2015 I want my team to sell 200 houses, which is a big pullback from my previous goal. REOs and HUDs are even harder to find in 2015 than in 2014, which will decrease our sales. However, the new team members and training we implement should increase the number of sales from the other agents. I also want to add a couple more agents and my goal is to have every agent on my team make $100,000 a year.

In 2015 we did add two new agents and almost added a couple more to our team. They have just gotten started, but are doing awesome so far. One of my agents that was hired in 2014 made well over $100,000 in his first year, which was awesome. We did not sell 200 houses, we sold 127. That is way below my goal, but our market keeps going crazy. Prices have increased and even though we sold fewer homes, the value of the homes was much higher. HUD homes and REO properties have decreased even more and the sales have shifted from me to my team, which is exactly what I wanted. 

2015 goals for InvestFourMore?

  • For InvestFourMore I want to increase traffic, increase my relationships with other investors and blogs and continue to improve my investing strategies by learning as much as possible. Here are some specific goals:
    • 300,000 views a month by the end of 2015
    • Implement a new real estate agent success system
    • Borrow private money through the blog in 2015
    • Improve or create a new forum for InvestFourMore

InvestFourMore has done awesome and I have the most fun working on it than I do anything else. I did not hit 300,000 views, but I am very close! I have a new source for private money, that was from the blog. I knew the investor before I started the blog, but he approached me about lending money after reading about my business on the site. I created the new forum and it has been a success as well. I also created a new Facebook Group, which has been very successful and you are all welcome to join. I did many more things with the blog, including starting a high-level mentor program (email me if interested: [email protected]). 

2015 personal goals for 2015?

  • I don’t have any big goals for 2015 as far as car buying. I would love to buy an Aston Martin V8 or Lamborghini Countach at some point, but I don’t plan on doing it in 2015. I have personal income goals and a few more that I will keep private. I can’t share everything!

The year was a good one personally and I did not buy any more cars. I did meet a lot of great people and I started a new blog about cars: Howdidyouaffordthatcar.com. I have not had time to do too much with the site yet, but I plan to work on it little by little. I didn’t reach many of my personal goals for income, but I achieved many others I did set. 

What are my new goals for 2016? 

As you can see, I did not achieve many of my goals for 2016. That may seem like a disappointment, but it is actually a good thing. If I had achieved everything, that would mean I  set my goals too low and did not challenge myself enough. I also know there is a lot of room for improvement! Below are my new goals and some things I plan to do to achieve them.

2016 rental property goals?

For 2016 I want to buy 10 more rentals! Yes, that is a huge number, but I think I can do it. Here are a couple of things I am going to change to reach that goal:

  • I am working on refinancing 8 of my rentals into long-term 30 year fixed rate loans. I am using some national portfolio lenders. I will pay a little higher rate, but have my loans locked in and get $300,000 in cashback. My properties will still cash flow and I will be able to buy many more rentals with that money that cash flow as well.
  • I am thinking about investing in other markets. I bought a turn-key property in Ohio in 2015, but for future rental property purchases, I want to buy below market value. In order to do that in another market, it will take a lot of work. My reason for switching markets is the huge appreciation we have seen here. It is getting harder and harder to find great cash flow.
  • I am looking for a new local portfolio lender. My portfolio lender is getting tougher and tougher to work with now that I have hit a certain dollar amount of loans with them. That is one reason I am considering refinancing 8 of my properties with another lender. I would also love to find a lender who does not have a seasoning period, which would allow me to refinance properties faster and get some of my investment back.

fix and flip goals for 2016?

For 2016 I want to flip 20 houses! Yes, this is another huge goal for the new year. This will double the amount of homes I flipped in 2015, but I think it is possible as well. It will be tougher if I decide to keep two of my current flips as rentals. Here is why I think I can make this happen:

  • I have ten flips going right now. I will get these ten flips sold in the first half of the year. I have two more flips under contract, which would leave me with 12 flips. I only have to buy 8 more, get them repaired and sold before 2016 is over.
  • I think I can buy and repair that many homes in the next year because I am changing my repair process again. I had a vision in place for 2015, which has not happened. However, I am going to make it happen in 2016 and that may take some big changes in the way repairs are handled.
  • I may look into more financing options with my flips. I already have a new private money lender who has made the process much easier. While he charges more than my portfolio lender does on my flips, I can close in a couple of days. I may look into adding more private money lenders as well.

real estate team goals for 2016?

For 2016 I want to hire another really good agent. I do not want to hire too many agents, because we don’t have space for many more! I also want to focus on getting leads for our team through our website FergusonGreeley.com. I think we have some great agents in place, we need to get them trained and performing as well as possible, before adding more. Again I want to sell 200 houses in 2016, this goal may seem too high, but one of these years I will get there! How will I meet these goals?

  • Focus on organic leads through our website, utilizing everything I have learned from InvestFourMore.
  • Use Facebook to generate leads and sales for our team (we already do this and have had great results).
  • Weekly training meetings and great support for our agents (we already do this as well).
  • Flipping more houses will generate more leads and opportunities for our agents.

blog goals for 2016?

For 2016 I want to keep increasing traffic and the number of people I help buy investment properties or make more money as an agent. Here are some goals:

  • 500,000 views a month by the end of 2016. As a site gets bigger and bigger the traffic increase slow down. I still want to grow the site, but I also want to focus on helping people more than getting the biggest audience possible.
  • Focus on a few core things. With a blog or website, you can get sucked into 1,000 different activities that take a ton of time. I started a podcast in 2015, which has been awesome and should be a core activity, I think my coaching products should be a core activity and writing articles.
  • I want to write a really awesome book. I have written five eBooks that can be downloaded as a PDF or read as a Kindle eBook. I think the books are good, but I want to write an awesome book. I have already started writing an extremely in-depth book on rental properties that will be available as an eBook and a physical book that can be ordered and delivered to your door. I want this book to be the best rental property book available. I am also working on a book that I am co-writing with J Scott.

personal goals for 2016?

I don’t disclose what I make or how much I want to make on the blog because I try to keep at least a few things private! I do have personal income goals, business goals, and many other personal goals. Here are some long-term goals I added to my bucket list. I don’t have dates yet for when I want to accomplish these, but I am working on that.

  • Buy an old plantation and fix it up. I love old houses and old mansions. At some point in my life, I would love to buy an old plantation house and fix it up.
  • Start a used car dealership. I have already looked into starting a car dealership so that I can buy more exotic cars. I love cars and my dream job would be to buy awesome cars all day long, selling them is tougher for me. I met some really cool people this last year, including some guys who started a car dealership.
  • I want to buy a 1980’s Aston Martin V-8 in 2016. Prices on these cars are going up and I want to buy one before they skyrocket as my Diablo has.

Conclusion

Over the last year, I have learned a lot, changed the ways I do business and had a lot of fun. I think I can improve things immensely in 2016. One reason I think I can improve things is because of my personal habits and routines. I learned many things over the years about success and once you reach some level of success it is easy to slack off. I did slack off on my daily routines, goal reviews and personal improvement over the last year. I have made a huge effort to get those habits back on track in the last three months. I am really excited to get things started in 2016 and see what happens!

Build a Rental Property Empire

Categories Money

Source: investfourmore.com

Apache is functioning normally

I was on Zillow the other day looking at real estate when it occurred to me that I never really touched upon the so-called “Zestimates” offered up by the famous real estate portal.

Most consumers have heard of the Zillow Zestimate, which made its debut back in 2006.

But they’ve been largely written off by industry folk (real estate agents) as “unreliable” and various other expletives, assuming the value estimation is lower than it should be.

First things first, let’s define a Zestimate. By Zillow’s own account, a Zestimate is the “estimated market value” of a property.

By estimated, they mean a home value assigned using proprietary computer algorithms developed by statisticians.

They also refer to Zestimates as a “starting point in determining a home’s value,” which is important to note when browsing around Zillow.

A Zestimate is computed based on data, not human touch, vision, interaction, etc. And we all know how computers can fall short…this explains why there are error rates.

Speaking of, the median error rate for the entire nation is currently 4.6%, which means half of Zestimates nationwide were within 4.6% of their sales price, and the other half were off by more than 4.6%.

Where to Find a Zestimate?

  • Simply visit the home details page of any property
  • And you’ll see the Zestimate near the top of the page in the center
  • Below the most recent sold price
  • There is also a section below dedicated to the Zestimate

If you look up any property on Zillow, whether it’s for sale or not, you should see a Zestimate at the very top of the page, directly under the last sales price (or current listing price).

And if you scroll down a bit more, you’ll see an entire section dedicated to the property’s Zestimate, including a 1-year, 5-year, and 10-year graph.

On the graph, you’ll be able to track the history of the Zestimate alongside home prices for both the city and zip code to get a better feel for the property in question.

It also displays the movement of the Zestimate over the past 30 days to give you more information about recent price movements, as seen below.

Recently, the company launched a Zestimate forecast, which as the name implies is an estimate of the home’s value over time, in this case the next 12 months (both dollar amount and percentage wise).

Finally, you’ll see a so-called “Rent Zestimate,” which is simply the estimated monthly rental price of the property.

Is Zillow Accurate?

  • It depends on the number of recent sales comps in the immediate area
  • How unique or not unique the property is
  • If any major home improvements have been made since the last sale
  • Or if the neighborhood dynamics have shifted considerably

A Zestimates accuracy is clearly of utmost important, especially if it’s being relied upon by millions of prospective home buyers.  But Zillow says themselves that Zestimates track the market, as opposed to drive it. So it’s not a forward-looking valuation tool.

So are these Zillow estimates accurate? This is a tough question to answer because like any other statistical model they could get the value right on the nose or be $100,000 or more off.

It’s a bit of a crapshoot really.  But it certainly depends on the property. And the day because they’re apparently updated daily.

For example, a 3-bedroom, 2-bathroom single-family residence built in 1982 in Your Town, USA may be assigned a Zestimate of $250,000, based on public data culled by Zillow.

You’ll also see a value range, which displays the high and low estimated value of the property.

A large range indicates less data/higher volatility, whereas a small range means Zillow has plenty of information to make an informed decision, and hopefully a lower median error rate.

In other words, if there are lots of sales in a given area where homes are pretty uniform (same style/size/layout/number of beds and baths), the Zestimate will probably be pretty accurate.

Conversely, if the property is unique and in a sparsely populated area where homes only sell a few times a year, the Zestimate may be a far cry from its true value.  And this can be too low OR too high.

So if a multi-million dollar home sells next to yours, and it’s the only recorded sale over the past six months, your Zestimate will probably be inflated if it’s not truly a multi-million dollar home.

Zestimates may also appear to be too low if there’s a ton of demand in a certain area because home buyers are technically overpaying based on the value Zillow comes up with.

The opposite is also true.  That being said, the seller won’t care that they’re selling well above their Zestimate so long as someone is willing to pay.

And if you make the “Zestimate is too high” argument, you’ll probably get laughed at by the seller and the real estate agent.

Of course, if I were buying a home and had the choice, I’d want to be making an offer on a home that was listed below the Zestimate, whether accurate or not.  It’s not a must, but if I had the choice…

If you want to get really deep, you have to question what accurate really means.  Is what a property is worth what you should pay for it?  Does it matter what it’s “worth” if someone is willing to pay an entirely different amount?

I’m sure over time we’ll see improved Zestimate accuracy, which is a good thing, but it will always leave many unanswered questions like those just posed.  Then again, so will full-blown appraisals.

In fact, there have been three different versions of the algorithm released thus far (2006, 2008, 2011, and 2019) with probably more to come.

Note: Only about 100 million homes have an associated Zestimate, so you could get extremely unlucky, but chances are the property you’re researching will have one.

The 2019 Zestimate Update

In late June 2019, Zillow announced a major update to its Zestimate, calling it the “most sophisticated and accurate” version to date.

What makes it different now is that it relies upon so-called computer vision and neural networks to identify and value any improvements present in a home, along with real-time data.

For example, it can analyze a property’s photographs and determine if a countertop or fixture is high-end or low-end, merely by classifying different patterns found in the pixels.

It’s pretty wonky stuff, a product of the $1 million Zillow Prize science competition that spanned two years.

But if your house has nice stuff inside, like a new kitchen, and perhaps good curb appeal outside, it can help pump up its value.

It appears to go beyond the black and white data stuff to find the qualities that make a particular property special or unique, and most importantly, more valuable.

The use of real-time data will bolster accuracy as well, with the list price and time on market of for-sale homes also factored in.

As a result of the update, Zillow says the error rate is now less than 2%, meaning half of all Zestimates will fall within 2% of a home’s eventual selling price.

That’s down from nearly 5% in prior iterations, which should be welcome news to those who saw their value go up (and not down!).

A Zestimate Is Not an Appraisal!

  • Despite what you might think or hear
  • A Zestimate is not an appraisal, Zillow says this verbatim
  • It’s just an estimated market value
  • Also check out the market appreciation number for increased accurary

This is where things get ugly. A lot of homeowners, and I suppose some in the industry, seem to get tripped up into thinking a Zestimate is a home appraisal.

Zillow explains right on its informational page that a Zestimate is not an appraisal, and cannot be used in place of an appraisal.

Why? Because Zillow hasn’t physically inspected your home, like a real appraiser would.

And the data they receive may be dated, incomplete or inaccurate, especially if recent changes have been made to the home in question, such as major home improvement, or if a home has just sold nearby.

Of course, they do allow homeowners to edit their home facts if thing change.

But it’s still really nothing more than a home value estimator, just like the Redfin Estimate.

Zillow also shows a so-called “market appreciation” tab in the Zestimate section for certain properties that reveals the local housing market appreciation. I’ve seen it for homes in Los Angeles.

For example, if home prices rise by 10% in a given neighborhood since purchase, they’ll provide a sale-based estimate by combining the purchase price and the dollar amount of that appreciation.

So a home that sold for $250,000 with 10% appreciation would get an estimate of $275,000, which could exceed the home’s Zestimate.

Different properties have different types of estimates available, all of which you’ll be able to see on the individual property page.

Regardless, you can’t get a mortgage with a Zillow Zestimate. You’d be laughed right out of the bank.

An appraisal from a certified appraiser will be required by the mortgage lender to obtain financing in most cases unless you’re paying with cash.

So what does that tell us? Well, it means Zestimates are exactly what Zillow says they are, a starting point. An idea, a ballpark, an estimation of a home’s value using a computer. The actual sales price could be entirely different.

In other words, take them with a huge grain of salt, just like advertised mortgage rates.  But still brag to your friends if and when your Zestimate rises!

Read more: How much house can I afford?

(photo: AlexiUeltzen)

Source: thetruthaboutmortgage.com

Apache is functioning normally

A week or so ago, I was scanning through my archived posts and it occurred to me that my blog’s 10-year anniversary was just days away.

I found the first post I wrote and laughed a bit as I read it, thinking how naïve and young I was at the time. I was in my mid-20s, working for a wholesale mortgage lender and pondering a home purchase.

But property values were sky-high at the time and I was aware of that. I couldn’t wrap my head around buying a place at those prices. And in hindsight, I’m glad I didn’t.

I know a lot of people who did buy back then, and many no longer own their homes, while some actually stuck it through and are now sitting fairly pretty.

Those Who Held On Since 2006 Are Doing Fine

As mentioned last week, time tends to heal all real estate wounds. Even if you buy at a particularly bad time, if you hold onto your property and pay down your mortgage, you’ll likely come out ahead.

The problem 10 years ago was that the mortgages tied to those expensive properties weren’t sustainable. Many borrowers couldn’t afford to hold them beyond their first rate reset, which may have come in just six months’ time.

But for those with a fixed-rate mortgage, or the income to endure the ups and downs, it was possible to ride out the storm and wind up in a decent equity position.

Let’s pretend someone purchased a home back in July 2006, when home prices peaked, for around $650,000. Today, prices might be closer to $750,000, thanks to rapid appreciation over the past several years.

Sure, that same property may have fallen as low as $450,000 at some point in time over the past decade, but things have corrected big time.

For sake of simplicity, we will assume they took out a 30-year fixed at a rate of 6.76%, the average for July 2006 per Freddie Mac data.

If they put 20% down, that would leave them with a starting loan amount of $520,000. The monthly payment on that loan at 6.75% would be a whopping $3,372.71 per month.

Had they held the loan for 10 years, the balance would be whittled down to roughly $444,000. Assuming prices today are closer to $750,000, they’d have over $300,000 in home equity. Not too bad for buying at the height of the market.

Chances are they would have refinanced too, to a lower rate, so they’d be in pretty good shape, even if some years were especially brutal.

Rates Were Nearly Double 10 Years Ago

Today, mortgage rates are nearly half what they were a decade ago. Using Freddie Mac data, the 30-year fixed has fallen from 6.76% in July 2006 to 3.48% today.

That’s very close to double, and might explain why home buyers are snapping up properties left and right at the moment.

If you factor in inflation since 2006, home prices are actually pretty flat. Using a CPI calculator, a $650,000 home purchase in 2006 is equivalent to buying a $777,000 home today.

The difference is that you get an interest rate that is nearly half what it was back then. That seems like a pretty good deal, even if it all feels a bit frothy given the massive gains recently.

Mortgages Are Boring Now

So we know home prices are reasonable, and interest rates are super cheap, and to make matters even better, mortgages are ultra-boring these days.

When I was working for a lender in the early 2000s, it was more common to originate an option arm than it was a 30-year fixed. If it wasn’t an option arm, there’s a good chance it was some kind of adjustable-rate mortgage.

It likely wasn’t a 15-year fixed, and if it was a 30-year fixed, it may very well have been interest-only as well.

Today, most mortgages are fully-amortized 30-year and 15-year fixed mortgages, meaning borrowers are paying down their mortgages and enjoying payments that never change over the course of the loan.

This makes the situation even better for everyone because we shouldn’t see a deluge of foreclosures anytime soon due to unsustainable mortgage payments.

To sum it up, relatively flat home prices, rock bottom rates, and plain vanilla mortgages. Sounds good.

What We Should Worry About Over the Next 10 Years

While the current situation looks pretty solid on paper, home prices have increased dramatically, and without the availability of ultra-low mortgage rates, we could face some serious affordability issues.

Heck, folks are already having trouble affording homes in certain hotspots throughout the country, even if they’re making money hand over fist.

Another big problem developing is the lack of a down payment, which was one of the major catalysts during the prior crisis. No skin in the game.

We aren’t quite at zero down nationwide again, but there are many more low-down payment options available today than there were a year ago.

Today, we’ve got plenty of 3% down options at our disposal via programs like Bank of America’s Affordable Loan Solution and the Wells Fargo yourFirstMortgage.

If 3% down is still too much for you, you can now take advantage of 1% down programs from Guaranteed Rate and United Wholesale Mortgage.

Or if you don’t want to provide any down payment at all, you can go with BancorpSouth, Fifth Third, or simply take out a USDA loan.

Of course, the payment (and interest rate) will be higher if you put nothing down. But there is at least one company willing to split the down payment with you in order to keep your LTV at 80% or less.

Things could get ugly again if higher and higher home prices force lenders to come up with the creative financing of old, especially if inventory rises at the same time. But I don’t think we’re there just yet.

Looking back over the past 10 years, a lot has changed and a lot has remained the same. We went through one of the worst crises in recent history but came out stronger, as we usually do.

For those who stuck it through, they should be back above water and in a good equity position.

Those who sold (by necessity or by choice) and are working to get back in the housing market might find themselves in the unfortunate position of buying nearer to the top, again. But at least they’ll get a really low mortgage rate this time around.

It’s hard to say what the future will hold, or how the next decade will play out. But when I read my first post, it feels like we’re facing the same problems again, just without the bad mortgages. In place of exotic financing features are interest rates at 50% off.

What goes down must come up, right? What happens when rates rise? Are we destined to repeat history or will we get it right this time around? Maybe there is no right and wrong. Maybe it’s all cyclical and booms and busts are just a part of life.

Perhaps it doesn’t matter if you don’t speculate and just buy a home you can genuinely afford that you also truly love.

Source: thetruthaboutmortgage.com

Apache is functioning normally

There’s been speculation pretty much ever since the last cut that the FHA would lower insurance premiums once more.

And the rumor mill has been really busy the past few weeks, signaling a possible cut in the next month or so.

The latest rumor comes via a bulletin from Inside Mortgage Finance, which revealed that industry chatter points to a 25 basis point cut in FHA premiums after the presidential election in early November.

That means the typical FHA borrower who puts down 3.5% and takes out a 30-year fixed mortgage will pay an annual MIP of 0.60%.

The decrease would return annual premiums to just above their pre-crisis levels of 0.55%, which would make perfect sense given the fact that we are now well beyond the most recent crisis and back to square one for the most part.

In case you haven’t been keeping score, the FHA’s annual MIP was 1.35% before the 50 basis point drop in early 2015.

Actually, it was as high as 1.55% if you had a loan amount above $625,500 and an LTV north of 95%.

But this rumored change will bring things back down to earth.

The argument for the change is that the FHA’s Mutual Mortgage Insurance Fund has been beefed up thanks to the higher premiums collected over the past few years and lower mortgage defaults during that span.

Is It Enough to Justify a Refinance?

While the change will be welcome news to most, it may not sway the decision to refinance.

The 25 basis point change on a $200,000 loan would amount to annual savings of roughly $500.

Currently, such a borrower would be paying about $142 per month in MIP costs. It would drop to $100 with the change.

The problem with FHA is the upfront MIP, which is set at 1.75% and probably not going to change.

If you refinance from an existing FHA loan into another FHA loan, you might be entitled to a partial refund of the upfront premium if the loan isn’t older than 36 months.

If you can snag a lower mortgage rate in the process, the argument is a lot more compelling. For some, just paying a lower MIP might be enough, assuming their loan isn’t very old and much of the upfront premium can be recouped.

Another problem with FHA loans these days is the fact that mortgage insurance is in force for the life of the loan, instead of just the first five years or once the LTV drops to 78%.

That’s why it often just makes sense to refinance out of the FHA and into a conventional loan if your LTV dips to 80% thanks to recent home price appreciation. You can avoid the mortgage insurance entirely and get a similarly low interest rate.

FHA Premium Cut Is Good News for New Home Buyers

Of course, the change will be great news for those looking to purchase homes with FHA financing.

As noted, savings of nearly $50 per month for relatively small loan amounts is nothing to sneeze at. And it just gets better as your loan amount rises.

Aside from the savings, it could help more borrowers qualify with lower monthly payments that could push the all-important DTI ratio to acceptable levels.

It will also make the case for an FHA loan vs. a conventional loan more interesting. You’ll still have to do the math to see which type of loan is best for your situation.

And remember, this is just a rumor. It’s not fact yet. But if it does happen, it’s supposedly going to take place after the election. Of course, the decision could be swayed by the outcome.

Source: thetruthaboutmortgage.com

Apache is functioning normally

By Peter Anderson 16 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 November 4, 2011.

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Christmas time is only a month and a half away! At our house it’s one of the most joyous times of the year as we celebrate the birth of our savior, and revel in all the blessings we have seen in our lives during the year. This year we’re celebrating the birth of our first born son – and he’s celebrating his first Christmas!

The most important parts of Christmas aren’t physical or material things, but in our culture it’s often expected to give gifts during the Christmas season. Because of that, if you’re not careful it can quickly become 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.

Check out the newly expanded list: 100 Frugal Christmas Gifts

Here in this post I thought I would put together a list of ideas for some good frugal gifts that you can give this Christmas.

NOTE: 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. Feel free to chime in on the comments section down below with your own frugal gift ideas!

The Big List Of 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 can be cheaper than you think!
  6. Scrapbooks: Make a scrapbook for a close friend showing 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, written family histories, family tree, 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 silk 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. Laser Etched Crystal: Need a unique Christmas gift? Turn any photo into a 3D crystal image. While this isn’t the most frugal option on the list, if you’re looking for something special, you can find something well under $100.  Use coupon code HOLIDAYCHEER to save 30%.
  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.
  52. Outdoorsman gift pack: Put together a gift pack with a leatherman mini, a pair of choppers, and an aluminum water bottle (or your choice of other outdoor gear)
  53. Used electronics: Have an extra MP3 player and know someone who needs one? Clean up your spare and give it as a gift!
  54. Art lovers gift pack: Get a free photo canvas of one of your favorite photos, along with supplies to hang it. If the person is artistic, put together a gift pack with art supplies!
  55. Give a memory photo book: Give the person a photo book that includes memories of you and that person together.
  56. Active lifestyle gift pack: Put together some small gifts like a BPA free water bottle, workout video or video game and some wristbands. Be careful not to offend anyone with this one. 😉
  57. Accessories: Know someone with an Ipod? Give them an Ipod accessories pack. Father with a cell phone? Give him cell phone accessories.
  58. Host a party: Instead of giving gifts to a large group of friends, invite them over for a Christmas party that you host.
  59. Gingerbread house kit: Give all the things needed to make gingerbread houses, along with recipes for frosting and building instructions. (Best if given before Christmas)
  60. Give the gift of a blog: Know someone who might enjoy blogging? Buy them a domain name, setup their blog and host them on your hosting account if you have one! Buy a copy of my ebook for them!
  61. Give the gift of communication: Know an older member of the family who doesn’t have a cell phone? Buy them a cheap pre-paid phone and a small amount of air time. As cheap as $20-30!
  62. Take someone out to dinner: Take a friend or family member out to dinner at a reasonably priced restaurant on the house!
  63. Tea gift pack: Give a nice teacup along with a selection of teas.
  64. Make a music mix: Purchase some of your favorite music for someone from Itunes and put it on a thumb drive or CD-RW! (no illegal content distribution folks!)
  65. Make a memories CD for a parent: If you’re younger make a memories CD for your mom and dad with photos, audio or video of you talking about good times you’ve shared, and maybe some written memories.
  66. Yard Work Coupons: Have an elderly family member or friend? Make up some nice looking coupons for free yard work or other odd jobs on your computer.
  67. Scrappers gift pack: If you know someone who enjoys scrapbooking, put together a nice canvas bag with scrapbooking materials, and maybe a gift card to Michael’s or other craft store.
  68. Sports gift pack: Know a kid who enjoys sports? Put together a sports gift pack with equipment for several different sports.
  69. Recipe gift pack:  Give the gift of several of your favorite recipes, and a gift card to a local grocery store.
  70. Create a memory jar:  Have a bunch of friends write down favorite memories of the person receiving the gift – get as many as you can.  Then put them all on small pieces of paper, and put them in a decorated jar with the instructions to open one fun memory every day.
  71. Put on a concert:  If you’re musically talented, put on a Christmas concert for family and friends.  If you want to give to others, go to a local nursing home and play!
  72. Football gift pack: Have someone obsessed with football?  Get them a t-shirt for their favorite team, a team blanket for cuddling up and watching games on Sunday and some snacks!
  73. Write a poem:  Write a “Where I’m From Poem”, either about yourself for the gift receiver, or about them.  Details here.
  74. Custom  collage notebook:  One year my brother made me a notebook that had a fun photo and magazine clipping collage on the cover. It was creative and I used that notebook for quite a while.
  75. Movie based on a book:  Buy someone a book that you enjoyed, as well as the movie based on that book.

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!

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Source: biblemoneymatters.com