Thinking About an Investment Proprty (again)

I’m always on the lookout for a deal. For years I had looked for investment properties, but could find none that made any sense, given the massive appreciation on real estate the last few years- rent would never have been able to cover even 70% of my mortgage. But now, the prices have come down, and I think I need to seriously consider purchasing something else again.

The softening real estate market has scared off a lot of would-be investors. On one level that makes sense, but if you really think about it, it makes no sense whatsoever. Consider this:

When ketchup is at market price or maybe even seems to be high, you probably only buy exactly what you need. When it goes on sale, you probably (or at least want to) buy the ketchup in a higher quantity because you are getting it on discount. This of course relies on the assumption that the price will eventually rise back to normal levels, and, if history is any indication, house values will again begin to rise.

It is certainly strange that we seem to be programmed to only buy equities when they are rising in price. I’m not hearing “get into the stock market now.” All I hear is about people worrying about if they should get out. The same applies for real estate, and as a result, home sales are down and less people are improving their homes (but, that in turn keeps prices low and creates good deals for thrifty people like us).

If anyone else has recently purchased a second home or investment property or is thinking about it, I’d love to read your thoughts.

Zillow- Home Valuation Tool

You’ve probably heard about the real estate site zillow.com. If you haven’t, it aggregates a bunch of data like recent sales activity, taxes, homeowner input, and new listings to generate a “zestimate” for a particular house or neighborhood. It gives you a satellite image of any address you enter, and allows you to easily scan the area. I find it to be a nice tool if you’re looking for a new home, curious about your existing home’s value, or want to know what your neighbor paid for their house. The image illustrates my house's estimated value (dark blue) compared my zip code's values.

But how accurate is it?

When I first looked up my house in Zillow before I bought it, it was estimated to be right around the actual price I bought it for. The thing is, Zillow had no way of knowing that it was a fixer-upper, so it really should have been priced slightly higher I think. After I bought the house, I claimed ownership of it by creating a Zillow account. This allows you to customize your home’s profile by adding or deleting amenities, which affect the value. The estimate it is giving me right now seems pretty accurate, but I was honest in the profile I created. I could have said the house has five fireplaces and a finished basement, and the value would have gone up accordingly. I just looked at the zestimate of a house around the corner from me that came out at $485,000. A few months ago it actually sold for $285,000! The house looks like it needs some work, but $285 really sounds like the new buyer got a great deal, so I don’t blame Zillow for the estimate being higher than the closing price, but it should not have been that high, either.

So take the zestimates only as a guide, as there might be some homeowners out there who are inflating their home’s value or the software might not be as accurate as we’d all like. Zillow has a nice page that rates the accuracy of their estimates compared to actual sales in different areas of the country: http://www.zillow.com/howto/DataCoverageZestimateAccuracy.htm. My area gets only two out of four stars, so that’s another indication that this is a nice tool for initial research, but not for major decision-making.

Tax Stimulus Check

What do you plan on doing with your $600? I'm actually going to spend it, just like it's supposed to be. Surprisingly, I won't be spending it on a home improvement; instead, I'll probably use it towards the purchase of a laptop.

Anyone plan to use it on their homes?

Playing Opossum

Though I live in a densely populated suburb, we do still have pockets of woods and some streets nearby that have houses with large pieces of land. Still, I find it amusing that I’m having a problem with wildlife in my backyard.

A year ago, my neighborhood was besieged by wild coyotes. There were at least 4 incidents involving coyotes coming near people, and in one the animal might have been after a baby. I never saw one myself (and I like dogs, anyway). This year, my backyard has seen much activity from groundhogs (which are cute and seem to be very scared of humans) and opossum (which are very ugly and have many sharp teeth).

Last week, I went outside to water plants around 8:30 at night. I was startled to see my little pet pug face to face with an opossum! They were exactly the same size. I began yelling to get the dog inside, and tossed water on the opossum. It eventually ran under the deck. We haven’t let the dog out by herself at night since.

I’ve inspected below the deck for a possibly opossum home, but I don’t see one. Judging from the holes dug around my fenceposts, I think they are just travelling through my yard, as I don’t have anything they can eat. So I placed bricks in all the openings they created and covered them with dirt. They still got through!

Now it’s time for drastic measures: trapping it (or them) and releasing it (or them) into the woods. I called my township, and animal control only gets involved with dead or sick wild animals. So then I called a few private companies, and prices ranged from $275 to $425 to trap one or two animals! This sounded absolutely absurd to me.

So, I bought my own cage for $50. I'll set it myself and release the animal in an approved area. I’ll let you know what happens, and if my money-saving ways actually pay off.

What I'm Reading

Though the purpose of this blog to share ideas on how to save money in relation to homeownership expenses, from time to time I’ll highlight other things related to real estate, like interesting books or TV shows.

I’m currently reading a book called American Shelter by Lester R. Walker. For a couple of years I searched for an affordable book that summarized different architectural styles of residences, and I finally found it. Walker does a nice job of keeping things short and simple to read, and the diagrams show the evolution of each style of housing. It’s in black and white and contains no photographs, so it’s not a typical coffee table book, but it is very informative. Makes me wish most houses weren’t so cookie-cutter, but you often need to spend more money if you want something out of the norm.

The edition I have was a softcover last updated in 1998, and was purchased at a Barnes & Noble for only $4.95 (I shop exclusively at their discount section). I have also seen it in a Barnes & Noble in another state, so it may even be available at your local store. I also included a link to it on Amazon's site, below:

My Furnace and AC Search

Yesterday I mentioned in a post about the new furnace and AC unit I recently purchased. Here are some details on that process:

My furnace was 21 years old, and had grown noticeably louder over the past year since I moved into the house. Though it still worked fine, I presumed it was at the end of its life, and it certainly was not efficient. My AC condenser was 20 years old and also worked fine, but was also near the end of its life and was inefficient. So with a large tax refund I was due to receive, I decided to replace both of them to stave off any future problems and to save on my utility bills (and help out the environment).

I began initial research on the internet, which told me I could expect to pay anywhere from $4000 to $9000 for both units. I definitely wanted to pay on the lower end because 1) my tax refund was around that amount, and 2) I didn’t plan on living in the house for more than 5 years. I prepared myself for selecting equipment that was not extremely efficient or high-end. I decided I wanted a 2-stage furnace and R-410A AC unit.

So then the fun part began- meetings with HVAC salesmen. I’m always thorough, so I met with many over a two week period. Here’s a rundown:

1) small, local company: York-$6000, Goodman- $3600

2) small, local company: Ruud- $5400, Goodman- $4800. Did not like this company because he tried to talk me out of R-410A without valid reasons

3) large, national retailer: Carrier- $7515

4) same large, national retailer: Carrier- $5379. After I did not jump at their first offer, they sent this guy out to give me "preferred pricing." The price only was good if I accepted on the spot, supposedly

5) large, local company: Carrier- $7487

6) small, local, kind of family friend, company: Goodman- $3600. Was not 2-stage or R-410A

7) small, local company: Gibson- $3600. Did not like the salesman and could not find much info on the brand

8) small, local company: Goodman- $4550. Liked salesman and presentation, but offered lower SEER unit than others

After all the meetings, I researched each individual brand, and came to the conclusion that Goodman units would be fine for my situation. Most of what I read stated that if installed well, Goodman is no less reliable than more expensive equipment. It also comes with a 10 year total parts guarantee, and lifetime on a couple components.

(Most of my research came from the company sites and anecdotes provided on HVAC forums. Unfortunately, I could not find a Consumer Reports style ranking of manufacturers or models.)

Funnily, I actually went with the first company who came to the house. He had the equipment I wanted, had a reasonable price, and most of all, seemed to be the most trustworthy. Installation took place over two days the following week. That seemed to go well (except for a new AC base I’m still waiting on). We only got to use the heat a few times, but it did work and was definitely quieter than the old furnace. In a couple of weeks I hope I can really test out the AC. My township inspection will happen in a week or so.

As my new utility bills come in, I’ll compare to last year and tell you how much I’m saving.

Save the Planet, Save Your Money

In celebration of Earth Day, I thought I’d tell you about my own forays into trying to save the environment. (Please, no arguments about how Al Gore is wrong or that I’m being brainwashed by liberal hippies; leading scientists regard global warming as a fact, and that’s good enough for me.)

Recently, I’ve done a number of things to reduce waste produced by my home, most of which have also saved me money:

• replaced my furnace: went from 60% efficiency to 80%, which should lower my gas bill. Also, it is a two-stage unit, so my electric bill should also go down
• replaced my air conditioning unit: went from 10 SEER to 14 SEER, which should definitely cause a noticeable dip in my electric bill. I also went for the R-410A refrigerant, which is more environmentally friendly and supposedly the way of the future
• switched my electric service to a provider that uses only wind energy: actually about $5 a month more expensive, but using a renewable resource is the way to go
• started a compost pile: I bought a bin at a reduced cost from my county, and if more people joined me in doing this, we'd have less need for garbage pickup and processing, which would lead to savings on energy and taxes. Eventually, I’ll also save because I’ll have little to no need for buying soil
• in the process of replacing standard bulbs with CFL bulbs: more expensive at the outset, but longer life means $ savings and less energy used
• readying a section of the lawn for a garden: one less area I’ll have to mow (and spend gas on), and will provide some food that I now won’t have to pay retail for

There are plenty of sites that give tips on how to save money while becoming more “green.” (I don’t like that term because it’s just so trendy, but I’ll use it in the name of spreading a good cause.) Here are a few sites I have used:

• Bankrate.com
• Green And Save
• This Old House
• U.S. Green Building Council

Check out the sites of your local utilities, governments, and universities, as they likely have more information that is even more pertinent to your situation.

So, how is everyone else celebrating Earth Day? Any developments on your own homes that made them more efficient and maybe also saved you some cash?

The Thrifty Home

Since it will be the subject of many posts, I thought some background on my house would be appropriate:

My house is located in the New Jersey suburbs, near the ocean and about an hour from New York City. In general, those two attributes make this a pretty expensive area in which to live. I live in a large town that has a mixture of all types of housing, though the majority are single family houses.

My house is a three bedroom, one bath ranch. I believe it was built around 1947, and an addition was put on sometime after that. When I bought it in late 2006, it was the ugliest house on the street. Unfortuantely, it still is the ugliest house on the street, as I am concentrating on bringing the interior and backyard up to my standards first, as those are the areas I gain the most pleasure and use from. Once those are further along, I will turn my attention to the aesthetics.

Some of the things I did pretty much immediately upon moving in: painted nearly every room, changed outlets and switches, put a coating on the wood floors, and minor landscaping. I'll write more about the more significant changes I have made, which include kitchen and bathroom overhauls, backyard rebirth, and infrastructure.

I of course see my house as an investment, and thus all the purchases related to it are scrutinized. I'll document my research and analysis efforts, and I hope to read your advice and comments.

Welcome Home!

Hello everyone, welcome to my blog! Some background on why I started it:

I'm an avid reader of personal finance-related blogs, as I love to find new ways to save money. I don't make very much, so everything I earn is valuable, and everything I spend must be done so wisely. Since most of my spending goes to houseld bills and repairs/upgrades on the house itself, I searched for a blog or info site that combined the thrills and perils of homeownership with the joy of getting a good deal. I couldn't find one, so I dubbed myself the Thrifty Homeowner and started my own.

The blog will document the work I do on my own house, which will be a springboard for
- ways to save on repairs
- ways to maximize efficiencies
- thoughts on real estate in general
- great deals in the marketplace
- anything else related to owning a home that can affect your wallet

PLEASE comment and get involved. I hope this becomes something of a forum, as I'd love to know what's on your mind and what I should blog about. In the future I'll be looking for some guest bloggers, so start thinking of some ideas.

Thanks!