Posts Tagged ‘investing’

Recap of Home Renovation- #1 Choosing your architect

Taking on this project was a huge leap of faith for me. Doing a renovation of this scale (the amount of $, the level of renovation, the time and details required) was a first for me, but I knew that in the end it would be worth it. As I’ve shared, we were on the hunt for a house for a LONG time and we were OK with waiting. To recap, the first time I made contact with the owner was in the fall of 2016. Giselle’s friend lived nearby and my eyes were immediately drawn to how awful it looked. “Could this finally be the ugliest house on the block that I’ve been praying for?” I have no doubt that Jesus took the wheel (I love that term because it’s so true… I generally believe we have control over certain things but at the end of the day, I’m just working God’s plan for me)

At the end of the day, I’m grateful for the growth that I experienced throughout this journey. My process wasn’t perfect and I made some mistakes (expensive ones too!)- which I’ll share- but my goal at every “bump in the road” was to move forward.

One of my intentions for this project was to document and share the progress because a) I wanted to have this process together for future projects and b) I envisioned the transformation to be seamless! When B didn’t happen the way I envisioned, I was hesitant to share because I was mad at myself for making stupid mistakes. The reality is, sharing my mistakes may help others avoid them (and my goal this year is to impact the lives of 100 people) so I need to get over myself and just do it.

So I can’t do this all in 1 post, but I will highlight different stages- share what worked for me, what didn’t, how I moved forward and what I learned.

First thing I’ll share is my experience working with an architect. This needs to be shared since I learned a lot from this process because apparently I was not aware of this important distinction. Architect does not = designer. This isn’t the case for everyone, but the sole job of an architect is to build a house based on codes that need to be adhered to. Every architect needs to create plans for houses that adhere to a code, but design is not an element of every architect that should be assumed. So in essence you need to be really specific with your vision or provide a similar model/plan to work off of, in order to achieve the design that you have in mind.

After we hired our architect and as we were going through the process to get the plans finalized- and even while we were in the trenches of the renovation after plans were approved- there were a lot of things that I assumed would have been considered based on the incorrect assumption that architects provide design- the pitch of a roof, the placement of lighting, the flow of a room, the ideal space for rooms, bathrooms, etc. exact placement of windows and doors (the height from which the windows should be from the floor, for example) turning radius to get furniture in/out of the house. My assumption was that these things were considered in creating the floorplans and design of the house. It was only after we were in the thick of working with the architect did we how much double and triple checking we needed to do. There are firms that provide this component, but when selecting your architect, be clear with your expectations on what should be provided and have it in writing. I didn’t know what to compare and honestly (as stupid as this sounds) I didn’t interview a lot of people because it was someone I knew. In the end, I am at peace with the choices I made. We spent a long time finalizing plans for various reasons, but I think the main one was that I expected much less back and forth because I expected more knowledge of design from the architect. Next time, I know that I will need to be really specific with expectations or expect to pay more money and factor that expense in at the purchase.

And to make clear, this isn’t a post to bash the architect I worked with because there is a possibility I would still work with them and there’s responsibility in my actions as well. My intention is to share what my expectations/assumptions were, how they were incorrect- and what I learned from that process so that I can avoid the same mistakes when I’m selecting an architect in the future.

Building intentional partnerships

I was hesitant on putting my past projects up here because I felt like what I’ve done in the past doesn’t align with what I’m looking to do with Legacy Collective going forward- but this is how my Legacy started so now I feel inclined to share it because it’s part of my journey. The point of me sharing this is so you can gain an understanding of my track record. Most properties that were purchased required building trust with a potential partner or investor. Going forward requires me to do much of the same- but I look to be more intentional on who I partner with.

Here’s a few highlights of deals I’ve closed over the years:
Track record

Pay attention to the numbers, which are circled in red. I share this because getting into real estate doesn’t mean you need to have deep pockets. Most developers aren’t using their own money to fund their projects, and even if they are, you need to know that it isn’t the only way. There are many things I love about real estate- the potential to impact lives with what is created, the ability to give me time to be with my family and being able to use it as a vehicle to build generational wealth- which for a lot of people, feels so far removed and not even a possible. But along with this, comes the possibility of creating financial freedom to spend time with those who matter most and do the things that make our lives more meaningful- AND you don’t need to be a landlord or rehabber to achieve any of this. People keep their careers and do all this without crunching numbers, managing contractors, etc.

– Have you thought of investing in real estate as an additional stream of income but don’t know how to get started? If you haven’t, have you thought of building an additional revenue stream but can’t because your time is committed to your job and you can’t possibly take on another thing to do?

– Would you call yourself a socially conscious consumer? Are you mindful about the brands you buy because their goals and mission align with yours? If so, have you thought that you could also be a socially conscious investor? That money that you invest (whether it’s in real estate, an investment fund or some other vehicle) can support socially conscious businesses, while you receive a return on your money?

I’d love to hear from you even if none of this relates to you or is on your radar. Don’t hesitate to reach out if you have questions or just want to connect!

To Buy or Not to Buy?

So a few people have asked me my thoughts on whether they should rent or buy. Generally speaking, most people come from a mindset that you should own a home as soon as you can vs. renting and paying someone else’s mortgage.

Which is absolutely true, to a degree.

Here’s a fun flowchart that makes deciding a little too easy:
Should I Rent or Buy Flowchart: Business Insider

And a couple of recent articles on the topic:
Should I Rent or Buy a House? Marketwatch

In This Floundering Housing Market, Should You Buy Or Rent? Forbes

So before I start talking about this in more detail, I’ll put this out right now… I’m RENTING! (gasp…shocker!) 😉

There’s a lot of backstory behind that which I’ll save for another post, but long story short- we owned a place in the city, sold it at a loss and rented in Philly. When the time came for our daughter to start school, we had the opportunity to rent a house behind our closest friends. We had to pay minimally more (around $100/month more than what we were paying in Philly) to be in a bigger house, a better school district and behind our closest friends. So we hopped on it.

Now, although we rented our primary residence, we actually did buy/sell houses during the time that we rented. So we didn’t truly waste all of our money paying someone else’s mortgage.

Renting our primary residence has offered us flexibility that was extremely important to us. I’ve always known that I didn’t want our family to come across the need to move (because of school or work), and then have a hard time selling a house. Between my husband’s job, the kids starting school and being a city girl, we weren’t ready to decide on a place where we wanted to “plant our roots.”

Which leads to where we are today- after almost 6 years of renting- we might actually buy our primary residence.

Mind you, I’m being extremely selective on where we buy, knowing that whatever it is- our goal is to plant our money there and have it be a source of income for us. For example, if whatever we buy is worth $350k after all repairs, the plan would be to stay as close to $280k as we can, leaving around 20% in the property that will grow over time, as the mortgage gets paid down and using those funds to rehab/sell.

We’ve decided that whatever we end up buying, we want to:

1)Not pay retail. This means that whatever we buy, we will likely do a lot of work to it, which may include expanding it, allowing us to add value. This also means that if for some reason something happens and we need to sell, paying below retail will give us some room to price our house lower than the market so that it hopefully sells quickly.

Oh and by the way, just because you are offering less than asking price, does not mean you’re getting a deal. I don’t care if the house is an REO, foreclosure, short sale, etc. I won’t give a lesson here on how I calculate the value of a house, but what is considered to add/take away value to a house varies depending on your local market.

2) Buy in an area that is steady or growing, not just one that we can afford and the house fits our needs

3) Buy in an area where renting the house out will allow us to cash flow, giving us an extra source of income and equity line to tap into in order to re-invest.

So why all the criteria? Mostly, it’s the timing of everything. I’m not a financial advisor, but I understand real estate enough to know that buying a house just to buy because it sounds nice and not seeing how that house fits in with my long term financial/life plan is not ideal for me. Additionally, if all these criteria aren’t met but we get a homerun deal for a big house that probably wouldn’t rent out because renting, we are OK with that because we know we would be able to sell it.

I must share, the biggest benefit of buying your primary residence- is not having to pay capital gains tax- which you would have to pay on the sale of an investment property. You can sell your primary residence and avoid tax on no more than $250k in profits on the sale if you’re single, $500k if you’re married.

So how does this apply to you? What if you want the flexibility of renting, but want the benefits that come along with buying? Here are a few ideas:

1) Buy a multi-unit and live in one of the units.

2) Rent where you live and buy a property in an area that cashflows enough to cover the majority or all of your rent payment. For example, if you’re renting a place for $2k/month, consider buying a property that generates at least $2k amount in rent that you’re paying + more for cash flow- ideally $2500

3) If taking advantage of your local real estate market sounds appealing to you, but you feel it would take a bit of time to understand your market in order to make a move, consider partnering with an investor you trust or has been referred to you, who has the real estate experience you lack. And do your homework on them. You can generate extra income using funds you would have used to buy a house and instead, just lend on a project.

Well there you have it. Now hopefully I didn’t get you more confused on whether or not you are ready to buy!