Archives for August 2014

By Joe Szabo, Scottsdale Real Estate Team

If you’re in the market for a vacation home but are looking to minimize costs as real estate prices rise and you face a stagnant paycheck, you might be considering going in with trusted friends or family members. Assuming you go that route, here are a few things to keep in mind so that you don’t turn your dream house into a nightmare.

Decide how the property will be used

Conflicts will arise if you approach the purchase of this second home with different assumptions. For example, one party may view the home as a money-making rental unit and may be fixated on its investment potential; the other side, however, may think of it primarily as a vacation spot for all to enjoy. For a house-sharing arrangement to succeed, you’ve got to be in agreement as to how this property will be used — in advance.

Put business before pleasure

Just because everyone gets along and is compatible doesn’t mean there won’t be conflicts down the line. To avoid possible disagreements (and keep the relationships in tact) consult with your attorney to draft an ownership agreement that specifies when each co-owner gets to stay in the house and how you’ll share costs and responsibilities. While how often you get to use the house is generally determined by how much money you put in, creative arrangements can work, too. After all, each situation is unique, but you will need to agree – not only on how and when you can use the house, but perhaps more importantly, how you’re going to handle the big-ticket expenses (mortgage, taxes, insurance, utilities) as well as minor repairs.

Consider an LLC                    

We’ve all heard the horror stories: An owner loses his portion of the home when a co-owner defaults on the mortgage; one homeowner dies, and that person’s portion of the investment goes to a co-owner rather than to the deceased owner’s relatives; there’s a lawsuit, and someone loses his/her stake in the property. The best way around these types of issues — and others — is to buy the property within a limited liability corporation, or LLC. Consider setting one up. It’s relatively inexpensive to do.

Have an exit strategy

Any sense as to how long you both plan to keep the property? What happens if one of you becomes financially strapped and can’t keep up with payments? Might you sell the property one day, and if so, under what circumstances? Can you sell to an outsider? How will pricing — and payouts — be determined? Could you prevent a sale by buying out your partner? An exit strategy is essential.

Please note that this Scottsdale Real Estate Blog is for informational purposes and not intended to take the place of a licensed Scottsdale Real Estate Agent. The Szabo Group offers first class real estate services to clients in the Scottsdale Greater Phoenix Metropolitan Area in the buying and selling of Luxury homes in Arizona. Award winning Realtors and Re/MAX top producers and best real estate agent for Luxury Homes in Scottsdale, The Szabo group delivers experience, knowledge, dedication and proven results. Contact Joe Szabo at 480.688.2020, [email protected] or visit www.scottsdalerealestateteam.com to find out more about Scottsdale Homes for Sale and Estates for Sale in Scottsdale and to search the Scottsdale MLS for Scottsdale Home Listings.

By Joe Szabo, Scottsdale Real Estate Team

Just about every homeowner has experienced the same sensation at one time or another: The excitement of a home purchase is deflated at the closing table when the closing agent slides over the Truth in Lending Statement that shows just how much money the loan will cost over the term of the loan.

It is a sinking feeling to see that a $250,000 loan will likely cost in excess of $500,000. To avoid this, many people strive to pay off their loans early. Indeed, one extra mortgage payment a year can make a huge dent in reducing the length and total cost of your loan. Assuming you can, the question still remains: Should you? Saving money seems like a no-brainer, but the answer that is right for you may be more complex.

Don’t throw away money on prepayment penalties

Before you can even crunch the numbers to decide if it is right for you, make sure you know what — if any — prepayment penalty you will be accountable for. Depending on the area of the country and the lending institution, you may or may not be liable for paying a penalty on an early payoff. Penalties are wasted money. They are funds that could be doing more productive work. At least if you are making mortgage payments, you get the benefit of tax deductions. You might be able to find a better use of your funds.

Have savings for retirement or cash cushion

Are you maxing out your retirement investing? If not, it is likely your financial planner will tell you to do this first. Besides the numerous benefits of maxing out retirement account payments, your money may be better suited toward alternative endeavors rather than reducing your mortgage debt payments. By continuing to carry your mortgage debt, you will be able to devote more of your funds to the here and now. You can increase your present-day savings by squirreling away for a cash cushion so that in the case of an unfortunate event in the future (such as illness or job loss), you will not feel the hit as much. If you spent all your extra money reducing your mortgage principal, you may be forced into a situation where you have to refinance to get that money back.

Consider your other debt payments and prioritize

If you carry consumer debt from month to month, especially credit card debt, you should first consider using all extra money to reduce those debt payments that have interest rates higher than your mortgage rate. If you start paying back low interest rate loans (mortgages) before high interest rate loans (credit cards), you are leaving money on the table each month. Until your high-rate loans are paid off, it does not even make sense for you to think about an early payoff. Why pay off a principal of a 4.5 percent loan and continue paying interest on a 14.5 percent loan?

Using your mortgage to outlast inflation

Your monthly payment may seem high to you today, but it is likely that in 30 years the same amount will seem like a joke. As inflation rises, keeping your mortgage may actually be a hedge against inflation if you have a fixed-rate loan. Your payments will never increase and over time will actually become “cheaper” comparatively.

Gaining emotional freedom

Perhaps the best argument for paying down your mortgage debt is the psychological release you will get in owning your home debt-free. There is a liberating sense of freedom in paying off a loan, especially when that means you now own a piece of property outright. It gives you flexibility, confidence and a method to avoid risk of loss since your dollars have been spent on achieving equity. But this may not be the fastest way at growing your net worth because those dollars are no longer working for you. The funds are tied up in your property and not out there in the world gaining interest.

Just like most decisions in life, there are positives and negatives when deciding whether to pay down your mortgage early. On the one hand, you may have a debt-free asset. On the other, it may not make financial sense. The best advice is to first seek guidance from a financial planner. And then be honest with yourself about your goals. Only you can make the best decision for you.

Please note that this Scottsdale Real Estate Blog is for informational purposes and not intended to take the place of a licensed Scottsdale Real Estate Agent. The Szabo Group offers first class real estate services to clients in the Scottsdale Greater Phoenix Metropolitan Area in the buying and selling of Luxury homes in Arizona. Award winning Realtors and Re/MAX top producers and best real estate agent for Luxury Homes in Scottsdale, The Szabo group delivers experience, knowledge, dedication and proven results. Contact Joe Szabo at 480.688.2020, [email protected] or visit www.scottsdalerealestateteam.com to find out more about Scottsdale Homes for Sale and Estates for Sale in Scottsdale and to search the Scottsdale MLS for Scottsdale Home Listings.

By Joe Szabo, Scottsdale Real Estate Team

Creating a successful mix of patterns results in a balanced and beautiful room, but it takes a nimble hand. Too many patterns and the room is overdone; too little and the room is bland. It is more than just mixing and matching colors. The trick is to find just the right combination of scale and design to create the perfect effect.

Patterns are an integral part of the overall look of the room. Patterns on fabrics are the most obvious usage, but there are also inherent patterns in furniture shapes, wall coverings and statement area rugs, too.

Style

Patterns come in many different styles. Naturalistic patterns are realistic renderings of natural forms, such as flowers — and as of late, birds. Stylized patterns simplify natural designs to capture their essence; the fleur-de-lis, for example, is a stylized iris. Geometric designs include stripes, checks and plaids. More modern versions celebrate trellis-like patterns in large formats. Abstract patterns are loose artistic interpretations of realistic or geometric designs and gate-like designs.

Scale

The scale of a pattern is determined by the size of its motifs or designs. Small-scale patterns can read as a texture rather than as a pattern and can be a place for the eye to rest when used in rooms that include larger patterns. Medium-scale patterns are versatile and seldom overpower other elements. With large-scale patterns, which work well in generously-proportioned rooms, make sure you have a large enough area to display several pattern repeats so the design does not look truncated.

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Please note that this Scottsdale Real Estate Blog is for informational purposes and not intended to take the place of a licensed Scottsdale Real Estate Agent. The Szabo Group offers first class real estate services to clients in the Scottsdale Greater Phoenix Metropolitan Area in the buying and selling of Luxury homes in Arizona. Award winning Realtors and Re/MAX top producers and best real estate agent for Luxury Homes in Scottsdale, The Szabo group delivers experience, knowledge, dedication and proven results. Contact Joe Szabo at 480.688.2020, [email protected] or visit www.scottsdalerealestateteam.com to find out more about Scottsdale Homes for Sale and Estates for Sale in Scottsdale and to search the Scottsdale MLS for Scottsdale Home Listings.