Archive for the 'Real Estate Nuts and Bolts' Category

Return on Investment (ROI) for Residential Rentals

said on November 14th, 2011 filed under: Localism, Market Trends, Real Estate Nuts and Bolts

There are four reasons you should be buying rentals right now.

  • Money is cheap.  Interest rates, even for investment properties, are at all-time lows.
  • Home prices have fallen, great deals are everywhere.
  • There are plenty of renters (former owners who have lost their homes to foreclosure)
  • The money you have sitting on the side in fading IRAs, money markets, mutual funds, etc. is evaporating right in front of your eyes.

Let’s say that you do have some money tucked away in an unproductive portfolio, and that you have decided that it will generate a larger and safer return in rental properties.  How much cash should you use as down payment? How much should you borrow?

You want to make a maximum Return on Investment (ROI).  Right?

Let’s say you can find decent rental properties from $150,000 to $200,000 (ready to rent total costs–purchase + fixing up + holding costs + etc.).

You will be able to rent these properties for $1200 per month.

  • At 100% cash purchase (ready to rent) you will generate a ROI of 4% to 5%.  Not bad, and better than your money market.
  • At 50% cash and 50% loan (ready to rent) you will generate a ROI of 6% to 9%.  That’s a lot better isn’t it?

If you would like an excel spreadsheet showing how the calculations work, get in touch with us and we’ll be glad to share with you.

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Rural Home Inspections

said on November 7th, 2011 filed under: Country Property, Localism, Real Estate Nuts and Bolts


Inspecting rural homes will  involve several system reports not usually required in urban or suburban sales.  In addition to the items discussed in our other articles about home inspections (wood destroying pest, whole house, heating and air, chimney, roof etc.) rural properties typically require corner or boundary marking, septic, well, and possibly others.

In our area of northern California, Placer and Nevada counties,these inspections are usually paid for by the seller.

On some sales, however, especially foreclosures and short sales, the lender or owner continue reading…

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Pest Inspection Basic Training

said on November 6th, 2011 filed under: Localism, Negotiating, Real Estate Nuts and Bolts

Wood destroying pest inspections, and the costs of repairs indicated in those inspections, can be one of the most difficult obstacles to overcome in a real estate transaction.

Inspections are cheap, typically about $150 in northern California.  Sellers should commission these inspections prior to putting the house on the market–whether or not they continue reading…

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Pre-Inspections by the Sellers

said on November 6th, 2011 filed under: Localism, Negotiating, Real Estate Nuts and Bolts

Before putting their home on the market for sale, there are pros and cons for the sellers to consider when hiring professionals for pre-inspections.

Why sellers should not pre-inspect

  • Sellers may spend money they don’t have to spend, costs that they can pass on to the buyer, or not spend at all.
  • Sellers may discover things about their property that they don’t want to know about.

Though I may agree with the first point, and understand the human nature that informs the second point, I must urge the seller, in the strongest possible terms, to surrender the notion of “plausible deniability.”  Simply put, if an inspection reveals defective items, those flaws must be disclosed to the agents (seller and buyer agents, both) and to the buyer.

In fact, the report itself must be disclosed, not just the findings.  Suppose the seller fixes all the defects discovered in the inspection?  The entire report itself still must be disclosed.  How about really old reports, and how old is “really old?”  I don’t know the answer to those questions, but recent legislation has made this point clear:  all inspection reports must be disclosed.

Once again, we go back to the basic rule taught to agents in real estate kindergarten:  When in doubt, disclose.

Why sellers should pre-inspect

Knowledge is bargaining power.  The sellers are in a much stronger position to set the price their house strategically and negotiate with confidence when they know exactly:

  • what condition their home is in
  • how much money it will take to bring the house up to standard condition or better

Pre-inspections may reveal opportunities to “spend a little and make a lot” by correcting problems that buyers will use to beat down the price.  This is especially true for health and safety items.

Pre-inspections may reveal opportunities to upgrade certain items, especially cosmetic items, that will attract or please the buyers.

Homeowners develop blind spots as they accomodate themselves to that sticking door or that toilet valve that keeps running until you give the handle a second shake.  These little annoyances, now forgotten by the sellers,  add up in the buyers’ mind, and give the buyers an impression that the property is poorly maintained.  The pre-inspectors will identify these irritants so they can be pre-emptively fixed.

Pre-inspections can be used to great effect in marketing the home.  A home, clean as a whistle, with pre-inspection reports available are very attractive to buyers and to their real estate agents.  Agents prefer to show houses with as few problems as possible.  The reports are quite encouraging and reassuring.

Buyers Remorse.  This disease, also known as “second thoughts” and “cold feet,” is epidemic in today’s buyer-dominated marketplace.  It seems as if buyers, as soon as they get an offer accepted, start looking for reasons to walk away.  Sellers should eliminate as many reasons as possible, before the buyer even knows about the house.

Sellers should eliminate as many “mysteries” as they can.  This pre-market strategy is particularly important with rural properties, the subject of our article on inspecting rural homes.

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The Costs of Home Inspections

said on November 3rd, 2011 filed under: Country Property, Localism, Real Estate Nuts and Bolts

Costs of home inspections will vary from one locale to another.   Below are typical costs incurred in Placer County and Nevada County, two counties in northern California characterized by small towns and farms.  These are the physical inspections of the property.   Other investigations may involve locating documents such as permits, examining title reports, and so on, and there may also be costs associated with those investigations, but the costs are not the subject of this article.

Whole House Inspection

  • This cost varies according to the size of the home, number of stories, and whether there are crawls (attic and below the house)
  • $350-500

Wood Destroying Pest Inspection

  • $125-200

Heating and Air Inspection

  • $75-100

Chimney Sweep and Inspection

  • $100-200

Roof Inspection

  • $75-100

Corner Marking

  • $200-400

Septic Pump and Inspection

  • $600-800

Well Test

  • Gallons per minute (GPM)
  • Total coliform bacteria
  • E. Coli contamination
  • $400-500

Mineral Tests for Well Water

  • The laboratory has a menu of tests that can be ordered in addition to the yield and potability studies that come with the basic well test
  • Iron, sodium, magnesium, mercury, arsenic, etc
  • $50-250

Electrical, Plumbing and other specialized inspections

  • Typically these inspections incur hourly costs as customary for the area.
  • $60-80 per hour


Not all inspections will be appropriate for all properties.  In an extreme case involving a large two-story farm house on rural property with a suspicious well, ambiguous  property boundaries, and a whole house inspection that called out for additional specialized inspections,  the total price tag for all inspections could run as high as:




For a newer, single story home on a quarter acre subdivision lot, with piped water and a sewer system, the minimum inspection costs could run as low as:




Can inspections, any and all, be waived by the buyer?  Yes.  Yes, but . . . the seller and both agents become exposed to great risks for non-disclosure and abrogation of fiduciary duty.  Even if the buyer signs waivers filled with dire warnings, even if the buyer assures the agents that she knows what he’s doing and accepts the property “as is,” . . . when a serious problem arises, “His Honor” is going to side with the poor, inexperienced buyer, and he’s going to lower the boom on the seller and the agents who should have known better than to let the buyer sign such waivers and stumble into a detrimental transaction.

There’s an old real estate saying I like to put on the bottom of my correspondence:

“What’s good for the buyer is good for the seller.  What’s good for the seller is good for the buyer.” 

What’s good for the buyer and seller is also good for the real estate agents.

Appropriate inspections are good for everybody.



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What Does the Seller’s Agent Owe to the Buyer?

said on October 17th, 2010 filed under: Localism, Real Estate Nuts and Bolts

When I represent the seller of a property, I owe him or her the utmost loyalty, honesty, and skill.

But I also have a fiduciary duty to you, the buyer.  What does that mean, “fiduciary duty from me, the listing agent, to you, the buyer?”

I believe in the Golden Rule, remember that one?  Do unto others as you would have them do unto you.

I believe in honesty and fair dealing with you.

I will disclose to you all facts in my knowledge that affect the material value of the property.

I will not lie to my client, or for my client.  I will not lie to you.

But I will not disclose how much the seller is willing to take, his “bottom line.”  Don’t ask.

And I will not disclose confidential, financial, or personal information about my seller that is not relevant to the transaction.

When I was a rookie agent, my Broker, Sue Thompson, taught me a certain way of thinking about real estate transactions.  She said, “What’s good for the buyer is good for the seller.  What’s good for the seller is good for the buyer.”  Does that sound counter-intuitive or contradictory to you?  Only if you look at real estate transactions as competitions where one party takes every possible advantage of the other.  I don’t think about transactions that way, and I don’t conduct my business that way.  Buyers and sellers both have goals, dreams, agendas they are trying to achieve.  My job is to help everybody move forward.  It’s a good transaction when everybody is smiling at the end, when everybody is a winner.  That’s how I think.

Remember?  Think Bob.

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