Real Estate Archives - The Free Financial Advisor

Is It Ever Worth Buying Solar Panels For Your Home?

March 22, 2021 by Tamila McDonald Leave a Comment

For many homeowners, finding ways to save on their electricity bills is a priority. In most parts of the country. Utility costs usually go up over time and can be hard to shoulder for many households. On occasion, this piques homeowner interest in solar panels. However, it’s normal to wonder. Is it ever worth buying solar panels for your home? After all, they can be pricey to install and have to be maintained. So do you get enough from them to make it worth the investment? If you’re trying to decide if buying solar panels for your home is the right move for you. Here’s what you need to consider.

The Cost of Purchasing and Installing Solar Panels

First and foremost, you need to determine how much it will cost to buy the solar panels you need. You also need to understand how much additional equipment is required – and have them installed. Along with the panels themselves. You’ll usually need other items. Like an inverter, cables, wiring, and metering equipment. You may also want to invest in batteries to store some of the energy you produce. Though those tend to be incredibly costly.

Installation can also come with a large price tag. Usually, solar panel installation requires specialized skills. That can push the total cost up.

Ideally, you want to gather several quotes in advance. That way, you can get a grip on the price. Thus, allowing you to determine if the investment is worthwhile.

Solar Panel Incentives in Your City, State, or Country

At times, there are incentives available that can offset some of the cost of buying solar panels for your home. For example, you may be eligible for rebates, tax breaks, subsidies, or other incentive programs.

In most cases, incentives are offered through the government – including on the local and national level – though they may also be available through your utility company. The incentives vary regularly, so you need to review the programs to see when they expire, allowing you to estimate which ones may be available to you based on your prospective installation date.

Ongoing Maintenance After Buying Solar Panels for Your Home

After installation, you have to contend with maintenance costs. The solar panels are a critical energy system, and they can’t be left unmaintained. If you neglect maintenance, you may find your system breaking down quickly or not functioning at its best.

Usually, cleaning is the most frequent form of maintenance you’ll need to handle. However, inverters, batteries, and other components may only last several years. As a result, you might have to plan for regular replacement based.

Additionally, you might need to budget for panel damage. While today’s solar panels are tough, that doesn’t mean they can’t be harmed. For example, a hail storm could be problematic and may require a panel to be repaired or replaced if it is damaged.

Sun Exposure on Your Roof, Not Just in Your Area

While solar panels are more efficient than they used to be, you get the best performance if your solar panels get a high amount of direct sun exposure. That means you need to look past the weather in your region and actually check out how sunlight moves across the section (or sections) or your roof you are considering for the installation.

Your Current Electric Bill

Your current electric bill is brimming with information that can help you decide if buying solar panels for your home is a good investment. Not only does it list your current electricity costs, but it can also reveal the amount of electricity you use, usually in kWh.

You can use the kWh information to estimate the number of panels you need based on the amount of sunlight the installation area receives. Alternatively, you can provide that information to the companies you receive estimates from, allowing them to give you a more accurate quote.

Once you have an idea of how much a solar panel system that could cover your energy needs costs, you can estimate how long it would take to recoup that expense through electricity bill savings. For example, if the solar panel system would run $20,000 to purchase and install, and your monthly electric bill is $200, then it would take around eight years and four months to recoup that investment, not including the additional money you’ll spend on maintenance.

Is Buying Solar Panels for Your Home Worth It?

By looking at all of the information above, you can estimate how long it would take to get your money back after buying solar panels for your home. At that point, you can decide if the investment is worthwhile to you.

For some homeowners, it will be incredibly worthwhile thanks to a high amount of sun exposure, solar panel incentives, and other factors. For others, the cost of a system that can handle 100 percent of their energy needs will be too high to make recouping the investment in a timely manner possible.

Ultimately, the choice is always yours. However, by doing the math, you can make sure you understand the financial side of the picture, ensuring you make a choice that’s best for your household.

Do you think buying solar panels for your home is ever a good idea? Why or why not? Share your thoughts in the comments below.

Should You Invest in Mobile Homes?

March 17, 2021 by Jacob Sensiba 1 Comment

Mobile homes get a bad rap, but they could really be a good place to invest money. Investing in real estate is a good way to diversify your portfolio. Mobile, or manufactured homes, could be a good little niche in that sector. Should you invest in mobile homes?

What is a mobile home?

Mobile homes, also known as manufactured homes, are residential structures built in a factory or separate location and moved to the desired location. These homes are built according to HUD guidelines.

Those guidelines are as follows:

Design and construction
Strength and durability
Transportability
Fire resistance
Energy efficiency
Overall quality

Why invest in mobile homes?

Social stigma around mobile home parks prevent people from investing in them

Investing in individual mobile homes is difficult because the people that rent them are a (and I’m making a big generalization here) a challenging bunch to deal with. Invest in the grounds and infrastructure where the mobile/manufactured homes are.

There are several benefits to investing in mobile home parks:

Recession-resistant (held up through the GFC)
Tenants rarely leave, but sometimes, evictions are necessary (as they are with any real estate endeavor)
Supply is waning, demand is increasing
Predictable maintenance costs
Stigma reduces competition with other investors
Great financing options
Limited need for contractors
They’re inexpensive (you can buy individual units to rent on your property for less than $10,000 – depending on the area and demand)

(List provided by BiggerPockets)

Conclusion

As I mentioned in the beginning, investing in real estate is a great way to diversify your portfolio. It can also be a good way to get a return on your money.

Within the real estate sector, mobile home parks can be a very good niche, for the reasons I mentioned above. Should you invest in mobile homes?

How Do I Get a Mortgage as a Solopreneur?

February 15, 2021 by Tamila McDonald Leave a Comment

Buying a house can be exciting, but the process is also incredibly complex, particularly if you are a solopreneur. When a traditionally employed person needs to secure financing for a home purchase, they typically have little difficulty demonstrating the stability of their income. For solopreneurs, that’s much more challenging. However, that doesn’t mean you can’t get a mortgage as a solopreneur. If you want to buy a home, here’s what you need to know.

Verifying Employment

When you’re a solopreneur – as well as a freelancer of a self-employed individual – proving your employment is a bit tricky. While people who work regular jobs have documents like paystubs and can often get a statement of employment from their employer, that isn’t’ the case with solopreneurs.

Usually, solopreneurs will need to go the extra mile to verify their employment. They may need to secure documentation from clients, supply a copy of a business license or insurance bond, or provide other kinds of proof. Past tax returns may also be viable sources of information.

In many cases, the lender can tell you before you apply what type of documentation might be necessary. That way, you can work on gathering it before you submit your application for a mortgage.

Income vs. Profit

Most solopreneurs work diligently to claim every potential deduction available to limit their tax liability. While this can be beneficial financially, it will have an impact on your ability to secure a mortgage.

Solopreneurs and self-employed individuals don’t have traditional paystubs to showcase their income. As a result, lenders typically request copies of two years of tax returns (sometimes more), along with other financial documents, like bank statements.

Depending on whether you operate as a business or sole proprietorship, you might need to provide personal and business tax return records and bank statements. Usually, the lender can outline what’s required before you apply.

When reviewing the information, the lender is concerned about your income, not profitability. If your cunning use of tax deductions significantly lowers your taxable income, that lower figure is what they’ll use to determine how much you can afford to pay.

Interest Rates

Some lenders view solopreneurs and self-employed professionals as riskier borrowers than those who have traditional employment. Often, with an increased risk level comes higher interest rates.

Now, precisely how much your solopreneur status will matter depends on a range of factors. If you have an excellent credit score, intend to put at least 20 percent down on the home, and need a small loan amount in comparison to what you could potentially afford, the impact may be less significant. However, if you’re looking for a large loan, can only put a small amount down, and have only a good or fair credit score, it could make a difference.

Tips for Getting a Mortgage as a Solopreneur

If you’re a solopreneur, there are things you can do to increase your odds of getting a mortgage. First, formalize your business with a license, and pay yourself as a W-2 employee instead of taking an owner draw. This can make it easier to show your employment and income, as well as separate some of your business finances from your personal situation.

Additionally, reduce your debt load, build a solid emergency fund, and make a larger than necessary down payment. You may also want to bypass certain tax deductions, allowing you to increase your income on your tax returns.

It’s also smart to shop around for your mortgage. Some companies are more welcoming to solopreneurs than other lenders. If you can find one that commonly works with self-employed professionals, freelancers, and solopreneurs, you may have an easier time meeting their requirements.

Do you have any other insights that can help someone get a mortgage as a solopreneur? Share your thoughts in the comments below.

Moving Back to the House

January 27, 2021 by Jacob Sensiba Leave a Comment

For today’s personal reflection, I’m going to talk about moving back to the house that K and I are currently renting.

K is my son’s mother and we are getting back together. I’m excited to grow with her and to make our relationship into something even better than it was before. But that’s not the point of today’s post. Today we’re talking about moving back to the house that’s being rented.

Current living situation

As a result of K and I getting back together, we had a conversation about where we wanted to live and raise our son. My current place that I’m renting was an easy choice because it’s within two minutes of my work and has a large enough basement that our son can play when it’s cold and/or rainy outside.

We’re moving!

After we had a conversation and I had time to reflect, the better choice is to move back into the house we own together. Our renters are moving out at the end of their lease and mine is up at the same time. I feel more at home in that house and in that city than I do currently. The drive is significantly longer, but I enjoy driving. It gives me time to either get into work mode or get out of work mode (depending on the time of day).

At the house, our son has a yard to play in, there are two playgrounds/parks within a few blocks, and we are near some water. What also played a role in the decision is where our son is going to school. We decided to enroll him in a private school, which makes the location of where we live a little less important.

Besides the drive, the only other thing I don’t like about this house is the basement. It’s a very old home. Over 100 years old, so the basement is very short and uneven.

The short-term plan

What we decided to do is to stick it out. We’re going to live in this home for a few years, pay down some outstanding debt, and save for a down payment. When we’re ready, we’ll look for a new home that checks all of our boxes.

There are some big and exciting changes coming down the line, and I’m very excited to take them on with K.

How to Avoid NJ Exit Tax

October 14, 2020 by Jacob Sensiba Leave a Comment

Federal income taxes are the same for every state. The only difference is how much money you make and what tax bracket you fall in.

State taxes are a completely different story because each state has its own rules. New Jersey is a perfect example with their “Exit Tax”. In this article, we’ll talk about ways to avoid NJ exit tax.

What’s the deal?

When you sell your NJ home and then move out of state, you have to pay the NJ exit tax.

When you sell a home, regardless of the state you live in, you have to pay tax on any gains you made. How much tax you pay depends on how long you owned and lived in the home.

According to NJMoneyHelp.com, “On June 29, 2004, New Jersey enacted P.L. 2004, Chapter 55, which requires sellers of real estate who are not residents of New Jersey to make an estimated income tax payment on the gain from the sale.”

It has nothing to do with selling and moving out of state. It’s just about selling the home and paying taxes on any gains made at the time of closing. The rule was enacted to ensure that NJ would receive the taxes owed on the property regardless if the seller was an NJ resident or not.

If you do not fill out one of the forms (see below) and pay the estimated taxes owed, the deed may be rejected.

Exemptions

There are 1 of 4 forms that you need to file when selling a home in NJ. Form GIT/Rep 3 Seller’s Residency Certification/Exemption – has 8 exemptions. The first applies to NJ residents. The remaining exemptions are listed below:

Real property was used as a principal residence and qualifies under IRC Section 121 of the Internal Revenue Code which excludes up to $500,000 of gain for married taxpayers, $250,000 for single taxpayers. Remember this does not include vacation or investment homes.
Addresses a mortgagor conveying the property to a mortgagee in foreclosure.
Seller is a governmental agency.
Seller is not an individual, estate, or trust, i.e. corporation, partnership, etc…
Total consideration is $1,000 or less
Gain from the sale will not be recognized if qualified under Sections 721 (contribution to a partnership), 1031 (like-kind exchanges), 1033 (involuntary conversions) and non-non-like kind property received
Transfer is by an executor/administrator of an estate pursuant to decedent’s Will

If one of these exemptions doesn’t apply to you, then you’ll have to pay tax on the proceeds and fill out Form GIT/Rep 1 or 2.

Conclusion

There are several ways to avoid NJ exit tax, but if you don’t qualify for one of those ways, make sure you fill out one of those forms and pay the taxes due.

Appreciating vs. Depreciating Assets

October 7, 2020 by Jacob Sensiba Leave a Comment

I think it’s widely known that there are two types of assets: appreciating and depreciating. I think it’s less known what’s classified as appreciating and depreciating.

In this article, we will look at what each term means, examples of each, and how to use them effectively.

What’s appreciation?

Appreciation is the increase in value. The majority of assets used to accumulate and grow wealth, appreciate. An asset can appreciate because of supply, demand, or a change in interest rates.

What’s depreciation?

Depreciation is the exact opposite. It’s the loss of value. The most common example is a car, but more on that later.

Appreciating assets

*Stocks – It’s commonly known that investing in stocks is the best way to not only keep pace with inflation but to grow your wealth. A stock is partial ownership in a public company. Popular examples include Apple, Amazon, Facebook, etc. (Click here to learn more about stocks)
Real estate – Single-family homes, duplexes, apartment complexes, etc. Though the pace at which real estate appreciates dwarfs compared to stocks, it does so slightly over time. (Source)
Private equity – This can be starting a company of your own or you can invest in a startup. There are also private equity funds that exist, as well. Basically, it’s a company or venture that is not open to the public (i.e. stocks on the exchange, etc.).
Alternative – Less common assets that could appreciate (cryptocurrencies, precious metals, art, and other collectibles).
Bank accounts – Savings accounts, certificates of deposit, etc. These don’t appreciate much, especially in the current “low-interest-rate”. Some may argue that you shouldn’t classify these as appreciating assets because inflation erodes away the purchasing power over time.

Depreciating assets

Cars
Boats
Furniture
Equipment
Patents/Copyrights – Patents, other than section 197 intangibles, have a useful life of 10 years and can be amortized over that 10 year period. (Source)

What’s the point?

Appreciating assets – Owning and investing money in an appreciating asset is the key driver in growing your wealth. Those who’ve accumulated significant amounts of wealth have done so by earning a living, saving, and investing diligently over decades.
Depreciating assets – There are a few reasons to own a depreciating asset.
- Fun and convenience – We own and drive cars because we need them to go places. We buy boats because they are fun. In either case, you could also own a car or boat for your business, in which case it would serve a different purpose.
- Business – Owning and operating machinery and equipment is how many of us make a living or run a business.
- **Tax write off – If you use equipment, machinery, cars, etc. for business, oftentimes you can use the depreciation of that equipment as a tax write off. Financial advisors use a set of fancy calculations to come up with the tax benefits of depreciation, we won’t go into that here.

Conclusion

Appreciating and depreciating assets both serve a purpose. It’s important to know the difference between the two and how to use each one as effectively as possible.

*Stocks can sometimes experience periods of volatility and negative performance. During such periods, the value of such stocks may decline.

**Be advised: talk to your accountant about specifics.

5 Reasons to Pay off Your Home Loan Before You Retire

August 10, 2020 by Tamila McDonald Leave a Comment

Retirement is a significant transition, often representing a major financial shift in a person’s life. Having as few expenses as possible is typically ideal, ensuring that any retirement funds can last through the remainder of a person’s life. By paying off debts, your monthly obligations can be lowered. If you are wondering whether your mortgage is one of the debts you should tackle, here are five reasons to pay off your home loan before you retire.

[Read more…]

5 Surprising Things Not Covered By Homeowners Insurance

June 29, 2020 by Tamila McDonald Leave a Comment

Overall, homeowner’s insurance is fairly comprehensive. It financially protects you from the burden associated with a variety of potential events. This ensures that you can move forward with repairs or replace stolen or damaged belongings. However, homeowners insurance doesn’t cover everything. In fact, there are some gaps that many don’t expect. These gaps can lead to a rude awakening if certain kinds of events occur. If you are wondering what is not covered by homeowners insurance. Here are five things that usually aren’t.

[Read more…]

Down Payment or Investment Opportunities?

June 17, 2020 by Jacob Sensiba Leave a Comment

The current dilemma I am having is whether to stash my savings for a down payment on a house or contribute to my Roth so I have cash available for buying opportunities.

I’m pinching pennies, and I’m saving money wherever I can so that cash is accessible when I need it. I just don’t know what to do with it.

Do I put it towards a down payment or set it aside for investment opportunities. Like most things in life, the answer will lie somewhere in the middle.

Down payment

I’ve mentioned in prior reflections that I’m renting right now.

I’m renting because I got divorced and exhausted all of my savings on the down payment for my house. That house is currently being rented by another family, and my ex-wife and I still own it.

That’ll help build equity into the house so we receive more if/when we decide to sell, which is good.

I’m happy with my current living arrangements. I like the place. I like the neighborhood. My commute to work is 2 minutes, and I’m close to all of my family and friends. All good things.

The only bad part is I have no outdoor space to call my own. I have no yard.

I’m trying to frame it positively by saying that I’m not spending my time on yard work, and instead, have more time to spend with my son/work on myself when he’s not here. These are both very good things.

However, I want to give my son a space to play. A place to put a jungle gym and a sandbox. A place where he can just run around and have fun.

I want to give him that because he deserves it. I want to use my savings for a down payment on a house so we can have a place to call our own.

Investment opportunities

Here’s the second part of my dilemma. I see a lot of chances to put my money to work in the market.

I’m able to play the long game because of my investment philosophy and my training. The best investors I have long term time horizons.

What I mean to say is I can see past the present and I have an idea of what my investments can do over the long term, and the [possible] reward for investing now can’t be ignored.

That’s why I’m having a difficult time deciding what to do.

What will I do?

As a parent, you want to give your kids everything. I want to have a place we can call our own.

At the same time, I know how valuable it is to start saving and investing early so I can take advantage of compounding returns.

So here’s what I’m thinking. I’m going to develop a “savings plan”. I’ll take the dollar amount for an ideal down payment and how far in the future (in terms of years) when I’ll want to use it.

I’m thinking of $25,000 for a down payment and four years until I’ll use it. I’ll, then, divide $25k by 48 to get my monthly savings goal. Anything over that number I’ll put in my Roth.

That’ll take care of saving for a house and for retirement.

My Last Reflection:

My Experience with Life Insurance

Are Home Warranties Worth It?

May 25, 2020 by Tamila McDonald Leave a Comment

Whenever you buy a home, regardless of its age, it’s highly likely that you’ll be given a chance to purchase a home warranty. Often, these services are marketed as safety nets. Offering you protection against potentially large expenses, like repairs or appliance replacements. In many ways, it sounds like the perfect way to get some peace of mind. Especially after making such a big investment by buying a house. But the big question is. Are home warranties actually worth it in the end? If you’re considering a home warranty. Here’s what you need to know.

The Appeal of Home Warranties

New homeowners often can fathom shouldering a major financial burden. After all, they’ve likely put down quite a bit of money to acquire the property. For most this means diving deep into their savings to make the purchase happen. As a result, the idea of having to pay for a new appliance or critical home system repair now is incredibly daunting. That’s why home warranties are appealing.

Home warranties are advertised almost like insurance. It protects homeowners from unexpected costs like those mentioned above. It’s essentially a service contract. One that allows home buyers to pay an amount upfront in exchange for financial assistance if a qualifying event occurs within a specific period. That concept provides a sense of security, making it enticing for many.

What Home Warranties Do and Don’t Cover

Every home warranty is different. However, the service contracts do typically have quite a bit in common. In most cases, they are limited to items and systems that were in good working condition at the point the homeowner bought the property.

Additionally, home warranties focus on failures that result from standard wear-and-tear, not events like thefts, fires, and floods, which fall into the hands of homeowners’ insurance companies. Further, if a homeowner neglects system or item maintenance, causing it to fail or to require repairs, that usually isn’t covered.

Which items and systems are included will be spelled out in the service agreement. Similarly, the approved failure circumstances will also be outlined.

The Cost of Home Warranties

The price of a home warranty can vary depending on numerous factors. The property’s location, existing items, and current systems all play a role in the cost. Similarly, the home’s age will impact the price tag. However, it isn’t uncommon for the price to come in between $350 and $600 a year, not including the service call fees, which usually run about $75 to $125 per visit for each contractor specialty involved.

In comparison to replacement expenses and typical repair costs, that can seem like a bargain. For example, central air conditioning replacements can run $5,000 or more, depending on the specifics of the system, and just one appliance can run from $350 to $8,000+.

Home Warranty Pros and Cons

A home warranty does provide some protection against the unexpected; that’s really the biggest benefit it provides. Plus, it can help reduce the cost of certain repairs, as the warranty itself may come with a significantly smaller price tag than shouldering the financial burden without one.

Additionally, if you are selling a property, throwing a home warranty into the deal could make your property a more attractive buy. It gives the homebuyer a degree of protection, which might make them feel more secure about moving forward.

However, home warranties are limited. If a lack of proper maintenance is a factor, the company won’t cover anything, and you still have to pay the service call fee. The concept of “proper” maintenance is a bit ambiguous, so there’s no guarantee that the home warranty company’s definition will match yours, leading to arguments. This is especially true if the previous owner was negligent, and the new owner can’t undo the damage on their own. That could be enough for a company to deny a warranty claim.

Claim and Dollar Maximums

Home warranties also come with claim and dollar maximums, along with exclusions. While they aren’t incredibly expensive, many are highly limited, impacting their value.

Finally, aside from providing peace of mind, you don’t get anything from a home warranty if you have no claims. If a person put that cash in a high-yield savings account instead, they may be able to afford any repairs or replacements on their own once the need arises.

Is a Home Warranty Worth It?

Ultimately, a home warranty does potentially have value, especially if a home seller wants to throw one in as part of your purchase. However, if you are considering adding one yourself, reading the fine print is a must. You need to see if the requirements and restrictions provide you with value.

It’s also wise to research the warranty provider using trusted resources. Not all companies are as reputable as others, so finding one that has a solid reputation is essential.

Otherwise, there’s always an alternative. If you build up a healthy emergency fund, you may be able to cover any unexpected costs yourself, eliminating the need for a warranty. For many, that approach works, so make sure to keep it on the table while you examine your options.

Do you think home warranties are worthwhile investments? Why or why not? Share your thoughts in the comments below.

The Cost of Purchasing and Installing Solar Panels

Solar Panel Incentives in Your City, State, or Country

Ongoing Maintenance After Buying Solar Panels for Your Home

Sun Exposure on Your Roof, Not Just in Your Area

What is a mobile home?

Why invest in mobile homes?

Conclusion

Related reading:

Verifying Employment

Income vs. Profit

Interest Rates

Tips for Getting a Mortgage as a Solopreneur

Current living situation

We’re moving!

The short-term plan

Related reading:

What’s the deal?

Exemptions

Conclusion

Related Reading:

What’s appreciation?

What’s depreciation?

Appreciating assets

Depreciating assets

What’s the point?

Conclusion

Down payment

Investment opportunities

What will I do?

My Last Reflection:

Related reading:

The Appeal of Home Warranties

What Home Warranties Do and Don’t Cover

The Cost of Home Warranties

Home Warranty Pros and Cons

Claim and Dollar Maximums

Is a Home Warranty Worth It?