How Millennials Make the Rent, and the Mortgage, in Denver
Many are moving to the suburbs, which are getting an urban edge.
There’s a land of jobs and money where the weather is fine, the air is crisp and the views are well above average.
It’s Denver, CO, and its recent discovery by millennials and retirees is starting to show in its housing prices.
“Before everybody started moving here, 686 square feet would only be like $700 or $720 a month,” said Brianna Maes Michel, a 27-year-old Denver native and hair stylist who now pays $1,200 a month for that much space. “Everything has gone up.”
The shift happened fast. Michel was paying $720 a month for an apartment in a better neighborhood just two years ago.
Denver has some of the hottest housing in the country, with home values up 14.5 percent to $326,300 over the past year, and expected to gain another 4.2 percent in the coming year. Home values have been growing faster than rents, which rose 9.7 percent in 2013 — and both far outpace gains in median household income, which rose a mere 2.6 percent that year.
That doesn’t mean rents are cheap. Even people migrating from more expensive cities are shocked.
Jorie Didier, a 27-year-old from Boston, bought her first house as soon as she moved to Denver rather than spend a penny on rent.
“I knew renting something the same size was going to cost twice as much, so I made the decision that it was in my best interest to buy a house and start building equity that way,” Didier said.
Like many millennials around the country, she moved to a suburb — Aurora — to save money. The arrival of these young adults on the outskirts of towns is turning some suburbs into dense, walkable areas with urban amenities.
The urban suburb
“They’re not the old suburbs,” said Zillow Chief Economist Svenja Gudell. “They’re not white picket fences and cul-de-sacs all around. [Millennials are] looking for suburbs that have redefined themselves.”
One such area is Stapleton, a neighborhood in Denver that’s far enough out of the city core to be considered a suburb by many locals. The former site of the city’s airport, it was built with urban values in mind. It has an abundance of parks, one of them spanning 80 acres, plus 46 miles of biking and walking trails, pools, community gardens and a growing number of restaurants, gyms and yoga studios.
“There are so many young families there that it’s easy for them to make friends,” said J. David Lampe, a real estate agent with RE/MAX Alliance in Denver.
Newcomers Luke and Cristine Bergman chose Stapleton to buy their first home — and with his business partner, to open his first restaurant, Concourse, a name that springs from the neighborhood’s history.
“It’s up-and-coming, and there’s even going to be a farmers’ market,” said Luke, who’s been a chef in South Beach and New York. “We’re going to be pioneers of cool restaurants out there.”
5 Home-Buying Mistakes That Can Sabotage Your Retirement
Buying a home is a major step toward building a solid, secure financial future—so whether you’ve made the plunge into ownership or are aiming to soon, you should pat yourself on the back! (This, of course, is not as easy as it seems.) And yet, in the race to settle into a place of your own, it can be easy to overextend yourself and cut corners on yet another important financial goal: saving for retirement.
Even if retirement is decades away for you, this subject nonetheless repeatedly tops the list of Americans’ economic fears in Gallup’s annual Financial Worry metric. But just because you buy a home doesn’t mean you can’t save for retirement, too. It’s a high-stakes balancing act, one where the right home-buying decisions will keep your retirement on track, and the wrong ones may throw you seriously off-kilter.
Here are some common retirement saboteurs to avoid.
Saboteur 1: Buying a house outside your price range
When you purchase a home, your retirement savings are on the line—even if it may not seem that way at the time.
“Housing is the biggest expense most people have,” points out Mary Erl, a certified financial planner and owner of Nest Builder Financial Advisors in Gurnee, IL. Hence, if you purchase a property that’s way outside your budget—and you’re forced to forfeit saving for retirement in order to make your mortgage payments—you’ve put yourself in a bind. A pickle, even.
And don’t just consider your current income, but your future income, too.
“People almost never take future earnings into consideration,” laments Joe Pitzl, a certified financial planner and partner at Pitzl Financial in Arden Hills, MN. “Younger couples get married, buy their first home based on their combined household income. But then when they start a family, one of the spouses leaves the workforce to raise the children and all of a sudden they’re bringing in a lot less money each month. That reduces how much money you can save for retirement.”
Saboteur 2: Draining retirement accounts for a down payment
While it’s tempting to borrow from your IRA or 401(k) to amass a down payment on a home, many financial experts say home buyers should do so sparingly, only as a last resort. IRAs and 401(k) plans are called retirement accounts for a reason—you’re not meant to touch the money until you’ve entered your golden years. If you borrow from either plan before age 59½, you’ll get slapped with a 10% excise tax on the amount you withdraw, on top of the regular income tax you pay on withdrawals from traditional defined contribution plans. Ouch.
Making early withdrawals also obviously prevents the money from accruing interest in these accounts. Put simply: Raiding the piggy bank before the money has matured can put a serious dent in your retirement savings, and many underestimate the repercussions.
“Withdrawing $5,000 from your IRA or 401(k) to pay for home repairs may not seem like a big deal,” Pitzl says. “But if you do so at age 30, that money would have grown exponentially over time if you left it in the account.”
Saboteur 3: Paying off your mortgage too quickly
While it sure sounds impressive to pay off your mortgage in three years, it’s not necessarily the best for your retirement. The reason: There’s good debt and bad debt. You want to pay off your credit card bill (bad debt) in full each cycle or you’re going to pay interest. Mortgage payments, though, work differently.
From a psychological standpoint, you probably don’t like owing a hefty sum to your lender. (We don’t blame you.) However, if you’re a younger homeowner with a new mortgage (good debt), it’s beneficial from a retirement savings perspective to make only the minimum monthly payments on the loan and invest the money where you can get a higher return.
For example, on a 30-year mortgage, at today’s interest rates, it makes more sense to put the money into an IRA or 401(k) than increase your mortgage payments, Pitzl says. “Don’t throw every penny you can at your mortgage debt,” he says. Granted, if you’re approaching retirement and are close to paying off your mortgage, it may make sense to up your payments if you want to retire debt-free.
Saboteur 4: Not saving for a rainy day
When asked about their emergency savings, an alarming 29% of Americans said they had none, according to a report last year by Bankrate.com. Nada. But without a sufficient emergency fund, you may be tempted to run up credit cards or tap your home’s equity or retirement accounts to pay for major repairs (new roofs don’t come cheap). And “if you get laid off, your mortgage payments don’t stop,” Erl says.
Therefore, make sure you have enough cash tucked away to cover six months of living expenses in the event you lose your job and budget 2% of your home’s value for annual maintenance (1% for newer homes), says Pitzl.
Saboteur 5: Waiting too long to downsize
Your $1 million McMansion may have made sense when your family of five was living under one roof, but if you’re heading into retirement, it’s probably time to downsize.
A common mistake, says Austin Chinn, a certified financial planner at Fountain Strategies in San Jose, CA: “People destroy their retirement savings by staying in their home so that they can have their kids move back in after they graduate college.”
Unless you’ve budgeted for a boomerang child, you need to do what makes sense for you financially.
“If you can move from a larger home to a smaller home and wipe out your mortgage, that’s a huge boost to your retirement,” says Erl.
Because crunching the numbers can be complicated, it can be helpful (and a huge relief) to meet with a financial planner to determine if a reverse mortgage makes sense for you (find one at Napfa.org).
Faces of Denver & Boulder
In recent years, Denver has made numerous appearances on lists featuring the best, most exciting places to live in the nation. So it’s no surprise that creative, forward-thinking entrepreneurs and professionals choose to call our city home. Meet some of the brains behind local businesses and leaders in various fields.
Non-Bank Servicers Creating Bigger Mortgage Problems
It’s hard to find a more sympathetic foreclosure story than Kathleen Conrad’s.
The disabled widow of a Marine who served in Vietnam, Conrad, 66, lives in a rundown Westchester house the couple bought in 1999, realizing their modest version of the America dream.
But after her husband died in 2004, Conrad faced larger-than-expected cuts to her widow’s benefits. During the 2007 housing market boom, she took out a second mortgage from GMAC. In 2013, Conrad fell behind on payments and was contacted by her loan’s new owner, Infinite Customer Systems and the strong-arm tactics began to get Conrad out of the home.
Unlike big banks, non-bank servicers like Infinite are not bound by even the modest consumer protections built into the National Mortgage Settlement (NMS) of 2012.
Non-bank servicers are taking a page from their predecessors’ playbooks. Sources say that many of the same old problems the NMS partially sought to address are back with the nonbank servicers, including long delays in reviewing loan modifications and wrongful denials of loan modification requests.
While Federal Housing Finance Agency director Mel Watt is still dithering about whether to finally allow principal write downs to help troubled borrowers keep their homes, private investors who’ve already gotten a steep discount on distressed debt sold by government-sponsored entities are using hard-knuckle tactics with homeowners.
“The investors buying these loans are not interested in offering home-saving solutions to struggling homeowners,” said Jacob Inwald, director of foreclosure prevention at Legal Services NYC.
As government-sponsored enterprises including Fannie Mae sell delinquent mortgage loans to shore up their balance sheets and banks pull back on this market, private investors are muscling in. They range from small fry like Virginia-based Infinite Customer Systems to $60 billion Texas-based private equity titan Loan Star Funds. Loan Star is the backer of mortgage servicer and originator Caliber Home Loans, a major new player in New York.
After a flood of complaints about Caliber’s practices, Attorney General Eric Schneiderman opened an investigation last year. Loan Star declined to comment. A spokesman for the AG said the investigation is ongoing.
ICS’ Patrick Desjardins said he tried to reach a deal with Conrad before filing foreclosure. She halted the case by filing for bankruptcy protection, aided by foreclosure defense attorney Linda Tirelli. Earlier this month, a judge voided ICS’ lien, leaving the investor with worthless paper, and Conrad in her home.
“I don’t know where I would have [gone]” Conrad said. “That’s why I was fighting so hard to keep the house.”
Experts fear the new wave of investors will steamroll other vulnerable New Yorkers.
“We’re really concerned about the outlook,” said a spokesman for the Center for NYC Neighborhoods. “This is an unprecedented transfer of property ownership, accelerated by the distressed sales to non-bank servicers.”
Non-banks serviced 25 percent of the $9.9 trillion in outstanding US residential mortgages last year, against just 7 percent in 2012.
That’s according to a new Government Accountability Office report released last week by Sen. Elizabeth Warren (D-Mass.) and Rep. Elijah Cummings (D-Md.), who called for more oversight. This shift could lead to “harm to consumers, such as problems or errors with account transfers, payment processing, and loss mitigation processing,” the report said.
These new risks come as thousands of New Yorkers are mired in foreclosure. A new report from New Yorkers for Responsible Lending notes that as of last October, the state had nearly 90,000 pending foreclosure cases, half of which were filed in the previous 12 months. The crisis has bypassed wealthy enclaves of the city while ravaging low-income minority neighborhoods in Brooklyn, Staten Island and Queens.
Income Properties in Summit County
Angela Colley at Realtor.com has outlines which type of first-time homebuyers you shouldn’t be. If you’re ever unsure about any step in the home buying process never hesitate to ask your realtor.
The 6 Worst Homes for First-Time Buyers
Deciding to buy your first home is a little scary. Looking for a home is anxiety-inducing. But actually making an offer? That’s a whole different level of panic. Are you choosing the right one? What if you buy this home and the perfect place comes on the market a week later? What if you end up hating the place in a year?
Unfortunately, there isn’t a one-size-fits-all formula for first homes. (If there were, we’d tell you.) And no, we can’t totally destress the process (buying a house is a big deal, after all). But we can help you avoid the biggest mistakes. And, as it turns out, some homes just aren’t right for the average first-time buyer. Go ahead and take a look.
1. The one that’s a little too ‘cosy’
You may not have children when you buy your first house. You may not even be planning on children. But those plans could change in the next five to 10 years, and that tiny two-bedroom historic bungalow you’ve been eyeing may go from just right to clown-car small.
“If you are recently married and plan to start a family, do not buy a two-bedroom home. Unless you bunk the kids together, you will be moving once the second child comes along,” says Seth Lejeune, a Realtor® with Berkshire Hathaway HomeServices in Collegeville, PA. “Three is generally a good average. If you end up staying there longer than expected, you can start a family and still be comfortable.”
2. The bloater
On the flip side, you shouldn’t just get the biggest house you can qualify for, either. Five bedrooms might make sense for you in the future, but if it’s just you and your partner now, you probably won’t need those other four bedrooms for years. In the meantime, you’ll be carrying a much larger mortgage than you need—or possibly can handle.
“There’s almost nothing worse than buying more house than you need and having a reminder come in the mail every month as you scrounge to make payments,” Lejeune says.
3. The money pit
If the home needs one or two biggish projects and a handful of small weekend jobs to get into perfect condition, you might come out ahead. But if you can spot a dozen problem areas now, you may end up going broke trying to repair that place.
Instead, opt for a fixer-upper with an end in sight.
“I generally advise people to keep it simple—like kitchens and bath upgrades,” Lejeune says.
4. The weekend stealer
Is the front lawn a tropical garden? Does the house have a swimming pool out back? Is there a huge vegetable garden that needs tending? Those features might look great now, but do you really want to spend every weekend maintaining your home?
“Pools, hot tubs, elaborate landscaping, etc. are great in theory, but all require maintenance,” Lejeune says.
If you’re not up for the challenge, move along.
5. The dream crusher
In an ideal world, you’ll live in your first home for a while, maybe make a few improvements, and sell it for a profit later so you can upgrade to an even more awesome pad.
But that doesn’t mean you should look at every home for its investment potential.
Sometimes your tireless home improvements won’t mean much to the next buyer. And sometimes that home simply isn’t going to go up in price, no matter what improvements you make.
“If you make a row home in the worst part of the city into the Taj Mahal, you’re never gonna get that money back,” Lejeune says.
If your only reason for making an offer is what you might get out of it after you sell it, consider the market very, very carefully before you make the plunge.
6. The doorbuster
If you’ve found a really good deal on a home, go ahead and pat yourself on the back for being a regular real estate pro. But then stop and ask yourself why the deal’s so great. Is the location a bit gritty? You might save big bucks in the beginning, but there also might be big problems if and when you try to sell the home later on.
“I would advise that you pick [a locale] with a strong school district and a fiscally sound municipality,” Lejeune says.
Even if you don’t plan on having children, or you don’t care if a neighborhood is a little rough around the edges, future buyers might—and that means you may be forced to offer the same discount you got when you bought the house. And nobody wants their decisions as a first-time buyer to come back and haunt them as a first-time seller.
“The Summit Combined Housing Authority serves to enhance this county by helping those who define our community attain a safe, long-term housing solution and build a community in which to thrive.”
Danny and I took the Homebuyer Education Class before we bought our first home and found it was very helpful. In addition, if you are looking at programs like Deed Restricted Housing or Mortgage Credit Certificates, I believe that this is mandatory before you can qualify. Be sure to check out this course which is open and free to public if you sign up.
The Summit Combined Housing Authority presents their next FREE Homebuyer Education Class on:
Tuesday April 19th
Buffalo Mountain Room, Frisco County Commons
As a RSPS certified realtor I can help you find your perfect family get away. Realtor.com explains how owning that home can even help get you more tax benefits.
5 Tax Benefits of Owning a Second Home
There are tons of benefits that come with owning a second home: novelty and adventure, a place to escape and unwind, an opportunity to create memories that last a lifetime, a valuable tool to make vacation-craving friends like you a whole lot (for better or for worse).
But there’s another benefit that’s often overlooked: the tax breaks.
You already know that owning a home usually offers some tax deductions. But what if you own two? Or three? What if you’re a regular Donald Trump (back in his real estate, meat magnate heyday, of course)?
Since we know you won’t mind a little extra cash to spend while soaking in your surroundings during your next getaway, we thought we’d tell you how to reap the fruits of your second-home purchase.
1. Mortgage interest—yes, again
When it comes to owning a second home, the interest on your mortgage is deductible. The same rules that come with writing off mortgage interest for your first home apply to your second.
In fact, you can write off as much as 100% of the interest you pay on up to $1 million of debt, which includes total debt taken on to pay for both homes, as well as money spent on improving the properties. (That’s not up to $1 million for each property—just up to $1 million in total.)
2. Home improvements
Is your second home a fixer-upper? If you want to spend the off-season making improvements to your hideaway, you can deduct the interest on a home equity loan or line of credit.
But there are a couple of exceptions.
For starters, there will be a limit on the amount you can deduct if the home equity loan on your main or second home is more than $50,000 if filing single or $100,000 if married or filing jointly.
Second, the amount you can deduct has a limit if the mortgage is more than the fair market value of the home, says Gil Charney, director of The Tax Institute at H&R Block.
For example, let’s say a taxpayer has a mortgage of $220,000 and takes out a home equity loan of $65,000. The property’s fair market value is $275,000. Since the difference between the fair market value and the mortgage is $55,000, then $55,000 of the home equity loan can be deducted, not the full $65,000.
3. Property taxes
You can also deduct your second home’s property taxes, which are based on the assessed value of the home. That’s good news. Even better news? Unlike the mortgage interest tax deduction, there’s no dollar limit on the amount of real estate taxes that can be deducted on any number of homes owned by the taxpayer.
But beware: Taxpayers who can afford two homes are likely to land in a higher tax bracket—which means slimmer pickings for tax savings. For example, in 2016, a married couple whose gross income exceeds $311,300 would have limits on the types of itemized deductions they could take.
4. Renting out your home
If you rent out your second home for 14 days or less over the course of a year, that rental income is tax-free—and there’s no limit to what you can charge per day or week. Score!
But if you’re hoping to put your secondary digs on Airbnb or another rental site for more than 14 days during the year, be prepared to do some heavy math come tax time.
You’ll want to figure out the number of days you rent your home and divide that by the total number of days your home was used—whether it was you or a renter staying there. (The total number of days that the home was vacant doesn’t fall into this equation.)
For instance, let’s say you rented out your vacation home for 30 days within a year, and vacationed in your home for 90 days.
We’ll divide 30 (the days you rented it out) by 120 (the total number of days the home was used). The result: 25% of your rental-related expenses—which could range from utilities to the cost of a property manager—can be deducted. Now, if your home is losing value, that same percentage (in this example, 25%) of depreciation costs can also be deducted.
Here’s the caveat, Charney explains: Depreciation costs can be deducted only if there is rental income remaining after taking into account other deductions, such as mortgage interest, property taxes, and direct expenses tied to renting your home—like agent fees or advertising.
5. When it’s time to sell
Maybe you bought a far-off hideaway that you’re lucky to visit a couple of times a year. Or perhaps your vacation home is just a quick drive away, and you spend every possible moment there.
If it’s the latter—and you don’t already know which of your homes is your primary residence and which is the second home—now’s the time to figure it out. Distinguishing between the two can have big tax implications when it comes time to sell.
That’s because a capital gain of up to $250,000 (or $500,000 for taxpayers who are married/joint filers) on the sale of the principal residence may be excluded from taxable income.
Your principal—or primary—residence is the home you used most during the five years prior to the sale. But other factors—such as your job’s location, voter registration address, and banking location—could also come into play. Among other requirements, you must own and use that principal residence for at least two of the five years before the home is sold.
We know—that’s a lot of heavy stuff to take in. But you knew your second home would pay off in more ways than one, right? Now, hurry up and file your tax return—so you can escape to your happy place and forget about burdensome things. Like taxes.