Tuesday, October 16, 2007

Take your home outside

So you have decided to stay in your home instead of trying to sell right now - or you are trying to think of ways to make your home more attractive to buyers.

An open-air "room" adds inexpensive living space that may come in handy at resale. And it needn't have a price tag as big as the great outdoors.

By Sarah Max, Money Magazine contributing writer
June 21 2007: 6:57 PM EDT


NEW YORK (Money Magazine) -- Pam and Mark Elmore weren't in the market for a home last summer. But when the Bend, Ore. couple happened to stop by a newly built house with a 1,000-square-foot patio, a fully equipped outdoor kitchen - fridge and range included -and a fire pit, they immediately realized they had to have it.

Now the Elmores cook dinner outside about four nights a week. "It opened up a whole new space in our house," says Pam. "We are constantly entertaining out here."
Good-bye, flipping houses. Hello, flipping burgers.

Americans, it seems, are rediscovering the pleasures of their own backyards. For many what was once a place for casual barbecues with friends has now become a full-fledged room with all the amenities of the indoors: gourmet appliances, light fixtures, cushioned furniture and even flat-screen televisions.

In colder parts of the country, homeowners are putting in heat lamps and fireplaces so they can lounge outside almost any time of year.

"The whole standard for outdoor space has changed," says Stephen Melman, director of economic services for the National Association of Home Builders.

A recent NAHB survey of builders and other industry professionals found that outdoor fireplaces are fast becoming standard in upscale homes, and almost two-thirds of architects surveyed by the American Institute of Architects last year reported an increase in demand for outdoor kitchens, patios and decks.

The most compelling reason to build an outdoor room is the pure pleasure of it. But you can reap practical benefits too: It's a relatively inexpensive way to expand your living space.
"The outdoors is basically a second living room for many of our clients," says Stefan Thuilot, a landscape architect in Berkeley.

In many regions Mother Nature will heat and cool the space so it won't increase your utility bills.
Property tax assessors typically base their valuations on "livable" (that is, indoor) square footage, so outdoor additions shouldn't raise your tax bill.

And though you probably won't recoup your full investment when you sell, you may get back a good chunk.

"In the upper end of the market, houses that have outdoor rooms sell faster and at the higher end of the price range," says Teri Herrera, a real estate broker in Bellevue, Wash.
But a back-deck remodel can easily morph into a six-figure extravaganza. You could spend $500 for a basic stainless steel grill - or $100,000 or more for a kitchen with granite countertops and luxury appliances; a fireplace can cost anywhere from a couple thousand bucks to $50,000 for a custom-built stone version.

But spending too much on a souped-up backyard isn't smart, especially in a weak housing market. Before you order an open-air home theater and invite your friends over for the barbecue of the century, you need to figure out what makes sense in your yard and match your dreams to your budget.


Lay the groundwork

There's no lack of magazines to give you inspiration, but also put some thought into the following practical concerns:

What you'll do outside
If you're aiming to entertain, you'll want enough space for a large table or sitting area; if you'd like to curl up with a book on chilly evenings, a fireplace might be the centerpiece of your design. If you're in a rainy region, you'll get more use out of an area that can be covered with a solid awning.

Once you have ideas, "audition" different parts of your yard with a portable grill and basic patio furniture, says Deborah Krasner, an outdoor-kitchen designer and author of "The New Outdoor Kitchen."

This will help you discover what parts of your yard have the best views or the least noise.
When Olga and Ken Hayes of Manchester-by-the-Sea, Mass. began designing their 1,000-square-foot backyard deck and garden sitting area, they thought about the movement of the sun.

"We put the living room and water garden on the eastern side so I could enjoy the morning light on the garden on a summer day," says Olga. "In the afternoons there's light on the western-side patio where we do our entertaining."

Your local rules
Depending on where you live and the scope of your project, you may need approval from the city, says Julie Moir Messervy, co-author of "Outside the Not So Big House."
Many neighborhoods ban fences and pergolas, or covered awning structures, and others dictate what materials can be used. You may also need approval from your homeowners association to make drastic changes to your property.

Your neighbors' yards
Peek over nearby back fences to make sure your plan isn't off the charts. "If you overspend for your area, you'll be hard-pressed to get that back in a resale," says John Bredemeyer, an appraiser in Omaha.

What you'll spend, what you'll get
If you don't have the cash to fund the project, get a fixed-rate home-equity loan (about 8 percent today). It's a better deal than a variable home-equity line of credit, which currently has an average rate of 8.7 percent.

But don't take on tons of new debt for a project that won't necessarily recoup its costs at resale, says Burlingame, Calif. financial planner Barbara Steinmetz, especially if you're not going to be around long enough to enjoy it. Says Krasner:

"If you're not sure you'll be there for five years, put in a nice patio and buy a grill you can take with you when you leave."

How to do it right

Chances are, your wish list and your wallet aren't exactly in sync. To cut the budget down to size, keep these tips in mind.

Hire the right help
For anything more extensive than a simple deck, you'll likely need an expert to help you map out the plan. But unless your renovation requires complex engineering work, you can probably hire a landscape designer for $50 to $100 an hour instead of a landscape architect, who may charge twice that much.

The typical plan takes about 20 hours, although this will vary. For an elaborate project it's often worth paying a 15 percent to 20 percent fee for a "design and build" firm that can do everything from sketching out your plans to subcontracting out plumbing and electrical work.

Do it in stages
Unlike most indoor projects, outdoor rooms can be built over the course of many summers. This gives you more time to save for the big-ticket items and makes it more feasible for you to do some of the work yourself.

Consider trade-offs
Instead of spending $10,000 for a custom-built fireplace, pay $200 for a portable fire pit or chiminea. If you like the look of an outdoor kitchen but aren't prepared to spend $20,000 on a full setup, opt for a high-quality grill set in cultured stone, says Kevin Schaffer, a landscape designer and president of Artisan Outdoor Living in Bend, Ore.

Flagstone is often considered the must-have material for patios, but at about $30 a square foot, it can be a budget breaker.

An elegant-looking alternative is stamped concrete, says Schaffer, which costs about $13 a square foot.

When Bill and Jackie Fritsch of Broomall, Pa. put in an outdoor kitchen and sitting room, they splurged for a $13,000 grill and $13,000 hot tub. The television, on the other hand, is "the cheapest flat screen I could find," Bill says. And it's getting plenty of use.

"For five years we never went out back at all," says Bill. "Now the patio furniture stays out until a week after New Year's."

Goodbye subprime, hello FHA

At mortgage conference, lenders push back-to-basics theme for industry in coming years.

By Jeanne Sahadi, CNNMoney.com senior writer

October 15 2007: 5:49 PM EDT

BOSTON (CNNMoney.com) -- If your credit is weak or your savings anemic, here are two phrases you're likely to hear from mortgage loan officers in the next few years: FHA and mortgage insurance.

They're part of a back-to-basics theme that was emphasized Monday at the annual conference of the Mortgage Bankers Association in Boston.

For those who entered the business in the past five years, they've only known the good times and will need to be re-educated, said Paul Bibb, CEO of National City Mortgage, who was on a panel of leading mortgage industry executives.

"You probably have a lot of loan officers who can't spell FHA," said Bibb.

Bibb and David Lowman, CEO of Chase's Global Mortgage, which is a top 10 originator and servicer, said that during the go-go days of the housing boom, loan officers would steer home buyers with weak credit to subprime loans. And they would advise them to finance part of their down payment with a home equity loan.

"We probably all wish we had trained our sales staff to sell mortgage insurance," Lowman said. "The reason we're in this crisis is that we got away from the basics."

Now with the subprime market eviscerated, loan officers will be steering more borrowers with weak credit to loans insured by the Federal Housing Administration and advising those with little savings to get private mortgage insurance in cases where they can't put down 20 percent.

The FHA program is intended for home buyers and homeowners with weak credit. Borrowers with FHA-insured loans - which they get from private lenders as they would any other mortgage - pay a small premium to the FHA every month.

The FHA, in turn, uses those premiums to cover the lender in the event of foreclosure and requires lenders to pursue viable ways to help borrowers avoid foreclosure if they become delinquent.

Bibb can remember a time when FHA loans made up 30 percent of National City Mortgage's business. A few years ago, however, FHA loans had shrunk to about 3 percent of the business. Now, he said, they currently account for as much as 12 percent.

The call to go back to basics comes amid a sobering forecast for home price growth. Patricia Cook, executive vice president and chief business officer of Freddie Mac, who was also speaking on the MBA panel, expects price declines on a nationwide basis this year and next and then only a slow recovery thereafter.

Some markets are holding up and will continue to do so, Bibb said. But he's less optimistic for markets such as Arizona and Nevada where home-price gains were driven by heavy speculation. "[In those markets] the correction could be quite severe and last into 2009, if not 2010," Bibb said.

Lawmakers have been working on legislation to reform the FHA to modernize its standards so that they reflect changes to the housing market in the past 30 years. Among the changes on tap, lawmakers want to:

Raise loan limits. Today the FHA won't insure loans above $362,790 for single-family homes, and even less in lower-cost areas. Lawmakers are considering raising that ceiling to at least 100 percent of the conforming loan limit for mortgages backed by Fannie Mae and Freddie Mac, currently $417,000.

Reduce down payment requirements. Homeowners would no longer be required to have 3 percent equity or the cash equivalent. They could get an FHA-insured loan with 0 percent down.

Reduce complexity. Lenders have been complaining about the time and expense it takes to make an FHA loan.

Separately, the Department of Housing and Urban Development, which oversees FHA, may move to introduce risk-based pricing. Riskier borrowers would have to pay higher premiums than less risky borrowers.

Monday, October 1, 2007

5 Hot Trends in Real Estate Development

Daily Real Estate News
From "Green Construction" to Mixed Use Developments, Engineering Firm Giffels-Webster Engineers identifies some of the most robust trends in Real Estate Development.


Green building and design. Increased pressure on communities and businesses to promote environmentally sound designs has led developers to incorporate green elements into their projects. A plan to develop a parcel of land for retail might include green roofs, rain gardens, or gutter water retention and irrigation systems. LEED-certified environmental experts soon will become "must-have" team members as demand for energy efficient, healthy spaces grows stronger.

Assisted living centers. Assisted living developments are on the rise due to higher life expectancies and the influx of aging baby boomers. By helping seniors lead independent lives in non-institutionalized environments, these projects are designed to incorporate nature trails, community dining, exercise facilities, music rooms, libraries, salons, and game rooms. Opportunities exist to work with both private developers and public government-funded projects.

Hospital expansions, education campus additions. The hospital and education expansion trend is fueled by institutional projects being funded privately though corporate gifts and individual endowments. These "recession-proof" resources mean even during economic downturns, the market segment moves forward with plentiful building and capital improvement projects.

Mixed-use developments. Mixed-use developments are growing popular today because they reduce risk. Retail and residential can adjoin each other, and it's common to see large, national retailers combined with smaller, boutique-type stores, as well as housing varying by size, budget, and amenities. With this approach, the developer's investment is spread across the spectrum so it remains viable even if one segment does not perform as expected.

Urban revitalization. To attract and keep people in their communities, municipalities and townships are working to make their downtowns, retail hubs, and central business districts more inviting and accessible. Streetscape improvements, including attractive landscaping, decorative streetlights, brick sidewalk pavers, and strategically planned parking areas, are examples of how municipalities are proactively transforming their space to appeal to potential and current residents.

What does this mean to you? By looking at these trends and spotting areas where any one of them is begining to take place, you may have the opportunity to purchase a property in an area rip for revitalization, for example. In such a case, your investment may increase in value both during and after revitalization. If you are considering building a home, integrate "green" technology to increase its desirability, efficiency and potential resale value.

The Thomas and Drake Group in Palm Desert has provided services to clients who operate Senior Assisted Living homes. The real estate itself is typically a five bedroom home in a quiet residential area with no steps or stairs. A small group of seniors live at the property and continue to lead independent lives with the help of a live-in caregiver. From a real estate investment standpoint, the property and its expenses are paid for by the income from the business. From a business standpoint, owning multiple smaller units is a more affordable capital outlay than purchasing a larger facility.

Since the temperatures in the California Desert can be extreme, the use of Green Technology and energy efficient design in construction is not only eco-friendly, it also can make a huge difference in heating and cooling costs. Super-insulated homes, for example, can cut summertime electric bills by as much as 90% - sound unbelievable? The Palm Springs and Palm Desert areas are known for their mid-century architecture. These beautiful homes were built as winter-time seasonal retreats - not year-round residences - and as such were not well insulated and were built in the 1950's when the technology for energy efficiency did not exist. A typical summertime electric bill for one of these mid-century homes can be as much as $1800.00. The same sized home built today with super-insulation, tight construction, radiant heat barrier, double-paned low-e windows has a typical monthly summertime electric bill of about $200.00.

Both Palm Springs and Palm Desert now have mixed-use developments under construction. Port Lawrence in Downtown Palm Springs is combining retail, office and residential in one project. Residential lofts and condos will be situated above retail, restaurant and other commercial space, and the interest is huge. Since Palm Springs is a resort destination, many visitors want to be in the middle of everything - as close to the restaurants, shops and casinos as possible. This project does just that.

What could a hospital or college campus possible have to do with your residential real estate investment? Rental Properties. As both The College of the Desert and the UC San Bernardino / UC Riverside campuses expand, students will need housing. A time-tested simple investment strategy is to own rental properties around college campuses.

If you would like more information on any of the Real Estate Trends in this article or on commercial or residential properties in the California Desert, including Palm Springs, Palm Desert, Rancho Mirage, Indian Wells, La Quinta, Desert Hot Springs, Cathedral City and Indio, please contact the Thomas and Drake Group or visit our website at www.ThomasAndDrake.com .