Is it a good idea to buy a rental for college students or a nightmare waiting to happen?

Dear Dave,

My wife and I very recently sent our son off to college on the front range. We are considering investing in a house near the university he is attending. We would like to know your opinion on investing in a property near a university or college. Is it a good idea to buy a house that could be used as a rental for college students or is it a nightmare waiting to happen?

Any feedback you have would be appreciated!

Thanks -

Joe and Darbi - Grand Junction, CO

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I think purchasing a property is a great idea!  I would suggest you check with your financial advisor or accountant, but I would bet the investment would pay off over the course of your son’s college career.  I will add one qualifier, it will work out better if your son is also responsible and will responsibly help you maintain the property while living there.   Let's look at a quick scenario to demonstrate how you might benefit from purchasing, rather than pouring out rent over the next 4-5 years.

Let's say you purchase a 3 bedroom condo for $300,000 and put 5% down, which is $15,000. You then own a 3 bedroom condo with a monthly payment estimated at $1700 which should include taxes and insurance.  You only need one bedroom and surely your son has a couple of friends that he would like to have living with him.  Let’s assume they would be willing to pay $700 per month, which in turn makes your monthly out of pocket shelter expenses $200, which is $400-$500 per month less than having him rent.  Five years from now, assuming that your second son takes a bit longer to graduate than 4 years, and let's also assume the market has improved 5% per year for your condo, it would then be valued at $383,000.  Let's also assume that you have paid the principal down to $260,000, which leaves you with over $100,000 in equity when you go to sell.  I know there are expenses and this is not direct profit, but at the very least you should receive some return, rather than footing the bill with nothing but a diploma to show for it.  The numbers in this scenario may not be exact, but it does illustrate the fiscal advantages of owning vs. renting for your college student.

There also is a loan specifically designed for this situation and it is referred to as the “Kiddie Condo Loan”.  The requirements are designed specifically for your scenario and require that the child must live in the home and be on the loan.  The financial qualifications for the loan are done off your information, but it allows your son to begin building a credit portfolio for after he graduates.  There are several great things about this loan.  You can qualify with only 3.5% down, the loan is assumable and with today’s low-interest rates, assumable loans may be very advantageous in the future.  If your son decides to stay in his college town after school, he can assume the loan from you and take over the payments or you could sell it and have them assume your interest rate.  As you can see, there is a good case to be made for a college purchase, in town or out of town, for kids who are attending college. 

Lastly, one of the great things about University towns, their real estate generally will not fluctuate up or down as drastically as other areas, because they have built-in buyers and sellers that cycle through which generally helps ensure good demand and smooth out any other market influences.  The worst-case scenario would be that you have a rental in a college town that will be pretty easy to rent year after year.  I say, “do it and you are likely to be glad in the long run”.  Hope this helps.

Dave Kimbrough

The Kimbrough Team

Can We Take Our Fridge When We Sell Our Home?

Dave,

We've had an unexpected job change come up and have to sell our house - sadly we just did a big remodel to our kitchen and it is wonderful.  We were given some money, from my parents, to buy a top of the line refrigerator - one that I had painstakingly researched and I absolutely love! 

I want to take the refrigerator with us because we used my parents gift money to buy it, but my husband doesn't think we should.  If the refrigerator is taken out when we move, not part of the house sale, is that going to delay being able to sell our house? We're really in a dilemma as we ready for this move.

Thanks in advance-
Jennifer - Grand Junction - Redlands area

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Jennifer,

Sorry about the unexpected job change, there is some of that going around right now.  Don’t sweat this one, there are several options.   In some real estate markets it is customary to leave all the appliances, however it is not customary in our market to leave your refrigerator or your washer and dryer. It most certainly should not cost you a sale or make it harder to sell your home if you plan on taking it with you.  Make sure to have your agent note that the kitchen fridge does not stay and WHY.  Everyone, or at least almost everyone, is human and the majority of the time appreciate sentimental reasons behind why some things are done the way they are.  If you have your agent disclose that you are taking the fridge with you and it was a gift from your parents, then you are unlikely to face much of a head wind from any reasonable buyer.

Another option, one that would eliminate any confusion, would be to purchase a replacement fridge and leave it with the home after sale.  This is an option, but not one that I would recommend.   Make no mistake about it, if it is new and as nice as you say, buyers are going to want it.  The question is how understanding will they be about it and like I said, most will totally get it and there will be no issue.  By removing it prior to sale and replacing with a less expensive model, you remove the issue all together.  This is overkill, IMHO, but an option to consider. 

My final verdict, leave it there, explain why you are keeping it and if the buyer balks about it, let them move on to something else.  If your fridge is the deal breaker, then they probably need to find another house to buy that they love enough to purchase their own fridge!!  Don’t worry…..everything will be cool! : )

Dave Kimbrough

The Kimbrough Team

Can We Still Decorate For Halloween When Our Home is For Sale?

Dear Dave,

My family just loves Halloween. We usually like to go all out with decorating, but this year we have our house on the market to sell. It has been for sale for about 6 weeks and we haven’t had any offers. What do you think about decorating a house for a ‘holiday’ when it is for sale? I know that every Realtor probably has a different opinion on this, but I would really like to know yours.

Thank you,

Carrie and Tom - Fruita, CO

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Carrie & Tom,

I am a firm believer in enjoying this time of year!  I personally think it would be a crime not to decorate and enjoy the holidays.  In my opinion a home never feels more like a home than it does during the Thanksgiving and Christmas season and I see no reason not to extend that to include Halloween.  No pun intended, however I don’t believe you will scare anyone away by decorating!  I do encourage you to decorate tastefully and try to err on the side of too little rather than too much.  With Halloween, I would make a concerted effort to not decorate with things that are too gruesome or scary and make an effort to decorate with all ages in mind.  Believe me, if your kids love the way you decorate the likelihood is the families that come to look at your home during the holidays will love it also. 

Remember that buying a home is still very much a “feel” thing for most buyers and the more senses you get involved and the more “like a home” you make your home feel the more likely you will be to sell.  I can tell you that more often than not, when a buyer gets a feel about a home and they can picture themselves or their family living there, your chances of them making an offer go up significantly.  Also, don’t be afraid to bake some cookies, pies, cake or at the least light a candle that plays up the holiday season.  We have purchased cinnamon pine cones in the past and for less than 10 bucks it will fill your home with a wonderful aroma.  This is the greatest time of year to have fun and get immersed in the season, enjoy it because it will be gone too soon.  Remember time is the one thing we can’t get back, so enjoy it, have fun and make this a season to remember.

The key take away here is tasteful and not overdone, yet have fun and enjoy the season.  The spirit of the holidays is contagious and my bet is someone will catch the spirit at your house this season.  Don’t be the least bit shocked if you sell between now and the end of the year!

Dave Kimbrough

The Kimbrough Team

We're Getting Lots of Showings & No Good Offers...

Dear Dave,

I had 24 showings been on market 59 days one low ball offer week after listed we did not accept, now no other offers.  I dropped the price of the house 8 thousand off the list price a month ago and still no offers.  Our house is in move-in condition and the neighborhood is very nice. After a price drop only two showings please advise since we still have no offers.

Mary B. No area provided

***We also received a similar question from Robert***

Dave,

I have a home that has gotten over 50 showings with no offers. Our home shows like a model and consistently get compliments about how beautiful and well keep it is. On the advice of our agent, I have reduced our price over $120,000 during our listing period with the same results….  No offers. Having spent my entire career as a senior global marketing executive and with an Ivy League MBA.   Analysis dictates that the marketing is attracting the wrong customer which would account for no buyers. I would be interested in your take.

Robert M., No area provided

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Mary and Robert,

Since your questions are quite similar, I am going to try and a new approach and answer both at the same time!  You both have VERY similar scenario’s and I would suggest that both of you have had enough showings that you should have had offers by now.  Also of note is that between the two of you you have had nearly 75 showings and only one offer….. I might suggest that you might start to consider things are not as perfect/pristine as you may believe.  I will also note that both agents are providing ample traffic and must be doing a good job of marketing your properties.

Mary, I am not sure how low your “low ball” offer was, but there is the old adage that often proves true…. “first offer, best offer”.  What that means is that the first offer you receive is often times the best offer you will get.  I have found this to be true more often, than not.   If we put that lost offer in the rearview mirror, we must focus on the present and what lies ahead!  Robert, I would suggest that you should also focus on what is in front of you and not spend much time concentrating on the past.

From what you have both have described your traffic is fantastic, statistically, you should receive an offer within 13-15 showings and Robert I would suggest that despite the $120k in price reductions your value is still too high for what buyers are finding.  With so many showings there is something else going on rather than price.  Buyers are finding out about your homes either online or through their agent's efforts.  Buyers are liking what they see enough to schedule a showing (which generally means that the pictures and price appear to be acceptable), but end up not writing an offer.  This generally (not always) means that there is something else going on.  It might be the condition, floor plan, odors, neighbors, colors, setting, high traffic road, a barking dog next door or any number of other issues that would cause buyers to not choose your home.  Ultimately, all things being equal, there are three things you can control, marketing, condition, and price.  If the marketing is good (Robert I know you are questioning this) then you will get showings and 50 is a lot!   If that many are coming to look you can assume there is something else coming into play if they are choosing other properties….. If you have a condition issue or non-desirable feature, those are typically only cured by either price changes or just waiting for the perfect buyer fit.

 Lastly, it is not out of the question to say that the marketing is attracting the wrong buyers, but to attract 50 wrong buyers and no right ones would be statistically very unlikely unless your home is so specific in features and price that it only will be attractive to a VERY narrow pool of buyers. If this is the case a marketing adjustment needs to be done to ensure the approach is more targeted.  It's hard to get buyers excited about an amazing riding arena and barn if none of them ride horses! 

I am putting out good vibes for both of you and am hopeful that your journey will come to an end soon but try to remain patient.  Remember it only takes one showing to completely change your outlook!  Thanks again for writing in.

Dave Kimbrough

The Kimbrough Team

What's Best Sewer or Septic?

Dear Dave,

We live in an older neighborhood and our house is connected to a septic system. The system is about 30 years old and we suspect it may be nearing the end of its lifespan. The public sewer line has been brought into our neighborhood, but the cost to hook up to it is about $10,000. 

We need some advice on the route we should go - septic or public sewer system?

Thanks for answering questions each week - we look forward to hearing how you answer ours.

Thanks in advance,

Mick and Jamie – Grand Junction, CO

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Mick and Jamie,

This one is easy!  Keep your septic system running as long as you can, because when it fails you will HAVE to hook up to the sewer system.  Once sewer has been run to your neighborhood you are obligated to hook up if/when your septic fails.  That means, keep your septic running as long as you can to avoid the sewer installation and plant assessment fees, but be prepared for expenses either way.

Here are some common signs of septic system failure:

1.      Slow drains or “stuff” backing up into your home.  If you have slow draining you should call and have your septic tank pumped out.  Your tank may be overloaded with solids and just needs to be pumped out to restore proper flow and allow it to properly drain into the leech field.

2.      Unpleasant odors inside or outside your home.  You will know the smell when you smell it.  It most likely won’t be a, “honey do you smell that?” smell, it will be a “Honey is that you?” smell.  All kidding aside, it will be a noticeable sewage odor.  Make sure to have this looked into before your next neighborhood party!

3.      Soggy areas or puddles in your lawn, when it has not been raining.  This is likely telling you that your drain field is going bad and not properly draining.   If you notice this, it needs to be addressed as soon as possible.

If you have slow drains, gurgling sounds, waste backup in the home or foul smells in your home, it very well could be a clogged main line or issue with your tank.  If you have not already done so, I would have Goodwin’s Septic come out and pump your septic tank and have it inspected to see if you have any issues that can easily be corrected.  It is my understanding, keep in mind that I am no septic expert, that if your tank and lines check out and you have puddles, standing liquids or drain field issues, you are likely to need a new field.  This means you would have to abandon the existing field and install a new one.  If your field or tank has failed and you have sewer in your neighborhood, you will have to “hook up” to the sewer system and abandon your septic. You realistically will not have a choice.

Keep in mind, the nice thing about Sewer is, you flush it and forget it… for the most part. The bad part is the ongoing costs associated with monthly sewer bills.  Bottom line, If sewer has come to your neighborhood, it is just a matter of time till you become a part of it. 

Dave Kimbrough

The Kimbrough Team 

What type of backyard decking material is best for increasing my home value?

Dear Dave,

We have been considering a deck makeover and are undecided about what type of material to use for our decking. We really have no intentions of moving, however always have the “what would be best if we did have to sell?” mentality when making home improvements.What are your thoughts on composite deck material, like Trex, versus a standard redwood or natural wood decking material? I want something that is going to last, add value to my home and stand up to kids and dogs. I am leaning towards a Trex type decking, but it seems to cost a lot more.

Thanks for the help!
Joel - Orchard Mesa, CO

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Joel,

Good question and paying attention to your outdoor living space is VERY smart. It is nice you can make this decision based on what you want and not have to make the decision based solely on what the monetary return will be. Since you are going to keep living there, then the return on your investment is not paramount and getting what you want becomes a larger part of the equation. Outdoor living space has become increasingly important and buyers will absolutely pay more money for a home if the outdoor living area is top notch and dialed in! Decks can be an awesome feature on any home, especially in Western Colorado where we enjoy over 300 days a year of sunshine. A deck can also be a huge liability to any home if it is in disrepair or in bad need of a major overhaul. Much of your decision should be based on your home's setting, price range, and your budget.

What do I mean by your setting? Your home's setting is a crucial part of deciding how far to take this endeavor. If you back up to wonderful views, a private field, the Gunnison River or Valley floor, then spending extra money will pay off and might pay off in a big way. If you have a special setting then the value of an awesome outdoor living area takes on a higher value and will become a significant selling feature in the eyes of future buyers. In turn, if you are located in a typical neighborhood setting with smaller yards and rows of fence line, then the importance of the material is less important as you are not really capitalizing on a special setting. The location of the deck on your home is also a major player in this decision. How does the deck layout in reference to the rest of your home's living space? If you have a large deck that extends from your kitchen/eating or main living room and is easily usable in the day to day and for entertaining, then the importance is heightened. If, for instance, your deck is off the side of your home and accessible only through the office then the importance is significantly diminished and I would suggest finding another feature to highlight.  

“The price point of your home is also a major player in the decision-making process. The higher the home value, the more likely the extra cost of Trex decking or more exotic natural wood will be appreciated. ”

The price point of your home is also a major player in the decision-making process. The higher the home value, the more likely the extra cost of Trex decking or more exotic natural wood will be appreciated. I have seen some amazing exotic wood and Trex wood decks that were no doubt a serious selling feature and were significant value ads, especially for those who live and covet the outdoor lifestyle. The one thing you do not want to do is overbuild or over-improve your home and the value of homes in your neighborhood. If you add a $10k deck to a $160,000 home it is not as likely you will get all that money back. In turn, if you add a $25k deck to a $400,000 home there is a good chance you can recover those costs.  

The bottom line is this, if you are looking for durability, low maintenance and can afford the larger investment then I would go with a high-quality TREX type product. Be careful of going with a copycat product, not all composite decking is created equal. If you are looking for a more budget friendly option, go with natural wood, Cedar is a wonderful choice, but expensive. Consider treating it with water seal every year or two to ensure it looks great for years to come and does not become a maintenance issue. Even if you go with a pressure treated natural wood deck and keep it maintained it will look great and last for years. You don’t have to go expensive to be fabulous, but you will have to maintain it. I hope you love your new deck and it provides incredible memories for years to come!

Dave Kimbrough
The Kimbrough Team

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Affordable Landscaping Tips with Big ROI

Dear Dave,

I have about $5,000 saved up to do some landscaping around my house this spring/summer. I'm trying to decide what my focus should be for my yard/house. I am only planning on staying in this house a couple more years, so I want to make improvements that add the most value. I would really appreciate your advice on the most important landscaping elements in a yard - front and back. They both need work - I just don’t know where to start or where to focus with my funds.

Thanks,
Bobby - Fruita, CO

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Bobby,

The yard is one of the most overlooked elements of any home, when it comes to potential buyer appeal, so you are wise to pay it some attention and focus some of your resources on your yard. A study done by the University of Michigan showed that buyers valued a well landscaped home by 11.3% more than a home with poor landscaping. Another study done at Virginia Tech determined the value may increase by as much as 12.7% for a home with good landscaping vs. one with minimal or poorly designed landscaping. Here is one more number to ponder…you can expect a 150% return on your landscaping investment. That is what I would call good ROI (return on investment)! Regardless of what number is right and how much of your investment you can expect to get back one thing is very clear, all this data clearly points to the fact that your landscaping is VERY IMPORTANT!

“Regardless of what number is right and how much of your investment you can expect to get back one thing is very clear, all this data clearly points to the fact that your landscaping is VERY IMPORTANT!”

Let’s be honest, $5,000 is not an exorbitant sum of money to invest in your landscaping, but if done wisely can make a big impact on your home’s value and overall appeal and easily provide you with a great ROI! The old adage of, “go big or go home” needs to be in your rear view window, as we are going to be swinging for singles and doubles. Most of these things are not expensive, but will make a significant impact when done in conjunction with one another.

For your front and back yard we are going to mostly keep it simple. Step one is to make sure your yard and beds are weed free and create cleanly defined lines between your grass and beds. Cleanly defined lines make keeping your yard maintained much easier and are pleasing to the eye. With your budget let’s go with the metal edging to help create those boundaries and keep your costs down, but make sure when you do it to edge nicely along the grass for a clean line. Also remember to create a clean edge around your walk ways and sidewalks. Next, make sure to put down good weed barrier and add new rock to your beds to freshen it up. You may have to remove what is there to lay down new weed barrier, but it is likely you can recycle the medium you remove and just add new to it. Again, let’s go for the clean look, but go cost effective by using a small (1/2 – 3/4 inch) river rock or some type of mulch. This will look great and keep your costs down. Next, add some pops of color to your flower beds or by using potted planters around your front door and walk ways. Most homes lack good color in the yard and that is a mistake. Color is what makes the world go round and using it wisely can really help make your yard stand out. 

If you don’t have many/any trees, don’t be afraid to do a little budget splurging on slightly larger trees. I believe spending a bit more on a larger tree (15 gallon size) can help give your yard some dimension and you don’t have to wait as long to see some results. Trees can also be great to help hide or obscure something that you don’t want to see. They can be very good screens to create privacy. 

Lastly, try to keep aside $2,000 (of your allotted $5k) to create something special. Creating an outdoor living or entertaining area is the “wow” factor you need to really take it to the next level. It DOES NOT have to be expensive. It can be a small flagstone or paver patio with fire pit or small water feature. You could build a small raised party deck with some nice lighting that extends your patio and creates some back yard magic! Don’t be afraid to get creative and use resources like Pintrest or Houzz.com to find cool outdoor patio or entertaining area ideas. 

Have a blast with it and send me a picture of before and after! Hope this helps and it turns out great.

Dave Kimbrough
The Kimbrough Team

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Would converting my garage to another living space increase my home's resale value?

Dear Dave,

I own an older home, built in the 1980’s. I’m doing some upgrades this spring and am considering adding on to it. I recently saw a home that was a similar age and when they remodeled they turned the 2 car garage into a living room and opened up the adjoining wall into the house.  Something like this might suit our needs perfectly.  What are your thoughts on this? Is it good for potential resale or would I be better off leaving it as a small garage and not adding living space.

Thanks - I would appreciate the advice.

John - Grand Junction, CO

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John,

This one is a tough one. If you need extra living space, it does not get any more convenient or inexpensive than to convert the garage to a new living room or couple of bedrooms. Keep in mind that the conversion does come at the expense of valuable resale space, the garage. I am one of those who believe the garage is sacred space! Where would one put his duck decoys, bikes (motor of pedal), ATV’s, kayaks, canoes, dog kennels, gun safes, hunting gear, tool boxes, work bench etc.? I am sure you see my point. A garage, especially here in Western Colorado, is valuable space and hard to replace. Oh, and I nearly forgot, you might even have enough room to park your car!

For resale purposes I am of the belief that the conversion will generally cost you money and not increase your value. That being said, if you convert and add 2 bedrooms and go from a 3 bedroom home to a 5 bedroom home, you might find someone who has a large or blended family that has a specific need for the extra bedrooms. In this specific scenario I could see the possibilities of the conversion adding value.  Outside of this specific situation I think the loss of the garage outweighs in cost and function the addition of added living space.

The last thing to consider is to go ahead and make the conversion, but do so in such a way that you will be able to easily convert it back when/if you sell in the future. By doing this you will have a cost effective addition and keep the flexibility to convert it back easily. This is a common practice and is easy to remedy when the time comes to sell.

“As you can see, I am a fan of garages and believe that having a garage is an important and valuable feature.”

As you can see, I am a fan of garages and believe that having a garage is an important and valuable feature. I will close with this, if a conversion will fit the needs of your family perfectly, then go ahead and do it and enjoy living there with the added living space. Converting and then converting back in the future will surely be less expensive than selling and buying. If the rest of the house fits your needs, just convert and do so in a way that leaves you the flexibility to easily convert back if needed. Hope this helps!

Dave Kimbrough
The Kimbrough Team

Have a Question? Ask Dave!