Home Renovations Anyone?

 Financial Friday: Where’s the Biggest Bang for Your Buck With Home Renovations?

by John Stickle

If you’re going to spend money renovating your home, where will you get the most back when it’s time to sell?

The research points toward smaller, well-chosen improvements. Certain exterior upgrades and a modest kitchen remodel generally recover more of their cost than expensive kitchens and major additions.

For a home here in St. Augustine, this is where I’d start:

First, the outside. Take a look from the street. Does the house need paint? Is the landscaping overgrown? Does the front entrance look tired? I’d address those things before spending a fortune inside.

Next, the kitchen. You don’t always have to gut it. If the cabinets are in good shape and the layout works, countertops, hardware, lighting, and updated appliances may be enough. Keep the spending in line with the house and the neighborhood.

Then, the bathrooms. Freshening up an outdated bathroom is worth considering. Adding one needs a closer look. Going from one bathroom to two could solve a real problem. Going from three to four may accomplish much less.

What about a pool? If you’re spending $80,000 to $100,000 or more, don’t assume that amount gets added to your selling price. National research shows pools typically recover only part of their installation cost. Build one because you want to use it, with resale as part of the calculation.

So where would I put the money? If getting the most back is your goal, start with what needs attention and keep the project—and the budget—under control. Before you spend $100,000, let’s look at the nearby sales and see where that money has the best chance of paying you back.

Sources: 2025 Cost vs. Value Report (Jacksonville regional benchmark); NAR 2023 Remodeling Impact Report: Outdoor Features.

Cost vs. Value report

NAR outdoor remodeling report

Do School Ratings Correlate with Higher Home Values

 Do Better School Ratings Automatically Mean Higher Home Values?

by John Stikle

We hear it all the time in real estate: “The schools are great, so the house is worth more.”

Schools certainly matter to buyers. But does being inside a highly ranked school’s attendance zone automatically add a premium to a home’s value?

I recently looked at St. Johns County sales, comparing similar homes just inside and just outside those boundaries. The results went both ways. Some homes in the higher-ranked zone sold for more. Others sold for less. Once you started looking at pools, updates, construction, and neighborhood amenities, the explanation became more complicated.

The comparisons didn’t establish a reliable, across-the-board school premium. That doesn’t mean schools have no influence. It means you can’t take a school rating and automatically add a percentage to the asking price.

There’s another part of this conversation worth considering. Some of our more affluent areas also have some of our highest-ranked schools. But which is driving which?

Many rankings rely heavily on test scores. Those scores reflect what happens in the classroom, along with the opportunities children have outside it. Greater financial resources can mean access to preschool, tutoring, books, technology, and enrichment activities. Those advantages can contribute to stronger academic results. That isn’t a measure of how much any parent cares about their child’s education.

So when expensive homes and highly ranked schools share the same neighborhood, we shouldn’t assume the school alone created the higher property values. The housing, location, community amenities, and educational opportunities can all be connected.

My approach is pretty straightforward: consider the schools, verify the attendance zone, and look closely at the actual sales. A rating is useful information. What comparable homes are selling for is what helps us put a price on the property.

Still Paying PMI? Your Home’s Equity May Hold the Exit Key

 

Still Paying PMI? Your Home’s Equity May Hold the Exit Key

Could it be time for you to review your mortgage to determine the ability to cancel your mortgage insurance premium?  Let’s unwrap the topic and learn more about the executive order signed this week and how it may affect you.

If your downpayment at purchase was less than 20% you are likely paying a mortgage insurance premium.   This premium insures the lender’s investment in your loan in the event of default.  If your equity position changes that calculation you may be able to cancel the policy and save significantly every month. Mortgage insurance premiums typically range from 0.5% - 3% of the loan amount annually.  That actual rate is determined by many risk factors considered by the lender.

Next steps?  The first thing you’ll need to do is call your mortgage company to determine how much you are paying and what documents will be required to cancel. In most cases a new appraisal will be required to support a value of 80% loan to 20% equity.  In other cases, a market analysis may be sufficient.  The next questions will be requirements for the individual or firm determining that market value. If you’ve owned your home long enough a tax assessment may be all that is required.  Actually, pretty simple.

A new executive order has been signed which will automatically cancel the premium when equity reaches the 20% level.  The details haven’t been disclosed yet but rest assured, it won’t be retroactive so in the short-term evaluating your mortgage, mortgage insurance and any other insurance policies should be done annually.  Is it time to call your realtor for help?

Financial Friday - Understanding Capital Gains Taxes on Primary Homes

 

Understanding Capital Gains on Primary Homes        

By Peggy Gachet

 

In 1997 capital gains taxes were updated to reflect:

$250,000 in capital gains on primary homes tax free for an individual

$500,000 in capital gains on primary homes tax free for a married couple filing jointly.

Let’s break down how that is calculated.  Use the original purchase price of the property then add major improvements. In many cases improvements made to ready your house for the market may be used.   Add those figures to the base purchase price thereby establishing the adjusted basis.

Next take your sales price and subtract closing costs, commissions and the adjusted basis to determine your taxable earnings. You are taxed on earnings greater than those reflected in the table above based on your income level and the duration the asset was held.

For most it is that simple. For those who move frequently there are three very important caveats and limitations that are frequently misunderstood. You must own the home for at least 24 of the 60 months leading up to the sale. You must have lived in the home as your principal residence for at least 24 of the 60 months leading up to the sale (the months do not have to be consecutive) and lastly, you haven’t used the exclusion on another home sale in the 2 years prior to this sale.

Years ago, my husband and I faced the loss of a pension.  Fortunately for us, we were young enough to recover and build our own pension by exercising the very program outlined in this blog article. It works! Especially if you can control the urge to continually upgrade with each purchase. Try to find a home you can improve while you live in it and your earnings potential grows.  It is a great opportunity to build wealth but requires discipline and intention.  Are you ready to take the next step. If so, interest rates become less important in the big picture.. It’s worth exploring.

Is it time to call your Realtor and CPA?

 

Financial Friday

 

Take a Deep Breath—The Fed’s Rate
Increase May Not Mean What You Think

by John Stickle

Take a deep breath and relax. The Fed's latest quarter-point interest-rate hike may have very little direct effect on a 30-year mortgage.

The Fed primarily controls short-term interest rates. While mortgage rates can react to its decisions, the 30-year mortgage rate is driven more by inflation, Treasury bond yields and what investors believe is coming next. A quarter-point Fed increase does not automatically mean mortgage rates will increase by a quarter point.

Even if a $400,000, 30-year mortgage moved from 6.95% to 7.20%, the principal-and-interest payment would increase by approximately $67 per month. Nobody likes paying more, but it may not be the budget-buster the headlines make it sound like.

Interest rates matter, but they are not the only factor driving the real estate market. Here in St. Augustine and St. Johns County, it still comes down to the basics: price, inventory, condition and competition.

A well-priced home in good condition can still sell, while an overpriced home can sit regardless of what the Fed does.

The bottom line: one quarter-point increase should not cause buyers or sellers to panic. Look past the headlines and pay attention to the numbers that actually affect your property and your monthly payment.