Resources
Passive income: A key to financial stability
If you are a younger Millennial or older Gen Z like I am, you are without a doubt aware of the struggles our generation is facing. We are hearing “Boomers killed the planet and the economy, and we are doomed to poverty.” Well I am here to bust this myth and explain an accessible path to longterm financial stability. The key is to eliminate your largest expense through passive income. What is the largest expense? According to a study by Harvard University, about [40 million households pay more than 30% of their income in rent](https://www.jchs.harvard.edu/sites/default/files/reports/files/Harvard_JCHS_The_State_of_the_Nations_Housing_2020_Report_Revised_120720.pdf). Everyone needs a place to live, so that housing expense is never really just going away (unless you live in your parents’ house for the rest of your life), but what we can do is subsidize it with passive income. Passive income is the concept of your money working for you. It is money that can be regularly collected for effort often as minimal as simply collecting it. ## Become a landlord In my experience, the easiest way to start generating passive income is by becoming a landlord. The solution is to buy a multi-unit property to live in and rent the other unit(s). Renting from a tenant’s perspective is throwing 30% of their income into a black hole every month. From a landlord’s perspective, that money is being put directly into your pocket. For our purposes, this money would go to cover the mortgage and taxes so that the out-of-pocket expenses are virtually eliminated. You may be saying to yourself, “This sounds all well and good, internet Realtor guy, but I’m barely covering my expenses as it is. How am I supposed to buy a house?” And this question has been answered decades ago so that renting versus owning is a choice rather than a barrier. It is true that the downpayment on a home loan can be tens of thousands of dollars, but with a team including a savvy Realtor and lender, that can be reduced to what is comparably a pittance. A vast amount of programs exist to help you get out of renting and into home ownership, the only problem is that many people simply do not know about these programs so they think home ownership is out of reach. You now know that you can do it, but you know nothing about home ownership, and even less about being a landlord. That’s ok! Everyone starts somewhere and if you have a great Realtor, they can continue to help you after you buy the house and can act as a property manager to take care of the landlord responsibilities. [Contact Merrimack Valley Realty](https://mvrealtyllc.com/contact) to help you find the best multi-unit property today.
To Buy or Not to Buy; A Southern NH Broker’s Opinion on the Current Market Part I & II
In a mental tug o'war with yourself, you’re considering moving. With Realtor.com labeling our small corner of the world the hottest market in the country, you think that settles it. Further research presents an opinion that this is a bubble and that with patience it will burst and buyers will have the upper hand again. So which is it? Do you ride out the storm or join the fray? I am firmly of the opinion that this is not a bubble, but there will likely be a small adjustment soon. The whole country has an elevated market, but what is unique to Southern NH is that single family new construction has been outpaced by population growth for far too long and that has finally caught up with us. It is a simple supply and demand issue. The situation has been exasperated by the pandemic though. There has been an increase in MA to NH migration, virus conscious people are reluctant to list, and historically low mortgage rates. As covid restrictions continue to be lifted and mortgage rates rise, there should be some small corrections from either end of the market scale, but not enough to be considered a bubble burst. The conclusion: This market is here to stay until the underlying situation is corrected. The market has only had a significant decline once in the last 40 years, which has since been more than overcome. Hard statistics led us here and are not going away, but waiting for some fluid situations to change before entering the market is left to the individuals. If part I was a macro look at the Southern NH buyer’s market, part II is a micro look at how the market affects different types of buyers, specifically current homeowners and current renters/first time buyers. For current homeowners, the best news is that you can benefit from the best seller’s market in history before you buy your new home. Even if you just purchased a few years ago and put in only minor upgrades, there are very strong signs that you will walk away with a significant amount of profit. If you use that profit towards the purchase of another property or a strong performing asset, you can minimize the hardest pill to swallow about this market; the price. Using that newfound small fortune as the down payment on your next purchase is a great way to strengthen your offer. On the other hand, trying to put in offers before your current home is sold and making that offer contingent on your sale could severely hamper your offer. Terms can be nearly as influential to sway a seller as the dollar amount because they affect the likelihood of the deal happening on time, for the stated price, or even at all. For the first time buyers, you will only be seeing one side of the market, so there won’t be the luxury of home sale proceeds, but you can minimize the required contingencies on your offer. Just make sure that, if you are a renter, that you give your landlord appropriate notice and review the terms of your rental agreement. Many landlords will incentivise their exiting tenants for making the process as easy as possible for them. An offer pitfall unique to first time buyers is the type of financing. The Federal Housing Authority (FHA) first time buyer loans are a common option, but require additional inspection requirements for the property that could create headaches for the seller. Options for conventional first time buyer loans offer similar terms to assist buyers, but without causing any additional problems for the seller. A conventional option may require a higher credit score though. These strategies are only scratching the surface of tips and strategies we use to help buyers are Merrimack Valley Realty, LLC. If you’d like to talk more about these methods, you can reach us at 603-489-6111 or use the “how can we help?” button on the home page of our website.
Flipping 101: The fluff and buff
So, you want to try your hand at “Flipping”? Looks so easy…fun even! What a great way to make extra money. Or, is it? What HGTV doesn’t tell you about flipping is that it takes a gut of steel. It wakes you up at night as you wonder if you confirmed with the mud & tape guy and authorized the shipping fee on the cabinet order, and rest only comes on the day you close the sale of your flip. If you have a strong stomach and access to extra cash (I can’t stress this enough...everything ends up costing more than you think it will, and the last thing you want is to start a flip and not be able to finish it because the passage of time will erode your profit), let’s use this time together to start at the beginning and identify the flipping species. There are basically two varieties of flips: the “fluff and buff” or the “total gut job”. Everyone wants the workload of the former with the profits of the latter, but in order to come to a successful completion, within budget, it’s really important not to commingle the two categories. Attempting to flip a more aggressive project house with only cosmetic basics will guarantee that you own this house for quite a while. ## What happens in a fluff and buff? The “fluff and buff” is easy to recognize using a few of your five senses. Is it absent the smell of mold? Can you walk across the floor without feeling like you’re tipping to one side? Is it relatively quiet without wind whistling through gaps in doors or windows? Can you count electric outlets every six feet? Is the floorplan conducive to family living? Use your common sense: would you live here? If the answer is an unequivocal “yes” to each question, perhaps you have found the rarest of candidates in today’s hot market, a true “fluff & buff” flip. Please confirm your personal conclusions with a qualified home inspector. In my experience, flippers are the most optimistic of people, often seeing (hearing and smelling) what they hope is real. A true fluff & buff flip is absent any fatal flaws on the official inspector’s report (they typically color-code their findings. This type of flip will have few, if any, red warning symbols). Congratulations! You can possibly make a small profit with cleaning products, a paint brush/roller, new light fixtures, carpeting, a rake, and hedge trimmers. Before you begin to choose all your favorite colors, flip through some current decorating magazines. Choose colors and textures that appeal to a wide population. Personal choices, especially when you’re first starting out and lack experience, only serve to limit the buyer pool and cause your flip to languish on the market. If your only experience in painting is your bedroom in high school, it is best to leave it to the pros. A professional paint job will set your flip apart and demonstrate quality to your buyers. You can roll up your sleeves and clean, clean, clean in preparation for the painters to arrive. If you’re ready to dive into flipping, I would love to put my 27 years of flipping experience to work and [help you find a property](https://mvrealtyllc.com/contact) that can translate to a paycheck. If you are interested in a more aggressive project with a bigger payday, be sure to check back for the next installment of Flipping 102.
Flipping 102: The total gut job
In my last post, I jokingly called a more aggressive flip a “total gut job,” but there is some scary truth to this label. Anyone who has renovated a home knows the concept of “project creep.” Once drywall is removed from a single wall, revealing something scary behind it. Or, to remove the drywall it is impossible not to remove adjacent sheetrock, then ceilings, then floors. You get the picture…before you know it, the house is gutted! Why does this happen? Because drywall is a convenient cover for former DIY projects that resulted in unsafe conditions, things that have allowed water to penetrate, or that were simply deemed too expensive to solve at the time. Things such as poor wiring, termite damage or mold can be hidden with drywall. So, before you know it, the wall you wanted to remove in order to open up the floor plan, if done properly, leaves you looking through studded walls and wondering if you’re going to lose money rather than make it. ## Call in a professional How can this be avoided? By seeking experienced pre-purchase advice! Choose a realtor who know something about construction, or better yet, has hands-on experience flipping their own properties. And, by all means, do not skip the home inspection! Realtors with flipping experience are rare, but they can help you recognize the difference between the desirable “fluff & buff” (see our [Flipping 101]() post) that can usually be completed by anyone with a decent eye and desire to work, or the budget busting “gut job” project. [Choose Merrimack Valley Realty](https://mvrealtyllc.com)! We’ve been flipping houses since 1994. We can help you find the best flipping property based on your budget goals, and we have great sub contractors we work with on our own flips to help our more adventuresome clients who truly do want to step up the risk level to achieve that greater reward.