ABR, CHMS, Lic. Broker
I am committed to delivering a real estate experience based on honesty and integrity that will create the foundation for a lifelong client relationship. I pledge to improve the financial lives of my clients and to commit resources available, be it time, energy, or financial to making both our local and global community a better place.
To provide real estate services that help our clients successfully and efficiently achieve their real estate goals whether they be a property sale, purchasing a first home, or acquiring a sound investment property. Clients will be treated with respect and receive prompt and professional service.
REAL ESTATE EDUCATION AND EXPERIENCE
- Full-Time Real Estate Consultant Since 2001
- University Of Wisconsin-B.B.A. Degree In Real Estate, 2001
- Hold WI Real Estate Brokers License (Up to date on all continuing education requirements)
- ABR Certification (Accredited Buyers Representative)
- CHMS Certification (Certified Home Marketing Specialist)
- Board Member, Madison Landlord Council
- Member, REALTORS Association of South Central WI (RASCW) andWisconsinREALTORS Association
- Past Member, RASCW Transaction Forms Committee
- Member, Madison Commercial Brokers Group
- Member,MidwestInvestment Club
- Residential Income Property Owner and Manager
- Member, International Council Of Shopping Centers (ICSC)
- Commercial Real Estate Sales and Management
Completed The following Certified Residential Specialist (CRS Designation Courses)
- CRS Creating Wealth Through Real Estate Investing
- CRS Making The Right Real Estate Finance Decisons
- CRS Short Sales and Foreclosures: What Buyer’s Representatives Need to Know
- CRS Short Sales and Foreclosures: Protecting Your Clients’ Interests
- CRS Positioning Properties To Compete In The Market
- CRS Marketing With Microsoft Office
COMMUNITY INVOLVEMENT AND INTERESTS
- Team In Training, Leukemia and Lymphoma Society (LLS) Fundraiser Participant
- Event organizer for Cheers To A Cure LLS fundraiser held at Capital Brewery,Middleton,WI
- Helped raise over $15,000.00 for the LLS and completed the Chicago and Anchorage Marathons with their support.
- Member, RASCW Affordable Housing & Equal Opportunities Committee
- Chair of Annual RASCW Fundraiser Committee (proceeds used for Habitat For Humanity, Movin’ Out and purchase of portable wheelchair ramp)
- RASCW Habitat For Humanity Workday Volunteer
- Trails Home Labrador Retriever Rescue of WI Foster Dog Caretaker
- Some of my hobbies include:
- Scuba Diving
- Home Renovations
MY THOUGHTS ON WHEN BUYING TO OWNER OCCUPY MAKES SENSE:
Buying a property is a huge financial decision. Don’t rush into buying a home or condo, even if owning looks cheaper than renting in your area, before taking some time to think about your financial situation and longer term plans. You may want to consider delaying a home purchase if you have:
SHORT OCCUPANCY TIMELINE: If you may need to move quickly or can’t see yourself living in the property for at least 4 or 5 years, it may not make sense to buy at this time. Selling real estate is a time consuming and costly process, and depending on the market, could be a potentially money losing process if you are forced to sell in a buyer’s market or before appreciation rises enough to cover your closing costs where you would not recoup all your down payment back at closing.
We are just coming out of a market downturn, and people who bought at the peak are still likely seeing current values lower than what they paid. This is a good reminder why you want a long time horizon of ownership, to allow for prices to rise again, along with your equity which continues to build with each mortgage payment, so you can ride out a market down turn and not be forced to sell for a loss.
MAINTENANCE CONCERNS: Spend some time picturing yourself handling the general maintenance items involved in home ownership and getting comfortable with that extra work you’ll be taking on. If you just can’t think of spending time doing yard work or maintenance items, you may want to delay buying until you feel ready for the extra jobs that come with being a home owner.
Of course you may decide to go with a lower maintenance condo, or a newer home on a small lot, to lessen some work involved, or just budget for hiring out some items.
FINANCIAL CONCERNS: Now on to the biggest item to consider- the financial impact of owning a home. It’s no fun being house poor and worried about paying your bills each month. Consider delaying a home purchase if you don’t feel comfortable financially making the mortgage payments, taxes, and insurance while also factoring home upkeep.
A house you can comfortably afford offers great stability, and becomes like a long term savings plan, with your building equity with each payment until the loan is paid off. As the years go by, your properties value should also be appreciating with inflation, helping you build long term wealth. But again, the key is to be comfortable with your payments, as owning a home you can barely afford can quickly turn what should be a stable, positive event, into a stress filled nightmare if unexpected maintenance or other problems arise (job loss, car repair, etc).
Even with our tighter lending standards, you may be more financially conservative than your lender, and decide it’s just not the time to buy or opt to buy a lower priced home than you could get financing for. A good first step in the buying process is to talk with a lender to see where you are at with credit history, loan options (there are still low-down payment options and even 100% loan options like USDA Rural loans), and decide what price range you want to be in and if there is a specific loan program you want to use. Underwriting guidelines, interest rates and loan programs are always changing, so you need to talk with a knowledgeable loan officer. Feel free to contact me for some recommendations!
In looking at your overall financial picture and if buying a home fits into that at this time, don’t discount the FINANCIAL BENEFITS to owning a home:
INFLATION HEDGE: One benefit of buying in our current low interest rate environment is that you can lock in your interest rate, and therefore set your mortgage payments, for the next 15 or 30 years. This low rate will start looking better and better as rates climb over time. Your locked in mortgage payments will also look like a bargain down the road compared to rental rates, for those who don’t own, as landlords will increase rents with inflation and other expenses, while your house payments stay at their at the same low rate.
Interest rates are up a bit from record lows, but still historically at ultra low rates, and aside from a few dips here and there, really have nowhere to go in the future but up, especially as the Federal Reserve continues talks and actions of tapering their Quantitative Easing program of buying Treasury bonds and mortgage backed securities to help keep interest rates at record low levels in an effort to stimulate the economy.
In thinking more about long term financing and your budget, if you are able to buy less house or budget elsewhere, to find yourself able to afford the higher monthly payment on a 15 year mortgage, you will save thousands in interest payments compared to a 30 year loan. By paying off the loan in half the time, you’ll be free to invest all that money in the future that would have gone to your lender in interest payments over 30 years! If you do go with a 30 year loan to get the lowest initial payment possible, consider budgeting in the future to make additional payments each year, as even making a few extra payments here and there can have a big impact over time in shortening the life of your loan and total interest paid.
TAX INCENTIVES: The government also likes to see home ownership and encourages it through offering home owners tax deductions on mortgage interest paid (a big expense early on in your loan when the bulk of your payments go toward interest each month), real estate taxes paid, and even your profits when you sell your homestead! Consult your tax advisor for details on all deductions, but the basics of selling your homestead are that you can sell your principal residence (the property you lived in for at least 2 of the last 5 years) and pay no federal income tax on gains in that sale up to $500,000 if married and $250,000 if single. If you enjoy doing renovations and building sweat equity, you can move up and on to a new project every two years with your profits protected from capital gains tax!
WHAT TO BUY: If it can be avoided, you do not want to own the most expensive home in the neighborhood as your value will be negatively impacted by the less expensive homes around you, while if you can find the cheapest house in a neighborhood, your value will be enhanced by your more expensive neighbors. MONEY MAGAZINE lists buying the smallest house in the best neighborhood you can afford, as a good rule of thumb for building wealth.
If you don’t mind some extra maintenance, and having a tenant(s), you could also consider buying a multi-unit property to owner occupy one unit. The other unit will pay a substantial amount, if not all of your mortgage payment (we can look at the numbers in detail), allowing you to save or do improvements while living there. Financing options are greater and rates are lower if you are owner occupying a unit than just buying a rental property as an investment, and down the road, when you decide to move, you can simply rent out your unit, if you like, and keep the property as a cash flowing investment property.
NO PERFECT HOME: Do spend time thinking about what your housing needs are (what you must have to be able to stay in this home for 4+ years) and those features you’d like to find (fireplace, fenced yard), but realize that there is no perfect home and that compromises on items will need to be made, but you should be able to get much of what you want in a home (around 80% is what I feel is a realistic target).
Keep in mind that some items can be changed or added over time (don’t get hung up on easy changes like counter tops, carpet, paint) and focus on the main items of the property like location, lay out, size, etc.
Even people who agonize over house plans to build their perfect house, likely quickly start thinking of things they wish they had done differently after moving in.
MY THOUGHTS ON RESIDENTIAL INCOME PROPERTY:
I think real estate is a great tool for building long term wealth, and like with owner occupied homes, recommend buying for the long run. Real estate markets have their ups and downs, but the long-term trend is up, and you don’t want to be forced to sell in a down market, so just buy planning for a long term holding period.
I’m sure you can find an investor who can easily illustrate this steady climb in prices over the long run, by their shaking their head as they drive by a property now worth $500,000 that they sold for $300,000 and say "I should never have sold that property" or when driving by a property for sale at $500,000 saying "I remember when I could have bought that property $300,000”).
I consider real estate a solid inflation hedge as well, as you are able to raise rents to keep up with inflation while paying off your fixed rate loan (given our current low interest rates, I would do a long term fixed-rate loan).
As far as what to buy, in our market, single family homes, while commanding higher rents, are generally bought by owners to live in, who are willing to pay more than what makes sense for an investor to buy as a rental based on income alone, as a home owner will factor in more emotion, security, pride of ownership, etc. into their valuation and what they are willing to pay for a property, pushing investors more often into multi-unit properties for cash flow and better returns on investment than renting out single family homes. If you are thinking of buying a home or multi-unit property to rent out, my general advice is:
LOCATION: If you want to save money and manage the property yourself, try to find a property close to your home to save you time running over for showings, repairs, or just checking on the property to make sure there are no issues the tenants aren’t informing you of, and see the current condition of the neighborhood.
BE FINANCIALLY CAUTIOUS: Although it may be tempting to buy a property that doesn’t cash flow, and rely on the speculation of rising rents and property appreciation to make an investment work on paper, I would advise against that, and wait to find a property that provides positive cash flow after covering all expenses right at the time of purchase (or shortly after if you have to fill a vacant unit). I strongly believe in the saying that you make you money when you buy, so be patient and wait for the right property (the location, unit size/lay out, condition you want) with a motivated seller, as your returns are all tied into getting the right property at the right price. If the seller is motivated enough, you may even be able to buy at below market rates, but be prepared for competing offers.
Also, do your research so as not to underestimate expenses, turning what you thought was a winning investment into a cash drain each month after finding insurance, utilities, management fees, snow removal, financing costs, etc. are higher than anticipated in your initial budget.
Don’t forget to set aside cash each month in reserves for long term projects like a new roof or parking lot repaving. If you are finding your operating expense estimates are a lot less than 35-45% of gross rental income as a general ballpark, you may want to do more research to confirm your budget is accurate and always throw in some allowance for vacancy and lost rent, even if the property hasn’t had a vacancy in year’s, so if anything, your actual numbers after ownership are better than projected!
Another quick reference you can look at is the debt service coverage ratio (Net Operating Income/Annual debt service on your loan). A ratio of 1.0 means there is just enough income to cover your mortgage payments. Less than 1.0 means you have to pay in each month to cover the mortgage payments and the property is operating at a loss at the assumed loan terms.
Obviously the higher the ratio the better, with commercial lenders usually liking to see at least a 1.2 debt service coverage ratio (20% more income is generated (again this is NOI, so income left after paying the operating expenses) than needed to cover the mortgage payments).
TREAT THIS LIKE A BUSINESS: As a landlord, you are a housing provider and play an important part in the local economy and in the lives of your tenants. You need to protect your investment by screening prospective tenants to make sure the odds are in your favor that they will be good tenants (not cause damage or disruptions, pay their rent on time, etc.), and after obtaining good tenants, work to keep them as long term tenants by offering top notch service by responding to issues that arise promptly so they are happy to renew and also be more agreeable to market rate rent increases.
Check on your property often (with property notice to the tenants) to make sure they are doing their part in the property upkeep (lawn care, trash picked up, etc.), and to spot any issues they may not feel are a big deal, buy that are to you (leaking faucet, missing roof shingles, etc.).
Some more good general advice I received is that a vacant unit is far better than rushing to sign a lease with a bad tenant who fails to pay their rent, damages the property and is a headache to get out through the time consuming eviction process!
Study your local ordinances on landlord and tenant laws to make sure you are not violating any laws with your business operations at the start of tenancy (tenant screening, lease terms/clauses), during tenancy (proper notice for entry, proper evictions process, etc.) and after tenancy (security deposit deductions, removal of property left behind, etc.).
Along with teaming up with a competent attorney and/or local trade organization to make sure you are complying with all laws, make sure you study or talk with a tax professional to get all the tax deductions that come with owning an investment property (keep track of expenses and capital improvements, mileage, properly depreciating the property, etc).
FINANCING: A fair amount of investment purchases, especially with foreclosures, go to buyers paying all cash. However, financing is available for investment property. Talking with a local lender knowledgeable in investment property loans is a good first step in deciding whether now is the right time to buy a rental property. I can refer you to some if needed.
Typically they will need at least 20% down, so unlike your owner occupied home, there are no low down payment options on investment property, and lenders will require a higher interest rate (probably around ½ % above what you can get an owner occupied loan) and will also want to see you have reserves/financial capacity to maintain the property. Lenders will look at rental income, and should count 75% of that towards your income in helping you qualify for the loan.
Another general reminder is that 1-4 unit properties are not considered commercial property, and let you obtain fixed rate mortgages for longer terms (15 or 30 years), where as if you get into larger properties over 4-units, you will be stuck getting a commercial loan which are for shorter terms (usually 3 to 10 years with your needing to pay off the loan balance or refinance at the end of the term). To keep payments lower, the loans are usually amortized over 25 or 30 years leaving your balloon payment/loan balance at the end of the term. Depending on the property and borrower strength, a commercial lender will likely want to see more owner equity as well (25% or 30% down payment/equity, but terms can vary better or worse based on property and borrower strengths). If you are interested in commercial property, I can refer you to some knowledgeable local commercial lenders.
A final note on real estate financing is on leverage. Real estate is a rare investment option where you can buy a duplex or 4-unt largely through financing/borrowed money (especially if you owner occupy a unit and get a low down payment loan), boosting your returns on the money actually invested in the property (having only provided 20% of the purchase price).
This is great when values rise (buying a duplex for $200,000 with a 20% down payment ($40,000 invested) that appreciates at 2% ($4,000/year) gives you a return on your $40,000 investment of 10% based only on appreciation), but don’t forget that a market down turn can drag your returns down with just as fast when leverage starts working against you, so make sure to buy right-getting a price that compensates you for down side risk if you are looking at a troubled neighborhood or generating enough cash flow, should you need to decrease rents for a few years in a market down turn, to still be ok financially holding the property.
SELLING-1031 EXCHANGE OPTION: If you want to sell an investment property in order to buy another, look into doing a 1031 tax deferred exchange if you are looking at some big capital gains and depreciation recapture tax liability after selling.
There are strict time lines and procedures that must be met for selling and acquiring your replacement property to complete a 1031 tax-deferred exchange that must be researched, but if done correctly, this exchange process can let you defer paying capital gains tax and depreciation recapture tax on your investment property sale, giving your more net proceeds from that sale to invest in your next property since you aren’t paying tax on the gains and then buying a property with your remaining after tax proceeds.
You need to plan ahead when doing a tax deferred exchange as when you sell proceeds must be held by a qualified intermediary, the replacement properties of which you are thinking of buying must be identified within 45 days of the sale, and you must buy the new reinvestment property within 180 days of the sale.
MY THOUGHTS ON SELLING YOUR PROPERTY:
When you have made the decision to sell a property, be it your personal residence or an investment property, the general process I implement is to tour the property with you and research your local market to determine a reasonable market value and explain the current market conditions (is inventory low or is it a strong buyer’s market), and discuss your properties strengths and weaknesses within the market, along with possible ideas for improvements or staging you may want to consider before placing your home on the market. In any market, you want your property looking its best when buyers are viewing it!
I will review typical closing costs to get you an idea of what you would net at closing, and if all the numbers look good to you based on the current market conditions, and we are in agreement that I can help you achieve your goals and that you want to work with me, we can move forward with a listing contract for a price and terms agreed on, and I can then begin implementing a custom marketing plan for your property. This includes things like print and vast internet exposure, signage, broker tour/open houses, and may feature additional items like floor plans and a custom video tour.
My goal is to make your property sale as stress free as possible, and I’m ready to help work through any issues that arise (help obtaining bids, contractors, title work, make sure all contingency deadlines are met, negotiating on your behalf, etc.). Stark is a market leader in area listings sold, and I am confident in our ability to get your property sold as well, so contact me today to discuss your property and sales goals.