Podcast #13: Commercial Lending and Real Estate

podcast 13 commercial lending and real estate
For this podcast about commercial lending I sat down with Angie Hoffman at U.S. Bank.  During the podcast we discussed investing in real estate, commercial lending, and how commerceial mortgages can help investors.  If you want to learn more about commercial loans this is a great pdocast for you.
I hope you enjoy the podcast and find it informative.  Please consider sharing with those who also may benefit. Listen via YouTube: You can connect with Angie on LinkedIn.  You can reach out to Angie for more information on their lending products by emailing her at angela.hoffman@usbank.com.
You can connect with me on Facebook, Pinterest, Twitter, LinkedIn, YouTube and Instagram.
About the author: The above article “Podcast #12:  Hard Money Lending” was provided by Luxury Real Estate Specialist Paul Sian. Paul can be reached at paul@CinciNKYRealEstate.com or by phone at 513-560-8002. If you’re thinking of selling or buying your investment or commercial business property I would love to share my marketing knowledge and expertise to help you.  Contact me today!
I work in the following Greater Cincinnati, OH and Northern KY areas: Alexandria, Amberly, Amelia, Anderson Township, Cincinnati, Batavia, Blue Ash, Covington, Edgewood, Florence, Fort Mitchell, Fort Thomas, Hebron, Hyde Park, Indian Hill, Kenwood, Madeira, Mariemont, Milford, Montgomery, Mt. Washington, Newport, Newtown, Norwood, Taylor Mill, Terrace Park, Union Township, and Villa Hills.
TRANSCRIPT
Commercial Lending Podcast
 
Paul Sian: Hello everybody. This is Paul Sian, Realtor with United Real Estate Home Connections, licensed in the State of Ohio and Kentucky. With me today is Angie Hoffman with US Bank. Angie how are you today?
Angie Hoffman: I’m doing great Paul. How are you?
Paul Sian:  Great. Thank you for being on my podcast. We’re gonna start off. Today’s topic is ‘Commercial Lending’. Angie is a commercial lender with US Bank, as I mentioned. Angie, why don’t you tell us a little bit by your background. What you do with the US bank, and how did you get started in that field?
Angie Hoffman: Sure. So, I am a Cincinnati resident, have been my entire life. Was previously with a company called the ‘Conner group’, which is located out of Dayton, Ohio. They’re a private investment real estate firm. I was with him for about five plus years, just learned a ton of information, really loved the financing portion of their group. So, that turned me to the banking portion, which I ended up going with US Bank just because of the knowledge and the breadth of what they can do as well. Just the culture within US Bank has been phenomenal. I’ve actually been with us Bank now for five years; in the last three years I’ve been within the commercial real estate side as well as the business banking side.
Paul Sian: Okay. Your primary focus is commercial loans.
Angie Hoffman: Correct. Yes, both investment real estate as well as owner-occupied and small to medium businesses. 
Paul Sian:  Okay. The investment side, I represent a lot of buyers of multifamily. I know with the form below we do, the conventional space generally, and then when you’re in the five units and above. You go into the commercial space, which is your space. I have also heard it being covered with mixed-use buildings, industrial properties, is there something else that commercial loans would cover?
Angie Hoffman: Correct. I mean it can really be quite an array of properties, office is one that we see pretty often, and can tend to be either hot in certain areas, whether it’s office Class B or Office Class A. Retail strip centers, we’ll look at Triple Net properties, and absolute not properties. We are very popular, if you’re looking at diversifying a multi-family portfolio and adding in some triple net properties. We also do, obviously owner-occupied properties too. When you have that small business or medium business owner who wants to own their own real estate. We do that as well, and that’s again part of what my position entails, and then we will also look at portfolios will do single-family homes. 
I’m actually working with somebody now who has a portfolio of several single-family homes, that were looking to kind of restructure and refinance for him. We can even utilize current equity and properties to purchase additional properties to help you grow your portfolio. We do try to have a full understanding of your portfolio or a full understanding of what your strategy is. How partner with you, as you continue to grow that portfolio short- and long-term goals.
Paul Sian: For our listeners, who don’t know. What Triple Net means, do you mind explaining that.
Angie Hoffman:  Sure. So, Triple Net is gonna tend to be your properties that have the tenant itself is paying the taxes, the insurance, you may have some pretty minimal depending upon the property, responsibilities that are usually restricted to the exterior of the building. It may be like a roof or a parking lot. Type of maintenance but generally speaking the great thing about the triple net is that for some clients, it’s a property that you can basically own, and you have to do pretty much nothing with. So, you’re gaining that income without having to do a very minimal type of responsibility or maintenance. 
The downfall of that is that typically they’re gonna be somebody, who is gonna be a longer-term lease, which is great. However, you still have the issue that it’s a bigger square footage generally. So, five, ten, twenty thousand plus square feet. If you lose a tenant obviously, that can be very impactful. It just depends upon your, again your focus of your portfolio, and if you want to add in that. But it can be great opportunity, but tends to again be a little bit less of a return. Because of the minimal responsibilities.
Paul Sian: Going back to single family. That is similar, I am using the same term your bank use but to ‘wrap mortgage’. Is that what you use for single families?
Angie Hoffman:  We do have the ability, from the perspective of what you say wrap mortgage.  We’re typically calling that like an umbrella, if you’re grouping all, let’s call it, if there’s ten single family homes. You’re grouping this all into one, it lies together. We have the ability to do that depending again on the structure that the client is looking for. 
We also have the ability to separate out those facilities, and do a simultaneous closing for each one of them to have them separated out from each other. Obviously, there’s some contingencies but that the properties itself have to be able to cash flow by themselves, things along those lines that we would underwrite to. But we do have ability to look at it from both perspectives.
Paul Sian: Okay. The biggest advantage of that if someone has reached the maximum ten convention mortgage loanlimit. They can step into your space there and you could cover them, and they can either restart that or. With something like that, let’s say somebody does get ten properties, and are they able to finance in additional properties into that same loan or is that has to re-finance each time?
Angie Hoffman: No. We would be able to add in. I mean, if you’re asking like if they want to refinance these properties, and they’re also looking to maybe either use some of the equity in them or they’re also buying at the same time. We can do all of that together, so that’s not an issue at all.
Paul Sian: Let’s say to somebody new coming to investment. What is the typical down payment on commercial loans? That are looking to buy in the mixed-use space or multifamily space?
Angie Hoffman: So, generally speaking. We’ll go up to 80% loan-to-value. The biggest factor within that is gonna be how much the capability of the property to hold that debt. We’re gonna have, we have a pretty. I don’t want to say complex but we do have  multiple factors that go within our cash flow, and net operating, income calculation, that we’re gonna want to see. It balanced to a certain point for it to be able to hold the debt at an 80% loan to value. Again, we tend to partner with our clients. I have several clients who will send me properties on a daily basis, that they’re interested in. We will let them know what the debt capacity would be on that property.
Paul Sian: Okay. Income from the rents per sale, let’s say, something’s got a ten-unit building. Then you’re looking at the rents that are coming in. You’re also considering the buyers income level, income to debt ratio, all that as well.
Angie Hoffman: Yes. When I talk about the capacity, the debt for the property is being the one of the first things we look at is. In order to get to that 80% LTV, if you’re looking at the actual depth, they’re wanting the property to take on. Compared to other rent they’re taking in and the expenses, as well as some vacancy factors, things like that. That’s what we’re looking at to have a certain ratio, then on top of that. When we get to the next step would be look at the client globally, and their personal debt to income, and that factor too.
Paul Sian: Looking at that commercial mortgages, can buyer use the mortgage to upgrade property, to build in some equity in the property. Does the building of the equity get taken into account, and do you have a loan that allows them to do that?
Angie Hoffman: That question is kind of twofold. If you have a property, let’s say, it’s multiple unit, and you’re continuing to kind of do some improvements and renovations. If the property has the equity, we can look at small lines of credit to help with that renovation cost. Then once everything’s complete to be able to wrap that together. If you’re looking at a property that’s completely distressed, and doesn’t have any type of income. Then that’s gonna be something that generally we’re gonna have a harder time with. Because it’s a speculative type of scenario, and we want to typically see the actual income.
Paul Sian: How about converting something, I am interested in buying warehouse, either in retail space or multifamily. Do you offer products for that, or is that a similar situation when you’re looking at the risk as being a little high?
Angie Hoffman: Yes. So, that is gonna be a similar situation. Once the actual project would be completed again from a speculative standpoint, it just it becomes a little bit more difficult from a risk perspective. However, we’ve been in scenarios where we’ve worked with clients and partnered clients, people we know who work in that space more than we do. We can look to, guide them to what we would look at if we wanted to refinance that once it was completed, and there were leases in place.
Paul Sian: Okay. So, that is one of the benefits working with a big bank like US bank, is you can reach across departments there, and tap other resources within your organization.
Angie Hoffman:  Even if it’s within the organization, we have other resources whether it’s our private wealth or wealth group, have some capabilities that are different than what we have as well as from a CUI or network basis. It may be somebody just within my network that I know works within that space to introduce that way and hopefully can get that client taken care of.
Paul Sian: Are you able to comment on the underwriting process of commercial loans compared to residential. Is there a big difference in that process? 
Angie Hoffman: So, yes and no. I know we touch on it already a little bit. One of the biggest differences is obviously we’re gonna look at the actual collateral in a very different way, especially on the investment real estate side. When you’re looking at investment real estate, the factors that the net operating income as well as the cash flow of the property become factors. Whereas, when you’re buying a home, obviously it’s a lot more about the loan to value of the property. However on the other side of that, if we are looking at a property that’s gonna be owner occupied by a small to medium business. It becomes a lot more about the loan-to-value as well. So, it can depend upon the situation.
Paul Sian: Okay. How important is the person’s experience when they come to loan, get a loan for you. If it’s a new first-time investor looking at multi families versus somebody who’s already got five to ten units and then either self-managing or running it for a couple years.
Angie Hoffman: I mean, generally speaking, if you have somebody brand new, one of the biggest things is if you’re not familiar in the scope. You don’t have experience, you gonna be partnering  potentially with a property management company or somebody else who is maybe a partnership within the LLC or the property that you’re buying that has the experience. Just being able to show you may not have previous experience in this but you are partnering with a property management company that has historical success in these properties. You’re partnering with somebody, for instance, who has historical success in the properties.
Paul Sian: So, yeah boils down to your team then. What you’re bringing to the team. What kind of document requirements are there to start a commercial loan process with US bank?
Angie Hoffman: Generally speaking, in every situation is different, every request is different, client is different. But it’s typically going to be two to three years of taxes, personal and business, personal financial statements pretty standard as well. If it’s a purchase, we’re gonna want to see a purchase agreement or understand the purchase agreement as well. As you’re gonna want to have financials whether it’s profit loss or the rent rolls preferably a Schedule E or 8852 from the client. Showing what the historical trends of that property of have been. That’s where we really try and partner with our clients of understanding their portfolios, understanding what purchase they’re trying to make. So, that, does it fit, and is there anything we see because we see them on a very regular basis that. Maybe we need to discuss or let the client know that we are suggesting maybe prying a little bit more information.
Paul Sian: How important is ones credit score when they come to apply for loan with you?
Angie Hoffman: It is a factor, I mean. In any type of just like the traditional mortgage, it is gonna be a factor. But there are so many different factors that, it’s only one of many.
Paul Sian: One of the important things when it comes to purchasing real estate is I always tell the buyers that have a pre-approval letter ready. Is there something similar in the commercial loans place? A pre-approval letter, pre-qualification letter. Just something that says, somebody sat down with you, they started the initial process. They’ve got access to certain amount that they can borrow to purchase this property. Do you have something like that?
Angie Hoffman: We do. So, on the commercial side it’s gonna be called a letter of interest, and it basically lays out that we are working with a client. We have a price range or up to a price range that we’re looking for with the client, and depending upon the collateral. We are looking to work with him on the financing, again depending upon what the collateral is, and then we also have once we’ve actually maybe gone through a more official process of underwriting and submitted an actual financial package. We do have, depending again on what the financing contingency is for that client. 
We do have a letter of commitment, which lays out that there is an approval but it goes through all of the conditions as well like your appraisal certain things like that, that we’re gonna have to clear.
Paul Sian: Okay. How long does that process take? If you are writing an offer today for a client, and then usually you have to write in how many days we’re gonna close in. 30 days, 40 to 45 days. I know conventional, it’s usually a little quicker, a little easier. So, we can do it in 30 days or so. I mean, what would you recommend for a commercial loan?
Angie Hoffman: I think 45 days is very practical. One of the biggest things that I always talk about with my clients is that 45 days really is incumbent of me having a full financial package, meaning those two years of tax returns. The financials, I spoke about from the client that you’re purchasing, and or if you’re refinancing. To me, having that full financial package is really the key and then, again from there it’s gonna be some of the factors of the appraisal as well as the title work that would go along with it. But generally speaking, 45 days to close is pretty.
Paul Sian: Reasonable.
Angie Hoffman: Yes.
Paul Sian: You mentioned the documents that was my blog article documents for the conventional mortgage process. You mentioned W2s, 1040, tax returns, that is pretty similar the document requirements for commercial loans that it is for residential space?
Angie Hoffman: Yes. It’s very similar. With the PFS is gonna be one of the biggest as well as the two years of tax returns. Potentially three years depending upon, again the request size. Like you said, I mean, if they’re a W2 income type of employee, then we may need additional pay stubs. like I said, for any client, it could be very different depending again on what their history is. If they’re a business owner, then we may mean some more details but generally speaking, again it would be two to three years of personal business has returns, personal financial statement, and potentially obviously purchase agreement or additional documentation from that side.
Paul Sian: Okay. When it comes to partnership, people coming together, those documents from everybody. Correct?
Angie Hoffman: Correct. So, depending on what the ownership structure is. Generally, if somebody’s over 20% ownership within the property, then we’re going to need that financial information from them as well.
Paul Sian: Okay. I know with the conventional space. Lending into an LLC is generally impossible. Most lenders will not allow conventional borrowers to use an LLC. How does that work on the commercial side?
Angie Hoffman: The vast majority of the lending that I do is going to be through an LLC in a holding company. The clients are still a personal guarantor but the lending itself in the title is all within the LLC.
Paul Sian: Is it a requirement in LLC or is it an option for the buyer?
Angie Hoffman: It’s an option. I mean, one that again depending from an attorney’s perspective, if you’re talking about liability. It may be a best-case scenario to have an LLC with that property. But we always reference stuff talk to your attorney about what makes sense for you.
Paul Sian: How much, do you have any minimum loan requirements and your maximum loan requirement?  
Angie Hoffman: Up to ten million on the investment real estate side, and then once it’s beyond that, we do have a commercial group that we would work with a real estate group as well as our middle marker group that would potentially be involved. As far as minimum typically, again if it’s under 2,50,000. It’s still something that we would do. It just, we pull in a different partner to work with us on that too, because it kind of goes into a little bit different of a space.
Paul Sian: Is there, under 250,000$ or is there a lower minimum. I know some conventional lenders won’t touch anything fifty thousand and under.
Angie Hoffman: It’s pretty common. Yes, under fifty thousand is gonna be a little bit more difficult. 
Paul Sian: 50,000 to 2,50,000, and above that.
Angie Hoffman: But keep in mind too. I mean, if you have properties itself. It may be again, you see this more with the single-family home portfolios. You may have multiple properties that are under fifty thousand. But we’re looking at the entirety of the portfolio, makes a little bit different of a scenario. I would caution that anything that somebody is looking at from the perspective of either total lending amount or even individual property. We’re happy to take a look at it, have an understanding of what you’re looking to do, and if for some reason it’s not something that is in our world necessarily. Again, from an internal and external standpoint. We typically have somebody who I can contact.
Paul Sian: Discussing interest rates from general perspective, everybody’s situation is different and unique. But in terms of paying more, having a lower LTV, 60% LTV rather than 80%. People get themselves a better interest rate or is it generally, can we same and more just depending on credit and history.
Angie Hoffman: So, from an interest rate standpoint, the commercial side is a little bit different. Then maybe the mortgage or lines of credit side, then you then you generally see. Ours is based off of what banks cost the funds are, and then there is a spread that is on top of that. That’s where you get the percent from. Right now, cost of funds are pretty minimal. So, interest rates are extremely competitive. But from that perspective, it doesn’t necessarily factor in the actual loan it saw or the guarantor itself or the property itself.
Paul Sian: So, there’s some risk-based consideration towards interest rates. I guess a little higher risk project is that something you would price a little higher in the interest rate or generally that it’s not considered as much?
Angie Hoffman: No. That’s not considered as much, generally.
Paul Sian: Okay. Great. That’s all the questions I have for you today Angie. Did you have any final thoughts to share with the group?
Angie Hoffman: Sure. One thing I would say is if anybody has any questions about property specific, cash flow, if this property may fit into their portfolio or something that we would look to land up to 80%.I’m happy to partner with anybody on that side as well, and be resource for them. On top of that, I did want to mention that obviously US Bank is across the country. That gives us the ability even, if I’m your contact in Cincinnati to lend out-of-state borrowers.
I’ve worked with quite a few clients obviously from California that are buying in Cincinnati as well Chicago. So, those are people that I’ve worked with quite frequently as well.
Paul Sian: That is perfect. I’ve got a number of out of state clients to. That is one of the biggest challenges that I’ve faced with some local lenders is that they don’t lend to out of state. That’s a great ability to have.
Angie Hoffman: So, the key with in that too is just as I want to mention too. I mean, anytime that scenario comes up. We are happy to discuss it. One of the biggest factors with out-of-state lenders is that we do look for them to be within US bank footprint. So, we are very much on the west coast and Portland, all of those areas. If they’re somewhere you’re not familiar, if we’re within that area, please reach out. Let me know, and I’m happy to take a look.
Paul Sian: Great. Thank you again. I will leave your contact information on my blog post once it gets published live. Thanks again for being on the podcast.
Angie Hoffman: Thanks for having me. 

Source: cincinkyrealestate.com

What the Flip? A 1909 Family Home Is Fully Restored and Grabs Top Dollar

realtor.com

Flipping a house is a lot of work, and can yield a big profit. But not every project is guaranteed to be lucrative. So what’s the key to successfully making over a fixer-upper and selling it for a gain? Our new series “What the Flip?” presents before and after photos to identify the smart construction and design decisions that ultimately helped make a house desirable to buyers.

Oklahoma City is an alluring place for home buyers these days. Its cost of living is low, there are plenty of opportunities for work and play, and you get the pace of city life with the quiet of the country nearby.

With a median listing price of $225,000, Oklahoma City is certainly a place to score a sizable single-family home for a reasonable chunk of cash, but finding an age-old property with good bones is a challenge. So when our flippers stumbled upon this four-bedroom, three-bathroom home from the early 1900s—in one of the city’s most prestigious and historic neighborhoods—they jumped.

Sure, the home wasn’t exactly in great shape, but that’s where the flip comes in. This old home went from drab and dusty to absolutely fabulous. It was purchased in July 2018 for $325,000, and in September 2019 it was sold again, for $642,000. The sellers doubled their money in just over a year—a result that any flipper could hope for.

So what made this such a successful flip? We turned to our experts to uncover the winning design and home improvement moves.

Living room

The living room is often the first space buyers see when they enter the home, so bringing this room up to date was key. The original room felt dark, dirty, and cramped, so the sellers had a big project on their hands.

“Lighting is key to this room,” says Malissa Kelsch, real estate adviser with Red Rock Real Estate. “Removal of window coverings and additional can lights deliver a distinctive sensation of relaxation.”

“They resurfaced the walls, which was a great choice to make the walls feel like new construction,” adds architect and interior designer Alondra Alberti. “The light paint and blond floor stain showcase how large the space actually is.”

But one of the most impactful changes was simply the removal of the accordion doors leading to the kitchen.

“The living room seamlessly flows into the kitchen to make it a perfect home for entertaining,” adds real estate agent Sarah Bernard. “This is the open, bright look that buyers today are demanding in new construction, so to renovate with this in mind makes lots of sense.”

Office

Previously, the home office looks like a strange afterthought. The flip transformed it into a gorgeous, usable room.

“Home offices are one of the most sought-after spaces in our current climate of working and teaching kids remotely,” says Bernard. “The new floor, lighting, and open, sleek modern space with windows make this a strong selling point for busy buyers.”

“The hardwood floors throughout facilitate the visual flow between spaces, creating a more harmonious relationship between the office and the rest of the house,” says Alberti. “I also love the contrast of the black-matte stair raisers and wooden handrails. It provides a sophisticated rustic appeal that a lot of buyers look for in a home.”

Kitchen

“It looked like a sad little kitchen crying in the corner,” Alberti says of the pre-renovation space. But the flip made a huge difference in this all-important room.

“They have repositioned and expanded the kitchen, creating an open concept tied in by a beautiful, massive island that not only provides contrast but also bar seating,” Alberti explains. “They did a great job combining different materials and textures. … It’s a design risk that elevates the home.”

Kelsch says the new kitchen is definitely more appealing to potential buyers.

“Additional usable counter space, storage, and lighting make this a desirable kitchen and a ‘wow’ feature in the home,” she says.

Bathroom

The old bathroom in this home was like a walk back in time, but not in a good way.

“The wallpaper and the top-and-bottom built-in cabinets made the space feel enclosed and restricted,” says Alberti. “The old shower doors are always a must-go—they have had their run for far too long.”

The updated bathroom now feels warm and welcoming.

“The shower wall niche was a particularly nice touch because it provides practicality to the user,” adds Alberti. “Those kinds of details are never overlooked by buyers.”

Bernard agrees: “The new, beautiful bath lets in natural light for the tranquility that homeowners want in their bathrooms,” she says. “The updated shower and more functional and modern vanity feel clean and fresh compared to the original.”

Bedroom

From the gray wall-to-wall carpet to the heavy drapes, can we all just agree that the old bedroom was the stuff of nightmares?

“The new bedroom sheds pounds of darkness that were exhibited in the old carpeting and bulky cabinets,” says Bernard. “The white walls and wonderful new windows are inviting in a room that anyone can envision themselves waking up in. This is a luxury look that buyers in all price ranges desire.”

“This bedroom has had a complete turnaround. The new vaulted ceiling helps make the room feel more spacious, and removing the cabinetry opens up the room,” says Kelsch. “Bringing in as much natural light as possible by taking down dated old drapes and updating furnishings and fixtures will bring top dollar to this house.”

The post What the Flip? A 1909 Family Home Is Fully Restored and Grabs Top Dollar appeared first on Real Estate News & Insights | realtor.com®.

Source: realtor.com

5 Key Property Features When House Hunting

5 Key Property Features When House Hunting

When shopping for a home, many of us know our basic focal points, such as identifying the right neighborhood or finding a house with the ideal number of bedrooms and bathrooms. These factors are important, but there are other home features (some very large and some very small) that can greatly contribute to the enjoyment of your new home. Let’s make sure you don’t miss any of them.

Here are five opportunities to maximize the benefits of your purchase that go beyond just the house and why each one deserves your consideration.

click to enlarge

Home Buying Consideration #1: The Garage

Garages are a very important feature for many homebuyers, and can even end up being a dealbreaker for some buyers. More than a parking spot, garages provide valuable storage and project space, as well as a way to protect your vehicles from all types of damage. When you are first shopping for a home, you may know that you want a garage, but you may not have considered all of the variables that go into the garage design, and which choice is right for you.

Garage Design: Why it Matters

When evaluating garage design, it’s important to start by considering what you may want to use the space for, and what external factors (such as weather) might impact your use. Here are several major garage design aspects to keep in mind as you house hunt.

Rental space: Depending on the size and layout of your garage, is there space that could be rented out full time, or used as a short-term rental to generate additional income? That extra income could be directed towards your mortgage payment.

Storage opportunities: Does the garage have room to store what you need to reduce in-home clutter? Is there space for shelves, or even room in the rafters?

Potential property value increase: According to the sales comparison approach (SCA), one of the most recognizable forms of valuing residential real estate, a “finished” garage that feels like an extension of the home’s indoor living space is one of several features that can increase overall home value. You may also want to consider the possibilities of eventually remodeling a bland garage in an otherwise perfect home.

Attached vs. Detached Garages: Pros vs. Cons

One of the biggest distinctions in garage design is whether a garage is attached or detached. Often influenced by lot shape (narrow lots on an alley often have detached garages, wider lots with a driveway often have attached garages) or the age of a home, having a detached or attached garage has both advantages and disadvantages.  

Attached Garages: Pros

  • Convenient access to your cars, storage, and other items, particularly if you live in an area with an extreme climate 
  • Attached garages are often less expensive to build, and can be climate controlled by accessing the electrical and HVAC systems that are part of the home
  • As attached garages are the most popular type of garage, having one typically increases the value of your home

Attached Garages: Cons

  • If you’re thinking of adding one, it may not be possible to fit on a narrow, urban lot
  • Since they offer direct access to the home, they can be a security and fire risk  
  • They can be hard to add onto or expand, and any additions or changes might require more expensive permits and extensive inspections
  • Adding an attached garage, particularly to a vintage home, may look strange or otherwise detract from the exterior look of the home
  • Noisy garage activities may be heard more inside the home

Detached Garages: Pros

  • More flexibility in size, layout and location, lot size and shape permitting
  • It’s easier to add room for cars, storage, and projects, and to add onto if needed
  • Less fire and security risk to your home 
  • Less of an impact to the look or curb appeal of your home
  • Can increase the resale value of your home

Detached Garages: Cons 

  • Particularly in bad weather, less convenient in terms of access 
  • Will require separate utilities, HVAC, and more
  • May not be allowed by your HOA or city permitting office

Now that we’ve examined the garage, let’s take a look at another key feature — what’s going on with the front and backyard?

Home Buying Consideration #2: The Yard

No longer limited to just a lawn, yards have now become an extension of the home. A convenient, well-designed outdoor living space is something that many homeowners desire. Yards can be great spaces for entertaining and are often much less expensive to create than comparable indoor entertaining spaces. Here are some important yard elements to consider. 

Trees and landscaping: Important for both aesthetic and practical reasons, trees and landscaping can increase your yard’s appeal. A mature, well-designed landscape is valuable, as it represents an investment of both time and money. 

Outdoor kitchen: Whether you are grilling for two or entertaining 200, an outdoor kitchen makes cooking fun and convenient. 

Fireplace or fire pit: This stylish focal point makes it easy to keep enjoying your yard, even after dark or in cooler weather. 

Automatic sprinklers, drip system, and misting system: Automatic sprinklers and drip systems can keep your yard looking lush for a low cost, and are particularly valuable in dry climates. Misting systems can also keep you cool on hot days. 

Deck or Patio: A stylish outdoor surface makes it easy to enjoy your yard, and many new construction materials require little to no maintenance. 

Shed: Well-designed sheds can go beyond storage, offering everything from a private workspace to extra space for guests to sleep. 

So, you’re considering the finer points of a yard. But what about adding a body of water to that yard for cooling off on hot days? Here’s the pros and cons of investing in a water element for your next home.

Just starting your home search? Here’s the best time to begin.

Home Buying Consideration #3: The Pool

Pools and hot tubs are perhaps the most controversial of all outdoor home features. Some homebuyers totally avoid them, and some won’t look at a house without them. Which side are you on? Here are some factors to consider. 

Backyard Pool and Hot Tub: Pros 

  • Pools and hot tubs can be aesthetically pleasing
  • Both are also useful for entertaining
  • In warmer climates, pools can provide a way to enjoy the outdoors comfortably
  • If you like to swim, engage in other aquatic exercises regularly for fitness, or use a hot tub for muscle and joint pain, having your own can be convenient
  • In hot climates where pools are common (i.e., Arizona, California, Florida), having a pool can significantly increase the resale value of your home 

Backyard Pool and Hot Tub: Cons

  • Both pools and hot tubs require regular maintenance that includes chemicals, cleaning, and repair
  • Many families with small children do not want a pool at home due to safety concerns
  • Your insurance cost may be higher, and your utility bills may go up as well, particularly for heating a pool 
  • When it is time to sell your home, there are many buyers who will not want a house with a pool

A pool is a big decision that comes with both maintenance and benefits alike. You can always opt for a different kind of water feature, like a backyard stream. But if you’re looking to streamline your life, investing in home tech devices is almost a no-brainer.

Home Buying Consideration #4: The Appliances and Tech Gadgets

As technology improves and designs continually evolve, having up-to-date appliances and other devices in your home has become increasingly important. For example, while attractive kitchens are near the top of many house-hunters’ wish lists, there are items within those kitchens that can help — and items that can hurt — when it comes to increasing a home’s value.

Appliances That Can Help Property Value

Commercial-grade appliances: Particularly in high-end properties, many buyers expect to see appliances from luxury or professional brands. 

Smart devices: Thermostats, fire detectors, carbon monoxide detectors, security cameras, door locks, and doorbells are just a few of the relatively new smart home devices that homebuyers are now beginning to appreciate and even expect.

Appliances That Can Hurt Property Value

Old and energy inefficient: These power-sucking products will cost you in both your utility bill, and the resale value of your home. 

Homes totally lacking certain appliances: Is your property missing a dishwasher, indoor laundry, or other key features? This can be a major turn-off for buyers who don’t want to have to complete a complicated remodeling and installation project. 

Mismatched appliances: Appliances from different eras or in different colors can make your kitchen look unfinished and low-quality, even if your other finishes are fantastic.

Looking to stock up on home amenities? We’ve targeted the seasonal best deals for doing so.

Now that you’ve considered the key interior and exterior components of your dream home, there’s one last important element to contemplate: the driveway.

Home Buying Consideration #5: The Driveway

Walkways and driveways connect your home to the outside world and play a crucial role in the curb appeal of your residence. Although often overlooked, they are important home features that can be messy and expensive to replace or update. 

If you are evaluating the driveway at a potential home, or considering an update at your current home, the first choice you will need to make is whether you want asphalt or concrete. Both have benefits and drawbacks that may vary depending on your climate, landscape, and usage needs.

Today, many homeowners and buyers are also looking for something beyond the basics, with driveway design trends including elaborate paving materials, irregular shapes, and additional features like extra parking for guests.

Know the Tricks, Now Land the House

Although these five features may not be your first considerations in the house-hunting process, they are important elements that you will use or interact with nearly every day. Add them to your consideration list, and you will be sure to end up in a customized home that you enjoy and treasure. If you’ve found your ideal home with all the right features, reach out to a PennyMac Loan Officer today or apply online to get pre-approved for the loan that’s right for you.

Source: pennymacusa.com

Let the Roaring 2020s Begin

First some great news: because of your support in reading and sharing this blog, it has been able to earn quite a lot of income and give away over $300,000 so far.

The latest $100k of that happens at the end of this article. Please check it out if you want to feel good, learn more, and even join me in helping out the world a bit.

As I type this, there are only a few days left in the 2010s, and holy shit what a decade it has been.

Ten years ago, a 35 year old MMM and the former Mrs. MM were four years into retirement, but not feeling very retired yet. We stumbled out of 2009 with a precious but very high strung three-year-old, a house building business that was way more stressful than it should have been, and a much more rudimentary set of life skills. It was a time of great promise, but a lot of this promise was yet to be claimed.

Ten years later, despite the fact that I have one less marriage, one less surviving parent, and ten years less remaining youth, I am in an even better place in life right now, and would never want to trade places with the 2009 version of me. And on that measure alone, I can tell it has been a successful decade.

This is a great sign and it bodes well for early retirees everywhere. Compared to the start of the decade, I am healthier and stronger physically, wealthier financially, and (hopefully) at least a bit wiser emotionally. I’ve been through so much, learned so much in so many new interesting fields, and packed so much living into these 3653 days. A big part of that just flowed from the act of retiring from my career in 2005, which freed me up to do so many other things, including starting this blog.

It has not always been easy, in fact the hard times of this decade have been some of the hardest of my life. But by coming through it all I have learned that super difficult experiences only serve to enrich your life even more, by widening your range of feelings and allowing you to savor the normal moments and the great ones even more.

Ten Years of Learning in Three Points

I think the real meaning of “Wisdom” is just “I’ve seen a lot of shit go down in my lifetime and over time you start to notice everything just boils down to a few principles.

The books all say it, and the wise older people in real life all say it too. And for me, it’s probably the following few things that stand out the most:

1) This Too Shall Pass: nothing is as big a deal as you think it is at the time. Angry or sad emotions from life traumas will fade remarkably quickly, but so will the positive surprises from one-time life upgrades through the sometimes-bummer magic of Hedonic Adaptation. What’s left is just you – no matter where you go, there you are.

2) But You Are Really Just a Bundle of Habits: most of your day (and therefore your life) is comprised of repeating the same set of behaviors over and over. The way you get up, the things you focus your mind on. Your job. The way you interact with other people. The way you eat and exercise. Unless you give all of this a lot of mindful attention and work to tweak it, it stays the same, which means your life barely changes, which means your level of happiness barely changes.

3) Change Your Habits, Change your Life: Because of all this, the easiest and best way to have a happier and more satisfying life is to figure out what ingredients go into a good day, and start adding those things while subtracting the things that create bad days. For me (and quite possibly you, whether you realize it or not), the good things include positive social interactions, helping people, outdoor physical activity, creative expression and problem solving, and just good old-fashioned hard work. The bad things mostly revolve around stress due to over-scheduling one’s life, emotional negativity and interpersonal conflict – all things I am especially sensitive to.

So while I can’t control everything, I have found that the more I work to design those happiness creators into my life and step away from things that consistently cause bad days, the happier and richer life can become.

Speaking of Richer:

I recently read two very different books, which still ended up pointing me in the same direction:

This Could Be Our Future, by former Kickstarter cofounder and CEO Yancey Strickler, is a concise manifesto that makes a great case for running our lives, businesses, and even giant corporations, according to a much more generous and person-centric set of rules.

Instead of the narrow minded perspective of “Profit Maximization” that drives so many of the world’s shittier companies and gives capitalism a bad reputation, he points out that even small changes in the attitude of company (and world) leaders, can lead to huge changes in the way our economy runs.

The end result is more total wealth and happier lives for all of us – like Mustachianism itself, it really is a win/win proposition rather than any form of compromise or tradeoff. In fact, Strickler specifically mentions you and me in this book, using the FIRE movement as an example of a group of people who have adopted different values in order to lead better lives.

Die with Zero*, by former hedge fund manager and thrill seeking poker champion Bill Perkins sounds like a completely different book on the surface: Perkins’ point is that many people work too long and defer too much gratification for far too long in their lives.

Instead, he encourages you to map out your life decade by decade and make sure that you maximize your experiences in each stage, while you are still young enough to enjoy each phase. For example, do your time in the skate park and the black diamond ski slopes in your 20s and 30s, rather than saving every dollar in the hopes that you can do more snowboarding after you retire in your 60s.

Obviously, as Mr. Money Mustache I disagree on a few of the finer points: Life is not an experiences contest, you can get just as much joy from simpler local experiences as from exotic ones in foreign lands, and spending more money on yourself does not create more happiness, so if you die with millions in the bank you have not necessarily left anything on the table. But it does take skill to put these truths into practice, and for an untrained consumer with no imagination, buying experiences can still be an upgrade over sitting at home watching TV.

However, he does make one great point: one thing you can spend money on is helping other people – whether they are your own children, family, friends, or people with much more serious needs like famine and preventable disease.

And if you are going to give away this money, it’s better to do it now, while you are alive, rather than just leaving it behind in your estate, when your beneficiaries may be too old to benefit from your gift anyway.

So with this in mind, I made a point of making another round of donations to effective causes this year – a further $100,000 which was made possible by some unexpected successes with this blog this year, combined with finding that my own lifestyle continues to cost less than $20k to sustain, even in “luxury bachelor” mode.

And here’s where it all went!

$80,000 to GiveWell, who will automatically deliver it to their top recommended charities. This is always my top donation, because it is the most serious and research-backed choice. This means you are very likely doing the most good with each dollar, if your goal is the wellbeing of fellow human beings. GiveWell does constant research on effective charities and keeps an updated list on their results – which makes it a great shortcut for me. Further info in my The Life You Can Save post.

Strategic Note: I made this donation from my Betterment account where I keep a pretty big portion of my investments. This is because of tax advantages which multiply my giving/saving power – details here at Betterment and in my own article about the first time I used this trick.

$5000 to the Choose FI Foundation – this was an unexpected donation for me, based on my respect for the major work the ChooseFI gang are doing with their blog and podcast and meetups, and their hard-charging ally Edmund Tee who I met on a recent trip. They are creating a curriculum and teaching kids and young adults how to manage their money with valuable but free courses.

$2000 to the True Potential Scholarship Fund, set up by my inspiring and badass Omaha lawyer friend Ross Pesek. Ross first inspired me years ago by going through law school using an extremely frugal combination of community and state colleges, then rising to the top of the pack and starting his own firm anyway. Then he immediately turned around and started using some of the profits to help often-exploited immigrant workers in his own community with both legal needs and education.

$1000 to plant one thousand trees, via the #teamtrees effort via the National Arbor Day Foundation. I credit some prominent YouTubers and Elon Musk for promoting this effort – so far it has resulted in over 20 million trees being funded, which is a lot (roughly equal to creating a dense forest as big as New York City)

$5000 to Bicycle Colorado – a force for change (and sometimes leading the entire United States) in encouraging Colorado leaders and lawmakers to shift our spending and our laws just slightly away from “all cars all the time” and towards the vastly more effective direction of accommodating bikes and feet as transportation options. Partly because of their work, I have seen incredible changes in Denver, which is rapidly becoming a bike utopia. Boulder is not far behind, and while Longmont is still partially stuck in the 1980s as we widen car roads and build even more empty parking lots, these changes slowly trickle down from leaders to followers, so I want to fund the leaders.

$5000 (tripled to $15,000 due to a matching program that runs until Dec. 31) to Planned Parenthood. Although US-centric, this is an incredibly useful medical resource for our people in the greatest need. Due to emotional manipulation by politicians who use religion as a wedge to divide public opinion, this general healthcare organization is under constant attack because they also support women’s reproductive rights. But if you have a loved one or family member who has ever been helped during a difficult time by Planned Parenthood, you know exactly why they are such an incredible force for good – affecting millions of lives for the better.

And finally, just for reasons of personal and local appreciation, $1000 to the orchestra program of little MM’s public middle school. I have been amazed at the transformation in my own son and the hundreds of other kids who have benefited from this program. They operate a world-class program on a shoestring (violin-string?) budget which they try to boost by painstakingly fundraising with poinsettia plants and chocolate bars. So I could see that even a little boost like this could make a difference. (He plays the upright bass.)

You could definitely argue that there are places that need money more than a successful school in a wealthy and peaceful area like Colorado, and I would agree with you. Because of this, I always encourage people not to do the bulk of their giving to local organizations. Sure, it may feel more gratifying and you may see the results personally, but you can make a much bigger difference by sending your dollars to where they are needed the most. So as a compromise, I try to split things up and send the lion’s share of my donations to GiveWell where they will make the biggest difference, and do a few smaller local things here as a reward mostly for myself.

So those are the donations that are complete – $99,000 of my own cash plus an additional $10,000 in matching funds for Planned Parenthood. But because environment and energy are such big things to me, I wanted to do one more fun thing:

$5000 to build or expand a local solar farm.

This one is more of an investment than a donation, but it still does a lot of good. Because if you recall, last year I built a solar array for the MMM Headquarters coworking space, which has been pumping out free energy ever since. My initial setup only cost me $3800 and it has already delivered about $1000 in free energy, more than the total amount used to run the HQ and charge a bunch of electric cars on the side.

So, I plan to invest another $5000, to expand the array at HQ if possible, or to build a similar one on the roof of my own house, possibly with the help of Tesla Energy, which is surprisingly one of the most cost-effective ways to get solar panels installed these days. These will generate decades of clean energy, displacing fossil fuels in my local area while paying me dividends the whole time, which I can reinvest into even more philanthropy in the future.

What a great way to begin the decade. Let’s get on it!

* Die With Zero is not yet released, but I read a pre-release copy that his publisher sent me. The real book comes out on May 5th

** Also, if you find the scientific pursuit of helping the world as fascinating as I do, you should definitely watch the new Bill Gates documentary called Inside Bill’s Brain, which is available on Netflix.

Source: mrmoneymustache.com

Wealth Tax: Definition, Examples, Pros and Cons

Man holding large wad of bills

A wealth tax is a type of tax that’s imposed on the net wealth of an individual. This is different from income tax, which is the type of tax you’re likely most used to paying. The U.S. currently doesn’t have a wealth tax, though the idea has been proposed more than once by lawmakers. Instituting a wealth tax could help generate revenue for the government but only a handful of countries actually impose one.

Wealth Tax, Definition

A wealth tax is what it sounds like: a tax on wealth. This can also be referred to as an equity tax or a capital tax and it applies to individuals.

More specifically, a wealth tax is applied to someone’s net worth, meaning their total assets minus their total liabilities. The types of assets that may be subject to inclusion in wealth tax calculations might include real estate, investment accounts, liquid savings and trust accounts.

A wealth tax isn’t the same as other types of tax you’re probably familiar with paying. For example, you might be used to paying income tax on the money you earn each year, self-employment tax if you run a business or work as an independent contractor, property taxes on your home or vehicles and sales tax on the things you buy.

Instead, a wealth tax has just one focus: taxing a person’s wealth. According to the Tax Foundation, only Norway, Spain and Switzerland currently have a net wealth tax on assets. But a handful of other European countries, including Belgium, Italy and the Netherlands, levy a wealth tax on selected assets.

How a Wealth Tax Works

Uncle Sam picks a rich man's coat pocketGenerally, a wealth tax works by taxing a person’s net worth, rather than the income they earn in a given year. In countries that impose a wealth tax, the tax is only levied once assets reach a certain minimum threshold. In Norway, for instance, the net wealth tax is 0.85% on stocks exceeding $164,000 USD in value.

Wealth taxes can be applied to all of the assets someone owns or just some of them. For example, the wealth tax can include securities and investment accounts while excluding real property or vice versa.

Every country that imposes a wealth tax, whether it’s a net tax or a tax on selected assets, can set the tax rate differently. It’s not uncommon for there to be exemptions or exclusions to who and what can be taxed this way.

A wealth tax can be charged alongside an income tax to help generate revenue for the government. The wealth tax rates are typically lower than income tax rates, in terms of the actual percentage rate, but that doesn’t necessarily mean paying less in taxes. Someone who has substantial assets that are subject to a wealth tax, for instance, may end up paying more toward that tax than income tax if they’re able to reduce their taxable income by claiming tax breaks.

Is a Wealth Tax a Good Idea?

In countries that use a wealth tax, the revenue helps to fund government programs and organizations. In some places, such as Norway, revenue from the wealth tax is split between the central government and municipal governments. It would be up to the federal government to decide how wealth tax revenue should be allocated if one were introduced here.

In the U.S., the concept of a wealth tax has been used to argue for a redistribution of wealth. Or more specifically, lawmakers who back the tax have suggested that it could be used to more fairly tax the wealthy while relieving some of the tax burdens on lower and middle-income earners. While wealthier taxpayers may take advantage of loopholes to minimize income taxes, a wealth tax would be harder to work around, at least in theory. That could yield benefits for less wealthy Americans if it means they’d owe fewer taxes.

That sounds good but implementing and collecting a wealth tax may be easier said than done. It’s possible that even with a wealth tax in place, high-net-worth and ultra-high-net-worth taxpayers could still find ways to minimize the amount of tax they’d owe. And the tax itself could be seen as unfairly penalizing wealthier individuals who own charities or foundations, invest heavily in businesses or save and invest their money instead of using it to buy things like luxury cars, expensive homes or other physical assets.

It’s important to keep in mind that a wealth tax is targeted at people above certain wealth thresholds, so most everyday Americans wouldn’t have to pay it. But it could cause problems for someone who unexpectedly receives a large inheritance that increases his wealth, even if his income remains at the lower end of the scale.

The Bottom Line

Rich man in his private jet

In the U.S., the wealth tax is still just an idea that’s being floated by progressive politicians and lawmakers. Whether a wealth tax is ever implemented remains to be seen and it’s likely that debate over it may continue for years to come. And enforcing one could be difficult if it were ever introduced, if for no other reason than there are many ways for the extremely wealthy to avoid taxes. In the meantime, talking with a tax professional may be the best way to manage your own personal tax liability.

Tips on Taxes

  • Consider talking to your financial advisor about the best ways to handle taxes as you grow an investment portfolio. If you don’t have a financial advisor yet, finding one doesn’t have to be complicated. SmartAsset’s financial advisor matching tool can help you connect with professional advisors online. It takes just a few minutes to get your personalized financial advisor recommendations. If you’re ready, get started now.
  • Managing taxes is an important part of growing wealth and creating an estate plan. The less you pay in taxes, the more money you have to save and invest toward establishing a legacy of wealth. A free income tax calculator is a good way to start figuring what you owe or to get confirmation that  your calculations are correct.

Photo credit: ©iStock.com/Serhii Sobolevskyi, ©iStock.com/svengine, ©iStock.com/FG Trade

The post Wealth Tax: Definition, Examples, Pros and Cons appeared first on SmartAsset Blog.

Source: smartasset.com

This Stylish Treehouse Is Luxury Off-the-Grid Living

Kati O’Toole and her husband, Darin, wanted to create a giant piece of artwork on their private and heavily wooded seven-acre property in Montana. They ended up with what they refer to as the Montana Treehouse Retreat – a two-story, fully finished treehouse nestled among three living trees.

“Everybody thought we were crazy [at] the beginning, like ‘What are you guys doing building a treehouse here?’ Our parents thought we were crazy,” says Kati.

But the hard work and vision paid off, and now visitors from all over the world routinely come to stay at their carefully crafted work of art. The 700-square-foot treehouse features a master suite with a deck that overlooks the forest, a living area with three benches that can double as sleeping quarters, and two bathrooms. Guests can also prepare a meal in the treehouse’s downstairs kitchen, complete with a refrigerator, a stove, a sink and a dishwasher.

“There’s even air conditioning in this treehouse, because we wanted to create a very luxury experience here. I have to be honest – the treehouse is nicer inside than the house that I live in, so I like to come back here and just have a little retreat away from it all,” says Kati.

Every detail of the treehouse was painstakingly thought out, and most of the materials were either sourced locally or repurposed. The trim and the interior feature wood that Darin himself milled, sanded and finished, and the breakfast table nook was made from the base of a tree located right on their property.

One of Kati’s favorite details of the treehouse, however, is the spiraling exterior staircase, which is wrapped around a large tree shipped in from Darin’s grandmother’s yard, roots and all.

Although Darin handled most of the heavy-duty construction of the structure, Kati’s handiwork is all over the interior.

“We wanted it to be kind of funky and modern – but still have some Montana accents and still be a little rustic too. So there were many things coming into play, and we wanted people to feel like it was a very cozy home away from home when they came here, and just like a one-of-a-kind Montana experience,” she says.

A combination of white shiplap and multicolored wood paneling covers the interior walls, giving the home an eclectic yet polished farmhouse look, and expansive windows create an open, airy feeling in the small living spaces. Modern elements that are dotted throughout the house, like the industrial chandelier in the kitchen and the black hexagon and subway tiles in the bathrooms, are more reminiscent of a boutique hotel than a remote treehouse located near Glacier National Park.

Close to Kati’s heart are the pieces by local artists that don the walls, with some of the pieces coming from guests who created the artwork while staying at the treehouse.

“It’s been really cool to see [how] this place inspires people,” she says.

But the defining characteristic of this home – and what guests travel miles for – is the unique experience of living out your childhood dreams of sleeping in a treehouse.

“It’s a very unique feeling that most people have never experienced, to be lying in bed and seeing a tree – or you’re actually moving. And people have told me that they love the experience, and it’s – yeah, it’s a treehouse. That’s the beauty. It’s a real treehouse,” says Kati.

Related:

  • Explore a Tiny Tropical Treehouse in Hawaii
  • This Nashville Treehouse Will Drench You in Light
  • Tour These Whimsical Cabins Made From Recycled Materials

Source: zillow.com

Consumer Spending Habits Are Changing — What to Know

The COVID-19 pandemic has been the biggest overnight financial shakeup in our country’s history. Its effects will be felt for years into the future, if not permanently. On the economic front, it’s caused a huge change in consumer spending, largely due to how people’s income and living/working patterns have shifted. 

How Income Is Changing

According to a July report from the Congressional Research Service, the big changes in household income hasn’t affected everyone equally. Those who are hardest-hit already had a lower income to begin with — families with children, and non-white people. For example, 71% of parents earning under $25,000 per year have lost income, compared to only 33% of child-free households earning more than $200,000 per year. 

In other words, the rich are staying rich (and even getting richer), while the poor are getting poorer. And since these high-earners are increasingly working from home, it’s caused massive shake-ups in consumer spending, with winners and losers on all fronts. 

Top Spending Categories of 2020

The average family earned $68,703 (or $5,725 per month) during 2019, according to Census data. We don’t yet know what it’ll be for 2020, although it’ll almost certainly be lower when averaged across the entire population, including those with and without income losses. Here’s how the loss in income is affecting what people are spending their money on. 

Alcohol

Pre-Pandemic: In 2019, the average household spent $579 on alcohol, according to the Bureau of Labor Statistics (BLS). 

Pandemic: In April of 2020, alcohol spending was up by approximately 50%, according to an analysis from The New York Times.

With everyone stuck at home and a looming sense of existential doom everywhere you look, it’s no wonder that spending on alcohol has increased. The way people are buying their alcohol is shifting, too, according to a May 2020 Nielsen report. In-store sales of booze jumped by around 26% compared to the same time a year ago. Online sales were even more popular, with a 477% jump in direct-to-your-door delivery service. 

In addition, people shifted to buying larger packages of alcohol, with a 20% jump in sales of 24- and 30-packs of beer and cider, and a 2% decrease in sales of six-packs. Sales of boxed wine in particular were also up by 44% from the previous year, as was 1.75L Costco-sized jugs of hard liquor, with a 47% increase. 

Groceries

Pre-Pandemic: The average family spent $4,643 on groceries in 2019, according to the BLS.

Pandemic: Grocery spending is up by 10%, according to an October report by The New York Times. 

Whether it’s the sourdough bread craze or cozy comfort foods, many people have gotten a crash course in cooking from home over the past few months. And although groceries have always been a big part of the household budget (especially if you have teenagers), they’re higher now than they’ve ever been before. 

However, you can get your groceries in a lot of ways, and some are booming more than others right now. For example, an earlier survey from The New York Times in April showed that while spending at supermarkets was largely the same compared to the prior year, spending at online grocers was up by 80%, food delivery spending was up by 50%, and spending on meal kits surged by 40%. This isn’t surprising, as many people are still (rightfully) wary of packed grocery stores and are instead opting for the convenience of ready-to-cook-from-home meals.

Real Estate

Pre-Pandemic: The average sales price of a home was $278,800 in August 2019, according to the National Association of Realtors (NAR).

Pandemic: The average sales price of a home was 11% higher — $310,600 — in August 2020, according to the (NAR).

You’d think that the largest bombshell in U.S. economic history would derail the real estate markets that were already set off-course by the 2008 recession. So far (and surprisingly so), that hasn’t been the case. Despite the world burning (literally, if you live on the West coast), home prices continue to chug along at an increasing pace. 

There’s been a lot of speculation about why this is. Some experts suggest that high-paid tech workers (those least likely affected by the pandemic), are now free of their tether to high cost-of-living areas and are thus increasingly flooding out into the suburbs along with all of their cash. In particular, properties that are well-designed for working from home (such as those with extra rooms that can double as offices) are in particularly high demand. 

Areas Where Consumer Spending Dropped

As we’ve seen, some industries have picked up. But by and large, consumer spending is down, and here are some of the major industry drops. 

Travel

Pre-Pandemic: The average family spent $2,037 on their summer vacation in 2019, according to an Allianz Insurance survey.

Pandemic: Travel spending is down by 57%, according to October 2020 numbers from Status Money. 

Many of the highest-price travel is done overseas and at expensive places, like Disney World, and on cruise ships. Obviously, those things are out for this year. 

So although you can’t take that expensive Paris vacation you’ve always been dreaming of right now, that’s not stopping a lot of people. In June 2020, the American Automobile Association (AAA) predicted that 97% of trips would be taken by car, either locally or around the U.S. After all, there are still many world-class natural wonders to see right here at home, whether it’s Yosemite, Old Faithful, or hiking along the Appalachian Trail. 

Clothing 

Pre-Pandemic: The average U.S. family spent $1,883 on apparel during 2019, according to the BLS. 

Pandemic: Clothing spending was down by around 60% in April, according to an analysis from The New York Times.

With so many people working from home via Zoom, you really only need clothes on the top half of your body (be careful not to stand up from your desk though!). Even so, with so many places closed down and no one to see you, people just aren’t spending as much on clothes these days as they used to. 

Some of this spending has recovered. For example, while The New York Times recorded a decline of around 60% on clothing spending in April, it had recovered a bit to just a 20% decline by October. Sales of cosmetics were also down by 14%, at least for cosmetics brand L’Oreal. According to a JP Morgan analysis, certain cosmetics were particularly hard-hit, with fragrances, luxury makeup, and professional supplies down by 25%. 

Restaurants

Pre-Pandemic: The average U.S. family spent $3,526 on dining out in 2019, according to the BLS.

Pandemic: Restaurant spending is down by 15%, according to The New York Times.

COVID-19 is particularly transmissible in enclosed environments with a lot of packed people that are touching their faces. It’s no wonder that restaurants have emerged as a flare in the debate between safety vs. the economy. After all, the restaurant industry alone employs 15.6 million people, according to the National Restaurant Association. 

But just as with anything else, the impact isn’t equally spread across all types of restaurants. According to a May survey by McKinsey & Company, casual and fine dining saw the biggest declines of 70% to 85%, while pizza companies actually did better than usual, with up to a 5% increase in sales from the previous year. 

How Spending Will Change Over the Holidays

Last year, the average consumer spent $1,048 on holiday shopping, according to the National Retail Federation. This year, a survey by Power Reviews shows that 73% of people expect to spend about the same amount on holiday shopping as last year, despite the present state of the economy.

One thing that is changing, though, is that more people will shop online this year, and earlier, too. According to the same Power Reviews survey, 64% of people are planning on doing more online shopping this year, and around 25% of people are planning on getting an early head start. This is largely due to concerns about inventory and shipping delays. 

The post Consumer Spending Habits Are Changing — What to Know appeared first on Good Financial Cents®.

Source: goodfinancialcents.com

Cheap Ways to Keep Kids Entertained During Holiday Break

Cheap Ways to Keep Kids Entertained During Holiday Break is a post originally published on: Everything Finance – Everything Finance – Its all about Money!

During the winter, it can be difficult to keep our kids entertained. Depending upon where you live, it can be really hard to entice them to stay outside for any length of time. And during the holiday break, it seems to be even worse because they don’t have school work to keep them distracted. So, we have found some cheap ways to keep kids entertained during the holiday break and the winter. Some of these ideas won’t cost you a penny, while others may cost a tiny bit of money if you don’t already have items to work with.

Volcano Fun!

If you ever went to a school science fair, I am sure you have seen a homemade volcano at least once in your life. While there are plenty of different ways to make a volcano, there is one that I ran across on accident that I prefer.

One of my favorite ways to keep my drains clear is with baking soda and hydrogen peroxide. The two of them create a chemical reaction that burns away all of the gunk that may be stopping up your drains. And when my kids were younger, they loved to watch me do it because it created a really cool effect.

Which gave me the idea to start using just those two ingredients (and sometimes food coloring when I want to get really crazy) to create homemade volcanoes for them. If you have some playdoh lying around, then that and a plate will do the trick for a volcano vessel.

Just have your kids create a volcano out of the playdoh on the plate, or even on an old piece of wood from the yard. Put a couple of spoonfuls of baking soda into the volcano. Add food coloring for effect, if desired. Then take the volcano outside and add baking soda until you start to see a reaction.

We have done this with snow also, and it was pretty cool to watch the eruption change the shape and color of the snow volcano. However you choose to create the volcano, the kids will love it and it shouldn’t cost you anything to create.

Lego Contest

If you are anything like us, then you probably have some Legos lying around somewhere. In fact, we have two huge bins of them, so there is no shortage of Leg’s around here. During the holidays, one of our favorite things to do with the surplus of Legos is to create a Lego contest.

If you have a ton of them, then the contest can get fairly creative and elaborate. And, depending upon the ages of your children, the contest will vary also. However, some of our favorite Lego contests have been:

  • Best Lego house
  • Most elaborate Lego swimming pool
  • Most creative Lego car
  • Craziest Lego family
  • Biggest Lego city
  • Best Lego luxury boat

These are just a few ideas to get you started, so get creative and have fun!

Treasure Hunt

Having a treasure hunt is always a crowd pleaser and is sure to keep kids entertained. Creating a treasure hunt is similar to the Lego contest, in that it can easily be varied based on the ages of your kids and the environment. If it is too cold outside, then you can keep the treasure hunt inside.

I like to create our treasure hunts so that they are both inside and outside, so the kids can get some fresh air. The easiest way to do this is to create a simple map and create clues to where you have hidden the treasure. The treasure can be anything, really. Hiding candy for pretend gold doubloons are always a favorite of our kids. But, you could also hide a deck of cards, a pair of warm fuzzy socks, or a small set of Legos.

I like to try and find things that we have lying around that the kids have forgotten about to hide as treasure. Sometimes I’ll throw a lollipop or piece of candy in the treasure also, for added excitement.

The treasure can be hidden in an old bag or something more elaborate like a plastic pirate treasure chest with a lock. If you use something like this, then they will have to find the key along the way before they get to the treasure. This is a ton of fun!

Make Your Own Games

Making your own games can also be a lot of fun. Especially if you put the kids in charge of making them. We happen to have a couple of artists in our house who love creating and drawing, so this is a great plan for them.

Just give them some blank paper, scissors, and crayons, markers or colored pencils to get started. Then have them create their own Snakes and Ladders, Candy Land or Pin the Tail on the Donkey game. And it doesn’t even have to be a donkey, but any animal they’d like to pin the tail on.

Let them get creative and really work hard to create their own versions of the games. Once they are done, then comes the real fun for everyone. Making and playing these homemade games can keep kids entertained for hours. Which I am a huge fan of!

Obstacle Course

And last, but definitely not least, creating an obstacle course is always a ton of fun. We like to use things such as:

  • Old boards
  • Chairs
  • Buckets
  • Planters
  • Hammock
  • Garden hose
  • Plastic bins
  • Rakes
  • Shovels

Creating an obstacle course is something that we usually prefer to create outside, just so there’s less chance of slamming into walls or furniture. But, it could be created indoors also, if the weather outside simply won’t comply.

Have your kids work on finding the raw materials around the house or yard to create the obstacle course with. Then have them create the obstacle course, which needs to be realistically doable. Then, you can time each kid running the obstacle course to see who the winner is.

After the course has been run a few times, then have the kids rearrange to create a completely different course. This is an activity that can not only keep them busy for hours but help burn out some energy and get them some fresh air. Bonus!


These are some fantastic, cheap ways to keep kids entertained!
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Keep Kids Entertained Summary

When it comes to the holidays and too much free time, there are many ways to keep kids entertained. And they don’t have to cost you very much if any, money. Use what you have at your disposal first, so you don’t have to buy anything extra. So, creating a volcano or an obstacle course might be great first choices. After you’ve tried those, I would suggest having your kids make their own games and a Lego contest, followed up by a massive treasure hunt. No matter which options you choose, your kids are sure to be entertained, which makes everyone’s life much easier.

What ideas do you have to help keep kids entertained during the holidays this year?

Cheap Ways to Keep Kids Entertained During Holiday Break is a post originally published on: Everything Finance – Everything Finance – Its all about Money!

Source: everythingfinanceblog.com

Escape your home for a safe holiday staycation

With the 2020 holidays upon us, it’s likely you’ve spent some time considering how you’ll have a COVID-safe celebration. Should you stay? Should you go? Is travel to your family even an option this year as some states impose new travel restrictions and mandatory quarantine periods?

Perhaps for safety’s sake, you’ve decided to stay put. But you also recognize that being “home for the holidays” doesn’t have the same cozy appeal as it used to when you’ve already been home working from home for months on end. What you might need is a staycation – the getaway for when you can’t get away.

Check out all the answers from our credit card experts.

Ask Stephanie a question.

Get away for the holidays without going away

Traditionally, when we think about holiday travel, we’re most likely planning how to get ourselves to a faraway destination – whether that’s to see family across the country, or to flee from some combination of family, holiday hustles and winter weather.

This year, I’ve personally decided I won’t be among the holiday crowds attempting to fly on the busiest travel days of the year. Instead, I’ll be sticking closer to home, celebrating in my own city with a staycation – and testing a theory that there is no place like a Hyatt for the holidays.

If you’re planning to stay close to home like me, here’s some good news: Your credit card points work just as well for living it up in luxury in your hometown as they do when you’re on the road.

Some more good news: You’ll save lots of points and dollars by not flying anywhere this holiday – so go ahead and book the suite!

How to use your credit card points to book a staycation

If you live in or near a city, finding a hotel to tuck into for a few days over the holiday period should be pretty straightforward.

To plan a staycation, I normally start by checking what’s available near me by searching the website for each of the hotel groups in whose loyalty programs I participate.

Here in my hometown of Portland, Oregon, I found plenty of options at varying price points when I looked up Marriott, IHG, Hilton and Hyatt – the four hotel programs in which I currently have points.

For example, a few weeks ago, I decided to take an early holiday staycation at the Hyatt Centric Downtown Portland. I chose the hotel because of its location right in the middle of the city, and because Hyatt has a 25% points-back offer on award stays and free parking for The World of Hyatt Credit Card holders through the end of the year.

I paid 30,000 World of Hyatt points for a two-night stay, got 7,500 points back, and got upgraded to a suite thanks to my World of Hyatt elite status. Without points, the suite would have cost $355 dollars a night – plus the free valet parking saved me another $47 a day. I was able to get a $804 value for 22,500 rewards points. Even though I was less than two miles from my actual house, I felt a world away.

How to use travel rewards to book a staycation

If you don’t already have a hotel-branded rewards credit card for earning points in a specific hotel program like World of Hyatt, or if you live in a location where there aren’t many chain hotels, you’ll likely have more luck booking a staycation using travel rewards points.

You can book directly through the respective program’s travel planning portal. Flexible bank programs include Chase Ultimate Rewards, American Express Membership Rewards and Citi ThankYou points.

Once you find a hotel you want to visit, and before you make the booking, you’ll want to check to make sure the hotel amenities that excite you for your staycation are going to be open and accessible.

Other than being snuggled up in a warm bed that I didn’t make myself, the best part of my staycation weekend at the Hyatt Centric Portland was the food.

Masia, the hotel’s signature restaurant designed by Portland’s award-winning Spanish chef Jose Chesa, was finally open and serving after a long COVID closure. Since I live in a city where indoor dining still hasn’t made a full comeback (and is now taking a pause for the holiday season), it was a rather delightful experience to spend two mornings lingering over a long breakfast.

If you’re booking more than a week in advance, you should also make sure your reservation is flexible or cancelable should your own plans change, or the COVID regulations in your state or county change and require the hotel to amend their offerings.

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Did You Know that Amazon Has a Secret Luxury Site?

Amazon’s best-kept secret is out. VRSNL, (short for “versional”), has been quietly selling luxury fashion items since September 2019. A total of 30 designers are currently on the VRSNL roster, including Alexander McQueen, Balmain, Prada and Jimmy Choo. What distinguishes VRSNL is a section called “The Remix,” which features original editorial content that tells stories behind the brands and designers. The retailer also has an app, which allows today’s trendsetters to shop wherever, whenever.

The post Did You Know that Amazon Has a Secret Luxury Site? first appeared on Century 21®.

Source: century21.com