Annual Maintenance

A common expectation of homeowners is to want the components and systems in their home to work when they need them. Periodic maintenance is just as important as having a trusted service provider to make necessary repairs.

Victims of Murphy’s Law can attest that their air conditioner goes out on the hottest day of the year or the water heater fails when you have out of town visitors.

If the convenience of having things work doesn’t justify maintaining your home’s systems, consider that it can be less expensive than the results of neglect causing repairs or replacement.

• Replace burned-out, dim or missing bulbs in light fixtures and lamps. Consider switching to LED bulbs.
• Dryer exhaust vents build up lint even though you may be cleaning the filter regularly.
• Fire extinguishers need to be recharged or replaced after expiration date.
• Establish a recurring appointment on your calendar to change filters in your HVAC.
• Replace missing or damaged caulk around sinks, bathtubs, showers, windows and other areas.
• Clean gutters.
• Schedule an inspection with a pest control a minimum of once a year unless you have a service contract.
• Schedule a chimney cleaning prior to using the fireplace for the first time in the season.
• Keep all tree branches and shrubs trimmed away from the home.
• Pressure wash exterior, deck, patio, sidewalks and driveway.
• Keep levels of insulation in the attic above your ceiling joists.
• Check appliances with water lines for leaks or worn hoses.
  • ice maker  • washing machine   • dishwasher   • others
• Test all GFI breakers and reset.
• Inspect all electrical outlets for broken receptacles, fire hazards or loose fitting plugs.
• Have furnace and air conditioner serviced annually.
• Test smoke and carbon monoxide detectors and change batteries.

The early fall is a great time to take care of these items before the weather becomes harsh.

Up to $500 for Doing Home "Work"

The energy-efficient home upgrades tax credit is scheduled to expire on December 31st this year.  If you need to make improvements to your home, this could be an incentive to do it before the end of the year.  If you have already made qualifying improvements without realizing the tax credit is available, it may seem like a holiday gift you weren't expecting.

The equipment must be installed to qualify for the credit which can put you under a time crunch.  Heating and cooling systems, insulation, windows, doors, skylights, water heaters and home weatherization may qualify.

The Residential Energy Efficiency Tax Credit has been available for purchases since January 1, 2011.  The tax credit is 10% of up to $5,000 of qualifying improvements which would make a maximum of $500 tax credit.

The cumulative maximum amount of tax credit that can be claimed by a taxpayer in the different years this law has been in effect is $500.  If it has been claimed in previous years, the taxpayer is not eligible for this credit for additional new purchases.

For more information, see energy.gov or talk to your tax professional.

Will the "Good Life" Be Ready When You Are?

The Life of Riley was a TV show from the 50’s starring William Bendix but the title’s origin came from an expression meaning that a person was living the “good life.” Most people envision themselves living the good life by retirement but don’t really have a plan to get there.

There’s a rough rule of thumb used to estimate how much net worth a person would need by the time they retire to generate a certain income. The target annual income is divided by a safe, conservative yield to determine the investable assets needed.

A person who wanted $100,000 annual income generated from a 5% investment would need investable assets of $2,000,000. If a person had $500,000 now, they would need to accumulate $1.5 million more by the time they retire. If it was estimated to be 15 years away, they would need to save about $100,000 a year, each year until retirement.

It is a sobering example that could be depressing without a plan. It might be easy to say, “I should have started sooner” which may be true but there is still hope.
Gradually, over the next several years, accumulate rental property and allow the tenant to retire the debt for you. The equity in each property will grow from the amortization of the loan each time a payment is made. It also grows as the property increases in value due to appreciation.

Single family homes as rentals offer the investor an opportunity to meet their retirement and financial goals for the following reasons:

• The ability to borrow large loan-to-value mortgages
• At fixed interest rates
• For long terms (easily up to 30 years)
• On appreciating assets
• With significant tax advantages
• And reasonable control not offered by alternative investments.

 

Shifting Debt to Tax Deductible

The Mortgage Interest Deduction is available to homeowners for up to $1,000,000 of acquisition debt on the combination of their first and second home.  They can also deduct interest on up to an additional $100,000 of Home Equity debt.

While Acquisition Debt is used to buy, build or improve a principal residence, the Home Equity Debt can be used for any purpose.  It can be used for educational or medical expenses, to purchase a personal car or boat, consolidate debts or pay off credit cards.

A homeowner with $15,000 of credit card debt at 19% and sufficient equity in their home could replace it with a home equity loan at much lower interest rate. Not only would the interest rate on the home equity loan be about 1/3 of the rate paid on the credit card, it’s would now be tax deductible.

If the taxpayer was in the 28% bracket, the net interest on a 6.5% loan would be 4.68% after tax benefits are considered.
Shifting personal debt to Home Equity debt can result in an interest deduction and probably, a lower interest rate. For more information see IRS Publication 936 page 10 and consult your tax professional.

Bunch Your Taxes and Save

One of the drawbacks to low mortgage rates is that the total interest and property taxes paid for the year may be lower than the standard deduction.  A little planning might be able to help you at least every other year.

Most homeowners know they can deduct their qualified mortgage interest and property taxes on their Schedule A of their 1040 tax return or to take the standard deduction if it is greater.  See Your Deduction...Your Choice.

Deductions are taken in the year that they're actually paid.  If a homeowner paid their 2012 property taxes in 2013, they would not be deductible on their 2012 tax return.  Then, if the 2013 property taxes were paid in 2013, both the 2012 and 2013 taxes could be deducted on the 2013 Schedule A.

By delaying the payment of the 2012 taxes until 2013, the combination of the 2012 and 2013 taxes might exceed the 2013 standard deduction and provide a higher deduction. 

Other Schedule A expenses such as charitable contributions and medical expenses may be bunched also.  From a practical standpoint, since most mortgage payments are due monthly, the mortgage interest would not be bunched.

This information should be discussed with your tax advisor to see how it might apply to your individual situation.  The key is you must be aware of the strategy early to be able to use it.

Maintaining Comfort

Some people refer to the heating and air conditioning systems as the "comfort systems."  If you've ever had to be without one in the dead of winter or the heat of summer, lack of comfort may be an understatement.  Simple maintenance with a HVAC checklist is something that every homeowner can perform.

Periodically

• Change your filter every 90 days; every 30 days if you have shedding pets.
• Maintain at least two feet of clearance around outdoor air conditioning units and heat pumps.
• Don't allow leaves, grass clippings, lint or other things to block circulation of coils.
• Inspect insulation on refrigerant lines leading into house monthly and replace if missing or damaged.

Annual, in spring

•  Confirm that outdoor air conditioning units and heat pumps are on level pads.
• Pour bleach in the air conditioner's condensation drain to clear mold and algae which can cause a clog.
• Avoid closing more than 20% of a home's registers to keep from overworking the system.
• Replace the battery in the home's carbon monoxide detector.

Even with the attention that perfoming this list will provide, it is recommended that you have your units serviced annually by a licensed contractor.  Furnaces can be inspected for carbon monoxide leaks and preventative maintenance may help avoid costly repairs.  Click Here if you'd like a recommendation.

Mise en Scene

The Memorial Day threshold of summer has been crossed and summer activities are commencing; it is time to think about your yard space. Between barbeques, graduation parties, and long sundays in the hammock, our yards will be the focal point of our homes for the coming months and good landscaping is essential.

Besides the personal enjoyment that comes with a luscious garden, it also serves as a strong investment for your property. Various surveys conclude that there is about a 15% return on investment (ROI) for landscaping on home sales. It is projected that “high quality landscaping adds 5-11% to the [overall] price value of your home [which you can easily achieve] by spending $500 to $3,000 on plants and materials” (Josh Garskof, CNN.com) In the St. Louis area, Bayer’s Garden Shop is a great resource for quality do-it-yourself landscaping projects. (http://www.bayergardenshops.com/)

So, the question is: how do we turn this....                               Into this....

Ok, so maybe you’re  not building the gardens of Versailles, but you still want that “wow” factor. The balance of individualizing your garden and making it timeless and appealing to the next owners is a delicate one.  According to the American Society of Landscape Architects (ASLA), the top three current garden features are low maintenance gardens, lighting and fire pits. Weave your ideal outdoor ambiance with some of the most desirable attributes sought after. The following charts reflect percentages accumulated from the 2011 ASLA’s Outdoor Living Survey:

In the dirt

 On the dirt

About the dirt 

Whether you are just looking to improve your personal living space, or sell your home in the near future, a great mise en scene can elevate your summer to the next level. 

References
http://money.cnn.com/2007/06/01/real_estate/landscapingtips_juneissue.moneymag/index.htm, http://www.asla.org/NewsReleaseDetails.aspx?id=3085



Written by Ciara Brewer on behalf of Monica Brewer