A lease-to-own, also commonly referred to as a rent-to-own or a lease option, is an arrangement between a buyer and a seller in which the seller leases a property for a set period of time, at which point the buyer typically has the option to purchase the property outright (sometimes a contract legally obligates the buyer to purchase).
Nearly everything in this type of contract is negotiable. Often, the seller agrees to set aside a portion of the monthly payments toward a down payment or equity in the home.
It’s also important to note that this is commonly used as a short-term agreement — a few months to a few years — and that, at the end of the lease period, the buyer needs to obtain a traditional loan.
So why would either side consider a rent-to-own scenario?
A buyer may need time to put away money for a down payment and/or to build up their credit. Perhaps they’re self-employed, for example, and need a few years’ worth of tax returns to demonstrate income stability to a traditional bank. Or they have less than stellar credit and simply need time to repair it.
A seller might like the idea of locking in a purchase price and collecting monthly payments along the way. Say the two sides agree to a three-year term with a purchase price of $170,000. If the buyer pays $1,000 a month, the seller collects $36,000 and still sells for $170,000 at the end — which, even after expenses, can net the seller a nice profit.
A lawyer who’s well-versed in real estate law is usually the best person to review, if not draw up, the contract. And buyers should keep an eye on building their reserves and credit so they can qualify for a mortgage that will allow them to take ownership at the end of the term.
Tips for managing contractors
As much as we love our home renovations, there’s no denying that the process can nevertheless be a stressful one. Some of that is due to the myriad of details, ranging from large choices like siding color and style to the smallest, like door stops or light covers.
And a good chunk of the stress can come from working with contractors. From personality styles to deadline stress, the homeowner-contractor relationship can be a tricky one.
To keep a project running smoothly and to reduce stress, consider these tips for working with a contractor:
- Communicate clearly and in detail. From the first walk-through to the final check, make sure you are clear in your expectations and goals. Put it all in writing, from the paint finish and number of coats to the projects a contractor needs to complete before getting that next check.
- Speaking of milestones — never get ahead on the money. In other words, pay the contractor enough to cover materials and some of the early work, and then draw up milestones that serve as a carrot. This is fair to both sides: the contractor isn’t working for free, and you aren’t in a position to lose money should a worst-case scenario happen, and the contractor stops showing up.
- Get referrals and visit construction sites. Any reputable contractor will gladly hand over referrals and welcome you to their job site. This gives you a look at finished projects as well as their style with in-progress work.
- Get multiple estimates. This may not be necessary with a small project — you probably don’t need three estimates for someone to install a toilet — but you should always get estimates from multiple contractors for mid-sized to large projects. Not only do you get a better idea of the price, but you could be surprised at how differently contractors may visualize the same job.
Act pushes businesses to enroll employees in retirement plans
If the galloping stock market isn’t enough incentive to get into a 401(k) retirement plan, President Trump’s Secure Act, which went into effect Jan. 1, 2020, offers another perk.
The Act gives a tax credit to employers that automatically enroll workers into their retirement plans.
Studies show people are more likely to stay in a plan if they are auto-enrolled, rather than have to do it themselves, according to Business Insider.
Under the Secure Act, small employers will get a tax credit to offset the costs of starting a 401(k) plan or Simple IRA plan with auto-enrollment, on top of the start-up credit they already receive.
States have created their own automatic-IRA programs, where companies without a retirement plan can or must provide one for their employees.
Enrolling in a 401(k) or IRA vastly expands money in retirement.
Start the New Year with a survey of your fitness levels
With so much health advice in the news today, just thinking about what you should or should not be doing can be a dizzying prospect. Harvard doctors agree that health can be an overwhelming topic. But they say that if you have a handle on these four numbers, you can have a pretty good idea of where you stand and what to do about it.
- Your body mass index (BMI). Many people are overweight and don’t think they are. The health risks climb when you reach the overweight level. Here’s what they mean:
Underweight is a BMI of less than 18.5, and normal weight is a BMI of 18.5 to 24.9.
Overweight is a BMI of 25 to 29.9, and obesity is a BMI of 30 or over. If your calculation shows more than 24.9, it’s time to lose weight. To get a fast BMI rating, see nhlbisupport.com/bmi/bmicalc.htm. Just enter your height and weight. - Your blood pressure. Ideally, it should be 120/80 or below. Starting at 115/75, the risk for heart attack, stroke, and other cardiovascular disease doubles with each increment of 20/10.
People with systolic blood pressure (the first number) of 120 to 139 or a diastolic of 80 to 90 are “prehypertensive.” Changes in diet and activity patterns can help prevent cardiovascular disease at this level. - Your fasting glucose. If you have two fasting plasma glucose measurements of 126 mg/dL or greater, you have diabetes.
- Your LDL cholesterol level. Your bad cholesterol reading should be below 100, but 70 is better. Diet, exercise, and medications like statins, or all three, can lower your LDL, reducing your heart disease risk by about a third
How to Get RV Insurance in Cypress, Texas
Owning an RV is a great choice for many Texas residents, since it has some great RV parks, such as Grand Texas RV Resort and Fredericksburg RV Park, both in the Houston area. However, owning an RV comes with some obligations. When driving or staying in an RV, especially in the Cypress, TX area, you will need to get RV insurance.
While we have touched on when RV insurance is required, you may be wondering how to get RV insurance. Luckily, it is easy to get RV insurance for your recreational vehicle in Cypress, TX. Below are some simple ways to get started and get your insurance quote as soon as possible.
Call an Insurance Agent
By calling an agency such as InsureUS, which serves Cypress, TX, you will be able to connect to a real person right away to speak about your specific needs. When you speak to an agency that has local agents that work and live in your area, it can make the insurance process much smoother for all involved so that you don’t have to worry.
All of InsureUS agents are only a phone call away and are locally owned and operated.
Request a Quote Online
One of the simplest ways to start getting RV insurance for your vehicle is to fill out a form and request an RV quote online.
With an online form, you simply leave your name, contact information, the coverage needed, and whatever comments or questions that you’d like answered. This option is best for people on-the-go who may not have time to make a phone call or want to see their quote in writing.
Get a Quote Now
InsureUS is here for all of your RV insurance needs in Cypress, TX. Call, email, or fill out our form to learn more.
Cost of retirement: More expensive than you might think
The cost of retirement can vary dramatically depending on where you live and what choices you make before you retire.
Ideally, you want to have enough social security and investments to maintain your current lifestyle.
While investment advisers routinely say $1 million in investments will ensure a happy retirement, this is not necessarily true. In high-tax states with high cost of living, a big retirement pot is probably essential. But, in lower tax states with lower cost of living, retirees might need about a fourth of that amount.
The key question is how you prepare before retirement.
- Run the numbers. Check with Social Security for an estimate of retirement income. But, remember your Medicare and taxes will be deducted from social security, so that number will be lower. For other income, you will be paying cash for taxes. Look at all your expenses. Medicare plus supplements and prescriptions could run more than you think. For example, some prescriptions could cost $100-$300 per month, even with a prescription plan.
- Get out of debt. The best strategy is to be out of debt before retirement. Aim for zero credit balances.
- Pay off the mortgage. In some cases, holding a mortgage might be financially wise, depending on how much your investments are making as opposed to the interest rate on your mortgage. But good general advice is to pay off the mortgage before retirement.
- Transportation. Plan to have a late model car that is paid off before retirement. A car payment soaks up retirement funds.
- Emergency fund. Build one with at least 3 to 6 months of expenses. Emergencies won’t stop just because you are retired, and you won’t have money coming in. You must avoid credit card debt.
- Long-term care insurance. Plan early to buy long-term care insurance when prices will be lower.
The Golden Years in business
“What am I going to do with all this time?”
That’s a question retirees often ask themselves these days. The trend of retired Americans or those close to it is to keep working. Some need income; others use it for travel and leisure activities, hobbies, or purely for the personal fulfillment of work and staying involved with others.
In March of this year, the second annual Small Business Survey revealed 65% of more than 5,000 Americans polled said they envision opening a business when they retire.
These results are not surprising, according to Dr. Luke Pittaway, Professor of Entrepreneurship at Ohio University. People are living longer, he says, and more than ever before are choosing to start a business to stay active.
According to The Balance Small Business, any service that consumers and companies will pay for can be turned into a business. Among them are accounting, bookkeeping, handyman, landscaping, pet care, and more.
Freelance writing is more popular than ever with blogging, writing for businesses large and small, e-books, and memoirs, among others. Self-publishing is fast and affordable these days.
Nearly any hobby can be turned into a business too. How about gardening? Baking? Photography? A musical instrument?
Contact your former employers to offer your services. Access your network to find potential clients.
Starting a home-based business enables the retiree to profit from decades of experience in his or her profession. Selling one’s skills through a service-based home business is one of the fastest and least expensive ways to start making money at home. At or near the top of the possibilities are consulting and coaching. Both can be performed at home and enhanced by online tools.
PPP loans and taxed expenses
The IRS issued guidance in November clarifying the tax treatment of PPP loans that have not been forgiven by the end of the year the loan was received:
- Businesses are not taxed on the proceeds of a forgiven PPP loan, so the expenses are not deductible.
This means that the taxpayer sees neither harm nor benefit, since the taxpayer has paid nothing out of pocket.
Here is how this looks on your tax return, according to bench.com:
A C-corporation receives $100,000 in a PPP loan, uses the money entirely on payroll and qualifies for loan forgiveness.
The $100,000 won’t be listed as taxable income on the tax return.
BUT, the tax deduction the business would normally get (about $21,000) won’t be allowable. So, surprise — you have an extra $21,000 tax liability (assuming 21 percent corporate tax). You did receive a net $79,000 from the program, which you have already spent, but which you might not have had otherwise. - Businesses are encouraged to file for forgiveness as soon as possible. If a business believes a PPP loan will be forgiven in the future, expenses related to the loan are not deductible, whether the business has filed for forgiveness or not.
- If a PPP loan is expected to be forgiven but it is not, the business WILL be able to deduct expenses.
According to the CARES Act, a forgiven loan amount won’t be included in taxable income.
Should you sell or buy a home in 2020?
According to Forbes, today’s mortgage rates — at about 3.75 percent — will stay low in 2020. At the same time, market watchers expect home prices to continue to escalate due to low inventory and high demand.
Without more listings on the market, competition will increase early in the year. Entry-level home prices will rise higher than incomes. Low-interest rates and the lack of starter homes will continue to raise prices.
Housing inventory will remain soft through most of the year. As one real estate agent remarked, “You can’t buy what’s not for sale.”
According to the National Association of Home Builders, new construction in late 2019 reached a 20-month high. Even so, months may be needed before building can sustain demand.
Realtor.com reveals Millennials constituted almost half — 46 percent — of mortgage originations in September 2019, up from 43 percent in 2018. At the same time, Baby Boomer and Gen X mortgage activity faded.
If today’s older adults (born between 1931 and 1959) behaved like previous generations, more than 1.6 million homes would have been on the market in 2019.
But Boomers are staying in their homes, not downsizing as did previous generations. One factor: Older people are working longer. Another factor is that young people are staying at home longer. In 2016, 16.1 percent of senior households had younger generations living with them, up from 14.4 percent in 2005, according to Trulia and Census figures.
As for homeowners, should they sell in 2020? According to the Federal Reserve, household equity in real estate has more than doubled since its shortage in 2012. Mortgage equity is at an all-time high
Homeowners with the flexibility to move in the next few years may be assuming that when they’re ready, the market will be as inviting as it is today. This is not necessarily true, and some vital housing-market drivers suggest 2020 could be a sweet spot for selling a home.
Mortgage interest rates are low. Potential buyers track them carefully. That’s a pleasant tailwind for buyers interested in a homeowners’ property,
Has the time come to book their profits and move on?
Only the homeowner knows.
Prevent hacks into home security system
The latest home security gadgets are a far cry from the early days of simple motion detectors. Whether it’s the Ring video doorbell, which alerts you to someone at your front door (and allows you to talk to them), or other systems that use facial or voice recognition, we’ve got cameras and eyes everywhere.
The downside, of course, is the potential for hackers to access those cameras and find their way into our homes.
Consumer Reports offers tips to keep our home security cameras from being hacked:
- Keep your camera’s firmware up to date. Some cameras automatically download and install these updates, which fix software bugs and patch software vulnerabilities, while others require you to check for updates on your own.
- Change your camera’s password. You should approach your security camera’s password the same as your other devices and use long and complex passwords without personally identifying information.
- Set up two-factor authentication if possible. This means the camera company sends you a onetime-use passcode via text, phone, email, or authentication app that you input in addition to your username and password when you log in to the account. As CR points out, even if a hacker cracks your password, they won’t be able to access your camera unless they also gain access to your onetime code.
- Set up a password manager. A password manager generates strong, random passwords and stores and remembers them for you. Many are free.
