Local Ottawa City Contractor
Normally I avoid recommending local contractors because of the potential downside (will they continue to provide quality work, etc.) but today I’m going to make an exception. I’m giving a public recommendation to Elgin from Elgin Eden Contracting. Just a quick tip though, if you need work done call him sooner than later because he’s generally very busy and therefore has a waiting period. If you’re in the local Ottawa region you can get a hold of him at: (613) 858-9034.
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An Ounce of Prevention Really is Worth a Pound of Cure
I again re-learned from first-hand experience that an ounce of prevention really is worth a pound of cure. How? Two of the windows to my own house leaked because the caulking had gotten old and cracked which caused water to leak in. The water saturated some of the framing wood, caused a lot of mold (in no time at all might I add), and basically ended up with two half walls being replaced to get at the problem. A very expensive lesson to learn again.
For those of you who read this blog regularly, you know that I’ll look at the numbers to really see if the cost of the prevention really outweighed the cost of the repairs. So let’s not waste anymore time and look at them right away.
Since the costs for the repairs can fluctuate quite a bit, I’ll make a worse and best case scenario. In the best case scenario, which luckily pretty much happened for me, you won’t need to replace the actual windows (especially if they’re higher-end windows), much of the framing, any of the flooring, etc. The worse case is that everything is completely water saturated and full of mold. In my particular case, in both rooms only the framing below the windows was saturated with water and mold. The rest of the framing, the flooring, and the windows were all ok. So what’s the total cost? Seeing as I had to rip open two walls, replace some framing, etc., a round number of $1000 for labour and materials is easy to achieve. This could however easily climb to $5,000 – $10,000 if new windows need replacing, if the floor is finished, if the water damage spread to the floor below, etc. So let’s assume a small round number of $2,500. Is the prevention worth $2,500?
I quickly went to Amazon.com and looked at the price of caulking where one tube of GE Silicone II caulking will set you back $6.89. Assuming this price, for $2,500 you can buy 362 tubes of caulking. For a standard sized house, I can’t see anyone using more than 10 tubes of caulking (including windows, doors, vents, etc.). Going further, let’s assume we need to caulk every 3 years (this is aggressive, generally you do it every 4-7 years). Looking at the numbers:
$2,500 / $6.89 = 362 tubes of caulking
362 / 10 tubes per session = 36 caulking sessions
36 caulking session * 3 years in-between each session = 108 years of caulking and leak free windows!
Therefore we could have spent that same money we did on repairs and bought caulking for almost 2 full lifetimes and saved ourselves from all leaks in the future (well at least all leaks due to bad caulking) in our lifetime. So yes, in this case, an ounce of prevention is really truly worth a pound of cure!
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LandlordMax And FollowSteph as Graphs
Today’s entry is very different than usual. I came accross a website graph of Problogger.net today that was generated with Websites as graphs – an HTML DOM Visualizer Applet. It was unique and interesting enough that I generated one for each of LandlordMax.com and FollowSteph.com which you can find below:
red: for tables (TABLE, TR and TD tags)
green: for the DIV tag
violet: for images (the IMG tag)
yellow: for forms (FORM, INPUT, TEXTAREA, SELECT and OPTION tags)
orange: for linebreaks and blockquotes (BR, P, and BLOCKQUOTE tags)
black: the HTML tag, the root node
gray: all other tags
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An Adventure in Solving a Difficult Software Bug
Today I just came accross a good article written last week by Neville Franks, the author of software Surfulater (which I might add is a great product I personally use for offline storage and information management of webpages). In his article he articulates very well the trouble of first finding a difficult to find software bug, then in finding the actual cause, and not to mention solving the issue. What I particularly liked about it though is that even if you’re not very technically literate, it gives you a good appreciation of some of the issues software developers face.
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LandlordMax Property Analyzer
For over a year now we’ve been internally discussing about releasing a “Property Analyzer” software product to compliment our core LandlordMax Property Management Software. This Property Analyzer software would help you analyze real estate properties before you purchase them rather than manage them like LandlordMax. The main idea is that you could enter in information about a real estate property and try many different scenarios in seconds to see if a property’s numbers worked for you.
To give a quick and simple example, you could see if the real estate property you’re interested in purchasing for $200k (or $220k, $230k, etc.) at an interest rate of 5.6% for 10 years (or 4.8% for 5 years, etc.) with a rent of $1000/month (or $950/month, etc.) would be cash flow positive assuming a vacancy rate of 3% (5%, etc.), and so on. Basically you could run through a number of different scenarios in seconds to determine if that property will work for you, if it it will make you money and how (cash flow, capital appreciation, etc.).
However before we break the ground and start implementing this potentially new product, I’d really like to hear from you about it. Would you be interested in a “Property Analyzer” software product from LandlordMax? And if so, what features would like to have in it? Which features absolutely have to be in it? Let me know what you think.
I look forward to all your comments.
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FollowSteph Website Re-design Completed
It looks like the re-design is now completed! All the data should be restored and all the old links should be automatically forwarding to the new urls. Feel free to drop me a comment to let me know what you think of the new design. And if you catch anything missing please let me know.
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FollowSteph Website Re-design
As many of you might have noticed today FollowSteph.com‘s look and feel has substantially changed, as well not all the posts are there right now. That’s because I’m in the process of re-designing and re-implementing FollowSteph.com with WordPress, converting all the posts and data. All the old links will still work as expected, pointing to the right articles when I’m done.
So please bear with me as I convert the website. I expect I’ll be done sometime later tonight if all goes well!
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Common Real Estate Ad Terms and Their Relationship to Selling Price
Those of us who have dealt with the real estate market, we are all too familiar with the many terms used to describe a real estate property. Terms like “spacious”, “state of the art”, “charming”, etc., they all bring up different mindsets. To the untrained real estate investor, these terms can be confusing. However over time you start to get an understanding of what they really mean. For example, a “great neighborhood” often means that the houses in the neighborhood are nicer than the one being sold. No one will go out and say they’re selling you the ugliest house on the block, rather they’ll put a positive spin, such as you have a great neighborhood.
In any case, in the book Freakonomics, they did a detailed study of the many words used to describe real estate properties and they found strong correlations between the words used in the ads and the selling price of the properties. Now before I go on, please note that correlation means that the two items are related but it doesn’t mean that one causes the other. So for example, there is a correlation that cars painted yellow get in fewer acccidents. Does this mean that if you paint your car yellow you’re less likely to get into a car accident? Not at all. One does not explain the other. You have to look at other factors. In this particular example, the reason that yellow painted cars get into fewer accidents is because of the type of person who buys and drives a yellow car rather than just the color of the car.
Getting back to words that describe real estate properties, it’s been found that the 10 most common used in real estate ads do have strong correlations to the selling price.
Top Five Terms With Higher Selling Prices
Granite
State of the art
Corian
Maple
Gourmet
Top Five Terms With Lower Selling Prices
Fantastic
Spacious
!
Charming
Great Neighborhood
Very interesting! Why do these specific terms have strong correlations with higher or lower selling prices? The book goes on to debate this, and I’m sure some of them are obvious once you start to think about it. However for today what’s interesting to note is that the words in your real estate ad will ultimately affect your selling price.
Again, I strongly recommend the book Freakonomics. There’s lots of great information on many a topic, not just real estate. If you’re interested, you can buy a copy here through this Amazon.com link.
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Interesting Statistics About Real Estate Agents
I’ve been reading another interesting book called Freakonomics over the last week which is filled with lots of facts and great explanations behind them. In my next article I’ll even write about another real estate related metric I found in the book. But for now, heres today’s tidbit:
Real estate agents keep their own properties on the market an average of 10 days longer and sell them for an extra 3+%. To quote the book, on a house of $300,000, that means they sell it for an extra $10,000.
Freakonomics goes into more details as to the cause, and it’s nothing negative against the real estate agent. It’s simply all about incentives, and it makes perfect sense once you understand the facts. So let’s take a quick look.
Looking at that same $300,000 property again, after breaking up the commission, etc., the real estate agent’s average take is $4,500, or about 1.5% of the total purchase price. Now if we take a $310,000 property (adding the $10,000 difference), the real estate agent’s additional 1.5% revenue on $10,000 comes to a total of $150. Therefore the question is, is it worth it for the real estate agent to work an 10 additional days (have more showings, consume a lot of time, take away time from selling other properties, etc.) for $150? I agree with the author, probably not, the incentive just isn’t there. Would you work an additional 10 days for $150? (yes I understand that it’s not 8 hours a day for 10 days, but it still does eat up a lot of time over those 10 days). Now if you change that $150 difference to $10,000, then again I agree with the author, there is substantially more incentive there.
So although the statistics clearly show that the incentives are higher for a real estate agent to sell their own properties, can you blame them? I can’t. Is there a better way to align both your incentives? Probably but I’m not sure how. If you think you do, feel free to comment.
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50-Year Mortgages Increases Risk
CNN Money.com reported recently that you can now acquire 50-year mortgages! I can understand the market is becoming very competitive as the number of new mortgages is dropping, however I find it difficult to believe that lenders are offering 50-year mortgages. Assuming you acquire a mortgage at 25 years of age, that means you will be done paying your mortgage at 75 years of age, well past the average retirement age!
On top of this, assuming I understand correctly, these mortgage are adjustable. I personally like long term fixed rate mortgages because with today’s historical low interest rates, it’s to your advantage to lock in the rate (for example I locked in my personal home at a fixed rate of 5.4% for 25 years). The only benefit I can see from these 50-year mortgages is that your monthly payment will be much lower because of the term of the mortgage.
Without the protection of fixed rates, all you’re doing is giving people who normally couldn’t afford a house (for example many people in California) the opportunity to do so, but with even more risk than before. These are people that maybe even subprime lenders won’t consider that can now afford their monthly payments because of the length of the term. This just means that as interest rates continue to climb, they will affected to an even greater degree than normal lenders!
Let’s take a quick look at the numbers, you might be very surprised. I know I was!
| Interest Rate | Term (Years) | Monthly Payments |
|---|---|---|
| 5% | 25 | $2,922.95 |
| 7% | 25 | $3,533.90 |
| 5% | 50 | $2,270.69 |
| 7% | 50 | $3,008.44 |
Looking these numbers (I chose 25 years rather than the standard 30 year because of my own personal interests, but I’m sure the numbers are very similar), we can see that if the interest climbs from 5% to 7%, the 25-year mortgage increases the payments by $610.95. Now, taking the 50-year mortgage, if we increase the interest rate from 5% to 7%, the payment goes up $737.75, a much larger amount. Looking at percentages, the 25-year mortgage increases the payments by 21% whereas the 50-year mortgage increases the payments by 32%. Assuming that the people acquiring 50-year mortgages are doing it because this is the only way they can finance their properties, then the increases in interest rates are going to be much much more troubling much quicker!
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