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Homeownership

A definition of the term Starter Home and why no one should use it

(HOMEOWNERSHIP) You see the term in the MLS for fixer uppers and you hear it when Realtors are working with first time buyers but the term “starter home” shouldn’t be in anyone’s vocabulary.

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Just words

Collins English Dictionary defines a starter home as a “small, new house which is cheap enough for people who are buying their first home to afford.” You won’t find the phrase too often outside of the real estate industry.

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There isn’t much about the etymology of the phrase, but most likely, it’s a marketing ploy to get people to buy into the idea of purchasing another home in a few years.

Grind your gears

Mark Greutman, husband to Lauren Greutman, believes that the term “starter home” should bother people. The phrase implies that you will upgrade later.

Your starter home isn’t good enough for the rest of your life. And not to get into how well Americans have it, what about people who will never be able to afford anything more? Is it an insult to them?

Do You Really Need Two Living Rooms?

Older generations bought one home and lived in it until they could no longer be independent. In today’s world, we buy a starter home, then upgrade to have more space, to live farther away from our neighbors, to have rooms that are only used once or twice a year, and to make sure you have a two or three car garage to hold your vehicles and more stuff, some of which isn’t taken out very often.

But consider this – You could pay off your starter home in 15 to 20 years, if you budget right.

You could be out from under a mortgage and have money to travel, send the kids to college or even retire early. When you think about what led to the financial crisis in 2008, isn’t it better to have a smaller house where you can make the payments than worry about losing your house?

Be Content Where You Are

Realtors are motivated to make sure that they have customers. If people buy one home with the intent to stay, will the market dry up? Probably not, because people move and a new generation will be ready to purchase homes for their own family.

Let’s think about that phrase, “starter home.” It fuels consumerism and discontentment. Don’t call cheaper houses starter homes, but just a home.

#StarterHome

Dawn Brotherton is a staff writer at The Real Daily, and has an MFA in Creative Writing from the University of Central Oklahoma. Before earning her degree, she spent over 20 years homeschooling her two daughters, who are now out changing the world. She lives in Oklahoma and loves to golf. She hopes to publish a novel in the future.

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Homeownership

The Granny Pod could be the alternative to nursing homes (and why people will soon demand bigger back yards)

The Granny Pod looks like a guest house and sits conveniently in any backyard – they plug right up to existing plumbing and electrical and allow both caregiver and senior to have their own space while remaining connected.

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I’ve spent most of my life living everywhere but the United States, and from what I’ve seen in other cultures, when couples tie the knot parents come with the marriage! That doesn’t necessarily mean the parents live with the kids (although I’ve seen that in countries like Japan, Korea, and Turkey), but I feel safe saying that it’s a given the kids will taken in/take on/take over their ailing parents at some point in said parent’s lives (Italy for example).

I’m not sure the US is set up that way. The big business of senior living facilities and nursing homes tells me otherwise.

But that might be changing thanks to the Granny Pod and similar mono-living facilities that can be installed in a person’s backyard (which is why we suspect people may demanding bigger back yards in coming years).

Close, but not TOO close

MedCottages or “Granny Pods” seem to be a viable solution for taking care of elderly family members without giving up the independence Americans put so much emphasis on.

A recent story explains that Reverend Ken Dupin created the MedCottage as an alternative to nursing homes, as 78 million baby boomers head toward retirement.

These 12 feet by 24 feet pods can sit conveniently in any backyard and plug right up to one’s existing plumbing and electrical. The pods allow both caregiver and senior to have their own space while remaining connected.

Retiree support for Granny Pods

For its part, AARP, the lobbying group for aging Americans, has gone on record to assert that local zoning laws pose one of the biggest obstacles to making such dwellings a practical solution to caring for aging family members in what it calls “accessory dwelling units.”

AARP spokesperson, Nancy Thompson said “the MedCottage has some of the features the organization advocates in accessory dwelling units, but not all of the universal design features that could be useful for people of all ages.” She does add that it’s a step in the right direction for accessory dwelling units.

No more condo fees

I’m no social worker, but studies bear out that human contact is vital as we grow older. Even in a worst case scenario (when an individual living in a nursing home is alone in their room for much of the day), they at least meet other patrons at lunch or dinner, and at whatever social outings are plugged into a daily schedule. For all the close circuitry and monitoring the Granny Pod offers, I don’t know if it takes the place of human contact, so hopefully families will remember the ties that bind them and do more than just monitor a screen to see if Granny is okay.

Another benefit of the Granny Pod is that once it’s paid for and installed, that’s it – no more monthly rent or condo fees that can deplete a retiree’s resources.

Granny Pod starting a movement

According to the Washington Post, other companies seeking to make similar structures are Seattle-based FabCab (whose name comes from Fabulous Cabin), and San Francisco-based Larson Shores Architects, which designs what it calls “Architectural Solutions for the Aging Population,” or ASAP, and its “Inspired In-Law” dwellings” demonstrates that assisted living facilities aren’t the only item on the menu.

As this type of structure catches on, it may threaten nursing homes and even retirement condo villages, and could influence the sizes of yards builders offer in coming years. Industry practitioners should be aware of the trend, and be able to offer this type of setup to clients who are actively considering options for their parents (the solution may just be a bigger back yard).

#GrannyPods

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Homeownership

Loftium trades a fat down payment for a spare bedroom made available for Airbnb

(REAL ESTATE NEWS) Loftium will help you out with a down payment on your first home if you turn your spare bedroom into an AirBnB and millennials seem open minded about this option.

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Homeownership may not be such a distant dream for renters hoping to buy one day. Seattle-based startup Loftium has devised an alternative approach to obtaining a down payment on a house: Airbnb a bedroom in the house for up to three years.

For buyers who have been pre-approved by a lender, Loftium will pay up to $50,000 on a down payment on a house.

The home must be the primary residence of the homeowner, so Loftium is not available for purchase as an investment property, per their eligibility FAQ.

In exchange for the dough, Loftium requires home buyers to sign a service contract agreeing to list a spare room on airbnb.com for 12-36 months, depending on the loan amount and rental price, and split the profits 70/30 with Loftium. The idea is to generate a passive income stream for the homeowner to help with monthly payments on the home.

While Loftium does take a cut of the Airbnb profits, they are in no way a co-owner of the home. If you purchased a home through them, it’s yours and yours alone – “like it should be,” the website declares.

There are a couple of caveats, and I mean, if someone is handing you $50,000 to help you buy a house, it would make sense to look into the conditions of ownership.

For instance, the Loftium home owner must be a good Airbnb host. So no sabotaging the listing by making the space sound like Shawshank, no making guests feel awkward or unwelcome, and listed rooms must be furnished with at minimum: a queen-sized bed (or larger) with mattress and frame, a chair, a desk or bedside table, and a lamp.

All other stipulations would be the same for any other Airbnb host.

This may sound a little insane, maybe even a little desperate to anyone who has successfully managed a down payment on a house to share the space with strangers for an agreed upon time, but this is exactly the boost many renters need to overcome the down payment hurdle. And Millennials are already primed for this sharing economy and are open minded to the arrangement.

Loftium co-founder Yifan Zhang believes that within the next five to ten years, prospective home buyers will have three standard options for coming up with a down payment: save, ask the parents to help out, or sign up for Loftium. Based on early interest, likely from those signing up for quotes and votes for their city (more on that), Zhang expects business to scale quickly.

So far, Loftium is only available in Seattle as a beta test for the service. There have already been successful homeowners in this brand new program, one of which had the clever idea of finding a place with a mother-in-law quarters to rent out as her listed space/bedroom, and Loftium is currently offering 50 down payments initially this fall in the Seattle area.

The plan is to eventually expand into Chicago and Washington D.C., but interested renters have the option of submitting votes for their city. As of publication, Austin is currently sitting around 4,000+ votes.

There will be some obstacles for particular cities that will prevent Loftium from setting up shop, such as city legislation that prevents people from renting out rooms in their homes, but I suspect that with the rise in popularity of alternative approaches to homeownership coupled with the demand of travelers seeking to rent out a shared space, this could absolutely change over time.

The service sounds almost too good to be true, and it will be very interesting to hear the success, or even horror stories, of how these contracts will play out, but I believe others will jump on board to offer something similar.

Take heed millennials, homeownership is within reach!

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Homeownership

How many homeowners are impacted by proposed MID cap?

(REAL ESTATE NEWS) The mortgage interest deduction (MID) cap inserted in the proposed tax bill could impact more homeowners than originally thought.

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As a part of the recent tax reform legislation release, the House proposed reducing the mortgage cap at which one can no longer deduct their interest payments from their taxable income by a factor of 50 percent. But how many people would this proposal actually affect? As it turns out, quite a few.

The current mortgage interest deduction (MID) sits at a cool million dollars, meaning that anyone who currently has a mortgage of up to $1,000,000 can deduct the amount of paid interest from their taxable income. These proposed changes would lower that number to $500,000 — still a respectable figure, some would argue.

That said, researchers at the National Association of Realtors (NAR) crunched the numbers, and the results are surprising: somewhere around 15 percent of Americans own homes with mortgages totaling at least $500,000 — and those numbers are “conservative” by NAR’s estimates.

Additionally, projections show fairly aggressive growth in the number of homeowners with $500,000-plus mortgages in as few as 10 years.

Once one adjusts for future inflation, the number of people who might be affected by this bill within the next ten years certainly isn’t negligible, with some states seeing almost twice the number of $500,000 and up mortgages within that time frame.

The bill wouldn’t affect people who now own houses with mortgages that are in excess of the proposed MID cap, but the current rate at which houses are rising in value means that the percentage of people affected could still be quite high, and anyone hoping to remodel or sell during this time will most likely have to contend with the revised MID cap if the legislature does pass.

Ultimately, NAR says a bill lowering the amount of deductions from taxable income will lead to a few things. First and foremost, homeowners whose mortgages meet or exceed the proposed MID cap may be reluctant to sell, resulting in scarcity and tampering with the market.

Equity value could potentially drop, and home values in general may be susceptible to dropping values as a result of the tax reform as it is currently proposed.

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