By the numbers: Should you rent or buy?
Many renters wonder if they would lose money buying a home or come out even. The answer can seem complicated as it involves your own personal finances, as well as rental costs that are out of your control. Below, we offer insights and some local trends and numbers that you can keep in mind as you decide if it’s time to buy a home in Minnesota or western Wisconsin.
When talking about renting versus buying, it makes sense that the first comparison should be the average monthly expense of renters and homebuyers. According to Zumper, the median rent of a two-bedroom Minneapolis apartment as of June 2015 was $1,530.
Now let’s look at what it would cost to buy a median-priced home in the metro area, which in June 2015 was priced at $229,900. Assuming a homebuyer had a 10 percent down payment and good credit that would allow them to secure a 4.5 percent interest rate and a 30-year fixed rate mortgage, the homebuyer would pay $1,020 per month for mortgage and interest.
In this example, the Minnesota homebuyer would save $510 a month over renters, which adds up to $6,120 annually. That money could be used toward other homeowner expenses like property taxes, homeowners insurance and renovations. And, there are also tax benefits to owning a home.
When monthly expenses are essentially a wash, it can be easy to put off buying a home, but when you look at the effects over the long-term, buying comes out ahead by a long shot.
A person’s home is usually their biggest investment and their greatest asset. According to the Federal Reserve’s Survey of Consumer Finances, which was last conducted in 2013, the net worth of typical homeowners is 36 times that of the net worth of the typical renter. Specifically, the average homeowner in 2013 had a net worth of nearly $200,000 while the average renter’s net worth was just over $5,000. (For reference, the median value of the homes owned was $170,000.)
How does this happen? When you pay rent, you are contributing to your landlord’s mortgage (or if they own the property outright, it goes directly into their pocket). Meanwhile, as a homeowner, you are essentially paying into a long-term savings account that you can cash when you sell your home.
Another benefit to being a homeowner is that your monthly mortgage payment will not increase if you secure a fixed-rate mortgage. Meanwhile, renters are at the mercy of their landlords, who can typically raise the rent annually based on demand in the market.
According to Marquette Advisors, rent increased 10 percent in the Twin Cities metro area in 2014. The average rent for the metro in 2013 was $966, a number that rose to $1,000 in 2014. This is a pretty drastic increase, and it adds up to an annual increase of $408 per renter on average.
While a large influx of renters can mean that your rental payment may increase from year to year, the monthly payment on a fixed rate mortgage won’t increase — even if you pay it off over 30 years.
After years of spending thousands of dollars annually on rent, the millennial generation is finally entering the home buying market. This age group, generally agreed to be between the ages of 18 and 35, makes up nearly 29 percent of the U.S. population and came of age during the Great Recession.
As the economy improves and low interest rates hold, many millennials are entering the home buying market. According to a recent survey by TD Bank, 50 percent of millennials say they are “likely or extremely likely” to buy a home in the next year.
While you shouldn’t do something simply because your peers are, it’s worth noting that the next generation of Americans hasn’t lost its interest in owning a home. Homeownership rates are expected to grow in the next decade as millennials purchase their first properties.
100 percent freedom
Of course, not every pro and con can be weighed in objective terms. If you’ve ever looked around a rental and wished you could rip up the dingy carpet or put in a new light fixture, you know that homeownership comes with the freedom to decorate and renovate to your heart’s content. In the era of “upcycling” and Pinterest, it seems unusual not to have a home bucket list that includes everything from painting doors to adding retaining walls.
If you ran the numbers and you’re ready to enter the home buying market, get in touch todayget in touch today. We offer insights and guidance to homebuyers across Minnesota and western Wisconsin every day, and we’d love to start helping you.
If a couple splits, who gets the house?
The end of a significant relationship is often so emotionally taxing that couples do not go through the proper channels as they divide their assets and move on to the next chapter. While this is completely understandable, it’s important that both parties advocate for themselves, and work together one last time to come to a reasonable consensus.
Here are insights that you can use as you decide what to do with your house after a divorce or separation.
Swallowing your pain and getting down to business
There are plenty of stories out there about spouses who conceal money or bank accounts from their partner, but the house is one asset that can be a transparent source of income for both parties. That’s why, even if you suspect your former partner isn’t going to be honest about other finances, it’s important that you agree to remain amicable and proactive about the decision you make surrounding your home. If your partner disagrees, it may be time to hire a mediator who can help you set ground rules for what’s to come.
Option 1: One partner stays in the house for now
When making a plan for the house, many couples choose to have one partner remain in the house. Often, this is because they want to create a smaller impact for their children. With one partner remaining in the house, the kids can stay at the same school, play on their same teams and be involved in their usual activities. If this is the case, be sure to work with an attorney who can recommend how to split the cost of the mortgage. While it may be tempting to focus on the short-term, it’s also imperative that you decide now if there will be a 50/50 split on the house once you eventually sell, or if one partner will have a larger share in the end.
You may also want to discuss, in general terms, what kind of conditions will be required to eventually sell the home. Will it just need a coat of fresh paint, or will you still need to jointly replace the furnace as you had previously planned? If you’re on good terms, suggest that one partner pay for the “fix-up” costs, and then recoup those costs at closing. That way, you can avoid having to pool your future finances in order to get the carpets cleaned or repaint the walls. Both partners should agree on each fix, unless otherwise stated, and the “fix-up” partner should save every receipt to reduce gray areas later.
Option 2: One partner buys the other out
In the case that you want to buy your partner out, or your partner wants to buy you out, you’ll need to work with a mortgage loan officer. Essentially, if both partners were on the title, it means they qualified for the loan together. Now, the partner who intends to stay must qualify for the loan on his or her own -- and they must receive the express approval of their lender to take over the loan (and title) individually.
If the approval is given, it’s still important to have a lawyer examine the home’s title once the process is complete. The updated title should only have the buyout partner on the documents. “The new mortgage will also require a new title policy. Although you will be insuring the lender and not yourself, this process will give you relative assurance that your partner has not further encumbered the property without your knowledge,” said Edina Realty Title President Brad Fisher. “Any buyer should always consider purchasing an owner’s title policy at closing for a one-time fee based on the price of your home. Your owner’s title policy will pay for court costs and related fees of any covered title risk,” he added.
Option 3: Selling the house
Obviously, there are a lot more variables in play if both separating partners intend to sell the house. First, you should discuss if you want to sell it immediately or if you’d like to rent it until you feel the market hits its peak. Some couples may agree not to sell the home until it has reached positive equity.
If you plan to sell now, start by hiring a non-biased REALTOR® with plenty of experience in your market area. Now, more than ever, you’ll need the insights of someone who is working on behalf of both of you to get the process complete. While it may seem tempting to hire a trusted family friend or relative, it’s important that you choose someone completely neutral, but who has been made aware of your circumstances.
Next, you should have open discussions about sales price and listing date. Be sure to determine an initial list date and come to a consensus on who will pay for any repairs that need to be made to the house. (Again, it may be helpful if one person agrees to pay for these renovations and is then repaid for those costs after the sale closes.) You likely want to sell your house quickly, so ask your REALTOR for insights about when you should lower your sales price, and by how much, in order to achieve a faster sale.
Before you list the home, be sure to come to an agreement on what percent of the home’s sale each partner will receive upon closing. To ease the stress on the buyer, make a plan to receive one payment at closing, which will then be distributed to each party as agreed.
If you prefer not to attend the closing together, one partner can attend and the REALTOR or attending partner can fax the final documents once the process is complete.
Working with professionals
There’s perhaps no better time to use a professional REALTOR than when you are in the throes of a difficult separation that requires selling your family home. As REALTORS for Edina Realty, we not only work with buyers of all different life stages every day, we also live up to a code of ethics that we take very seriously. During this time, you can rest assured that we will handle your property (and you!) with honesty, kindness and respect.
Exploring the best lake home communities in Minnesota and western Wisconsin
Minnesotans and Wisconsinites may argue over who has more lakes, but the reality is that there are plenty of lakes, rivers and waterways to go around in our little pocket of the country. This month, we offer insights on the best lakeshore communities in both Minnesota and Wisconsin. Warning: it may be hard to choose a favorite; it certainly was for us.
Located just two hours northwest of the Twin Cities, Alexandria is a growing community with an abundance of lakeshore homes. Homes built on Lake Carlos, which borders the northern end of “Alec,” tend to be in a higher price point than homes built on Lake Ida, which is the other largest lake in the area.
It’s almost impossible to discuss Minnesota lakeshore communities without talking about Brainerd. The Brainerd area, which includes Baxter, Crosby, Nisswa and surrounding communities is known for its beautiful resorts, Northwoods charm, and stunning lake home properties. Waterfront homes on the massive Lake Mille Lacs range in price, but are generally quite affordable for the area. If you’re looking for a luxury lake home, you may want to set your sights on Gull Lake, which has plenty of high-end properties and beautiful views.
Cold Spring and St. Cloud, Minnesota
Head one hour or so northwest of the Twin Cities to find Cold Spring and St. Cloud, two lakeshore communities that boast year-round living on Sauk Lake, Rice Lake, Big Fish Lake and more. The area is also bisected by the Mississippi River, meaning there are plenty of riverfront homes available as well. Don’t miss out on your chance to own a waterfront home closer to the metro area.
Whether your ideal lakeshore living consists of catching walleye for dinner or enjoying a sunset boat cruise with family and friends, you’ll find that most lake homes in Crosslake fit the bill. The area is famous for the Whitefish chain of lakes, which is comprised of twelve total lakes including Upper Hay Lake, Big Trout Lake and Lower and Upper Whitefish and Cross Lake itself. If you’d prefer something off the chain, don’t miss the abundance of lake homes and lake cabins found on Pelican Lake.
Detroit Lakes, Minnesota
Detroit Lakes, located in west central Minnesota, proudly boasts 412 total lakes in the area. Homebuyers in any price range can find plenty of lake homes on Detroit Lake, West Battle Lake and Otter Tail Lake. Those looking for luxury lakefront homes may find their bliss on Pelican Lake (which differs from the Pelican Lake in the Crosslake area).
Of course, we wouldn’t want you to miss out on the other quaint lakes with just a few properties for sale at a given time. Search all 412 lakes for Detroit Lakes waterfront homes.
Located less than one hour south of the Twin Cities, Faribault is another great example of a year-round lake home community with close ties to the metro area. The least expensive lake homes in Faribault can be found on Roberds Lake and Cedar Lake, while lakefront homes on Cannon Lake and Circle Lake vary in price and max out around $800,000.
Located just north of Crosslake, Minnesota is another wonderful lakeshore community. The crown jewel of the Hackensack area is a toss-up. Leech Lake, the biggest body of water around, boasts incredible bays and views, and has plenty of luxury lakefront homes to choose from. Lake home buyers also love Woman Lake, a mid-sized lake that sits adjacent to the aptly named Baby Lake and Child Lake. Ten Mile Lake is another fantastic choice, with a range of reasonably priced homes that should suit any buyer.
Minnetonka and Wayzata, Minnesota
Perhaps no Minnesota lake home community is better known than the one on Lake Minnetonka. From die-hard loyalty to Bayside and Maynard’s to the raucous Fourth of July celebration on Big Island, Lake Minnetonka knows how to deliver. Even if you aren’t going to buy, don’t be afraid to click around and check out the gorgeous properties for sale on Lake Minnetonka and pin them to your Pinterest boards for future dreaming.
Prior Lake, Minnesota
As new construction pops up in almost every price point, and the downtown enjoys a resurgence fueled by new stores and eateries, Prior Lake is one of the hottest areas for buyers. Lake home buyers can enjoy a home on either Upper Prior Lake or Lower Prior Lake and should plan to spend plenty of their summer free time at Lakefront Park, or at one of the town's casual lakeside restaurants. If you're looking for a town with modern lake homes, small-town charm and big city accessibility, it doesn't get much better than Prior Lake.
White Bear Lake, Minnesota
Just north of St. Paul is the metro city of White Bear Lake. The community was founded based on its namesake lake, which is 2,400 acres in size. Everything from well-established homes to new construction homes are available in White Bear Lake, so if you’ve been hoping for a lake home that doesn’t feel like a Northwoods cabin, this could be your ticket.
Willmar, located just two hours west of the Twin Cities, is another community with plenty of smaller lakes to choose from. Mid-priced lake homes can be found on Norway Lake and Eagle Lake, and some of the best-priced lakefront and lake access homes are on Nest Lake. If you’re looking for a larger lake with your pick of neighbors for cookouts and boat cruises, check out lake homes on Green Lake, Willmar and Spicer’s most popular body of water.
Hayward and Spooner, Wisconsin
Let’s hop over the border to discuss some of western Wisconsin’s best lake home communities. Located two and a half hours northeast of the Twin Cities, Hayward is an area positively stacked with lakefront properties. Chippewa Lake and its flowage offers lake homes in every price point, from bargain to luxury knockout. Waterfront homes on Grindstone Lake and Lac Courte Orielles, which are adjacent to one another, are well-priced and usually boast an A-frame -- which is customary in the area. Some of the most incredible waterfrontage in the Hayward area is found on Round Lake, so don’t miss it.
Further into the Spooner and Minong area, you’ll find dozens of lake homes on the Minong Flowage. Long Lake is known as “the Walleye Capital of Wisconsin,” while artists will love to settle down on Shell Lake, which is located right in the middle of the area’s charming downtown.
The Siren area is the county seat of Burnett County, and it’s known for its incredible dairy and friendly small-town feel. Much of the area was wiped out by a devastating tornado in 2001, so the entire downtown has been rebuilt and many of the area’s lake homes are new as well. Some of the most affordable lakeshore real estate in Wisconsin is available in Siren, on Spirit Lake and Clam Lake. Yellow Lake has plenty of lakefront homes to offer and with its location just west of Highway 35, you can’t beat the commute.
St. Croix Falls, WI
Located just over the Wisconsin border, an hour northeast of the Twin Cities, is St. Croix Falls. This area boasts incredible riverfront homes along the St. Croix River, where you can enjoy everything from kayaking to speed boating. If it’s a lake home you’re after, nearby Wapogasset Lake and Bone Lake may have the most lakefront homes for sale in the area. But don’t forget to check out Turtle Lake, which is home to the (locally) famous St. Croix Casino.
Getting started on the hunt for a lake home
Whether you’re planning to buy now so you can get in some boat time before fall arrives, or just want more insights on how to buy a lake home, we can help. Together with our fellow Edina Realty REALTORS®, we are able to help anyone interested in buying a lake home in Minnesota or western Wisconsin. Our lakeshore experts have decades of local experience and can field questions about trout fishing, water quality, no-wake zones and more. Reach out todayReach out today to get started.
When a tree falls from a storm, who pays for the cleanup?
Recent summer storms have everyone asking – who pays for the damages caused by a fallen tree?
First, it’s important to know that once a tree is down, homeowner’s insurance only comes into effect if property is damaged. So if a tree falls cleanly onto the lawn, then the homeowner will have to pay for 100 percent of the tree removal costs. If a tree hits any property covered by the homeowner’s insurance policy, such as a driveway, fence or the house itself, then the policy will cover all repair and tree removal expenses, less the deductible.
In the case above, we describe a scenario where a homeowner’s tree falls in his or her own yard. What happens if the tree was rooted in your yard, but falls into your neighbor’s yard? If property damage is caused, your neighbor will have to file a homeowner’s insurance claim on their own policy.
If no damage is caused, and your tree falls clear into your neighbor’s yard, everything gets a bit stickier. Good manners dictate that you should, at minimum, offer to pay for some, if not all, of the removal expense. Consider this: if valuable property of yours blew into your neighbor’s yard, you would expect to be able to retrieve it. This should apply to a not so valuable fallen tree as well – it’s still your obligation as it was something residing on your property. Besides, the discord that could come from ignoring the problem is likely worse than the expense of removing the offending stump and branches. Having good neighbors often means being a good neighbor, so roll up your sleeves and extend a neighborly hand!