Every day we see TV personalities telling elderly folks that the solution to their debt problems are reverse mortgages. They make it sound like it is the ideal way of getting something for nothing…you just need to be 62 years of age or older; own a home and banks will give you money. You don’t need to show how you will repay the loan, because the banks pay you. Does that sound too good to be true? IT IS!

 

Personally I believe reverse mortgages are the worst con played on our elderly. It feeds on our insecurities and wishes to remain in a place we know - our home. But unfortunately our twilight years are neither simple nor predictable. For most Americans, our home is our biggest asset and once gone most are just left with Social Security that for most barely cover living expenses.

 

A Reverse Mortgage is a loan…not a welfare plan. The loan can be for about 50% or less of the value of the home. The older you are the greater the loan to value ratio because our average life expectancy is about 78 years

 

They say this is a great program for the elderly, but in reality it is a great plan for the banks. In a conventional 30 year mortgage the first 15 years of the mortgage we pay mostly interest and the remaining 15 years we pay mostly principal until the loan is paid. The lower the balance the smaller the interest payment.

 

In a reverse mortgage is the opposite - the principal is continuously increasing because the balance goes up daily by the amount of the interest owed. In a conventional mortgage the equity is increasing as you pay down the mortgage while in a reverse mortgage the equity is decreasing at a rapid pace because the balance is constantly increasing by the interest.

 

The homeowner is still responsible to pay taxes, insurance and maintenance - if the homeowner fails to pay these expenses he/she may be in default and either forced to pay or foreclosed. If the homeowner decides to sell or refinance he/she must payoff the balance - if the balance is greater than the value of the house, the bank may take the property or all the proceeds from the sale.

 

A trend I often see with elderly homeowners is that they reach a point where they can’t keep up with the maintenance and the house starts deteriorating fast. Of course anyone driving by can see that the house is not being maintained and they become the target of conmen who swindle the elderly by offering to do cheap repairs. Of course they often run away with their money and don’t do the repairs and the house continues to deteriorate until zoning enforcement is called -- then start the big problems that often lead to the elderly person losing their home.

 

As we get older things can change in a blink of an eye - the best alternative for elderly people is to have cash rather than assets. To give you an example; years ago we cared for my wife’s parents who lived in their own house about 10 minutes from us. One morning we received a call from my brother in law to tell us that he found their mother on the floor with a compounded leg fracture. We ran over and called rescue - by that evening when they were done with her surgery we received a call from my wife’s niece who had stayed with my father in law – “Please come immediately because Dida fell and I can’t pick him up.” As result of the morning’s event, he suffered a stroke. We called rescue again and that night both were in the hospital. That’s how quickly things can change with the elderly.

 

There are much better options than reverse mortgages. Best option is not to become attached to the property and sell before it becomes a burden. It is better to sell the property and deposit the proceeds in a money market account or certificate of deposit. Even if you are getting less than1% interest, you’re ahead because it is actually earning rather than eroding value of your assets as happens with a reverse mortgage.

 

A selling point used in marketing a reverse mortgages is that there is a tax benefit because it is a loan, however you may just be passing on the taxes to the estate.

 

When you sell your primary home you don’t pay taxes on the first $250,000 profit if you are single or $500,000 if you’re married. If a spouse dies before the sale of the house, you can prorate the dead spouse’s profit to reduce taxes….a tax accountant can help you with those details. Any profits above those limits pay 15% capital gains tax – you may want to check with your accountant because these rates may change in 2012.

 

You can also sell your house with a leaseback provision that may allow you to remain in the house as a renter without the worries or expenses of property taxes, insurance and or maintenance. You may also be able to take back a 50% balloon first mortgage and pay your rent with the income from the mortgage. If the lease rates become too high, you can always move. The most important thing to remember is that a REVERSE mortgage erodes the equity in your asset twice as fast as any other form of mortgage and you have options to reverse mortgages that may be more beneficial to you. Call me at 305 510-0647 if you want to discuss your options. 

People often make the biggest purchase of their lives based just on what they see. However when it comes to real estate there are many factors that you don’t readily see that are far more important than the granite counter tops, stainless steel appliances or marble floors.

 

Most everyone knows that the most important factor in real estate is location and even though people forgot that criteria during the last boom, we are seeing now that LOCATION is still king. The location of a property as it relates to place of employment, availability of services, schools, public transportation, walkability and other factors is most important.

 

As US society moves forward and energy costs continue rising, locations that offer the opportunity to have alternatives to the automobile are going to be more valuable - this already happening in many major cities around the world. According to the American Automobile Association the cost of owning and operating an average midsize sedan is about $10,000/year. If you were able to eliminate one car, you can save about $300,000 over the lifespan of a 30-year mortgage.

 

Another factor that most people don’t see but it is becoming more important is energy efficiency. Nowadays there are homes that are much more energy efficient than others and may cost half as much to operate. The next wave of condominiums is going to include energy efficient buildings that are Energy Star Rated and LEED Certified or other third party verification.

It is important to know if homes have energy efficient features like well insulated attics, walls, impact or insulated windows, Energy Star appliances, high efficiency AC, water heaters, etc. The difference in operating costs can be significant - my home is over 50% more energy efficient than a conventional home and I save on an average of about $300/mo.

 

To put in perspective, assuming energy costs remained at today’s level, during the lifetime of my 30-year mortgage I will save about $108,000. If I use that money to pay down my mortgage, I can save another $92,000 in interest payments for a total of $200,000. Imagine savings on transportation and energy alone can save a homeowner about $500,000 over the lifespan of their mortgage.

 

There are many other components that you don’t see, but they add to your comfort and savings. For example the type of shower valves make a big difference in taking a shower so you’re neither scolded nor frozen. How often have you been taking a shower and someone turns a faucet in the kitchen or flushes a toilet in another bathroom and the water temperature changes drastically? Pressure balanced valves prevent those radical changes in temperature by maintaining the proportions of cold and hot water stable even if the flow drops. However many developers opt for the cheaper conventional valves that cost $50-75 rather than install the more expensive pressure balance valves that cost about $300-350. When you compare the cost of the valves against the overall cost of the house it is minor expense to enjoy a pleasant shower and avoid being scolded.

 

The same applies to air conditioning – you may notice that the house is cool, but an AC with an SEER of 18 -20 is much better than SEER13-16. The same applies to exhaust fans in bathrooms…you may have a real cheap unit that makes a lot of noise, but does not remove the humidity resulting in fogged mirrors and wet wall that attract mold and mildew. Or have high efficiency and quiet exhaust fans that remove the humidity and is hardly heard.

 

These are just a few examples of house components that most buyers do not see, but make a big difference in the quality of life and operating cost of the house. There are many more and a knowledgeable real estate agent knows to ask those questions and help you make the best purchase, not based on what you see, but on what you really get. As an Architect and Realtor I can help sophisticated buyers look beyond what is obvious to assist them in finding what is the best fit for them. Call Carlos Ruiz at 305 510-0647 or ruiz.c@ewm.com for more information.

The two biggest expenses for most households are housing and transportation. In this blog we are going to discuss transportation, which takes about 15% of our gross income.

 

The most difficult change to make is our mindset -- that which we believe is our reality. That’s why market analysts pick our brains to find out what we believe – then provide what we want, rather than what is best for us.

 

That’s why Flex fuel vehicles were selling in Brazil about 15 years before reaching US markets. While we were still selling Hummers in the US, Japan was selling cars that made 80 MPG. We still have Americans believing that we have unlimited amount of fossil fuel and climate change is something invented by Al Gore. Due to our beliefs and perception our industry did nothing about energy conservation after the 1973 embargo and only recently joined the world race for conservation and alternative fuels.

Most people in Miami believe we can’t live in Miami without owning or driving a car. Since they are convinced that’s not possible, they don’t consider the alternatives. However, depending on where you live and work, you can now live in Miami without owning or driving a car.

 

There are many ways we can go from point A to point B - the automobile is just. We can walk, bike, drive, use scooters, motorcycles, public transportation, cab, rental car, carshare, bikeshare, Segway, skateboard, motorized skateboards, boats, etc. Our imagination and sometimes laws or regulations are the only limit. Laws can be easily changed; mindsets, not so easy.

 

According to the US Department of Transportation, in the US we have about 1.58 cars per household. According to the American Automobile Association, it costs the average American about $9,519 per year to own and operate a midsize sedan about 15,000 miles. A family that can eliminate one car can over the lifespan of their 30-year mortgage save over $285,000.

 

This lifestyle may not fit everyone, but those who choose to eliminate one or all cars, save significantly and can use savings to improve their quality of life. To be able to eliminate a car from your equation begins with a change in mindset to accept that it can be done. Second you need to find out if your place of work is within a transportation network. There are many areas that can be easily reached by public transportation, bike, etc. People working in Downtown Miami, Coral Gables, Dadeland, Coconut Grove, Brickell, the Omni area and even Miami International Airport are good candidates. People working in large institutions like the University of Miami, Civic Center, Jackson Memorial and even the School Board are good candidates.

 

Next comes finding a place to live that offers alternatives to being car dependent. There is a tool that was started a few years ago that is helpful. Walkscore and transitscore allow you to evaluate each property according to proximity to basic services and public transportation. At this point this should be used as a tool, but not the only deciding factor. These systems are not complete plus they don’t take into consideration what each of us considers near. Their basic rule of thumb is that transportation and basic services should be a quarter of a mile from the property. Most of us can easily walk 1-3 miles without much difficulty. On the average a typical person will walk a mile in about 10-15 minutes.

 

There are also different ways to get around economically by using bikes, scooters, motorcycles and Neighborhood Electric Vehicles (NEV). NEV is very economical to buy (cost $10-15,000) and operate and for short distance (10 miles or less) they are very effective. These vehicles have a range of 25-30 miles; have top speed of about 25 MPH and can legally travel on roads with speed limits up to 35-45 MPH. The costs to operate these vehicles are 2-5 cents per miles. In addition the Federal Government is offering a $1500 tax credit on the purchase of an NEV before January 2012. There are also plug in electric (PEV) that offer longer range and more options like a conventional car. In addition you have conventional Hybrids and now hitting the market are plug in Hybrids. In the future those families who need two cars will probably own a short range NEV and long range vehicle.

 

In conclusion, there are many ways to move around sustainably and inexpensively, but the whole process starts a change in mindset and finding the right location. Location of place of work; location to live; location to shop and get your services. In the not so distant future most households in American may own a long range and short range vehicle or eliminate the second vehicle all together. The sooner you start down that path the more money you will save and the better your quality of life will be. 

The City of Coral Gables has a recycling program and encourages residents to recycle many products. It is a single stream program that allows residents to mix all recyclables.

 

Residents are issued a 14 gallon red container in which all recyclable items are to be stored prior to the once week collection. If you regularly have more recyclables that what fits in one container, you can call the City Solid Waste Department and ask for additional containers

 

To be assured of a pickup, residents must make materials accessible to the collector prior to 7 am on the scheduled collection day. Recycling containers should be left in an area easily accessible and immediately adjacent to the garbage cans on the garage side of the house. Do not place the recycling bins out near the street as City workers provide rear yard collection service as a means of keeping these unsightly containers out of the public view and it is a code violation to do so. 

 

§ Phone Books: Picked up from your recycling container.

 

§ Paper: Newspaper, paperback books, magazines, paper grocery bags and light cardboard from cereal     boxes.            Advertising inserts are acceptable. No hard cover books.

 

§ Glass: Rinsed out bottles and jars; all kinds and colors. (Include lids separately).

 

§ Aluminum: Rinsed out soft drink and beverage cans.

 

§ Metal Cans (other): Most clean metal cans such as for vegetables, juices, pet food, etc.

 

§ Plastic: Rinsed out soft drink bottles, milk, juice and water jugs, detergent and bleach bottles with a #1 thru #7 recycling symbol on the bottom. Please do not include plastic wrap, plastic bags, nozzles, rubber and Styrofoam items.

 

Note:  Non-recyclable items are left in your container and should be disposed in the trash or garbage.

 

Chemicals, insecticides and paints have to be taken to the Miami-Dade County Home Chemical Collection Centers. For more information go to http://www.miamidade.gov/dswm/home_chemical_disposal.asp