KimberlyJacobi, Author at The Jacobi Team, Century 21 Select Real Estate, Inc.

What you need to know about buying a home during COVID

All across the United States people are still buying and selling houses despite the presence of COVID 19. At record numbers in fact. The Chico, CA area is no exception. Inventory in Chico today (as of publishing date it is Jan 2021) is almost as low as it was right after the Camp Fire in 2018, when houses were flying off the market, being purchased by fire victims who received their insurance money and wanted to put down roots again in the area. Here is how we are handling the process of buying a home or selling a home in our Chico area during this pandemic.

Virtual meetings, In-person showings

It is hard to imagine making the single most biggest purchase of your life without seeing the house in person first. We are still showing houses in person, but all other interactions, when possible, we are doing via ZOOM or by phone. For example, filling out paperwork can be done virtually. Texts, emails and phone calls handle any and all questions and updates with clients. But when it comes to considering a house to buy, you can still see the house in person. Here are the safety guidelines that the California Association of Realtors have put into place for showings:

Rules for Realtors about showings during the Pandemic

On July 2, 2020, the Departments of Public Health and Cal/Osha revised their posted “Industry Guidance: Real Estate Transactions,” which contains a host of rules detailing how properties must be shown during COVID-19. Here are the 8 steps they published for realtors and brokers to comply with:

Step 1: Adopt a “Prevention Plan.”

Step 2: Do not hold “traditional” open houses or showings that are open to the general public on a walk-in basis.

Use an appointment or digital sign-in process to control the number of people at the house. If you are going to hold a non-traditional “Open House,” then any “Open House” signs or ads must include a rider or express condition that appointments or digital sign-in are required before entry. Showings should be done virtually, whenever possible. Only one listing agent and one “buying party” (including the buyer’s agent) may be in the dwelling at the same time.

Step 3: All visitors must sign a PEAD-V form and deliver it electronically to the listing agent in advance of entering the property.

The form should be signed on the day of entry, or if not possible or pragmatic, then no earlier than 24 hours before entry. Doing this accomplishes several things:
a) It is an agreement that the visitor will comply with the Posted “Rules for Entry Showings” (Form PRE)
b) The visitor acknowledges receiving and agrees to the Prevention Plan
c) The visitor attests they are not, to the best of their knowledge, afflicted with COVID-19, among other things.

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Step 4: The Posted Rules for Entry must be posted at the entrance to the property and be clearly visible.

Also link to or publish these rules in MLS listings and publicly online.

Step 5: The property must be equipped with hand sanitizer and disinfecting wipes. Face coverings are to be available in case any person did not bring their own.

Step 6: The property must be thoroughly cleaned and disinfected.

Commonly used surfaces such as counters, door and cabinet handles, key lock boxes, keypads, toilets, sinks, light switches, etc., must be cleaned and disinfected before and after each showing. The agent who shows the property shall follow cleaning and disinfecting protocols and provide sanitation products unless otherwise agreed. Keep in mind that the brokerage whose plan is being
implemented (almost always the listing brokerage) must regularly evaluate the plan for compliance and correct deficiencies identified. May a seller do the cleaning? If current occupants are present and/or participate during showings, they should adhere to the same cleaning and disinfecting protocols.

Step 7: Open doors and windows, weather permitting, to introduce fresh air. Also, doors and other areas of ingress and egress must be opened to minimize clients touching surfaces.

Step 8: Prior to or immediately upon entry, all visitors must use hand sanitizer or wash their hands with soap and water before touring or inspecting the property.

Real Estate is an essential business

Since we are considered essential then we are still able to conduct business and be there for our clients. It has been amazing to watch the industry and our clients adjust to this new norm. More than ever, technology is playing a huge role in searching for houses, writing contracts and signing documents, negotiating, and passing along information.

Inspectors, lenders and title companies are all a part of the essential business of real estate. Inspectors are all still available and working here locally in Chico. We aren’t sure how the rest of the country is doing in that category but here in Butte county, it’s business as usual for the inspectors. They also have to follow the guidelines posted previously in this blog. Title companies locally are locking their doors but still working like busy bees behind closed doors to close escrows. When it comes time to sign the closing documents, mobile notaries are being mobilized and meeting clients (face masks on!) to have clients sign documents that need to be notarized. If you are buying a home with all cash you won’t need a notary so the title company can Fed Ex or email the documents for you to sign and send back.

The moral of the story is, now is still a great time to sell or buy. Inventory here in Chico and the surrounding areas is less than a month of inventory. In other words, if we stopped taking new listings from today, then Chico would sell out of homes in less than a month. Prices are the highest they’ve been in Chico since 2005. But buyers still have incredible buying power because interest rates have been holding at record lows. So even though a house costs more on its price tag today than it did two years ago, for example, your monthly payment will be lower than it was two years ago because your interest rate today is low enough today to make up that difference.

We hope you stick around and check out our website. There is a lot of information here to check out and you can also search for local homes and get local market reports. If you want to chat with us give us a call today!

Written by Kim Jacobi, Jacobi Team Century 21 Chico

7 Small Tasks for January Decluttering and Organizing

If decluttering and organizing is on your New Year’s resolutions list, you might start visualizing your goal by saving photos of your favorite organized spaces to a Houzz ideabook. But at some point, you’ve got to go from dreaming to taking action. As a professional organizer, I recommend that you begin with tasks that take only an hour or two to complete.

Tackling smaller areas of your home can give you a sense of accomplishment that motivates you to continue organizing. Here are seven often-neglected areas that can be great places to start. Depending on the time you have, you may be able to get through several of these tasks this month.

1. Organize the Linen Closet

Linen closets can easily become disorganized, cluttered and overstuffed. Sometimes it may even become hard to close the door. The new year is a great time for a fresh start in this area.

Towels

Towels should be washed once or twice a week to maintain freshness and eliminate bacteria. I suggest keeping two to three bath towels per household member so you have a backup on wash day. If you have more towels than you truly need, consider getting rid of any that are faded, stained or frayed. A local animal shelter will probably be happy to receive them.

Sheets

Two sets of sheets per bed should generally be sufficient. If you use a duvet cover without a top sheet, there’s no reason to hang on to unused top sheets. Donate those that are in good shape.

Blankets

I recommend not letting the linen closet become a catchall for blankets you never use. Small fleece blankets commonly given as promotional items might be stashed and never looked at again. Consider parting with these and any other unused quilts, throws or comforters.

Once you’ve pared down your supply, I suggest labeling shelves to identify which linens belong where. You might use categories such as “master bedroom sheets,” “twin bed sheets” and “guest room sheets.” Alternatively, if your budget allows, you might consider purchasing containers to store bed and bath linens. Label your containers and store sets together: A queen-size top sheet, fitted sheet and matching pillowcases should go in the same bin to make it easy to find the whole set.

2. Clean Out the Coat Closet

A coat closet is valuable real estate that not everyone has the good fortune to possess. However, it can become a disorganized mess if not attended to periodically. Now might be a good time for a quick purging and organizing session.

When working with clients, I recommend they pull everything out of the closet and place coats, jackets and accessories on a clean table or other work surface. My clients are often surprised by how much a small space can hold!

Outerwear

Since this category of clothing tends not to be sentimental, it’s often easy to donate items you no longer use. If you happen to be saving outgrown jackets for a younger sibling, consider storing them away from this prime spot. Likewise, consider storing seasonal items like ski jackets with ski equipment.
You might find jackets and coats that were mistakenly left at your home after a party. In the future, return them in a timely fashion so they won’t continue to crowd your coat closet.

Accessories

Gloves, hats and scarves can usually be sorted quickly. Donate those you no longer use. Toss old gloves or mittens that are missing their mate. It might make sense to store rarely worn sentimental clothing such as logo hats and scarves — perhaps from your college, vacation or favorite sports team — in another part of the house.

Shoes

These have a way of piling up. Toss overly worn shoes and those without a mate. Consider donating outgrown children’s shoes that are still in good shape. It might be best to store athletic shoes and cleats in the garage or other storage area so they don’t give your closet an unpleasant odor. I recommend storing special-occasion shoes on the top shelf of your bedroom closet.

Random items

Now is the time to return random items stashed in the coat closet to their proper homes. Before entertaining, some of my clients throw clutter from counters and tabletops into boxes that they stash in the back of the coat closet. If you have such boxes, commit to sorting through them. You may discover a lost treasure buried there.

When returning coats and jackets to the closet, you might organize them by category (all raincoats together, for instance). Another option is to group coats and jackets according to their owner. You might want to invest in an over-the-door organizer to hold accessories. These can be great for storing gloves, hats and scarves.

Also consider giving yourself a deadline to get any donations out of the house so they don’t end up back in the closet.

3. Declutter Under the Kitchen Sink

Since the area under the kitchen sink is small, it can usually be transformed in less than an hour. Start by pulling out all the contents and placing it on a counter or table. Then wipe the interior of the cabinet clean with warm, soapy water.

Next address your undersink products. Consider consolidating duplicates. For example, two half-used containers of dishwasher pods might be consolidated into one. (Take care not to mix products, as cleaning agents containing ammonia and bleach create toxic fumes if combined.)

Toss any products that have dried out or are no longer needed. People sometimes collect free samples of dishwasher soap or other cleaning products and then never use them. Consider getting rid of such samples or at least using them in the coming weeks so you don’t end up storing them indefinitely.

Wipe off remaining products with warm, soapy water. I suggest corralling supplies in plastic storage caddies to help the space under the sink stay neat. If you don’t want to purchase new caddies, you may be able to repurpose containers you already own.

Group similar products: dishwashing products in a single container, cleaning supplies in another. If you need more storage, you might consider purchasing an organizer that attaches to the cabinet door.

4. Purge the Freezer

Many people clean out their refrigerator on a regular basis yet don’t address the freezer.

Begin by removing all of the contents. Wipe down the freezer with warm, soapy water.

Consider tossing foods that have been in the freezer for many months. It’s safe to freeze food indefinitely at 0° F but, according to the FDA, the food’s quality decreases the longer it’s frozen. Tenderness, flavor, aroma, juiciness and color can all be affected. The quality of ground beef declines in three to four months, for example, while chicken pieces will last for nine months, according to the U.S. Department of Health and Human Services. The quality of soups and stews starts to degrade in two to three months.

If you don’t want to throw food away, you might instead eat it now before the quality deteriorates further. Also pitch foods that haven’t been properly wrapped and have freezer burn or are covered in ice crystals.

5. Clean Out the Kitchen Junk Drawer

Often my clients have one or more junk drawers in the kitchen. These might contain pens, receipts, hair ties, screwdrivers, flashlights, power cords, earbuds, lip balm, old sunglasses, packing tape, old cell phones and a multitude of other random items. It’s often difficult to find anything in them because they’re so messy.

I suggest limiting your kitchen junk to just one drawer, and try to limit its contents to things you use every day.

To organize this area, I recommend first removing everything from the drawer. Toss anything broken or unusable, such as dried-out pens. Toss or file old receipts. Consider donating unused items that still have life in them, such as old sunglasses. Remove the SIM cards from old cellphones and recycle the phones at a local electronic-waste-disposal site.

Then return the items you want to keep — but not in the junk drawer — to their proper homes: tools to the toolbox, hair ties to the bathroom drawer.

For the items that will remain in the junk drawer, consider purchasing organizers or repurposing small containers to keep the drawer from becoming chaotic. Use these containers to store everyday items such as earbuds, phone chargers, pens, tape and scissors.

Since a junk drawer has the tendency to become a dumping ground, spend a few minutes each month removing things that don’t belong there and returning them to their proper homes.

6. Refold the Contents of your Sock and Underwear Drawer

Underwear and sock drawers can easily become a tangled web. The trick to corralling socks and lingerie is to break a large drawer into smaller sections and group similar items within each.

I recommend purchasing inexpensive drawer organizers. Collapsable cloth boxes or plastic containers are a good choice, or you can repurpose shoe or photo boxes. Spring-loaded plastic drawer dividers are another option.

To begin the organizing process, I recommend removing the contents of the drawer. Toss socks without a mate as well as anything else that has reached the end of its functional life.

I have a large drawer, so I divided it into five sections: bras, underwear, athletic socks, dress socks and tights. The boxes I purchased happen to fit perfectly in my drawer. If you can’t find a good fit for yours, consider spring-loaded dividers, which can be adjusted to fit most drawers.

You can fold bras and arrange them vertically within one box so that you can easily find the one you want. I recommend folding underwear neatly in another box and tights in a third. For socks, organizer Marie Kondo recommends folding them and storing vertically. If this doesn’t work for you, opt for the old-fashioned method of rolling each pair in a ball. Consider storing athletic socks in a separate container from dress socks.

I’ve found that my underwear and sock drawer has stayed neat and organized since I purchased drawer organizers. It’s easy to maintain and I don’t have to spend time each month tidying it.

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7. Organize Your Bathroom Drawer

Like any drawer that holds small items, the bathroom drawer can quickly become a jumbled mess without the use of drawer organizers. Fortunately, these are available in many shapes and sizes. Some people like individual clear plastic containers that fit products such as toothpaste, dental floss and razors.

I recommend that you measure your bathroom drawer before you purchase to ensure the correct fit. If you buy different sizes, they fit like a puzzle in the drawer, so be careful when measuring. It may be more economical to purchase one large organizer that’s divided into sections.

For this room, I do recommend purchasing organizers rather than repurposing existing containers. Bathroom drawers are shallow, and organizers also need to be able to stand up to moisture, so if you intend to repurpose containers, keep this in mind.

As with the previous tasks, begin by emptying and wiping out the drawer. Toss anything that’s dried out or unusable. Make room in your organizers for daily items like toothpaste, floss, razors, moisturizer and sunscreen. Create a space for cosmetics you use often. If you own a lot of makeup, you may want to store the less frequently used items in a container under the sink.

Once you’ve completed these seven tasks, give yourself a small reward. If you’re motivated to continue decluttering your home, you might even consider seven slightly larger tasks to focus on next month.

Written by Jeanne Taylor, found on the Houzz.com website

Hi from Emmett and Kim! We are a husband and wife real estate team here in Chico, CA with Century 21 Select Real Estate. We hope you stick around and check out our website! You can search for homes for sale in Chico or towns around it. You can get answers to your questions about buying a home or selling a home. You can even sign up to have an online consultation with Kim or Emmett about buying a house! Call us if you just want to talk real estate.

Electric Floor Heating

Radiant floor heating systems heat a room by means of a system of pipes or wires that run beneath the surface flooring to gently radiate heat upward into the room. Such systems offer a good way to heat a room addition where it is difficult to extend existing HVAC ductwork, and they are especially effective on flooring surfaces that are naturally cool to the touch, such as stone, concrete, or ceramic tile. Radiant floors can also be a good choice in large, tall rooms since the heat source emanates at floor level, where the heating is most needed. And particularly in rooms where you walk with bare feet (the prime example is a bathroom), a radiant floor makes for unparalleled comfort.

Radiant floor systems come in several styles, but one of the most popular is the electric system, in which a wire mesh or loops of individual wires run across the floor beneath the surface, creating warmth by means of the natural resistance occurring as electricity flows through the metal wires.

Anatomy of an Electric Radiant Floor Heating System

The principle of radiant floor heating has been around for centuries. In ancient Rome, for example, many public buildings had a system of tunnels beneath stone floors that circulated air warmed by wood-burning fires. In the modern electric adaptation, thin heating cables installed under surface flooring—most commonly ceramic tile—heat the floor much the way an electric blanket works. Typically they are operated by their own 15- or 20-amp electrical circuit controlled by a wall thermostat. Often such systems are used to provide supplemental heat and are installed during remodeling projects.

Most electric radiant floors involve laying strips of electrical matting across the subfloor, linked together and connected to an electrical circuit and line-voltage thermostat, and secured in place by a covering of thin-set mortar. The surface floor covering is installed over the electrical matts. In these matt systems, you can cut pieces to size to fit irregular areas, although it is generally better to use full-sized mats. Ideally, the mats cover most of the floor, but it is also possible to confine the heating to areas where you usually walk. In other systems, individual wires are looped across the bathroom floor about 3 inches apart and secured by thin-set adhesive. For ceramic or stone tile floors, the electrical mats or wires are installed over the cement board underlayment, over which the ceramic tile is then laid.

Pros

Electric radiant heating systems buried within thermal masses (such as between cement board and ceramic tile) can retain heat for a long time, even after the power is turned off.

Electric radiant floor systems offer a discreet way of heating a floor. With the right temperature setting, it is difficult to even detect that the radiant heat is operating.

The systems can help reduce overall heating costs—your HVAC or space heaters do not have to operate as hard to heat up the room.

These systems are ideal for use under naturally cool surfaces, such as ceramic and stone tile or on concrete slabs.

Electric systems are easy to install during remodeling projects.

Radiant system, in general, are more cost-effective than other means of electric supplemental heating, such as space heaters.

Electrical systems are the most DIY-friendly of the radiant floor options.

Cons

These systems are difficult to install retroactively, as the floor covering must be removed. They are most practical during new construction or during major remodeling projects.

They are more effective at warming the floor surface “to the touch,” rather than heating the entire room (though it is possible to use radiant floor heating as your primary heat source).

For whole-home use, electrical systems are more expensive to operate than warm-water radiant heating.

Broken wires are trapped between flooring surfaces and are difficult to repair.

Radiant floor heating is less effective under carpeting, hardwood, or vinyl since heat can be trapped between the insulating surface layer and the subfloor.

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Costs

You can expect to pay at least $8 per square foot at a minimum for the materials for an electric radiant floor. For estimating purposes, $10 to $12 per square foot is a safe number to use for materials alone. On average, for professional installation plus materials, plan on spending about $16 per square foot.

While it depends on where you are located and the cost of electricity there, you can figure on operating costs of about $0.50 to $1.00 per day for an 8 x 10-foot bathroom, if the system runs 24 hours a day (regulated by thermostat). When operated 8 hours a day, costs run about $0.25 to $0.35 per day for the same 8 x 10-foot bathroom.

Alternate Forms of Radiant Floor Heating

Less common but also available is the hydronic (hot water) radiant floor system. In hydronic systems, tubes of water warmed by a central boiler or hot water heater circulate beneath the floor. Hydronic radiant floor systems are more typically used in new construction for creation of whole-house heating systems. Installation costs are considerably higher than for other central heating systems, but hydronic radiant systems are extremely efficient and offer much lower ongoing operating costs—about one-third that of forced air systems.

Written by Lee Wallender; found on thespruce.com website

Hi from Emmett and Kim! We are a husband and wife real estate team here in Chico, CA with Century 21 Select Real Estate. If you have any questions about buying or selling a home, or any other home related questions, please reach out to us! We hope you stick around and check out our website. You can search homes for sale, get local market reports, and more!

12 Hidden Renovation Costs That Can Sink Your Budget

Surprises happen. Shelling out cash on unexpected renovation costs isn’t completely avoidable — but there are plenty of hidden renovation costs you can prepare for.

Here are some of the surprising things that can set your wallet on fire during your next big project.

#1 Extra Muscle: $500

Even if you’re just clearing out the renovation space by moving boxes downstairs, you still might find yourself in need of a few strong hands.

“For the longest time, we thought we could clear out the space ourselves,” says Summer Sterling, who renovated her home’s entire top floor, including gutting the kitchen, updating two bathrooms, and vaulting a ceiling. She and her husband lived in the basement during the remodel. “Then we realized we have this gigantic furniture.” The Sterlings moved as much as they could beforehand, but the movers still cost about $500.

#2 Anxious Pups: $125 Per Week

Some pets have nerves of steel. Others cower at any unexpected noise or strangers. And construction zones are full of noisy strangers: dropping wrenches, hammering, or stomping through your home in metal-toed boots.

Monitor your dog to see how he handles the stress. If the answer is “not well,” prepare for a brief boarding — although you might find a mid-day dog walker or a short stay with Nana is soothing enough (and far less expensive).

Sterling and her husband adopted a new dog shortly before the remodel. “It was tough on our little guy,” she says. “He likes to sleep all the time.”

Their two pups doubled their time in doggie daycare — stressful for the dogs and the budget. But planning your work during your sitter’s down season can save you some cash.

#3 Dinners Out: $80 Per Week

Cooking without a kitchen challenges the best chefs — there’s a reason it’s a stalwart Top Chef challenge. Even if your kitchen remains intact during the reno, putting together a meal in a home filled with dust is no fun at all.

Sterling and her husband ate out or ordered take-out “at least three or four times a week,” she says.

Instead of single-handedly funding your favorite restaurant’s expansion, she recommends storing pre-prepped, microwaveable meals in a chest freezer. Or setting up a makeshift kitchen.

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#4 Dumpster Fees: $400

Construction junk has to go somewhere. If you’re DIYing the remodel, dumpster fees might come as a surprise.

Expect to spend about $400 on your trash-mobile, but contractors can provide localized, ballpark dumpster estimates.

Once it’s in your driveway, save some extra cash by using the dumpster to ditch unwanted stuff accumulating around your house. Tired of those nasty old blinds? Say adieu, without paying extra disposal fees. Just leave room for the construction junk.

#5 Hotel Stays: $500

You’re determined to live at home during the reno, but if a contractor accidentally smashes through your bedroom wall or the noise gets too unbearable, you might find yourself packing up for a short stay in a nearby hotel.

You don’t need to book your staycation beforehand, but budgeting enough cash for a few days’ away will make the decision to abandon ship a bit less stressful. Or hole up with some friends — just make sure to bring wine and cover dinner as payment.

#6 Childcare: $175 Per Week

Checking your calendar, you realize demo day coincides with school inservice. You can’t have the adorable little rascals stomping through the dust — so off to the sitters they go. Great. Another $100 down the drain.

Keep a close eye on the calendar and pre-arrange playdates for their days off to keep your wallet in check. Or bring over Aunt Margie to keep the kids corralled (and entertained) in a spare bedroom.

#7 Labor Costs: $50 Per Hour

Delays, schedule changes, and unexpected surprises don’t just add time to the renovation — they mean paying more to the workers.

“Our labor costs wound up being much higher,” says Janet Heller, whose sink broke during a bathroom renovation — requiring multiple trips and two times the work from contractors and laborers.

Know each contractor’s hourly cost so when disaster strikes, you can budget appropriately.

#8 Professional Cleaning: $150

Your new kitchen features sparkling, brand-new marble and stunning oak cabinetry — but you can’t ignore the fine layer of sawdust covering everything.

“Construction dust is everywhere,” Sterling says. Allocate a few days for a top-to-bottom clean. Scrubbing everything yourself can save you some much-needed cash.

But if the mess is too daunting, consider hiring a service as a post-renovation treat. Even if they’re just handling the hard-to-reach spots, a little help will be more than welcome. Now all you have to do is go home, kick back, and heat up your very last frozen dinner.

#9 Office Space: $195 Per Month

Telecommuters have their own renovation challenges. How can you take a phone call with clients when a drill is whirring overhead?

“I work from home, but am unable to function with so much construction noise above me,” Sterling says. “There’s no privacy whatsoever.” But privacy doesn’t come cheap: A “flexible desk” at a co-working space can cost $195 per month — and more if you need a closed door.

Sterling leased a temporary office twice per week during the renovation and lowered costs by working out of coffee shops or a library as often as possible.

#10 Higher Utility Bills: 15%-20% Extra

Doors opening. Fans whirring. So many power tools. Is there anything in construction that doesn’t suck up energy?

“We’re living in a much smaller space, but the efficiency is terrible,” says Sterling, who spent about 15% to 20% more on electricity during the renovation. “The bloody contractors leave the windows open all the time.”

Don’t feel bad if you’re a bit of a nag. Unless the breeze is necessary (drying paint and new hardwood floors require ventilation), pop upstairs every evening to close the windows.

#11 Lawn Landscaping: $1,500

Did they really need to put their equipment on your beautiful Kentucky bluegrass? For some reason, renovating the interior can mean your lawn takes a beating that only a professional landscaper can repair.

Ask contractors beforehand if they plan on using your yard for staging, and place down tarps to protect the foliage. Or find alternative spots, like the attached garage or gravel driveway.

#12 Permits: $1,000

Before the first sledgehammer swings, sit down with your contractor (or city building department) for a detailed discussion of exactly what permits you need.

“Usually a contractor will include plans and permits,” says Charles Rinek, owner of custom home building company Rinek, Inc.

But make sure you know early on if they don’t, otherwise you’re in for a surprise. Sterling says she paid more than $1,800 in permit fees — causing major sticker shock, if you’re not expecting the bill.

Written by Jamie Wiebe, found on houselogic.com website

Hi from Emmett and Kim! We are a husband and wife real estate team here in Chico, CA with Century 21 Select Real Estate, Inc. If you have any questions about buying or selling a home please do not hesitate to reach out to us! We hope you stick around and explore our website. There is a lot of great info and you can search for homes for sale as well!

How to form a real estate LLC

What are the fundamental mistakes investors make when forming a real estate LLC?

Investing in real estate offers many lucrative advantages compared to other investment vehicles. On the other hand, it can also expose real estate investors to risks and pitfalls they never knew existed. That said, forming a real estate LLC (limited liability company) is one of the more important things investors can do to safeguard themselves from outside interference.

A real estate LLC is a corporate structure that aims to not only shield you from being sued if things go awry but protect your personal assets such as a home, personal bank account, or investments. By forming a real estate LLC, investors and their respected businesses will be viewed as two separate entities in the eyes of the corporate world, helping to protect them from being personally liable in case of debt or lawsuit from the business. Along with protection, a real estate LLC offers unique tax advantages to investors, as well as the flexibility to accommodate their growing business demands.

What Is A Real Estate LLC?

An LLC for real estate is an established legal entity that allows investors to purchase and own real estate in such a way that protects them from personal liability. This means that the investor buys and sells real estate, as well as conducts other business, in the name of the LLC, rather than as an individual. In case any outside entities or individuals make a claim, the individuals behind the entity can avoid personal liability. Also, property owners are allowed to establish individual LLCs for each separate property, meaning that they can avoid cross-liability between properties.

Real Estate LLC vs. Liability Insurance

If investors decide that the process of forming an LLC is not worth the protection it will provide if they were to face a lawsuit, they can choose to rely on liability insurance instead. Liability insurance is an affordable option, but these policies can be risky as they will include exceptions and limits to the protection they offer. Overall, LLCs are becoming increasingly popular due to the benefits they offer real estate investors.

Limit Personal Liability

One of the biggest benefits that LLCs offer investors is a limit to the personal vulnerability they would face if a lawsuit were raised against the property they own. For instance, if an investor personally owns a property, they would be named in the lawsuit, leaving their personal assets vulnerable in the legal proceedings of the case. However, if the property is owned by an LLC, investors can reduce their personal liability in a lawsuit. Instead of having to defend their personal assets, the liability of the case would fall on the LLC, creating a protective barrier between the investor and their personal property.

How To Set Up A Real Estate LLC In 6 Steps

Starting a real estate investment LLC has risen in popularity in the past decade, namely due to the unique benefits that cannot be ignored. Forming a real estate LLC is not difficult; rather, it is a matter of doing your research and getting organized. The following is a brief overview of the required steps, which can vary by state.

1. Research your state’s regulations on forming a LLC.

2. Pick out a business name and run a search to make sure it doesn’t already exist.

3. File an “Articles of Organization” document that can be found on your Secretary of State homepage.

4. Create an Operating Agreement for your LLC, which outlines how your entity will be organized and run.

5. Find out whether your state requires you to publish an intent to file through your local newspaper.

6. Obtain any necessary business licenses and permits, as well as apply for a tax identification number through the IRS.

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Step 1 Research Regulations

The formation of an LLC will vary slightly from state to state, with fees and regulations being subject to change. Most investors choose to incorporate within the state they conduct business, though some opt for areas with more “relaxed” business laws like Delaware or Nevada. Do note that if you have a physical presence or do business across states you will have to register a foreign LLC in each of these places. Selecting a state is entirely up to you, just be sure to research the process before actually getting started. All of this information will be available on your area’s Secretary of State website.

Step 2 Choose A Business Name

The right business name is more fundamental than you might think. Not only does it need to attract potential clients, but it must also be unique to register as an LLC. Write out a few potential options before going online to check their availability. One of the best tips to follow as you name your business is to avoid pigeonholing yourself. Starting an LLC is only the beginning of your real estate business, so choose a business name with potential. Once you have some candidates in mind, make sure they are not already taken. The most common reason LLC applications are rejected is because of problems with business names.

Step 3 File Your “Articles Of Organization”

The Articles of Organization for an LLC is essentially the blueprint of a business. It should state the company name, primary address, start date, business owners (called “members”), and a brief description of the business. As I mentioned above, the specificities can vary between states. With that in mind, make sure you include each of the required parts before submitting your Articles of Organization to the Secretary of State’s office. This is also the part of the process where business owners are required to pay any fees associated with starting an LLC. It may take a few weeks to hear back from their office, but if everything is submitted properly there should be no issues with approval.

Step 4 Create Your Operating Agreement

Not all states will require an operating agreement, though it is not a bad idea to create one as part of your business plan anyway. The states that do require one include California, Delaware, Maine, Missouri, and New York. While the other states have different rules, an operating agreement can actually come in handy no matter where you live. Essentially, it states how the business is divided among members and how decisions will be made within the company. Further, it can also describe what would happen in the event one member decided to leave the company. One of the biggest perks of starting an LLC is that it can offer protection from several negative situations. The same logic applies to an operating agreement: it protects business members by anticipating possible scenarios that could harm the business structure.

Step 5 Publish An Intent To File

There are only three states that require an intent to file: Arizona, Nebraska, and New York. What this means is if you are forming an LLC in one of these three states you are required to publish an ad in your local newspaper stating your intention to create an LLC in that state. Generally, investors will publish ads over three to six weeks in a newspaper. The newspaper will then send back an Affidavit of Publication, which will need to be submitted to the Secretary of State’s office.

Step 6 Obtain Licenses And Permits

A real estate investment LLC is typically not the only designation you will need to open your doors for business. Almost all states will have separate licenses and permits that are required before conducting business. These can include a general business license, sales tax permit, professional license, and more. Again, your questions on this part of the process can typically be answered with a little online research. I recommend starting with the U.S. Small Business Administration’s website and going from there.

5 Fundamental Mistakes To Avoid When Starting A Real Estate Investment LLC

While forming a real estate LLC is immensely important for protection, the beginning stages of setting it up can also be massively intimidating for beginners. Also, there are several common mistakes that investors make along the way. To better assist in understanding the complexity of a real estate LLC, the following outlines the biggest mistakes people need to avoid when forming an LLC:

1. Not starting the process of forming your LLC before pursuing new deals.

2. Selecting the wrong LLC structure for your business.

3. Commingling personal and business funds, or engaging in unethical practices.

4. Not consulting a professional on the best corporate and tax structures for your business.

5. Omitting the proper steps and due diligence recommended when forming an LLC.

Mistake 1 Waiting To Form Your LLC

The purpose of a real estate LLC is to legally separate yourself from the business. When first getting started, even if you haven’t completed a deal yet, it’s imperative you begin the necessary steps of forming a real estate LLC. This investment umbrella will supply investors with the real estate LLC benefits of asset protection and allow them to immediately reduce their taxable income with business-related expenses. The addition of a real estate LLC can also help to legitimize an investor’s business credibility, as this corporate structure will provide an element of professionalism and trust that other competitors won’t have.

Along with pulling the trigger early on an LLC, it’s also important for beginner investors to understand that LLCs are governed by individual state laws. This means that, depending on the state you registered your LLC in, the filing requirements and protection they offer will differ from state to state. For example, Nevada is a popular destination to establish a business LLC, as the state offers optimal asset protection laws.

Mistake 2 Ignoring Corporate Layers

Another mistake that investors commonly make when forming a real estate LLC is choosing the wrong LLC structure. As a result, investors may not be taking full advantage of all tax breaks available to them.

Generally speaking, LLCs are “pass-through” entities, which means owners pay taxes on the company’s profits through their own income tax filings. This basically allows investors to bypass corporate taxes, including double taxation. However, because there are many different investment options in real estate, from buy and hold, rentals, rehabs to wholesale, it’s important to note there are also subsidiaries of LLCs.

A real estate LLC subsidiary allows investors with diverse investments to spread their company’s assets across different business entities, helping to further reduce risk. This practice is pretty straight forward and similar to forming a real estate LLC. For more information, including rules for starting an LLC, investors are recommended to visit SBA.Org.

Mistake 3 Piercing The Corporate Veil

The primary benefit of forming a real estate LLC is the entity’s ability to provide distance between you and the business, while not relinquishing control.

Although forming a real estate LLC can provide an assortment of benefits, including liability protection, it can also be denied if mishandled. An LLC is simply the shell of a corporate structure, which means it will not be enough to avoid personal liability. For those that engage in fraudulent activity or most commonly co-mingling personal and business funds, this corporate shield can be shattered—leaving you vulnerable to liability. By co-mingling funds, it makes it extremely hard to prove that your LLC is, in fact, a separate entity from you. That said, the importance of separating business and personal finances is second to none, as this small side-step can breach the conditions of a real estate LLC.

Mistake 4 Not Hiring A Professional

There’s a time and place to do everything yourself as an investor, but not when it comes to the legal or tax segment of your business. The importance of consulting an attorney and a tax advisor is undeniable, as these experienced professionals will provide the best advice moving forward.

As a real estate entrepreneur, it’s important to remember that your skillset lies somewhere else. Although learning information on corporate structures and tax loopholes has its place, your time and effort are better spent in other departments of the business. Leaving it to a professional will allow you more time to concentrate on taking your business to the next level. With the right team and people in place, your real estate LLC will not only cement your position as a business, including full protection but put it in a position to achieve every tax benefit available.

Mistake 5 Lacking Due Diligence

Far and away the biggest mistake investors make when forming a real estate LLC is failing to conduct the necessary due diligence. While starting a business takes time, effort, and motivation to successfully achieve, it can all be erased (and more) without the appropriate legal structure in place. Taking the proper steps, including planning and precaution, is vital when starting your real estate career, but especially when forming a real estate LLC. Remember this important step encompasses both how you and your business will be taxed, but also how it will be protected in the case of legal issues. Taking the time now to understand the fundamentals of an LLC and how it applies to you and your business will put investors in the best position to succeed, both now and in the future.

FAQs About Real Estate LLCs

Due, in large part, to their complex nature, only seasoned business owners tend to understand the “ins and outs” of what LLCs are and how they are formed. Prospective investors, on the other hand, are often clueless about how these legal entities work. New investors aren’t awarded the luxury of years of experience, nor are the concepts at play easy for them to digest. As a result, far too many of today’s real estate investors learn about the legal structure of their own companies through trial and error, which is risky to say the least.

Instead of subjecting one of the most important aspects of any real estate business to unnecessary risk, investors are better off learning from their predecessors. Specifically, investors could benefit immensely from asking the right questions, not the least of which are outlined below:

Can You Buy Real Estate With An LLC?

Real estate companies structured under an LLC are allowed to buy real estate. In fact, LLCs afford investors one of the most versatile vehicles to shelter their taxes and protect their assets. With the help of an LLC, savvy business owners may even be allowed to keep more of the money they make when it comes time to file their taxes.

Why Should You Put Rental Property In An LLC?

Not only should rental properties be placed under an LLC, but each property in a respective portfolio should have its own separate LLC. Not only will filing as an LLC award investors with great tax benefits and asset protection, but each subsequent LLC will provide another layer of protection. Setting up an LLC for each property will “insulate” them from each other, effectively reducing risk.

What Is The Best State To Form A Real Estate LLC?

While the best state to form a real estate LLC is subjective and dependent on an investor’s personal aspirations, Nevada is a great place to set up a real estate LLC. In addition to awarding business owners the many benefits associated with today’s LLCs, those formed in Nevada are awarded an extra layer of protection. Specifically, Nevada allows LLCs to form what’s known as a “Series LLC.” According to LegalZoom, “The Series LLC allows for the erection of limited liability shields within the LLC. For example, a real estate LLC might hold several properties and set up a series LLC in a manner that prevents one property from being foreclosed upon to satisfy the debts of another property.”

Do You Have To Live In The Same State As Your LLC?

Real estate companies are pretty much free to set up an LLC in any state they choose, with a few exceptions. It is common for business owners to file in the state they currently work in to avoid confusing tax requirements, but sometimes it may be worth it to file in a different state. Take the state’s tax laws into consideration when deciding for yourself.

How Much Does It Cost To Form A Real Estate LLC?

The cost of forming a real estate LLC is contingent on the state it is filed in and the steps taken to form the entity. Individual state filing fees can vary dramatically but tend to range anywhere from $50 to $500. That price, however, is just the filing fee. Additional fees may be required for your own federal tax ID number, or in the event you hire a lawyer or use an online incorporation website.

Summary

Forming a real estate LLC is one of the most important steps an investor can undertake when getting started. It not only protects you and your personal assets, but it allows you to reap the tax benefits that you rightfully deserve. While the ability to generate sales and build your business is crucial to success, it is equally (if not more) important to keep it protected at all costs. Investors should remember this act pertains to not just your business, but your livelihood as well.

Disclaimer: Prospective business owners should consult a professional before forming a real estate LLC.

Written by JD Esajian and shared from fortunebuilders.com website

What Types of Home Inspections Can a Buyer Do?

There are lots of types of home inspections you can do when you are buying a house. In California, these inspections are generally done during escrow, and who pays for them is negotiable. No inspections are required when buying a home, unless you are getting a VA loan, then you will be required to get a pest inspection and a septic inspection, if applicable, and a well inspection, if applicable.

General Home Inspections

General home inspectors look for signs of damage and defects. They’ll often refer buyers to a specialist to investigate further and fully diagnose the problem when and if they spot something significant, or something that lies outside their scope of expertise.

A general home inspector might see evidence of wood damage and suggest that you call in a pest expert to find out what caused it. These specialists can provide you with different repair options and give you a sense of what the bill might be to remedy the situation.

Tip:

The costs of inspections are generally left to the buyer unless they’re required by an appraiser in order to get a loan.

Chimney Inspections

Some older chimneys don’t have flue liners, or the interior brickwork might be crumbling. A chimney inspector will detect these problems and can also make sure smoke is discharged properly and that the cap is in good repair. Cost: a mere $100 to $300 as of 2020.1

Electrical Inspections

A general home inspector might tell you that the electrical box is so old that it no longer complies with city code. An electrician can tell you the best brands for replacement and how much it will cost, among other disclosures.

Tip:

Be sure to check out the electrical panel and Google the model number to make sure it hasn’t been recalled.

Lead-Based Paint

The federal government banned the use of lead-based paint in 1978, but older homes-and even some built after 1978-can still contain it.2 You have a right to have the home tested for lead-based paint and to hire a certified lead abatement contractor to remove it.3

Search for homes in Chico between $400,000-$600,000. Click here: Search

Heating and Air Conditioning

A home inspector might measure the differential temperature reading from an air conditioner or a furnace as low, and recommend that the unit be inspected by an HVAC specialist to find out why. Most furnaces must be taken apart to determine the source of the malfunction.

Tip:

An HVAC specialist can tell you how much it will cost to fix the unit, or whether it needs to be replaced entirely.

Wood Damage

You’ll find wood-destroying critters in just about any part of the country, but they particularly thrive in warm climates. A pest inspection discloses not only the presence the likes of termites or powder post beetles, but it also identifies non-pest issues like dry rot. This type of inspection can cost as little as $50 or so as of 2020.4

Foundation Inspections

A home inspector can tell you if your home was built on a slab or a raised foundation and note suspicious cracks, but a foundation engineer can tell you if the home is sliding or the foundation is faulty. This type of inspection can run $300 to $1000 as of 2020.5

Pool and Spa Inspections

Pool and spa experts can offer an estimated life expectancy of the unit based on crucial key components such as the heater or spa blower. These specialists also check for leaks.

Tip:

Sometimes pools can be covered under home warranties for an additional cost.

Roof Inspections

Get your own roof certification on an older roof, even if the appraiser requires it and the seller won’t pay for it. Make sure the company is reputable and likely to be in business later if you should have to make a claim.

Sewer or Septic System

Get a sewer or septic tank inspection. Some older homes might not be connected to a sewer system. Modern inspection technology inserts a digital camera into the sewer line and pushes it through to the main line. Many sewer inspectors will even make movies of the process for you.

Soil Stability

Testing the soil is important if you’re buying a home on the side of a hill because you don’t want the home or any part of the hill sliding away during a severe rainstorm. Some areas also are prone to soil contamination.

Landscaping Inspections

The best way to determine if the trees and bushes on the property are healthy is to hire an arborist to inspect them.

Water Systems and Plumbing

A plumber can tell you if galvanized plumbing needs to be replaced. Some galvanized pipes are so clogged that you can barely fit the lead of a pencil through them.

Inspect the construction and find out the depth of the water table, including water sanitation, if the property has a well. This type of inspection will run about $165 as of 2020.6

Gases and Chemicals

A mitigation contractor can test for radon or methane gas and recommend ways to remove it. Qualified formaldehyde inspectors can also determine the presence of unacceptable levels of this colorless and flammable chemical, which is often used in building products. It’s been known to cause cancer in rats.

Tip:

A radon check can set you back as little as $10, if you purchase a home test kit.7

Asbestos Inspections

Contrary to popular belief, general home inspections don’t include tests for asbestos. The only way to tell if a material actually contains asbestos is to have it tested by taking a sample to a lab.

Tip:

Don’t rely on do-it-yourself home tests.

Mold Inspections

Mold is typical in residences in damp, humid climates, and it can trigger health problems even in healthy individuals. An inspector can test for its presence and determine what type of mold, if any, is present.

Document Inspections

Not all inspections are physical. Researching records can turn up significant information, too:

Square footage:

You might want to verify the square footage of your home because public records sometimes contain mistakes. Buyers or their lenders can hire an appraiser to provide this measurement.

Easements and encroachments:

Your owner’s title policy will disclose easements, but ask the title company to send you the actual easement documents from public records, too. You can also hire a surveyor to inspect and prepare an improvement location certificate (ILC), which will show any encroachments.

Lot size and boundaries:

A preliminary search for a title policy will give you a plat map, showing the boundaries and the size of the lot. Consider hiring a surveyor if you want this information verified. Don’t rely on fences to determine boundaries, but be warned. This type of survey can cost as much as $675 and as low as $346 as of 2020.

Permits and zoning:

Go to your city planning department and ask to see the permits on the home. Sometimes people remodel without permits. The zoning department can also tell you if running a home-based business is legal where the home is located.

If You’re Buying in an Area Prone to Disasters

You might want to add one more item to your inspection checklist if you’re buying in an area that has a history of severe weather events, such as flooding, hurricanes, or tornadoes. A disaster inspection can tell you if the property suffered any resulting damage and how well it’s likely to stand up to another such event.

BY ELIZABETH WEINTRAUB
Updated November 13, 2020
At the time of writing, Elizabeth Weintraub, CalBRE #00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.