Checklist When Buying Industrial Premises for Business Use

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Despite no Budget sops, gold zooms on buying; silver also up

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MUMBAI: Gold rose sharply and reclaimed the key Rs 28,000 per 10 grams mark at the bullion market here today on emergence of frantic buying by stockists and speculators amid strong global sentiment.

Silver too surged and closed above the Rs 46,000 per kg level on the back of heavy industrial demand.

Traders and investors, who were on the sidelines expecting an import duty cut on the yellow metal in the maiden Union Budget of the Modi Government, got into a buying mode, triggering a rally, a trader commented.

Standard gold (99.5 purity) galloped by a whopping Rs 750 to conclude at Rs 28,605 per 10 grams from Wednesday's closing level of Rs 27,855.

Pure gold (99.9 purity) also jumped by a similar margin to end at Rs 28,750 per 10 grams against Rs 28,000.

Silver (.999 fineness) skyrocketed by a massive Rs 1,150 to finish at Rs 46,580 per kilo from Rs 45,430 yesterday.

Globally, the shiny metal rallied on weak dollar as well as bargain hunting after US Fed's minutes of the recent policy meet gave no indication of interest rate hike.

Spot gold was bid higher at USD 1,341 an ounce in early European trade.

Meanwhile, the gems and jewellery sector expressed disappointment over the Budget, which they had hoped would reduce import duty on gold (currently at 10%) and abolish or at least water down the stringent 80:20 norms for import of the yellow metal. None of this was addressed in the Budget.

"The entire industry was waiting for a positive turn of events but feels let down by the Government in its maiden budget," All India Gems and Jewellery Federation (GJF) Chairman Haresh Soni said.

Millennials squeezed out of buying a home

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Bailey Cato and Josh Czupryk are unusual for Millennials: They were able to buy a home, but not without a lot of disappointment first.

Just 36% of Americans under the age of 35 own a home, according to the Census Bureau. That's down from 42% in 2007 and the lowest level since 1982, when the agency began tracking homeownership by age.

It's not all their fault. Millennials want to buy homes -- 90% prefer owning over renting, according to a recent survey from Fannie Mae.

But student loan debt, tight lending standards and stiff competition have made it next to impossible for many of these younger Americans to make the leap.

"When we surveyed Millennials they cited several barriers to homeownership, especially access to financing," said Steve Deggendorf, a senior director for Fannie Mae.

Many Millennials simply can't come up with the hefty 20% down payments. Others don't have good enough credit to qualify for loans.

Related: Priced out: 'I can't afford a home in my town'

Making it even more difficult are the heavy student loan burdens many college grads carry.

"Our problem is an obvious one -- debt," said Mike Kennedy, a 32-year-old marketing director who lives in Northboro, Mass. "My wife just graduated with her master's and I'm still paying off mine."

Even without the $50,000 in student loan debt they owe, affording a home in their town is difficult, he said. Single-family homes there cost $300,000 and up.

Russell Cragun, an online marketing manager, and his wife, Chalay, are both 25. They are looking at homes in the Orem, Utah, area, where the median home price is more than $230,000.

Lured by tax incentives, tech companies have been relocating to the area and creating many high-paying jobs. That has heated up demand -- and home prices.

Related: Buy vs. rent: What you'll pay in 10 biggest cities

But with $15,000 in student loan debt to pay, it's hard to save enough for a downpayment, said Russell.

Tech and other high paying industries have had the same impact on home prices in many of the cities where young adults most prefer to live. Places like San Francisco, New York and Los Angeles are unaffordable to most residents seeking to buy a home, but even more so for those who have not hit their high earning years.

 

Competition is so stiff in these markets that young buyers can't compete with older, deep-pocketed buyers who are often able to pay for homes in all-cash.

Thomas Bright of Richmond, Va., lost out on two purchases that way.

"When you are a first-time buyer, you aren't poised to compete with all-cash buyers," he said.

Related: Tech workers squeezing out renters

Just finding a property can be a challenge. Even though the housing bust has shaved about 20% off home prices, the number of homes available for sale has dropped significantly in many markets.

Usually, the good homes go quickly, according to Richard Ernsberger, 34, an attorney who lives in Pittsburgh.

"I have been in the market for a one- or two-bedroom townhome or condo for several months," he said. "It seems as though a good number of homes go within days of being listed."

Josh Czupryk, 29, who works as an education coach, and his wife, Bailey Cato, 28, a teacher, wanted to live in a safe Memphis, Tenn., neighborhood with good schools and nice older houses.

"Every one we looked at had a fatal flaw," he said. One house had a blighted one next door. Another had a completely paved backyard.

Eventually, Czupryk and Cato found a four-bedroom for $295,000. Working in their favor was the fact that neither had built up any student loan debt.

Related: Can you afford a home in these 27 cities?

There is a ray of hope for young wanna be homeowners, said Fannie Mae's Deggendorf. "Mortgage lending is getting a little less tight, with lenders approving buyers with a little lower credit score and who have less of a downpayment," he said.

If that trend continues, young buyers just might be able to buy homes again.

First Published: June 1, 2014: 1:41 PM ET

8 Questions To Ask Yourself Before Buying A Second Home

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Mikey Rox and his husband, Everett Morrow, live full-time in New York City, but last year they also purchased a second house in Asbury Park, New Jersey, where they often spend their weekends.

It’s less than a mile from the beach, with three bedrooms and a private backyard — perks that are tough to come by in the Big Apple. “We wanted someplace we could relax outside of Manhattan,” says Rox, 33.

And when they’re not there, they rent it out. “We enjoy the idea of the house paying for itself,” Rox says.

Nationwide, hundreds of thousands of people just like Rox and Morrow are jumping on the vacation-home bandwagon. In fact, sales of second properties were up almost 30% in 2013 from the previous year, according to the National Association of Realtors.

But although buying a second home can be tremendously exciting, the decision also comes with its own unique financial considerations. So before you put an offer on that bungalow by the lake, consider asking yourself these eight key questions to make sure your head’s in the right place.

We’re not just talking about the sale price here — there are a lot of associated expenses you need to factor into the equation too. So while that vacation house you’ve been eyeing may be small, it still requires budgeting for a mortgage, property taxes, insurance, utilities, and maintenance fees — and some of those expenses are probably higher than you think.

When you’re not living in a home on a daily basis, you often don’t have the ability to tackle small problems before they become big ones — and that can translate into higher maintenance costs in the long run, says David Blaylock, a CFP® at LearnVest Planning Services. “Plus, you’re not on site. So a lot of the things you might normally take care of yourself, you’re going to have to hire someone to do.”

A good rule of thumb to consider? Budget about 1% of the home’s purchase price for annual maintenance. So if you bought a $300,000 home, set aside $3,000 a year for such common pop-up costs as an emergency plumbing repair or a new furnace. And if you have an older home that could present more issues or if you plan to rent it, aim for 1.25% to cover extra repairs.

And don’t forget to factor insurance into the equation. In general, insuring a vacation home will cost about 20% more than a primary residence, says Craig Venezia, author of “Buying a Second Home: Income, Getaway or Retirement.”

Insurance providers view vacation homes as a higher risk because you won’t be living there full-time. “In their eyes, there’s a greater chance the house can be damaged,” Venezia says. “And if you’ll be renting out the property, you’ll need additional medical and liability coverage in the event that one of your guests gets hurt on the property.”

RELATED: Buying a House: How Much Can You Afford?

Buying a second home is a money decision — not just a fun way to spend your leisure time — and it’s one you shouldn’t make until after the rest of your finances are in tip-top shape. Are you mostly debt-free? Are you saving enough for retirement? Do you have at least 20% equity in your primary residence, plus enough cash on hand for a 20% down payment and 3% closing costs for the vacation home? “You also want to consider making sure things like college savings are taken care of before you start evaluating the purchase of a vacation property,” Blaylock says.

And while mortgage approvals for second homes typically aren’t as stringent as they were a few years ago, lenders will still be looking closely at your debt-to-income ratio, which is how much money you have to pay each month for debts like student loans, compared to what you take home. Ultimately, Blaylock says, lenders want to know how capable you’ll be of paying back the loan in a timely manner.

In general, you should be able to accommodate all of your mortgage payments (including the vacation home) and the rest of your debt using no more than 36% of your monthly gross income. If you can’t make those numbers work, this probably isn’t the right time to spring for a vacation manse.

RELATED: 4 Couples, 4 Home Purchases: How Much Can They Afford? 

Some people may view a vacation home as a cost savings tool — they see it as a way to save on the lodging fees they’re paying every year when they take a trip.

But Blaylock warns against this strategy: “That’s pretty flawed logic — for the amount you’ll spend on a vacation home, you can take a lot of nice trips each year and stay in hotels.”

Another perspective? View it as an investment — either as a place where you plan to retire or a property that you can sell down the road to supplement your retirement income. When evaluating the investment property’s long-term potential, it’s important to research how prices have appreciated over time in the market where you’re buying.

“I suggest looking at median home prices over the last ten years,” Venezia says. “While this is no guarantee of how it will appreciate in the future, it will give you a sense of how it has performed historically.”

Are you reserving the property exclusively as a second home for yourself, or will you rent it out to help cover associated costs? “Definitely think about why you want to buy it and how you want to use it,” says Venezia. “This gives you a basis to start thinking about types of properties and where to look.”

If you’re buying the house for your own personal use, you’re free to purchase whatever strikes your fancy — and disregard what might attract tenants. But if you’re counting on rental income to cover the mortgage, you have to be more conscious of the home’s location and appeal to others. “For example, you may prefer that secluded cabin in the mountains,” Venezia says, “but many potential renters may find it to be too remote to rent.”

Also keep in mind that very different tax rules apply, according to whether your second home is for personal use or if you rent it. Given the complexity of tax considerations and reporting rental income, make sure to consult with a tax professional before you make up your mind.

RELATED: So You Say You Want to Be a Landlord

The first step is to think about how often you’ll want to rent, plus how long the potential rental season will be. “On average, people who are actively renting are doing so about 15 weeks out of the year,” says Eric Horndahl of vacation rental site FlipKey.com. “And they report, on average, that they make approximately $26,000 per year doing so.”

After marketing costs, that’s enough to cover the mortgage, taxes, and insurance on the average $360,000 home — if you put 20% down, Horndahl adds. For some perspective, the median vacation home purchase price in 2013 was $168,700, and the median down payment was 30%, according to the NAR.

While you’re vacation-home shopping, take a look at similar properties in your area on FlipKey.com or HomeAway.com to see how active the rental market is, and how other places are priced on a nightly or weekly basis. “This will help prospective rental owners make assumptions on how many nights or weeks they will rent it out for, and project their rental income,” Horndahl says.

Next, consider how attractive the home will be to potential renters: Is it close to local attractions, such as the beach or a vibrant downtown? Does the property have any unique selling points or great amenities?

“When they’re going on vacation, people are looking for a hot tub or swimming pool,” Horndahl says. “Also, people who rent vacation homes tend to be larger groups, so you also want to make sure you’re taking size into account.”

Bottom line: Make sure there are a few characteristics that will help your house stand out from others in the area, making it a top choice for renters.

If you’ve decided renting makes sense, you need to determine whether you’re willing to do all the work yourself, or if you’ll pay someone to tackle it for you.

And by work, we mean everything from advertising, finding and screening tenants, cleaning, handling contracts and deposits, and regular maintenance and repairs. According to Venezia, you should expect to pay 20% to 30% of your rental income for property management services.

Many people start out thinking they’re going to do it all themselves — until “they realize how much time they have to put into finding tenants and dealing with paperwork,” Venezia says. “Then that 30% isn’t such a bad deal.”

If you live within a reasonable driving distance of the home, you’re handy and you have the time, you may be able to do the property management yourself. It also helps if your vacation spot is a condo — where some of the maintenance is done for you as part of your association fees — or it’s a newer home, which may have fewer issues.

It’s one thing to buy a vacation home near the shore. It’s another to buy one in a region that’s regularly hit by hurricanes. “If your home is in a designated flood zone or prone to other natural disasters, such as earthquakes or tornadoes, it will be more expensive to insure,” Venezia says. “Waterfront homes, in particular, will be more expensive. On the flip side, they also tend to attract more renters and command higher rents.”

Only you can decide if the location and potential rental income are worth the extra insurance costs, plus the hassle if your home is damaged. If you do decide to buy in a riskier area, it’s key to budget for higher — and sometimes unexpected — costs.

RELATED: Waterfront Housing: Is the Risk Worth It?

As with any large purchase, make sure you’re not buying a vacation home based purely on emotion or impulse. Research the area and sleep on any big decisions before you make them.

“The beauty of a vacation home is that it’s a luxury,” Venezia says. “You have the flexibility of time on your side, so whether you buy something this month or next month isn’t going to make a bit of difference.”

In other words, take your time and find the type of property that you really want — and can afford. Then leap.

RELATED: 5 Homeowners Reveal: The Biggest Home-Buying Mistake We Made

LearnVest Planning Services is a registered investment adviser and subsidiary of LearnVest, Inc. that provides financial plans for its clients. Information shown is for illustrative purposes only and is not intended as investment, legal or tax planning advice. Please consult a financial adviser, attorney or tax specialist for advice specific to your financial situation. Unless specifically identified as such, the people interviewed in this piece are neither clients, employees nor affiliates of LearnVest Planning Services, and the views expressed are their own. LearnVest Planning Services and any third parties listed in this message are separate and unaffiliated and are not responsible for each other’s products, services or policies.