Real Estate Investing

Eco-friendly building design and construction is expected to make up at least 20 percent of all new construction by 2009. There has been extensive coverage of how much money homeowners can save on monthly utilities costs if they build an eco-friendly home. But how much is the one-time capital cost? The answer may surprise you.

According to a 2003 study of 33 LEED-certified office and school buildings in California, the average premium cost per project was less than two percent per square foot. The level of LEED certification greatly affects the premium construction cost per square foot, because higher levels involve more complex features like solar energy panels.

The California study, summarized on Buildings.com, breaks down the average premium cost per LEED certification level. The eight buildings at the lowest LEED-certification level had an average cost premium of less than 1 percent. The 18 silver buildings averaged a 2.1-percent cost premium, while the six gold buildings had an average premium of 1.8 percent. The single platinum building was at 6.5 percent.

“More and more buildings can be built at the LEED-certified level for little or no cost premium,” says Greg Kats, author of the California study. “You can easily get at least half-way to certified at a zero-cost premium.”

Kats warns homebuilders to beware of “glued-on green.” That is the decision to tack on eco-friendly options like low-emitting paint or recycled carpet in the middle of the project. Eco-friendly building works best when it is planned out well from the beginning, Kats says.

Homebuilders should also beware of “greenwash.” These are products put out by companies who don’t really practice green principles on a daily basis, but merely want to make a buck off a product whose eco-friendliness is questionable at best. These types of companies market green products to ride the current trend, but don’t necessarily have the earth as a top priority.

Ultimately, with a little research and planning, basic eco-friendly features like Low E windows, recycled carpet and extra insulation can be integrated into your new home with nominal, if any, extra cost. Why not, considering your helping the earth and saving money on a monthly basis in the long run.

Many a couple has dreamed of buying “their own piece of the world” and building their ideal home upon it. However, the all-important step of buying the right land requires a lot more time, work and careful consideration than many people could possibly realize. The following are some important things to remember when buying the perfect lot.

Don’t buy the cheapest: Sure, there are still some good deals out there. But if your lot is super cheap, there’s probably a reason. You could end up paying a great deal more in the long run.

Financing: Pre-qualify for a mortgage so you know exactly how much house you can afford. As for land, the days of paying cash for land are practically over due to rising real estate and building costs. Certainly save up as much cash as possible, but know that the majority of people seek loans and that’s OK. If you plan on breaking ground within 90 days, consider a 90-day note on the land and then roll it into your construction loan. This is risky, however, because many things can arise to delay construction.

Choose your house plans: Some builders recommend choosing your house plan before the land so you will know factors like whether your lot needs to be sloping to allow for a walk-out basement.

Identify water and sewer sources: Water can come from the city or, if the land is farther out, it can come from a well or spring. Sewer service can also come from the city or, if the land is farther out, a septic tank can be used. In that case, before buying the land, request a perk test proving the land has been approved for the construction of a septic tank that is adequate for your desired house size.

Location: How close is the lot to your work? Good schools? Restaurants and shopping? Is there a pizza delivery service nearby? Take into consideration any special needs you and your family may have when choosing location. A hospital or golf course may be important to you. Also consider whether the surrounding homes are large enough and valuable enough to warrant building your desired home in that neighborhood. Think twice if the neighborhood’s average property value is more than 20 percent below what your property value will be when all is said and done. If the location is far enough removed from civilization, there may extra costs incurred during the building phase for materials delivery and labor costs.

Technical stuff: Zoning, easements and property boundaries. They may be an afterthought, but these issues have brought many a landowner into court litigation. Check with the local government. Is the house size you desire even allowed on that site? Is it zoned residential? Is the surrounding area zoned residential, commercial or industrial, and is a zoning change expected any time soon? Is there a minimum width requirement on the land? Also arrange an easement if you will need to drive across another person’s property to get to your own. Determine who will manage the upkeep of the roads and any costs you might incur. Ask the seller if you can see a land survey showing where your property ends and your neighbor’s begins. Is the property in a floodplain? This means mandatory flood insurance. Don’t get snared by an overlooked technicality after it’s too late.

I have been obsessed with the new HGTV series “Property Virgins” ever since I saw the promo with host Sandra Rimonato dramatically exclaiming to novice homebuyers, “I can’t believe you fell for that!” The drama of stepping into the world of homeownership is nothing new to anyone who has already bought their first home (or those who simply live vicariously through the poor innocent souls featured on the real estate reality show). Below are some tips to help ease the process for first-time homebuyers.

Analyze Your Spending Limit: How much house can you afford? It’s a tough question to answer. SmartMoney’s interactive Home Buying Worksheet can assist in this process, with questions about such issues as mortgage ratios and lending limits. SmartMoney lists the general rule of mortgage payment, property taxes and homeowner’s insurance staying at 28 percent or less of gross income. The 25 percent figure has also been batted around by various analysts, and it does seem smarter to base the percentage on your take-home pay instead of gross income.

Pay off debt: This is where I think SmartMoney has it dead right; their advice makes perfect sense to me.

“First, credit card debt is expensive and limits your ability to save… Second, credit card debt will limit how much you can borrow. That’s because lenders often won’t allow your total monthly debt service — which includes payments for credit cards, student loans and car loans, as well as homeowner’s insurance, property taxes and a mortgage — to exceed roughly 40% of your gross income.”

Check Your Credit Report: The importance of checking your credit report before you even begin visiting properties cannot be underestimated. The last thing a nervous first-time homebuyer wants in the final days leading up to closing is a credit report surprise. This can affect the loan amount you can be approved for and could even cause any pending contracts to fall through.

Start Shopping: About 80 percent of home searches start on the Internet with MLS listings posted on sites like Realtor.com. Home shoppers may spend several months or even years browsing and comparing property listings, maybe even doing a few drive-by viewings. This provides a feel for the desired location, square footage, price, number of beds and baths, perks, school district, etc. Once a home shopper is actually ready to put down the computer mouse and hit the streets, it is a good idea to drive by the house at different points during the day. How is the neighborhood in the morning, on weekends and during late afternoons as people start arriving home from school and work?

Rate Inventory: About.com offers some really innovative ideas for property hunting. It involves note-taking and even photography to record your impressions as you go and help you stay organized throughout your search. The site recommends viewing top choices a second time. It also recommends going ahead and buying if you find that perfect home at the perfect price, instead of shopping around and coming back later. It might be gone!

Compare Loan Offers: There are tons of companies out there just waiting to loan you money! How to select the best one? Fannie Mae offers loans with no money down for qualified individuals. A smaller salary can make lenders shy away from approving a loan, but may be compensated for with a larger down payment. SmartMoney also points out that Washington Mutual offers programs with only 10 percent down. Bonus: the mortgage insurance normally tacked on to downpayments of less than 20 percent is done away with in this case. Well, technically it’s figured into the interest rate, which is tax deductible, unlike PMI payments. SmartMoney also points to HUD loans, FHA loans and Fannie Mae’s “expanded approval” program as options for low- to moderate-income families, first-time homebuyers and those with slightly marred credit.