Transform Your Garage Into a Home Office Area

Suzie Wilson

If you work remotely or run a business out of your home, you know how important it is to have the right work area. It’s almost impossible to set any kind of boundaries between work and life, without one. If you don’t have a room in your house that can be used as a home office space, there are other alternatives out there, including turning your garage into an office. Because the garage is set apart from the central living spaces in your house, it can work especially well for those who need a little more privacy or quiet for their work.

Structural considerations

Before starting your renovations, assess the structure itself and see if it is sound. There’s no point in putting a lot of cosmetic work into a garage that simply isn’t safe for working. Also, make sure it is suited to be made into an office, and figure out what changes will need to be made. For instance, garages tend to be less well insulated than homes, so if you want to use your garage as a year-round workspace, you might need to add insulation, and possibly an extra layer of drywall. The garage door may let a lot of cold or hot air in, so consider replacing it with something more solid, or having a wall installed.

Do a major declutter

For many people, garages double as storage spaces. this often means a lot of random objects and items end up there. Whether it’s broken lawn furniture you meant to fix, half-empty paint buckets, or your kids’ old sports equipment, there might be a lot of stuff in your garage just taking up space and gathering dust. So before you start renovating, you’ll probably have to tidy up, throw stuff out, give stuff away, and clean up.

Practical considerations

Making a garage into a workspace that is genuinely livable may take some other alterations too. A concrete floor may be chilly and uncomfortable, so you may want to add some tile or laminate. Think about how to update the lighting to something warm and inviting, to make the space look less industrial. Also, consider details like ventilation, heating, and cooling. If there isn’t easy access to a bathroom from your garage area, you may need to extend plumbing for added convenience. You’ll also need to think about storage space that is both functional and attractive. And don’t forget to make sure you are set up for your technological needs, with spots to plug in devices, and access to good internet.

The aesthetics of your office space

Obviously, functionality and practicality are top considerations, but a good office area will also be aesthetically pleasing, so consider updates like fresh coats of paint, attractive furniture, and stylish window fittings. If you plan to meet with customers in your workspace, make it comfortable and appealing. Look up different office design styles to see which might be a good fit for you.

Financial considerations

While having a garage attached to your house raises its value, having a fully equipped home office may raise its value even more. If you can save by working from home instead of purchasing or renting out office space, the savings deriving from this investment may be substantial indeed. And if you’re worried about what to do with your vehicle now that you’ve exiled it from the garage, don’t worry – you can always add an affordable carport, or even more affordably, purchase a car cover. A good car cover can protect your vehicle from the elements and make your life easier if you live in a climate with more extreme weather.

So long as it follows all local laws and regulations, having a dedicated office space in your home can make your life easier and increase your home’s overall value. So it might be worth your while to transform your garage, especially if it’s mostly serving as a storage place for clutter. If you need more guidance or information pertaining to real estate in general, check out more articles like this one at The Real Estate Think Tank.

TRET Short: For Sale By Owner

Join the TRET team as Conrad Bastien Jr. discusses For Sale By Owner properties in our third TRET Short:

TRET Short: For Sale By Owner

The Ultimate Guide to Picking a New Tenant Referencing Provider

Hello TRET Readers/Followers:

Want to know more about ways to check references for residential tenants? Please read the article below from Just Move In.

The Ultimate Guide to Picking a New Tenant Referencing Provider

How to Navigate Legal Structures in Real Estate

Stephon Martin

As the real estate market attempts to move past the COVID-19 pandemic and progress toward a “New Normal,” federal moratoriums have become a way of life in real estate. Navigating the legal landscape of a local market has always been part of creating wealth in real estate. Every real estate marketplace is subject to its own local laws, as well as its state law and federal law. At the highest level, real estate investment and development is a game of understanding the rules—the applicable laws, ordinances, building codes, etc., and knowing when you can bend them in your favor through variances, court cases and lobbying. Although much of this may seem a little nefarious, it need not be, as our legal system was designed to establish a certain set of default rules for real estate, with a mechanism to allow for change in the event that either some rules are inapplicable generally or inadequate for a given situation. That stated, below are some ways to capitalize, navigate or at least survive the laws of any real estate market:

How To Get Rich In Real Estate: The Proven Method

Stephon Martin

Welcome the first post of the New Year! A number of years ago I wanted to start a business purchasing residential mortgages in the secondary market. This was a significant time after the Great Recession of 2009 and although the smoked had cleared from that downturn, enthusiasm in the mortgage secondary market had not yet fully recovered. I knew that if I were to market my business idea, which I was positive was sound, I would have to not only formally document it in a presentation and a business plan, but would also have to show actual positive implementation results. I realized that I would have to raise a small amount of capital to implement this strategy on a small scale, so that I could present it to larger investors upon its successful completion.

Lesson From the Pandemic For Residential Landlords

The effects of Covid-19 on the residential rental market are apparent—many jurisdictions have enacted rent freezes, landlord/tenant courts have been shut down and moratorium on evictions and foreclosures have been set. Moreover, the accompanying downturn in the economy has left many without the ability to pay rent on time, if at all.

Considered rationally, the need for all of the social safety nets put in place for renters is obvious. The only way to truly survive a global disaster is to band together and implement a series of solutions. Radical measures had to be taken to mitigate the global pandemic. “We’re all in this together,” is not just a motto, it’s a reality. As a society, we are tasked with taking care of our most vulnerable populations, because the repercussions of not doing so are far more expensive than the costs of their protection. In this instance in particular, increased homelessness and/or a wave of relocations due to a rise in home displacement would only serve to exacerbate infection rates around the nation. That said, here are some clear lessons that residential landlords can learn in the wake of this global event.

Real Estate in the Time of Pandemic

Photo by CDC

With our country beginning to find its way to a new normal at the end of months of quarantine, we in the real estate market are all left with one nagging question—What should we expect from here? 

Like most people, I do not have definitive answer. If you are over the age of thirteen, however, this pandemic is certainly not the first market disruption that you have experienced and with each such occurrence, we all learn some valuable lessons about the real estate industry. With that said, here are a couple of lessons that we can learn from this particular time of change: 

Change Is A Coming: How Current Economic Conditions Should Affect Real Estate Investment

Many economist and market pundits are predicting a market downturn, beginning some time in 2019 or 2020. All of the indicators of an overheated boom seem to be present--increasing margin debt, decreasing dividends, stock market price inflation and increased levels of corporate debt. Essentially, low interest rates have made credit more accessible. As a result, businesses are using credit to buy back some of their outstanding stock. In response to the relative decrease in availability of stock, stock market prices are rising, increasing household wealth across the nation. Spurred on in part by technological development, the economy seems to be booming at present, but it is important to note that mechanism that is fueling this increase in wealth is debt.

Property Maintenance Laws and Lending

The fight against property blight is a battle that has been waged for many decades. Some areas of the nation, have struggled with abandoned properties and even abandoned neighborhoods since the shrinking of the nation’s industrial sector beginning in the 1970’s. Other areas became intimately acquainted with blight as a result of the wave of foreclosures that took place at the end of the first decade of the century. However it may have arrived, the real estate finance market is certainly now affected by the palpable concern of property blight and has had to adjust to attempts to mitigate its damaging effects. 

Why Worry About Blight?

To be clear, blight is a real issue that can lead to a number of undesirable effects. Abandoned properties that are poorly maintained cause safety issues. Poorly maintained building systems and structure will eventually fail at some point, causing unsafe buildings. Overgrown landscaping leads to health concerns. These health and safety concerns become a problem for neighboring properties, as neighbors must then focus on how to curb the spread of these issues onto their properties. More generally, well-maintained properties inspire a pride of ownership that carries over to neighboring property owners. The opposite is also true—abandoned and poorly maintained properties drain the neighborhood of pride of ownership and lead to less diligent maintenance throughout the neighborhood.

Cooperatives

Welcome to another year at the Real Estate Think Tank. I enjoy writing about real estate and am thankful that I have this forum to share my thoughts on the subject. With that said, let’s get into Cooperatives.

A Cooperative, also known as a Real Estate Cooperative or Co-op, is a form of real estate ownership in which owners purchase shares in a corporate entity that owns a building. This entity is usually called an Apartment Corporation. Despite the name “Apartment Corporation,” a co-op can be both residential and commercial. Although residential co-ops, known as Housing Cooperatives, are more prevalent, commercial co-ops are not uncommon. 

In exchange for the purchase of shares in a co-op, each owner is given both an ownership interest in the Apartment Corporation, usually in the form of shares of stock, and a proprietary lease. The proprietary lease entitles each owner to occupy a certain portion of the building exclusively and confers most, if not all, of the rights of property ownership over the designated space, called an apartment.

Since the Apartment Corporation owns the building and not the owners, owners in a co-op are referred to as shareholders. Furthermore, shareholders do not technically own real estate or real property, but instead own shares, which are considered personal property. This distinction has certain legal ramifications that are noteworthy, but beyond the scope of this post. The ownership characteristics of a co-op, however, are also very interesting.

Condominiums

Condominium ownership is a form of real estate ownership that has unique characteristics. For those not well-versed in condominiums, here is a quick overview of their definition and purpose:

A condominium or condo allows a property, typically a multistory building, but not infrequently a large parcel of land, to be split into sections and owned by multiple owners. The unique aspect of condominium ownership is that it entitles an owner to ownership of a specific portion of a property and the space or “air” bounded by that portion. For example, through condominium ownership, one can convey the first floor of a three story building to one party, the second to another party and the third to yet another party. Interestingly, the units are frequently not required to be the same size, so one could create a two-unit condominium out of a three story building and convey the first floor to one party and the second and third floors to another party. A condominium is formed by recording a document, typically called a declaration in most jurisdictions, but also referred to by other names, such as a master deed, against the property. This document informs the public that the property is now a condominium, outlines the sizes of the units and common areas and provides other relevant information about the condominium.  Once a condominium is formed the property can no longer be sold as an undivided whole, unless the condominium regime is abandoned. The condominium regime will remain in effect until either the unit owners decide to abandon the condominium, the government dissolves the condominium, the property somehow loses the condominium status through the violation of local laws or the government condemns the property.

My Take On Tax Liens

Tax liens have always been of interest to me. As a teen, I would remember the infomercials advertising tax lien investments as the way to own tons of property for pennies on the dollar. Since my father was a contractor and property manager, I was introduced to real estate ownership at a young age and read my first book on tax liens in my late teens. At the time, I could not figure out why more people were not investing in tax liens. As an adult, real estate professional and attorney, I can now appreciate the risks/reward trade off that comes with this asset class. So, here is my take on tax liens.

Tax liens are a low cost way to obtain exposure to the real estate market. Although the supply and demand of tax liens is very much influenced by local events, tax liens will be around as long as there are municipalities in need of money and property owners who do not pay their taxes. Although cheap and available, investments in tax liens propose some unique risks and benefits.

One of the unique benefits of tax liens is that they initially offer passive income at high rates of return. Most tax liens are purchased via auction and most auctions employ one of two bidding methods--bidding up price or bidding down interest. Whether the price of the lien is bid up or the interest rate is bid down, the amount of back taxes owed does not increase and statutory penalty rates of interest typically offer an attractive return to purchasers that do not overbid. Moreover, upon the purchase of a tax lien, the municipality continues to serve as the collection agency for a statutorily mandated length of time, in most cases. This allows investors to collect on the purchased lien with minimal effort, for a period of time.

Taxes, Taxes, Taxes

This may be stating the obvious, but the tax consequences of a real estate transaction are one of the most important aspects of the deal. Although most generic measures of property value, such as cap rate and NOI seek to exclude taxation in order to generate values that can be comparable across investors, an individualized tax assessment of any real estate acquisition is essential to determining its true rate of return of and its opportunity costs.

Although I am not a tax professional, tax expert or tax adviser, I would like to briefly discuss various real estate investment tax considerations. I will attempt to address a few of the more popular tax considerations at the property, entity and security level:

Mortgage Backed Securities and Personal Bankruptcy

At long last, the end of the series!

Personal bankruptcy is usually filed by an individual for very different reasons than corporate bankruptcies. Whereas the primary motivation behind filing a business bankruptcy may be protection of the business or satisfaction of debts, personal bankruptcies are frequently filed for asset protection, in addition to satisfaction of debts.

The two sections of the bankruptcy code that apply to personal bankruptcies are chapter 7 and chapter 13. As with business bankruptcies, chapter 7 for personal bankruptcies is a process of liquidation and seeks include all non-exempt assets of the petitioner in the bankruptcy estate in order to liquidate them to pay off debts. Chapter 13, on the other hand, seeks to reorganize the debt of a petitioner pursuant to a payment plan, which typically last from 3 to 5 years.

Special Purpose Entity Bankruptcy Concerns for Mortgage-Backed Securities

Let us continue the bankruptcy theme begun in my last post and discuss the effects of Special Purpose Entity (SPE) bankruptcies and their effect on mortgage-backed securities. Obviously, most bond covenants designate the bankruptcy of a SPE an event of default and restrict the likelihood of its happening. In the unlikely event that such a bankruptcy does happen however, here is an overview of the process.

As a quick review, I would like to restate that mortgage-backed securities are the result of a process of securitization that takes place when a real estate lender sells a package of its loans to an entity, called and SPE. The SPE receives the money to purchase the loans from the sale of either securities, beneficial interests in the entity or trust certificates from a trust set-up to hold the loans. If securities or trust certificates are sold, they are called mortgage-backed securities (MBS). Through the securitization process, real estate lenders are provided with cash to originate more loans and investors are able to purchase MBS and invest in the real estate market without having to hold real property. If you question why one would want to invest in the real estate market at all, please see my earlier post, “Why I Choose Real Estate.”

Why I Choose Real Estate

A number of times throughout my career, I have been asked a very poignant question—why real estate? Admittedly, other asset classes do carry a certain level of prestige, which is typically more associated with the asset’s mystique, yet I find that real estate can be as involved and complex as any other asset class. Although the mathematics for risk curves and certain derivative transactions may be more intricate than those used in a typical commercial real estate property acquisition, such transactions and risk analysis can be structured around real estate financing structures. In fact, the mathematical aspects of some of the more “complex” investment vehicles are not as esoteric as they seem and most can be understood, given enough time and exposure to them. The legal issues specific to each class of investment can also be considered complex, but not beyond the comprehension of most competent lawyers. Ultimately, the decision to prefer one asset class over another boils down to a matter of preference.

So, why do I so closely follow real estate? The reason is that underlying any real estate-related transaction is a relationship to a tangible hard asset. A tangible hard asset that has a value influenced by easily understood factors. Real estate markets for every property class are motivated by the economy, real estate demand and the market for the business that the property serves. The real estate market is also relatively stable and changes over the course of years, not months or weeks. Finally, real estate is one of the few assets that lends itself to owner-operation in a way that a company or payment stream may not.

Second Mortgages: Why They Are Less Prevalent In Commercial Real Estate Than In Residential Real Estate

Early in my whole loan trading career, an investor once offered to fund a partnership that would purchase second position liens, also known as second mortgages, secured by commercial real estate. The investor promised to pledge a substantial amount of capital, if I was able to assemble a portfolio of target assets. Understanding the risk/reward profile of such an investment and desiring to deliver for what seemed to be a potential source of new business, I quickly began to work on finding commercial seconds to underwrite and select. After a few days on the phone with a number of commercial lenders, real estate debt funds and large financial institutions, I began to realize that commercial real estate second mortgages were not easy to find. Finally, after a few weeks of searching, I informed the investor that I was unable to find any asset worth purchasing that met his mandate.

Nearly ten years later, I now understand why the second mortgage, an established method of financing in the world of residential finance, is so infrequently used in commercial real estate. To state it plainly, the property-income focus of commercial real estate, makes commercial seconds more of a liability than an asset. It is this income focus that leads most commercial lenders to emphasize property performance over the qualifications of the borrower. As a result, most commercial financing is offered with no recourse to the buyer upon default, giving the lender as much control over a distressed asset as possible and incentivizing the owner of a distressed property to “walk away” when there are no more options. In order to maintain as much control over the property as possible, most commercial real estate lenders will insist that they be on the only creditor of the property and that the property be structured in such a way that it is remote from the bankruptcy of the borrower. These goals are typically accomplished by establishing a holding entity for the property to be financed, placing the borrower in the equity position of the entity and making the lender a creditor of the entity, secured by its largest asset.