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Should I Pay Down My Mortgage or Make Home Improvements

bigg_question.jpgBigg success is life on your own terms. The five elements of bigg success are money, time, growth, work and play. Today our focus will be on money.

One of our listeners, Bob, called us with a bigg question. He and his wife have some extra money and they are wondering whether they should use it to pay down their mortgage or make some home improvements.



Both options are very illiquid

You can’t get your money back once you spend it with either option. So make sure you have enough extra cash to cover between six to twelve months of living expenses before you do either one.

A guaranteed return

Paying down your mortgage is one of the safest investments you can make. It’s a guaranteed return equal to your mortgage rate.

For example, if your mortgage rate is 6% and you pay it down early, you’re essentially earning 6% on your money guaranteed!

That’s a decent rate of return right now.

Returns on home improvements are often more sketchy. Start by asking yourself this question:

How does the value of your home compare to other homes in your neighborhood?

If you’re one of the most expensive homes already, making improvements probably won’t do you a lot of good financially. However, this is your home. It’s more than just an investment. So ask yourself a second question:

How long do you plan to live there?

The longer you plan to stay put, the higher the emotional returns – an important point to consider because money isn’t everything. What types of improvements yield the best financial returns? Most major outlays don’t return much if anything. Cosmetic improvements usually show a better return – paint, new floor coverings, landscaping, and those sorts of things. Remodeling the kitchen or bath can yield a reasonable return, particularly if they look a little outdated, as long as you don’t go over-the-top.

Weighing your options

Determine how much it will cost for your desired improvements. Then ask a Realtor or an appraiser to find out the expected increase in your home’s value. Now calculate your return:

Return = (Increased Value – Cost of Improvements) ÷ Cost of Improvements

Compare that to your mortgage rate. If the return for making the home improvements is significantly higher, you might consider making the improvements instead of paying down your mortgage.

Just keep in mind, this is not an apples-to-apples comparison. Paying down your mortgage offers a guaranteed return. Making home improvements does not.

Choosing between improvements

If they go with the improvements, Bob wants to replace the windows. His wife wants to remodel the kitchen. Which would be better for the money?

We wonder why you want to replace the windows, Bob. Is it for cosmetic reasons or are you thinking about energy-efficiency? Perhaps it’s both.

Stimulus for you

We hate to disappoint your wife, but right how is a great time to replace windows or make other energy-efficiency improvements. The Economic Stimulus Act extended and improved the tax credit for these types of repairs.

You get a 30% tax credit up to a $1,500 limit. So you can spend up to $4,500 on qualified improvements.

A tax credit is better than the deduction you’re used to getting on Schedule A. Deductions reduce your taxes by the amount of your marginal rate. Credits reduce your taxes dollar for dollar.

So $1,500 of your new windows could be paid for by the government!

The one cash outlay that pays you back year-after-year

However, it doesn’t stop there. It’s amazing how much air can leak out through poor windows. You’ll save money on your utility bills for years with the right windows.

Your returns for making any energy-efficiency improvements aren’t guaranteed but they’re close. They may also be higher than the returns on a lot of other investments these days. Improving your energy-efficiency is a cash outlay that pays you back year after year!

Thanks for your bigg question, Bob!

Do you have a bigg question?

Please share it with us by calling us 877.988.BIGG(2444) or sending an e-mail to

Please join us next time when we talk about two recent examples of saying, “We’re sorry.”

Thank you for sharing your time with us today. Until next time, here’s to your bigg success!


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My Rental Property is Costing Me Money. What Should I Do?

Bigg Challenge
Jeff’s job took him several states away from a rental property that he bought about two years ago. He bought the property and fixed it up. Now his tenant is moving out and the place is a mess. So he’s going to have to invest a bunch again. But he feels he has no choice since he has so much in it already. Besides, it’s a bad time to sell real estate. He wants our thoughts on his situation.

Bigg Advice

It’s been said,

“Find a landlord who lives more than twenty minutes from his
rental and you’ll find a landlord who’s probably ready to sell.”

Properties can be managed across cities and states, but for the most part, real estate is a very local business. And, a lot of people don’t understand that you’re in business even if you only have one rental property.

Consult with a good attorney

You’ve treated this like a business, Jeff. You had your tenant sign a lease. But a lot of landlords feel like there’s little recourse if a tenant tears up the place. However, you can take legal measures against a tenant who causes damage beyond normal wear and tear.

So consult with an attorney to explore your options. There’s a good chance your attorney may handle your case on a contingency. Of course, you’ll still have to cover the courts costs.


Check with a realtor, and even other property owners, to get an idea of what to expect if you list your property. Of course, you won’t know until you actually put it on the market, but you can probably make a reasonable guess with some more information.

Sure, we hear news reports that the real estate market is down. However, you may find it’s not as bad as you think. And here’s the thing … isn’t it better to fix it up and let it sit empty than to fix it up just to fix it up again if your next tenant does the same thing?

Distance makes the difference
Every landlord risks bad tenants, but since you live so far away, Jeff, it seems like the best move for you. The only other thing you might consider is contracting with an experienced local property manager to handle the leasing and maintenance.

You sunk my battle ship!
Picture a ship that’s sunk. You can invest money to try to make it float again, or you could just leave it on the bottom of the ocean and get a different ship. Hopefully, you quickly see which one of those two is better.

George said that, unfortunately, he’s learned this the hard way. It’s not easy when you’re the one in the middle of the situation. But the money you’ve already invested is a sunk cost, like the sunken ship. Don’t base your decision today on money that’s already been spent. Base it on what kind of return you can get on the money you will invest. If it’s better elsewhere, cut your losses and move on.

We hope this helps you with your bigg decision, Jeff. Thanks for sharing your Bigg Challenge with us!



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Remain Flexible to Sell Your House Faster

By Bigg Success Staff

Life Changes


As we’ve said before, we highly recommend that you sell your house through a qualified realtor. They will help you sell your house faster than it otherwise would.

As part of listing your house for sale, discuss contingency plans with your realtor. Specifically, discuss “what if”. Here are a few scenarios you may consider, depending on the circumstances at the time you list your house for sale:

  • What if enough people aren’t looking at it?
  • What if it doesn’t sell by a certain time?
  • What if the whole market is weak?
  • What if financing is tough to get?

Answering these questions upfront helps you plan logically. If you wait until you’re into the sales process to think about them, you may respond emotionally and against your best interests.

You should also discuss these alternatives, as well as new possibilities, as part of your 505 weekly report from your realtor].  He or she may suggest that you drop your price, offer an additional incentive to the buyers, spruce something up, and more.

These things may entice more people to look at your house and the more people who look at it, the more likely one of them will buy it. It is definitely a numbers game!

Your house is likely to sell faster if you listen to your realtor’s advice and remain flexible. As you gain new insight into market conditions, you can adapt your offering to find the buyer you need. 

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Insist on a Weekly Report Before You List Your House with a Realtor

By Bigg Success Staff

Life Changes


You’ve listed your house for sale with a realtor. Days, even weeks, have gone by with no apparent interest in your house. You start to get anxious. What’s going on?

So you call your realtor. He or she tells you what’s being done to market your house. You discuss some alternatives. You hang up your phone and you feel better.

But in a few days, you still don’t see any potential buyers so you call again. Is your realtor doing anything? So you call your realtor again. And once again, after talking with him or her, you feel better about what’s being done to move your house.

Then a few days later … well, you get the picture!

There’s a better way – insist on a weekly report before you list your property with your realtor.

4 Pointers for the Report


You don’t need a detailed written report from your realtor. After all, you want him or her focusing on finding buyers, not talking to you! However, your realtor should be able to get you up-to-speed on what’s going on in a few minutes.

Agree to how the report will be delivered. It can be a phone call or an e-mail. See what your realtor prefers. If it’s a phone call, take notes and e-mail them to your realtor for review to make sure you accurately understood what was said.

You want to know what’s been done to market your product. Get a feeling for the number of times your house has been shown, any comments that were made, and any suggestions your realtor may have now.

Your contact with your realtor should conclude by discussing your alternatives. We’ll discuss this more in our next article on selling your house.

Getting a weekly report from your realtor serves two purposes:

  • It keeps your realtor accountable
  • It keeps you from bugging them too much!

You’ll feel less stress if you communicate regularly with your realtor. You may also be able to make some adjustments as new information becomes available.

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4 Things-to-Do Before Listing Your House for Sale

By Bigg Success Staff

Life Changes


You want to sell your house. As we’ve said before, we highly recommend that you 290 hire a good realtor] to help you through the process. Among other things, they are a great resource for 313 determining your asking price].

No house is perfect. A reasonable buyer won’t expect yours to be. However, with the counsel of your realtor, there are things you can do to increase the likelihood that your house sells sooner rather than later for more rather than less.

Here are four things you should do before listing your house for sale.

#1 – Get a professional inspection
Chances are high that your buyer will want an inspection. So be proactive and get one before you take your house to market. Talk to your realtor to see which, if any, repairs you should do before you list it.

Your buyer will take comfort in knowing that an inspection has already been done. You’ll have receipts for work that you’ve already completed. Then your inspection report can be a marketing tool.

#2 – Make cosmetic improvements

Talk with your realtor about the aesthetic changes you should make. Minor things – like a fresh coat of paint, fashionable window treatments, refaced cabinets, or refinished bathtubs – often make a huge difference.

If you can’t do the work yourself and don’t know someone, ask your realtor for a referral. They’ll almost certainly have a stable of people with whom they regularly work.

#3 – Clean it
When you bring it to market, your house should be cleaner than it ever has before. Remember cleaning your apartment to get your security deposit back? That’s not good enough!

Simply stated, the cleaner your house, the better it will show. If you don’t want to do it yourself, pay someone to do it. Your realtor can help you find a good cleaning company, if you don’t know one. 

#4 – Stage it
Discuss staging with your realtor. If you’ll be moving out of the house before putting it on the market, you may want to work with a professional staging firm. If you’ll continue to live in the home while it’s on the market, you may do some minor redecoration. For example, you may want to remove photos of your family so potential buyers can picture their family in the house

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