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4 Tips to Become a Successful Landlord

Monday, September 24, 2012 posted by Tommi Crow

   Owning a piece or real estate with the objective of earning regular cash flow is probably the best known and most common form of real estate investing.   The rental property is the way a lot of people in the “middle class” have found a real opportunity to make a fortune, if they know what they need to be successful.

Thousands of distressed and vacant properties, historical low interest rates and rapidly increasing rental rates have converged and created a great opportunity.  If you are considering becoming a landlord, focus on 4 basic fundamentals to insure profits and success.

1.  Paying Tenants-  This may sound obvious, but the first fundamental you need to be a successful landlord is a good quality tenant who can pay the rent.

One of the biggest challenges for a landlord is keeping good paying tenants and avoiding vacancies.  If a property is vacant, it usually results in the loss of at least one month’s rent while the place is being freshened up and a new tenant is found.   We highly recommend that all prospective tenants be screened, including a background and criminal record check.   Landlord screening services are available to assist you or your property manager.

One of the best way to keep your rental occupied at all times is to invest in a location that attracts a lot of renters.  Neighborhoods near colleges and universities are filled with students who rent while they attend school…and for the most part, parents insure the rent will be paid.   Homes near education facilities are also in high demand and landlords can usually charge a rent premium for these properties.  Any area with a lot of employment opportunities will also have very good rental demand.  In many markets, larger, 4 or more bedroom homes are scarce.   Find a niche in your market that provides a stream of ready tenants. 

2.  Keep Expenses Low – Contolling costs are one of the basic fundamentals of successful real estate investing.  Some costs of property ownership are known, such as taxes and insurance…but, others are often beyond an investors ability to control. 

Property taxes and insurance are expenses that are determined by third parties.  Combined, they can easily cost at least one months rent each, or more.  On average, budget about one months rent to cover your insurance premium.  Property taxes are another matter and they can vary greatly.  High property taxes helped trigger the housing collapse in Florida, when landlords couldn’t earn any cash flow on rental property.  When searching for an investment property, make sure you verify the taxes because tax rates can easily cost as much as two or three monts rent.

3. Property Maintenance – Keeping your property in good working condition is a big part of managing a successful investment.  Again, screening tenants is key in keeping costs down.  A good tenant will certainly have normal wear and tear and your property, but they won’t do much damage.  However, a bad tenant can cause thousands of dollars in property repairs in a very short period of time.

As far as controlling expenses  is concerned…it is cheaper in the long run to address maintenance issues as they arise.   For example, a roof leak can cost a few hundred dollars to fix, but the price can quickly escalate to thousands of dollars and lost tenants, if ignored.   Although no one likes to pay maintenance expenses, being a slum lord is a costly proposition.  Deferred maintenance brings down the value of the entire property, increases ownership costs in the long term, decreases the amount of monthly rental income that can be charged and atracts renters with less than stellar references or ability to pay.

4.  Reduce Mortgage Costs – Refinance and lock in historical low interest rates.  Current quotes for investor loans for residential property are under 4%.  If you can reduce the amount of interest you pay for your money, it immediately increases your bottom line.  It is also a good idea to appeal tax assessments.  Contact your local taxing authority to see the procedure required.  Most people who go to the tax office armed with recent comps and educate themselves, can get some tax relief.

If renting is so great..why does your landlord own? For all the challenges of owning investment real estate, earning income while owning an asset that someone else pays for is still one of the best ways to create wealth.   If you get really good at it, you can make a good money, decrease the amount of taxes you pay and increase your networth multi-fold.   Lucky you.  Timing has never been better.

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Big Tax Breaks for Real Estate Investors

Monday, March 26, 2012 posted by Tommi Crow

  With reduced home prices and interest rates near historic lows, affordability levels in early 2012 reached their highest point in 42 years according to the National Association of Realtors.

Not only are homes at record affordability levels, real estate ownership also opens the door to a wide variety of tax benefits and additional savings.

“A recent poll shows that 75 percent of likely voters think real estate tax deductions are appropriate and reasonable,” said Steve DiUbaldo, president of Atlantic & Pacific Real Estate, a full-service real estate brokerage with offices in 22 states. “People understand the value of owning a home and the role played by tax benefits. Combine today’s affordability levels with tax advantages and now is a very good time to consider both residential and investment real estate.”

So what are the biggest real estate tax breaks? For most owners and investors the list of major tax write-offs looks like this:

1. Property Taxes. Real estate owners can write off the cost of state and local property taxes. For many borrowers this deduction can reduce taxable income by thousands of dollars.

2. Mortgage Interest. The IRS defines a home mortgage as “any loan that is secured by your main home or second home. It includes first and second mortgages, home equity loans, and refinanced mortgages.”

Mortgage interest can generally be written off, but not always. The limitation for mortgage interest on a primary and secondary residence is a total of $1,000,000 for acquisition indebtedness and $100,000 for home equity indebtedness. There are lower limits for individuals and those who are married but filing separately.

3. The Standard Deduction. “Everyone is entitled to a standard deduction,” said DiUbaldo. “However, write-offs for mortgage interest, property taxes, mortgage insurance premiums and other costs generally allow real estate owners to justify itemizing expenses and thus larger write-offs.”

4. Mortgage Insurance Premiums. Mortgage insurance allows purchasers to buy with less than 20 percent down. Qualified borrowers can get FHA financing with 3.5 percent down, conventional loans can require as little as 5 percent down and VA purchasers can borrow with zero down. Closing costs are extra.

“In general,” says the IRS, “if you itemize deductions, you may deduct premiums paid for mortgage insurance provided by the Department of Veterans Affairs (VA), the Federal Housing Administration (FHA), the Rural Housing Service (Rural Housing), or private mortgage insurers in connection with a mortgage for the purchase of your main home.”

5. Points. A “point” is a fee to the lender equal to 1 percent of the mortgage amount. Borrowers often have the option of paying points at closing rather than a higher interest rate over the life of the loan. Whether it’s better to pay points or accept a higher interest rate depends on such issues as the interest rate, the number of points and how long the property will likely be held.

In general, a point paid at closing for acquisition financing is fully deductible in the year paid. If a point is paid to refinance a home, the point is deductible over the term of the mortgage, typically 1/30th per year.

6. Investors can claim Depreciation. Depreciation allows investors to take an additional tax deduction because a real estate “improvement” is believed to wear out over time and will need to be replaced.

“Depreciation is an accounting concept,” said Atlantic & Pacific Real Estate’s president. “The investor is not actually spending the cash represented by the ‘cost’ of depreciation and one result is that it’s possible to have an investment property which produces a positive cash flow that is partially or wholly not taxable currently. In certain instances, subject to individual taxpayer limitations, it is even possible to show a loss for tax purposes.”

7. Sale Profits. When a prime residence has been occupied for two of the past five years it’s probable that much or all of the profit will be sheltered from capital gains. With a joint return up to $500,000 can be protected, $250,000 for an individual owner. Example: You bought a home in 1990 for $100,000 and sell it in 2012 for $300,000. There’s a $200,000 long-term profit, none of which is taxed.

If you’re an investor, sale profits are taxed as long-term capital gains if the property has been owned for at least a year. That means long-term capital gains in 2012 are generally taxed at 15 percent.

8. Tax-deferred exchanges: The National Association of Realtors says investors purchased 23 percent of all existing home in January. One reason for such interest is that it’s possible to have tax-deferred real estate exchanges with investment property.

“You can swap one investment house for another, but you can also trade a rental house for a commercial property or a property with four units,” said DiUbaldo. “An exchange can allow an owner to defer capital gains taxes for years if not decades, and swaps are one of the reasons investors come to our website ( www.apreus.com ).”

The Bottom Line: Whether purchasing as an owner-occupant or as an investor, tax rules can powerfully impact the value of your real estate. For the latest information, details and deductions be sure to check with a local tax professional.

As always, we urge you to consult with your own independent Certified Public Accountant as to the appropriateness of any tax deductions for your specific circumstances.   Article by Market Watch.

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If you are one of the millions of Americans who would love to take advantage of record low home prices and record high levels of foreclosures, but your cash on hand is coming up  little short… consider using a portion of your IRA funds to buy a piece of rental property.

Millions of Americans have billions of dollars tied up in IRA’s that nay be paying little to no interest or gains to investors.  Maybe it’s time you considered diversifing from stocks or mutual funds… and add some tempting real estate bargains into the mix.

Here are the basic rules:

  • The funds used to buy the property must be held in a self directed IRA.  You can not use 401K funds or Roth IRA’s to buy real estate, but you can roll over those funds into an IRA before you buy.
  •  The property you buy must be an investment property.   You can not buy a second home or primary residence with IRA funds without paying a penalty.
  • You must pay cash for the investment property.  You can not borrow or take out a mortgage against your IRA investments.  
  • Monthly rental income must be placed back into the IRA account.
  • When the property is Sold…the sale proceeds must be deposited back into the IRA.
  • No taxes are due on rental income or capital gains held in the IRA, until the money is withdrawn at retirement age, so earnings grow tax free.
  • The IRA can pay all expenses associated managing and maintaining the property.
  • You can use a property manager or manage it yourself.

Real Estate IRA

Here is a simple example of how the investment could grow and fund your retirement.

  • You buy a $100,000 rental property with IRA funds.
  • You collect $10,000 a year in rent that is paid directly back into the IRA. 
  • After 10 years, the entire $100,000 you invested in the home has been paid back into the IRA.  Bonus, you still own the property and you can sell it anytime you chose and put the proceeds into your account, too.
  • You pay NO TAXES on income or capital gains until you withdraw money from the IRA.

Tax deferred gains

Buying a foreclosure with IRA money can be a great way to diversify your retirement portfolio and take advantage of historically cheap real estate prices and highly motivated sellers.  As with any tax related investment…ALWAYS consult your tax expert before investing.

Thank you for visiting InfoTube.net.  The spring home selling season is underway and it looks to be the best one in several years.  If you are in the market for home, this is a great time to be shopping.   Check out some of the great deals on our site…or place your property listing on our site for FREE.

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New York City Man Hole Covers Made in India?

Wednesday, November 2, 2011 posted by Tommi Crow

This photo, sent by an InfoTube customer, perfectly illustrates the reason that the United States is going down the drain.  

Does NYC know that Pittsburgh, PA is a steel town?  Does Mayor Bloomberg realize that tens of thousands of taxpayers in Pittsburgh are unemployed, many losing their homes?  Does the New York City purchasing department know that Pennsylvania is located right down the road from the state of New York?

If “they were cheap” is the answer…I don’t care how cheap Indian man hole covers are.  If they were FREE, US workers and taxpayers can’t afford them.

In addition…wasting oil to freight heavy man hole covers half way around the world is slap in the face to US families and business.  The economy has been crippled by $4.00 a gallon gasoline and the billions of dollars that have been borrowed to fight wars for oil! 

I say Enough!   We believe that Americans have to start producing what America buys.  It’s really that simple. 

Thank you for visiting InfoTube.net.  We hope you join in us in our fight to Save American Jobs!!!   (Click here to read our David and Goliath success story).

Demand American products when you shop.  Together, we can turn this around.  Just look at what one, young woman did to turn the new bank charges for ATM’s around!!!!

Banks Bulldoze Foreclosed Homes

Tuesday, August 2, 2011 posted by Tommi Crow

Bank of America has come up with a new tool to deal with its glut of abandoned and foreclosed homes…. a Bulldozer.

Bank of America, the nations largest mortage servicer, plans to “donate” 100 blighted homes in Cleveland, OH and contribute cash toward their demolition.  The bank has a similar plan for 100 homes in Detriot, 150 in Chicago, with 9 more cities to follow.  Wells Fargo, Citigroup, JPMorgan Chase and Fannie Mae are also considering their own bulldozing programs.

  Getting rid of repossesed homes is the biggest headache for US lenders.  1,679,125 homes ( 1 in every 77) are in some stage of foreclosure as of June.    Lenders feel that no one will buy many of these homes and they”re trying to cut their losses.  Bulldozing the problem away means the banks won’t owe property taxes to our floundering cities and it won’t have to pay for repairs, maintenance and upkeep on the property.  In addition, there are some perks for giving away a house.  The banks get a bunch of tax write-offs and best case… they may even get a pat on the back and some nice PR, too. 

The idea of Bulldozing houses is nothing new.  Although the banks are not blowing up homes for alturistic reasons…I think we can all agree that removing home inventory is good for all of us.  In 2010, Warren Buffet advised that “blow up a lot of houses” was a viable option and similar to ‘cash for clunkers’ auto program.  I always thought bulldozing abandoned homes and returning the land to a raw state was a smarter solution than handing out money in the form of a homebuyer tax credit.   The tax credit cost billions of dollars, put money into the hands of a few people blessed with good timing and did little to reduce inventory.

Bankers, why not take the “TNT” strategy one step further.   Donate unwanted houses to local non-profits vs blowing them up?  Make a call to Habitat for Humanity, for example?   I can’t understand why Habitat is still building new homes, when we can’t get rid of the ones that are causing problems in our neighborhoods.   Habitat needs to change their business model with the times and so do our lenders.  Families, who are in dire need now, wait up to 6+ months for a new home to be built and the cost of building from scratch far exceeds the costs of rehabbing properties, in most cases.       

Just my two cents….

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More than 150 years ago, America’s greatest landscape architect, Frederick Law Olmsted, created Central Park and changed New York forever. He went on to transform dozens more cities, leaving a priceless legacy of vibrant, beautiful cityscapes. And, in the process, he increased property values. 

Olmsted discovered this himself when he tracked the value of land around Central Park and found that the city’s $13 million investment had led to an astounding $209 million increase in just 17 years. The architect recognized what many planners still fail to grasp: Parks and managed green space are vital pieces of urban infrastructure that not only improve the quality of life for millions of people but also drive economic growth. 

Today we must act again to transform our cities. The commercial real estate binge of the past decade and the growth of online shopping as an alternative to brick-and-mortar stores have left more than 200,000 acres of vacant retail, office and industrial space. Residential real estate is a massive problem as well. Distressed properties are a drag on our communities and the economy, and threaten to topple even more banks that hold mortgages on these “toxic assets.”

 We need to move these toxic assets off the banks’ books, reduce the surplus of commercial space and create jobs, all while revitalizing our cities. This brings us back to Olmsted.

 Olmsted designed transformative parks, campuses and greenways; his firm completed an amazing 6,000 commissions and launched a green wave across 19th-century America. The same kind of wave could help resolve the 21st-century real estate mess.  

 We don’t have the luxury of vacant land that Olmsted often started with, so we must bulldoze underperforming and underused property, put people to work creating parks on some of the land and “bank” the rest until the economy recovers.

 Beginning with Atlanta, Georgia Tech is researching what is needed to accomplish this in 12 major cities. The project is known as Red Fields to Green Fields. Under this plan, some of the abandoned or underutilized property would be acquired by a parks agency or by public-private partnerships, which would then begin demolition, park design and construction, putting people to work immediately. More jobs would come as the improved areas attracted development.

 This would not be the first time that property has been bulldozed for economic gain. The railroads, which had many miles of underused track to maintain, pulled up 55 percent of their tracks in the past 60 years to increase profitability, enabling the creation of 19,000 linear miles of “rails-to-trails” parks.

 Pittsburgh, realizing that the steel industry was never coming back, tore down riverfront steel mills and replaced them with an attractive mix of parks and office space. In Michigan, Flint and Detroit are finding ways to “bank” land as open space. 

The banking system and the federal government could play an important role in this effort. Rather than backstop bad real estate paper, the Federal Reserve, the Federal Deposit Insurance Corp. (FDIC) and the Treasury Department could help finance the acquisition of excess commercial real estate through a land bank fund. 

Instead of buying mortgage-backed securities, why couldn’t the Fed buy excess developed real estate to be held as green space through “land-backed securities”? Why couldn’t the FDIC give some of the useless properties it obtains through bank closures to land banks or nonprofit organizations? 

With the right financing structure, philanthropic entrepreneurs could use leverage to remake America just as some of our bad developers used easy bank financing to help create the excesses. 

Acquisition money could also come from expanding tax incentives that encourage banks and landlords to donate land and encourage wealthy individuals and corporations to buy conservation tax credits. Georgia Tech’s analysis has also shown that the money needed for a nationwide program would be a tiny fraction of current real estate support programs, such as the Fed’s “quantitative easing” or its recent purchase of $1.5 trillion in mortgages. 

The 2009 stimulus package did much to protect jobs but little to stimulate the economy with transformational investments.  Converting underused commercial real estate to green space and “banked” land would be transformational. It would create jobs, strengthen the banking system to encourage lending and stabilize property values so that real estate owners would be ready to spend again. Most important, lush new parks would enhance neighborhoods across the country.    

Michael G. Messner is a Wall Street investment fund manager. He and his wife, Jenny, funded the documentary “The Olmsted Legacy,” which is airing on PBS, and are funding the Red Fields to Green Fields research at Georgia Tech.

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The program, called Giving House, turns any real estate transaction – residential sales, purchases or rentals, as well as commercial sales or leasing – into a philanthropic endeavor.  Giving House matches buyers and sellers with top real estate agents, who in turn donate a portion of their commissions to a designated non-profit organization.

The first organization to benefit from the Giving House program will be the Children’s Hospital Foundation at Westchester Medical Center, which supports Maria Fareri Children’s Hospital, the advanced-care pediatric facility for New York’s Hudson Valley and Fairfield County, Connecticut.  Funds generated through Giving House real estate transactions will help fund the construction of a new in-patient “neighborhood” at the hospital, enabling it to care for more than 450 additional children each year.

Giving House is the brainchild of real estate agents Kerry Fedigan-Cid and her husband, Steve, veteran real estate agents with Prudential Douglas Elliman in New York City.  As Westchester County residents, the Cids were inspired to launch Giving House after their daughter, Olivia, was treated at Maria Fareri Children’s Hospital for a fractured skull sustained after a tumble from her bicycle.  Once the Cids witnessed the expert pediatric care and attention shown to their daughter by the Children’s Hospital’s staff, the couple had the impetus to link their profession, real estate, with philanthropy, an effort they had often discussed.

“In 2009, a down year, total real estate sales volume in Westchester County still topped $3.27 billion.*  That’s a tremendous amount of money changing hands.  Why can’t a portion of this money go to a worthwhile organization, particularly one like Maria Fareri Children’s Hospital at Westchester Medical Center that provides such an important service to the community?” remarked Steve Cid, Co-Founder and Vice President, Giving House.  “The idea seemed so simple and right, and we were surprised no one was executing it.”

“Everyone is a winner in a Giving House transaction,” added Kerry Fedigan-Cid, Co-Founder and President, Giving House.  “Both the clients and agents feel a real sense of accomplishment, plus their efforts benefit the entire community.  Having a world-class children’s hospital in your backyard is a tremendous asset to local residents and one that makes our region a more desirable place to live.”

“We are grateful that the Cids have chosen our hospital as the inaugural beneficiary of the Giving House program,” commented Michael Gewitz, M.D., Physician-in-Chief, Maria Fareri Children’s Hospital at Westchester Medical Center. “And it’s only fitting that funds generated through real estate transactions will support the construction of our new inpatient ‘neighborhood,’ where hundreds of children will be treated for complex medical conditions each year.”

Added Fedigan-Cid: “It’s not an exaggeration to say that Giving House will help support one of the most important construction projects in our area – the new neighborhood at Maria Fareri Children’s Hospital at Westchester Medical Center.”

For more information on the Giving House program, including how you can link with a Giving House agent or become one yourself, interested parties are encouraged to visit www.GivingHouse.org.

InfoTube.net would like to applaude the Giving House program, along with all of the real estate agent’s who make it possible…even in a very tough economy!  Good work!!!

Tips for New Landlords

Tuesday, September 21, 2010 posted by Tommi Crow

Given the millions of homes that are languishing on the market, it’s no surprise that many owners are considering leasing their homes in order to avoid big financial losses.  If you are an owner that is debating the pro’s and con’s of leasing your property, we have some very valuable advice to share with you.

Leasing out your home can be a great experience.   A good tenant will care for your property, while paying your mortgage.   Owning investment property also has tax benefits, and while the home selling market maybe soft…the present rental market is stronger than ever.

TIPS FOR A NEW LANDLORD!

  • Don’t be afraid of bad credit.  References are as important as a credit report.   In addition, many renters who lost their homes have gotten rid of their biggest expense…their mortgage.  So, if their references check out and they have good jobs, don’t let a bad credit report scare you.
  • Ask the tenant to provide a current copy of their credit report, references and their last paycheck stub. 
  • Call the renter”s employer to verify that they are still working there.
  • Consider hiring a private investigator for less than $50.  They can immediately find out whether the tenant is a scammer or not.
  • Check you local laws to see if you have to have a permit to rent out your house.
  • If you are using a standard lease agreement, ask your lawyer to look it over and avoid potential surprises.
  • Build in convenience for yourself.  Requests wire transfers and automatic deposits for monthly rent payments.
  • Craigslist and InfoTube.net are fantastic places to advertise your rental.  Best of all, both sites are Free and allow pictures.

Thank you for visiting InfoTube.net, your FREE homes for sale and rent listing website.  Please check back in with us tomorrow when continue our blog with Property Management Tips for Homeowners.

Is Solar Power Right for You?

Wednesday, November 18, 2009 posted by Tommi Crow

If you dream of going off the grid…  If you giggle at the thought of paying less than $500 a year for electricity…today’s solar power may be perfect for you.  

Here are a Few Resources and Tips to Help You Decide

  1. Read Ed Begley Jr.’s Guide to Sustainable Living
  2. Watch the Planet Green channel
  3. Do a home energy audit at energystar.org or call your power company.
  4. Find Cash Back Offers.  Tax incentives abound for energy savings.   Too see what is offered in your area, check for incentives and rebates on a federal, state and local level. 
  5. Check Tax Rebate and Credit websites dsireusa.org and greenmadesimple.com

Improvements in solar technology mean financial savings within 6 years, depending on your location and property.  Check it out.  Solar may be the perfect answer for your needs.

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I’m thinking Turkey.  The leaves have fallen, lawn mowers are stored and furnaces are in use.   It’s at this time of year that many of our customer’s ask…  “Should We Take Our Home Off the Market During the Holidays?”

The answer is definitely “NO”.  There are a lot of reasons to keep your home listed right through the New Year.  And, there’s a special timely reason this holiday season!!

  1. The First Time Buyers Tax Credit has been extended until April 30, 2010 AND it’s been expanded.  Step Up Home Buyers, who make a lot of money, can also receive $6500 in Tax Credits until April.   Big tax incentives mean that smart buyers will be house shopping vs mall shopping this holiday season.  
  2. Interest Rates are at Record Lows.  30 year fixed rate mortgages are below 5 percent.  But, with the dollar weak and falling, low rates may not be around for long.   Serious home buyers are aware of the difference that even a small interest rate increase would make in their house payment.  The combo of Tax Credits and Low Interest Rates create strong urgency among buyer’s.  Smart seller’s spruce up their homes and play into the pressure.
  3. Holiday Shoppers are Serious Buyers.  Trust me.  Everyone of us loves the holidays.  So, the people who are out looking for homes in November, December and January are SERIOUS Buyers.  Do you really want to pull your house off the market when the most serious people are shopping??  Think about it and gear up!!
  4. Less Competition.  Many sellers don’t read our blog.  They foolishly pull their homes from the market during the holidays, and this year will be no exception.  Less competition and MLS exposure could make the difference between For Sale and Sold, this Christmas. 
  5. Houses are Pretty during the Holidays.  Staging your home is easy during the holidays.  The mood is festive.  Holiday colors are warm and inviting.  Candles, centerpieces and decorations touch the heart and convey a peaceful lifestyle.  Light the candles, make a roaring fire, bake some goodies and turn on some relaxing holiday music.  Buyer’s love to see a home decorated and looking special.  Don’t let this once a year opportunity pass you by.
  6. Curb Appeal.  If your landscape and lawn isn’t that great, breathe a sigh of relief that no one else’s is this time of year, either.   Add seasonal color, a wreath, perhaps some decorations.  Just keep it subtle and classy.  No mowing, no weeding and trimming, and best of all snow covers all…

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Home Buyer Tax Credit Extended.

Thursday, October 29, 2009 posted by Tommi Crow

Great news for home buyers, sellers and owners, alike.  The homebuyer tax credit has been expanded to include step up buyers, who have owned a home for 5 years.  It also extends the tax credit through the end of 2010.  

GREAT NEWS! 

It appears that Senate Democrats have recognized the tremendous value of the First Time Homebuyers Tax Credit and odds are it will be renewed soon. At this time, it is believed that the credit will allow anyone purchasing a home, by April 30, 2010, to participate and receive the full credit available.

The credit will continue until the end of 2010, but the amount of tax credit will drop by 2 percent every 90 days.  The graduated benefit should help the housing market recover into and through the 2010 summer selling season.

Here is the text of the story as reported in Bloomberg News today:
Senate Democrats on Board with Credit Extension

Senate Banking Committee Chairman Chris Dodd (D-Conn.) says Senate Democrats have agreed to extend the first-time home buyer tax credit.  The latest version extends the program to home sales signed not closed by April 30. Purchasers would have another 60 days to close the sale.  The credit will also be expanded to include so-called step-up buyers who have lived in their current home for at least five years.

The credit would be cut slightly to a $7,290 cap.  Income eligibility for first-time home buyers would stay the same, but it would rise for step-up buyers to $125,000 for individuals and $250,000 for couples.
Source: Bloomberg News, Dawn Kopecki and Ryan Donmoyer (10/27/2009)

Not surprisingly, real estate industry lobbiest are attempting a full court press as they make a final push for extension of the first-time buyer tax credit.   

And, it’s little wonder.  The IRS estimates that 1.4 million homebuyers have claimed the credit through August, and the Realtors Association estimates the credit was crucial in pushing 355,000 of those buyer’s off the fence.   

If the real estate industry gets it’s way and the amendment passes, the $8000 tax credit would be extended to June 30th, 2010 and it would allow more taxpayers to qualify for the subsidy.  The amendment would increase the income limit to $150,000 for a single filer and $300,000 for a couple, up from the current limit of 95,000 and $170,000, respectfully.

The Pro’s: Why Vote “Yea”

  1. Lenders are still in trouble, as more people default or fall behind on their mortgages.  Experts predict an additional 1.5 million foreclosures in 2010, increasing supply and further eroding prices and demand. 
  2. Dems and Rep like it.  The proposal was introduced by a GA Republican, Johnny Isakson, and it is also supported by Democratic heavy-weights.  House speaker Nancy Pelosi and Senate Majority Leader Harry Reid support the extension, President Obama hasn’t taken a position for either side.
  3. Still too Many Houses.  Although the supply of existing homes on the market has fallen from 1-5 months down to 8.5 months, a healthy market has only 5-6 months supply of house.
  4. Unemployment is Rising.  With national unemployment levels at 10 percent, and some states reporting a far higher number, extending the taxpayer subsidy of housing market would likely create and preserve jobs.  In addition, people out of work usually means more loan deliquency, foreclosures and further downward pressure on pricing.

The Con’s:  Why Vote “NAY”

  1. The Cost to the Taxpayers.  The extension comes with a heavy price tag of $16.7 BILLION over 5 years.
  2. As bad as Sub-Prime.  Opponents argue that the subsidy has artifically propped up the prices of inexpensive homes, targeted by first-time buyer’s, thereby creating another potential mini-bubble in affordable housing.
  3. Both Opponents and real estate industry admit that most people who claimed the $8000 deduction, would have purchased a home anyway due to historical low rates and steep price declines.
  4. Fraud.  The IRS has identified over 100,000 cases of fraud involving the tax credit.  On Thursday, the House Ways and Means Committee is scheduled to take a closer look.
  5. Did we mention the cost to taxpayers is $16.7 BILLION?

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Did First Time Buyer Tax Credit Help Sellers?

Monday, September 28, 2009 posted by Tommi Crow

The $8000 Tax Credit for first time home buyer’s (people who have not owned a home in the last 3 years) expires on November 30, 2009.    With the expiration date drawing near, the Realtor and builder lobby groups are pushing lawmakers to extend the program for another 6 months.   If they are successful, it will cost taxpayers of nearly $15 BILLION.  

“Yea” or “Nay”???    Before we cast our vote, we decided to find out whether the tax incentive successful or not?  Specifically, did it persuade people to jump into the market?   Would it be a good investment for taxpayers going forward?

According to a poll conducted by Zillow, the tax credit was persuasive.

  • 18 percent of home buyers said the tax credit was the main reason they pushed to buy a home before November 30, 2010.
  • Based on the number of first time buyer’s in the marketplace, a 6 month extension could persuade another 335,000 (18 percent) buyers to buy a home of their own.
  • If the first time buyer credit is extended, home sales would likely increase 5 percent.  Without it, sales would be down as much as 2 percent.
  • Only 31 percent of first time buyers said the credit had no influence on their decision to purchase. 
  • 69 percent of buyers said the tax credit was important in motivating them to buy a home this year.

Thank you for visiting InfoTube.net homes for sale and rent website.  If you have an opinion about extending or expanding the tax credit for homebuyer’s we would love to hear from you.  Click the Comment link below.   Your privacy is completely protected.

Bullish Signs for Housing Sales

Friday, May 29, 2009 posted by Tommi Crow

Although all the news about real estate, housing and lending isn’t particularily bullish, there are some compelling new motivations for buying now.   Rising interest rates, Inventory Decreases and the $8000 tax credit which expires December 1.

  1. Interest rates are soaring, as the dollar falls.  Economists predict that the low rates we saw only a month ago, aren’t likely to return anytime soon.   In April, 30 year fixed rate mortgages averaged 4.5 percent.  Last week, rates hit 4.98 percent.  And, this week, Bankrate.com is quoting 30 year fixed rates for prime borrowers at just over 5 percent.  Note: An increase of only 1/2 percent in interest rates raises the mortgage payment for a $170,000 loan by $52/month, $624/year or $18,720/over the life of the loan.
  2. The deadline for qualifying for an $8000 tax credit is rapidly approaching.   Although, the December 1st deadline may seem a long way off, in real estate terms it really isn’t.  A lot of people are sitting on the sidelines, waiting to see if prices will drop another 1 or 2 percent over the next 6 months.   Lenders are already warning us that when all those buyers rush into the market in August or September, the backlog in loan applications will mean a wait of 60-90 days to close an average loan.  Note:  Given that the average buyer in this market looks at over 30 homes, over a 3 month period, buyers who don’t want to miss the boat on their $8000 gift, should get serious now.

For those buyer’s hoping to time the market perfectly, we think their ship may be sailing by.    Home inventories are dropping, prices are stabilizing, interest rate increases erase potential gains made by a further fall in prices and $8 grand is on the line, if the December 1 closing deadline can’t be met.   Serious buyer’s should jump on board now, before they find out that the ship has sailed and they missed the boat!!

Thank you for visiting InfoTube.net homes for sale or rent website.  Sellers can place a free property listing, download legal forms, print brochures and more.   Buyer’s can search for great deals on property from the privacy of their own homes and benefit from dealing directly with the owner or builder.  Check advantage of FREE today!!!

Tax Perks and Tips for Homeowners and Buyers

Monday, March 16, 2009 posted by Tommi Crow

Tax Perks of Homeownership

  1. 100 percent of the mortgage interest you pay is tax deductible, which can add thousands of dollars to your bottom line each year.   Click Here to FIND OUT HOW MUCH YOU CAN DEDUCT, if you own a home.
  2. Property taxes (real estate taxes) paid to state and local governments are 100 percent deductible on your federal income tax return.
  3. Up to $500,000 ($250,000 for singles) in profit is tax free when you sell your home.

2009 Housing Stimulus Increases Tax Savings of Ownership

  1. Deduct $8000 from Your Tax Bill.   To qualify for the $8000 tax savings you must be a first-time (have not owned in the last 3 years)homebuyer earning less than $150,000 (married, filing jointly) per year.  You must live in the home for 3 years after purchase.
  2. Go Green and Take a $1500 Tax Credit.   The requirements for energy tax credits have eased.  Take advantage of a $1500 Tax Credit for home improvements such as energy-efficient windows, doors, insulation, appliances and mechanical systems.  
  3. Save 30 percent on Alternative Energy for your Home.   Earn a 30 percent tax credit for each dollar spent on things like solar heating, heat pumps or fuel cells.
  4. Save up to $2 million on foreclosures and short sales.   Taxpayers get a free pass on mortgage debt forgiveness until 2012.   Filers can exclude up to $2 million in forgiven mortgage debt, where the home sold for less than the amount owed on the loan.

Owning a home certainly has its privileges, both emotional and financial.  And, real estate is still the granddaddy of tax deductions.   Buy a home and save thousands of dollars, or rent and pay thousands to Uncle Sam.   If in doubt, ask your landlord why they own???

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