Archive for the 'Financing' Category
The recent negative moment in the Mortgage Backed Securities has evidenced a 1% (at times higher) jump in rates. A move such as this can force a pause for many investors who believe they may have gotten into the game too late and missed the best rate options, losing out on best possible cash flows. Recently speaking with an investor he shared significant concern for the difference he was seeing when attempting to close on another purchase this year with a 1% increase in rate from late 2017.
Is 2018 a good time to buy a home, sell a home, move up, or invest in real estate — or will you be better off parking your money elsewhere, whether that means buying a house in a different location or an investment in an entirely different industry? While no one knows exactly what will happen with home prices this year, if you have the right sources and know where to look, there is enough evidence to make a sound educated guess.
Where will we see softening housing markets first, and which cities are still showing healthy growth? We examined all 381 metropolitan statistical areas (MSAs) in the US for local affordability (and change in affordability), housing market price growth, and the pace of housing market price growth to pinpoint where the housing market is slowing down.
Conventional lending is the most popular source for mortgage lending in today’s 1 to 4 unit properties. Conventional lending can be either conforming or non-conforming. If it’s conforming, it will be for an amount under a specified maximum. In most areas, this is $417,000 for a single family home, but the amount is higher in certain areas, like Hawaii or metropolitan cities. When you are purchasing a multi-family property will graduate up to $625,500. Nonconforming mortgages are for higher amounts usually called a jumbo loan.
The biggest difference between a conventional mortgage and other mortgage programs is the required down payment. Government-backed mortgages have low down payment requirements to help home buyers move into a primary residence.
Congress has approved sweeping tax cuts and tax reform that have not been tackled by the federal government in over 30 years (since the Tax Reform Act of 1986.). The new tax law, formally referred to as “The Tax Cuts and Jobs Act,” will go into effect on January 1, 2018.
This article has the most up-to-date information along with a summary of how the new tax law provisions will affect homeowners and real estate investors who own all types of investment property. Although this article generally does not delve into tax issues not associated with real estate, there are many new tax provisions and this is essential information for anyone that owns real estate to understand.
Real estate values estimation has several uses ranging from sale listings of real estate and analysis of investments to property taxes and insurances. However, it’s particularly necessary when it comes to real estate sales and passive investing. After all, the value of a property is not just based on the initial payment made or the expenses for property upkeep and modifications. Instead, a property’s worth is also based on comparing recently sold neighboring properties’ prices. With this in mind, below are ways to find out property values, including home value estimator tools and methods.
7 Ways to Determine Real Estate Values
I wanted to take the time to write about the top ten tax deductions available for real estate investors. Though some of this may seem relatively elementary, I’ve included a few gold nuggets for even our most experienced clients.
Real estate investors are always asking what expenses landlords can deduct. Because the answer to that question can quite literally be endless, we often tell our clients to record everything. For those expenses that our clients are unsure about, we ask them to create an “ask my accountant” category or account in their bookkeeping solution which they can discuss during a short call.
The combination of inflation and low mortgage rates usually leads to much higher compounded rates of home appreciation. For owners of property, high rates of inflation and appreciation are welcomed and appreciated. For buyers or tenants, however, the skyrocketing purchase and rental prices are not liked much at all.
When it comes to retirement savings, we all do wish for the same amount of investment freedom that we usually get with our other investments. Traditionally, most of the financial institutions offer limited investment options, starting with stocks and bonds to mutual funds and CDs only.
For some investors, the goal is to own properties “free and clear,” that is, with no mortgage debt. While this is a worthy goal, it does not necessarily make financial sense.
For example, consider a $100,000 property that brings in $9,600 per year in net income (net means gross rents collected, less expenses, such as property taxes, insurance, maintenance, and property management). The $100,000 in equity thus yields a 9.6 percent annual return on investment ($9,600, the annual net cash flow, divided by $100,000, the cash invested).
Taxes rarely make for exciting reading material, but if you own an investment property, there’s at least one set of IRS regulations you absolutely will want to understand: 1031 exchange rules. Why? Because normally when you sell an investment property for more than what you paid for it, you’d have to pay a hefty capital gains tax.
But with a 1031 exchange, you get to defer paying those taxes if you reinvest the proceeds in a new property, making an “exchange” rather than a sale. It’s just that this transaction is subject to some strict regulations, so you’ll need to follow the 1031 exchange rules to the letter.
Here’s what you need to know to pull it off.
Three things you can take to the bank:
- Politicians will bend with the wind,
- Property taxes will never decline, and
- Rising home prices will increase low appraisals.
It’s no surprise that complaints that appraisals are once again killing too many sales are once again on the rise this summer.
A minister once gave a lecture titled “Acres of Diamonds.” He related the story of an Arab man who wanted to become rich. Informed by an old priest that he would find diamonds in “a river that runs through white sands, between high mountains,” the man sold his farm and set off on his quest to find diamonds.
Home-buyers rejoice when interest rates drop, but rising interest rates can actually be a good thing for investors. Because high rates make homes less affordable, the rental market improves, giving real estate investors a chance to improve cash flow and increase their return on investment.
Archimedes made the comment, “Give me a lever long enough and a fulcrum strong enough, and I can move the world.” Leverage is a method that allows you to control properties with little cash.
In order to ensure long-term success when purchasing a rental property, it’s important to develop a strong, reliable team that can help you through the buying process, and your lender is a BIG part of that equation.
That’s why, when it comes to real estate investing, you need a lender who fully understands the investing landscape.