Norada Real Estate Investments

  • Home
  • Markets
  • Properties
  • Membership
  • Podcast
  • Learn
  • About
  • Contact

Archives for February 2024

US Economy Surpasses Expectations with Strong Growth in 2023

February 24, 2024 by Marco Santarelli

US Economy Surpasses Expectations with Strong Growth in 2023

The United States economy exhibited remarkable resilience as it closed out the year 2023 with a robust performance, surpassing earlier predictions. The advance estimate of the fourth-quarter Gross Domestic Product (GDP) revealed a surprising annualized growth rate of 3.3%, defying consensus forecasts that had anticipated a more modest 2%, according to data released by the Bureau of Economic Analysis.

“That is three years in a row of growing the economy from the middle out and the bottom up on my watch,” President Biden said in a statement this Thursday morning.

Key Contributors to Growth

The expansion in real GDP was fueled by notable increases across various sectors, including:

  • Consumer Spending: Witnessed growth in both services and goods, with significant contributions from food services, accommodations, health care, and various goods categories.
  • Exports: Marked increases in both goods and services, led by petroleum and financial services, respectively.
  • Government Spending: Noteworthy rises in state and local government spending, nonresidential fixed investment, and federal government spending.
  • Inventory Investment: Led by wholesale trade industries.
  • Residential Fixed Investment: Driven by an increase in new residential structures.

However, it's essential to note that the positive momentum was partially offset by an increase in imports, which subtract from the GDP calculation.

Quarterly Performance and Deceleration

Compared to the third quarter of 2023, the fourth quarter exhibited a deceleration in real GDP, primarily attributed to slowdowns in private inventory investment, federal government spending, residential fixed investment, and consumer spending. Imports also decelerated during this period.

Overview of Current-Dollar GDP and Price Indices

The current-dollar GDP increased by 4.8% at an annual rate in the fourth quarter, reaching a level of $27.94 trillion. The price index for gross domestic purchases increased by 1.9% in the same period, reflecting a slight slowdown compared to the third quarter.

Personal Income and Saving Trends

Personal income exhibited a notable increase of $224.8 billion in the fourth quarter, primarily driven by rises in compensation, personal income receipts on assets, and proprietors' income. Disposable personal income increased by $211.7 billion, with real disposable personal income showing a substantial rise of 2.5%.

Despite the increase in personal income, personal saving slightly decreased to $818.9 billion in the fourth quarter, with the personal saving rate standing at 4.0% compared to 4.2% in the third quarter.

Annual Performance and GDP for 2023

Real GDP for the entire year of 2023 exhibited a noteworthy 2.5% increase compared to 2022. This growth was primarily driven by consumer spending, nonresidential fixed investment, state and local government spending, exports, and federal government spending.

While the increase in consumer spending was fueled by services and goods, the decrease in residential fixed investment was mainly attributed to a decline in new single-family construction and brokers' commissions.

Current-dollar GDP for 2023 increased by 6.3%, reaching a level of $27.36 trillion. The price index for gross domestic purchases increased by 3.4%, showing a moderation compared to the previous year.

Year-on-Year Growth and Price Index Trends

Measured from the fourth quarter of 2022 to the fourth quarter of 2023, real GDP increased by 3.1%. The corresponding price indices showed increases of 2.4% for gross domestic purchases, 2.7% for the PCE price index, and 3.2% for the PCE price index excluding food and energy.

This positive economic performance marks a promising outlook for the United States as it navigates through the intricate landscape of global economic dynamics.

Filed Under: Economy Tagged With: Economy

Fannie Mae’s 5% Down Payment Loan for Multi-Family Homes

February 24, 2024 by Marco Santarelli

Fannie Mae's 5% Down Payment Loan for Multi-Family Homes

What is Fannie Mae's 5% down payment loan for multi-family homes? In a groundbreaking move, Fannie Mae has announced a new policy that is set to revolutionize the multi-family housing market. Starting from November 18, 2023, Fannie Mae will reduce the down payment requirement for owner-occupied 2-, 3-, and 4-unit homes to just 5%.

This is a significant departure from the previous norm, which demanded down payments of 15-25% for duplexes, triplexes, and four-plexes. This policy change is set to create exciting opportunities for individuals looking to invest in multifamily residences. Fannie Mae's decision to lower the down payment requirements paves the way for prospective owner-landlords to make their dreams a reality.

In the past, the down payment requirement for multi-family homes was a substantial 15%-25% of the property's sales price. With this remarkable shift, Fannie Mae is making multi-family home purchases significantly more affordable and accessible. This forward-thinking move allows more individuals to take the plunge into income-generating property investments.

How Will Fannie Mae's 5% Down Loan Benefit Multi-Family Homebuyers

This policy change applies to a range of scenarios, including standard purchases, no-cash-out refinances, HomeReady, and HomeStyle Renovation loans for owner-occupied properties. First-time homebuyers and borrowers aiming to combat high mortgage rates will benefit immensely from these conventional loans.

The maximum loan amount for these 2-4 unit homes has been raised to an impressive $1,396,800. This means that buyers can acquire larger and more valuable properties with ease. Additionally, the removal of the FHA self-sufficiency test for 3-4 unit properties simplifies the pre-approval process for multifamily housing.

Eliminating Hurdles with FHA Rule 75

The FHA Rule 75, which previously mandated that 75% of rental income must exceed the monthly mortgage, is no longer a requirement for 3-4 unit properties. This change streamlines the process for buyers looking to secure pre-approvals for these multifamily homes.

Under the previous rules, multifamily property owners had to ensure that their rental income significantly surpassed the mortgage payment, including Principal, Interest, Taxes, and Insurance (PITI). This change will make it easier for buyers to navigate the real estate market and invest in income-generating properties.

A Golden Opportunity for Multi-Family Homebuyers

Homebuyers interested in taking advantage of this opportunity can apply now, with the changes set to take effect in Fannie Mae's system after November 18, 2023. This gives potential buyers ample time to prepare and gather the necessary documentation before the new policy takes effect.

For owner-occupant landlords, this policy shift represents a significant opportunity to reduce mortgage payments. The ability to make a smaller down payment not only makes multifamily homes more accessible but also allows homebuyers to gain valuable landlord experience. They can collect rent from other units while simultaneously building equity in their property.

Fannie Mae's decision to lower down payment requirements for multifamily homes is a promising step towards improving access to credit and affordable rental housing. With this policy change, the dream of owning a multifamily home while generating rental income is becoming more attainable for mortgage loan borrowers.

This policy change is a testament to their commitment to making housing more accessible and affordable for a wider range of individuals. Their dedication to creating opportunities for prospective homeowners and investors is evident in this bold move.

Don't miss out on this game-changing opportunity to invest in multifamily homes with just a 5% down payment.

Filed Under: Housing Market, Mortgage, Real Estate, Trending News

Lease with an Option to Buy House: What You Need to Know

February 21, 2024 by Marco Santarelli

Lease with an Option to Buy

If you're looking to buy a house but aren't quite ready to make the commitment, a lease with an option to buy might be a good option for you. A lease with an option to buy, also known as a lease option, is a real estate agreement that allows a tenant to rent a property for a specified period with the option to purchase the property at the end of the lease term. This type of agreement typically involves two separate contracts: a lease agreement and an option agreement.

The lease agreement outlines the terms of the rental, including the monthly rent payment, the length of the lease term, and any other conditions of the rental. The option agreement gives the tenant the right to purchase the property at a predetermined price at the end of the lease term.

Lease with an option to buy agreements can be beneficial for both buyers and sellers. For buyers, it allows them to move into a property they are interested in without having to commit to purchasing it right away. For sellers, it provides a steady stream of rental income and the potential for a sale at the end of the lease term. However, it's important to understand the key components of the lease option agreement and the potential pitfalls to avoid before entering into this type of agreement.

Key Takeaways

  • A lease with an option to buy is a type of agreement that allows you to rent a property with the option to purchase it at the end of the lease term.
  • This type of agreement can be beneficial for both buyers and sellers, but it's important to understand the key components of the lease option agreement and the potential pitfalls to avoid.
  • The process of entering a lease option agreement involves negotiating the terms of the lease, setting a purchase price, and determining the length of the lease term.

How Does It Work?

The lease with an option to buy agreement encompasses several crucial aspects:

  • Lease term: The duration during which the renter evaluates their choice to exercise the option to purchase.
  • Purchase price: The specified price at which the property can be bought if the renter opts for the purchase.
  • Option fee: A non-refundable upfront fee securing the right to purchase the property.
  • Monthly rent: The regular payment made by the renter, part of which contributes towards the property's purchase price.

At the end of the lease term, the renter has the option to buy the property at the agreed purchase price. If they decide to proceed, they must pay the remaining balance of the purchase price. However, if they choose not to purchase the property, they forfeit the option fee and any portion of the monthly rent allocated toward the purchase price.

Benefits and Drawbacks of Lease with an Option to Buy

There are several advantages to a lease with an option to buy. One of the main benefits is that it allows the tenant to try out the property before committing to a purchase. This can be particularly beneficial for those who are unsure if they want to own a home, or who are not yet financially ready to make a purchase.

Another advantage is that a portion of the monthly rent payment can be applied toward the purchase price of the property. This is known as a rent credit and can help the tenant build up equity in the property over time.

However, there are also some disadvantages to consider. One potential downside is that the tenant may end up paying more for the property than it is worth, particularly if the option price is set too high. Additionally, if the tenant decides not to purchase the property at the end of the lease term, they may lose the option fee and any rent credits they have accumulated.

Benefits
  • Allows quicker home access for those lacking immediate funds or credit.
  • Facilitates credit improvement and down payment savings.
  • Provides a trial period to evaluate the home before committing.
Drawbacks
  • This may lead to higher costs due to option fees and elevated rent.
  • No mortgage guarantee at the end, even with improved credit.
  • Risk of forfeiting fees and rent if not choosing to buy.

Types of Leases with Options to Buy

Lease-Purchase Agreement

A lease-purchase agreement outlines critical terms:

  • Lease term: The duration before the tenant can exercise the option to purchase the property.
  • Purchase price: The agreed price for purchasing the property.
  • Option fee: A non-refundable upfront fee securing the purchase right.
  • Monthly rent: The monthly payment, part of which contributes to the property's purchase price.

At the lease term's conclusion, the tenant can buy the property at the agreed price or forfeit the option fee and relevant rent portions.

Rent-to-Own Agreement

Similar to a lease-purchase agreement but usually with a shorter term and a higher option fee. Often suitable for individuals with poor credit or facing challenges in obtaining a traditional mortgage.

Seller-Financing

Seller-financing involves the property seller providing the financing for the buyer, eliminating the need for a traditional mortgage. It's an alternative for individuals with poor credit or facing mortgage qualification difficulties.

Key Components of the Lease Option Agreement

A lease option agreement is a contract that allows a tenant to rent a property with the option to buy it at a later date. This type of agreement can be a great way to get into a home when you don't have the funds for a down payment or if you're not sure if you want to commit to buying a home just yet. Here are the key components of a lease option agreement that you need to know:

Lease Terms

The lease terms of a lease option agreement are similar to a standard lease. This includes the rental amount, payment schedule, and the duration of the lease. It's important to read the lease terms carefully to ensure that you understand your obligations as a tenant.

Option to Purchase Details

The option to purchase details are the most important part of a lease option agreement. This outlines the terms of the option, including the option fee, the duration of the option period, and the price for which you can purchase the property in the future. It's important to negotiate these terms carefully to ensure that you're getting a fair deal.

Financial Considerations

There are several financial considerations that you need to take into account when signing a lease option agreement. These include the option fee, which is typically 2-5% of the purchase price, and the rental amount, which is usually higher than a standard lease. Additionally, you'll need to consider your ability to secure financing when the option period ends. It's important to work with a qualified real estate agent or attorney to ensure that you understand all of the financial implications of a lease option agreement.

Process of Entering a Lease Option Agreement

Entering a lease option agreement involves several steps. Here are the key considerations to keep in mind:

Negotiation Strategies

Once you find a property that you are interested in, it is time to negotiate the terms of the lease option agreement with the landlord/seller. Before you start negotiations, it is important to determine what you are looking for in the agreement. For example, you should consider the length of the lease, the sales price of the home, and the option fee.

During negotiations, it is important to be clear about your expectations and to be willing to compromise. Remember that the landlord/seller is also looking for a favorable deal. Try to find common ground and work towards a mutually beneficial agreement.

Legal Considerations

Before signing a lease option agreement, it is important to consult with a real estate attorney. A real estate attorney can review the agreement and ensure that it is legally binding and enforceable.

The lease option agreement should clearly outline the rights and responsibilities of both parties. It should also specify the consequences of default or breach of the agreement. Make sure that you fully understand the terms of the agreement before signing it.

Due Diligence

Before entering a lease option agreement, it is important to conduct due diligence on the property. This includes inspecting the property, reviewing the title, and researching the neighborhood.

Inspecting the property can help you identify any issues that need to be addressed before moving in. Reviewing the title can help you ensure that the landlord/seller has the legal right to sell the property. Researching the neighborhood can help you determine whether the property is located in a desirable area.

By following these steps, you can enter a lease option agreement with confidence and ensure that you are getting a fair deal.

 

Overall, lease with an option to buy can be a great way to get into a home if you cannot afford to buy one outright. However, it is important to carefully consider the potential pitfalls and to take steps to avoid them. By working with a reputable lender, carefully reviewing the lease agreement, and inspecting the property before entering into the agreement, you can help ensure that your lease with an option to buy is a success.

 

FAQs

1. What is a lease option?

A lease option grants the right to purchase the property rented at the end of the lease term.

2. How does a lease option work?

You pay an option fee and higher monthly rent, with a portion contributing to the property's purchase. At the lease term's end, you can choose to buy the property or forfeit the option fee and relevant rent.

3. What are the benefits of a lease option?

– Enables faster move-in to a home
– Allows time to enhance credit and save for a down payment
– Provides a trial period to try out a home

4. What are the drawbacks of a lease option?

– Potential higher long-term costs
– No guarantee of mortgage qualification at the lease term's end
– Risk of forfeiting fees and rent if not choosing to buy

5. Is a lease option right for me?

Depends on your individual circumstances; consider your financial situation and goals before deciding.

6. How much is the option fee for a lease option?

The option fee typically ranges from 1-5% of the property's purchase price.

7. What is the lease term for a lease option?

The lease term usually varies from 1-3 years.

8. Can I assign my lease option to someone else?

Assignment possibilities depend on the lease option agreement terms.

9. What happens if I don't exercise my option to buy at the end of the lease term?

If you opt not to purchase, you forfeit the option fee and relevant rent portions designated for the purchase price.

Filed Under: General Real Estate, Housing Market, Real Estate, Real Estate Market Tagged With: Housing Market, Lease with an Option to Buy, Real Estate Investing

Why Did Citizens Bank in Iowa Collapse?

February 20, 2024 by Marco Santarelli

Why Did Citizens Bank in Iowa Collapse?

The trucking industry in the United States has faced immense challenges over the past two years. Companies, both large and small, have gone out of business, and the competition for freight has driven rates to historically low levels. Brokerages have suffered, with some even shutting down.

The industry has seen hiring freezes and belt-tightening measures becoming the norm. Now, this trucking bloodbath has claimed an unexpected victim – Citizens Bank of Sac City, Iowa.

According to the Federal Deposit Insurance Corporation (FDIC), Citizens Bank, a state-chartered bank with approximately $66 million in assets, has failed. The Citizens Bank's exposure to commercial trucking appears to be the root cause of its failure. The FDIC, in conjunction with the Iowa Department of Insurance and Financial Services, announced the bank's failure, and all its deposits were assumed by Iowa Trust & Savings Bank.

The Failure of Citizens Bank and its Causes

The FDIC revealed that examiners, during a joint examination with the Iowa Division of Banking (IDOB), identified significant loan losses that had not been previously recognized by Citizens Bank. These loan losses were linked to the bank's concentration on “out-of-territory and out-of-state loans to one industry.” Unfortunately, some of these loans had incurred substantial losses, although the specific industry was not disclosed in the announcement.

Prior to its failure, Citizens Bank had entered into a consent order with the FDIC and IDOB in August. This order required the bank to engage an independent third-party loan consultant with the necessary expertise to manage the bank's commercial trucking loan portfolio.

The Impact of the Failure

It's essential to note that Citizens Bank was a relatively small institution with just $66 million in assets. The town of Sac City, Iowa, where the bank was based, has a population of slightly over 2,000 people, and the entire state of Iowa has a population of approximately 3.2 million people. Given the small scale of the bank and the area it served, questions arise about why a state-chartered bank in a small town was engaging in lending related to expensive commercial trucks, which can cost anywhere from $150,000 for basic models to over $220,000 for customized ones.

This unexpected failure underscores the challenges facing the trucking industry and the businesses associated with it. As the trucking downturn continues to impact various sectors, it serves as a stark reminder of the need for prudent financial management and risk assessment in the banking industry.

The failure of Citizens Bank in Sac City, Iowa, is a stark example of the ripple effects of the trucking industry's woes. While the specific industry responsible for the bank's losses remains undisclosed, the case highlights the importance of proper risk management in financial institutions, even in small communities. It's a lesson that resonates not only with local banks but also with the broader financial sector.

Filed Under: Banking, Economy, Financing Tagged With: Citizens Bank Collapse

How Do Real Estate Brokerages Make Money?

February 20, 2024 by Marco Santarelli

How Do Real Estate Brokerages Make Money?

If you are thinking of becoming a real estate agent or broker, you might be wondering how they make money. Real estate professionals work on commission, which means they get paid a percentage of the sales price of a property when they help a client buy or sell it. But how much do they make, and who pays them? Here are some answers to these common questions.

How Do Real Estate Brokerages Make Money?

The Commission Split

The commission is usually 5% to 6% of the final sales price of a home, but it can vary depending on the market conditions and the negotiation between the seller and the listing agent. The commission is paid by the seller at closing, and it is split between four parties: the listing agent, the listing broker, the buyer's agent, and the buyer's broker.

The listing agent is the one who represents the seller and markets the property. The listing broker is the one who oversees the listing agent and provides them with training, tools, mentorship, and legal compliance. The buyer's agent is the one who represents the buyer and helps them find and purchase a property. The buyer's broker is the one who oversees the buyer's agent and provides them with similar support.

The commission split depends on the agreements that each agent has with their broker. For example, a listing agent might get 60% of the commission, while the listing broker gets 40%. Similarly, a buyer's agent might get 70% of the commission, while the buyer's broker gets 30%. These percentages can vary depending on the experience, performance, and market share of each agent and broker.

To illustrate how this works, let's say a home sells for $500,000 and has a 6% commission. The total commission is $30,000, which is divided equally between the listing side and the buyer side. Each side gets $15,000, which is then split between the agent and the broker according to their agreement. If the listing agent gets 60% and the listing broker gets 40%, they will receive $9,000 and $6,000 respectively. If the buyer's agent gets 70% and the buyer's broker gets 30%, they will receive $10,500 and $4,500 respectively.

Other Sources of Income

Besides commissions, real estate brokers can also make money from other sources. For example, some brokers charge their agents fees for desk space, marketing materials, technology tools, or administrative services. These fees can be fixed or variable depending on the broker's business model.

Another source of income for brokers is referrals. Brokers can refer their clients or agents to other professionals who can help them with their real estate needs, such as lenders, inspectors, appraisers, attorneys, or contractors. In exchange for these referrals, brokers can receive a fee or a percentage of the service provider's fee.

Finally, brokers can also make money from their own deals. Brokers are licensed to buy and sell real estate independently without working under another broker. If they do so, they can keep 100% of the commission from their transactions.

In summary, real estate brokerages make money by earning commissions from their agents' sales and from their own deals. They also make money by charging fees to their agents or by receiving referral fees from other professionals. The amount of money they make depends on various factors, such as market conditions, negotiation skills, commission splits, business expenses, and number of transactions.

Filed Under: Real Estate, Real Estate Investing, Real Estate Investments, Selling Real Estate Tagged With: Real Estate Brokerage

Highest Paying Online Surveys: Sites That Pay the Most 2024

February 20, 2024 by Marco Santarelli

Survey Sites that Pay the Most

If you are looking for ways to make some extra money online, you might have considered taking surveys. Surveys are a popular and easy way to share your opinions and get rewarded for them. However, not all survey sites are created equal. Some pay more than others, some have more opportunities than others, and some are more reliable than others.

In this blog post, we will show you a list of popular survey sites that pay the most. These sites are free to join, have good reputations, and offer a variety of ways to earn money besides surveys. Whether you want to get paid in cash, gift cards, or products, you will find something that suits your preferences.

Highest Paying Online Surveys: Sites Which Pay the Most

1. Opinion Outpost

Opinion Outpost is a straightforward and user-friendly survey site with over 2 million members and a Trustpilot rating of 4 out of 5. They offer cash rewards via PayPal or gift cards for surveys covering a range of topics like politics, sports, entertainment, and more. Additionally, you can earn entries for quarterly prize draws with every completed survey. The minimum payout is $10 for PayPal and $5 for gift cards.

2. Survey Voices

Survey Voices is a unique platform that acts as a survey aggregator, connecting you with other survey sites that match your profile and preferences. They provide cash rewards through PayPal or gift cards for surveys from various sources, including Survey Junkie, Swagbucks, InboxDollars, and more. You can also access exclusive offers and deals from partner sites, and the minimum payout varies depending on the site you choose.

3. Ipsos i-Say

Ipsos i-Say is a reputable site with over 3 million members and a Trustpilot rating of 3.9 out of 5. They pay in cash via PayPal or gift cards for surveys covering topics like social issues, politics, media, and more. Loyalty points can be earned for active participation in polls and contests. The minimum payout is $10 for PayPal and $5 for gift cards.

4. Toluna

Toluna is a diverse platform with over 10 million members and a Trustpilot rating of 3 out of 5. They offer cash rewards through PayPal or gift cards for surveys on subjects like fashion, beauty, technology, and more. Additionally, you can create your own polls and opinions to share with the community and earn points. The minimum payout is $10 for PayPal and $5 for gift cards.

5. SurveySavvy

SurveySavvy is a well-established site, operating since 1999 with over 1 million members. They pay in cash via check for surveys covering topics like business, health, education, and more. You can also earn extra money by installing the SavvyConnect app, which tracks your online behavior and pays up to $15 per month. The minimum payout is just $1, the lowest among all survey sites.

6. Survey Junkie

Survey Junkie is one of the top survey sites with over 10 million members and a Trustpilot rating of 4.5 out of 5. They offer cash rewards through PayPal or e-gift cards for surveys on topics like health, lifestyle, entertainment, and more. You can also get invited to product testing and focus groups for additional rewards. The minimum payout is $5, which is lower than most survey sites.

7. Swagbucks

Swagbucks is another popular and trusted site with over 20 million members and a Trustpilot rating of 4.3 out of 5. They pay in cash via PayPal or gift cards for various online activities, including surveys, watching videos, playing games, shopping online, and more. You can also earn bonus points for signing up and completing your profile. The minimum payout is $3, which is very low.

8. InboxDollars

InboxDollars is a well-known platform that has paid over $60 million to its members since 2000. They offer cash rewards via check or prepaid Visa card for similar online activities as Swagbucks, such as surveys, watching videos, playing games, reading emails, and more. You can also receive a $5 bonus for joining and confirming your email address. The minimum payout is $30, which is higher than most survey sites.

9. Pinecone Research

Pinecone Research is a high-paying and exclusive site that only accepts new members by invitation or through special links. They provide cash rewards through PayPal or check for surveys and product testing before market release. You can also earn points that can be redeemed for merchandise or sweepstakes entries. The minimum payout is $3 per survey or product test, which is relatively high.

10. LifePoints

LifePoints is a global platform with over 5 million members and a Trustpilot rating of 4.4 out of 5. They pay in cash via PayPal or gift cards for surveys on topics like health, consumer goods, travel, and more. You can also earn points for joining and completing your profile. The minimum payout is $5, which is lower than most survey sites.

Filed Under: Making Money Online, Passive Income Tagged With: Survey Sites that Pay the Most

Is Disability Income Taxable: All You Need to Know in 2024

February 20, 2024 by Marco Santarelli

Is Disability Income Taxable

Disability income is a critical source of financial support for individuals who are unable to work due to an illness, injury, or other disability. However, you may be unsure about whether your disability income is subject to taxation by the US government. In this article, we will provide a comprehensive overview of the tax implications of disability income in the US.

Specifically, we will focus on Social Security Disability Insurance (SSDI), which is a federal program that provides disability benefits to eligible individuals. We will explain what SSDI is, who is eligible for it, and what benefits it offers, as well as whether disability benefits are taxable. By the end of this article, you will have a clear understanding of how disability income is taxed in the US and what you can do to minimize your tax liability.

Is Disability Income Taxable?

Disability income may or may not be taxable, depending on various factors. If the disability income comes from an employer-sponsored disability insurance plan with premiums paid with pre-tax dollars, the benefits received will be taxable. However, if the disability income is from a private insurance policy purchased with after-tax dollars or a government-sponsored program like Social Security Disability Insurance (SSDI), the benefits may be non-taxable or partially taxable.

For SSDI benefits, the rules regarding taxation can be complex and depend on factors such as filing status and income level. For the tax year 2022, the threshold for determining whether SSDI benefits are taxable is $25,000 for single filers, heads of households, qualifying widowers or widows, and married filing separately (did not live with a spouse) taxpayers, and $32,000 for married couples filing jointly. However, for those who file separately but lived with their spouse at any point during the tax year, the threshold is $0.

If the individual's combined income exceeds the threshold, then up to 50% or 85% of their SSDI benefits may be subject to federal income tax, depending on the tax filing status and the amount of combined income. For example, as a single filer, you may need to include up to 50% of your benefits in your taxable income if your income falls between $25,000 and $34,000. If your income exceeds $34,000, up to 85% of your benefits may be included on your tax return.

It's important to keep in mind that state tax laws may differ in the taxation of disability income. Individuals receiving disability benefits should consult with their state's tax agency to determine their state income tax obligations.

In summary, whether or not disability income is subject to taxation hinges on a variety of factors, including the origin of the income and the unique situation of the individual. In the case of SSDI benefits, determining their taxable status depends on the individual's combined income, with up to 50% or 85% of the benefits potentially being subject to taxation. It is strongly recommended that those who receive disability benefits seek out advice from a tax professional to better understand their tax obligations and explore methods to reduce their overall tax liability.

Understanding Social Security Disability Insurance (SSDI)

If you are wondering about Social Security Disability Insurance (SSDI), this section will provide a comprehensive overview of what it is, how it works, and who is eligible for it.

Definition and Purpose of SSDI

SSDI is a federal program designed to provide financial assistance to individuals who are unable to work due to a disability. The program is funded by Social Security taxes, and it is administered by the Social Security Administration (SSA). The purpose of SSDI is to provide financial support to disabled individuals and their families, allowing them to maintain a basic standard of living while they are unable to work.

The Role of the Social Security Administration

The Social Security Administration plays a critical role in administering the SSDI program. The SSA is responsible for determining eligibility for SSDI benefits, processing applications, and managing benefit payments. The agency also provides important information and resources to help disabled individuals navigate the application process and understand their rights and responsibilities under the program.

Eligibility Requirements for SSDI

To be eligible for SSDI benefits, you must meet certain requirements. First, you must have worked for a certain number of years and paid Social Security taxes. This is known as the “work credits” requirement, and the exact number of credits you need will depend on your age at the time you became disabled.

In addition to the work credits requirement, you must also have a medical condition that meets the SSA's definition of “disability.” This means that your condition must be severe enough to prevent you from performing any substantial gainful activity (SGA) for at least 12 months. The SSA uses a strict set of criteria to evaluate disability claims, and the process can be complex and time-consuming.

Overall, understanding the basics of SSDI is crucial for anyone who may be eligible for disability benefits. By knowing what SSDI is, how it works, and what the eligibility requirements are, you can make informed decisions about your financial future and ensure that you receive the support you need.

Who's Eligible for Social Security Disability Insurance?

If you are unable to work due to a disability, you may be eligible for Social Security Disability Insurance (SSDI) benefits. However, there are specific requirements that you must meet to be eligible for this federal program. In this section, we will cover the work test requirements, medical condition requirements, age requirements, and family members who may be eligible for benefits.

Work Test Requirements for SSDI: To qualify for SSDI benefits, you must have worked a certain number of years and earned a minimum amount of income. The work test requirements for SSDI are based on work credits, which you earn by paying Social Security taxes on your earnings. To be eligible for SSDI, you generally need to have earned at least 20 work credits.

Duration of Work Test Requirements: The duration of the work test requirements varies based on your age and when you became disabled. For example, if you become disabled before age 24, you may be eligible for fewer work credits.

Medical Condition Requirements for SSDI: In addition to the work test requirements, you must have a medical condition that meets the Social Security Administration's definition of disability. The condition must be expected to last at least 12 months or result in death, and it must prevent you from doing the substantial gainful activity.

Age Requirements for SSDI: There are no specific age requirements for SSDI, but you must have earned sufficient work credits before becoming disabled.

Family Members Eligible for Benefits: Family members may also be eligible for benefits based on their work history, including their spouse, children, and dependent parents. The family member must meet certain eligibility requirements, such as being unmarried and under a certain age.

By understanding the eligibility requirements for SSDI, you can determine if you or your family member qualifies for disability benefits.

What Benefits Does Social Security Disability Insurance Offer?

Social Security Disability Insurance (SSDI) provides various benefits to eligible individuals who are unable to work due to a qualifying disability. The amount of benefits received is based on the individual's past earnings, which are used to calculate their average indexed monthly earnings (AIME). The Social Security Administration (SSA) then applies a formula to the AIME to determine the primary insurance amount (PIA), which is the monthly benefit amount that the individual is entitled to receive.

To understand their earnings history, individuals can access their Social Security statement, which provides an estimate of their future SSDI benefits. If an individual also has private disability insurance, this may affect their SSDI benefits, as the total amount of disability benefits cannot exceed 80% of the individual's average earnings before becoming disabled.

Furthermore, if an individual receives benefits from other government-sponsored programs, such as workers' compensation or a temporary state disability program, their SSDI benefits may also be affected. In some cases, the total amount of benefits received from all sources may exceed the individual's pre-disability earnings, which can result in a reduction of their SSDI benefits.

Overall, SSDI provides important benefits to eligible individuals with disabilities, but it's important to understand how the number of benefits is calculated and how other sources of disability income may affect those benefits.

Conclusion

In conclusion, Social Security Disability Insurance (SSDI) provides important benefits to eligible individuals who are unable to work due to a disability. The amount of SSDI benefits received is based on the individual's past earnings history, and access to Social Security statements can help individuals understand their potential benefits.

While SSDI benefits may not be taxable in some cases, they can be subject to federal income tax if the individual's combined income exceeds certain thresholds. It's important for individuals receiving disability income to consult with a tax professional to understand their tax obligations and minimize their tax liability.

Additionally, private disability insurance and government-sponsored programs like workers' compensation or a temporary state disability program may impact an individual's eligibility for and amount of SSDI benefits. It's important for individuals to understand how these factors may affect their SSDI benefits and seek guidance as needed.


Sources:

  • https://www.investopedia.com/terms/d/disability-insurance.asp
  • https://www.ssa.gov/benefits/disability/
  • https://www.irs.gov/faqs/interest-dividends-other-types-of-income/life-insurance-disability-insurance-proceeds/life-insurance-disability-insurance-proceeds-1

Filed Under: Financing, Taxes Tagged With: Is Disability Income Taxable, Social Security Disability Insurance

Can You Deduct Real Estate Taxes: Things to Know

February 20, 2024 by Marco Santarelli

Can You Deduct Real Estate Taxes

If you own a home or property in the U.S., you may be wondering if you can deduct your real estate taxes from your federal income taxes. The answer is: it depends. The tax rules for real estate vary depending on how you use the property, whether it's your primary residence, a second home, or a rental property.

The rules for deducting real estate taxes can be complex, but in general, homeowners can deduct the real estate taxes they pay on their primary residence and any other real estate that they own, such as a vacation home or investment property. Businesses can also deduct the real estate taxes they pay on the business property that they own or lease.

In this article, we will explain everything you need to know about deducting real estate taxes on your tax return

Property Taxes for Primary and Second Homes

You can deduct real estate taxes imposed on you by state and local governments for your primary and second homes. You must have paid them either at settlement or closing or to a taxing authority (either directly or through an escrow account) during the year. If you own a cooperative apartment, there are special rules for deducting your share of the real estate taxes paid by the cooperative housing corporation.

However, there is a limit on how much property taxes you can deduct. The deduction for state and local taxes (SALT), which includes property taxes, is capped at $10,000 ($5,000 if married filing separately) for tax years 2018 to 2025. This means that you can only deduct up to $10,000 of your total property taxes and either state and local income taxes or sales taxes.

Another limitation is that you must itemize your deductions on Schedule A to claim the property tax deduction. This means that you must have enough deductible expenses to exceed the standard deduction, which is $12,950 for single filers and $25,900 for married couples filing jointly in 2022. If you take the standard deduction, you cannot deduct your property taxes.

Property Taxes for Foreign Homes

If you own a home or property in a foreign country, the tax rules are similar to those for domestic homes, with one exception. You can still deduct mortgage interest, mortgage points, and private mortgage insurance (PMI) on up to $750,000 ($375,000 if married filing separately) of secured mortgage debt for your first and second homes. However, you cannot deduct foreign property taxes on your U.S. tax return. The deduction for foreign real estate taxes was eliminated by the Tax Cuts and Jobs Act of 2017 for tax years 2018 to 2025.

Property Taxes for Rental Properties

If you rent out your home or property to others, you can deduct the real estate taxes as a rental expense on Schedule E. You can deduct the full amount of the property taxes, regardless of the SALT limit or whether you itemize or not. However, you must report any rental income you receive from the property and deduct any other expenses related to renting out the property, such as mortgage interest, insurance, repairs, maintenance, and depreciation.

The tax rules for rental properties depend on how many days you use the home for personal use versus rental use. If you use the home for more than 14 days or more than 10% of the total days rented out at fair market value (whichever is greater), you must divide your expenses between personal and rental use based on the number of days used for each purpose.

You can only deduct the rental portion of your expenses on Schedule E. If you use the home for 14 days or less or 10% or less of the total days rented out at fair market value (whichever is smaller), you can deduct all of your expenses on Schedule E and do not have to report any personal use days.

Other Tax Deductions for Homeowners

Besides property taxes, homeowners may also qualify for other tax deductions related to their homes. Some of these deductions are:

  • Mortgage interest deduction: You can deduct the interest paid on up to $750,000 ($375,000 if married filing separately) of mortgage debt used to buy, build, or improve your primary or second home. This limit applies to loans taken after December 15, 2017. For loans taken before that date, the limit is $1 million ($500,000 if married filing separately). You must itemize your deductions and receive Form 1098 from your lender to claim this deduction.
  • Mortgage points deduction: You can deduct the points paid to obtain your home mortgage as interest if they meet certain requirements. Points are prepaid interest that reduces your loan's interest rate. Generally, you can deduct points in full in the year they are paid if they are charged only for the use of money; they are computed as a percentage of the principal amount of the loan; they are paid by either buyer or seller; and they are the norm in your area. Otherwise, you must amortize the points over the life of the loan.
  • Private mortgage insurance (PMI) deduction: You can deduct the premiums paid for private mortgage insurance (PMI) on your home loan as interest if you meet the income and loan amount criteria. PMI is a type of insurance that protects the lender if you default on your loan. You can deduct PMI premiums paid or accrued in 2022 if your adjusted gross income (AGI) is less than $109,000 ($54,500 if married filing separately) and your loan was taken out after 2006 to buy, build, or improve your home.
  • Home office deduction: You can deduct expenses related to the business use of a part of your home if you meet the requirements for this deduction. You must use the part of your home exclusively and regularly for business purposes; it must be your principal place of business or a place where you meet clients or customers; and you must not rent out the part of your home to your employer and use it to perform services as an employee. You can choose between two methods to calculate this deduction: the simplified method or the regular method. The simplified method allows you to deduct $5 per square foot of your home office area, up to a maximum of 300 square feet. The regular method requires you to allocate your actual expenses (such as mortgage interest, property taxes, utilities, repairs, etc.) between personal and business use based on the percentage of your home used for business.
  • Energy efficient home improvement credit: You can claim a tax credit for making certain energy efficient improvements to your home. The credit is 10% of the cost of qualified energy efficient improvements, such as insulation, windows, doors, roofs, etc., plus 100% of the cost of qualified residential energy property expenditures, such as solar panels, solar water heaters, geothermal heat pumps, etc. The credit is subject to a lifetime limit of $500 ($200 for windows) and applies only to existing homes that are your principal residence. The credit is available for property placed in service by December 31, 2022.

In summary, homeownership can provide many tax benefits for homeowners, such as deductions for property taxes, mortgage interest, mortgage points, PMI, and home office expenses. Homeowners may also claim tax credits for making energy efficient improvements to their homes. However, there are also limitations and rules that you need to follow to claim these benefits correctly. It's important to keep track of your home-related expenses and receipts and consult a tax professional if you have any questions about your specific situation.

Filed Under: Real Estate, Taxes Tagged With: Can You Deduct Real Estate Taxes, Real Estate Tax Deductions

6 Tips for Real Estate Buyers Looking to Buy a House

February 20, 2024 by Marco Santarelli

Tips for Real Estate Buyers Looking to Buy a House

Buying a home is one of the biggest and most important financial decisions you will ever make. It is also a complex process, with many different steps and moving parts. That's why it is important to be prepared and to have a good understanding of the process before you start shopping for a home.

This post will provide you with some tips for real estate buyers to help you make the process easier and more successful. We will cover everything from getting started to closing on your new home.

Here are a few reasons why it is important to be prepared when buying a home:

  • The real estate market can be competitive, and you need to be ready to act quickly when you find a home you want.
  • There are many different factors to consider when buying a home, such as your budget, needs, and lifestyle.
  • The home-buying process can be complex and time-consuming, so it is important to be prepared.

By following the tips in this post, you can increase your chances of finding the perfect home for you and your family, and you can make the home-buying process as smooth and stress-free as possible.

6 Tips for Real Estate Buyers Looking to Buy a House

1. Understand Your Budget and Financial Capability

Buying a property is a significant financial decision that requires careful planning and consideration of your financial situation. Understanding your budget and financial capabilities is crucial to ensure a smooth and successful real estate transaction.

Assess Your Finances

Before diving into the real estate market, take a comprehensive look at your finances. This involves assessing your income, savings, investments, and any outstanding debts. Understanding your financial standing provides a clear picture of how much you can comfortably allocate towards a property purchase.

Determine a Realistic Budget

Once you have a thorough understanding of your finances, determine a realistic budget for your property purchase. Consider not only your current financial situation but also any anticipated changes in income or expenses. Your budget should align with your long-term financial goals and allow for a comfortable lifestyle after the purchase.

Consider Additional Costs

When setting your budget, it's crucial to consider additional costs associated with buying a property. These costs may include:

  • Closing Fees: Fees related to the closing of the property transaction, such as legal fees, appraisal fees, and title insurance.
  • Maintenance: Budget for ongoing maintenance and potential repairs needed for the property.
  • Property Taxes: Account for property taxes, which vary based on the location and value of the property.

By factoring in these additional costs, you ensure that your budget is comprehensive and accurate, giving you a realistic view of what you can afford in the real estate market.

2. Research the Real Estate Market

Researching the real estate market is a crucial step in the home-buying process, enabling you to make informed decisions and find the right property at the right price. Here's how you can effectively research the market and understand the dynamics of your desired location.

Study Current Market Trends and Property Values

Begin by immersing yourself in the current market trends of the real estate industry. Look for recent sales data and analyze the price trends for properties in the area you're interested in. Understand how property values have been changing over time to gauge whether it's a buyer's or a seller's market.

Consider consulting real estate websites, local newspapers, or real estate agents to get up-to-date information on property values. Look for factors such as property types, sizes, and neighborhoods to determine their influence on prices.

Keep Track of Supply and Demand

Understanding the balance between supply and demand in your desired location is essential. An area with high demand and limited supply typically leads to increased property prices, while an oversupply may result in more favorable prices for buyers.

Monitor the number of properties available for sale in your desired location and how quickly they are being sold. Additionally, keep an eye on any upcoming developments or changes in the area that could affect demand.

By staying informed about market trends, property values, and supply-demand dynamics, you equip yourself with valuable knowledge that can guide your real estate decisions effectively.

3. Identify Your Needs and Preferences

Understanding your needs and preferences is a fundamental aspect of finding the perfect property that aligns with your lifestyle and future plans. Here's how you can comprehensively identify your requirements and make a well-informed decision in choosing the right property.

List Your Specific Requirements

Start by creating a detailed list of your specific requirements for a property. Consider factors such as the size of the property, the number of bedrooms and bathrooms, the style of the house, and any specific amenities you desire. Think about whether you need a garden, garage, or other features important to you.

Take into account your lifestyle and preferences. Are you looking for a quiet suburban neighborhood, or do you prefer the buzz of a city center? Your preferences will guide your property search and help you focus on what truly matters to you.

Consider Your Future Needs

Anticipate your future needs when searching for a property. Consider factors such as family growth, potential job changes, or any lifestyle changes that may affect your housing requirements. A property that suits your current needs should also accommodate foreseeable changes to ensure a long-term fit.

Think about the proximity to schools, public transportation, or other amenities that may become more important in the future. Being forward-thinking ensures that your property investment remains valuable and functional for years to come.

4. Engage with a Real Estate Agent

Working with a reputable real estate agent can greatly simplify the home-buying process and enhance your chances of finding the right property. Here are the steps to find and collaborate with a skilled real estate agent who understands the local market well.

Find a Reputable Real Estate Agent

Begin by researching and finding a reputable real estate agent with expertise in the local market where you intend to buy a property. Look for agents who have a good track record of successful transactions and a strong understanding of the neighborhoods you're interested in.

Read online reviews, ask for recommendations from friends or family, and consider conducting interviews with potential agents to ensure they align with your needs and preferences.

Collaborate to Streamline Your Property Search and Negotiations

Once you've identified a reliable real estate agent, establish clear communication and collaboration channels. Discuss your specific requirements, budget, and expectations in detail. Provide feedback on properties you've viewed, allowing the agent to refine their search based on your preferences.

Work closely with the agent to streamline the property search process. They can schedule property viewings, gather essential information, and help you navigate negotiations. Leverage their expertise to secure the best deal and ensure a smooth transaction throughout the buying process.

5. Inspect and Evaluate Properties

Inspecting and evaluating properties is a critical step in the home-buying process to ensure that the property aligns with your expectations and is in good condition. Here's a detailed guide on how to thoroughly assess potential properties before making a decision.

Visit Multiple Properties

Start by visiting multiple properties that meet your criteria and are within your budget. Take the time to tour the properties and carefully evaluate each one. Pay attention to the neighborhood, surrounding amenities, proximity to essential services, and overall atmosphere of the area.

Consider aspects such as noise levels, safety, and the general ambiance of the neighborhood. This will help you determine if the location suits your lifestyle and preferences.

Conduct Thorough Inspections

When visiting a property, conduct a detailed inspection to uncover any potential issues or repairs needed. Inspect the structure, plumbing, electrical systems, roof, walls, and floors. Check for signs of water damage, leaks, mold, or pest infestations.

Don't hesitate to ask the seller or their agent questions about the property. Inquire about recent repairs, maintenance history, and any known issues. Consider hiring a professional home inspector to ensure a thorough evaluation and to identify any hidden or major concerns.

By meticulously inspecting and evaluating properties, you'll have a clear understanding of their condition and suitability for your needs, enabling you to make an informed decision when selecting the right property.

6. Negotiate the Purchase Price

Negotiating the purchase price is a crucial aspect of buying a property, as it can significantly impact the overall cost and terms of the deal. Here's a step-by-step approach to negotiating the purchase price effectively and achieving a mutually beneficial agreement.

Research Comparable Property Prices

Before engaging in negotiations, conduct thorough research on comparable property prices in the area. Look for properties with similar features, size, location, and condition to determine a fair market value. This research will provide you with a solid basis for your negotiation strategy.

Consider recent sales data, trends, and the demand-supply dynamics in the local market to understand the price range you should aim for. It's important to be well-informed and have a realistic perspective on the property's value.

Negotiate for a Mutually Beneficial Price

Once armed with the research, engage in negotiations with the seller or their agent. Begin by making an offer based on your research and assessment of the property's worth. Clearly state the rationale behind your offer and be open to a constructive dialogue.

Listen to the seller's counteroffers and carefully consider their perspective. Negotiate in a respectful and professional manner, aiming to find a middle ground that is agreeable to both parties. Be prepared to compromise on certain terms while keeping your priorities and budget in mind.

Strive for a mutually beneficial purchase price that aligns with the market value and suits your financial capabilities. Effective negotiation can lead to a successful deal that satisfies both you and the seller.

Filed Under: Getting Started, Housing Market, Real Estate, Real Estate Market Tagged With: Tips for Real Estate Buyers

How Often Are Real Estate Taxes Paid in the US?

February 20, 2024 by Marco Santarelli

How Often Are Real Estate Taxes Paid in the US

If you own a home or a piece of land in the U.S, you are probably familiar with property taxes. Property taxes are levied by local governments on real estate and sometimes on personal property, such as cars or boats. Property taxes are used to fund various public services and projects, such as schools, roads, parks, police, fire, and sanitation.

How Often Are Real Estate Taxes Paid in the United States?

Property Tax Due Dates

Property tax due dates also vary by state and locality. Typically, you pay your property taxes annually, around tax time or the fall. However, some areas allow you to pay your property taxes in installments, such as twice a year or quarterly. It all depends on your local regulations.

Here are some examples of property tax due dates in different states:

  • California: Property taxes are due in two installments. The first installment is due on November 1 and covers the period from July 1 to December 31. The second installment is due on February 1 and covers the period from January 1 to June 30.
  • Florida: Property taxes are due in one installment on March 31. However, you can get discounts if you pay earlier. For example, you can get a 4% discount if you pay in November, a 3% discount if you pay in December, a 2% discount if you pay in January, or a 1% discount if you pay in February.
  • New York: Property taxes are due in one or two installments, depending on your locality. In New York City, for example, property taxes are due in two installments. The first installment is due on July 1 and covers the period from July 1 to December 31. The second installment is due on January 1 and covers the period from January 1 to June 30.
  • Texas: Property taxes are due in one installment on January 31. However, you can pay them earlier without penalty. You can also apply for a payment plan or a deferral if you meet certain criteria.

To find out your exact property tax due date and amount, you should contact your local tax collector or assessor office. You should also check if you qualify for any exemptions or reductions that could lower your property tax bill. Some common examples of property tax exemptions are homestead exemption, senior citizen exemption, disability exemption, and veteran exemption.

Property Tax Basics

Property tax is calculated by multiplying the assessed value of your property by the tax rate set by your local jurisdiction. The assessed value is determined by an appraiser or an assessor, who evaluates your property based on its size, location, condition, features, and market value. The tax rate, also known as the millage rate, is expressed as a percentage or a dollar amount per $1,000 of assessed value.

For example, if your home is assessed at $300,000 and your tax rate is 2%, your annual property tax bill would be $6,000 ($300,000 x 0.02). If your tax rate is 15 mills ($15 per $1,000), your annual property tax bill would be $4,500 ($300,000 / 1,000 x 15).

Property tax rates vary widely by state and locality. According to the U.S Census Bureau data, the median annual property tax bill in the U.S was $2,578 in 2020. However, some states have much higher or lower property taxes than others. For instance, New Jersey had the highest median property tax bill of $8,953, while Alabama had the lowest of $618.

Property taxes are an important source of revenue for local governments in the U.S. They help fund various public services and projects that benefit the community. However, property taxes can also be a significant expense for homeowners and landowners. Therefore, it is important to understand how property taxes are calculated and when they are due.

If you have any questions or concerns about your property taxes, you should consult with a professional tax advisor or a local tax authority. They can help you plan ahead and avoid any penalties or interest charges for late or missed payments.

Filed Under: Real Estate, Taxes Tagged With: How Often Are Real Estate Taxes Paid, Property Taxes Due Dates

  • 1
  • 2
  • 3
  • …
  • 5
  • Next Page »

Real Estate

  • Baltimore
  • Birmingham
  • Cape Coral
  • Charlotte
  • Chicago

Quick Links

  • Markets
  • Membership
  • Notes
  • Contact Us

Blog Posts

  • 10 Best Cities in Ohio for Real Estate Investment in 2025
    June 15, 2025Marco Santarelli
  • Top 10 Hottest Housing Markets Where Home Prices Are Soaring
    June 15, 2025Marco Santarelli
  • Mortgage Refinance Rates Today – June 15, 2025: Is Now the Time to Refi?
    June 15, 2025Marco Santarelli

Contact

Norada Real Estate Investments 30251 Golden Lantern, Suite E-261 Laguna Niguel, CA 92677

(949) 218-6668
(800) 611-3060
BBB
  • Terms of Use
  • |
  • Privacy Policy
  • |
  • Testimonials
  • |
  • Suggestions?
  • |
  • Home

Copyright 2018 Norada Real Estate Investments

Loading...