Tag Archives: Real Estate Tips

Be Thankful You Don’t Have To Pay Your Parents’ Interest Rate!

Interest rates hovered around 4% for the majority of 2017, which gave many buyers relief from rising home prices and helped with affordability. In the first quarter of 2018, rates have increased from 3.95% up to 4.45% and experts predict that rates will increase even more by the end of the year.

The rate you secure greatly impacts your monthly mortgage payment and the amount you will ultimately pay for your home. Don’t let the prediction that rates will increase stop you from purchasing your dream home this year.

Let’s take a look at a historical view of interest rates over the last 45 years.

Be Thankful You Don’t Have to Pay Your Parents’ Interest Rate! | Keeping Current Matters

Bottom Line

Be thankful that you can still get a better interest rate than your older brother or sister did ten years ago, a lower rate than your parents did twenty years ago, and a better rate than your grandparents did forty years ago.

Post courtesy of keepingcurrentmatters.com

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There’s No Better Time to Be a Real Estate Investor

Real estate investors may have never had it so good. A classic alternative investment in a volatile stock market, real estate also just got a boost from the Tax Cuts and Jobs Act, with landlords among the biggest winners.

The law’s new provisions especially favor rental properties. “Real estate investors have historically been given preferential treatment by the tax code,” says Nick Sher, founder of New York-based Sher & Associates. “All things being equal, 2018 tax reform only enhanced that preferential treatment.”

And there’s no shortage of tenants. “Real estate is a strong long-term investment because people will always need housing,” says Ryan Coon, CEO of Rentalutions, a Chicago-based company that provides online tools for landlords. “While the housing boom and bust of a decade ago hurt a lot of overleveraged buyers, we’re facing a housing shortage right now, and that scarcity could mean higher rents.”

Other tax changes that have created disincentives for home ownership could push more consumers into the rental market. New limits on deductions for mortgage interest and state and local property taxes mean there’s less of a tax advantage to owning a home, Coon says. The higher standard deduction may also have a chilling effect on a taxpayers’ ability to benefit from itemizing and deducting mortgage interest.

If you’re considering wading into the rental property investing waters, here’s what the changes mean from a tax perspective.

Pass-through entities get a tax break. One of the most significant provisions of the tax bill affecting real estate investors is the 199A pass-through deduction. This allows residential landlords who operate as pass-through entities to deduct 20 percent of net rental income right off the top. “The new deduction will allow many individuals at the highest tax brackets to effectively reduce their tax rate from 37 percent to 29.6 percent,” says Chris Pegg, senior director of wealth planning for Wells Fargo Private Bank in San Diego.

But there are some exceptions for who can claim this deduction. “New qualified business income rules do not permit the full deduction for high-income specified service businesses, which includes lawyers, accountants, doctors, consultants and financial advisors,” says George Clough, senior vice president for People’s United Wealth Management in Bridgeport, Connecticut.

Claiming the full deduction also depends on income. For pass-through entities to qualify, total annual income must be less than $157,500 for single filers and $315,000 for those who are married and file jointly.

Rental property investors should also keep in mind that the 20 percent deduction of rental income is capped by whichever is greater: 50 percent of wages or 25 percent of wages plus 2.5 percent of the unadjusted basis of qualified property held by the business, says Rob Crigler, managing partner at Mariner Wealth Advisors in Madison, New Jersey. Qualified property is any rental property you own that’s subject to depreciation, and the unadjusted basis is the property’s original cost, without depreciation.

For an idea of how much the pass-through deduction could be worth to a rental property investor, he says to assume you own a 10-unit apartment building through a limited liability company, with no employee wages. The building was constructed in 2012, with land costing $100,000 and the building costing $800,000. In 2018, your LLC has a taxable profit of $300,000. In that case, Crigler says, the potential 20 percent pass-through deduction is $60,000 or 20 percent of $300,000; however, it’s limited to 2.5 percent of the $800,000 building or $20,000.

Anthony Glomski, principal and founder of AG Asset Advisory in Los Angeles, says investors just entering the rental property arena should fully understand the tax implications of the deduction. “Each person’s situation is going to be different,” he says. “For example, fully depreciated property may not qualify for the deduction, but a simple fix may be exchanging into another property with a higher basis.” Your financial advisor or accountant can help with determining whether you qualify for the deduction.

New Section 179 rules yield additional tax savings. The tax bill preserves and expands some existing tax benefits for rental property owners, including the Section 179 deduction. It allows business owners to deduct the cost of qualifying equipment or software purchased or financed in that tax year.

Beginning in 2018, the deduction is extended to rental property business owners, allowing them to deduct the cost of personal property, such as appliances or furniture used in rental units. The deduction has also been expanded to include investments in certain improvements, such as a new roof, an upgraded heating and air system or new fire protections and security systems.

“By having a firm grasp of Section 179, investors can realize some meaningful reductions to taxable income,” says Scott Bennett, a financial advisor with Wells Fargo Real Estate Asset Management in New York. “It’s important to be familiar with what assets and improvements qualify for the depreciation allowance to take full advantage of the change.”

In addition to widening the scope of deductible expenses, the tax bill also raises the Section 179 deduction limit from $500,000 to $1 million, with a phaseout limit of $2.5 million. This represents the amount you can spend on rental property assets or improvements before the deduction begins to be reduced on a dollar-for-dollar basis.

Additionally, the new 100 percent bonus depreciation allowance lets landlords deduct the entire personal property for rental units, instead of the previous limitation of $2,500 or less, says Nina O’Neal, partner at Archer Investment Management in Raleigh, North Carolina. “That certainly makes upgrading or replacing kitchen appliances to attract new tenants more appealing.”

Don’t overlook the downsides. Tax breaks are a great reason to consider owning rental property, but that doesn’t make it right for every investor. “It all sounds great in theory – steady rental income, tax benefits and ideally a gain on the property when you sell,” says Matt Archer, founder of Archer Investment Management. But finding tenants, resolving tenant issues and handling property maintenance and repairs are time-consuming. You can hire a property management company to do the legwork, but “that will decrease your net monthly income.”

Keep in mind also that these tax breaks won’t last forever. The pass-through deduction ends Jan. 1, 2026, and the 100 percent bonus depreciation deduction only lasts through 2022. Before adding rental property to your portfolio, consider whether the investment can still meet your goals and objectives after these tax benefits expire.

Post found on http://www.money.usnews.com

Why You Need A Professional On Your Team When Buying A Home

Many people wonder whether they should hire a real estate professional to assist them in buying their dream homes or if they should first try to go through the buying process on their own. In today’s market: you need an experienced professional!

You Need an Expert Guide If You Are Traveling a Dangerous Path

The field of real estate is loaded with landmines; you need a true expert to guide you through the dangerous pitfalls that currently exist. Finding a home that is priced appropriately and is ready for you to move into can be tricky. An agent listens to your wants and needs, and can sift through the homes that do not fit within the parameters of your “dream home.”

A great agent will also have relationships with mortgage professionals and other experts that you will need in order to secure your dream home. 

You Need a Skilled Negotiator

In today’s market, hiring a talented negotiator could save you thousands, perhaps tens of thousands, of dollars. Each step of the way – from the original offer to the possible renegotiation of that offer after a home inspection, to the possible cancellation of the deal based on a troubled appraisal – you need someone who can keep the deal together until it closes.

Realize that when an agent is negotiating his or her commission with you, they are negotiating their own salary; the salary that keeps a roof over their family’s head; the salary that puts food on their family’s table. If they are quick to take less when negotiating for themselves and their families, what makes you think they will not act the same way when negotiating for you and your family?

If they were Clark Kent when negotiating with you, they will not turn into Superman when negotiating with the buyer or seller in your deal. 

Bottom Line

Famous sayings become famous because they are true. You get what you pay for. Just like a good accountant or a good attorney, a good agent will save you money…not cost you money.

Post courtesy of keepingcurrentmatters.com

 

6 Amazing Tips on Turning Real Estate Into a Real Fortune

At least 30 U.S. billionaires made their money from real estate; some say that it’s the greatest way to create real wealth and financial freedom.

These six tycoons and members of The Oracles suggest how you can invest $100,000 or start with nothing.

1. Start small.

Although I’m a businessman first, I’ve always been a part-time real-estate investor. You can do both, too. Have a business or career that creates positive cash flow, which you can diversify into part-time real estate investing. I’ve done it for many years.

If you’ve never invested in real estate, start small and don’t use all your money. No one’s ever looked back and said, “My first deal was my best.” You’ve got to learn how to read the contracts, build your network of specialists—for example, lawyers and realtors—and develop a good eye for it. This only comes from experience.

The beauty of real estate is that you can learn the ropes while starting small: find some cheap properties, like single-family homes, renovate-and-flips, multi units, or commercial properties. Try to commit as little as possible while you get some notches under your belt. Joel Salatin, my mentor, always said, “Make your mistakes as small as possible without catastrophic consequences.”

If you have zero cash, maybe do wholesale deals. A business partner, Cole Hatter, and I created a real-estate program teaching you how to put a property under contract for very little money down, sometimes less than $1,000; you sell that contract to another buyer before the contract expires. Worst case: you just lose under a grand. Best case: you make $5,000-15,000 positive cash flow that can be reinvested in long-term holdings. Tai Lopez, investor and advisor to many multimillion-dollar businesses, who has built an eight-figure online empire; connect with Tai on Facebook or Snapchat.

2. Think big.

It’s easy to give up on the real-estate game because you don’t have any money, but it’s the deal that matters, not how much money you have. Chase the deal, not your budget.

I know a guy who saved $50,000 and started chasing $200,000 deals. First of all, you can’t buy more than four units with that budget. The problem with four units is that each can only produce maybe $1,000 or $2,000 per month. And that’s only after you’ve done thousands of dollars in work around the units to make them rentable in the first place. That math isn’t difficult—there’s just not enough money to make it worthwhile.

Smart Tips for Decorating Your Apartment on a Budget

Following simple guidelines can help you decide when to splurge and when to save when decorating your apartment.

Decorating a new apartment can quickly go from exciting to overwhelming, especially if you’re on a tight budget. As a renter moving into a new apartment, you want to make your place feel like your own home, but without spending a ton of money every time you move. Herein lies the eternal rental decorating dilemma: Which items should be higher quality, and where can you get away with more frugal options? If you follow this set of savvy furnishing guidelines, your temporary digs can look great without breaking the bank.

Here are some rules to decorate by.

decorating your apartment

Choose quality when it affects your quality of life.

While it’s tempting to buy items at the lowest prices possible, you also want your purchases to add value to your life. So it’s worthwhile to invest money into certain furnishings while being more thrifty with others.

Save on: Decor

All home decor has to do to make your life better is look good. It doesn’t have to cost an arm and a leg to do it. You can find just about any style of wall hanging, throw pillow, or faux plant at discount retailers like Target or Ikea. Or find something truly original at consignment and thrift stores. “Go to a second-hand shop, choose pieces you like, refinish them yourself, and update the hardware on it,” says Debra Duneier, New York City interior designer and owner of EcoChi. “It’s good for the earth and your budget.”

Splurge on: Your mattress set

Great sleep is vital for a healthy body and mind, and purchasing a great mattress makes that possible. Buy one that’s new and high-quality, and it will last at least a decade. Though mattresses can be pretty costly, you can still find ways to get a good one at a decent price.

“Find name-brand mattresses at outlet stores, and look for sales at certain times of the year,” Duneier suggests. You can also test drive a mattress in a store and then bargain shop online.

 

decorating your apartment

Accent pieces are optional, good furniture is not.

Since you’re not buying for the long-term as a renter, you don’t want to compromise your savings when putting together your temporary home. But there are some items you don’t want to buy cheap, because cheap usually means flimsy, and you’ll end up having to re-buy them every time they fall apart.

Save on: Curio cabinets, end tables, and window treatments

Furniture that doesn’t do heavy-lifting, like end tables or display cabinets, can be less high-end. This is especially true for items you know you won’t reuse in your next apartment, like curtains or blinds.

“Whatever you buy for your windows, you probably can’t take with you because windows are a different size everywhere you live,” cautions Duneier. “But, you can find knock-offs of the latest styles, which saves you money,” she adds.

Splurge on: High-use furniture

Sturdy furniture made with quality materials is imperative for anything you’re going to sit or lie on every day, such as the bed frame for your master bedroom. If they need to support your weight and abuse day in and day out, be willing to shop for quality materials and construction—and to pay for it.

 

decorating your apartment

Cater to your unique lifestyle.

Do you have kids or pets? Will you entertain a lot or spend most nights out on the town? Do you travel for work, or are you a work-from-home warrior? The answers can affect which items you should splurge on.

Kids? Splurge on: Fabric-covered furniture

With kids or pets, “make sure you buy darker, durable fabric that’s stain- and spill-proof,” Duneier states. To determine if something will stand the test of time, ask lots of questions in the store, read online reviews, or buy and test something that has a good return policy.

Work from home? Splurge on: Office furniture

If you work from home, spend money on your office chair, Duneier advises. You clock lots of time there, so you should make it comfortable. Ergonomic chairs and computer stands are critical to avoiding injuries.

Never entertain? Save on: A dining set

While an expensive dining set might be the best investment for a frequent entertainer, if you don’t do much hosting, your dining area might not get much use. If you typically eat out or in front of the TV, you can get away with a dining room table that will last you through your next apartment, rather than your next decade. After all, your next apartment might not even have a separate dining area.

 

Post found on trulia.com

Raising Rent Without Feeling Guilty

Year-over-year inflation means that raising rent is inevitable for most landlords. However, it can be hard to pass the financial burden along to tenants, especially if they’re long-term and have a good track record.

Here are three ways to increase rent without resentment:

  1. Add a clause in your initial rent agreement.

    Telling tenants ahead of time that rent will increase 2-3% each year is a good way to alleviate any shock that comes from raising the rent when their lease expires. If they ask, explain that a small increase each year helps cover taxes and minor repairs.

  2. Include details in a letter.

    Typically landlords send out a letter at the end of a lease to renew or go month-to-month. This is a good time to introduce the new rent price and explain your reasons. Did you install new countertops or upgrade the storage in your building? Make sure your tenants know that!Pointing out improvements can help take away the sting a price increase, and helps tenants feel confident that their money if going back into improving the living conditions.

  3. Keep rent raises to a minimum.

    In the case of owner-occupied buildings, many landlords choose to take a low maintenance and reliable tenant over a small increase in rent each month. If you’re in it for the long-haul, it might not be worth it to potentially drive good tenants out. However, if you make the yearly increases small there’s a very good chance they’ll stick around.

  4. Distribute the costs.

    If you feel uncomfortable about raising the rent with a monthly fee, you can always consider changing how you charge for utilities. For example, if you currently cover water and electricity, inform the tenants that they will now be in charge of paying the bill and include it in their new lease. This is an especially good option if part of the reason you need to increase rent is higher utility bills.

Post found on fourwalls.rentler.com

3 Ways Real Estate Can Boost Your Retirement Income

 

There’s big appeal in the idea of investing in real estate right now. And it’s not just because of all the attention these days on President Donald Trump, who made his fortune in the industry.

Many real estate-related investments have done quite well in the last decade or so. The median sales price of single-family homes hit $315,700 at the end of the third quarter, up 23 percent from the prior peak for values in 2007 before the financial crisis hit.

At the same time, a low-interest rate environment has depressed yields in typical safe-haven investments like bonds and certificates of deposit. That has made income-generating real estate assets even more attractive.

And, of course, there’s the basic value of real estate as part of any well-balanced investment portfolio.

“Without alternative assets, a portfolio is limited to stocks and bonds. That means the portfolio is not fully diversified,” says Craig Cecilio, founder and president of real estate investment firm DiversyFund. “The other big advantage of real estate investing is that your investment is backed by real assets.”

Yes, real estate values do fluctuate – and sometimes drop significantly. But since properties are physical assets, they will always be worth something whereas other investments can go all the way to zero.

So if you like the appeal of real estate, how should you start investing?

Buy rental homes. This is the most direct way to invest in real estate – however, this approach does comes with a few drawbacks.

The first is the initial investment that’s required, since buying a house can require a big one-time payment or taking on significant debt. Then, of course, there is the hassle of being a landlord to fix leaky faucets or dealing with tenants.

That said, in many markets where rental rates are higher than mortgage payments on a similar property, a shrewd landlord can easily wind up ahead at the end of every month – and more importantly, have a reliable income stream that is independent of any appreciation in the underlying real estate.

Of course, renting versus house flipping is very different, and this latter strategy can be fraught with risks, Cecilio says.

“Investors need to ask whether the incentives of the investment issuer are the same as their own incentives,” he says.

For instance, if a company benefits by selling you advice or issuing loans instead of sharing in the ups and downs of your investment portfolio, that’s a sign that they may not care much whether you ever make any money.

Buy into publicly traded REITs. A special class of companies known as real estate investment trusts, or REITs, are specifically designed to make public investment accessible for regular investors.

In fact, thanks to all the attention, the Standard & Poor’s 500 index added real estate as its 11th industry group in 2016 to show the importance of this segment on Wall Street.

The biggest appeal for income-oriented investors is that REITs are a special class of investment with the mandate for big dividends. These companies are granted special tax breaks to allow them to more easily invest in the capital-intensive real estate sector, but in exchange, they must deliver 90 percent of their taxable income directly back to shareholders.

As a result, the yield of many REITs is significantly higher than what you’ll find in other dividend stocks. Mall operator Simon Property Group (NYSE: SPG) yields about 4.8 percent. Residential housing developer AvalonBay Communities (AVB) yields about 3.1 percent.

And, of course, investors can purchase a diversified group of these stocks via an exchange-traded fund if they prefer. For example, the Vanguard REIT Index Fund (VNQ), yields about 3.9 percent at present and has a portfolio of 155 of the biggest real estate names on Wall Street. The VNQ has an expense ratio of 0.11 percent, or $11 per $10,000 invested.

Crowdfunding. A fast-growing form of real estate investment for the digital age is via “crowdfunded” properties. The concept involves pooling together the investments of individuals to purchase properties, and share in those properties’ successes.

DiversyFund is one provider of these crowdsourced investments, as is Fundrise, a Washington, D.C.-based firm that owns properties from South Carolina to Seattle.

“We allow investors to very simply invest in private real estate instead of public real estate, with much lower fees and greater transparency, through the internet,” says Fundrise co-founder and CEO Ben Miller.

Private real estate can offer much bigger yields than publicly traded REITs, Miller says, to the tune of 8 to 10 percent annually. But the challenge in the past was the burden of big upfront fees and a lack of liquidity or access to your initial investment after you buy in.

Miller says REITs offer low barriers to entry for investors and the ability to buy or sell stocks on a daily basis, but investors pay a steep “liquidity premium” for the ability to trade – and subsequently, suffer a lower return.

“That liquidity premium is theoretically a benefit, but it’s invisible for most people and it’s not free,” he says. “If you’re investing in the long-term for income, why would you pay that premium?”

Crowdfunding platforms like Fundrise, DiversyFund, Realty Shares and RealtyMogul all look to take the best of both private and public worlds. For instance, Fundrise has a minimum investment of just $500 in its “starter portfolio” and charges significantly lower fees thanks to the cost-saving benefits of technology and a lack of middlemen.

Post courtesy of usnews.com