Wednesday, August 22, 2012

Real Estate Investment Time Again?

In my opinion, there is no quicker, easier or safer way to build wealth than through real estate. In fact, the laws of this land are written heavily in your favor to purchase real estate, user real estate to lower your income taxes, and to keep most or all your investment gains. The same can’t be said of any other investment vehicle.

Buying Property
Boy, is it easy to qualify for a home loan. Would you loan a stranger $250K? Banks do it all the time. The hardest part of getting a conventional loan is the down payment, but banks will even loan you the down payment! There are many programs out there in our local Syracuse area geared towards first time homeowners that can get you into a property. They can’t wait to hand over their money. So take it.

Owning Property
Homeowners can deduct interest on mortgages and property taxes on their primary residences. On investment properties, government forces owners to depreciate residential property over 27.5 years, even though in reality the property is appreciating. So that means if the rent minus all expenses puts real money into your pocket year after year, your taxes can legally show a loss. For example, a condo which cost $275K is depreciated at $10K per year. Let’s say that every month, the positive cash flow from that property is $500, or $6K income for the year. But because the property “depreciated” $10K, my loss on the books is $4K, and consequently, my taxable income is reduced by $4K.

Selling Property
Homeowners can keep capital gains tax-free (up to $500,000 for married couples filing jointly or $250,000 for singles), provided that the home was the primary residence of record for at least two of the prior five years. The exclusion can be taken every two years. On investment properties, Section 1031 of the Internal Revenue Code allows owners to roll the gain from the sale of the old property to a new property without paying tax, provided that the new property is equal or greater in value to the old property and all of the proceeds from the sale of the old property are invested into the new property. We're seeing this happen all the time out here in New York.
So with all these benefits, if you aren’t into real estate, you should ask yourself why.

This post was contributed by William Cross Reality, providing Syracuse real estate.

Monday, August 13, 2012

US Mortgage Industry News Update

NEW YORK - JUNE 10:  Traders work on the floor...
(Image credit: Getty Images via @daylife)

For those of you that floated your rate last week, as I recommended, you just hit a bomb home run! And if you locked in on Thursday, you hit it clear out of the ballpark!
So what happened on Thursday? On Thursday I was anxiously waiting for the Manufacturing, and Junes New Home Sells reports, when those reports showed weaker than expect numbers for Manufacturing, and the new home sells report showed a larger than expected decline, investors jumped from stocks (I’m sure you heard about the 400 point hit to the Dow on Thursday) and into bonds. When bonds go up, mortgage rates go down. And go down they did on Thursday, posting lower rates than I’ve seen in about six months. Oh so crazy!
Interest rates today are an eighth of a percent lower than a week ago, rebounding on Friday and today from Thursday’s low numbers; if you haven’t locked yet, I recommend you lock in right now.
If you’ve been on the fence about purchasing a home or refinancing, take advantage of these rates and start making offers or lock in your refinance. Even if you missed Thursday’s rates, by locking today you can still save an eighth of a percent over last Monday, and an eight of a percent over the life of a 30 year mortgage will save you thousands of dollars, so when they dip like they did last week and today now is when you want to buy a home or refinance.
This coming week there will be two days you’ll want to have your mortgage professional on speed dial and at the ready, Tuesday and Friday. Looking at Tuesday, there are three reports that can affect mortgage rates: First are June’s Personal Income and Outlays, then the 2nd Quarter Employment Cost Index, and then finally the Conference Board’s Consumer Confidence Index report; and then later in the week Friday’s Employment report will be very important as well.
The bottom line is that this is going to be an interesting week for mortgage rates, and I expect the most movement in the rates on Tuesday and Friday. The market is expecting weak numbers that means if any of the reports are more positive than expected mortgage rates can skyrocket very quickly. It’s been said that you should keep your friends close and your enemies closer, but this week you should keep your enemies close and your mortgage professional closer.