Home Tax Deductions

Some of the most frequently discussed benefits of buying and owning a home are tax deductions. Taxes are one of those mild irritants that make you think of Chinese water boarding or a blister at the start of a marathon. Unfortunately, we all have to pay them so figuring out ways to pay less or even get a tax refund are usually drifting somewhere at the edge of our thoughts.

Tax Credits vs. Tax Deductions:

Before getting familiar with the tax benefits of home ownership, you will want to know the difference between a tax credit and a tax deduction. A tax credit is an actual dollar for dollar reduction of your total tax bill. So if you've calculated your tax bill and you owe $500, a $200 tax credit will reduce your bill to $300.

A tax deduction, on the other hand, is applied to your taxable income. Therefore if you have $50,000 in taxable income and you get a $5,000 tax deduction, you now only pay taxes on $45,000 of income.

Energy Tax Credits:

A variety of energy related tax credits are offered to home owners. For instance, if you install geothermal, solar or wind systems to generate electricity you can receive the Residential Energy Efficient Property Credit, which is worth 30% of the total cost of the system.

You can also take advantage of The Nonbusiness Energy Property Credit, which offers incentives to homeowners who make energy efficient improvements such as new windows, updated furnace and insulation. The credit is worth 10% of the cost of the improvements and has a lifetime limit of $500.

Mortgage Interest:

Each month a hefty portion of your mortgage payment will be interest. Fortunately, that interest can all be deducted from your taxes. This deduction also applies to interest paid on home equity loans and lines of credit.

Points:

If you paid points to get a better mortgage rate, you can deduct the points in the year that you paid them. The points must have gone towards a loan for your primary home. You can also deduct points paid on home refinances; however, the points must be deducted over the life of the loan rather than in a single year.

Property Taxes:

Many homeowners pay their taxes into an escrow account that is part of their monthly mortgage. Whether you do this or pay your home's taxes in a lump sum each year, this cost is deductible. If you do pay your taxes into an escrow account, you can find out the total on the annual statement from your lender.

Avoiding Capital Gains Taxes:

When you sell your home it may be subject to Capital Gains Tax. However, if you have owned and lived in the home for two years you can profit up to $250,000 from the sale of your home and not pay these taxes. Another way to avoid paying capital gains tax is to use the profit from your home to purchase a new home using a 1031 Exchange.

If you have questions about homeowner related taxes, please feel free to contact me at MyRealtorRob.

Home Buyer's Guide

The Perfect Home: That elusive enigma that haunts your dreams and waking life, taunting you to make difficult decisions like three car garage versus a big backyard. When you're house shopping, you're basically life shopping. We spend a lot of time in our homes and choosing the right one is akin to following the sunny path filled with flowers or the shadowy path thick with brambles. Thus, it's unbelievably important to follow some basic rules when it's time to buy a new home.

1.  Finger off the Trigger: What does this seemingly irrelevant tip mean? It means slow down, be patient; this is a time consuming process that generally takes months and sometimes years, so know ahead of time that perseverance pays off. Waiting means you have time to find what you want, secure optimal financing, get the proper inspections and make it to closing with all of your hair intact.

2.  Create a Method for the Madness: This is also known as your game plan. Start with your finances. What is your credit score? Your debt to income ratio? Your monthly expenses versus monthly income? Drive around and discover which areas you might like to live in and which ones are a "no way." Decide which amenities you have to have and which ones can be relegated to the slush pile. Talk with your spouse and your family and find out exactly what everyone needs and wants in their new home.

3.  Call in Reinforcements: This is your Realtor. He or she is the person who knows locations, demographics, financing options, sellers, market values and all of those really important details that you don't want to spend the time and energy learning yourself. Ask your friends and family for referrals if they've worked with a great buyer's agent. Most sellers have a real estate agent, so secure a buyer's agent to protect your interests.

4.  Pull out Your Fine Tooth Comb: Once you've started going to open houses and visiting homes with your Realtor, it's time to narrow down what you want exactly. Look at each house closely and factor in everything, not just whether the yard is nicely landscaped. Are there enough bathrooms? Is the driveway too steep? Is the price $50,000 higher than every other house on the block? You can't ask enough questions when it's time to buy a home. You will probably be staying a while, so shake the skeletons out of the closet early.

5.  Start Talking Money: You have discovered the ideal home, now it's time to make an offer. Your Realtor is very important here because they deal with all of that pesky paperwork. You simply stop by their office and sign the appropriate forms after discussing how much you want to offer. They present the offer to the seller or the seller's agent and you wait for a counter or accepted offer - pretty simple.

6.  Beg the Banks: Well hopefully there is no begging involved, but this is the part where you secure your financing. This involves contacting a variety of lenders to find out which mortgages they offer and what they charge for interest rates and closing costs. Once you find the most suitable option you begin the application process. There are other options here including buying the home with cash or on a land contract if the seller offers creative financing.

7.  Close the Deal: Again, your Realtor is the go-to guy here. He or she will prepare you for the closing, draw up the necessary paperwork and ensure that everything is in order for a successful closing.

8.  Make the Move: Hire a moving company, throw your stuff into trash bags, whatever your personal moving style happens to be. Hopefully you've already started packing and have a garage stacked with tidy cardboard boxes labeled delicate and house wares. If not, don't worry, moving is exhausting, but it's not life threatening. Again your realtor can come in handy here. They know good moving companies and can pass along recommendations.

If you're thinking of buying a home in East Lansing or Greater Lansing, please get in touch with me at MyRealtorRob. In addition to helping you find the perfect home, I am more than happy to recommend lenders, moving companies and a variety of other experts who can assist you in the home purchasing process.





The Benefits of 60 Plus Years: Reverse Mortgages

As we all know aging is a part of life. Fortunately, aging can have its perks, especially after you’ve entered the 60 plus age range. According to Mike Fak on WryteStuff.com, he’s found a plethora of perks for hitting 60 years of life. For instance, he now can wear white socks with any outfit, including suits, and not have a care what other people think. He can also justifiably get exhausted assembling his new exercise machine and no longer has to tell the librarian that the large print book he’s checking out is for an aging relative. These are only a few of his perceived 60 plus benefits, but another great one to add to the list is the option of a reverse mortgage.

Now before I dive into the reverse mortgage, let me add that this lovely option actually only applies to those 62 years and older, but once you’ve hit 60, you’re awfully close.

What is a Reverse Mortgage?

Stated simply, a reverse mortgage is a loan that allows you to borrow against your home’s equity. This means that instead of sending the bank a payment every month, they’re sending one to you. Not only that, but the repayment on this loan is delayed and may not have to be paid back in your lifetime. That’s a pretty sweet deal.

So Who Qualifies for a Reverse Mortgage?

Once again, you have to be 62 years of age or older. You must own your home outright or be capable of paying the remainder of your mortgage with proceeds from the reverse mortgage. You must also live in your home and there are certain criteria that your home has to meet according to HUD.

How Much Can I Borrow with My Reverse Mortgage?

This one varies according to several factors including your age, current interest rate, the appraised value of your home and any government enforced lending limits. You have several options for receiving the proceeds of your reverse mortgage. These include a single lump sum, tenure (monthly payments while you live in the home), term (monthly payments for a fixed period of time), and/or a line of credit.

How Does the Reverse Mortgage Get Paid Back?

The three major incidences when the loan will need to be paid are when you pass away, sell your home or move. If you stay in your home until death, the sale of your home or money from your estate will be required to pay back your reverse mortgage. If the sale of your home does not cover the amount of your mortgage, the lender is required to take a loss and they can request reimbursement from the FHA (Federal Housing Administration).

Possible Drawbacks to the Reverse Mortgage:

There are fees associated with reverse mortgages, which usually include mortgage insurance premiums, loan origination fees and closing costs in addition to ongoing insurance and service fees. You must also consider that choosing to pull the equity out of your home now reduces your savings for a later date, when you may need it more.

If you're interested in learning more about reverse mortgages or have other real estate related questions, please feel free to contact me at my website MyRealtoRob.

Find out more about Reverse Mortgaes at AARP Online.

What is a 1031 Exchange?

Let's say you want to find a way to defer the taxes on some real estate you are about to purchase and it just so happens that you have some real estate that you want to sell. One possible option is a 1031 exchange. A 1031 Exchange is exactly what it says: an exchange. The two transactions, rather than being considered a separate purchase and sale, are instead categorized as an exchange, allowing you to defer capital gain taxes.

The Benefits of 1031 Exchanges:

• For qualifying properties, capital gain taxes can be postponed and potentially eliminated all together.
• Access to more capital. Obviously not having to pay 15% to 20% in capital gain taxes on your purchased property frees up money to invest elsewhere.

How do I qualify for a 1031 Exchange?

• The property that you are purchasing must be of greater value or of equal value to the property that you are selling.
• The equity in the property that you are purchasing must be of greater value or equal to the property that you are selling.
• The debt on the property that your are purchasing must be of greater or equal value to the debt on the property that you are selling.
• The entirety of the net proceeds from the sale of your current property must be used to purchase the new property.

As an East Lansing realtor, I am very familiar with 1031 Exchanges, due in large part to the variety of real estate investors that I work with regularly. If you would like to learn more about 1031 Exchanges or are thinking of purchasing or selling a Lansing area property and want to know if you qualify, please visit MyRealtorRob.

 Learn more about 1031 Exchanges here.

People who complain about taxes can be divided into two classes:  men and women.  ~Author Unknown

Short Sale Process

What is a short sale?

Stated simply, a short sale occurs when a lender or bank enters into an agreement with a borrower to accept less than the full balance of their loan at a sale. The borrower owes more on the home than current market value making it nearly impossible for them to sell the home without taking a loss. In times past, bank short sales were a rare occurrence. What bank after all is willing to take less than the amount borrowed for the sale of a home? Well it turns out quite a few. Especially these days when foreclosures are at an all time high and many individuals simply cannot afford to keep making their mortgage payments.

Who qualifies for a bank short sale?

The specific qualifications vary; however, individuals who can no longer make their monthly payments and are experiencing financial hardship may qualify to sell their home short.

The Short Sale Process:

Submit a request to sell short. Before any home sales can begin, the homeowner must submit a request to their lender seeking approval to sell their home for less than they owe on their mortgage. Generally at this time, they will submit a short sale package, which includes the listing agreement, executed purchase offer, the buyer’s letter of pre-approval and any supporting documents for the homeowner (financial statements etc.). The seller must provide adequate documentation including pay stubs, bank statements and other financial hardship evidence to encourage their lender to accept their request.

Purchasing a Short Sale

If you are buying a short sale, have patience because the process is more complex and may take longer than a conventional home purchase. Offers placed on the home are approved, countered or rejected by the lender, not the homeowner, and ultimately the lender’s goal is to recoup as much of their initial investment as possible.

Short Sale Tips

• Foreclosure can still occur during the short sale process and postponements are not guaranteed so pay close attention to foreclosure dates.
• Check for additional liens. Some homeowners will owe additional debts, which have become liens against their property. Investigate all potential liens before initiating a short sale.

Short Sales in East Lansing Michigan

If you have any questions about buying a short sale home or selling your home short, please contact me at MyRealtorRob. As a seasoned realtor in East Lansing and Lansing, I have dealt with a variety of short sales and understand the ins and outs of the process.

Find more information about short sales at KnowYourOptions.com.

Love Yourself This Valentine's Day by Selling Your Home

This Valentine’s Day, rather than give Hallmark your hard earned cash for a cardboard cliché, pour your love into your home. Valentine’s Day is really just an excuse to spread the love after all, so why not direct it towards something that can bring you happiness and alleviate the stress of paying double mortgages or feeling trapped in a home that you’re dying to unload. Follow the 4 tips below and get ready to see the home offers flooding in.

Bake something sweet and savory: This is a “killing two birds,” move because not only have you baked your honey a delicious Valentine’s Day treat, you’ve also made your home more…homey. The smells of baking are bound to draw any buyer into a nostalgia induced buying frenzy. At the very least, the smells will create a warm, inviting atmosphere that buyers (especially those with families) will enjoy.

Set the Stage: Forget mood lighting and rose petals, this Valentine’s Day, get your house ready to sell with an increasingly popular technique called staging. According to a 2011 article on CNN Money, staging can be as simple as rearranging your furniture or as complex as purchasing new fixtures, painting and redecorating all together. The idea is to transform your space to highlight your home’s best features while simultaneously making it very easy for your potential buyer to imagine living in it.

Take It Online: Not to EHarmony or some other dating site, but to the places where buyers go. Think Trulia, Zillow and websites catering to buyers. Make sure that your home appears on these sites with a variety of photos and plenty of home details, otherwise buyers won’t bother contacting you.

Offer Some Freebies: It’s hard to view selling your home as a competition, but in a market where buyers have the upper hand, it is one. Think of those old dating shows where the contestant behind the curtain highlights all of their quirky attributes. If they said the same thing as every other contestant, they wouldn’t stand out and they wouldn’t get the girl. Go the route of the underdog and offer some incentives to set your home apart. Offer to pay for closing costs, have your yard professionally landscaped or throw in a flat screen TV. You never know what perk will be the one to hook your buyer, so get creative.

If you're buying or selling a home in East Lansing, Okemos or the Greater Lasning areas in Michigan and need some more tips or just want to find out what's available, get in touch with me. If you're looking for the biggest and bestest Valentine's Day gift of all time, check out my current property listings and give your sweetie a present that they will not soon forget.

5 Reasons To Buy Rental Housing Near a University

It may not be time to go back to school, but that doesn’t mean you shouldn’t be frequenting college campuses. These property gold mines are profitable and sound investments and, depending on your location, can be more than affordable. For instance, I have several East Lansing, Michigan rental houses listed, just blocks away from Michigan State University, that are priced under $200,000 and two that are priced below $150,000. For homes that rent in upwards of $2,000 plus monthly, that can work out to be a very good investment.

According to a recent article by Ann Brenoff published on AOL Real Estate, college housing investments have thrived while most other housing markets have declined.  Brenoff cites increasing college enrollment that is not coupled with growing housing options, thus creating an opportunity for property owners to cover their mortgage and see some positive cash flow.

This isn’t an investment strategy for seasoned veterans only. Many parents of enrolled students and students themselves have begun to purchase property near their universities. For instance, Zac Bissonnette, a 2011 graduate of the University of Massachusetts, bought his first near-campus investment property his freshman year of college and his second year bought another one. He found that he easily covered his condo payments and had additional money to spare.

5 Reasons to Buy Property near a University

• Large population of potential tenants (students) for the foreseeable future.
• Students generally don't pay for their rent; their parents do, which increases the likelihood of timely, consistent payments.
• If your child attends the university, an expensive rental payment is alleviated and you can make money!
• Housing near campuses attract more than students. Think professors and university staff.
• University towns often have a lot of appealing amenities, which helps keep property values stable. For instance, in East Lansing we have an amazing variety of ethnic restaurants, great eclectic shops and a myriad of fun venues to check out.

East Lansing, MI

Obama's Home Refinance Expansion

Good news for homeowners struggling to stay on top of hefty mortgage payments. President Barack Obama has announced plans to improve the American economy by offering further relief to homeowners through expansion of HARP (Home Affordable Relief Program). Homeowners who qualify will be able take advantage of low mortgage rates, which may save owners who qualify around $3,000 per year.

Ultimately this program will not help everyone. It's designed for homeowners who hold private mortgages, but have still maintained their credit. Read more about Obama's Refinance program in a recent article published on Forbes.com.

If you're a homeonwer in the East Lansing or greater Lansing area of Michigan, and would like to learn more, please contact my trusted lender at Providence Mortgage. For all of your other real estate questions please visit my website.