Navy Fellas Realty Group

Real Estate, Residential sales and purchase

3 Ways Tax Reform Affects Your Real Estate Investments

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3 Ways Tax Reform Affects Your Real Estate InvestmentsThe Tax Cuts and Jobs Act of 2017 instituted some of the most dramatic changes to the financial landscape in the United States in over 30 years. These adjustments to the IRS code have an effect on everyone who earns and spends money in this country.

What changes can real estate investors expect to see from the new legal standards?

Higher Standard Deduction, Less Itemized Deductions

Before the reforms, single tax filers were allowed a standard deduction of $6,350. Married couples filing jointly were given $12,700. The standard deduction is the amount of income you can earn before any income taxes are applied. If a married couple made $50,000 in one year, they would only pay taxes on $37,300. With the new laws, single filers receive a $12,000 deduction and married couples get $24,000. 

However, with the increased standard deduction comes significant decreases in itemized deductions. Many smaller real estate investors depend on tax credits for homebuyers to make their purchases more profitable. Those have been removed from the list of approved deductions. 

Real estate investors need to adjust their strategy to take full advantage of new tax trends. Rather than focusing on flipping homes for profit, investors may consider holding on to properties and leasing them as rental units.

Mortgage Tax Deduction Changes

Homeowners who live in their primary property are still allowed to deduct a portion of the interest paid on their monthly mortgage. However, those who have taken out home equity lines of credit are no longer able to claim a deduction for those interest payments.

This is a big change for some real estate investors. It’s a common strategy to use home equity lines of credit to finance other projects. Without the extra deduction, these loans are still a great option for quick cash. However, investors will take more time to realize profits with this strategy.

Decrease In State And Local Tax Deductions

Investors use state and local tax deductions to increase their return on investment. Under the new rules, property owners are limited to a $10,000 maximum deduction. Real estate investors who operate in high-income areas will see a significant increase in their yearly tax bill. The $10,000 limit is unlikely to offset the high price of property taxes in places like California and New Jersey.

Newer investors who don’t hold a lot of properties can consider buying in markets with lower state and local tax rates. Those who are currently invested could sell some of their lower-producing properties to lighten the burden on their tax bills.

The new tax laws are a challenge for real estate investors. But with some planning and the right information, your business can still produce a generous profit.

If you are interested in investing in a new property, be sure to partner with a trusted real estate agent. 

Mortgage Challenges For Self-Employed Home Buyers

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Mortgage Challenges For Self-Employed Home BuyersIt’s no secret that mortgage lending institutions look favorably on steady paychecks and positive debt-to-income ratios. That can leave many self-employed prospective home buyers feeling anxious about getting approved for a mortgage. But just like the 9-to-5ers who get regular paychecks, self-employed people earning a good living can get approved with a little due diligence.

The primary concern of mortgage lenders is not necessarily where your revenue comes from, it’s confidence that you can meet the monthly obligations. A lender probably wouldn’t see a significant difference between someone who was paid every two weeks and another paid monthly. Why should a self-employed earner be any different? While there are differences, that doesn’t necessarily have to be a bad thing.

Self-Employed Mortgage Applicants Face ‘Different’ Scrutiny

When reviewing a self-employed person’s mortgage application, the lender can expand their consideration to items related to your business. Factors such as stability, longevity, location, and viability are issues that can come into play.

This type of review mirrors that of steady paycheck earners in terms of length of employment, history of layoffs and other potential revenue setbacks. There really isn’t a higher standard than for self-employed mortgage applicants. You enjoy a different professional life, and the process reflects those differences. That being said, there are a number of things you can do to put your best foot forward toward mortgage approval.

Strengthen Your Self-Employed Mortgage Application

First and foremost, every mortgage applicant must be able to demonstrate an ability to meet the monthly payments on paper. There is no way around the debt-to-income ratio. And although many self-employed people exercise some lifestyle flexibility in terms of tax deductions, your numbers have to prove you can take on a mortgage. That being said, there are important items you may want to consider when applying for a home loan.

  • Revenue Stability: Volatile swings in revenue are not generally persuasive. Lenders tend to like steady and positive growth reflected in your business and personal earnings.
  • Tax Returns Matter: This can be particularly problematic for people who find creatively legal ways to make revenue tax exempt. Home offices and company cars can lower your taxable income, but they also reduce your ability to pay the mortgage, at least on paper. Plan ahead by strategically filing strong earned-revenue tax returns.
  • Consistency Matters: There are a few ways to demonstrate consistency. It can be level monthly earnings or multiple years of tax returns in the same business. Your income may only be considered if it fluctuates in a way that frightens lenders.
  • Good Credit: Some cash-oriented people tend to discount the value of credit scores. The adage that “cash is king” may apply to the down payment, but a poor credit history can hurt your chances with lenders. Think “credit is king” when applying for a home loan.

Being self-employed does not mean you are at a strategic disadvantage when applying for a mortgage. But keep in mind that the home loan review can be slightly different.

As always, your best next step would be to consult with your trusted allies in real estate transactions – your trusted home mortgage professional and your trusted real estate agent. These partnerships can make a world of difference in the success of your home buying experience.

Is a Hard Money Loan the Right Strategy for You?

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Is a Hard Money Loan the Right Strategy for YouWhen used as a part of an effective real estate investment strategy, hard money loans are an excellent tool to quickly increase holdings without risking existing properties. However, these loans aren’t for everyone.

What investors get the most value from hard money loans?

Investors With Less-Than-Stellar Credit

Investors with credit challenges can qualify more easily for hard money loans. That’s because these loans aren’t based on the borrower. While you will have to prove a measure of creditworthiness, hard money lenders are more interested in the property you plan to buy. If you default on your payments, the lending bank simply takes possession of your property. For that reason, high-value properties in good condition fetch the best terms with hard money lenders. 

If you’re turned down for more conventional funding sources, you may still be able to move forward with a hard money loan for the right property.

Cash-Strapped Veteran Investors

When the market is hot, it’s not unusual for an investor to sink the majority of their liquid assets into new properties. However, this can leave them left out in the cold when new properties come up for sale.

Experienced flippers who are temporarily out of cash can use hard money loans to fund the purchase of additional properties. This allows them to continue expanding their holdings without compromising money earmarked for other projects. The short loan term is no problem for these investors since they know a property sale is always imminent.

Quick Investments: When You Can’t Wait

Sudden auctions can be a blessing to real estate investors. Sometimes, however, these deals pop up at the least opportune time. If you have your eye on a property that promises to go fast, a hard money loan can get you the cash you need in less time than conventional sources. That means you can take advantage of rock-bottom cash auctions quickly.

Since hard money loans don’t have the most favorable repayment terms, many investors choose to convert them into more conventional loan structures after the initial purchase. This strategy allows investors to participate in quick sales without sacrificing too much profit to interest payments.

Hard money loans are a unique source of funding for real estate investors. Use them wisely to realize the benefits and increase your investment income.

Your trusted home mortgage professional can help guide you through all of your financing options. Another important key partnership is with your trusted real estate agent. These skilled professionals are well-versed in many types of real estate transactions. 

What’s Ahead For Mortgage Rates This Week – February 4th, 2019

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What’s Ahead For Mortgage Rates This Week – February 4th, 2019Last week’s economic reports included readings new and pending home sales, Case-Shiller housing market indices and consumer sentiment. Weekly reports on mortgage rates and first-time jobless claims were also released.

New Home Sales Rise as Pending Home Sales Fall

Sales of new homes rose 17 percent in November for an eight-month high. Year-to-date sales of new homes were only 2.70 percent higher than for the same period in 2018.New home sales rose to 657,000 sales as compared to expectations of 563,000 sales and November’s reading of 562,000 sales. Analysts cautioned that Commerce Department readings for new home sales are prepared from a slim sampling of sales and are subject to volatility.

Pending home sales slumped in December to a negative reading of -2.20 percent as compared to November’s seasonally-adjusted annual reading of -0.90 percent. Analysts said the dip was likely caused by consumer concerns over the government shutdown and potential future shutdowns.

December’s reading was the twelfth consecutive negative month-to-month reading. Real estate pros and analysts cited ongoing challenges including high home prices and mortgage rates as contributing to fewer contract signings.

In related news, the Federal Reserve’s Federal Open Market Committee elected not to raise the Fed’s target federal funds interest rate range, which is currently 2.25 to 2.50 percent. Domestic and global economic concerns led committee members to pause interest rate hikes.

Case-Shiller reported lower home price growth in November with a year-over-year annual reading of 5.20 percent growth. Las Vegas, Nevada, Seattle Washington and Denver Colorado held the top three spots on the Case-Shiller 20-City Home Price Index.

Mortgage Rates, New Jobless Claims Rise

Freddie Mac reported slightly higher average mortgage rates last week; 30-year fixed mortgage rates averaged 4.46 percent and were one basis point higher than for the prior week. 15-year fixed mortgage rates averaged 3.89 percent and were also one basis point higher.

The average rate for 5/1 adjustable rate mortgages was six basis points higher at 3.96 percent. Discount points averaged 0;50 percent for 30-year fixed rate mortgages and 0.40 percent for 15-year fixed rate mortgages. Discount points for 5/1 adjustable rate mortgages averaged 0.30 percent.

First-time jobless claims surged last week to 253,000 new claims filed. Analysts attributed the spike in new jobless claims to seasonal quirks that were not expected to last. The four-week rolling average of new jobless claims is considered less volatile and rose by 5,000 new claims to 222,250 initial claims filed.

The University of Michigan released its Consumer Sentiment Index last week; the January index reading of 91.20 was higher than the expected reading of 90.70 but was the lowest since President Trump’s election. December’s index reading was 98.30; analysts blamed the government shutdown on the sudden dip in consumer confidence.

What‘s Ahead

This week’s economic news includes the President’s State of the Union speech and speeches by Fed Chairman Jerome Powell. Weekly reports on mortgage rates and new jobless claims will also be released.

Auction 101: Bidding On Your First Property

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Auction 101 Bidding On Your First PropertyWith the right combination of strategy, knowledge, and luck, flipping houses can create big profits for short-term investors. However, your path to success starts at your first auction.

For first-timers who are intimidated by their lack of experience at public auctions, follow these steps to ease the confusion of your first property purchase.

Locate Auctions In Your Area

Finding live auctions is as simple as an internet search. Websites run by government agencies list homes that have been seized due to tax liens or foreclosures. Try searching databases maintained by:

  • Fannie Mae
  • The FDIC
  • The US Department of Housing and Urban Development

Another option is your local newspaper. Banks publish foreclosure notices in the public notice section. You can also find advertisements from auction companies and information from the sheriff’s or county tax collector’s office that helps you hunt down low-cost properties.

For busy investors who plan to use real estate as an extra income, be certain to enlist the help of a professional real estate agent. They often keep lists of homes in foreclosure in the surrounding area.

Assess Available Properties

All properties are not created equal. To find the right fit for your project, find the following information for each potential listing.

  • Current bid price
  • Previous purchase price
  • Length of time property has been unoccupied
  • Property condition
  • Number of bedrooms and bathrooms
  • Sales history of homes in the surrounding neighborhood

This information isn’t always readily available. You may be able to find more information via an MLS search, public lands records, or various real estate websites that publish property data. Of course, if you’re working with a real estate agent, they will provide all the data you need to make the right decision.

Some auction sites include pictures and map data. At other auctions, bidders may be allowed to visit the property or hold open houses before the sale occurs.

Perform A Title Search

When you’ve found a few properties that you like, take some time to do a thorough title search. This process ensures your property doesn’t come with some unfortunate surprises.

During your search, you’ll need to:

  • Obtain records from the tax assessor to verify the tax status of the property.
  • Locate the property’s deed either physically or online.
  • Investigate the property’s sales history to ensure no one else can claim ownership.
  • Check for liens, unpaid mortgage commitments, and legal judgments against the property.

Once a property has cleared these steps, you’ll be ready to start placing bids on your first investment property.

Trying new things can be daunting as well as exciting. Don’t forget to rely on your trusted and reliable real estate professional to guide you along your home buying venture.

Case-Shiller: Home Prices Lower in November

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Case-Shiller Home Prices Lower in NovemberHome price growth continued to struggle in November, with Case-Shiller’s 20-City Home Price Index moving from October’s reading of 5.30 percent annual growth to 5.20 percent growth in November. This was the lowest reading since January 2015.

Las Vegas, Nevada remained first in home price growth rate with a year-over-year home prices growth of 12 percent. Phoenix, Arizona’s year-over-year home price growth rate was 8.10 percent and Seattle, Washington held third place with a year-over-year home price growth rate of 6.30 percent.

Las Vegas’ large year-over-year growth in home prices was attributed to the city’s ongoing recovery from the recession when home prices tanked in southern Nevada. Cities including Denver, Colorado, San Francisco California and Seattle, Washington saw steep declines in home price growth rates as compared to past peak home price growth fueled by post-recession recovery.

Challenges to home price appreciation were no surprise as slim supplies of available homes and high buyer demand created buyer competition and fewer choices of available homes. Affordability continued to discourage first-time and moderate income buyers.

David M. Blitzer, chairman of the Index Committee at S&P Dow Jones Indices said, “The pace of price increases is being dampened by declining sales of existing homes and weaker affordability. Sales peaked in November 2017 and have drifted down through 2018. Affordability reflects higher prices and increased mortgage rates through much of last year.”

Affordable Homes Hard To Find Amid Slim Supply

First-time home buyers accounted for about 32 percent of home sales in November; their market share has not increased in recent months. First-time buyers typically look for pre-owned homes that cost less than brand new homes.

Healthy job growth and record unemployment rates could encourage potential buyers, but buyers were sidelined by short supplies of available homes and concerns about mortgage rates and overall economic trends. Analysts said that recently falling mortgage rates may not have been enough to encourage buyers who continued to face high demand for fewer homes and strict criteria for mortgage approval.

Positive indicators for housing markets included stable inflation and the Fed’s decision not to rise its target interest rate range; this was expected to help slow rate increases on consumer credit including mortgage loans.

If you are in the market for a new home, please be sure to consult with your trusted real estate agent and your trusted home mortgage professional.

3 Green and Gorgeous Trends in Home Design

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3 Green and Gorgeous Trends in Home DesignThese days, people want energy-efficient homes that look great. To answer the call of passionate environmentalists, developer are rising to the occasion and designing home features that minimize waste, save energy and reuse reclaimed materials. The results are gorgeous, green homes that help move the sustainable living trend forward.

Hidden Solar Panels

Solar panels are a great way to save energy, but not everyone loves the optics. A series of solar panels on the roof may save you money on your utilities, but it can detract from the natural shape of your home. As an alternative, innovative in-roof solar panels are installed level with the roof line.

This is accomplished by designing a deeper roof so the solar panels are flush with your shingles or other roof material. Of course, this requires some forethought, but it’s not impossible to retrofit your existing home to take advantage of the clever development.

Reclaimed Materials

Deconstruction involves the “un-building” of a house. Specifically, when buyers or developers tear down a structure before building a new one, they attempt to reuse, salvage or donate as many materials as possible. Otherwise, all this material ends up in a landfill.

Reclaimed brick brings a rustic character to a new home. It also adds a historic appeal and interest to an interior or exterior space. Wood siding and beams reduce further deforestation and often give you beautiful hardwoods and rugged lumber that has stood the test of time. Reclaimed flooring often nets you thicker wood slabs that you can refinish for a powerful visual effect.

Bamboo is the ultimate sustainable building material. This fast-growing wood results in light-colored, unique wood floors. Although its’s softer than traditional hardwoods, it’s a great wood substitute that can regenerate in three years with minimal pesticides or fertilizers.

Large Windows That Conserve Energy

In the past 20 years ago, windows have gotten larger – and more energy-efficient than ever. High-performance glazing and innovative frames hold in heat in winter and cool air in summer.

Steel windows now open up and require fewer mullions to support larger glass panes, which reduces construction materials and air leakage. This means that green-minded homeowners can enjoy floor-to-ceiling views of the ocean or mountains without paying a huge utility bill or expending vast amounts of energy.

Be sure to let your trusted real estate agent know if green living is on your priority list for your future property.

 

 

3 Things You Should Know About Land Surveys

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3 Things You Should Know About Land SurveysOne thing to think about when purchasing a home or parcel of land is to have an updated land survey conducted. While property deeds generally include detailed information, many are outdated for a variety of reasons that include nature, weather conditions, and adjustments in floodplain maps among others.

Even when the information about the property is spot-on at the closing, human perception of where your property begins and ends can lead to some unenviable outcomes. Given that buying real estate ranks among the largest personal investments for most people, these are three things you may want consider about land surveys.

Good Fences Make Good Neighbors

The old Robert Frost poem “Mending Wall” ponders the reasons that people erect property line fences and why they fix them each spring. The reason is a simple one, setting boundaries avoids unnecessary disagreements and allows people to get along.

Land disputes can turn otherwise friendly neighbors into hostile abutters because there is a pervasive sense that someone is stealing from you. Good fences are the product of clearly identified boundary markers and professional surveyors are the people who measure and certify them. If you plan on buying or recently purchased a parcel of land, updating the land survey may be in you and your neighbor’s best interest.  

Squatters Can Take Your Land Through Adverse Possession

Many states continue to allow the practice of adverse possession. In some places, it’s known as “squatters rights.” If someone who does not rightfully own a piece of land can maintain or utilize it for a period of time, they may be able to put in a claim.

Although many people consider this an outdated and unfair practice, it remains too common in rural and suburban areas. Misplaced fences are often the basis of such claims. When abutters work your land or use it to access their own, that can be the basis of a claim to get a permanent easement or take it from you.

Land Surveys Can Be Used For Insurance Purposes

The severe weather storms that struck communities across the country have prompted organizations to update their floodplain maps. Property owners who were not previously required to purchase flood insurance may now find themselves considered “at risk.”

But that designation can be considerably more complex than just owning a home or residential property inside the flood zone. These updated maps do not necessarily consider the elevation of each and every property. In order to be properly listed, you may need to have an elevation certificate to petition FEMA and others that your property is not at risk. That means having a professional land survey conducted.

There are numerous reasons why current land surveys can prove valuable to real estate buyers and sellers. Without one, you are operating without critical information about a significant investment.  Your trusted real estate agent and home mortgage professionals can refer you to appraisers and land surveyors in your area. Be sure to rely on these valuable resources during your new home purchase.

What’s Ahead For Mortgage Rates This Week – January 28th, 2019

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What’s Ahead For Mortgage Rates This Week – January 28th, 2019Last week’s economic news included readings on sales of previously owned homes and weekly readings on average mortgage rates and new jobless claims. A scheduled report on sales of new homes was not available due to the government shutdown.

National Association of Realtors®: Sales of Pre-Owned Homes Lowest in 3 Years

Sales of previously owned homes fell in December and failed to meet expectations. 4.99 million pre-owned homes were sold on a seasonally-adjusted annual basis; analysts predicted 5.10 million sales based on 5.33 million sales in November 2018. December’s reading showed the lowest number of sales since November of 2015.

Sales of previously-owned homes fell 6.40 percent month-to-month and were 10.30 percent lower year-over-year. Inventories of previously-owned homes also slipped in December with a 3.70 months supply of homes as compared to 3.90 months supply of available homes in November. Real estate pros consider six months supply of homes for sale as an average inventor.

Real estate pros said that lower buyer traffic in all regions of the U.S. could indicate less interest from buyers, but on a positive note, fewer buyers also remove the high rates of competition seen in the recent past.

Lower mortgage rates are well-timed for the upcoming spring sales season. Real estate pros were hopeful that lower mortgage rates will hold and entice more buyers into the market.

Mortgage Rates Mixed, New Jobless Claims

Freddie Mac reported no change in average interest rates for fixed rate mortgages. The average rate for 30-year fixed rate mortgages held at 4.45 percent; the average rate for a 15-year fixed rate mortgage was also unchanged at 3.88 percent. Rates for 5/1 adjustable rate mortgages averaged three basis points higher at 3.90 percent. Discount points averaged 0.40 percent for fixed rate mortgages and 0.30 percent for 5/1 adjustable rate mortgages.

First-time jobless claims fell to 199,000 new claims filed. Analysts expected 218,000 new claims to be filed based on the prior week’s reading of 212,000 new claims filed. Last week’s reading represented the first time since 1969 that new jobless claims fell below 200,000, but analysts were wary of potential impact of the government shutdown on new jobless claims. The shutdown ended on Friday until February 15, but politicians seemed unenthusiastic about future shutdowns.

What‘s Ahead

This week’s scheduled economic reports include Case-Shiller Home Price Indices and readings on pending home sales, construction spending and the post-meeting statement from the Federal Reserve’s Federal Open Market Committee.

Labor sector readings on private and public employment and the national unemployment rate will also be released. Weekly readings on mortgage rates and new jobless claims will be released on schedule.

Buy Or Build Your Home? 5 Factors To Consider

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Buy Or Build Your Home? 5 Factors To ConsiderA home is one of the biggest investments you can make, and the American Dream for many. Most people spend significant time finding or designing their “dream home.” The first decision is whether to buy or build. 

As of September 2018, the average sales price of a new home was $377,200, according to joint data collected from the U.S. Census Bureau and the Department of Housing and Urban Development. Existing homes sales price was approximately $258,100, according to the National Association of Realtors. 

New homes attract bigger prices than existing ones, meaning building costs are also high. So, how do you decide what is best for you?

Here are five factors to consider. 

Time 

Building a home takes time since you must complete several phases. You must buy land, find an architect to design, get building permits, find a contractor and start building. It can take between six months and a year before you move into your new home. 

Buying an existing home shortens that time. For a new house, you can move in once the escrow closes. Older homes may require renovations, but it won’t take long. 

Home Design 

Building your home gives you the benefit of customization. Working with your architect, you can design your dream home to reflect your taste and preference. Buying an existing home, means you may have to compromise on a few aspects. 

Energy Efficiency 

Rising energy costs is a concern to potential homeowners. Designing your own home means you can incorporate measures to be energy efficient. Buying an old home may require more resources to upgrade. That might end up hitting your wallet harder. 

Fortunately, most homebuilders are responding to market demands for energy efficient homes. Most new homes meet these standards. 

Budget 

Budget is an important consideration when buying or building your home. A buying price on an existing home reflects the value of the house.  

Building, on the other hand, means you have to juggle a budget constantly throughout the construction period. It is not uncommon to spend more than you budgeted for initially. 

Even if you decide to find a perfect existing home, you may finally opt to build. Conversely, you may strategize to build and later choose to buy an existing home. In both cases, working with qualified professionals such as a trusted mortgage lender, real estate agent or a builder can make the process seamless.