A, B, C ' s of Real Estate Investing

Class A Investment Property
The "Class A" asset class is for the ultra-conservative real estate investor. This asset class provides stability and is very low risk. Class A properties are more clearly defined as:

Single-Family House
Example Class A Property »

Priced from $100,000 - $150,000.
Overall investment returns of between 12% - 18% per year.
Very stable locations where "Owner Occupants" make up approximately 90% or more of the neighborhood.
Located in very strong, high-ranking school districts.
Lowest vacancy factor at 3.5% overall across this class.
Lowest wear and tear due to more stable and responsible tenants.
Easily liquidated soon after acquisition, if needed, for a slight profit.
Typical investment requires $20,000 - $25,000 per property if using financing.

Class B Investment Property
The "Class B" asset is for the somewhat conservative real estate investor who is willing to take on managed risk. While this provides a higher return than Class A and the overall stability of Class B properties is strong, there may be years with a higher than normal vacancy but with this risk can come reward.

Example Class B Property »

Price points from $75,000 - $100,000.
Overall investment returns of between 15% - 20% per year.
Moderately stable locations where "Owner Occupants" make up approximately 75% of the neighborhood.
Located in average school districts.
Mid-level vacancy factor at 5% overall across this class.
Normal wear and tear is expected.
Easily liquidated soon after acquisition, if needed, for a break-even.
Typical investment requires $14,000 - $20,000 per property if using financing.

Class C Investment Property
This asset class is for the investor willing to take on managed risk for the possibility of higher reward. "Class C" assets provide a much higher potential return than A and B. Class C properties are the least stable and throughout the course of time may experience higher than average vacancy and higher than normal wear and tear.

Example Class C Property »

Price points from $50,000 - $75,000
Overall investment returns of between 20% - 28%
Somewhat stable neighborhoods where the "Owner Occupants" make up approximately 50% of the neighborhood.
These are NOT "War Zone" locations but will usually be within densely populated urban areas.
Located in less-than-average school districts.
Higher level of vacancy at times. 7.5% overall vacancy across this asset class.
Higher than normal wear and tear is expected.
Difficult to liquidate for a break even. Expect to spend a few thousand dollars if you have to sell within your first year of ownership.
Typical investment requires $10,000 - $14,000 if using financing.

Blending together the classes of properties gives an investor a diversified real estate portfolio with balance, predictability and the highest consistent rate of return; not found when a portfolio is tilted toward one single class.

What does AWC in a home listing meam? Is the house still available?

: I keep seeing some listings online that say “AWC” or Active with Contract. What does this mean? Is it available or not? A: Recently in our Multiple Listing Service there was a pretty major change with the addition of the “Active with Contract” status. Here’s what it means to you. When you are searching for a home either via an MLS feed that your Realtor has set up for you, or on a website like Realtor.com – you may notice some homes say “Active” while others say “Active with Contract” or “Pending”. Here’s the difference: Active (ACT) – Home is actively available on the market and does not currently have a contract on it. This doesn’t mean the Seller hasn’t received any offers yet – they may have – and its up to your Realtor to ask the listing agent. It does however mean the Seller hasn’t yet accepted any offers presented. Hurry and go see a listing that is active before it goes AWC or PNC! Active with Contract (AWC) – This status is often seen on short sales, but occasionally you’ll see it on non-distressed properties as well. The reason “AWC” – or Active with Contract – was created was to allow Realtors to continue marketing homes that were under contract already but have contingencies. Contingencies are things like “bank must approve the sale” or “financing” or “inspections” – things which must be completed or overcome in order for the sale to close. So why does the Realtor want to continue marketing an AWC listing? Two reasons. #1 – sometimes short sale contracts fall through either because the bank counters the offer presented at a higher number, causing the Realtor to have to start all over marketing for a new buyer. #2 – because the Realtor wants to find buyers even though the house is under contract and sell them other Active homes. Many times buyers ask me is it worth looking at AWC listings? The answer is maybe, but keep in mind if the current contract should fall through, the listing will go back to Active, and it will pop back up in your email notifications, and you can look at it then. If you really are in love with an AWC home you’ve seen online, your Realtor can always call the listing agent and inquire as to how strong the listing agent feels the current contract is. If its pretty strong, it may be better not to get your hopes up and move on. Pending (PNC) – This means the home is under contract and they are not currently seeking to continue marketing the home. Most contingencies will be removed once a listing goes “Pending”. Still – if you are in love with a pending house – it may be worthwhile to have your Realtor call the listing agent to see what the status is.

Elfers, Florida....Why "Elfers"???

The area was known as the Baillie settlement until the Elfers post office was established on Dec. 14, 1909. Frieda Marie (Bolling) Eiland, the wife of the first postmaster, chose the name of the post office to honor a favorite uncle, whose last name was Elfers. Railroad service came to Elfers for the shipment of citrus in 1913. In 1915, the Elfers School opened; it was the first brick school in western Pasco County. A new building replaced it in 1966.[4] The Elfers School red brick school has been converted into the Elfers CARES Center which celebrated a grand re-opening in 2013. The building now has a cafe, a "spacious auditorium", and is the home of the Avery Branch of the New Port Richey Public Library.[5] Elfers was incorporated from 1925 to 1933. Homes for sale in the Elfers Area lovely Eastbury Gardens

Just Listed!

5552 TULIP DR, NEW PORT RICHEY 34652 MLS#W7604778: http://youtu.be/ECVSuiG8u9Q

Sold!

Check out Debbie Small's post on Vine! https://vine.co/v/OrFHIXDIUKh

Sold!

4307 Sail Drive; New Port Richey, FL 34652: http://youtu.be/_-PusMgrO00

4307 Sail Drive; New Port Richey, FL 34652

should you sell your home or rent it out? What are the tax ramifications?

Some homeowners who can’t sell their home may consider converting it to a rental rather than lowering the price or leaving it vacant. Remember, if a home has been used two out of the last five years as a primary residence, it may qualify for the homeowner’s exclusion of Section 121 of the tax code. This means any gain up to $500,000 for a married couple filing jointly or $250,000 for a single person may be excluded and exempt from tax. Therefore, the property could be rented for up to three years and still fall within the qualifying timeframe. If the property was rented for more than three years, it would no longer qualify for the exclusion. Example: Phil and Miranda are married homeowners who are looking at selling their home. If they sell, they would have a $300,000 long term capital gain. Since Phil and Miranda meet the requirements of the Section 121 exclusion, there is no tax due. However, if instead of immediately selling the house, they rent the home for more than three years and then sell they would lose the exclusion. This would mean a tax liability of $300,000 x 15% or $45,000 upon the sale of the property. If there is not much of a gain to be taxed, converting a primary residence to a rental property may be an appropriate strategy. Again, real estate licensees should encourage their customers to consult with tax experts to make an informed decision.

What is Cancellation of Debt?

Overview of IRS Cancelation of Debt Income, from the Taxpayer Advocate Service What is Cancellation of Debt? If a taxpayer borrows money from a commercial lender and the lender later cancels or forgives the debt, the taxpayer may have to include the cancelled amount as income for tax purposes, depending on the circumstances. When the taxpayer borrowed the money he or she was not required to include the loan proceeds as income because the taxpayer had an obligation to repay the lender. When that obligation is subsequently forgiven, the amount received as loan proceeds is normally reportable as income because the taxpayer no longer has an obligation to repay the lender. The lender is usually required to report the amount of the canceled debt to the taxpayer and the IRS on Form 1099-C, Cancellation of Debt. debbiesmall.net

Short Sales, Foreclosures and Income Taxes: a Summary

Short Sales, Foreclosures and Income Taxes: a Summary If a taxpayer owes mortgaged debt to a lender and the lender cancels or forgives that debt in a short sale or foreclosure, in general the cancelled debt is taxable. However, the canceled amount may be excluded from taxation under the Mortgage Forgiveness Debt Relief Act of 2007. In general, this law allows taxpayers to exclude income from the discharge of debt on their principal residence. Debt reduced through mortgage restructuring, as well as mortgage debt forgiven in connection with a foreclosure or short sale, qualifies for the relief. This provision applies to debt forgiven in calendar years 2007 through 2012. Up to $2,000,000 of forgiven debt is eligible for this exclusion ($1,000,000 if married filing separately).

Mortgage Forgiveness Debt Relief Act of 2007

Tax Relief for Some Financially Distressed Homeowners Homeowners experiencing short sales and foreclosures were given tax relief under the Mortgage Forgiveness Debt Relief Act of 2007. Instead of treating cancellation of debt as taxable income on the foreclosure of a principal home, no taxes will be levied on discharges of indebtedness of up to $2,000,000 for married taxpayers filing jointly and of up to $1,000,000 for a married taxpayer filing a separate return through tax year 2012. The basis of the taxpayer's principal residence is reduced by the excluded amount, but not below zero. The 2008 Economic Stabilization Act provided a three-year extension for home mortgage debt forgiveness relief. Qualified principal residence indebtedness is acquisition indebtedness (as discussed previously) with respect to the taxpayers' principal residence, but with a $2,000,000 limit ($1,000,000 for married individuals filing separately). Principal residence has the same meaning as under the home sale exclusion rules of IRC Code Section 121. Acquisition indebtedness of a principal residence includes refinancing of debt to the extent the amount of the refinancing doesn't exceed the amount of the refinanced indebtedness. The exclusion also does not apply to a taxpayer in a Title 11 bankruptcy. An insolvent taxpayer (other than one in a Title 11 bankruptcy) can elect to have the mortgage forgiveness exclusion not apply and can instead rely on an exclusion for insolvent taxpayers.

Mortgage Forgiveness Debt Relief Act of 2007

Tax Relief for Some Financially Distressed Homeowners Homeowners experiencing short sales and foreclosures were given tax relief under the Mortgage Forgiveness Debt Relief Act of 2007. Instead of treating cancellation of debt as taxable income on the foreclosure of a principal home, no taxes will be levied on discharges of indebtedness of up to $2,000,000 for married taxpayers filing jointly and of up to $1,000,000 for a married taxpayer filing a separate return through tax year 2012. The basis of the taxpayer's principal residence is reduced by the excluded amount, but not below zero. The 2008 Economic Stabilization Act provided a three-year extension for home mortgage debt forgiveness relief. Qualified principal residence indebtedness is acquisition indebtedness (as discussed previously) with respect to the taxpayers' principal residence, but with a $2,000,000 limit ($1,000,000 for married individuals filing separately). Principal residence has the same meaning as under the home sale exclusion rules of IRC Code Section 121. Acquisition indebtedness of a principal residence includes refinancing of debt to the extent the amount of the refinancing doesn't exceed the amount of the refinanced indebtedness. The exclusion also does not apply to a taxpayer in a Title 11 bankruptcy. An insolvent taxpayer (other than one in a Title 11 bankruptcy) can elect to have the mortgage forgiveness exclusion not apply and can instead rely on an exclusion for insolvent taxpayers.

Foreign Investment in Real Property Tax Act FIRPTA

Foreign Buyers and Sellers Must Have Federal Identification Numbers In 1980, the U.S. Government implemented the Foreign Investment in Real Property Tax Act (FIRPTA). The purpose of this law is to impose an income tax on the gains derived by foreign persons from the sale of their U.S. property. FIRPTA imposes an income tax on the sale of any U.S. real property interest. If either the buyer or seller of the home is a nonresident or resident alien who neither has nor qualifies for a social security number, that person must file with the Internal Revenue Service on Form W-7. Form W-7 is the application for an IRS Individual Taxpayer Identification Number (ITIN) to be used for tax purposes only. It is not, nor does it qualify as, a social security number; it does not change the holder’s employment or immigration status under United States law. FIRPTA also affects an individual’s ability to execute a 1031 Exchange. debbiesmall.net

Just Sold!

Just Sold!  Waterfront Pool home in Lovely Beacon Square#debbiesmall debbiesmall.net #WestPasco #loveFL #NewPortRichey #FloridaLuxuryRealty # #baileysbluff #GulfHarbors #beaconsquare #HolidayLakes #holiday # waterfront #poolhome

Taxes or how $100 becomes $60

a Federal Marginal Tax Rate of 28%, a State Income Tax rate of 7% and the requirement to pay Self-Employment Tax at 15.3% (rounded to 15%).
Before Tax Income: $100
Less Federal Income Tax of 28%: -$28
Less State Income Tax (not in Florida) -$0
Less Self Employment Tax of 15.3% (rounded to 15%): -$15
Equals after-tax or disposable income: $57

Using the example above, a self-employed taxpayer would need to earn $100 to have disposable income of $57.
Similarly, if the taxpayer was an employee and not self-employed, the taxpayer who earns $100 would have $64 in disposable income.
Before Tax Income: $100
Less Federal Income Tax of 28%: -$28
Less State Income Tax (not in Florida) -$0
Less ½ of Social Security from paycheck, (rounded) -8
Equals after-tax or disposable income: $64

Taxes marginal tax rate

A taxpayer’s marginal tax rate is determined after total income and adjustments to that income are calculated. The marginal rate is essentially the amount of tax paid on an additional dollar of income, so the marginal tax rate for any individual will increase as his or her income rises. This method of taxation aims to fairly tax based on an individual's earnings, with lower income earners to be taxed at a lower rate than higher income earners.
Taxable income can be calculated by starting with the Gross Income. Subtract Adjustments from it and you have Adjusted Gross Income also referred as AGI. After deducting Standard or Itemized Deductions and Exemptions, your result is Taxable Income.
After taxable income is determined, the taxpayer needs to refer to the tax tables by filing status (single, married filing jointly, married filing separately, and single head of household) that are set each year by the IRS.

True

“To thine own self be true, and it must follow, as the night the day, thou canst not then be false to any man.”
– William Shakespeare

Buyers market? Sellers market?

How do you know if the market is leaning towards buyer’s or seller’s? The answer lies in the months of inventory available in your market. Compare the “active” houses on the market with the amount that actually closed in the same month or timeframe. That figure provides the market “absorption” rate. The traditional definition of a buyer’s market is one that has an absorption rate of 9 months or more. An absorption rate between 6 and 9 months indicates a balanced or transitioning market. A 6 month or less supply of available inventory would indicate a seller’s market.