DEAN GRAZIOSI: DEAN GRAZIOSI REAL ESTATE

Did you know there are tax benefits to owning and selling your home? When it comes to paying Uncle Sam, owning property can actually work in your favor. The key is to sell at the right time, that is when your tax returns are not due. Selling before or after this time has its definite advantages if you pay close attention to the tax laws.

The Tax Payer Relief Act of 1997 has been credited for helping the real estate sector stay ahead of everyone else. This provides you much-needed tax shelter and keeps you from having to pay a fortune. According to tax law, when you sell a home, you are allowed to keep tax free capital gains up to $500,000 if you are married and file jointly. If you are single or married and file separately, that amount is $250,000. In order to qualify for this, your home must have been the prior residence in which you have lived for at least two out of the five years prior to when you file. Theoretically, this exclusion is one that can be used multiple times every two years as long as you qualify by meeting the requirement previously described.

So how can this really benefit you? Let’s say you buy two homes. You live in one and rent the other. After two years, you qualify for the exclusion. You sell the home in which you live and move into the other. After two years of residing there, you sell it and use the exclusion again. Here you would qualify and reap the benefits twice within a four year period.

There are special provisions for when you are forced to sell before the two year period of time is up. These include: death of a spouse, divorce, illness, relocation due to a job change, war, natural disaster, or some other unforeseen problem. If you encounter circumstances that qualify, the $500,000 or $250,000 exclusion can be prorated. What this means is you can exclude the prorated amount in capital. For example, if you are married and file jointly, and only live in your home for a year, the amount you will be able to exclude is $250,000. This amount would be $125,000 for anyone single or married and filing separately if only living in the home one year prior to the unforeseen circumstance or event.

Filing taxes is a must, but understanding the tax laws pertaining to home ownership can benefit you greatly. Just think of how many times most people actually sell multiple homes within their lifetimes. If you own several properties, you may really benefit from this tax exclusion, thus making your investments extremely worthwhile. In fact, it may just be yet one more reason why buying is preferred over renting.

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When businesses need to find a commercial space to lease they often wonder what the benefits of buying a commercial property are compared to renting a space.  Depending on the particular business there are benefits to both, but for many companies buying a commercial space is the way to go. 

One of the biggest benefits to purchasing a commercial space is the fact that the owner will have a fixed cost for the long term.  Business owners who rent a commercial space often end up having to adjust their yearly budgets due to rent increases or the need to re-locate from one space to another once a lease has expired.  Having a fixed amount to pay each month or year makes it much easier to plan for the long term success of the company.

Another benefit to purchasing a commercial space is that the space becomes an asset to the company and has the potential to gain value over the lifetime of the business.  A business that leases, essentially throws away the money they spend on rent each month with no return other than the use of the space to run their business.

Businesses who own their own buildings are able to use that building as collateral should they ever find themselves with the need to raise some capital.  This allows a company to utilize every possible avenue out there to ensure that their business is a complete success. 

Property owners who find themselves with a little more cash in their pockets than they expected can put that extra money toward the loan on the property.  The ability to pay off the loan faster will allow for more cash flow that can be used for things that actually make the company money rather than make them spend the money.

Expanding a business is often much easier for owners who opt to purchase their commercial space instead of leasing.  The fact that they own their own building allows them to utilize it anyway they want.    If they have the space they can make additions or if they don’t they can rework the interior to a more suitable arrangement without having to worry about getting permission from a landlord.   

When all is said and done there are plenty of benefits to owning a commercial space and it is best to consult a seasoned commercial real estate broker to help you weigh all the options.  It is also imperative that the business owner completely understand where they are headed.  A company with a long track record of success and a solid future ahead of them will be wise to think about purchasing property to help them gain an even firmer financial foothold.  

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Hedge funds are funds that can use alternative investment strategies, such as hedging against market downturns, investing in asset classes like currencies or distressed securities, and utilizing return-boosting tools like leverage, derivatives, and arbitrage. They can be used as an alternative to the stock market for investors seeking not only capital appreciation but capital preservation. The primary goal of the majority of hedge funds is to make consistency of return, rather than magnitude.

However, not all hedge funds are created equal. Returns, stability, and risk vary between strategies. Many strategies hedge against downturns in the markets, but not all. Hedge funds are flexible in their investment options, and there are multiple strategies, including selling short (selling shares without owning them in hopes that the price will drop and the shares can be purchased at the lower price), investing in anticipation of a specific event (merger transaction, hostile takeover, bankruptcy, etc.), or trading options or derivatives (contracts whose values are based on the performance of any underlying financial asset, index, or other investment). Many strategies benefit from not being correlated to the direction of equity markets. Hedge funds are largely unregulated because they cater to more sophisticated investors. US laws require the majority of investors in a fund to be accredited, meaning they earn a certain amount of money annually and have a net worth of $1 million. Some might call them mutual funds for the Donald Trumps of this world—in other words, the super-rich.

Hedge funds are estimated to be a $2 trillion industry that is growing every year, and there are approximately 10,000 hedge funds in the US. Most are highly specialized, relying heavily on the specific expertise of the managing team. The performance of many hedge funds is not dependant on the state of global markets, especially relative value hedge funds. In contrast, conventional equity or mutual funds are usually totally exposed to market risk.

The common misconception that hedge funds are extremely volatile and unstable is based on the assumption that they all use global macro strategies and place large directional bets on stocks, bonds, commodities, currencies, and gold while using lots of leverage, when in fact most use other strategies. Less than 5% of hedge funds are global macro funds, most hedge funds either don’t use derivatives or use them only for hedging, and many don’t use leverage at all. Benefits of hedge funds include reduction of portfolio risk when added to a balanced portfolio, a wide choice of strategies for investors to meet their investment goals, higher returns and lower risk on average than traditional funds; elimination of the need to watch entrance and exit times on the market, making it a more viable long-term option; and portfolio diversification not possible with traditional investing.

Downsides to hedge funds include management and performance fees from management firms, though high water marks and hurdles help to curb these fees. They also require a large starting investment, which is why they generally are catered more to the wealthy.

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It’s been a long road for the real estate market, the market crash that occurred in 2008, foreclosure rates that skyrocketed, and new construction almost seemed to disappear. But there are some noticeable changes that are happening that should make everyone take more notice.

The foreclosures are starting to show a trend in slowing which is a very good sign for many property owners.  This also means that if you want to get a hold of a property whether for your own use or for an investment purpose, the time is now.  There is a noticeable decrease in the availability of homes on the market that are marked for a quick sale due to a pending foreclosure.

Statistics are also showing an increase in first time home buyers then has been seen in the past several years, also another good sign that the real estate market is starting to take a turn for the better.  These new generations of home buyers have spent the past several years making sure that they were going to be able to actually purchase a new home by improving upon their credit scores.

In the past a prospective home buyer was told that in order to obtain a new home mortgage they would have to obtain a credit score of 760. However, there are indicators from lenders that this credit score requirement will drop. The drop will occur when the lenders will once again have to start competing against each other to offer loans to those that will once again qualify for a new home loan. 

During the past several years, investors have been buying up the homes with the intention to make them their rental property investments. This is going to mean that property rentals are going to increase which is going to be a great opportunity for those in the property management business.  Investors do not have time to manage all of the properties that they have and are purchasing, so they are going to start hiring property management companies to manage them for them. Those investors were thinking ahead because there is going to be an increase of younger generation that will be entering the work force that are not quite ready to purchase their first home.

Now is the time to prepare for a change in the real estate market, home buying trends will make a strong rebound, eventually and for those that planned by either improving their credit scores, invested in distressed properties, saved what money they could for a down payment on a new home purchase will come out on the winning end when the market begins to start working for them and not against them.  

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If you’re planning to put your house on the market for a spring sale, the time to prepare is now. There are several steps you can take to make sure it is ready on time. Doing this will help you avoid unwanted stress and can make the selling process a bit smoother.

Give your home a good spring cleaning. This means cleaning from top to bottom. Wash walls and windows, dust blinds, and thoroughly clean the curtains. Also remember to clean all appliances so they are smooth and shiny, dust baseboards, and clean out all your closets. The cleaner it all looks, the easier it will be for prospective buyers to picture themselves living there.

Declutter your home. Get rid of items you don’t need or use. This will look better to those viewing your property and will mean fewer things to pack when you do move. You may also want to begin the packing process. Pack those items you don’t use or won’t need any time soon. You’ll be happy you did just prior to moving day.

Inspect your home. This will help you avoid unwanted surprises that often crop up at the time of sale. Look at walls and floors to be sure no water damage exists. Check your plumbing to ensure no leaks are present. Check for the presence of unwanted rodents or insects. You’ll want to take care of this problem immediately should you detect it. Make sure there are no damaged or broken window seals. Repair any problems you find before putting your home on the market.

Get rid of any unpleasant odors that might be lurking around in your home. Begin by checking for the source of these smells. Masking them only takes care of the problem temporarily which usually doesn’t work even for a short period of time. Finding the cause will enable you to eliminate the problem altogether.

Paint inside and out. There’s nothing quite like a fresh new color to make a room look larger and more open. This will give you the opportunity to choose the colors that will make your home look more modern and appealing to a wide variety of buyers. Neutral colors with a matt finish typically work the best. Repair all damage and nail holes before ever picking up a paint brush. Touch up all the trim and ceilings if this is necessary.

Complete all outstanding household projects and repairs before ever putting your home on the market. A project that appears unfinished will not go unnoticed by prospective buyers. Completing them ahead of time will improve the overall look and feel of your house and most likely help entice prospects to make an offer.

Making sale preparations is a lot of work, but worth it all in the end. Use the tips above to get ready for a spring sale so you can be moved into your new home in time for summer.

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If you are like many homeowners who are thinking about selling their home in the improved market, there are some easy and inexpensive repairs that you can make to help your home stand out.  It’s surprising how just making a few minor improvements can increase the appeal of your home.  We are going to offer you some of the most common things that many sellers often overlook before listing their home.

The first thing you should do is remove the clutter.  Out of all the suggestions we have for you this is by far one of the simplest.  To make your home less cluttered you should pack up and store most of the items you own.  If you have a collection that takes up the majority of space in one room or area experts suggest that you pack it away.  The fewer of your personal belongings potential buyers see, the easier it will be for them to picture their own personal belongings in your home.

The next thing that should be done is to focus on the exterior of your home.  Walk down to the curb in front of your home and see what sticks out at you.  These are going to be the same things that potential buyers notice when they pull up to your home.  You may notice that your shrubs are looking a bit unruly, or that your paint may chipping in some areas.  These are all relatively easy things that can be fixed prior to listing your home.  You should also give your flower beds a close look, if there are any dead flowers or plants that do not look healthy you should remove them at once.

Next on your list should be giving your home a thorough cleaning.  Make sure that you have dusted and cleaned all of the nooks and crannies located in your home.  You should also pay attention to the outside of your home as well.  You may also want to have all of the carpeted areas in your home cleaned by professionals.  Cleaning the driveway with a pressure cleaner will provide it with fresh appearance.  Another area that should be cleaned well is the windows.  Potential buyers do not want to have to look through dirt and grime simply to see the yard, it will also allow more natural light to enter your home.

Evaluate the interior paint colors of your home.  If you feel that they are too bright or busy you may want to invest in some neutral colored paint.  This is by far one of the easiest things that sellers can do to improve the overall appeal of their home.  While at the paint store, remember to choose colors that will be easy on the eyes.  Fresh paint will also help your home look cleaner and well taken care of.  

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Choosing the right closing date can help save you money while reducing the chances of a mistake being made that could end up either delaying or cancelling the deal.  Purchasing a home is one of the biggest purchases anyone can make, and it all starts with the closing.  The majority of lenders will require up to 45 days to approve financing; but once that has been taken care of, it is important that buyers work with their lender and the agents involved in the sale to choose a closing date that is beneficial for everyone involved.

Many homeowners are not aware that they have the ability to choose their closing date.  This can be beneficial for buyers who may need some extra time to pack up their old home or for any other reason that may have come up.  Below are three common reasons that buyers should keep in mind when selecting a closing date.

• Cash Flow – Purchasing a home is an expensive process, if cash flow becomes an issue during it is recommended that you choose a closing date towards the end of the month.  This will lower the amount of prepaid interest that you will be responsible for paying.  Prepaid interest is used to cover the period of time between the closing date and the end of that month.  To avoid having to pay a large amount of prepaid interest, choosing a closing date closer to the end of the month can be rather beneficial. 
• Be Prepared – When choosing a closing date you should choose one that is at scheduled around the time you are prepared to take possession of your new home.  Taking possession of your new home can mean one of two things; you are either prepared to move in and get settled or you are now ready to begin renovating the property.  In either case you should a date that will allow you ample time to prepare for either moving in or beginning work on your new home. 
• Avoid The Rush – Many homebuyers tend to schedule closing dates near the holidays in order to use that free time to move.  The reasoning behind this decision is sound, but you may not be the only one who is thinking in this way.  Many other homebuyers may have the same idea, which can lead to mortgage lenders becoming bogged down with closings.  It also means that there is a greater chance of a mistake occurring when your paperwork is filed.  This is a great way to utilize your vacation time, but just prepared for any delays that may occur.

Purchasing a home is one of the biggest investments you can make during your life.  Take the time to properly understand what is involved in the process and how acting at certain times throughout the deal can be beneficial for you.

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If you are considering purchasing a home, you may be wondering if that home will be considered as an investment.  Many homeowners feel that their homes are an investment, but what they aren’t sure of is whether their home is a good investment.  A good investment refers to something that can be considered an asset; a bad investment is used to describe something that is believed to be more of a liability.  These two distinctions should be used by your to help your determine in which category your home lies.

When you purchase a home, it is likely that you have taken money from one of your investments either a bank account, mutual funds, stocks or bonds.  These investments were paying you a rate of return on the money that you had invested.  If you are removing money from one type of investment and planning to invest it in another asset, in this case a home, you hope that your home will increase in value.  If it does then it was a wise investment on your part.  Moving funds from one investment to another can be risky on your part, but in the end it may pay off for you at a later date.

In time most real estate should increase in value, which will result in you being rewarded with equity in your home.  While that is a good thing for homeowners, was it a smart move.  Could you have done better by finding another method to cover the cost of your down payment or purchasing a different home in a different location?  In order for you home to be considered a good personal investment, you will need to own your home for a long period of time.  Owning a home for a short period of time often doesn’t add any net worth.  With all of the costs associated with selling your home shortly after you purchased it, you may actually end up losing money.

By long, we are referring to owning your home for a minimum of at least 5 years.  If you are not entirely sure that you will own the home for that long, you may want to remain a renter.  You may be better off financially keeping your money invested until you feel that you are truly ready to become a homeowner. 

When purchasing a home experts suggest that you choose a home that is in good physical shape, with a fixed-rate mortgage.  By purchasing a home that is in good condition, you will be less likely to spend additional money on home improvements.  This can help you keep more money in your investments.  Deciding to purchase a home can be one of the biggest decisions you will ever make.  Carefully look at your financial stability and decide if you are ready to take on a mortgage payment.

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The past and current states of the economy have meant foreclosure for many home owners. All the changes that have been brought about over the last several years are making many people antsy about their futures. The good news is there are both temporary and permanent alternatives to foreclosure that just may solve many problems.

The state of each individual home owner’s mortgage has an effect on the real estate market as a whole. The alternatives to foreclosure will help with recovery. If you are in a situation that is prompting you to make such a decision, you’ll want to explore all your options before settling on the one that is best for your specific needs. Below are a few worth examining.

Temporary alternative:  The Advanced Claim

This option is for home owners whose need is truly temporary. If you are having short-term difficulties, this may be the option for you. Here, the insurer will pay the amount of delinquency to the servicer in return for a promissory note from the borrower. The borrower’s mortgage loan is then whole. The insurer, in turn, collects part or all of the borrower’s advance over time.

Temporary Alternative:  A Forbearance Plan

Again, this option is for keeping owners with temporary problems in their homes. It is most often used for borrowers with temporary reductions in income, but long-term prospects for income increases. Here, such increases must be able to sustain the mortgage obligations. It may also work for troubled borrowers who wish to sell properties on their own. The forbearance period may range from six to 18 months, or even longer in some cases. Here, the borrower’s specific circumstances are taken into consideration. During this time, borrowers may be allowed to make reduced monthly payments. As time goes by, the payment amounts will increase, thus eliminating the delinquency. It is important to note forbearance plans may be consider a servicer matter, which can lead to the loss of homes for some owners. Because of this, they are only used when necessary and will certainly not fit every borrower’s needs.

Permanent Alternative:  A Loan Modification

This may be used for home owners who are experiencing a permanent reduction in income. Loan documents can be modified in a variety of ways, but the two that are most common are interest rate reductions and term extensions.

Loans with interest rates that are above market can be modified through refinancing. Here, the interest is adjusted to the market rate, and the borrower charged the amount of the standard origination fee that is affordable. If the interest is either at or below the current market rate, monthly payments can be reduced by extending the mortgage term. This will be a permanent reduction and may even mean a new 30 year amortization schedule.

Permanent Alternative:  Deed In-Lieu of Foreclosure

This is a last resort. Here, the borrower voluntarily conveys the property rights to the lending bank. This bank is known as the servicer. This is not a new practice, but may not be the best permanent option. Though it may appear better than a foreclosure on the borrower’s credit, professional council  is recommended to determine whether or not it is the best option. The process involves the borrower signing over the property deed, so careful consideration is crucial.

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In September, home building surged to a four-year high.  Builders started work on new homes at an annual pace of 872,000 homes, up 15% from the August pace.  They filed for new permits at an annual rate of 894,000 homes, an increase of 11.6% over the previous month.  Both of these numbers were the best since 2008.

Mortgage rates are at record lows, and the Federal Reserve’s decision to buy $40 billion in mortgages every month is likely to keep rates low for a while.  While some would argue with the election year announcement that unemployment has dropped, that news coupled with record low mortgage rates and bargain home prices is seen by some economists to be a possible “perfect storm” of influences that could initiate a boom in housing.  Many others expect a slower and much more orderly improvement in markets.

Barclays Capital released a report forecasting that home prices which have fallen by more than a third since 2007 could be back to peak levels as soon as 2015.  In their view the correction in the housing market has been over-dramatic, and they expect rises in home prices of 5% to 7.5% annually.  Construction is expected to be even stronger.  Some analysts expect that home building could be back to the pre-bubble average of 1.5 million new homes a year by 2016.

Home builder stock prices are spiking, and mortgage and equity mutual funds are jumping as well.  It seems that human nature never changes, and a little good news can go a long way, maybe farther than desired. 

Appraisals could dampen this enthusiasm though. 

An article this week in the New York Times talks about appraisal problems that are slowing a housing recovery.  Appraisers are being accused of being too conservative and letting too much personal bias into their valuations in some cases.  However, more criticism is centered on their conservative approach that is due to their employers, the lenders, and their constant pressure for appraisers to cover their investments.

Part of the problem is said to be Appraisal Management Companies that have come into being due to rules that forbid lenders to choose their appraisers.  These management companies are accused of raking off high fees while referring inexperienced appraisers who will work for less money and increase their profits.

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