How Tax Reform Will Effect Real Estate: 5 Examples

How Tax Reform Will Effect Real Estate: 5 Examples

While there are winners, losers, and others, when it comes to the recently passed, tax reform legislation, this article will review, some of the effects and potential ramifications, as they specifically related, to real estate. Even within this topic, commercial properties, rental properties, and real estate management companies, appear to, potentially be significant beneficiaries, while, some homeowners, will discover, either little impact, or a negative one! This article, will attempt to, briefly review and examine, 5 examples, and consider the overall impacts, etc.

1. $10,000 State and Local Taxes, Cap: In the past, homeowners could deduct the entire amount of their real estate taxes, as well as state and local taxes paid. The new law changes that significantly, capping the deduction, at a maximum of $!0,000 per year. For example, where I live, in Nassau County, Long Island, New York, every evaluation, states, we will be, the most adversely affected area, in the nation. This capped amount is insignificant in a region, where our so – called, SALT taxes, are significantly higher, and thus, most envision, it having a negative impact, on the values and selling prices of these homes. When real estate tax, was fully deductible, it enhanced the comparative value of owning, versus renting, and, thus, the economists, and experts in this area, are anticipating, at least a 10% drop in pricing, because of this. Wouldn’t that make ownership less desirable, and, thus, have an undesirable effect on everything related to real estate, in certain, specific regions, of the country?

2. $750,000 Mortgage, maximum mortgage interest deduction: Presently, mortgage interest is tax – deductible, on loans, up to a million dollars. This law changes that, to $750,000, instead, on new mortgages. Especially in areas, where home prices, were $950,000, and above, this might be expected, to have an adverse impact on home sales, the real estate industry, and, on mortgage lenders.

3. Buying versus renting: First – time buyers often weigh, and/ or balance, home ownership, versus, renting! They often, factor in, potential appreciation, of the ownership asset of a house, as well as the deductability of real estate taxes and mortgage interest, into this consideration, and thus, those owning rental properties, might profit, while others suffer!

4. Pricing, and vacation home ownership: Owning a second, or vacation home, becomes more challenging and problematic, because, no longer, will the real estate taxes, and/ or mortgage interests, on these properties, be tax -deductable. The overall impact on pricing of most types of residential housing, will certainly not benefit, present owners, hoping to sell their houses, etc!

5. Home sales: When the real estate market, suffers, the overall economy, does not generally prosper! We will see, commercial properties, benefit, in terms of their pricing, and returns on investment, while residential homes, in many parts of this nation, will become, far more challenging to sell, at a desirable (to the present owner) price. Since, for most people, the value of their home, is their single largest financial asset, this could create, a situation, where, many, witness, an unforeseen, financial/ economic loss!

Wake up America, because there are ramifications to everything, and this legislation, creates a few winners, many, who will tread – water, and many losers! Be prepared, and proceed wisely!

Richard has owned businesses, been a COO, CEO, Director of Development, consultant, professionally run events, consulted to thousands, conducted personal development seminars, for 4 decades, and a RE Licensed Salesperson, for a decade+. Rich has written three books and thousands of articles. Website: http://PortWashingtonLongIslandHouses.com and LIKE the Facebook page for real estate: http://facebook.com/PortWashRE

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Home Buying Advice for Young Los Angeles Couples

Home Buying Advice for Young Los Angeles Couples

Most homebuyers enjoy looking at real estate, particularly in character-rich Northeast LA. But first you should get your financial ducks in a row.

It is no secret that Northeast LA is a hot real estate market. For many years, real estate in Highland Park, Eagle Rock and Pasadena have consistently been in high demand. Homes in Glassell Park, Hermon and Garvanza continue to fetch top dollar. Everyone is trying to take his or her slice of the American dream of homeownership.

But some interesting data on home prices, rental prices and home ownership rates with younger people in the Los Angeles area should be given serious consideration by young individuals and couples who are sitting on the house-buying fence in 2017 and 2018.

The short story is prices for owning and renting are going up, ownership rates in LA lag behind the rest of the country, and low interest rates mean mortgage payments are actually less right now compared to other periods in the recent past.

Since 2007 home ownership dropped from 52.3 percent to 47.8 percent (in 2016), according to data collected by Apartment List. Those least likely to be homeowners today are African-Americans, Hispanics and people under the age of 45. (For what it’s worth, ownership rates overall dropped by 8.1 percent in San Diego.)

Another set of statistics (compiled by Lending Tree) found that 36 percent of Millennials were homebuyers. Ownership largely correlates with income and savings, so for those who think they might be able to do that, here are four critical steps to take to make it happen:

Time it to when you are most employed/credit worthy- You want to show a lender your best credit worthiness, which is a function of total income (both earners), debt-to-income ratio and your overall credit score. If either member of the couple plans to take time off or scale back their work schedule, such as to have children or go back to school, it’s wise to get a mortgage before making that move.

Know your financial parameters – Simply, you need to know what you can afford. List your monthly expenses, your monthly income, and pay special attention to what your monthly housing expenses are (calculating for utilities and insurance). Then meet with either a mortgage broker or a realtor to use that information to calculate what size of a mortgage you can afford. There are various terms in every mortgage (i.e., number of years, interest rates, size of down payment and closing costs) that will affect the size of your monthly payments.

Find your down payment – This will be 10% to 20% of the purchase price, or more if you have it. On a $600,000 home, that means you’ll need up to $50,000. We will leave it up to you to determine where it comes from (often it is from parents or grandparents who understand the good sense of owning over renting).

Plan for 4-6 years out – Because there are transactional costs associated with home buying, there is a breakeven point for all purchases (assuming an appreciating market) where you will be able to see a profit should you decide to sell. The real estate valuation firm Zillow calculated in 2015 the “breakeven horizon” in the Los Angeles region to average at 5.1 years. But this comes with variation. The Zillow analysis found numbers for several Northeast Los Angeles neighborhoods that hover around this average:

Eagle Rock 6.3 years

Highland Park 4.8 years

Hermon 4.5 years

Glassell Park 5.5 years

Mount Washington 6.1 years

Note that other areas have longer breakeven points, including Atwater Village (7.4 years), Silver Lake (8.3 years), Los Feliz (8.9 years) and South East Pasadena (9.1 years). No numbers were available for Garvanza, another popular NELA area.

Without question it’s a process that requires planning, saving and organizing. But for most people a home is also the biggest investment of their lives. There should be a little work involved.

Knowledge real estate in Highland Park and Homes in Glassell Park click domain for more details.

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