One big question that I have is how this proposed provision will be affected by the new proposed provision, which will possibly increase the $7,500 limit to $15,000. If the new legislation offers $15,000 that does not need to be paid back, then I see a pretty strong incentive to purchase a home.

As the story continues to develop, I will be sure to update the blog. Be sure to check my previous entries on this topic by clicking on the Home Buyer Tax Credit Category on the side panel of the blog.

Joseph Griffin

At this point, however, this is only a possibility. We will know in a few days whether or not it passes and they amend the current provision by raising the limit to $15,000.

One of the big questions to be answered is whether or not those who have already purchased a home and received the $7,500 tax credit will be able to amend their returns and receive the additional $7,500 credit that is now being proposed. If not, then I think of lot of people are going to be fairly upset. There is much to watch here. Check back for updates and please leave any questions as a comment.

For more information about the tax credit click here to see my other posts on this developing topic.

Joseph Griffin

As many of you are aware, the USDA Guaranteed Rural Housing Program had been operating under a Congressional Continuing Funding Resolution that was approved in 10/08 and was supposed to provide sufficient funds for this program through the end of March. Due to unprecedented demand for USDA financing, the funding for this program was used up by early January. We have been forced to suspend the closing of any USDA loans until Congress gets additional funding approved. I am very confident that USDA will be funded soon but I do not know when that will occur. In the mean time, we are still able to handle your conventional, FHA and VA financing needs as usual. If one of your clients already has an application in process with me, their loans should close as expected.

If you have a client who wants to proceed with a USDA application, we can process and approve it so that it can close immediately after funding is approved. Obviously, this is going to require flexibility from your sellers.

Joseph Griffin

‘‘(g) ELECTION TO TREAT PURCHASE IN PRIOR YEAR.—In the
case of a purchase of a principal residence after December 31,
2008, and before July 1, 2009, a taxpayer may elect to treat such
purchase as made on December 31, 2008, for purposes of this
section (other than subsection (c).”

This section is stating that if you make a qualifying purchase between January 1, 2009 and July 1, 2009, then the IRS will consider that you purchased the home on December 31, 2008. This means that if you purchase a home between the 2009 dates above, you can go back amend your 2008 tax return and receive the tax credit. You do not have to wait until time to file your 2009 tax return. I hope that this helps.

Joseph Griffin

My other related posts are:

Way’s to Use $7,500 Tax Credit as a Downpayment

How the Tax Credit Applies to New Construction

Quick Faxts about the $7,500 Homebuyer Tax Credit

IRS Form for Claiming the $7,500 Homebuyer Tax Credit

• The Knowledge Challenge
• The Mindset Challenge
• The Financial Challenge

The Knowledge Challenge:

This refers to the fact that you need to have some basic knowledge about the area of business that you are about to enter. The following is a preliminary list of what you need to have some knowledge about:

• Where to acquire properties
• A general understanding of your state’s Landlord/Tenant laws
• What type of research to do on a potential tenant
• How to manage tenants
• An understanding of the value of properties and the market rental rates

Your best bet to answer these questions in your area is to find a Realtor who has rental properties. He or she can educate you about the current market and where to find further information. You can use them to purchase your properties, and they will earn a nice commission for the information and help they have provided. You may think that if they own rental properties that they will be cautious about helping their competition, but most good agents know that no one person can have the entire market and will be willing to help because they will earn the commission when you use their services to purchase properties. But if you want them to help you and then you do not help them earn a commission when you purchase a property, don’t be surprised if they aren’t very helpful next time you call. It is a two way street.

On a side note, don’t be surprised if you find that very few realtors have rental properties. They will tell you all the horror stories about bad tenants, lost money, etc. Most of the stories will be basically true, and it will be your story, if you don’t do your homework, create a plan based upon concrete information, and follow that plan. Find someone who is successful in owning rental properties to get your advice from, not the individual who couldn’t make a go of it.

The Mindset Challenge:

This refers to the fact that you need to have the appropriate mindset before you get into this business. You need to see yourself as providing a service for a fee, not a service because you love humanity. Those individuals who are easily taken in by stories by the down and out ought not own or, at minimum, manage the properties they do own. The relationship that you will have with the tenant is very specific: you will provide a well-maintained home at an agreed upon rate; they will pay a set amount for that product. When they fail to pay, you should have no qualms about terminating the lease and evicting them for failure to pay. If you think you would have difficulty following through with an eviction after they have told you a sad story, you need to have a professional manage any properties that you purchase.

The Financial Challenge:

The financial challenge is the only challenge that most people exists in the rental business. They completely ignore the previous two. The financial challenge, to some degree, is the easiest challenge to overcome. In many areas, you can get started in the business with less than $15,000. The problem is that most people want to buy a nice house or an apartment complex to start out, but I suggest starting out small. For less than $15,000, you can purchase a single-wide mobile home in a mobile home park. In western NC, the rent a three bedroom, two bath single wide in a park is around $500 per month. You will be responsible for lot rent to the park owner, as well as insurance and taxes. Based on the properties that I own, you can expect these three expenses to cost about $1,800 to $2,000 per year, which means that if you rent the property for the entire you, you could expect around $4,000. You will obviously have repairs to make throughout the year and a vacancy factor, but you could assume that these costs will be less than $500. Therefore, a net of $3,500 would be just over a 20 percent return on investment for your $15,000 initial investment.

Another more affordable option is to purchase a duplex and live in one side of the property and rent out the vacant side. Of course, if you have the financial ability, you can always goes for larger projects: apartment complexes, a nicer home, a commercial property. But, remember, you can start small and build up over time.

If you have any questions, please feel free to leave a comment.

Joseph Griffin

 Way’s to Use $7,500 Tax Credit as a Downpayment

How the Tax Credit Applies to New Construction
 
Quick Faxts about the $7,500 Homebuyer Tax Credit

Now that it is tax time, I’ve received a few questions regarding how to file for the tax credit.  So attached to this post is the appropriate IRS Form and instructions for filing for the tax credit.  It is IRS Form 5405 Homebuyer Tax Credit.  The form includes instructions for how to complete it for those of you who file your taxes yourself. 

Even if you have already filed your taxes, you can go back and amend your tax return if you were eligible for the credit, but did not file for it.  I’ve had a couple of people e-mail me who asked about this and were able to amend their return without any problem. 

I’ve also received a question about someone who is eligible for the return, but their spouse has an IRS lien.  If the lien is against one spouse, then you may be able to file separately.  But if you are able to do this, you will only qualify for $3,750 of half of the tax credit.  This was done to make certain that spouses filing separately wouldn’t receive $15,000 by filing for the full $7,500 rebate.  If you have other specific questions, please look at my previous posts first.  If what you are looking for isn’t there, please post a comment, and I’ll be sure to answer it.

Joseph Griffin

Joseph Griffin

As a side bit, you may find it interesting to know that Lowe’s Foods was started by the same family that founded Lowe’s Hardware in Wilkesboro, NC.  The company is currently owned by Alex Lee, but it is interesting to note its humble beginnings.

Joseph Griffin

Let’s first begin by saying that a FICO score and a Beacon score is the same thing.  It is a score which is calculated based upon a number of factor related to an individuals credit worthiness which gives a numeric indication of one’s credit reliability.  The typical range is understood to be between 300 and 850, but this is debated.  For an interesting take on the mathematics of the beacon score check here. The basic idea that you want to have associated with the FICO or Beacon score is that it attempts to quantify the likelihood that you will make your payment on time or as agreed.  The higher your score the better you are rated. 

There are three different major credit agencies that report credit scores: Equifax, Experian, & Transunion.  Although they market their scores under different names, it is basically the same.  There may be a slight variation based upon the information that may be present in the credit file of one company while it may not be in the credit file of another company. 

Below is a chart from BankRate.com that shows the breakdown of the US population’s credit scores.  For instance, 12 percent of the population has a score between 600-649. 

It is important that you know your score if you are seeking a loan for a home because it let’s you know how the bank will view you.  The higher your score, the more desirable you will be as a client.  You can get a free credit report at a number of places online.  I personally use Experian to monitor my credit report and rate, but it is a fee service.  You can also estimate your score at BankRate.com by clicking here.  I did it myself and it came in a little lower than my actual score, but it seems rather accurate for those who are just curious. 

Joseph Griffin

What I find particularly interesting about this report is that NC is experiencing growth even when such a large portion of the jobs has been traditionally rooted in the manufacturing industry.  What this says is that North Carolina has a truly diverse economy that is able to support growth even during a downturn in the economy.  Granted you will have pockets throughout the state, which do not have a very diverse economy, but in those County’s which had the highest growth (Wake, Union, Meck) there is a diverse economy that has continued to create jobs even during the down economy, according to the report. 

Joseph Griffin