Property Inheritance
Stepped-up basis is an incredible benefit to people who inherit property. Not only do they receive the property itself, the basis or cost value of the property becomes the fair market value at the time of the decedent’s death. This avoids recognizing the gain between the decedent’s cost and what it is worth when it is inherited. If a person had purchased a home for $100,000 and 20-years later when they died, it was worth $500,000, there would be a potential gain in the property of $400,000. However, because of a tax provision called step-up tax basis, the person inheriting the...
Read MoreLess to Own than to Rent
The question is “financially speaking, are you better off owning than renting in the long term?” Renting a home has advantages. It is usually a short-term commitment from year to year and the landlord is responsible for the repairs. Owning a home with today’s low mortgage rates, the total house payment could easily be less than what the rent would be on a comparable home. Once you assume ownership, you will have the responsibility of the repairs and possibly, a homeowner’s association fee. Many times, an initial benefit of owing a home includes the ability to deduct...
Read MoreAre You Covered?
A home warranty is a service contract that protects your home’s appliances and some systems from repairs or possible replacements. A convenient benefit of a home warranty is that when you report an item, they will assign a service provider to evaluate whether it should be repaired or replaced without the owner having to act like a middleman. Homeowner’s insurance is required by most mortgage lenders when there is an outstanding loan. This coverage protects the structure and the dwelling and the homeowner’s personal property from named occurrences like theft, natural...
Read MoreThoughts on Credit and Getting a Mortgage
Credit plays a huge role in getting a mortgage because it is a variable that helps the lender determine the likelihood that the loan will be repaid on a timely basis. Credit bureaus evaluate people’s credit worthiness using a FICO score. The higher the score the better the borrower’s credit. The mortgage rate charged to a borrower depends on their credit score. There is an inverse relationship between credit score and interest rate changed. The higher the score the lower the rate and the lower the score, the higher the rate. Two separate buyers with the same income, purchasing...
Read MoreFirst Love, Second Wife or Third REALTOR
There is a story of a real estate agent’s prayer: “Dear Lord, if I can’t be someone’s first love, or second wife, at least, please let me be their third REALTOR®.” In a normal market with a balanced supply of sellers and buyers, this describes the preference that it might be better to be the third listing agent to help the seller after they became more realistic about their list price. In today’s market, it might have more to do with buyers because of the increased competition, their chance of having an accepted offer is greatly reduced and it is only...
Read MoreSimple Rates of Return
Looking for a simple way to determine if a rental property will give you the rate of return you want? This modified annual property operating data may be just what you’ve been looking for. There are many different rates of return that investor’s consider to determine whether a property will generate the yield that they expect. Sometimes the simplest of calculations can tell you whether you want it or not and if you get the other things like tax advantages and appreciation, it just makes it that much better. The first yield we will look at is commonly called the Cash-on-Cash rate...
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