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Are Home Improvements Tax Deductible?

05th Mar 2016 Blog, Panamloans, Tax Deductible, Taxes

Tax season is lurking right around the corner. As April approaches, many homeowners are wondering if their 2015 home improvements are tax deductible. The answer, however, is not so easy. “Major home improvements are tax deductible,” says Balram Kakkar, a New York attorney and Real Estate Professional, “but only after you have sold your home.” So while you may not be able to claim these deductions this year, Kakkar suggests you keep track of all improvements for the day you decide to sell. But are you able to deduct all home improvements? According to the IRS, a tax-acceptable improvement is defined as one that adds value to your home, “considerably” prolongs your home’s useful life, or adapts your house to new uses. What improvements fall into this category? Examples, according to Kakkar, include new plumbing or wiring, or adding a bathroom. So while you can write off that first floor half bath, your new patio and swimming pool set-up likely won’t count. “If the work done on the home is purely for maintenance, the cost cannot be deducted and generally cannot be added to the basis, or value, of your home,” explains Kakkar. photo credit: House/Home Inspection via photopin (license)

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Home Price Index Continues To Rise, Though Only at 3.3% in New York City

05th Mar 2016 20 City Composite, Blog, Inflation, New York City, Panamloans, S&P Case-Shiller National Home Price Index

According to the latest results for the S&P/Case-Shiller National Home Price Index, home prices continued to rise across the country during the last 12 months. The Index, which covers all nine U.S. census divisions, showed a 5.4% annual increase in December 2015 as compared to a 5.2% increase in November 2015. The 20-City Composite, which measures the value of residential real estate in 20 major U.S. metropolitan areas, recorded a year-over-year gain of 5.7% in December 2015. Portland, San Francisco and Denver reported the highest year-over-year gains among the 20 cities measured, at 11.4%, 10.3% and 10.2%, respectively. In comparison to those increases, New York City saw a year-over-year gain of 3.3%, among the lowest of the 20 cities measured in the index. In total, thirteen cities reported greater home price increases in the year ending December 2015 versus the year ending November 2015. The general takeaway from these indices is that while home prices have continued to rise, the pace has slowed. Nonetheless, home prices in all but one city measured by the 20-City Composite are rising faster than the rate of inflation.

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Investing Retirement Funds In Real Estate

05th Mar 2016 401(k), Blog, Investment Property, IRA, Mortgage, Panamloans, Real Estate, Tax Strategies

Investing wisely in investment real estate is a fantastic way to boost returns in your retirement accounts. If your investment adviser is simply buying index funds and charging you management fees, you accounts will be stagnant and you will be working through retirement. Instead consider investing your retirement assets into a “self-directed” IRA and see your savings grow long-term, tax-deferred or tax-free. You must however follow strict rules so as not run afoul of IRS regulations. Eligible properties You must invest in a business property, not a personal residence, second home or occasional rental. Also, you cannot use your IRA to buy a property you already own; it has to be a new purchase directly into the IRA or other retirement account vehicle. To invest in a rental property, you can open an IRA custodial account, transfer cash from an existing IRA account — or possibly 401(k) — into the custodial account and then purchase real estate under the IRA account name. You must pay attention to very specific IRS rules in what you can and cannot do in funding and managing the investment. You can also buy and sell real estate in a self-directed IRA if you are in the flipping business, but there are limits on how many you can do per year. The profits on any transaction would be tax-deferred or tax-free and allow your IRA to continue to grow with those tax advantages. IRA investing concerns The negative side of investing through your retirement funds is your inability to leverage. You can’t get a traditional mortgage loan in an IRA, so you must have sufficient funds in your IRA to permit you to complete the purchase. In the alternative, you could purchase part of the property as Tenants in common with another person or your-self in …

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Strategies For Buying and Financing Investment Properties

05th Mar 2016 Back Ratio, Blog, Credit Scores, Debt Service Ratio, Fannie Mae, Freddie Mac, Front Ratio, Investment Property, Mortgage, Multi-Family, Panamloans, Rental Income

As it has become harder to get qualified for conventional loans, it may be worthwhile for investors to consider buying properties that are not classified as one-family. A lot of small commercial banks will underwrite properties that are 2 family and higher and/or mixed use apartment buildings more easily than conventional banks. While underwriting a conventional loan, that then gets sold Fannie Mae or Freddie Mac, most banks look beyond the cash flow of the property being purchased.  They also scrutinize the full income and expenses of the individual owner.  If you are an investor, it is highly likely that you have multiple properties and conventional underwriting gives you credit only for 75% of the investment rental income, before they deduct expenses related to that property.  In addition, they look for a Schedule E or other proof of actual rental income for the past several years. They also look at the borrower’s other sources of income such as salary, self-employment, interest and dividend income and qualify based on all the income and expenses.  They will deny the loan if your housing expenses are above a certain percent of your income, generally, about 28% all your expenses, called the “front ratio” and all your liabilities, including housing expenses are in excess of 33% of all you income,  called the “back ratio.”  For investors this process can sometimes stretch to several months as the banks come back for more and more paperwork and letters of explanation. A commercial bank, on the hand, will keep the loan on it own books and not sell it Fannie Mae or Freddie Mac or the secondary market. It will review credit and income; however, it will underwrite the investment on a Debt Service Ratio (“DSR”) basis.  Your credit score is still relevant, but the cash flow …

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Single-family Starts Tumbled 14.1 Percent in Northeast

05th Mar 2016 Blog, GDP Growth, Home Builders, Housing Starts, Multi-Family, Panamloans, Single-Family

U.S. housing starts unexpectedly fell in January likely as bad weather disrupted building projects in some parts of the country, in what could be a temporary setback for the housing market. Groundbreaking fell 3.8 percent to a seasonally adjusted annual pace of 1.099 million units, the Commerce Department said on Wednesday. Part of the decline in starts could be attributed to the snowstorms, which blanketed the Northeast last month. December’s starts were revised down to a 1.143 million-unit rate from the previously reported 1.15 million-unit pace. Economists polled had forecast housing starts rising to a 1.17 million-unit pace last month. The report comes on the heels of a survey on Tuesday showing confidence among homebuilders fell in February amid concerns over “the high cost and lack of availability of lots and labor.” Builders were less optimistic about current sales. Still, the housing market fundamentals remain strong, with a tightening labor market starting to push up wage growth. Though residential construction accounts for a small fraction of gross domestic product, the decline in starts at the beginning of the year suggests that an anticipated rebound in economic growth will be modest. The economy grew at a 0.7 percent annual pace in the fourth quarter after consumer spending moderated and a strong dollar hurt exports. Gross domestic product growth was also restrained by efforts by businesses to sell inventory and cuts in capital goods spending by energy firms. GDP growth estimates for the first quarter are currently around a 2 percent rate.  In January, single-family housing starts, the largest segment of the market, fell 3.9 percent to a 731,000-unit pace. Single-family starts tumbled 14.1 percent in Northeast and fell 3.8 percent in Midwest. Groundbreaking on single-family projects was unchanged in the South, where most home building takes place. Single-family starts in the …

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Applications for New Home Purchases Increased in January

05th Mar 2016 Blog, FHA, MBA's Builder Application Survey, Mortgage, Mortgage Bankers Association, Panamloans, RHS USDA, VA

The Mortgage Bankers Association (MBA) Builder Application Survey (BAS) data for January 2016 shows mortgage applications for new home purchases increased by 14 percent relative to the previous month. This change does not include any adjustment for typical seasonal patterns. By product type, conventional loans composed 67.4 percent of loan applications, FHA loans composed 19.5 percent, RHS/USDA loans composed 0.7 percent and VA loans composed 12.4 percent. The average loan size of new homes decreased from $333,182 in December to $325,806 in January. The MBA estimates new single-family home sales were running at a seasonally adjusted annual rate of 499,000 units in January 2016, based on data from the BAS. The new home sales estimate is derived using mortgage application information from the BAS, as well as assumptions regarding market coverage and other factors. The seasonally adjusted estimate for January is an increase of 4.0 percent from the December pace of 480,000 units.  On an unadjusted basis, the MBA estimates that there were 38,000 new home sales in January 2016, an increase of 11.8 percent from 34,000 new home sales in December. MBA’s Builder Application Survey tracks application volume from mortgage subsidiaries of home builders across the country.  Utilizing this data, as well as data from other sources, MBA is able to provide an early estimate of new home sales volumes at the national, state, and metro level.  This data also provides information regarding the types of loans used by new home buyers.  Official new home sales estimates are conducted by the Census Bureau on a monthly basis.  In that data, new home sales are recorded at contract signing, which is typically coincident with the mortgage application.

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