Pending Home Sales are Up in January

Click this link for the full article on how pending home sales are the highest they have been since April 2010 when buyers were rushing to take advantage of the Homebuyer Tax Credit!

April 1st FHA Mortgage Insurance Premiums to Increase

Click this link for the full article on how borrowers taking advantage of the low downpayment requirements for FHA loans will pay more for the upfront fee - it will increase from 1% of the loan amount to 1.75% - and the annual premiums will increase for most purchasers 0.10% per year!

Introduction to Limited Partnerships

By John Hamilton, CNE

My experience with Limited Partnerships was primarily to purchase real estate investment property in the late 1980s.  I was one of three general partners that mainly arranged for the purchase and the closing of the residential investment properties.  One of the general partners was an estate planning attorney, and most of the limited partners were his clients. My job was to find and negotiate the properties.

One of the reasons that limited partnerships are used in the purchase of real estate is that often times individuals would like to benefit from the pooling of investment capital in order to purchase larger investment properties that produce better cash flows as well as better potential for appreciation.  By forming a limited partnership, the limited partner investors limit their liability to their investment, and only the general partners have liability in managing the investment.  Also, if a limited partner wants to leave the partnership, he can be bought out without terminating the partnership.  The general partners are responsible for the management, operations and debt of the partnership, as well as potential legal liability of the partnership.

Because of this limited liability of the limited partners, it is less risky and thus easier to attract investors.  The danger of putting your investment money in a limited partnership is in giving up control to the general partners.  Even those with a track record of previous success, may not be reliable in the future.  I have always liked to be in control of my real estate investments, and you only have yourself to blame if things go wrong.

Typically, in structuring a limited partnership, the investing partners have a priority return of their investment along with a reasonable interest rate, prior to any profits being shared with the general partners.  And there are any number of ways the profits may be shared, and of course all of the profits are passed through to the partners who then report these profits on their tax returns.

One other point, inasmuch as the general partners would have liability from the investment, many times the general partners are structured as a Limited Liability Company (LLC) or as a corporation, in order to protect all of the partners.

Another use that has become popular for the use of the limited partnership structure is the “Family Limited Partnership”, where most of the time the parents become the general partners and the children and/or grandchildren are limited partners.  The parents can transfer assets into the limited partnership and the children are granted an ownership interest in a specific amount of the assets.  Those assets do not have to be distributed to the children, the parents can retain control, and yet that portion of the income attributable to the children will be taxed at the lower tax rate of the children, and therefore lower the total tax liability of the family.

Existing Home Sales Up

Click this link for the full article. Existing home sales were up 4.3 percent from December to January, and the for-sale inventory was down 20.6 percent from a year ago.

Some Tax Laws Relating to Real Estate

IRS Schedule C: Profit or Loss from Business
Summary:
Independent contractors are to track their “reasonable and ordinary” expenses related to their business, including costs for marketing and selling a property, for reporting on Schedule C of their federal tax return to deduct those costs from their income.
Regulator:
U.S. Internal Revenue Service
Original statutory authority:
U.S. Internal Revenue Code (IRC), Section 162 (a)
Penalties:
Penalty fees as assessed by the IRS
More information:
NAR IRS information reporting summary
This summary is not a comprehensive analysis of how the law applies to you. Consult a qualified real estate attorney to determine how the federal law and laws in your state impact you in this area.

Mortgage Interest Deduction (MID)

Summary:
The mortgage interest deduction can influence household home purchase decisions by permitting home owners to reduce their federally taxable income by the amount of interest paid on the loan which is secured by their home. Limited to home loan amounts of up to $1 million or $100,000 in equity for home equity loans.
Original statutory authority:
26 U.S.C. § 163(h) of the Internal Revenue Code
Regulator:
Internal Revenue Service
Penalties:
Criminal penalties can apply in cases involving fraud.
More information:
IRS Publication 936: Home Mortgage Interest Deduction
NAR MID Resource Page
This summary is not a comprehensive analysis of how the law applies to you. Consult a qualified real estate attorney to determine how the federal law and laws in your state impact you in this area.

Capital Gains Exclusion on Sale of Principle Residence

Summary:
Taxpayers can exclude up to $250,000 ($500,000 for married couples filing jointly) of capital gains on the sale of their primary home. To be eligible, taxpayers must have lived in the home as their primary residence for two of the five years before the date of sale.
Original statutory authority:
Taxpayer Relief Act of 1997 (Public Law 105-34, H.R. 2014, 111 Stat. 787)
Regulator:
Internal Revenue Service
Penalties:
Criminal penalties can apply in cases involving fraud.
More information:
“Excluding Your Gain,” from IRS Publication 523: Selling Your Home
NAR: Capital Gains Exclusion on Sale of Principle Residence
This summary is not a comprehensive analysis of how the law applies to you. Consult a qualified real estate attorney to determine how the federal law and laws in your state impact you in this area

Credit Standards Loosening for Housing

Click this link for the article on how credit standards have loosened since the end of the recession and this is spreading optimism throughout the real estate industry. In a report released Wednesday, home builder confidence approached a five-year high this month!

Home Pricing Stratagies to Consider

Click this link for some suggestions on Home Pricing Stratagies.

Hedge Your Commercial & Residential Real Estate Investments!

Click this link for an excellent article on how to hedge your commercial and residential real estate investments.

Attention Investors!

Click this link for the full article about why the vast majority of people believe that real estate is the surest way to build wealth over time and that the recent downturn offers unique investment opportunities.

Salt Lake's Real Estate Market is Recovering!

The Directors of the Salt Lake Board of Realtors just released the following message that clearly shows that the local real estate market is in a transitional phase -

Board of directors message

Salt Lake’s real estate market is showing clear signs of a recovery. More than 1,000 homes went under contract in January, a nearly 40 percent increase compared to homes under contract a year ago, according to Utahrealestate.com.

The increase in pending home sales can be traced to the creation of more Utah jobs, rising home affordability and falling home inventories.

In fact, the number of new listings in Salt Lake County in the fourth quarter of 2011 fell to 3,686, the lowest level in 14 years (third quarter 1997).

According to a recent government report, “all of Utah’s industrial sectors are adding jobs, the lone exception being government … The industrial sector leading Utah’s employment growth is professional and business services — up 11,000 positions over the past year. Half of this is in high-paying professional and technical industries like legal services, computer systems design, consulting, and marketing research. The other half is through employment service businesses (temporary help services), which supply workers to other businesses and industries.”

Currently, in Salt Lake County there are 4,723 active listings, according to Utahrealestate.com. Of that number, 36 percent of those listings are under contract or about 1,689 listings.

Home Inventories Down & Sales Up in January

Click this link for the article on positive real estate results for January.

Housing Will Boost GDP for First Time in 7 Years!

Click this link for the article on Fannie Mae's report that housing will boost GDP for first time in seven years

Benefits of Short Sales!

Click this link
For the article on the benefits of Short Sales - Buyers with patience can pick up a great value, Sellers have less damaged credit by avoiding Foreclosure, and recently lenders have become aware that Short Sales will often reduce their losses significantly.

Mom & Pop to the Rescue!

Click this link
For the full article on how small investors see that timing is the key to any investment and among others David Hicks, co-president of HomeVesters of America, known as the "We Buy Ugly Houses" company says "Right now it's just that perfect storm for mom and pop investors."

5 Home Inspections You Would Rather Not Flunk!

Click this link
for a quick guide for Homebuyers on potential problem areas that should be addressed!

Banks Paying Homeowners to Avoid Foreclosures

Click this linkFor the article from Bloomberg News about how lenders are now realizing that short sales are far less costly and time consuming than foreclosures, and are now offering as much as $35,000 or more in cash as incentives to homeowners to sell their properties as a short sale for less than what they owe.

Settlement Reached With Banks On Relief For Some Homeowners

Click this link for information on the 5 banks that just worked out a $26 Billion mortgage relief program to help homeowners who owe more than their homes are worth in return for immunity from mortgage related lawsuits. The Banks are Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financia.

10 Common Errors Homeowners Make When Filing Taxes

Click this link for this tax information

Technological Blunders - Recover from & Avoid!

Click this link for information on how to recover from and also how to avoid technological blunders

Help for Repayment of the First Homebuyer Tax Credit

For folks that took advantage of the first Homebuyer Tax Credit that required repayment - there is help available from the IRS on how to repay the credit. Check this link for the article

9 Documents that Help Homeowners Save On Taxes

Click this link to learn more about the 9 documents that will assist you in getting all of the tax write-off that you can from your home.

Economist Predict Housing Crisis Ending in 2012

Banks are now lending amounts up to 3.5 times borrower earnings. This is up from a low during the crisis of 3.2 times borrower earnings.Loosening credit standards and more available credit, lead Capital Economics to predict the Housing Crisis to end this year - Click this  for the full article.

New Refinance Initiative

     Link Here   for some details of a new proposal by the administration to allow more homeowners that are “underwater” (who owe more that their homes are worth) to obtain federal assistance in refinancing at the low rates that we have today.  This program would be paid for by some of the largest banks, and it would restrict these banks and mortgage servicers from foreclosing until they have exhausted efforts to modify mortgages.  Another part of the program would allow bulk sales of foreclosed homes to large investors in a pilot program to reduce the number of foreclosed properties.