Gunning Daily News

Rental Investment; What You Need to Know

December 19, 2011 4:58 pm

In this tough economy, more and more individuals are looking at the potential long-term investment of rental property to provide a supplemental revenue stream and/or tax shelter. Like anything that appears too good to be true, beware of rental rehabs.

Mark Fitzpatrick of Lenox Home Loans (lenoxhomeloans.com) recently blogged that if you’re planning on rehabbing to rent, or purchasing investment property and are planning to take advantage of traditional bank financing, it’s important that you have your ducks in a row so the closing of the deal goes as smoothly as possible.

Fitzpatrick says taking the time to plan ahead for your traditional bank loan before you get into a deal will help hugely when you want to exit the deal. He says the following are the three biggest “gotchas” he sees when financing investment property for real estate investors:

1) Inadequate reserves.
Reserve funds, i.e. cash in the bank, are not typically required if you’re refinancing a property you live in, but it’s a different story with investment properties. Plan on the lender asking you to document reserve funds of up to 6 months worth of principal, interest, taxes, and insurance for each financed investment property you own, according to Fitzpatrick.

2) Cashing out after your rehab. It used to be that you could buy a beat-up property for cheap, rehab it, and immediately transact a cash-out loan to get your investment and profit out of the deal. Not so today. Fitzpatrick says Fannie Mae guidelines require you to own the property for at least six months before you can do a cash-out loan. So make sure to account for this in your numbers, or consider financing the purchase and repairs with hard money.

3) Inadequate equity. Fitzpatrick says Fannie Mae limits the max loan-to-value for investment properties to 85%, but when you take into account pricing and bank overlay guidelines, the effective max loan-to-value for an investment property is actually around 70% to 75% right now (sometimes 80%), depending on the scenario.

If you want to learn more, Fitzpatrick offers a number of other points as well as regular articles on financing issues through the lenoxhomeloans.com site.

Selling Your Vacant Home?

December 19, 2011 4:58 pm

In early 2011, the Census Bureau released a statement noting that the national average for vacant homes in the U.S. rested at over 11 percent, placing more pressure on the housing market. Selling a vacant home is more difficult than selling a furnished one, in any market. A vacant home—regardless of how nice the property—can seem eerily empty and lacking in character and warmth. However, if you are trying to sell a vacant home—whether it’s a second home or a space you were unable to sell before moving to a new location—there are a few key tips that can make the process easier and help provide a quicker selling time, and a better selling price.

Attention to Detail. Once furniture is removed from a space, even the slightest imperfections become apparent. An older carpet that was once disguised by modern furniture is now blaringly out-of-date. Nail holes in the entryway or a dining room in need of a fresh coat of paint are now obvious. Spend extra time fixing up any noticeable damages, repainting, and caulking, getting new carpets, pressure washing and fixing up anything in need of repair.

Freshen up. It’s amazing how quickly an empty house can begin smelling stale and musty. Before a showing, throw open windows and doors to allow for fresh circulation, and consider some mildly scented candles or air fresheners. Remember; nothing too overpowering.

Amp your curb appeal. Since the house may be lacking inside in terms of character, make sure the exterior packs a punch. Not only should you clear clutter, children’s toys, and debris from your yard but you should also keep grass neat and repair those broken fence posts. For even better results, consider planting new flowerbeds, upgrading that tired front walk or even hiring a landscaper.

Consider staging. Statistics show a well-staged home spends 50% less time on the market. Even if you have moved all your furniture out, you may want to consider hiring a staging company that offers furniture rental. These professionals can make an empty space into a scene of warmth and comfort, removing the burden of decoration from your shoulders and easing anxiety.

Remember, potential buyers are not just looking for a roof over their head. They are looking for a place to start a new chapter in their life. You want to show them everything your property has to offer. Since vacant homes often sell for considerably less—typically 15-20 percent lower than the asking price!—taking extra precautions is worth it.

Auto Insurance 101: Back to Basics

December 19, 2011 4:58 pm

All of the different types of insurance coverage can make shopping for car insurance confusing and stressful. Below is a basic breakdown of the different varieties of auto insurance, and how you can save a few bucks.


Liability

If you're in an accident, this protects you from liability you might face from the other parties in the accident. It's divided into two areas; bodily injury and property damage.

Bodily injury covers medical bills, loss of income and legal bills. If you don't have enough liability coverage, you might have to dip into your savings to pay off big bills from lawsuits.

Property damage covers damage to physical property like homes and storefronts, and vehicle repair or replacement costs for any other parties in the accident.

Vehicle Protection

Damage to your car is covered under auto insurance. Like liability it's split into two sections; collision and comprehensive coverage.

Collision covers repairs or replacement of your car because of a crash, up to your car's actual cash value. The cash value is your vehicle’s value after taking into account depreciation and wear and tear.

Comprehensive coverage is for damages to your car for things other than accidents, such as storms, vandalisms, or collision with an animal.

Underinsured/Uninsured Motorist coverage covers you in the event you're in accident, and the other party has no or very little insurance.

Medical Payments coverage covers medical expenses that may result from a covered accident.

Personal Injury Protection helps cover medical expenses—as well as any loss of income or child-care expenses—you might face while healing from an accident.

Price Break-Down

To determine your premium, determine the coverage limit; the higher it is, the more you pay in premium.

If you lower your coverage limit, you'll play less premium, but you'll pay more out of pocket if you're ever in an accident that exceeds the limit.

Another way to lower your premiums is upping your deductible, which is the amount you pay if you make a claim for an accident. If you have a higher deductible, you have a lower premium.

For example, if your car requires $3,000 in repairs after an accident and your deductible is $500, you will have to pay $500 out of pocket, and the insurer will pay the rest, $2,500.

You can lower your premium in other ways including safe driving, and avoiding traffic tickets and accidents. If you have children on your policy, their good grades can lower the premium.

When purchasing any large item, it’s always a good idea to shop around first. The Internet makes it easy to get multiple quotes, and you can tweak the various coverage and deductible levels to get different premium options.

Source: relocation.com

A Taxing Matter: Understanding the Saver’s Credit

December 19, 2011 4:58 pm

The Internal Revenue Service notes that by planning ahead, low- and moderate-income workers can take steps now to save for retirement and earn a special tax credit in 2011 and the years to come.

The saver’s credit helps offset part of the first $2,000 workers voluntarily contribute to IRAs and to 401(k) plans and similar workplace retirement programs. Also known as the retirement savings contributions credit, the saver’s credit is available in addition to any other tax savings that apply.

Eligible workers still have time to make qualifying retirement contributions and get the saver’s credit on their 2011 tax return. People have until April 17, 2012, to set up a new individual retirement arrangement or add money to an existing IRA and still get credit for 2011. However, elective deferrals must be made by the end of the year to a 401(k) plan or similar workplace program, such as a 403(b) plan for employees of public schools and certain tax-exempt organizations, a governmental 457 plan for state or local government employees, and the Thrift Savings Plan for federal employees. Employees who are unable to set aside money for this year may want to schedule their 2012 contributions soon so their employer can begin withholding them in January.

The saver’s credit can be claimed by:

• Married couples filing jointly with incomes up to $56,500 in 2011 or $57,500 in 2012;
• Heads of Household with incomes up to $42,375 in 2011 or $43,125 in 2012; and
• Married individuals filing separately and singles with incomes up to $28,250 in 2011 or $28,750 in 2012.
• Like other tax credits, the saver’s credit can increase a taxpayer’s refund or reduce the tax owed. Though the maximum saver’s credit is $1,000, $2,000 for married couples, the IRS cautioned that it is often much less and, due in part to the impact of other deductions and credits, may, in fact, be zero for some taxpayers.

A taxpayer’s credit amount is based on his or her filing status, adjusted gross income, tax liability and amount contributed to qualifying retirement programs. Form 8880 is used to claim the saver’s credit, and its instructions have details on figuring the credit correctly.

In tax-year 2009, the most recent year for which complete figures are available, saver’s credits totaling just over $1 billion were claimed on just over 6.25 million individual income tax returns. Saver’s credits claimed on these returns averaged $202 for joint filers, $159 for heads of household and $121 for single filers.

The saver’s credit supplements other tax benefits available to people who set money aside for retirement. For example, most workers may deduct their contributions to a traditional IRA. Though Roth IRA contributions are not deductible, qualifying withdrawals, usually after retirement, are tax-free. Normally, contributions to 401(k) and similar workplace plans are not taxed until withdrawn.

Other special rules that apply to the saver’s credit include the following:

• Eligible taxpayers must be at least 18 years of age.
• Anyone claimed as a dependent on someone else’s return cannot take the credit.
• A student cannot take the credit. A person enrolled as a full-time student during any part of 5 calendar months during the year is considered a student.
• Certain retirement plan distributions reduce the contribution amount used to figure the credit. For 2011, this rule applies to distributions received after 2008 and before the due date, including extensions, of the 2011 return. Form 8880 and its instructions have details on making this computation.

Source: www.irs.gov

Word of the Day

December 19, 2011 4:58 pm

Secondary mortgage market. Market for the purchase and sale of existing mortgages, designed to provide greater liquidity for mortgages; plays an important role in getting money from those who want to lend to those who want to borrow.

Question of the Day

December 19, 2011 4:58 pm

Q: Are there ways to save money when adding new space to my home?

A: The direction in which you build can make all the difference. Experts say building up is normally less expensive than building out on the ground level. Adding an expensive wing or addition requires a new foundation. It is less costly to extend plumbing and other mechanical systems upward, as opposed to installing new ones. So using the “air rights” over your house may be your best bet.

Handyman Connection: Save Money and the Environment with Green Home Improvement Projects

December 16, 2011 3:54 pm

In the dead of winter, when staying warm and cozy can mean making the heater work overtime, many homeowners look for home improvements that will keep energy bills from soaring. Handyman Connection, a network of home repair and remodeling contractors in North America, has released a list of green home improvement projects that help save energy use any time of year. 

"There are a lot of things you or a professional handyman can do around your home to help cut back on energy use," said Scott McKenzie of Handyman Connection. "That's something that will benefit both your budget and the environment." 

Small Do-It-Yourself Jobs
Not all green projects are major undertakings. There are simple ways for you or a professional handyman to make your home more energy efficient.
• Switch out light bulbs with compact fluorescent bulbs throughout the house.
• Install occupancy sensors so lighting will come on when people are in the room and automatically turn off when they leave the room.
• Clean or replace furnace filters once a month.
• Clean the air conditioner filter regularly.
• Add insulation to hot water pipes.
• Install a water filter and quit buying bottled water.
• Replace your showerhead and faucets with low-flow versions. This won't reduce water pressure but water consumption and energy costs can be reduced by up to 50%.
• Insulate the water heater and turn it down to 48 degrees and cut your water-heating bill in half.
• Install ceiling fans.
• Weatherize your windows and doors with caulk, weather-stripping and sealants. The average home can lose 30% of its heat or air-conditioning though the windows.
• Replace the thermostat with a programmable one with a timer. 

Bigger Home Improvement Projects
Home remodeling projects are the perfect opportunity to make your home greener. If you don't have the knowledge, tools and time, hire a reputable home improvement company.
• Replace standard toilets with high-efficiency toilets. These newer models use 20% less water, and dual-flush, water-saving toilets can save you about 20% on your monthly water bill.
• Install a new gas water heater with a timer if your current water heater is more than 10 years old.
• Insulate your roof, walls and attic with natural insulation.
• Put in a whole-house fan.
• If you have an attic, put in a solar attic fan to vent hot air out.
• Install solar panels.
• Replace windows with modern energy-efficient windows.
• Avoid formaldehyde-based particle board when putting in new cabinets.
• Take out wall-to-wall carpeting and put in wood flooring. Carpeting traps dust mites and allergens; carpet mould is one of the leading causes of respiratory problems. 

For more information, visit www.handymanconnection.com.

3 Simple Suggestions for a Healthy Holiday

December 16, 2011 3:54 pm

Let’s be real here—the holidays are a time for indulgence. With so many activities centralized around good food, and a plethora of sweet treats going around at the office, it’s hard not to taste them all—and why shouldn’t you? To keep healthy over the holidays, follow these simple steps to ensure the only thing stuffed on Christmas morning is your stocking!

1. Hydrate. Water helps cleanse the body of toxins and moves food through your system. It helps ease bloat and is great for your complexion, too. Plus, with holiday cocktail parties, water will help keep you hydrated if you’ve had a few cocktails. To jump start your water intake, drink two tall glasses first thing in the morning.

2. Keep moving. Suggest a morning or evening walk around the neighborhood with your family to help you digest and keep active while still spending quality time together.

3. Veggie swap. Make sure to serve veggies with every meal to cut empty calories and add filling fiber. Sub out chips or crackers for carrots with your famous dip, serve all meals with a big salad and switch that starchy potato side for some healthy steamed or sautéed veggies.

Word of the Day

December 16, 2011 3:54 pm

Second mortgage. Lien on property that is subordinate to a first mortgage. In the event of default, the second mortgage is repaid after the first. Also called a junior mortgage, and in some circumstances a home equity loan.

Question of the Day

December 16, 2011 3:54 pm

Q: What are conventional loan limits?

A: These are limits imposed by Fannie Mae and Freddie Mac on the amount of money you can borrow to finance a home purchase. The loan limit generally increases each year and applies to single-family homes in the 48 contiguous states, with higher limits in Alaska, Hawaii, Guam and the U.S. Virgin Islands and on homes with two, three and four units.

For example, in 2008, the loan limit is $417,000 for a single-family owner-occupied property, $533,850 for a two-unit property, $645,300 for three-units, and $801,950 for four-units.

Theoretically, no limit applies to the amount a lender can provide under the VA program. But in practice, local lenders generally lend up to $417,000 in 2008 with no money down.

There are also loan limits for owner-occupied homes under the FHA 203(b) program, the most common FHA option. The limits vary depending on whether you live in a "high cost" or "low cost" area, as well as the number of units that are being financed. In general, the FHA loan limit is $362,790 for a single-family home in high-cost areas and $200,160 in low-cost areas.