I’m planning on selling my house and moving in the next year or two, but I have a couple of different ways that I could see going about it and I’d love to get some advice from those with experience.I live in a somewhat run-down 115 year old house. It was lightly renovated before we moved in – mainly cosmetic updates. The stucco-lathe walls had drywall applied over them (without removing the stucco-lathe), a new furnace was installed, and a few other minor updates.Since moving in we’ve had the pipe running to the sewer replaced and we’ve replaced the roof.There is, however, a lot that needs to be done. There is rotting wood around the eves and in in the breezway that leads to the garage, the basement seeps water in heavy rains, and the electrical system really needs updating.We purchased the house for 63k in 2010 at a low point in the market and have paid off roughly 12k on the principal. As the market has risen some since then and we’ve done some updates, the house is roughly in the same condition as we bought it in, so I suspect that I should be able to get somewhere between 60k and 65k for it.I see 3 different scenarios that I may consider:Try to sell it as-is and let the next owner deal with the repairs (with full disclosure of the issues, of course)Get a home equity loan to do the repairs and then sell the house in a better condition, hoping to make it up in the sale price.Put the repairs on the credit card, hoping to pay them off after the house sells.I’d very much appreciate any thoughts on the best course of action. (I’m under no allusion that I’m going to get more out than I put in… I’m hoping the break even if possible or minimize the hit to my pocketbook otherwise).
A relative past and left me a plot of land in a residential development in TN (I’m not in the state). The plot is owned outright, but has no structure on it, and I guess it would need massive developing to even begin to build a house – trees, uneven land, I have no idea about how plumbing and power and all that works. There are neighbors with equally undeveloped land, and some with houses in the $250K – 500K range, judging from Zillow. Details are still coming to me, but I don’t even know where to start. Where should I start if I want to sell it? What do I need to be aware of if I just want to hold on to it? Are there companies or investors that I could turn to to develop it since I don’t have anywhere near the money or credit to do that on my own? I guess, just, any suggestions on where to start to understand exactly what I’ve inherited would be so helpful! Thanks!
I am a college student looking for housing for next year, and am currently looking at a 4 bedroom place, where basically every room except the kitchen and bathroom have been converted to a bedroom (so really a converted 2 bedroom house). I found the place on Zillow, and Zillow estimates the place to be a certain amount, but the owner is asking for much more. He says that what I am asking for is far below market value. How do I know that I am not getting ripped off?
I have 2 properties, one paid in cash, another with a mortgage. Both under my name (no LLC, Sole Prop).I’m working on a 3rd. As I build my portfolio I need to begin thinking about what should happen if something tragic happens. Any idea?
What’s the difference between the two? I’m trying to build an apartment complex and a feasibility study is coming back up to ten times more expensive. Am I really getting 10x more value out of it? The appraisal report includes determination of market value; discussion of the project’s profitability (market value versus development cost), determination of market rent for the property’s units; analysis of the property’s market share, ie, how many units the property contributes versus how many are available in the neighborhood both now and over time; determination of absorption (or lease-up) period.Is this enough market data for me to move on? Or does a feasibility study provide something much more valuable? Located in northern neighborhood of Chicago (Rogers Park)
[KS] Sorry in advance if this is the wrong sub – I wasn’t sure where to turn to. Long story short, our furnace flooded and needs to be replaced. The reason for the flooding is the AC drain line was clogged.Per the HVAC person today, it has been leaking for quite awhile, indicated by rust all inside the compartment as well as a trail of rust on the floor. We didn’t realize until it stopped the AC fan from working.On the inspection, it said “Furnace is “short cycling” and not operating continuously till satisfied desired thermostat temperature. Consult a HVAC contractor for further evaluation and repair or improvement as necessary. Service and recheck prior to closing.” It did not include a photo inside the unit but the rust stains on the ground are visible.We noted the furnace as an unacceptable condition (due to the short-cycling – we did not know about the flooding) to the seller. The seller agreed to “Clean and Service HVAC”. They did not clean the AC Drain Line that was clogged (and thus leaking), nor were we made aware of the leaking/damage.Do we have any recourse? I would assume not since we did not do a re-inspection, but for the $2,500 we’re spending on a replacement unit I wanted to explore options. It seems to me a lot of eyes had seen the damage and we weren’t advised of the water damage at any point.
What is a Real Estate Professional?In tax terms, a Real Estate Professional (“REP”) is someone who meets two specific criteria laid out in the tax code. In order to be an REP:A taxpayer must spend more than 750 hours/year providing personal services in a “real property trade or business” (“RPTB”) in which they materially participate. If the taxpayer materially participates in multiple RPTBs, they can add them together when counting hoursMore than half of the taxpayer’s total “personal service” hours worked must have been spent materially participating in a “real property trade or business”Before you can determine if you qualify, we should define a few terms used above:Real Property Trade or Business (“RPTB”) – In plain English, an RPTB is a business that is part of the real estate industry. The IRS’s guidance on what businesses qualify as an RPTB is hazy at best, but they do specifically include eleven businesses and specifically exclude one (see Appendix A below for a full list)Material Participation – In nontechnical terms, if you actively work at the company and provide services, you probably materially participate. If you are an outside or silent investor who doesn’t take part in running the company, you probably do not materially participate. Technically, there are seven tests to determine if you materially participate in an activity or group of activities (see Appendix B for all seven tests). Note that you only need to pass one of the tests to qualifyNote – A married taxpayer, even if filing a joint return, can only use his/her own hours when meeting the two criteria listed above and must not include hours performed by his/her spouse.What’s the point of being classified as a Real Estate Professional?In short, REPs may be able to classify income or losses from rental real estate as non-passive instead of as passive. Non-REPs must always classify rental income or losses as passive.What’s so good about having rental activities classified as non-passive instead of passive?There are two advantages to having non-passive income instead of passive income:Passive losses can only be used to offset passive incomeIf you don’t have any passive income this year, your passive losses go unused and carry forward each year until you either have passive income to offset or you sell the activity/propertyGiven that it is common for rental real estate to generate losses, taxpayers generally want to be able to use these losses to offset income generated elsewhere, such as the wages from their job or the profit from a company they ownConverting the losses from rental real estate from passive to non-passive income allows the losses to offset income generated by other non-passive activitiesUnlike passive income, non-passive income is not subject to the 3.8% Net Investment Income Tax, which is an additional tax levied on certain types of incomeI qualify as a Real Estate Professional and I am involved in rental real estate activities, does this mean they are automatically classified as non-passive?No! This is a common misconception! There is one more important layer to get through before your rental activities are considered to be non-passive.In order for a rental activity to be non-passive, the REP must materially participate in the activity. This may pose a problem for many REPs, since it’s common to work in real estate but have investments in rental activities on the side, and just being an investor isn’t enough to get passive treatment because of the lack of material participation.However, there is hope! The IRS allows REPs to group all of their rental activities together for the purposes of passing one of the seven material participation tests (Appendix B). So, if you are actively involved in several rental activities such that your total hours participating add up to more than 500 (or you pass one of the other tests), you can group these activities with other rental activities in which you are only a silent investor, and because they are grouped, they are all treated as non-passive!I’ve made it this far and I’m ready to make my rental activities non-passive, what do I do now?Track your time! While you are technically allowed to establish yourself as an REP using any “reasonable means”, the IRS has been explicitly told by the courts that they do not have to accept a “ballpark guestimate”, and you’re much more likely to stand up to any scrutiny if you have contemporaneous daily time reports or logs that can be corroborated by other records such as your calendar or datebookDetermine whether you will be grouping your rental activities together, and if you decide to group, you must make the election on your tax returnWhat common pitfalls should I avoid?Past court cases have shown that it is very difficult for a taxpayer who has a full-time job in a non-real estate field to qualify as an REP. Due to the criteria requiring that more than half of your total hours be spent on real estate, the IRS and courts find it hard to believe that someone can spend upwards of 2,000 hours on their full-time job and still find time to spend more than that on their real estate activities. If this is the case for you, daily time reports are even more important!I’ve said it before, but it is worth repeating. Track your time! Track your hours in real-time at the end of each day or week instead of trying to backfill your schedule at year-end. It may sound ridiculous, but past cases have shown taxpayers losing their REP status in court because they:Were unable to provide credible recordsProvided records that were duplicative of each otherTried to twist or misrepresent the hours spent on their full-time job (a teacher claimed that the only hours that counted as working were those spent in the classroom, and that hours spent planning or meeting with kids should not be included)Overstated hours spent on certain activities (e.g. 56 hours to replace a toilet, 24 hours to replace four window blinds)Provided records that totaled to more than 24 hours in a single dayGrouping your rental activities without considering your existing passive loss carry-overs. Normally, when you sell an activity, any passive losses that are being carried forward are freed up and used to offset the gain on the sale of the activity. However, once you’ve elected to group activities, none of the individual activities are considered “sold” (for the purposes of freeing up passive losses) until the whole group is sold, so you may inadvertently trap existing passive losses that otherwise would have been freed up when a single activity was sold offIn conclusion (tl;dr) –Without question, this is a complicated and often confusing area of the tax code (and we’ve only scratched the surface of the some of the more nuanced areas of this section), but one that can potentially provide those working in real estate with significant tax savings. If you work in real estate and have income or losses from rental properties that you’d like to try to convert from passive to non-passive, let us know! We can help determine if the strategies we’ve discussed are a good fit for you.Appendix A – Which businesses do the IRS consider to be Real Property Trades or Businesses?DOES qualify as an RPTB:Real property developmentRedevelopmentConstructionReconstructionAcquisitionConversionRentalOperationManagementLeasingBrokerageDOES NOT qualify as an RPTB:Mortgage brokerAppendix B – The seven tests of material participation in an activity or group of activities in a given year (Note – you only need to pass one of the seven tests to qualify):Have more than 500 hours working on the activity (not to be confused with the 750 hour requirement to be a REP)All of the hours spent on an activity were spent by you (e. no one else spent any time on the activity)Have more than 100 hours on the activity AND no one else spent more time than you on the activityThe activity is a “significant participation activity”, and your aggregate participation in all “significant participation activities” exceeds 500 hoursMaterially participate (by passing one of these tests) for at least 5 of the last 10 years (the five years may or may not be consecutive)The activity is a “personal service activity” and you materially participated (by passing one of these tests) for any three prior yearsBased on all of the facts and circumstances, you participate in the activity on a regular, continuous and substantial basis during the yearNotes about the material participation tests –Hours spent as an employee of a company do not count when calculating material participation unless the employee owns at least 5% of the company they are working forHours spent as an investor in an RPTB (g. reviewing financials of an entity) do not count when calculating material participation unless the taxpayer is also involved in the day-to-day management of the businessA married taxpayer is required to count any hours performed by his/her spouse when calculating material participation in an activity (this differs from the criteria to determine if a taxpayer is an REP)If the taxpayer holds an interest in an RPTB through a limited partnership, the taxpayer can only establish material participation in the activity by using tests #1, #5 or #6I hope you find this helpful!Edit: I am in NY, but this applies to anyone in the US.
So I just got off the phone with the owner of Berkshire Hathaway in Indianapolis and am planning to meet with him and talk about signing with them. What questions should I be asking at the “interview”? And also what questions and concerns should I be prepared to answered. Anything helps, thanks!
Yet another interesting headline in the world of health and well-being. PHOTOS: Japanese Scientists Turn Chrysanthemums ‘True Blue’
The scientists introduced genes from two other flowers that allowed the mums to mimic the chemical process producing blue pigment. This might be applicable to other flowers, like roses and lilies.
Currently at the University of Pennsylvania about to declare my major as Real Estate and a minor in Marketing… Should my focus really heavily rely on Real Estate or should i go into a another field that may fuel my real estate career? Real Estate is my end-game, but it seems relatively simple, should i put effort towards something else? what is your opinion/path in real estate? what did you use to learn/excel in the field?