Minneapolis Real Estate - What Is Happening In the Real Estate Market

Mortgage Interest Deduction is Limited per Residence

Linda Johnson — Tue, 10 Apr 2012 11:34:35 +0000

MID Limited per Residence

A recent U.S. Tax Court ruling clarified the IRS position that the $1.1 million limit for mortgage interest deduction applies per residence and not per taxpayer as some high-priced homeowners were hoping.

A married homeowner filing jointly can have fullly deductible interest on a mortgage of up to $1,000,000 of acquisition debt and up to an additional $100,000 of home equity debt. If the married couple files separately, each party is limited to deducting the interest on half of those maximum amounts.

The court case came about when two unmarried individuals who owned a home together as joint tenants felt that they were entitled to deduct the interest on $1.1 million of debt each. IRS did not agree with their understanding and neither did the Tax Court. The Court ruled that the limits apply per residence, not per taxpayer even if a home is co-owned by unmarried taxpayers.

The result for the taxpayers in this case was that their deduction was cut in half resulting in much more income tax due. While this situation only affects a few taxpayers, homeowners in this position should have a discussion with their tax professional.

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The IDEAL Investment

Linda Johnson — Sun, 04 Mar 2012 18:00:16 +0000

Rental homes can be the IDEAL investment in today’s market because they offer a much higher rate of return than alternatives without the volatility of ups and downs in the stock market.

IDEAL serves as an acronym to identify the advantages of rental properties:

Income from the monthly rent contributes to paying the expenses and a return on the investment
Depreciation is a non-cash deduction that contributes a tax shelter
Equity grows monthly as the mortgage amortizes due to some of each payment being applied to the principal
Appreciation is achieved as the value of the property goes up
Leverage can increase the return on investment by using borrowed funds to control a larger asset

The combination of these characteristics working together makes rental real estate a very good investment for today’s economy and years to come. Increased rents, high rental demand, good values and low non-owner-occupied mortgage rates contribute to positive cash flows and very favorable rates of return.

Contact me for more information about actual opportunities in our local market.

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Fix It Anyway!

Linda Johnson — Sat, 03 Mar 2012 14:00:31 +0000

“If it isn’t broke, don’t fix it” is certainly popular advice, but if you’ve ever had a serious plumbing leak, you certainly wished you had taken care of the problem earlier.

Washing machines, like all appliances, are supposed to work and when they don’t, it’s time to have them fixed or replaced. However, there is a critical connection from your water supply that may even be older than your washing machine itself.

Ask someone whose hose broke while they were asleep or out of town and you’ll hear stories of how quickly the water can damage walls, flooring and furniture. Almost anyone can replace the hoses with a pair of pliers for under $30.00 to avoid this potential catastrophe.

As you’re shopping for the replacement hoses, consider the braided stainless steel connectors. The advantage is that the stainless steel offers additional protection should a soft spot develop in the hose beneath. They’ll cost a little more but offer considerably more protection for a nominal price.

When you are considering putting your Minnetonka home on the market, just purchased a home in Minnesota or anywhere, or you have lived in your home for many years, a $30.00 fix could cost you a great deal less than something that breaks.

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Yes, Houses Are Selling!

Linda Johnson — Fri, 02 Mar 2012 18:26:03 +0000

Yes, homes are selling in this market. Not only are an average of 12,521 houses selling each day, but over 7,000 are getting mortgages. Yes, things are a bit tougher from filling out the paperwork to making sure everything is right, but buyers are getting mortgages.

For the portential home buyers who are waiting until the “bottom” to come understand that not making a decision is making a decision. Rents are continuing to rise and inventory is coming out of the marketplace, so by not making a decision to buy that non-decision is still costing them money. With interest rates at an all-time low along with the prices, waiting will cost you more when the interest rates increase. The Price of the home may go down, but the Cost of buying will go up as interest rates rise. And, that amount can be sizable.

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Warren Buffet Says It’s Time to Buy Real Estate

Linda Johnson — Wed, 29 Feb 2012 22:01:59 +0000

Warren Buffet says it’s time to buy real estate.

Warren Buffett appeared live on CNBC’s Squawk Box this week. During the interview, he was asked about the current real estate market and whether he felt now was the time to buy. His response was rather emphatic and has been used as a headline in hundreds of articles since the interview:

“If I had a way of buying a couple hundred thousand single-family homes I would load up on them.”

However, throughout the interview, he addressed the market from a few angles. Here is what he said:

Why invest in real estate now?

“It’s a way, in effect, to short the dollar because you can take a 30-year mortgage and if it turns out your interest rate’s too high, next week you refinance lower. And if it turns out it’s too low, the other guy’s stuck with it for 30 years. So it’s a very attractive asset class now.”

Is buying your own home better than investing in stocks right now?

“If I knew where I was going to want to live the next five or 10 years I would buy a home and I’d finance it with a 30-year mortgage… It’s a terrific deal.”

Should we buy multiple houses?

“If I was an investor that was a handy type and I could buy a couple of them at distressed prices and find renters, I think it’s a leveraged way of owning a very cheap asset now and I think that’s probably as an attractive an investment as you can make now.”

Over the last couple of months, there have been more and more financial analysts coming to the same conclusion: It’s time to buy real estate.