How Big of a Mortgage Can I Afford?

Not only does owning a home give you a haven for yourself and your family, it also makes great financial sense because of the tax benefits — which you can’t take advantage of when paying rent.

The following calculation assumes a 28 percent income tax bracket. If your bracket is higher, your savings will be, too. Based on your current rent, use this calculation to figure out how much mortgage you can afford.

Rent: _________________________

Multiplier: x 1.32

Mortgage payment: _________________________

Because of tax deductions, you can make a mortgage payment — including taxes and insurance — that is approximately one-third larger than your current rent payment and end up with the same amount of income.

Courage is resistance to fear, mastery of fear – not absence of fear.

Protected: Should You Buy a Home in Today’s Market?

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Protected: Impact of Foreclosures

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The IRA Owned LLC – A Great Tool for Investing

“So many investors are tired of watching their retirement accounts dwindle away from the lackluster performance of the stock market, while the value of their home and surrounding areas increase in the double digits,” said Marco Caporale, President and CEO of Independent Executive Management, LLC.
Although using your retirement account to purchase real estate does offer the potential for two to three times the annual appreciation of traditional stocks, it does come with a lot of regulations and severe penalties, if not correctly applied. That is why the right account has to be set up, the rules have to be followed and a good custodian can help. It is not difficult and it can be done and many are doing it and making great money for the future.
If you read this far you are thinking, “I have heard of this before and all I have to do is open a self-directed IRA.” However, to truly set your IRA free, (what many call checkbook control IRA), a couple of steps have to be taken that will give you total control of your IRA funds and profound asset protection. Yes, your IRA’s, other retirement accounts, and other investments are not protected from law suits and you can loose your nest egg.
Let me start by giving you some background information. First of all, most custodians, even true self directed custodians, require massive amounts of paperwork and numerous hoops to jump through in order for you to invest your IRA money in an “alternative” investment. This costs you time and money (custodian fees). To more effectively use your IRA, your IRA will instead place all of its assets into a limited liability company (LLC). Therefore, there is only one asset to be declared by the custodian to the IRS and this translates to fewer fees to you. Notice I did not say that your custodian manages your IRA. Then who manages the IRA? well, you of course.
Why an LLC? The LLC gives great asset protection and tremendous tax advantages. The LLC enjoys the asset protection of a corporation while it can be taxed as a partnership. Partnership taxation is great because the LLC itself will not pay taxes. Instead, the owner of the LLC pays taxes as if they earned the income. Who is the owner of the LLC? Your IRA is the owner of the LLC(a tax- exempt entity). Therefore, you can maximized your investment and pay no taxes, what a deal.
What are the “alternative investments” mentioned above? They are too multiple to mention here but I will try:
real estate, other LLC’s, franchises, unsecured loans, corporations, mortgage notes, commodities and futures, joint ventures, tax liens and tax deeds, currency exchange, times shares, limited partnerships, timberland investment, real estatle options,
commercial paper, hunt lease investments, stocks, bonds, mutual funds, annuities, ect.
Is the concept of an IRA owned LLC legal? Yes, and the case Swanson VS. The Commissioner in 1996 cleared up any doubts that anybody had about this issue. In this case the court rejected the IRS position that the business structure constituted a prohibited transaction. The IRS was so wrong that the judge had the IRS refund legal fees to MR. Swanson.
How can you create this magnificent business structure to increase money for your retirement years? Here are the simple steps:
1. Open a self-directed IRA account.
2. Transfer your IRA assets to the new, self-directed IRA account.
3. Establish a LLC in the state of your desire.
4. Apply for your LLC’s employer’s identification number (EIN).
5. Set up a brokerage account or bank account for your LLC.
6. When you are ready to invest instruct the custodian to place the IRA assets into the bank account or brokerage account of the LLC.
7. Start checkbook investing.
Finally, you can move into the sef-directed IRA owned LLC other retirement plans, 401ks, 403B and have other investors joint in with you. Good luck and happy investing.

Shallow men believe in luck. Strong men believe in cause and effect.

5 Property Tax Questions You Need to Ask

1. What is the assessed value of the property? Note that assessed value is generally less than market value. Ask to see a recent copy of the seller’s tax bill to help you determine this information.

2. How often are properties reassessed, and when was the last reassessment done? In general, taxes jump most significantly when a property is reassessed.

3. Will the sale of the property trigger a tax increase? The assessed value of the property may increase based on the amount you pay for the property. And in some areas, such as California, taxes may be frozen until resale.

4. Is the amount of taxes paid comparable to other properties in the area? If not, it might be possible to appeal the tax assessment and lower the rate.

5. Does the current tax bill reflect any special exemptions that I might not qualify for? For example, many tax districts offer reductions to those 65 or over.

“Nothing great has ever been achieved except by those who dared believe something inside them was superior to circumstances.”

IRA Advantages

John Doe’s IRA has purchased a single family home from an unrelated
seller. John now wishes to have the IRA sell it to his sister
with a first mortgage that his IRA will hold.
The purchase of a single family home from an unrelated party
is not a problem. John pays $300,000 cash and his IRA holds
the grant deed from the sale to his IRA by the third party.
John’s IRA later sells his sister the property and takes back a
first mortgage and a down payment in exchange. His IRA gives
her a market rate loan for 15 years and receives a 10% down
payment. Since this is a $280,000 debt owed to the IRA and
not by the IRA, there is no concern about the potential liability
of the IRA. John’s IRA has a fixed income investment and is
protected because it holds the trust deed in the event his sister
defaults on the loan. The transaction may also have the incidental
benefit of allowing John’s sister to purchase the home
more easily than she could have on the open market.

Jane wants to have his IRA purchase a $400,000 rental
property with a 50% down payment. Is this possible and are
there any special considerations?
Yes, it is possible, but there are special considerations such as:
-Disqualified persons (such as the IRA owner and his or her
spouse) cannot personally guarantee the loan for the IRA. The
loan must be supported by the property itself or some other
property that the IRA owns;
-The IRA will be subject to tax (UDFI or UBIT) on any income
and/or capital gains attributable to the leveraged portion of the
investment;
It should be noted, as an alternative to borrowing, that the IRA
can purchase the property with other parties, all of whom pay
cash. When this is done, there is no UDFI and there are no
issues associated with the financing.

Associate yourself with men of good quality if you esteem your own reputation for ’tis better to be alone than in bad company.

10 Questions to Ask Home Inspectors

Before you make your final buying or selling decision, you should have the home inspected by a professional. An inspection can alert you to potential problems with a property and allow you to make an informed decision. Ask these questions to prospective home inspectors:

1. Will your inspection meet recognized standards? Ask whether the inspection and the inspection report will meet all state requirements and comply with a well-recognized standard of practice and code of ethics, such as the one adopted by the American Society of Home Inspectors or the National Association of Home Inspectors. Customers can view each group’s standards of practice and code of ethics online at www.ashi.org or www.nahi.org. ASHI’s Web site also provides a database of state regulations.

2. Do you belong to a professional home inspector association? There are many state and national associations for home inspectors, including the two groups mentioned in No. 1. Unfortunately, some groups confer questionable credentials or certifications in return for nothing more than a fee. Insist on members of reputable, nonprofit trade organizations; request to see a membership ID.

3. How experienced are you? Ask how long inspectors have been in the profession and how many inspections they’ve completed. They should provide customer referrals on request. New inspectors also may be highly qualified, but they should describe their training and let you know whether they plan to work with a more experienced partner.

4. How do you keep your expertise up to date? Inspectors’ commitment to continuing education is a good measure of their professionalism and service. Advanced knowledge is especially important in cases in which a home is older or includes unique elements requiring additional or updated training.

5. Do you focus on residential inspection? Make sure the inspector has training and experience in the unique discipline of home inspection, which is very different from inspecting commercial buildings or a construction site. If your customers are buying a unique property, such as a historic home, they may want to ask whether the inspector has experience with that type of property in particular.

6. Will you offer to do repairs or improvements? Some state laws and trade associations allow the inspector to provide repair work on problems uncovered during the inspection. However, other states and associations forbid it as a conflict of interest. Contact your local ASHI chapter to learn about the rules in your state.

7. How long will the inspection take? On average, an inspector working alone inspects a typical single-family house in two to three hours; anything significantly less may not be thorough. If your customers are purchasing an especially large property, they may want to ask whether additional inspectors will be brought in.

8. What’s the cost? Costs can vary dramatically, depending on your region, the size and age of the house, and the scope of services. The national average for single-family homes is about $320, but customers with large homes can expect to pay more. Customers should be wary of deals that seem too good to be true.

9. What type of inspection report do you provide? Ask to see samples to determine whether you will understand the inspector’s reporting style. Also, most inspectors provide their full report within 24 hours of the inspection.

10. Will I be able to attend the inspection? The answer should be yes. A home inspection is a valuable educational opportunity for the buyer. An inspector’s refusal to let the buyer attend should raise a red flag.

Optimism is a man’s passport to a better tomorrow.

Home Warranty

A home warranty is a service contract, normally for one year, which helps protect home owners against the cost of unexpected covered repairs or replacement on their major systems and appliances that break down due to normal wear and tear. Coverage is for systems and appliances in good working order at the start of the contract.

Check your home warranty policy to see which of the following items are covered. Also find out if the policy covers the full replacement cost of an item.

• Plumbing
• Electrical systems
• Furnace
• Water heater
• Heating ducts
• Water pump
• Dishwasher
• Garbage disposal
• Stove/cooktop/ovens
• Microwave
• Refrigerator
• Washer/dryer
• Swimming Pool

Your chances of success are directly proportional to the degree of pleasure you derive from what you do.

Understanding Capital Gains in Real Estate

When you sell a stock, you owe taxes on your gain — the difference between what you paid for the stock and what you sold it for. The same holds true when selling a home (or a second home), but there are some special considerations.

How to Calculate Gain
In real estate, capital gains are based not on what you paid for the home, but on its adjusted cost basis. To calculate, follow these steps:

1. Purchase price: _______________________

The purchase price of the home is the sale price, not the amount of money you actually contributed at closing.


2. Total adjustments: _______________________

To calculate this, add the following:

• Cost of the purchase — including transfer fees, attorney fees, and inspections, but not points you paid on your mortgage.
• Cost of sale — including inspections, attorney fees, real estate commission, and money you spent to fix up your home just prior to sale.
• Cost of improvements — including room additions, deck, etc. Note here that improvements do not include repairing or replacing something already there, such as putting on a new roof or buying a new furnace.

3. Your home’s adjusted cost basis: _______________________

The total of your purchase price and adjustments is the adjusted cost basis of your home.

4. Your capital gain: _______________________

Subtract the adjusted cost basis from the amount your home sells for to get your capital gain.

A Special Real Estate Exemption for Capital Gains
Since 1997, up to $250,000 in capital gains ($500,000 for a married couple) on the sale of a home is exempt from taxation if you meet the following criteria:

• You have lived in the home as your principal residence for two out of the last five years.

• You have not sold or exchanged another home during the two years preceding the sale.

You meet what the IRS calls “unforeseen circumstances,” such as job loss, divorce, or family medical emergency.

“The greatest and noblest pleasure which men can have in this world is to discover new truths; and the next is to shake off old prejudices.”

Cybertips

Trick #1: Get a Human on the Phone

Tired of dialing toll free numbers and searching endlessly to get through to a human who can help you? These folks take this bit of craziness out of your life.

Just visit this great place and do a quick search for the company you’d like to call. Enter your phone # (they say they will never disclose your number to anyone — not even your mother!). As soon as they get a human on the line your phone will ring with a living breathing person standing by.

Great time saver.

Trick #2: Supercharge Your Browser

If you use Internet Explorer to get around the web you’ll like this add-on for IE 7. It adds lots of extras to make your browser easier, more useful, secure and customizable.

This neat addition adds neat features such as tab enhancement, super drag-drop, crash recovery, mouse gestures, tab history, spell check, auto form fill, web page capture, ad blocker and many more.

And best of all it’s on the house.

Great Place #1: Remodeling — Cost vs.Value

Ever wonder what house upgrades will provide the best return on your dollar when the time comes to sell? Here’s a great place to get the answers.

Every year Remodeling Magazine releases its “Cost vs. Value Report” where you can select your region and view various remodeling projects ranging from a deck addition to bathroom remodeling. The report provides you with an estimate of the job cost along with the added value on resale and continues by calculating the percentage of the cost recouped.

You’ll find lots of other good information at this great place that will help with your remodeling strategic decision making.

Great Place #2: This is the Future

Think things are changing? One week’s worth of the New York Times contains more information than a person was likely to come across in a lifetime in the 18th century.

By 2013 a super computer will be built that exceeds the computational capability of the human brain. By 2023 a $1000 computer will exceed the capabilities of the human brain.

These are just a few of the observations in this mind boggling 8 minute show at this great place. It’ll get you thinking and is well worth a visit.