July sales by area 2010 vs. 2009

AREA                          July 2010 Sales                  July 2009 Sales

Stockton                      369                                           571
Lodi                              62                                            67
Manteca/Lathrop     145                                           214

Impact of tax credit was enormous

Sales and For Sale in the last 12 Months

The monthly sales stats paint a very clear picture– the effect of the tax credit on the Stockton area real estate market was ENORMOUS.

Here are some things that jump out at us, when we look at these numbers:

• Sales in the San Joaquin County dropped 32% in July
• Stockton was the loss leader– a whopping 34% fewer July sales
• Lodi saw only a small dip in sales, relative to the other areas.

What does the rest of 2010 hold?

It is not obvious that the tax credit was holding the real estate market up and had increased the demand for housing.  Now that it has expired, we will see how the buyers react and will get a true demand and gage of the market strength.

Traditionally, July and August are when buying is at its yearly peak.  The slow-down begins in the fall and into the winter months.  But with the peak of the market already taken a dive it doesn’t look to good for the remainder of 2010.  The one positive aspect to this market is the historically low interest rates.  However, I’m not sure this will convince buyers to continue their activity as shown earlier in the year.

For reference, there were 510 sales in Stockton area in the month of August 2009.  In order to reach that mark again, demand in the area is going to have to do a dramatic turn around.

If you have any questions about any of these real estate stats, please don’t hesitate to leave a comment on this post.

Inventory of homes for Sale in past 12 Months- Click for larger image

]]> http://mckeeverrealestate.com/stockton-real-estate-area-sales-drop-35-in-july/feed/ 0 http://mckeeverrealestate.com/is-the-origination-fee-points-deductible-yes-the-irs-says/ http://mckeeverrealestate.com/is-the-origination-fee-points-deductible-yes-the-irs-says/#comments Tue, 27 Jul 2010 19:05:31 +0000 keebler http://mckeeverrealestate.com/?p=2416 Continue reading →]]>
Points!  Those pesky fees charged by banks and loan brokers are annoying and can sometimes be incredibly large.  The good news is that that fee can be deducted on your taxes.

The IRS says so! Surprisingly the IRS site on points is very easy to read.

Points may also be called loan origination fees, maximum loan charges, loan discount, or discount points.  I have read the IRS page on points and I believe I have a clear understanding of how it works.  However, I am not a tax professional nor do I give tax advice.

Attention Home Buyers:  Please, please, please consult your accountant to see how much you can write off.  Be sure to save your HUD-1 (the form which breaks-down the money) that you the receive from escrow.

So how is it deducted?  Here is the example taken from the IRS site.

Have more questions?  Read the IRS instruction for yourself on points:

http://www.irs.gov/publications/p936/ar02.html#en_US_publink1000229936

Please note I am not an accountant and do not claim to know everything there is to know about rental income tax laws.  I would advise you to speak to your accountant about any of the tips list here.  :)

#1 RENTAL INCOME TAX TIPS

The lower your rental income for the year, the less that you will owe in taxes. By minimizing your rental income, you can reduce your taxable liability.

This does not mean you should stop collecting rent, it just means you might not have to include all the rent you’ve collected in your taxable rental income.

1. You don’t have to report your rental income if you rented out your property or vacation home for 14 days or less.

2. Rental income is taxable in the year it is collected. If you did not receive the last month’s rent in the current year, do not report the income in the current year.

3. Exclude Security Deposits from your rental income if you plan on returning the deposits at the end of lease.

#2 MINIMIZE TAXABLE GAIN USING SALE EXPENSES

Many real estate investors overlook deductions when they sell their property. If you sold your rental property for a gain, make sure to minimize taxes by accounting for sale expenses – like closing costs, which can be found on the property’s settlement statement.

You should deduct Commissions Paid, Title Charges, Recording and Transfer Charges, and Additional Settlement Costs from the Contract Sales Price. This will help you minimize gain, and lower the tax liability on your sold property.

#3 LOOK FOR PROPERTIES WHILE ON VACATION

Be sure to deduct the cost of expenses incurred while looking for new property. Travel expenses in connection with the management of your investments are tax deductible if they are ordinary and necessary.

At least half of the time you spent away on travel must have been spent doing business, and the primary cause for travel must be business. Common business expenses that you can deduct while scouting for new investment properties are fees for travel, lodging, and services.

#4 ORDINARY AND NECESSARY ADVERTISING EXPENSES

Be sure to deduct any advertising expenses that are considered “ordinary and necessary” for your rental property.

Common expenses can be advertisements on the radio, in the newspaper, classified lists, and phone books. Other expenses may include the cost of

signs, banners, and postage for mailers. You can even deduct the cost of advertising for vacancies, including the cost of building a web site – just be sure that they are “ordinary and necessary” for your rental activity.

#5 DEDUCTING TENANT UTILITIES THAT THE LANDLORD PAYS

Utilities paid by the landlord for tenant use are fully deductible, provided that this is part of the rental agreement.

Landlords often incur expenses to light common areas or operate security systems on their properties. Other common expenses include power, water, gas, and cable, and internet.

Any utility costs incurred during a period of vacancy are also fully deductible – but be careful. Deducting large expenses during periods of vacancy can be a reason for the IRS to become suspicious.

#6 DEDUCTIBLE START-UP EXPENSES

Business start-up costs are generally capital expenditures, but you can elect to deduct up to $5,000 of business start-up costs incurred in 2008. The $5,000 deduction is reduced by the amount your total start-up costs exceed $50,000, and the remaining cost must be amortized.

Start-up expenses are costs incurred while creating an active trade or for investigating the creation of a business or trade. This includes expenses incurred when acquiring an existing for profit activity, as well as expenses incurred during the anticipated production of income.

Common start-up expenses may include:

Accounting fees

Analysis, survey, or study of potential markets, products, labor supply, transportation facilities, etc.

Advertisements for the opening of the business. Office equipment and furniture, setup costs Salaries and wages for employees who are being trained and their instructors. Travel and other necessary costs for securing prospective distributors, suppliers, or customers. Salaries and fees for executives and consultants, or for similar professional services

Keep in mind that certain expenses must be amortized over 5 years. Such expenses include legal expenses and expenses for setting up the business structure (as an LLC, etc…)

#7 SELL PROPERTY TO YOURSELF

ever, after moving out of the property, you sell it to your own S-Corporation, which allows you to exclude capital gain (up to $250k, $500k if married filingjointly) because requirements for the two-year rule have been met. The other advantage is you can have a new basis for depreciation on your appreciated property. Selling to your S-Corp isn’t for everyone though. You should avoid using this strategy if you cannot take advantage of the exclusion amount.

#8 PAY YOUR KIDS, OPEN THEIR IRAS

If it looks like you will have a large taxable liability at the end of the year, it’s not a bad idea to hire your kids to landscape your rentals.

You can pay your kids to do work on your properties, and put the money in IRA accounts for them. This is especially a good idea if you’ve already maxed out on your and your spouse’s IRA contribution for the year. You’re better off avoiding the taxes on your extra income, and the money will be safe in a tax free shelter.

And of course, it’s a great way to help your kids prepare for their first property!

To learn more about saving money on taxes, try the property management software and other money saving real estate software from TReXGlobal.com.

Selling property to your own S-Corporation may be beneficial in some specific situa- tions, like if you are trying to meet requirements for the two year rule ($250/500k exclusion), or if you are trying to take advantage of depreciation on appreciated property.

For example, say you lived in a property for three years, and rented it out for the next seven years – since you haven’t lived there for two out of the last five years, you cannot sell the property as a primary residence to avoid the capital gain.

#9 TRAVELING AWAY FROM HOME

You can deduct the expense of traveling away from home if the primary purpose of the trip was to collect rental income or to manage, conserve, or maintain rental property.

You can also deduct expenses incurred while staying overnight when traveling for business.

You cannot deduct the cost of traveling away from home if the primary purpose of the trip was the improvement of your property. You can read Publication 463 to learn the specifics.

#10 HIRE FAMILY MEMBERS TO MANAGE YOUR PROPERTIES

Property management fees are fully deductible, so consider hiring someone that you don’t mind paying, like a family member.

Obviously, the expense of your own labor cannot be written off, but that doesn’t mean your spouse or children have to work for free.

By hiring family members, it won’t bother you to pay manage- ment fees because the expense is fully deductible, and the money stays within your family. Keep in mind you’ll have to withhold Social Security and Medicare taxes for the income you pay.

AND of course, hiring a professional is always a good idea. Your teenager might not be the greatest candidate to collect rent

Everyone’s tax situation is different, and this information should not substitute professional advice. Taxpayers should always consult with their tax advisors to consider specific factors that might affect their situation. You can also refer to IRS Publication 535 to learn more about business expenses.

Source: To learn more about saving money on taxes, try the property management software and other money saving real estate software from TReXGlobal.com.

• More Forecloures coming to the market
• Higher Interest Rates
• Expiration of the tax credit (April 30th)

Dave’s take:

First of all I hope let me say that I hope i’m am right.  I sure don’t want my personal home to keep declining in value.

Real Estate is local local local. Working in a high foreclosure area in Stockton, Ca, I agree with the articles first point to a slight degree. Here in Stockton we are getting multiple offers on these foreclosed homes. I’m talking 5-15 offers! Our inventory is down to 1.4 months. A normal market is 6.5 months. An increase in supply of homes in our market will not hurt our prices to much. It will bring it back to a more normal supply and demand.

Rates will affect prices. Higher rates=less qualified buyers. Less buyers =more homes on the market= price drops.

The Tax Credit: Many people I speak to are buying because of the affordability of today’s home prices. Most could not have bought 3-4 years ago. The Tax credit is just a bonus for buying now! Come summer when prices are still low they are not going to stop buying because the tax credit went away. They are buying because they can own a home for less than what it would cost to rent.
David McKeever with http://mckeeverrealestate.com Stockton Ca

There are many reasons you may wish to buy a home, whether you need or want:

On the other hand, you may not be ready to buy a home. Buying a home:

The purchase of a home is, in part, a financial transaction.  Much like a trip to the grocery store to buy coffee, you have many choices and a significant price range. But unlike a bag of Costa Rican coffee, a house has certain bonuses: Equity, Tax Savings and Ownership.  What’s all that mean? Read on.  

A house is an investment in land and the existing structure.  History tells us that there is a good chance that a house will increase in value over time.  Also, by making timelymortgage payments, you are paying down the debt you owe and building equity.  Equity is the difference between the value of your home and how much you still owe.  You may not own your home outright, but your investment has a cash value. 

In addition to increasing in value over time, owning a home can have a significantimpact on your monthly paycheck – in a very positive way!  When you borrow money to purchase a home, the interest that you pay on that money is usually tax deductible.  

 For example, if you have an annual income of $45,000 and owe $200,000 on a 30-year mortgage at a fixed 7% interest rate, you’ll likely save about $200 per month intaxes the first year you own the home!