Why Americans Love Real Estate

By Gino Blefari
President & CEO
Intero Real Estate Services, Inc.

Results from a new Gallup poll out this past month show that Americans still view owning a home as the best place to park their hard-earned cash for the long term. And of course, opinion writers jumped on the chance to point out holes in the thinking.

Results from an April 3-6 Gallup poll on the Economy and Personal Finances showed that 30% of Americans saw real estate as the top long-term investment, up from 25% a year ago. This follows a February survey from Fannie Mae that showed Americans’ positive views on housing.

One Washington Post writer was quick to point out the pitfalls of real estate as a long-term investment, quoting research from Robert Shiller that shows housing’s return paling in comparison to stocks and other forms of investment.

“Over the past century, housing prices have grown at a compound annual rate of just 0.3 percent once one adjusts for inflation, according to my calculations using Shiller’s historical housing data. Over the same period, the Standard & Poor’s 500-stock index has had comparable annual returns of about 6.5 percent.”

We’ve heard this argument before. And while you can’t argue with arithmetic, there are two very large considerations missing: one, real estate is local. We cannot stress this enough. While the national median price may have shown only incremental increases, individual markets often tell very different stories. For instance, if you had bought a house in Sunnyvale, California, in the 1960s, as my parents did, you probably would’ve paid less than $20,000. Today, that house would be worth approximately $1.5 million. Just think, if they had continued to rent, how much money would have gone down the drain over the last 54 years.

The other consideration that is constantly missed in the “housing is a bad long-term investment” argument is lifestyle – something you can’t quantify with numbers, charts and graphs. By succumbing to a lifetime of renting in order to keep your money tied up in the stock market, you’re also signing up your family for a lifetime of uncertainty. You have no control over your monthly housing costs. And you have no control over surprise letters in the mail stating it’s time to move because the landlord decided to sell.

This is why housing will always be top of mind for Americans when they think about where they want to invest their money. Because at the end of the day, it’s about more than money. It’s about security, controlling your own destiny, and rooting your family in a certain lifestyle. For these reasons, and though it may defy logic when put to long-term graphs, housing is and will be the best investment for the majority of Americans.



Home Accessorizing Made Simple

Accessories are what give an interior soul and help distinguish a home from a furniture showroom. When accessories are done right, they tell the story of the owners’ lives — their passions, their travels … and maybe even their heartbreak. But accessorizing a house can be a scary thing. We’re often unsure what to include, what to leave out and how to arrange the things that remain. Fear not. Once you understand the principles, accessorizing can be a snap.

Look around your house, attic, basement and yard for potential accessories. Sometimes it’s not the thing itself, but how you display it, that counts. Common objects like stones, shells or pinecones make great accessories — if you gather enough of them and display them in an attractive bowl. Arrange costume jewelry on a tray or fill a bowl with decorative matchbooks. The next time you travel, skip the T-shirt shop and head for the antiques store, craft gallery or flea market. You’ll come home with something attractive and a story to go with it.

The bottom line: If you have fun with your accessories, your family and friends will get pleasure from them, too. Check out more tips and find more inspiration below.

Property Taxes Due by April 10th

Property Taxes Due

On April 10th at 5PM, San Benito County tax collector will be looking for homeowners 2nd installment of their property taxes. Hopefully every homeowners has prepared for this date, and they have saved money to pay their property taxes on time.

If the payment is late, then a penalty fee of 10% and a service charge will be added to the bill.  Property taxes go on the Preliminary Report and affect title, so homeowners need to make this a priority.  If owners have a hard time saving for the 2 installments for taxes, speak to their mortgage company on a compound account to add the taxes into their monthly mortgage payment.

Do not let this be a surprise next year, as most homeowners property taxes will increase with your home value!  Findo ore information on the San Benito County Tax Collector website.

9 Easy Mistakes Home Owners Make on Their Taxes


Sin #1: Deducting the wrong year for property taxes

You take a tax deduction for property taxes in the year you (or the holder of your escrow account) actually paid them. Some taxing authorities work a year behind — that is, you’re not billed for 2013 property taxes until 2014. But that’s irrelevant to the feds.

Enter on your federal forms whatever amount you actually paid in 2013, no matter what the date is on your tax bill. Dave Hampton, CPA, tax manager at the Cincinnati accounting firm of Burke & Schindler, has seen home owners confuse payments for different years and claim the incorrect amount.

Sin #2: Confusing escrow amount for actual taxes paid

If your lender escrows funds to pay your property taxes, don’t just deduct the amount escrowed, says Bob Meighan, CPA and vice president at TurboTax in San Diego. The regular amount you pay into your escrow account each month to cover property taxes is probably a little more or a little less than your property tax bill. Your lender will adjust the amount every year or so to realign the two.

For example, your tax bill might be $1,200, but your lender may have collected $1,100 or $1,300 in escrow over the year. Deduct only $1,200. Your lender will send you an official statement listing the actual taxes paid. Use that. Don’t just add up 12 months of escrow property tax payments.

Sin #3: Deducting points paid to refinance

Deduct points you paid your lender to secure your mortgage in full for the year you bought your home. However, when you refinance, says Meighan, you must deduct points over the life of your new loan. If you paid $2,000 in points to refinance into a 15-year mortgage, your tax deduction is $133 per year.

Sin #4: Misjudging the home office tax deduction

This deduction may not be as good as it seems. It’s complicated, often doesn’t amount to much of a deduction, has to be recaptured if you turn a profit when you sell your home, and can pique the IRS’s interest in your return. Hampton’s advice: Claim it only if it’s worth those drawbacks. If so, here’s what to  know about what you can write off.

Sin #5: Failing to repay the first-time home buyer tax credit

If you used the original home buyer tax credit in 2008, you must repay 1/15th of the credit over 15 years. If you used the tax credit in 2009, 2010, or 2011 and then sold your house or stopped using it as your primary residence, within 36 months of the purchase date, you also have to pay back the credit.

The IRS has a tool you can use to help figure out what you owe.

Sin #6: Failing to track home-related expenses

If the IRS comes a-knockin’, don’t be scrambling to compile your records. Many people forget to track home office and home maintenance and repair expenses, says Meighan. File away documents as you go. For example, save each manufacturer’s certification statement for energy tax credits and lender or government statements to confirm property taxes paid.

Sin #7: Forgetting to keep track of capital gains

If you sold your main home last year, don’t forget to pay capital gains taxes on any profit. You can exclude $250,000 (or $500,000 if you’re a married couple) of any profits from taxes. So if you bought a home for $100,000 and sold it for $400,000, your capital gains are $300,000. If you’re single, you owe taxes on $50,000 of gains. However, there are minimum time limits for holding property to take advantage of the exclusions, and other details. Consult IRS Publication 523.

Sin #8: Filing incorrectly for energy tax credits

If you made any eligible improvements in 2012 — or will in 2013 — such as installing energy-efficient windows and doors, you may be able to take a 10% tax credit (up to $500). But keep in mind, it’s a lifetime credit. If you claimed the credit in any recent years, you’re done. Fill out Form 5695.

Part II of the form, which covers systems eligible for a larger tax credit through 2016, such as geothermal heat pumps, can be incredibly complex and involves crosschecking with half a dozen other IRS forms. Read the instructions carefully.

Sin #9: Claiming too much for the mortgage interest tax deduction

You can deduct mortgage interest only up to $1 million of mortgage debt, says Meighan. If you have $1.2 million in mortgage debt, for example, deduct only the mortgage interest attributable to the first $1 million.

This article was original published in Jan. 2011.  By: G. M. Filisko

This article provides general information about tax laws and consequences, but shouldn’t be relied upon as tax or legal advice applicable to particular transactions or circumstances. Consult a tax professional for such advice.

Lawmakers eyeing MID as source of tax revenue

By: Stephen Fishman

<a href="http://www.shutterstock.com/pic.mhtml?id=46650142" target="_blank">Mortgage interest deduction</a> image via Shutterstock.

If desperate times call for desperate measures, the mortgage interest deduction — at least as we’ve known it since 1986 — could be in real trouble.

Everyone is looking for ways to cut the federal deficit and avoid the fiscal cliff. This will require both spending cuts and tax increases.

There are two main ways to raise taxes: raise the tax rates or reduce or eliminate tax deductions. The Republicans are dead set against raising  tax rates for anybody, so reducing deductions may be the only option available to increase tax revenue.

One of the most expensive tax deductions is for home mortgage interest — the “MID” costs about $83 billion per year. There has been talk about cutting or eliminating the home mortgage deduction for years, but it has never gotten anywhere. Not only is the real estate and building industry staunchly opposed,  the deduction also has broad support from the public.

There are two ways Congress could cut the home mortgage deduction: the direct way or the sneaky way.

The direct way would be to reduce the amount of the specific deduction. It could, for example, be limited to homes worth $500,000 or less, rather than the current $1 million limit. It could also be eliminated entirely for second homes. The most extreme measure would be to completely phase out the deduction entirely. Such direct attacks would be vigorously opposed by the real estate industry.

It’s more likely that Congress will go the sneaky route. Instead of specifically targeting the home mortgage deduction, a cap would be placed on all itemized tax deductions. The Obama Administration has already proposed capping such deductions at 28 percent for households earning more than $250,000. This would substantially reduce the value of the home mortgage deduction for high income taxpayers.

For example, under current law a taxpayer in the 35 percent bracket and deducting $25,000 in mortgage interest payments would receive $8,750 in tax savings. However, if the deduction was capped at 28 percent, the same taxpayer would save only $6,250.

Capping the home mortgage deduction — or reducing or even eliminating it — would not affect the great majority of taxpayers. Since the home mortgage deduction is an itemized personal deduction, it can’t be taken at all by the 70 percent of taxpayers who take the standard deduction instead of itemizing.

According to the Urban-Brookings Tax Policy Center, about two-thirds of the total tax savings from the home mortgage deduction go to households earning $100,000 to $500,000 per year.

Moreover, the deduction disproportionally benefits homeowners in wealthy cities and states where real estate prices are high. For example, the average per capita tax benefit for the 20,000 residents of Beverly Hills, Calif., amounts to $1,873, while the average benefit for the 20,000 residents of Clarksdale, Miss., is only $45.47.

Thus, reducing the deduction may come to be viewed as a way to reduce the deficit without harming the American middle class.

Monday Market Myth: Community Property

Myth: Because two people are legally married, the surviving spouse will automatically be granted the property.

False: Many people are under the assumption that the surviving spouse can absorb the monthly mortgage and automatically transfer title.  If it is not written, notarized, and recorded properly, then the property can be seized by the government or foreclosed by the bank.

Here are a few tips on what a owner can do to protect his family and property, should the unfortunate happen:

  1. Find out if you want to hold your property in a Trust, will, or change title to a. community property, b. joint tenants, or c. tenants in common
  2. Talk to your CPA about the tax consequences and capital gains when the property is sold.
  3. If it is not in writing, it does not exist as far as real estate is concerned.
  4. For the most accurate advice for your situation, please consult an attorney.