In This Issue:
- Top 5 Tips to Consider when Buying an Investment Property
- $8,000 Reasons to Extend Tax Credit Deadline
- Nevada Foreclosure Laws
As the nation and politicians seem to have taken opposite sides on health care reform, it seems that real estate scammers are bringing some bipartisanship on Capitol Hill. Just this week, Sens. Charles Schumer, a Democrat, and Jon Kyl, a Republican, brought legislation to the Hill that would give up to $200 million to state and local prosecutors to go after real estate fraud.
I see this as a win-win for the real estate industry. The law awards grants to prosecutors’ offices to hire new staff because, as Schumer said, “the housing crisis has spawned a cottage industry of refinancing and foreclosure prevention scams.” The other win is the legislation shows that reforms and safer days await the real estate business.
As you will read in this month’s newsletter, creative legislation such as the first time homebuyer tax credit and tighter laws in states like Nevada are having positive effects. You can have a positive effect on your business using our top five tips to consider when buying an investment property.
While the health care system is confusing and we really do not know which way the nation will go, it seems that the real estate industry is headed in the right direction. After a rough year, there is good news and new laws helping to improve the “health” and “care” of the real estate industry and us (the members)!
Top 5 Tips to Consider when Buying an Investment Property
Top 5 Tips to Consider when Buying an Investment Property
- Location, location, location. With the changes in the economy, rising fuel costs and changes in consumer priorities, location is becoming more important. The current trend is people wanting to be closer to the city center; another is that smaller more efficient properties are “in”.
- Strategy. You have one? The current market is much different than in the past five years. The days of flipping and short term investments are gone. Consider the more traditional buy and hold method. With strict credit many people may choose to rent rather than buy. Expect to hold for 3 – 5 years.
- Financing – got to have cash. With the current credit being so tight, your investment may require a fairly large cash outlay. Minimum of 20 percent, but be prepared to go all the way to 50% for non-owner occupied properties. Consider seller financing if possible.
- Look for a property with a sound fundamental structure. Paint, landscaping and carpet are inexpensive to fix and can turn a property into an attractive buy. But a roof, plumbing and structural problems will lead to significant fiscal investment, resulting in little monetary gain at sale time. Consider all costs and potential upgrades when evaluating a purchase.
- Taxes. Take advantage of the many tax advantages of having an investment property. Be sure to have a qualified accountant on your team to ensure that you are taking full advantage of this.
$8,000 Reasons to Extend Tax Credit Deadline
When the economy was broken, the government did what it could to fix it. One incentive has been a tax credit for first-time home buyers of up to $8,000. Now, according to an article in USA Today, this is the first time in five years that there has been increase in existing home sales four months in a row. I wouldn’t say the economy is fixed, but it is back on the right track.
Much of the credit towards helping those existing home sales is that tax credit and, perhaps because of it, we are in the midst of a market expansion. The bad news is that the final date for a first-time buyer to close on a property and receive the $8,000 tax credit will be November 30, 2009.
Some say that the credit should be extended to play out these economic gains, and some would like to see the tax credit limit expand to $15,000. That recommendation is a proposal in the U.S. Senate right now and includes any home buyer, not just the first timers. The $15,000 expansion would encourage the move-up buyer — one who is already a homeowner and is looking to purchase up. This all is aimed toward encouraging the housing recovery, keeping it going, and thus spurring on the economy.
It has also been recommended that the credit should be made available right now instead of having the purchaser wait to get the credit at some future tax time. This would allow the buyer to make immediate use of the money, for closing costs or a down payment on the property. As the rules for this tax credit now stand, a home owner must own the property for three years minimum in order to get the credit, to ensure, perhaps, that the buyer is a legitimate home owner and not just a speculator taking advantage.
Whatever happens, we know that the tax credit is directly related to some 350,000 home sales since its inception, and that proponents do not want the November 30th date to be the end of this economy boosting incentive.
Nevada Foreclosure Laws
In Nevada, lenders may foreclose on mortgages in default by a judicial or non-judicial process. Although both processes are permitted, judicial foreclosures are rarely used in the foreclosure process which typically takes 120 days from default to sale.
A non judicial foreclosure process allows lenders to sell a property in default without having to file a lawsuit. This is allowed because the mortgage contains a “power of sale” clause. Basically, the borrower pre-authorizes the sale of the property to pay off the balance of the loan if it would end up in default. The lender will record a notice of default with the county recorder and mail it to the borrower. The borrower then has between 15 and 35 days to pay off the default and stop the foreclosure.
At least three months after the recording of the notice of default, a notice of sale may be scheduled. A trustee is appointed, usually named in the deed, who will carry out the public sale. The notice of sale must be posted at least 20 days before the actual sale date of the property. The notice must be posted in three public places and published in a local newspaper once a week for three weeks. The place, time, and date of the sale must be stated in the notice of default. After the sale, ownership of the property is transferred to the winning bidder. In non-judicial cases there is no right of redemption after the sale.
In the judicial foreclosure process, a lawsuit is filed to obtain a court order to foreclose. This is used when no “power of sale” is stated in the mortgage. In general, a home will be auctioned off to the highest bidder after a court declares a foreclosure. In judicial proceedings there is a one year right of redemption period for the property.