Some usual tax benefits

Some tax benefits that are applicable on your first home are also valid for your retirement home. For instance, if you have taken a home mortgage to buy your second home, then you can claim tax deduction on the monthly payments you make to pay off your debt. Likewise, to ensure the safety of your new home, you must have taken an idyllic homeowners insurance policy. You can get tax benefits on the premiums of the insurance policy. Yet another area where tax deductions can be claimed is property taxes. These are some standard tax advantages that you get on buying your second home.

Rental income and tax benefits

Under normal circumstances, you won’t be living in your second home. If you rent out your unused premises, you can open a new source of income. In addition to getting regular rental income, you can also claim a number of tax deductions. There are three different scenarios of getting tax benefits.

You use more and rent out seldom- If you live in your second home and rent it out occasionally, that too for less than 15-days, then your will not get any tax benefits associated with rental. You don’t have to report your rental income in your annual income tax statement.

You use less and rent out regularly- In the second instance, you use your vacation home for less than 15-days in a year. For the remaining time period, tenants use your home. In such a case, you would have to declare your rental income in your tax statement. However, you become eligible for several tax benefits. Like, you can claim deductions on any repair work or alterations you undertake. You also get tax benefits on the rectification of damages caused by natural disasters as fire, earthquake, hurricane, tornado, etc. With time the value of the rental property depreciates; you can deduct the annual depreciation too. Another area where massive tax deductions can be applied is rental property management.

If your rental income is profitable, then you can deduct all the expenses pertaining to the management of rental property from the profit. However, if your rental property is not that profitable, then passive activity rule becomes applicable. According to this rule, if your rental income falls short of $100,000, then you claim a loss of at least $25,000. Things change slightly when your rental income is more than $100,000. In this scenario, the rental loss will continue to decrease until the rental income reaches the $150,000 mark. Thereafter, the rental loss won’t be considered.

You use some and rent out the rest- If you live in one half of your second home and the remaining half you have given on rent, then too you qualify for tax benefits. In this instance, you would have to report your rental income.

In nutshell, your second home is not just another lifeless property; it is a unique equity-building vehicle that helps you garner money easily and quickly.

 Now, let’s look at some of the advantages and disadvantages of home ownership. If you own your home the appreciative value of a home is not taxable if it is your principal residence. At the beginning of your mortgage little principal is paid on amount owing, However, in the latter years of your mortgage the equity in your home will grow at a much greater rate.  If you are a first time home buyer you may borrow from your RRSPs to a maximum of $25,000 each (up from $20,000 in previous years). The borrowed amounts can be taken out tax-free if you purchasing the home as your principal residence, and repayments to your plan are made over a minimum of 15-years.With rising housing costs financial institutions and private lenders have become more creative with mortgage amortizations and down payment requirements. This has allowed qualified purchasers to buy a home with as little as nothing down.

People looking for a mortgage should always be cautious when banks are lining up to give you money, as it is today. Marketing hooks like “no money down” popular with car dealerships and big banks are often misleading. Check for extra fees associated with “nothing down.” “No money down” does not mean “no fees.” Carefully check the true total amount you are borrowing, it may not be the “amazing deal” they lead you to believe. Your name may be on the title, but how much of the house is really yours? Current interest rates are at historical lows. You can choose either fixed or variable interest rates (based on the prime rate). Calculate your mortgage payments if interest rates were to rise by one or two percentage points. Ask yourself if you can still afford your mortgage if and when these rates rise. A homeowner’s carrying costs are generally greater than renting. Some of the carrying cost may be tax deductible, providing it is used as a home office for a business, self-employment or to earn rental income. Lower-income earners, in Ontario, may be able to claim the Ontario tax credit for property taxes when filing their annual tax return. With more than 70 per cent of Canadians owning their own home – there is no value that can be placed on the pride of home ownership.

So, at the end of the day it’s a choice based on lifestyle, careers, and future goals. There are obviously advantages and disadvantages to home ownership or renting a home. The choice is your just make sure you make the right choice for you and your family.

After purchasing 3 cash flow properties in Mount Pleasant, I was in the position where I needed to get them rented, and fast. We all know the first years of payments to the bank are mostly interest, so you might as well be using someone else’s money rather than burning your own. My agent had introduced me to a property manager who recommended that I furnish the houses before I rent them. She told me the spread between the mortgage and rent would be higher. What she didn’t tell me was that furnished rentals were more conducive to short term tenants and that she got a nice commission every time new tenants came in! Thankfully I only furnished 2 out of the 3 homes before I caught on, but it was still an expensive lesson. So an aside to all of this, be careful who you get involved with when using any service and always get references!

So after terminating the agreement with the property manager, I began contacting everyone and anyone who did property management in the area. The best deal I found through property management companies was $250 setup (internal fee) and 5% of the ratified lease agreement… which boils down to ½ month rent + $250.

Then I started asking the companies and people I was speaking with, “what exactly does a property management company does to get the house rented”. The key tasks were:

Staging the home
Showing the home
Placing an ad in the Post and Courier
Placing an ad at craigslist.com (the worst did this once every month, the best… every 3 days)
Sharing your property rental needs with colleagues
Collecting the rent and forwarding the rent to you

Realtors and agents have access to the Multiple Listing Service (also known as MLS), which is a powerful tool to get your property in front of other agents who may have someone looking for what you are selling or renting. You can get your property on the MLS by using an agent or going to a direct listing service for a fee (usually about the same as any setup fees you are charged with property management companies).

Admittedly, I have some real estate experience, but more as a hobby than a profession. I have agents handle my real estate investments up north but down here in Mount Pleasant South Carolina, I did not know anyone and my first experience with a property manager left a very bad taste in my mouth. The others seemed like they could handle the work, but I was burning through my reserves pretty fast and all the Short Sales in Charleston were keeping me up at night.

So I started posting the property on craigslist…

At first I would post once a day, manually. I created my ads in a Word document so I could copy and paste the text body and title, and I would punch the rest in. It only took a short time to notice my ads were getting buried in the hundreds of ads being placed each day. Then I noticed one person’s ads were sticking out, and they weren’t mine!

There was a gentleman who was using a funky looking arrow at the begging of his ad post that made his ads stand out. So just like any true man of academia, I copied his bullet! Now it was easier to see my ads and it motivated me to post several times a day, it was time consuming, but I was starting to get some calls. By now I had burned through a second month of mortgage payments for 3 properties and was feeling pretty motivated to get these things houses rented.

The problem was the time it was taking to do 3 postings 3 to 5 times a day, while trying to run around and do showings, and to do my day job as well. Then I automated. I tried several different posters but each kept getting caught up on the captcha (where you have to type in the letters you see to confirm you are a real live human that is doing the posting). To get it fully automated, I would have to pay a fee or buy expensive software that could read the captcha codes.

During this time, one of the 3 houses got rented, but it was far from celebration time. I now knew that craigslist was having an effect. Even after the house got rented, I had to go back and delete the ads that had been posted so the calls would stop!

Soon I found a software tool that would automate the ad the submission process all the way up to the captcha part, I would manually type in the captcha, and move on to the next ad. It took a little time to find the sweet spot for the rental price, I slowly dropped the price lower and lower every week until the phone started to ring. Now we were cooking. Calls were coming in, the properties were being shown (by me and my wife), and things were looking up. Then the next month of mortgage payments hit.

I was in a panic, I was ready to do anything to get these places rented, even take a loss. Just when things were looking dim, and I wasn’t sure if I was going to be able to hold on to my investments, a life changing thing happened… Steve Banis from South Carolina Homes, Inc. called me. It turns out, it was his bullet I had copied on craigslist and he wanted to see who the guy was that was putting up 5 times the number of his bullets everyday! As fate would have it, Steve and I hit it off immediately, from our thoughts on the real estate market to just our everyday beliefs and codes of conduct. It didn’t take long for me to take a liking to Steve, he was one of those guys that you come across once in a lifetime, maybe twice. I feel twice as bless because as our relationship developed. I became acquainted with Steve’s partner Matt Napier (completing my quota of once in a lifetime meetings) and one day after the second home had rented, we all (including my wife) met for lunch.

Now the I’s above would suggest it was all me doing this work. This is me taking credit for my wife’s work. I have a full time day job as a Network Engineer at my consulting firm, Technology Solutions by N.K.Narula covering Charleston SC and West Chester PA, and my wife has always handed the accounting and day to day management of my real estate investments in Arizona, Massachusetts, New York, Pennsylvania, and South Carolina. So it wasn’t a big stretch for her to take on the semi automated posting once I had hammered out the kinks. She currently does Real Estate Support Services in the Mount Pleasant area in South Carolina.

Meeting Steve and Matt was a ray of sunshine. Ever since we got to Mount Pleasant it seemed like just about everyone we met was ready to take, take, take. I guess when you’re buying houses you should expect that, but we wear our hearts on our sleeves on our shirts and were new to the area, we wanted to make friends. Goes to show, trying to be treated fairly and kindly by treating others fairly and kindly is like being in a lion’s den and expecting not to get eaten because you are a vegetarian. That’s not saying you should be mean or not treat people fairly, just be careful… it only takes one bad person to really make your life miserable!

Steve posted my final property (the one with the largest mortgage) on his website at www.schomesellers.com and sent a mass mailing out to his contact list which consisted of thousands of people. Here’s the kicker… Steve and Matt did all this for free! In return I assisted them with some technology needs, but it was evident, these guys were selfless individuals motivated by helping others. If you have real estate needs… I whole heartedly suggest that you enter your information at the http://www.schomebuyers.net/ website and they will call you back very promplty!

It didn’t take long after that, the house rented but it was unclear where they went to first, Steve’s website or craigslist… but they did go to both!

Steve and Matt keep in touch with my wife and I to this day and we talk on the phone quite often. We never miss an opportunity to get together to catch up and compare our thoughts and ideas on how we can help each other improve our businesses and stream line our methods, all with the focus of helping others.

It should go without saying but for the current business climate of rudeness and greed; always remember that the relationship you have with people you know and work with is more important than any single deal. When you put people first you will win. Put money first and you will lose. ~anon

Bottom line, does craigslist work… YES, and it doesn’t hurt to have friends like Steve and Matt, and I can’t forget to mention… the help and support of a wonderful wife!

Signed,

Neil Narula

Take Care of the Children While Working

It can arguably be said that one of the most often cited reasons to start a business from home is so that one or both parents can stay at home with the children while earning an income at the same time. Some individuals shy away from day care facilities, as they would like the best of both worlds by working and caring for their children at the same time. Many home-based businesses make this possible by allowing the parent to be in the house with their children and pay the bills as well.

Little or No Overhead Costs

An individual who works from home may also choose this business route as it allows them to expend little or no overhead on business expenses. Although many individuals will have to pay some extra costs associated with their business expenses, it is undoubtedly more economical to work from home than rent an office building and hired help elsewhere. Also, by starting a business from home, the business owner is already paying utility bills anyway so this too will reduce the overhead costs.

No Commute to Worry About

One will surely appreciate the fact that they have no commute which they have to deal with at the beginning and end of the workday. When one starts a business from home and has a home office they will not have to worry about commuting and dealing with all of the headaches and hassles that go along with such a thing like high gas prices, traffic and wear and tear on the automobile.

Time Efficient Alternative

If one chooses to start a business from home, they will also find that it is a time efficient alternative to the usual work environment. Not only will the individual save time on the work commute but they will also find that they can eat lunch at home which saves time by not having to venture out to find a meal during the day.

Can Work Around the Clock If One So Chooses

One last great reason to start a business from home is that it enables the business owner to work around the clock if they so desire. For example, should the business owner need to finish up some paperwork after dinner, all he/she will need to do is to walk over to their home office and take care of the issue. The 24-hour availability of the business from home provides convenience for the business owner.

Mike Kent, a realtor who sells homes in Birch Bay, Washington says that “about 70 percent of our buyers, for the last three, four months have been from Canada – Vancouver in particular.” Kent says that Canadians are following an American trend of purchasing retirement homes and renting them out until they’re ready to use these homes.

Another force driving Canadians to shop across the border for second homes is that Canadian real estate prices have soared astronomically in many areas while US home prices have begun to soften. Many Canadian buyers find that they can find a comparable home in the US for one-third to one-half the price of a Canadian home.

Retiring baby boomers are interested in purchasing vacation and rental properties. These properties can be used to earn income to supplement their pensions during their retirement years. It seems prudent for such investors to look beyond their own border for real estate opportunities. Average home prices in cities such as Vancouver have now topped the $800,000 mark. This exceeds the average price of most American cities. The real estate and oil boom in Western Canada have resulted in many home buyers being able to afford a second home. The rising Canadian dollar coupled with sharp increases in Western Canada’s real estate market will continue to drive more Canadian investors into the American housing market.

Take your time to monitor the market and see what the going prices are. You want to be able to buy your vacation home for a low price. This way you get a better return on your investment. It is also very likely that you will be able to sell it for a nice profit in the future. It will depend on the popularity of the vacation home location when you are ready to sell it as well as the market trends.

Carefully consider the location where you want to have your vacation villa. How much time do you plan to spend there? How much is the upkeep of the home going to cost you? What plans do you have for the vacation home when you aren’t using it? You also want to make sure this is a location where you want to continue spending your vacation time. If you aren’t sure then you should want to invest in one until you know for sure.

There is a misconception that only the very wealthy are able to buy a vacation retreat. That simply isn’t true in today’s economy. Many couples are investing in a vacation home rather than their retirement fund right now. They know they can always borrow money against their vacation home if they need money in the future. You can also make money from the vacation home by renting it out to other parties when you aren’t using it.

Make sure you know what it is that you are buying when you look at vacation homes. You don’t want to get so caught up in the fact that it is along the beach to not notice the poor shape of the foundation or that the pipes are leaking. While you definitely want the scenery from your vacation home to be lovely, you need to pay attention to the details of the vacation home. Take the time to ask why it is for sale in the first place as it can affect your decision to buy it.

Traditional mortgages don’t always require large down payments. If you have a good income, stable job and good credit, you should easily be able to get a traditional mortgage, even without a down payment.

However, if your credit is bad, there are still plenty of options for getting into the real estate market. Despite the mortgage-due-on-sale clause, sometimes a buyer can take over payments on an existing mortgage. It is very unlikely a bank will demand the full mortgage, and risk ending up having to deal with a foreclosure, if monthly payments are being made on time. These sales, called “subject to” sales. In these cases, the seller will require a second mortgage to get their equity out of the home. If there is little or no equity in the home, a contract can be arranged wherein the buyer agrees to pay off the sellers mortgage in a set number of years when they in turn sell the home. Often, this deal is made with the promise of a percentage of the buyers profit going to the seller when the home is sold again.

These contracts allow a highly motivated seller to walk away from their mortgage and either easily get a second mortgage, or start fresh, but receive a check in an agreed upon number of years for a percentage of the homes re-sale. As a buyer, you can assume the mortgage, either live in the home or rent it out, then when it has gained equity, sell it and only then give the person you bought it from a small sum.

While subject-to sales sound complicated, they can really be a great deal for both buyers and sellers with little money.

Make improvements that count.

Experts agree that the right renovations, especially bathrooms and kitchens affect the marketability and the rentabilty of your Vacation Home. Bathrooms have become a popular remodeling choice, and for good reason, they have the highest rate of return of any home addition or home remodel. Real estate agents agree that a gleaming kitchen with state of the art appliances, cork or hardwood flooring, stone countertops and lots of cupboard space can sell a house the instant a prospective buyer sees it. Conversely, a cramped, ill lit kitchen with outdated linoleum and harvest gold appliances might actually scare buyers or renters away. Now you may not want to go to that expense if this is a little mountain cabin get away that you only plan to use yourself a few times a year. But you have other options

Update what you can’t renovate.

If you can’t afford to renovate, update and refresh key rooms instead. Replacing an old countertop, repainting cupboards and walls, installing new door pulls and lighting make big improvements to your kitchen for a very modest price.

Similar touches increase appeal of older bathrooms, too. Fresh paint throughout your home is another low cost, high return project. It makes everything look cleaner and brighter. Decorate with rustic lighting or rustic furniture this will add a mountain cabin charm that will make your rental special. When you are ready to sell, buyers love a vacation home they won’t have to redecorate immediately. And renters who find that perfect vacation home to rent will return year after year.

Maintain where you can.

Depending on the age of your Vacation Home you can expect to spend between one and three percent of it’s value every year on maintenance and repair. Your maintenance budget should increase as your Vacation Home ages, so remember to include funds to replace major items as required. Foundations and roofs are things that are difficult to inspect, but the long run minor repairs can save about ten times the cost of work necessary to replace or rebuild.

Don’t over improve:

Before you commit to any big project, ask, “Is this improvement out of character for my neighborhood or area ?” If the answer is Yes, you may be consigning your house to an oddity status. If your vacation home is improved beyond the scope of all the surrounding area. Then it is likely your vacation home’s value won’t be realized when it comes time to sell.

Do your home value homework before you remodel. You want to attract good seasonal renters plus have the comforts you prefer when using your Vacation Home. But you don’t want to go overboard unless you intend to hold onto it for years to come. Be certain your choices will help you sell that Vacation Home when the time comes.

1. One dream that you could create is to be able to work at home full time and quit your day job. This is a dream that many online marketers have (and achieve) and it is a strong motivational factor. Once you are earning enough income from you Internet home business, working full time at home is a real possibility.

2. Another dream would be to get to a point financially where it would be easy to pay off your month end bills. There are many people who do not make enough money to cover their monthly expenses. With an Internet home business bringing in extra money, you will be in a much better position to deal with your financial challenges.

3. Yet another dream would be to buy or pay off a house. You could buy a primary residence for you and your family, for instance. If you already own, then why not buy a vacation home. Alternatively, you could buy a home to rent out and earn a residual income.

A fourth dream could entail providing something nice for your children. Suddenly, that expensive specialized soccer league or that special music program is affordable. Also, you may want to put some money aside for their college education from your Internet home business earnings.

5. A trip to the Caribbean or some other exotic part of the world would be a great idea. Let’s say that you put away $1000 per month from your Internet home business earnings. In under a year, you could pay upfront for your vacation and not have to go into debt.

6. Donating money regularly to charities is a dream that many people have. There are definitely many charities to choose from and your home business could certainly help to pay for this.

7. One final dream that I would like to present is to invest your Internet earnings and retire while you are still young. You require seed capitol to invest in the stock and real estate markets. It can be difficult to come up with this extra capitol from a regular job. Your Internet home business profits could fill this void quite nicely.

These are 7 dream list suggestions, however, feel free to add your own dreams. The main point that I am getting at is that you really need to create a dream list and then read it every morning. This will keep you motivated while you are working on building your Internet home business.

Selecting a new home in Chicago first starts with selecting the area where you want to live. Chicago’s suburban real estate market is as vibrant as it is in city itself. But selecting the location is not just an address, it’s everything from the quality of the soil under your feet to the view of the sunset from your back porch or balcony. Having an idea of how long you plan to stay there is also helpful when making the final decision. After choosing a community or neighborhood in which to search for a new home, most people ask several typical questions like how close is the home to the office, or to local schools. And of course, the most important question of all: Can we afford it?

But there are also some other things potential buyers must consider when selecting a new home. They should investigate the future infrastructural plans in the chosen Chicago neighborhood and try to foresee how those changes can affect their life. Further more, prospective buyers should recognize that services and costs in the new location differ significantly from those in their old neighborhood. It is important to remember that communities in Chicago change rapidly and it is in your best interest to know as much as possible about potential changes before making a purchase.

The city of Chicago has many housing options ranging from single family homes to investment homes, luxury high rise condominiums, townhouses or even homes for rent. The suburbs have developed both commercial as well as residential real estate at a tremendous pace. A large number of residential and commercial properties are always available for sale or purchase in Chicago’s suburban areas like Lake, Kane, DeKalb, DuPage, and Will counties.

New homes offer better windows, efficient heating and cooling equipment, superior air filtration systems and insulation, all adding to your energy efficiency, in comparison to homes built 20 years ago. New homes are structured to meet today’s more strict safety codes that give new homeowners an unmatched level of protection. If you buy a new home still under construction, you can decide on the color scheme, appliances and other design characteristics to suit your taste.

When selecting the home, check the builder: do they build quality homes? What’s their reputation, and what do others say about them? Other things to consider are the type and size of the home you want. Define how much funds you have available. How will you finance it? Then you can start the search. Use the internet, as there are plenty of websites selling Chicago homes and real estate properties.