Tax Advantages to Owning Real Estate

We've had a lot of bad news this past year and a half with financial markets crashing and foreclosures rising, but real estate continues to be a good investment.  Certainly you have to buy and sell at the right times to make money, but there are a variety of tax advantages to owning real estate that help make it a solid investment.  Remember, I'm not a CPA or an attorney, so you will always need to check with your advisors to make sure this information has not changed or applies to your situation. 

Tax Credits
I've mentioned the tax credits in earlier columns, so I won't discuss them in detail other than to say that most first time buyers and many repeat buyers are eligible for substantial tax credits through June 30, 2010 as long as the house they are purchasing is under contract by April 30, 2010.  There is some qualifying criteria that needs to be met, but these tax credits will go away next summer so eligible buyers need to act quickly to take advantage of them.

Sale of a Primary Residence
This has been around for several years, but I still have clients who are confused about this.  Right now, a homeowner can sell a primary residence every two years and not be subject to capital gains tax on the money made from the sale of the house.  A seller does NOT have to reinvest the proceeds in another home.  There are limits to the sales price.

1031 Exchange
This is a tax advantage for investors and a great way to increase your investment property holdings.  A 1031 Exchange is the exchange of one property you own, for another property (not your primary residence).  This is not a trade or exchange with another seller.  You have to take all the proceeds from the sale of your first property and place them on the purchase of one or more properties.  This allows you to defer any capital gains from the first sale.  You must hire a qualified exchange agent and follow some strict rules about timing and reinvestment of proceeds, but this is a great way to increase your real estate portfolio.

Mortgage Interest Deduction
We hear every year that this could go away, but the National Association of Realtors has fought hard to keep this tax deduction for homeowners.

More Green Painting

A quick paint update...I decided to repaint my kitchen and breakfast area the weekend before Thanksgiving and baking almost 100 pies in my kitchen!  This time I used the Benjamin Moore Natura paints, which are also No-VOC paints.  Like The Freshaire Choice paints from Home Depot, they have virtually no smell or Volitile Organic Compounds.  The Natura paints don't come in a biodegradable bucket, although they are made from recycled and post-consumer materials.

The huge advantage of the Natura paint line is being able to mix any color you want.  Any color Benjamin Moore carries in their regular line of paints can be mixed, as well as custom colors.  The paint dries fairly quickly and often only requires one coat for coverage.  I originally had red walls in my kitchen and repainted it a calming gray-beige color and it only required two coats of paint to completely cover the red.  So, I would say this is another great option for "green" painting.

October 2009 Sales Statistics

Last month in Bryan and College Station, residential sales hit a record high for all but one October in at least the past 12 years. The majority of sales were from $120-180,000. Based on the time of year and the average sales price, we can probably assume the First Time Homebuyer Tax Credit had a lot to do with this record number.

Fast Facts for October 2009:
144 homes sold
Average sales price was $177,827
Average days on market 127
Total active residential listings 1,216

To understand what our market is doing overall, we can see from the statistics above that we have about an eight month supply of homes on the market based on the number of active listings divided by the number that sold last month.  That doesn't really tell the whole story - to further understand the market and how it affects individual buyers and sellers we need to look at different price ranges and the sales within those price ranges.  

For example,  there were 72 active listings in the $120-129,999 price range and 24 of them sold last month - which means that segment of the market is more beneficial for sellers because there is only slightly more than a two month supply on the market.  However, if you look at the $500,000+ market, there are 78 homes on the market and two sold last month - with a 39 month supply on the market today, there could be some great opportunities for buyers in this segment of the market.

The market will change with the economy - or perceived economic conditions in this area, but it also changes seasonally, so stay tuned. 

Environmentally Friendly House Paint

I recently decided that several rooms in my house could use a little sprucing up and paint is a fast, easy and inexpensive way to make a change. Although I love a new car smell, I've never particularly loved new paint smell. Also being fairly environmentally conscious and having kids in the house, I wanted a paint with low odor and fewer toxic chemicals.
For several years now I've read about all the paint companies that have come out with Low-VOC or no-VOC paints. VOCs are Volatile Organic Chemicals. I've always been concerned that the quality of paint might not be up to par, but decided that the next time I was ready to paint I would try out one of the new, more environmentall friendly paints.

At Home Depot the other day I found a line of no-VOC paints called The Freshaire Choice. They had a nice range of colors and the consistency was fairly thick - which is important to me since I tend to drip when I'm painting. I started early yesterday evening with a light brown color called Pinecone Hill in my bedroom and was very pleased with the coverage, and I was able to sleep in my bedroom last night without opening all the windows.

This particular paint is biodegradable and comes in a biodegradable can made of 100% recycled materials with a label that is made up of 75% recycled paper and printed with soy ink. While this paint still contains chemicals and generates some waste, I think the company is working in the right direction and offers a good product.

As I work my way through repainting the whole house, I will try different brands of the no-VOC paints in each room and will keep you posted on which ones I think are the best.

Homebuyer Tax Credit Extended and Expanded to Existing Homeowners

The extension of the First Time Homebuyer Tax Credit is official.  The bill extends the deadlines for first time homebuyers to be eligible for up to $8,000 as a tax credit when purchasing their first home.  The new bill also includes some provisions for current homeowners to receive up to $6500 when they purchase a primary residence.

First Time Homebuyer Tax Credit At A Glance:

• First Time Homebuyers are eligible for a tax credit of up to $8000 when they purchase a home by June 30, 2010. 
• The home must be under contract by April 30, 2010 and close no later than June 30, 2010.
• A First Time Buyer is anyone who has not owned a primary residence in at least three years.
• Income limits for the tax credit for homes purchased after November 6 have been increased to $125,000 for single taxpayers and $225,000 for married couples.
• The tax credit is only good for homes up to $800,000.

Move-up or Repeat Homebuyer Tax Credit At A Glance:

• To be elgible for the tax credit, buyers must have occupied their home for at least five of the past eight years.
• The home must be under contract by April 30, 2010 and close no later than June 30, 2010.
• The new home must be a primary residence for the buyer.
• Income limits for the tax credit are $125,000 for single buyers and $225,000 for married couples.
• The tax credit is only good for homes up to $800,000.
• Repeat buyers do not have to buy a home that is more expensive than their previous home.
• Buyers cannot purchase a home from family members.
• Buyers can purchase new construction or contract to have a home built, but it must be under contract and close by the qualifying deadlines above.

The National Association of Homebuilders has an excellent FAQ sheet for both programs at
http://www.federalhousingtaxcredit.com/

Free Green Mini Seminars

The City of College Station is offering free "Green" mini seminars.  See the schedule and contact information from the city's news release below:

The City of College Station’s Recycling program will host a free “Green” Mini- Seminars for College Station residents and students! These seminars will take place in the new Public Works Office located on the 2nd floor of the College Station Municipal Court (300 Krenek Tap Rd.) at 6:00 pm.

Topics and Dates are as follows:
· Jan 15- “Green” your home or dorm! How can I make my home or dorm eco-friendly?

· Feb 12- Recycling Markets and Economics- Why don’t we recycle green glass or other items?

· Mar 12- Organic and Local Foods - What is the difference and why does it matter?

· Apr 9- Green Living

· May 14- Environmental Volunteering Opportunities

· Jun 11- Meet the professionals! Come and visit with the areas’ professionals in recycling, sustainability and water conservation.

To sign up for these classes, please visit www.cstx.gov/recycle and click on the Green Mini-Seminar link or by calling 979-764-6228.

First Friday in Downtown Bryan

If you haven't been to downtown Bryan in a while, First Friday is a great reason to visit - and it's tomorrow night!  Well-lit and pedestrian friendly, this is a fun date night or family outing. There are a lot of fabulous local merchants who stay open a little later on the first Friday of the month and frequently offer special sales.  There are usually artists and live music and most First Fridays have a theme - arts, going green, Farmer's Market, etc.  My boys and I love the free outdoor family movies at The Palace Theater.  Tomorrow's movie is Rudy, which starts right after dark.

There are great restaurants in a variety of price ranges with options ranging from Mexican to Italian to German.  Pizza, steaks, sandwiches and upscale fine dining can all be found within a four block range in Downtown Bryan.  The weather's supposed to be fantastic - hope to see you there!

6 Ways to Wow Landscaping

The weather has been fantastic lately and it offers the perfect opportunity for all of us to get out and work in our yards.  Whether you're planning to sell your home, or just want to make it a little more inviting when you come home everyday, there are some easy and inexpensive things you can do to spruce up your curb appeal.

1.  Dig up the Dead Stuff.  This summer was brutal on plants and shrubs.  If they look dead and haven't come back with all the recent rains, they probably aren't coming back.  Just go ahead and dig them up - empty space looks neater and cleaner than dead bushes.

2.  Add Color. Just a few pots with clusters of seasonal blooming plants will brighten up your walkway or doorway. 

3.  Shape Trees and Shrubs.  It's easy to let stray branches grow until they're huge and unweildy.  Catch them now and your trees will be stronger and healthier and neater looking.  Shrubs against the house can tear window screens, attract unwanted pests and make your house look dark.  Keep them pruned back so they'll be healthier and won't overwhelming the approach to the house.

4.  Light It Up.  Make sure the bulbs on your porch and coachlights are working.  Consider adding spotlights to trees or larger shrubs.  Solar powered lights are easy and inexpensive to install at walkways, back patios and in flower beds.  Just don't overdo it - when strategically placed, less is more. 

5.  Weed & Feed.  While the grass is in a somewhat dormant stage this winter, it's a good time to give it nutrients and keep the fast-growing weeds at bay.  Most major home and garden centers carry organic mixes if you don't want to put a lot of chemicals on your lawn. 

6.  Make Windows Neutral and Consistent.  This is an inside tip that translates to a neater outside look.  Make all the windows that face the front of your house match.  This might mean lining colored curtains or drapes with a white lining, or putting up blinds or shades that are all the same color.  Different colors and materials may fit your decorating inside, but when viewed from the outside of the house they can be very distracting and break up a nice, neat curb view. 

Enjoy the weather - and enjoy your home!

First Time Homebuyer Tax Credit Could Be Extended

It appears that the $8000 Tax Credit for first time homebuyers will be extended.  Set to expire on Dec. 1, 2009, Senate lawmakers, with White House support, seem to have reached an agreement not only to extend the tax credit, but to broaden its scope. 

The National Association of Realtors and the National Association of Homebuilders have been lobbying to extend the tax credit, which is also endorsed by the Treasury Secretary and HUD Secretary. 

As currently proposed, the $8000 tax credit would be extended for contracts written through April 2010, but buyers would still have until June 30, 2010 to actually close on the property. 

Two major proposed changes to the tax credit would allow existing homeowners to be eligible for a tax credit, and it proposes to allow more affluent buyers access to the tax credit.  Previously homebuyers were only eligible for the tax credit if they had not owned a primary residence in the past three years.  Now, it looks like current homeowners who have been in their primary residence at least five years would be able to benefit from a $6500 tax credit on the purchase of their next home.  This is meant to encourage move-up buyers.  Income restrictions would increase from $75,000 a year to $125,000 for single buyers and would increase from $150,000 to $225,000 for married buyers.   

If you or someone you know is considering a move, watch for updates on this blog.