said on January 21st, 2010 categorized under: Financing
Comment
Either someone at HUD is really smart, or they’re reading my blog.
I’m inclined to think it’s the former.
Last week I explained many rehabbers I work with were scrambling to find houses and duplexes to buy before the end of the month so once repairs were completed, they would have owned it the required 90 days in order to be able to resell it to an FHA buyer before the tax credit deadline.
This same waiting period often prohibited FHA insured buyers from acquiring some bank and HUD owned properties.
On Friday, HUD Secretary Shaun Donovan announced a temporary policy lifting the 90 day waiting period.
The waiver goes into effect on February 1, 2010, and is effective for one year; unless, of course, HUD changes its mind.
Sales must be “arms-length”, with no shared interest between the buyer and seller or anyone else participating in the sale. When the resale price of the duplex is more than 20 percent above what it cost the seller to acquire it, certain conditions have to be met for the waiver to apply.
This should help keep the market supplied with affordable first time home buyer properties in good condition.
Comment
Last week, HUD Secretary Shaun Donovan announced a government plan that would allow first time home buyers to use the $8000 tax credit as a down payment via a bridge loan program.
It seems in the days since, HUD has reversed their position, taking the program out of the spotlight entirely.
Apparently there was fear the proposal was too similar to the now-illegal seller-funded down payment assistance programs like Nehemiah, Genesis and Ameridream. IRS officials also expressed concern that the proposal could complicate tax issues.
Therefore, HUD has withdrawn the proposal.
While this is disappointing to lenders, home builders and Realtors who felt the ability to use the tax credit as a down payment would open the housing market for more first time buyers, I feel that the proposal existed at all is reason for optimism.
The administration clearly understands that while there are qualified first time home buyers ready to jump start the housing market, many are simply short some or all the required money for a down payment.
Simply helping them bridge that gap might be the missing ingredient to get things rolling again.
Stay tuned.
Comment
I was so startled this morning by the figures I was seeing for the Twin Cities duplex market that I almost fell out of my chair. Maybe Minnesota should make seat belts mandatory for office chairs too.
And after carefully recalculating, I think a mandatory helmet law might be a good idea too.
The average off market price for a duplex that received a purchase agreement the week ending May 9, 2009, was $144,238.
For the same week in 2008, the average sale price was $124,195.
That’s an increase of just over $20,000. This is only the second time this has happened in the year I’ve been watching.
It wasn’t just the prices that were up. In all, 40.9 percent more multi-family homes received purchase agreements than did for the same stretch in 2008.
Of these, 86 percent were lender owned or mediated. Sadly, this also represents an increase over last year, when “just” 76.9 percent involved a lender in the negotiations.
New duplex listings were down 19.7 percent from early May last year as well. A shrinking supply of inventory might explain the accelaration of duplex prices, but one week does not constitute a trend.
Over in the single family market, however, an improved pattern is emerging. On average over the last six weeks, more than 1000 purchase agreements have been signed a week; with numbers increasing over the week before in each.
In fact, the 1,185 pending sales for the week were 26.6 percent higher than the same week last year.
Of course, in this market, there are still obstacles worthy of protective gear.
Sales over $190,000 are down 19.2 percent from last year.
Over the last three months, sales of homes that are not lender mediated are down 17.6 percent from 2008.
And, as we keep hearing in the media, sales of new construction homes have dropped 16.8 percent from a year ago.
Perhaps a flak jacket is also in order…
Comment
It’s getting close to April 15, so it’s a good time to consider strategies to maximize your tax savings on your Minneapolis duplex.
First, you’ll need to report the income from the property, as well as expenses, on your tax returns.
A good way to simplify this process, is to keep a checking account specifically for your landlord activity.
So what tax deductions can you take as a landlord? Of course, you should consult a certified public accountant for expert advice, but general categories include:
Repairs and Routine Maintenance – if you repair the property, or buy supplies to do so, you may deduct the cost of both.
Depreciation – this is wear and tear to the part of the property you rent out, and allows you to defer taxes until you the time you sell.
Maintenance for Vacant Units – while you can’t take a deduction for the income you lose while a unit is vacant, you can take a deduction for expenses incurred to manage and maintain those units during vacancy.
Wages and Fees – You can deduct the wages you pay people you hire to maintain the building, as well as those you pay to professionals like lawyers or accountants.
Property Taxes And Local Services – As a landlord, you can deduct charges for utilties like water, sewer and trash, as well as local taxes or assesments for street or community improvements.
Insurance Premiums – You may deduct at least a portion of the cost or your insurance premiums.
Expenses for Rental Items – If you rent appliances for the unit, or carpet cleaning machines or lawn mowers to maintain the property, you may deduct those expenses.
Travel and Transportation – If you track the cost and mileage you log to manage your property or collect rent, you may deduct it.
Utitilies – If you install an extra phone line to conduct business related to your property in your office or home, you may deduct that cost. You can also decut the cost of any utilities you provide to the tenants.
Outdoor Painting or Siding – This is at least partially tax deductible.
Explore every category. After all, that’s one of the many reasons you bought a duplex!
Comment
One of the challenges we’re facing as the result of the decline in values of Minneapolis and St Paul duplexes is high property taxes that reflect a market value that’s no longer accurate.
This often translates into a little sticker shock when a duplex is a terrific deal, but has insanely high taxes. These are, of course, based on a county computer-generated market value that for whatever reason, doesn’t consider the reality of today’s market.
Well, there is a solution.
In fact, a client called me the other day to tell me just how easy it is. While you can find all of the fine print at http://www.taxcourt.state.mn.us/, the highlights are, basically, you have to be prepared to prove to the tax court that your property is worth what you say it is.
This too is easy. Simply bring in your HUD statement from closing, and/or a copy the appraisal the bank ordered for your loan. There’s a court filing fee ($240 for Regular Division or $150 for Small Claims) that’s fully refundable, and a petition to fill out and “serve” to various upon county officials.
If you have an income-producing property (such as a duplex, triplex or fourplex), you also need to satisfy a few more requirements after you file and serve the petition. Namely you have to provide the County Assessor with financial information about the property, such as income and expenses or anticipated income and expenses. If you don’t, the petition may be dismissed.
Many of the cases people file are resolved without a trial. My client ended up visiting with the Hennepin County Tax Assessor, who agreed she should realize a reduction in the assessable market value of her property.
How much did she end up saving? $1500 a year.
There is a deadline to be aware of, however. Property tax appeals must be filed on or before April 30th the year the tax becomes payable.
