The “Real Connection” in Real Estate!! Our Bi-weekly Digest!

VRCI PRODUCTIONS & ASSOCIATES & CME    Weekly Digest of Real Estate Extraordinaire Central

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Education in Real Estate  Investing 101

by Valerie Robinson, REI & CME  on January 25,2019

In the days when real estate  was “Golden”, when investors, sellers and buyers across our vast country was looking for opportunities and generally found them!   But with the transitioning that occurred in both markets, real estate had and did withstand the up and down financial and economical rigors.  Lenders and Investors both learned quite abruptly where and what the dangers were let alone their expectations on how to avoid, or handle them.  If you are just beginning to consider the idea of Entrepreneurship or idea of investing in real estate you are new investor or “newbie”and you do need some instruction to avoid losing your shirt, and probably your pants, hat and sanity, as well.

First you  will need to determine what your strategy will be in real estate investing.  Do you want to buy a property, fix it up and sell it quickly or do you want to buy a property,hold it and wait for the market to increase?  Do you want to deal with renters? All of these questions are ones that you need to answer before you invest in any piece of real estate.

THIS WEEK’S TOP STORIES

Thinking Ahead 2019

Consider what to do when ballooning consumer debt finally pops

Article Published by : American Banker, January 2019.

Commentary by: Valerie Robinson, REI & CME  on January 25,2019

Bankers are getting more concerned and worried about the rising cost of consumer delinquencies. What does this mean?  While households are managing to keep up with their loan payments, many are taking on more debt than ever. According to the banks, “Total household debt hit an all time high of $13.5 Trillion in the third quarter.”[1] Credit card and auto loans  delinquencies are seen on a downward term as seen from the Federal Reserve Bank in NYC.

The Banks have factored in the slow wage growth of the economy, the high housing costs and even the low personal saving rates among us working -class families. Is mentions how the bans can imagine  many households falling behind on their monthly bill payments even if the economy sours , or it they are faced with a sudden financial shock,divorce,unexpected major medical expense. Some will even wind up in bankruptcy. The problem with this model/scenario is that some borrowers of real estate  can wind up in deeper debt than anticipated. I’m NOT saying this is how you, the real estate investor will end up or see yourself in the years to come.

This is from the banks view regarding finance and where the economy is today and reflective of the Federal Reserve Bank of New York. Jerry L Nemorin, a former Wall Street investment banker commented as he stated,”This was during the financial crisis, and many consumers were in distress. There was no solution out there that was a  fully comprehensive solution and help work through the problems at that time”. Investors should be more savvy with knowledgeable

Education in Real Estate Investing 101

by valerie Robinson, REI & CME  on January 22,2019

There are several online sights that are helpful resources for banking, rate of interests forums and information on how to investigate Finance for yourself.  Your next step is to learn how to investigate the value of real estate properties yourself. The question we receive most is” Should you use or a real estate agent and have them show you property after property while you try to look for a good real estate investment? This question we will address and offer our opinion in our next article.

LINKS TO THIS WEEK’S ARTICLES:

The ABCs of Real Estate Investing

Let’s Talk Commercial Real Estate Shall We?

The difference Between Income Tax and Property Tax

The Benefits of Real Estate Investing!

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Real Estate Investing Guide: The Difference Between Income Tax And Property Tax

Just like in any other business, real estate investing would require you to pay different kinds of taxes. Two of which are income tax and property tax. To know the twists and turns of real estate investing, you should know what these taxes are, when do you pay them and their difference.

Income Tax

As the name suggests, income tax is tax that is deducted from your income. It is charged on the financial income of people, corporations or further legal entities. There are different systems of this kind of tax coupled with different degrees of incidence. Charging this kind of tax can be proportional, progressive or regressive.

When tax is imposed on incomes of companies, then this may be called corporate tax, profit tax, or corporate income tax and if self-employed, self-employment Tax. Tax from the earnings of an individual is usually charged from his total income. But in the case of corporations, the tax is usually charged from the net income of the corporation.

In terms of real estate investing, income tax comes in when you are profiting or having income from your property. For example, you have invested in a piece of land and leased it, then you would have to pay income tax from the income you get from your rentals.

This includes your gross income or all amounts that you received as rent. Rental income is considered to be any payment that you received for the use or the occupation of your property.

However, the positive side effect of charging income tax in real estate investing is that you can deduct different expenses of renting property from your total rental income. Generally, the rule is that you deduct your rental expenses during the year in which you pay them.

Expenses that you can deduct include advertising, cleaning and maintenance, utilities, insurance, taxes, interest points, commissions, tax return preparation fees, travel expenses, rental payments and expenses on local transportation.

If you are a taxpayer under cash basis, you usually report your rental income on your return in the same year that you constructively or actually received it. You fall under this category if you report income the same year that you receive it, despite the month you earned it.

Property Tax

In real estate investing, you also pay property tax. This is also known as millage tax. Property tax is said to be an ad-valorem tax, where a property owner pays depending on the value of the property being charged.

There are basically three different kinds of property. First is land, then your improvements to the land, such as buildings; and last but not the least, personality like manmade objects that are movable.

Real property, real estate and realty are all terms used to pertain to the combination of improvements and land. In real estate investing, the taxing authority usually requires or does an appraisal of the property’s monetary value, and then tax is assessed in ratio to the value.

If you really want to get into real estate investing, then you should know what form of property tax that is used in the municipality you are investing in.

One common mistake that real estate investors make is their confusion between special assessment and property tax. These are actually two different forms of taxation. One is an ad-valorem tax, which highly relies on the property’s fair market value for justification, while the other highly depends on a special enhancement that is called a benefit for its justification.

In real estate investing, the rate of your property tax usually comes in percentage form. To calculate your property tax, you multiply the assessed value of your property with the mill rate and then divide them by one thousand.

For more information on starting a career in real estate investing contact me for an appointment to discuss. If this article was helpful please leave a comment below.

Valerie Adams
Valerie@ConversionMarketingExpertz.com