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HomeRun Homes is a centralized marketplace which helps people Find or Sell a Rent to Own Home, both Nationwide and Globally to the thriving Rent to Own Market. http://www.lease2buy.com
Showing posts with label capital gains. Show all posts
Showing posts with label capital gains. Show all posts

January 31, 2012

Use A Mortgage, Rent It, Or Use Other Options

Hi Folks,
   Thanks for joining me here. I am so glad to write for you! OK, I promise not to corny.

   Over and over we hear that it is tough to get a mortgage. If you can't get a mortgage, what are some other options. What if you want a home, but don't want a mortgage?

   "It’s getting more and more difficult to qualify for a traditional mortgage", writes CA Hagy in an article titled, "Three Alternatives to a Traditional Mortgage". What are some reasons why you might be declined? Hagy names a few possible reasons, i.e. a foreclosure in your past, inability to prove a "decent cash flow", and self employment resulting in "irregular income?".

   If you fall into one of the categories mentioned above, you're not alone. Hady points out a few mortgage alternatives that might help you meet your goal(s).

   One option is to go the route of "Seller Financing", in which the "current homeowner offers to sell you the house", and you make payments to them but "they continue to hold the note until you have paid off the home". Hagy says that for a homeowner that cannot find buyers due to the tight lending situation. Seller Financing may be a "feasible option". The seller basically becomes the lender, and an agreement is drawn up with the full details of the transaction.

   "Borrowing from a Self-Directed IRA", writes Nagy, is "typically designed for investors who want to buy a home but don’t have the upfront cash to make it happen". As defined in the article by Nagy, "A self-directed IRA is somewhat like a Roth IRA or a traditional IRA", however, it's more flexible, For example, the IRA can invest in real estate, etc, but the "main catch", as Nagy calls it, that the IRS "does not allow you to use your own account or the account of a relative or business partner", thus, you "cannot use your own self-directed IRA to purchase a home. But you can use the money from another person’s self-directed IRA if they are not related to you". Confused? Nagy says that there are many investors "who will allow buyers to use money from their self-directed IRAs as an investment deal", and the investor would "own an interest in the property", or, the investor can simply "loan the money like a regular mortgage".

   The other option, "Leasing or Rent to Own", is something you might be quite familiar with, especially if you are a frequent visitor on our website. In a nutshell, the buyer can rent a home before actually purchasing it. The rent to own arrangement, which is also referred to as lease to buy, lease to own or a lease option, is one in which the buyer has an option to buy the home at a specified price within a specified period of time. This option would also benefit a seller unable to find qualified buyers, and would certainly benefit buyers who need time to save for a down payment and to "improve their credit score", says Hagy.

   Let's stay on the topic of Renting and Owning for a moment.

   "Sometimes it is better to rent than to own", writes Leah Ingram, in her article, "Rent or Own a Home?", who admits that "in today's real estate market it's not surprising if people are a bit gun shy about buying or owning a home." and she provides 3 tips to help you decide on renting vs buying.

   Ask your self; Do you have documented income, a good credit history, and a steady income? These are some important items to have in order to buy a home, in the first of three tips, courtesy of Jessica Edwards of Coldwell Banker Real Estate, within the article from Ingram. Edwards adds that if your income is unreliable, "getting tied down to a mortgage may not make the most sense financially".

   The next tip is to make a "timeline" of how long you will stay in the home; if it's just for a couple of years, you are "less likely to see a significant financial return on your investment", says Edwards, and says that if you stay under 2 years and sell it, "you may find yourself having to pay capital gains taxes".

   "Crunch the numbers", says Edwards, in her third tip. Add up the mortgage payments real estate taxes, insurance payments, maintenance costs, etc. and compare these costs of ownership vs. the cost of renting (monthly rent and average utilities).

   Ingram says that "buying doesn't always make sense and neither does renting", and suggests speaking with a "real estate expert, your tax person, and a financial professional" before deciding to rent versus buy a home.

What are your thoughts? We'd love to hear.


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Have a Great Week, and Happy Rent-to-Owning !
Regards,
Rob Eisenstein
HomeRun Homes Blog: http://blogging.lease2buy.com
HomeRun Homes Websites: http://www.lease2buy.com and http://www.homerunhomes.com

TAGS: #traditionalmortgage #foreclosure #SellerFinancing #homeowner #SelfDirectedIRA #IRS #Tax #RealEstate #RenttoOwn #leasetobuy #leasetoown #leaseoption #capitalgains

November 2, 2011

What is ROI and Why is it Important to You?

Hi Folks,
   Hope you're having a great week!

   Today, we are going to look at a very important calculation used by Real Estate Investors to gauge and measure potential investments. The calculation that we are going to look at is Return on investment (ROI), with which some of you may already be familiar. At the risk of going too deep into formulas, we are going to just touch on the topic, and provide you a good framework to decide if you want to research it further.

   ROI, which is expressed as a percentage (%), is the % of money that goes back to the investor (after taking into account the actual cost(s) of the investment), or Gain from Investment minus Cost of Investment, divided by the Cost of Investment. This is a very basic way of figuring ROI, but there are more complex ways to compute it, taking into account repairs, etc, but this is outside the scope of our basic discussion here today.

   What are some of the complications in calculating ROI?

   As Marc Davis writes in his article, "How To Calculate ROI For Real Estate Investments", for the Investopedia website, there are complications in Calculating ROI (some more complex than others). Some examples he provides are if the property is refinanced, if the property was bought with "an adjustable rate mortgage (ARM) with a variable escalating rate charged annually", and if there is an increase in maintenance costs, utility rates, and property taxes,

   Davis points out the following tip; "For income tax or capital gains tax purposes, however, real estate property owners are urged to get professional tax advice from a reliable source before filing". Sound advice.

   Do you use ROI when making a decision regarding your investment(s) in Real Estate? We'd love you to share your comments.

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Have a Great Week, and Happy Rent-to-Owning !
Regards,
Rob Eisenstein
HomeRun Homes Blog: http://blogging.lease2buy.com
HomeRun Homes Websites: http://www.lease2buy.com and http://www.homerunhomes.com


TAGS: #ROI #RealEstateInvestors #Returnoninvestment #ARM #adjustableratemortgage #propertytax #capitalgains #property