Posted by: Bart Schroeder on: June 7, 2009
Your financial planner should be able to put together a comprehensive plan that would consider the amount of investments you have in IRA’s, 401K plans, potential amounts from Social Security and, of course real estate. I like being able to do this myself, at the expense of some accuracy. I do my own using some simple tables and my calculator and then, submit it to my financial planner for further verification. But to answer your question, I would do the following: First you need to come up with how much income you’ll need when you retire. You take your current gross income, and apply the factors I’ve outlined below. You have to make a guess at what inflation will be between now and the time you retire. Since nobody knows for sure, I think the only reasonable thing to do is take a low rate of inflation and a high rate of inflation. For purposes of your question, I am going to use 3% and 6%. Since you didn’t give me your age, or how many years to retirement, I am going to offer several factors to use if you are going to retire in 10 years, 15, 20 or 25 years.
|
|
10 Years |
15 Years |
20 Years |
25 Years |
|
3% |
1.34 |
1.56 |
1.81 |
2.09 |
|
6% |
1.79 |
2.40 |
3.21 |
4.29 |
Posted by: Bart Schroeder on: May 19, 2009
If you are looking to buy your first home, here are some ideas to consider. A home gives you a place to live, pride of ownership, tax deductions, and with a little planning, it can become an additional retirement tool. Of course, you will want your home to fit your needs, but also consider some other ideas to make it a good investment.
Find the neighborhood that you like and then complete a rent survey as if you were going to rent it out immediately. Do a rent survey of the area by looking at ads in the classified section of the newspaper and determine what the rents for a similar property are. With interest rates below 6%, you need to secure monthly rents of about .006% times the value of your home. As an example, a $200,000 home should rent for about $1,200 a month. If the rents seem OK and the home is located in a growth area, it will probably be a good investment.
Then consider the following strategy: After you have purchased your first home, live it in for one or more years, then purchase a second home. Your first home is usually purchased with little or no money down. There are many first time homebuyer loan programs to take advantage of. Your second home can also be purchased with no money down. Normally, this is done by securing an 80% first mortgage and a 20% second mortgage. Then, rent out the first home. Yes, you will probably have a negative cash flow for a year or two, but liken it to a contribution to a 401K or IRA. You are using these funds for the same reason, saving for your retirement. In the third to fifth year, purchase the next property to reside in and convert the second to a rental as well. Since you can obtain the best interest rates as an owner-occupant, it is to your advantage to utilize this type of financing.
Under current tax rules, if you live in your home for 2 years or more, you can rent it for three years, sell it, within the three years and enjoy beneficial tax treatment. You will be subject to recapture on depreciation, but this can be a great way to get mostly tax free money to invest in other rentals.
Posted by: Bart Schroeder on: May 2, 2009
Can you hear that sound? Tick, tick, tick. It’s the sound of time slipping away. If you are, like many of us, receiving a “Notice of Valuation (NOV)” from your County Assessor that seems inflated (given recent events), then pay attention to that ticking sound because you don’t have much time to act. This is the time of year when we homeowners get our NOV’s. Now, if we are lucky, our County Assessor has accounted for the fact that, unlike past assessment periods, the values of our properties may be declining rather than appreciating. So, what to do in the event your assessment suggests a value much higher than you feel is the case right now? First, stay calm and try to be objective. Then, determine if an appeal is warranted. If, after due diligence, you’ve concluded that an appeal is worth the effort, then go for it. Before doing so, here are some things to consider:
Once you have reviewed sales of similar properties in the area and accounted for the differences between your property and the ones that sold, does the current year actual value on the NOV seem to be a fair estimate of value relative to your results? If it is close, you may want to go no further, the tax saving one can anticipate is only about $5-$11/year per $1,000 value adjustment for residential properties (depending on the total mill levy in the area). If the NOV current year actual value is substantially higher than your research indicates it should be, you may want to protest/appeal the valuation. The first step in the appeals process is to protest the Assessor’s valuation. To do this you may protest by mail or protest in person, but you must do so before the close of business on the dealine specified on your tax notice. In your protest, state why you think the NOV current year actual value is wrong and what you think is the value of the property. The Assessor will review your protest and send you a written Notice of Determination that will either adjust the value or deny your protest. If the Assessor adjusts your value to an amount you feel is fair, your taxes will be calculated on that value. If you are not satisfied with the value in the Notice of Determination, you may appeal to the County Board of Equalization (CBOE). To appeal to the CBOE, you must file yet another written notice of appeal with the CBOE within the time frame specified in that Notice of Determination. Again, you will receive a written notice of determination from the CBOE. If the result of this process is not acceptable, you may then appeal to the State Board of Assessment Appeals, to District Court, or through arbitration. Finally, if you find a mistake in your assessment in a previous year that you did not protest/appeal, you may ask that the mistake be corrected by filing for an abatement of taxes for up to two years prior. Again, you will be asked to document the mistake in writing to the CBOE and request a refund of excess taxes paid due to the mistake. Most County Assessors have excellent web sites that explain the assessment and appeals process as well as providing valuable property information. Assessor’s web sites can be helpful, free information resources for property owners and real estate professionals alike.
For more information, including a free consultation, send us a request at REInvest Group.
Posted by: Bart Schroeder on: April 28, 2009
I talk to way too many novice investors who have spent CRAZY money to learn real estate investing. They spend their hard earned money to go to seminars, buy tapes, and read books just to get MORE excited about, guess what, buying MORE tapes and books.
Don’t get me wrong, education is a beautiful thing. I wish I had more. But… when I see regular people spending thousands of dollars on so called Guru Mentoring, and still have yet to purchase a property, or receive a dime in cash flow it makes me wonder WHAT ARE YOU THINKING! They all know the proper terminology like Cash Flow, Cap Rate, etc, but are still in danger of making bad purchases in bad neighborhoods due to unbridled enthusiasm and unscrupulous property sellers.
What’s the Answer?
I am glad you asked! You are already taking the proper steps — belonging to our investor network. That’s most likely how you came to be reading this article. Share your thoughts, read the blogs and comment on them, hear about mistakes, pick up the phone and ask us a question. You will learn a lot.
Remember also that, unlike those “opportunities” mentioned above, our classes typically are offered at no, or minimal, cost. See a list of upcoming classes here. And be sure to bookmark this link and return often as the list is often updated. Learning the terminology is always helpful, but should not take precedence over the fundamental question to be answered:
Am I comfortable with my plan?
Even before you’ve finalized your plan, you want to find someone you can trust with your future to help you accomplish this. This is where we come in. Behind every REInvest Group agent, is a very qualified group of resources that consists of other Realtors/experienced investors, Property Managers, Attorneys, CPA’s that will spend time consulting with you, giving you multiple references and referrals and help you to accomplish what YOU want to accomplish. More than likely, they will present you with multiple options and alternatives because they want what is best for you.
Above all,
Posted by: Bart Schroeder on: February 26, 2009
Denver home prices declined a little in November while much of the rest of the country continued its downward spiral, according to a closely watched 20-city index released Tuesday. Prices dropped 1.1 percent in Denver from October to November. That was the smallest month-over- month decline among the cities measured by the Standard & Poor’s/Case-Shiller index. Compared with November 2007, Denver home prices were down 4.3 percent. Only Dallas, with a 3.3 percent drop, saw a smaller decline. Nationally, prices tumbled by the sharpest annual rate on record, 18.2 percent, as the deepening housing slump and national recession spared no region. Overall, homes in the index have lost a quarter of their value since their peak in July 2006. Phoenix, Las Vegas and San Francisco led the way down in November with annual declines of greater than 30 percent. Mike Burns, broker owner of Re/Max Professionals Inc., said he expected the index to drop in Denver because the homes sold during the second half of the year, including many foreclosures, were in the lower price ranges. “We’ve always been kind of a trickle-up economy,” Burns said. “When the lower prices start to move, that usually indicates the upper prices are going to start moving soon.” There’s just a six-month supply of homes priced at less than $250,000, Burns said. “That price range is really, really humming right now,” he said. “We’re going to see prices inch back up. What will sell this year will be moving toward the $300,000s, $400,000s and $500,000s.”
Source: Denver Post and Assoc Press. Jan 2009