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Archive for December, 2008

The 10 Costliest Landlord Mistakes

Classic business philosophy teaches that a great part of survival and subsequent success lies in an operation’s ability to reduce mistakes. The cost or repairing the mistakes is inversely proportional to the amount of profit potential of the operation. In other words…”Mistakes Kill the Profit Margin!!!!!”

As landlord’s, we don’t want to do damage to the precious profit margin we fought so hard to nurture. A landlord’s profit margin struggles every day to survive, grow and flourish in a sea of predators, competitors and government regulators. Below are the top 10 threats to you thriving profit margin.

1-Poor Screening

The costliest mistake is accepting a new tenant without properly screening. An undesirable tenant will often have a poor rental and financial histories. Landlords should review previous landlord relations, credit reports, courthouse records and income. It is probable that if they have not met their obligations with previous landlords, then chances are that they will repeat their behavior with new landlords. Many landlords have faced horrific situations where tenants have stopped paying rent while employing legal maneuvering to avoid eviction. Others have faced tenants who moved in and initiated criminal activity, which adversely affected other tenants and neighbors. Either of these scenarios translates into expensive ordeals where the measures of rectifying the situation can threaten the financial stability of the landlord.
A thorough screening also involves verifying that the person who is applying is the same person that submits credit/criminal info for screening. A picture I.D. should be cross-referenced with the application. Landlords must make sure that there are no omissions, inaccuracies or inconsistency in the actual application. Due diligence will certainly save landlords much money and stress.

2-Lease Preparation

Having a poorly prepared lease is very costly because it is the document that legally binds the landlord to the tenant. It is the rules of the relationship that dictate conflict resolution, financial responsibility and terms of execution. With out a professionally prepared lease the landlord stands to forfeit many of the rights afforded to the owners of the property. Landlords need to employ leases that are designed to protect them and their property and not the other way around. Many generic leases do not take into account the values of the landlord. Therefore, a custom lease would assure the landlord that their interests are protected.
Many times landlords receive requests for agreements after the lease has been signed. Landlords will use their best judgment when deciding to agree to a proposal but must never neglect to put the agreement on paper. A verbal agreement is always vulnerable to a false interpretation by the tenant.

3-Rent Collections

Landlords must always enforce the terms of rent payment as it is written in the lease including late payments and fees. If not enforced, the landlord runs the risk of creating a dangerous precedent that will certainly cost the landlord dearly. If a tenant fails to pay rent for two weeks, then legal notices and actions must be initiated as soon as the law allows. Landlords should not accept partial payments. The courts interpret receiving partial payments from tenants as an acceptance of terms by the landlord. The eviction process is subsequently terminated for that rental period while landlord’s costs increase.
If a tenant has had a poor history of paying rent on time, a landlord should consider not renewing the lease. Being late consistently is a sign of financial trouble and future uncertainty for the landlord. Poor payment habits can be a precursor to bankruptcy or evictions.

4-Law and Regulation Ignorance

Many landlords get into rental business with out learning the rules of the game. To get a perspective of the folly of not knowing the rule, Imagine trying to play basketball with out knowledge of the rules. You would become paralyzed from the constant rule infractions. It would be impossible to win. Translated to the rental business: Knowledge of the Laws and regulations can make the difference between a profitable venture and a loser.
Landlords must familiarize themselves with the states’ Landlord/Tenant Act. Every state has different laws, therefore due diligence must be taken by landlords to educate themselves. Landlords must also take the initiative to draw upon with the experiences of other landlords. Many landlord advocacy groups exist in most communities and the Internet.
Finally, it encouraged for landlords to develop a relationship with a real estate attorney that specializes in the rental industry. Having a knowledgeable supporter on your side can relieve a lot of uncertainty. A landlord must never wait to the last minute to develop a relationship with an attorney because the requirement of immediate response will prove to be costly.

5-Poor Response to Service Requests-

The number one reason that tenants do not renew their leases is poor response and execution for service requests from the landlord. Tenants expect a constant inspection, repair, and preservation of the general conditions of their rental home. This also includes a timely repair or replacement of parts for appliances. Everything has to be in working order and problems must be addressed quickly and courteously. Everything has to be in working order and problems must be addressed quickly and courteously. To facilitate an efficient delivery of maintenance requests, the property manager’s best method of receiving these requests is actually answering the telephone. When the manager is too busy to actually answer the phone or the request comes at an odd hour, many properties utilize apartment call centers. This resource allows properties to always have a human responding to the needs of their tenants. The apartment call centers are industry specific and have a direct, open communication with the maintenance and property management. Maintenance requests should be supported by a shared calendar that documents the request cycle: creation, delivery, execution, completion and follow-up. Maintenance requests, if implemented properly, should be a team effort that will lessen and distribute workload through the property staff.

6-Not Employing Good Customer Service

Running a rental business is just like any other business in the sense with respect to employing good customer service. Many landlords forget that they would not be in business if it weren’t for the customer. Practicing good customer service not only reduces tenant turnover, it also is one of the primary forms of marketing. Word of mouth advertising is the time tested, most effective way to promote any business. In the long run, a positive approach to communicating with your tenants will reflect in the profitability and value of a property. On the other hand, poor customer service will take a toll on the general conditions of the property. Tenants will not respect the property by not cleaning up after themselves or not following the property’s rules and regulations. Therefore, poor customer service may result in high turnover, high vacancies, higher operational costs and lower profits.

7-Not paying taxes

Many landlords do not have their rental income as their primary source of income and neglect to report their income to the government. Others fail to pay property taxes because they don’t reside in the property. Failing to declare income and ignoring property taxes can cause very expensive recovery efforts. The government will assess taxes, add fees, add penalties and assign interest. Other costs will come from attorney fees, added accountant charges and personal time. In extreme cases, landlords may get their property confiscated.

8-Not waiting for the funds to clear

In a rush to fill the occupancy, many landlords make the mistake of allowing the tenants to move in before the funds are cleared. The scenario of tenants moving into a property too soon has caused numerous headaches for landlords having to initiate eviction procedures without ever collecting any rent or deposit. Always ask for money orders and certified checks or simply wait for the funds to clear the bank.

9-Not conducting a detailed premove-in inspection

Neglecting to have the tenants complete a premove-in inspection can result in damages to a property that cannot be documented by the landlord. Payment for rent must not be accepted until this inspection is completed.

10-Not keeping a professional landlord/tenant relationship

Landlords must always uphold a professional relationship with tenants to avoid the pitfalls of not employing the codes of conduct that are based on the stipulations outlined in the lease. The professional relationship is based on the landlord realizing profits from the rental business. Changing the nature of the business relationship threatens the ability for the landlord to collect rent.

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Tax Liens and Distress Sales – Opportunities for Real Estate Investing

With the current real estate hiccup going on the U.S., more and more people are losing their homes because they failed to pay their home mortgages. But what happens to the homes is something few people think about. This can be a very good real estate investing opportunity for the shrewd, and one can quickly earn profits in a very short amount of time.

How To Earn Through Tax Liens

If a homeowner has defaulted on his payment, then the mortgaging bank will start the pre-foreclosure process. A tax lien will then be issued for the property, so that the right to retain the property can be gained. You can do real estate investing in tax liens for a certain property that has been issued a lien and put out for an auction sale. The way you can earn profit from this is that the state will pay fixed interest on a tax lien and there are others that will start the bidding price at auctions in the amount of the lien.

If the tax lien is unpaid during the duration of the redemption period, then all other mortgages and liabilities on the house are extinguished, and the title to the property will be cleared. The investor will now own his or her new property with a clean title. If the owner can pay the liability on his property however, the investor can still earn through interest earned on the lien. Real estate investing in this manner can lead to profits both ways.

Real Estate Investing Through Auctions

Sales of properties by tax-distressed owners can be quite a steal. However, you’ll need to find out if your real estate investing opportunity is going to be worth it. Check the property location beforehand, because you might be buying something worthless, like purchasing a piece of land that is routinely flooded. If you are able to acquire and own a piece of land legally, you can participate in property auctions as well. But, you’ll have to have ready cash on hand or in easy access, because auction sites will typically require that those who win the bidding on their chosen properties to pay a down payment or the full amount in a short span of time, if not cash up front. This is one of those investments not for those without capital.

Starting Up Your Own Real Estate Investing Business

You can always start up your own business in the real estate investing industry. Given that you have enough capital, and you have enough knowledge on the state rules on tax liens in your area, you can start investing in property tax liens immediately. One of the most important things to do when doing business in this nature is to check the property liens that you’ll be buying. Physical inspection is needed, but since it can be so time consuming, limit your searches to somewhere you can drive to. A real estate investing business will also require that you have adequate knowledge of the legal processes involved, since tax-distressed sales by homeowners will involve banks and other institutions, most notably the government. You can earn high profits with just a few pieces of properties sold, but you can also spread the profit out and sell properties for a smaller markup, provided that the turnover for those profits will be faster so you can move on to other properties for sale.

A distress sale is a great opportunity for investment, but one should always be careful since at auctions you won’t know if the property you’re buying is a good buy, and not a lemon. You should also check if the owner of the property is not on the verge of bankruptcy, because the IRS can override your lien and take first priority as well as your real estate investing opportunity away from you.

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Texas Real Estate Auction

Auctions have been around for a long period of time and they are steadily gaining in popularity as the way to buy and sell property effectively over the Internet. The majority of people attending a Texas Real Estate Auction are the ones building up a property portfolio but there are also many people seeking out their dream house.

Texas is one of the most populous states and has more than 478 cities and towns and people here in towns and cities look for the investment options and participate in online or offline auctions.

The online Texas Real Estate Auction provides a new and unique system that allows prospective buyers to view properties and bid online for any property offered. There are lot of advantages to an Texas Real Estate Auction among which are included: feasibility, better prices and quick sales. With online auctions, you can purchase the desired property from the comfort of your own home. Also, you can buy properties below market value and make a fast sale as everybody interacts over the Internet.

The online Texas Real Estate Auction opens up a favorable condition for the buyer and it gives him the opportunity to search for his needs and select the best option. For the seller, it gives a chance for many sales channels and generate interest in his property.

Real estate differs from one state to the next. When buying real estate in Texas you should know the laws and rules that will effect you. Some things, however, are universal and apply to anyone buying real estate anywhere. These things are also important to know before getting into a real estate transaction.

Understanding the rules of a Texas Real Estate Auction is vital to winning the bid and saving some money. Sellers should also play their part and answer any given questions correctly and truthfully. In their answers, it is important to not give long descriptions; on the contrary, they should be short and concise.

In the state of Texas, you will find a number of auctions take place annually and the owners of the property are able to sell their property at much higher price on some of the occasions. Therefore if you think that your property is at the prime location in one of the town or city or even in rural area, you can take help of one of the auctioneers in Texas and offer the property for sale. Most of the time Texas real estate auctions are able to attract large number of bidders and you can expect the best price of real estate in one of the auction.

There are two relationships between buyers and agents in Texas, Buyers Agents and Transactional Brokers. A buyers agent is a representative of the buyer. The buyers agent is required to look for the best interests of the buyer. They must tell the buyers everything about the real estate transaction and follow any direction of the buyer. A transactional buyer does not represent the buyer. They are there to sell real estate. They are not required to tell the buyer everything about the transaction. For specific information regarding a buyers rights in Texas you should contact the Texas Real Estate Commission.

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Summary Regulatory History of Cost Segregation

BACKGROUND

In order to calculate depreciation for Federal income tax purposes, taxpayers must use the correct method and proper recovery period for each asset or property owned. Property often consists of numerous asset types with different recovery periods, which must be separated into individual components or asset groups having the same recovery periods and placed-in-service dates.
When the actual cost of each individual component is available, this is a rather simple procedure. However, when only lump-sum costs are available, cost estimating techniques may be required to ?segregate? or ?allocate? costs to individual components of property (e.g., land, land improvements, buildings, equipment, furniture and fixtures, etc.). This type of analysis is generally called a ?cost segregation study,? ?cost segregation analysis,? or ?cost allocation study.?
Significant tax benefits may be derived from utilizing shorter recovery periods. The issues for Internal Revenue Service Examiners (Service Examiners) are 1) the rationale used to segregate property into its various components, and 2) the methods used to allocate the total project costs among these components.
The most common situation is the allocation or reallocation of building costs to tangible personal property. A building, termed “section (?) 1250 property”, is generally 39-year property eligible for straight-line depreciation. Equipment, furniture and fixtures, termed “section (?) 1245 property”, are tangible personal property. Tangible personal property has a short recovery period, thus, a faster depreciation write-off (and tax benefit).
Property allocations and reallocations are typically based on criteria established under the Investment Tax Credit (ITC). In a recent landmark decision, the Tax Court ruled that, to the extent tangible personal property is included in an acquisition or in overall costs, it should be treated as such for depreciation purposes. The court also decided that the rules for determining whether property qualifies as tangible personal property for purposes of ITC (under pre-1981 tax law) are also applicable to determining depreciation under current law. [See Hospital Corporation of America, 109 T.C. 21 (1997)] The Service acquiesced to the use of ITC rules for distinguishing ? 1245 property from ? 1250 property.

OVERVIEW

It is important to review the relevant legal history and the motivations of taxpayers to allocate costs to personal property. The legislative and judicial history of depreciation, depreciation recapture, and Investment Tax Credit (ITC) are closely related.
The Internal Revenue Code (IRC) has historically authorized depreciation as an allowance for the exhaustion, wear and tear, and obsolescence of property used in a trade or business or for the production of income (IRC Sec. 167 and the regulations thereunder.)

BULLETIN F

For example, IRS Publication Number 173 (also known as “Bulletin F”) was published in 1942 and provided a useful life guide for various types of property based on the nature of a taxpayer’s business or industry. Bulletin F identified over 5,000 assets used in 57 different industries and activities and described two procedures for computing depreciation for buildings:
Composite Method: A depreciation chart provided a composite rate for buildings, including all installed building equipment.
Component Method: Taxpayers could elect to depreciate the building equipment separately from the structure itself.

COMPONENT DEPRECIATION

In 1959, the Tax Court recognized the right of taxpayers to calculate depreciation using a component method for newly constructed property [Shainberg vs. Commissioner, 33 T.C. 241 (1959)].
Revenue Procedure 62-21, 1962-2 C.B. 418, superceded Bulletin F and provided safe harbor useful lives based on industry-specific asset classes for taxpayers that met the reserve ratio test (a complex provision).
Revenue Ruling 66-111, 1966-1 C.B. 46 (subsequently modified by Revenue Ruling 73-410, 1973-2 C.B. 53), addressed the use of component depreciation for used real property, in light of the decision in Shainberg. The ruling concluded that ?When a used building is acquired for a lump sum consideration, separate components are not bought; a unified structure is purchased? Accordingly, an overall useful life for the building must be determined on the basis of the building as a whole.?
Revenue Ruling 68-4,1968-1 C.B. 77, concluded that the asset guideline classes outlined in Revenue Procedure 62-21 ??may only be used where all the assets of the guideline class (building shell and its components) are included in the same guideline class for which one overall composite life is used for computing depreciation.?

ASSET DEPRECIATION RANGE (ADR)

The elective ADR system, implemented by Revenue Procedure 72-10, 1972-1 C. B. 721, was developed for tangible assets placed in service after 1970. All tangible assets were placed in one of the more than 100 asset guideline classes (which generally corresponded to those set out in Rev. Proc. 62-21). The classes of assets were based on the business and industry of the taxpayer. In addition, each class of assets other than land improvements and buildings was given a range of years (called “asset depreciation range”) that was about 20 percent above and below the class life.
If the taxpayer did not elect the ADR system, Revenue Ruling 73-410, 1973-2 C.B. 53, clarified that a taxpayer may utilize the component method of depreciating used property if a qualified appraiser “?properly allocates the costs between non-depreciable land and depreciable building components as of the date of purchase.”

ACCELERATED COST RECOVERY SYSTEM (ACRS)

Congress enacted IRC Sec. 168 I 1981. The ACRS was intended to provide a less complicated method for computing depreciation (known as ?cost recovery? by eliminating salvage value and specifying recovery periods of various classes of assets. In contrast to the elective ADR system, ACRS was mandatory and provided only five (later six) recovery periods. ACRS also allowed for a faster write-off of assets than had been allowed under previous rules.

MODIFIED ACCELERATED COST RECOVERY SYSTEM (MACRS)

Significant modifications, generally less favorable to taxpayers, were made to ACRS by the Tax Reform ACT of 1986 (effective for property placed in service after December 31, 1986). Under the Modified Accelerated Cost Recovery System, the recovery period for buildings and structural components increased dramatically.
Revenue Procedure 87-56, 1987-2 C.B. 674, provides the class lives and recovery periods for most MACRS assets. These determinations are based on the specific industry of a taxpayer and the specific activity for which the assets are used.

EXPENSING PROVISIONS AND BONUS DEPRECIATION

Another incentive for allocating costs to shorter-lived property is the expensing provision of IRC Sec. 179. By maximizing the costs allocable to tangible personal property, the taxpayer can not only get an immediate write-off under ? 179, but also qualifies for a shorter recovery period under ? 168. Also, the 30-percent additional first year bonus depreciation allowance pursuant to ? 168(k), enacted by the Job Creation and Worker Assistance Act of 2002 (Public Law 107-147), provides even further incentive for taxpayers to segregate property into shorter recovery periods. The Jobs and Growth Reconciliation Tax Act of 2003 recently increased the bonus depreciation under ? 168(k) to 50 percent for certain qualifying property acquired after May 5, 2003, and placed in service before January 1, 2006. Section 1400L provides special rules for qualifying property used by a business in the New York Liberty Zone.

INVESTMENT TAX CREDIT – IRC ? 48

In order to stimulate the economy, Congress enacted Code ? 48 in 1962. The ITC was designed to encourage the modernization and expansion of productive facilities through the purchase of certain new or used assets for use in a trade or business. Over the years, many other changes were made to the rules, including reductions in the depreciable basis of property for which ITC was claimed, temporary suspensions, termination, reinstatement, and, ultimately, the general repeal of ITC in 1986.

TANGIBLE PERSONAL PROPERTY

Eligible ITC property is defined in former IRC ? 48(a)(1) with reference to IRC ? 38 (in fact, eligible property is often referred to as “section 38 property”). It included tangible personal property that was closely integrated into the taxpayer’s trade or business. Land, buildings, structural components contained in or attached to buildings, and other inherently permanent structures, generally were not eligible for ITC.

SECTION 1245 AND SECTION 1250 PROPERTY

The benefits of the ITC were somewhat offset by the provisions of IRC Sec. 1245 and 1250, also enacted in 1962. These Code sections result in the conversion of capital gain to ordinary income on the disposition of a property, to the extent its basis has been reduced by an accelerated depreciation method. The definitions of property for purposes of Sec. 1245 and 1250 are very similar to that for ITC and make reference to the regulations under Sec. 48 and the definitions under Sec. 38 property. These interrelated Code sections and the regulations (38, 48, 1245 and 1250) provide the pertinent authority for determining eligibility for ITC.
The primary issue in cost segregation studies is the proper classification of assets as either ? 1245 or ? 1250 property. Accordingly, the ITC rules are critical in determining whether a taxpayer has classified property into the appropriate asset class.

INHERENT PERMANENCY TEST AND THE ?WHITECO FACTORS?

Revenue Ruling 75-178, 1975-1 C.B.9 outlined several criteria to determine Sec. 1245 property classification. The classic pronouncement addressing inherent permanency was Whiteco Industries, Inc. v. Commissioner, 65 T.C. 664, 672-673 (1975). The Tax Court, based on an analysis of judicial precedent, developed six questions designed to ascertain whether a particular asset qualifies as tangible personal property. The questions were referred to as the ?Whiteco Factors.?
It should also be noted, however, that movability is not the only determinative factor in measuring inherent permanency. In L.L. Bean, Inc. v. Comm., T.C. Memo, 1997-175, aff?d, 145 F.3d 53 (1st Cir. 1998), it was determined that, even though the structure could be moved, it was designed to remain permanently in place. Thus, it was determined to be an inherently permanent structure.

REPEAL OF ITC AND COMPONENT DEPRECIATION

Due to the significant tax benefits derived from ITC-eligible property, the use of component depreciation proliferated during the 1970’s and created problems not unlike those faced today by taxpayers, practitioners, and the Service regarding cost segregation studies. The problem became so pronounced during the late 1970?s that Congress disallowed component depreciation as a method of computing depreciation for buildings, simultaneously with the enactment of ACRS in the Economic Recovery Tax Act of 1981 (ERTA) [see IRC ? 168(f)(1)].
In 1986, MACRS reiterated that the use of component depreciation was not allowable.

HOSPITAL CORPORATION OF AMERICA v. COMMISSIONER (“HCA”) (1997)

A landmark decision, Hospital Corporation of America v. Commissioner, 109 T.C. 21 (1997)(“HCA”), provided the legal support to use cost segregation studies for computing depreciation. In effect, this decision has reinstated a form of component depreciation.
In HCA, the Service took the position that certain property items were structural components of a building and that ? 168(f)(1) prohibited the use of a component depreciation method for computing depreciation on buildings (including structural components). However, Judge Wells ruled that the property at issue was ? 1245 property and rejected the Service?s argument. Accordingly, the court determined that ?168(f)(1), prohibiting component depreciation, applied only to ?1250 property.
The HCA ruling effectively reinstated a form of component depreciation for certain building support systems, such as the electrical and plumbing systems that directly serve tangible personal property. Therefore, cost segregation methodologies previously used to allocate the cost of a building between structural components and ITC property can now be used for ? 1245 and ? 1250 property.

CHIEF COUNSEL GUIDANCE (on method of accounting)

Chief Counsel issued further guidance to the field in the form of an advice memorandum dated May 28, 1999. One observation was — a change in depreciation method is a change in method of accounting, requiring the consent of the Secretary or his delegate.
[Note, however, that the recent 5th Circuit opinion in Brookshire Brothers Holding, Inc. & Subsidiaries v. Commissioner, 320 F.3d 507 (5th Cir. 2003), aff?g T.C. Memo. 2001-150, reh?g denied (March 31, 2003), which was adverse to the Service, may impact cases in that circuit. The court affirmed the Tax Court decision that the regulations allow taxpayers to make temporal changes in their depreciation schedules, as well as changes in the classification of property, without the consent of the IRS. However, the 10th Circuit opinion in Kurzet v. Commissioner, 222 F.3d 830 (10th Cir. 2000), was favorable to the government on this issue. Clearly, the issue is unsettled. However, Treas. Reg. ? 1.446-1T(e)(2)(ii)(d)(2)(i), effective for taxable years ending on or after December 30, 2003, provides that a change in the depreciation or amortization method, period of recovery, or convention of a depreciable or amortizable asset is a change in method of accounting.
In general, it is the position of the Service that a change in depreciation method, recovery period, or convention for depreciable property resulting from the reclassification of property is a change in accounting method. Such a change requires the consent of the Commissioner (i.e., the taxpayer must generally file Form 3115, Application for Change in Accounting Method) and the adjustment to income is made pursuant to IRC ? 481(a). Accordingly, claims for adjustment based on a cost segregation study performed after the original return was filed should not be allowed (i.e., unless a Form 3115 has been filed).
The issue of whether or not changes in depreciation methods, conventions, or recovery periods constitute accounting method changes is unsettled due to conflicting court opinions. However, Treas. Reg. ? 1.446-1T(e)(2)(ii)(d)(2)(i) and Example 9 of Treas. Reg. ? 1.446-1T(e)(2)(iii), effective for taxable years ending on or after December 30, 2003, provide that they do constitute changes in method of accounting.
Taxpayers may conduct a cost segregation study on used property and then recompute its depreciation deductions for prior years.

Service Position on Method of Accounting

In general, it is the position of the Service that in the year an asset is placed in service, an accounting method is adopted relative to the depreciation method, recovery period, or convention for the depreciable property. In any subsequent year from the placed-in-service year, a change in depreciation method, recovery period, or convention resulting from a reclassification of such property, results in a change in method of accounting. Such a change requires the consent of the Commissioner (i.e., the taxpayer must generally file Form 3115, Application for Change in Accounting Method), and the adjustment to income is made pursuant to IRC ? 481(a). If a taxpayer has adopted a method of accounting, the taxpayer may not change the method by amending its prior income tax returns. See Rev. Rul. 90-38, 1990-1 C.B. 57. Accordingly, amended returns or claims for adjustment, based on a cost segregation study performed after the original return was filed (for the placed-in-service year), should generally be disallowed on the basis that the taxpayer is attempting to make a retroactive method change.

LOOK-BACK STUDIES

The correct procedure for a taxpayer to change its accounting method is the timely filing of Form 3115, Request for Change in Accounting Method. Pursuant to Revenue Procedure 2002-9, 2002-3 I.R.B. 327, a taxpayer may request automatic consent for the change.
It is the position of the Service that a change in recovery period is a change in accounting method. Accordingly, a taxpayer is required to obtain the consent of the Commissioner by filing a timely Form 3115.

LACK OF BRIGHT-LINE TESTS FOR DISTINGUISHING ? 1245 AND ? 1250 PROPERTY

A myriad of court cases has addressed the classification of property for ITC purposes. All of the cases are factually-intensive and quite often the opinions of the courts conflict. In addition, though the Service has issued numerous revenue rulings to address specific fact patterns, no bright-line tests have evolved.

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The country of South Africa provides a simple process for the residents and even non-residents to own a property; however it is always wise to know about the costs, conditions and rights, and for that matter this article will focus on the opportunity for non-residents to consider buying property in South Africa.

Real estate is without restrictions and non-residents can own property and get a mortgage. All foreign funds used for purchase of property must be declared however and documented. However, loans through South African financial institutions to legal aliens normally cover only 50% of the purchase price.

Although the Southern African market is dominated by a few property agents, you can search for real estate via the internet. Upon finding properties that are interesting to you, you can search property records at no cost with the Registrar of Deeds.

Property transaction fees usually include ten to twenty percent deposit plus attorney’s fees and registration fees. And the process, including verification of your identification documents and settlement of government duties, takes between six to eight weeks. Read the rest of this entry »

Home is the place you ought to go when you are tired and just want to loosen up. It is therefore important to have a house that you feel comfortable and satisfied. Purchasing a house is not an easy undertaking. There are a lot of stuff for you to contemplate before you go and buy your home. There are also many avenues to choose from when buying a house. You can buy through buy and sell, mortgage, real estate and even online.

In installment buy and sell, a buyer will have to pay the seller periodically. The buyer will be able to take the home in his or her custody upon the first initial payment of the house. This is highly recommended if you do not have enough funds to pay for the entire amount of the property for sale.

Mortgage will allow a buyer to acquire a house even if you are lacking in funds. The buyer will have to give an assurance that he or she will pay the said amount through a written legal agreement or note. As the buyer of the house, you will have to pay in a certain amount of time or else they will cease the property and put it on sale to recover the amount of your loan. Read the rest of this entry »

This type of loan has been very popular recently. Is it something that you should consider?

There are now many lenders offering minimum payment options. For the borrower it is critical to understand how these loans work before they sign up for them. Here are some items to consider:

1. Different payment level options

The basic feature of these types of loans is that a customer has a choice in the amount of payments they make for an initial period. This can give you several different levels of payments you can make each month. For example, you can pay the loan at the 30 year loan level, at the interest-only level, or even less than interest only.

2. Minimum payment term

The minimum payment in the beginning can be less than interest-only. Anytime you choose to make this payment, the difference between your payment and the interest-only payment is added to your principal. For example, if the interest-only payment is $2,000 and the minimum payment is $1,700, if you choose to make the minimum payment then $300 will be added to your principal ($2,000-$1,700-$300). Read the rest of this entry »