Sunday, September 6, 2015

What is a perfectly competitive market?

A perfectly competitive market is one which deals with a homogeneous product and in which there are so many buyers and sellers that no individual buyer or seller can individually influence the price of the product.  There exists a "market price" at which all sellers sell the product and at which all buyers buy it.  Except during periods of adjustment due to changes in the total supply or demand, no individual has any incentive to bid one penny higher or lower than the "market price."

In reality, a truly perfectly competitive market is an abstraction that does not exist in its purity on planet Earth.  The paradigmatic product that comes very close is wheat.  It's all pretty much the same thing, there are millions of buyers and sellers, and no individual buyer or seller can significantly influence the market price (although with the rise of "big agribusiness" this may be changing).

What does that mean for you and your business is that you have to operate a little different, offer your customers something that say you apart from you competition.  There is easy entry and exit to the market place because of low startup cost.

The drawback is that there are too many companies doing the same thing which give the customer a lot of choices.  Prices and services have to be competitive and the atmosphere is almost cut throat. 

To survive and make money in this make businesses have to offer something unique to its customers.  Something that only they can give the customer, like customer service or a rebate or a free analysis.  

Sunday, September 21, 2014

Its not to late for 2014 Tax Planning

If you are thinking about purchasing a new vehicle consider this. 
Internal Revenue Code Section 30D provides a credit for Qualified Plug-in Electric Drive Motor Vehicles including passenger vehicles and light trucks.  
For vehicles acquired after December 31, 2009, the credit is equal to $2,500 plus, for a vehicle which draws propulsion energy from a battery with at least 5 kilowatt hours of capacity, $417, plus an additional $417 for each kilowatt hour of battery capacity in excess of 5 kilowatt hours. The total amount of the credit allowed for a vehicle is limited to $7,500.

What is a §1031 Exchange?
A §l031 Exchange is a transaction in which a taxpayer is allowed to exchange one investment property for another by deferring the tax consequence of a sale. The transaction is authorized by §1031 of the IRS Code. The investor (or exchanger) must follow the strict 45- / 180-day guidelines for an exchange. Once the exchanger sells his/her property (relinquished property) he/she has 45 days to identify property(s) of equal or greater value. Once identified, the exchanger has 180 days from the day he/she sold their property to acquire the property(s) identified (or 135 days from the end of the 45-day period).  

After selling your home, how much time do you have to reinvest money in new home, before you are liable for capital gains tax?

Capital gains on your primary residence don't kick in until you reach $250k as a single or $500k as a couple. Keep in mind that the cost basis should also include any capital expenditures you made while owning your home. Several people mentioned a 1031 exchange which has nothing to do with your primary residence. There could be an exception if you rented the home recently, declared the income and expenses or depreciated the home.

If you or if you know anyone that may have had a loan with Bank of America or any of its affiliates, including Countrywide,  have them call this number.  They may be able the received relief or a cash settlement. 877.488.7814.

Know your loan limits
A good place to check out what you can deduct before you borrow is the chart on page 3 of IRS Publication 936. It’ll walk you through the requirements you must meet to deduct all of your home loan interest.  The first hurdle you'll run into is the total amount of your loan or loans. In general, individuals and couples filing jointly can deduct interest on loans up to $1 million ($500,000 if you're married and filing separately). The money must have been used for acquisition costs — that is the cost to buy, build, or substantially improve a home.  
The same $1 million limit applies whether you have one home or two. Buying a vacation home doesn't double your loan limits. And two homes is the max; you can't deduct a mortgage for a third home. If you have a mortgage you took out before Oct. 13, 1987, you have fewer restrictions on claiming a full deduction. The calculations for "grandfathered debt" can get complex, so get help from a tax professional or refer to IRS Publication 936.
Whatever you do, don't forget that you can also deduct the points and fees associated with a first or second mortgage when you initially buy your home

Spend loan proceeds wisely
The other limitation comes into play when you take out a home equity loan or HELOC, even if you don’t use the proceeds to buy, build, or improve your home. In that case, you can deduct interest on up to $100,000 ($50,000 if married filing separately) on outstanding home equity debt. This loan limit also applies in a cash-out refi, in which you refinance and take out part of the equity you’ve built up as cash.  That means if you decide to take out a $115,000 home equity loan to buy that Porsche, you can deduct the interest on the first $100,000 but not on the $15,000 that exceeds the limit. Use the same $115,000 to add a new bedroom, however, and the full amount is allowable under the $1 million cap. Keep in mind, though, that the $115,000 gets added into the pot of whatever else you owe on your other home loans. In many cases, points and loan origination costs for HELOCs are deductible.

Consider this simplified scenario: You borrow $250,000 against your home at 8% interest. That means you’ll pay $20,000 in interest the first year. Spend the $250,000 on home improvements, and all of the interest is deductible. Spend $150,000 on improvements and $100,000 on your kids’ college tuition, and all the interest is still deductible.
Beware the dreaded AMT
Even if you've followed all the loan limit rules, you can still get stuck paying tax on mortgage interest. How come? It's all thanks to the Alternative Minimum Tax. Congress created the AMT, which limits or eliminates many deductions, as a way to keep the wealthy from dodging their fair share of taxes.

Calculating the AMT can be complex, but if you make more than $75,000 and have several kids or other deductions, you might well be subject to it. Problem is, if you fall into the AMT group, you may not be able to deduct interest on a home equity loan, even if the loan falls within the $1 million/$100,000 limit. If you're subject to the AMT and borrow money against the value of your home, you'll have to use it to buy, build, or improve your place, or you may not have a chance to deduct the interest.

Thursday, August 29, 2013

The effects of rising interest rate, relative to real estate

As interest rates begin to rise the yield on the 10 year U S treasury bill will rise a well.  What this means is that it will cost more for home owners each month when buying a home.  For example a $850 mortgage could see a rise of $8.50 on a one point change.  A rise in the rate could also force the first time homebuyer out of the market.  

The bigger  questions is how high will the rise be and will there be more increases to follow?   On Friday, it opened at 2.76% and hit a high of 2.86% before closing at 2.83%.  The yield on 10 year U.S. Treasuries is up nearly 120 basis points since the beginning of May, and almost everyone on Wall Street seems convinced that it is going to go much higher.

Monday, August 5, 2013

Nice move by Amazon?

With print media disappearing this is a good move by Jeff Bezos in  acquiring The Washington Post.  He go it at a steal, paying only $250 Million, this will add significant  value to Amazon.

Its tablets could give its customers access to online news and it archive.  Further, think of the advertising revenue they will receive.  I believe this is the way of the news for the feature and Amazon is shifting in the right direction.

Thursday, July 18, 2013

The age of the Cash Buyers

One of the new trend in real estate today is that cash buyers are controlling the 250k and below market.  I expect this trend will continue until the foreclosure bobble subsides or cash buyers exhaust there will to buy.  These cash buyers are buying all the homes in this price range, and there are no signs of slowing down.  Once the homes are acquired they then flip them into a fifty thousand dollars or greater net profit.             
If this trend continues  the prices  of homes will  rise in that segment of the market (250K and below).  It also means that in the short run qualified FHA, VA, and Convention buyers are forced out of the market.  

What is the solution?  Is there a solution in the short run?

Tuesday, July 31, 2012

What is a Notice of Default?

The notice of default (NOD) is the first legal action in the foreclosure action in California. The next step is advertising in the paper and then the sale is scheduled the time from nod to sale is typically 90 – 120 days if there are no delays in the process.  Notice of Default is mailed to the owner. It is an official notice that is recorded in the county recorder’s office. This notice is advising the owner that they are in default of the agreement and if the loan is not brought current within 90 days the bank has the right to foreclose which in California usually occurs on the court house steps through an auction process. Just because the bank has the right they do not always exercise it immediately.
If the bank has an offer during the NOD period they very often but not guaranteed will not exercise their right to foreclose. Even if they have an auction date (trustee sale) you could get it postponed. An owner or selling agent cannot contact the asset manager. I say cannot because they will not have the contact person or number. Asset managers are only involved when the home is foreclosed on and becomes bank owned (REO). At that time they deal only with the listing agent. If you would like more information please do not hesitate to contact me.

Sunday, March 25, 2012

BofA to offer rentals as foreclosure alternative

Bank of America says it has begun a pilot program offering some of its mortgage customers who are facing foreclosure a chance to stay in their homes by becoming renters instead of owners.
The "Mortgage to Lease" program, which was launched this week, will be available to fewer than 1,000 BofA customers selected by the bank in test markets in Arizona, Nevada and New York.
Participants will transfer their home's title to the bank, which will then forgive the outstanding mortgage debt. In exchange, they will be able to lease their home for up to three years at or below the rental market rate. The rent will be less than the participants' current mortgage payments and customers will not have to pay property taxes or homeowners insurance, the bank said.
"This pilot will help determine whether conversion from homeownership to rental is something our customers, the community and investors will support," Ron Sturzenegger, legacy asset servicing executive of Bank of America, said in a statement.
Among requirements to qualify for the program, homeowners must have a BofA loan, be behind at least 60 days on payments and be "underwater," owing more on their mortgages than their homes are worth.
The bank based in Charlotte, N.C., said it will at first own the homes, then sell them to investors. If the program is successful, it could be expanded to include real-estate investors who buy qualifying properties and keep the occupants on as tenants.
"If this evolves from a pilot into a more broadly based program, we also see potential benefits from helping to stabilize housing prices in the surrounding community and curtail neighborhood blight by keeping a portion of distressed properties off the market," Sturzenegger said.
Foreclosure tracking firm RealtyTrac says foreclosure activity has picked up in some states, as banks deal with a backlog of homes with mortgages that had gone unpaid yet remained in limbo due to delays stemming from foreclosure-abuse claims, according to
Nevada has the nation's highest foreclosure rate as of last month, with one in every 278 households in the state receiving a foreclosure-related filing, twice the national average, according to RealtyTrac. Arizona ranks third behind California, while New York has not been as hard hit, with one in every 4,604 households receiving a foreclosure-related filing.