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Top Buyer Questions: Answers for Homebuyers

March 17, 2025 by Admin

Buying a home is a significant milestone and a major financial decision. Whether you’re a first-time buyer or looking to move into your next home, you’re bound to have many questions about the process. To help make your journey smoother, we’ve compiled some of the most common buyer questions and provided detailed answers to each. This guide will help you make informed decisions and avoid common pitfalls.

How Much Can I Afford?

This is usually the first question buyers ask, and it’s crucial to figure out before you start your home search. The general rule of thumb is to spend no more than 25-30% of your monthly income on housing. That said, your affordability depends on a number of factors, including your income, debts, credit score, and the amount of your down payment.

To determine exactly what you can afford, consider getting pre-approved for a mortgage. A pre-approval will give you a better idea of what loan amount you’re eligible for and will make you a more attractive buyer to sellers.

What Is a Pre-Approval and Why Do I Need One?

A mortgage pre-approval is a lender’s estimate of how much money they’re willing to lend you based on your financial situation. It’s different from pre-qualification, which is a rough estimate of what you can borrow. Pre-approval involves a more thorough analysis of your credit score, income, and financial history.

Having a pre-approval in hand shows sellers that you’re a serious buyer, and it can give you an edge in a competitive market. It also helps you set a realistic budget before you start looking at homes.

How Much Do I Need for a Down Payment?

The amount needed for a down payment can vary based on the type of mortgage you choose. Traditionally, 20% of the home’s purchase price was the standard down payment. However, there are many loan options today that allow for much lower down payments—some as low as 3%.

For first-time buyers, there are government-backed loans like FHA loans, which require as little as 3.5% down. Keep in mind, though, that putting less than 20% down may require you to pay for private mortgage insurance (PMI), which adds to your monthly costs.

What Are Closing Costs?

Closing costs are the fees associated with finalizing your home purchase. They typically range from 2-5% of the home’s purchase price and can include appraisal fees, title insurance, attorney fees, and loan origination fees.

Some buyers forget to budget for closing costs, which can lead to surprises down the line. Be sure to discuss these costs with your lender early in the process, so you’re prepared when the time comes to close on your home.

How Long Does the Buying Process Take?

The timeline for buying a home can vary widely depending on market conditions, the type of financing you’re using, and the property you’re interested in. On average, it can take about 30-45 days from the time your offer is accepted to close on the home. However, if there are any complications with the appraisal, inspection, or financing, this timeline could be extended.

Should I Get a Home Inspection?

Yes, a home inspection is highly recommended. An inspection gives you a professional evaluation of the home’s condition, identifying any underlying issues that may not be visible during a walk-through. This can include problems with the roof, foundation, plumbing, or electrical systems.

While inspections aren’t always required, skipping one could lead to expensive repairs later on. An inspection provides peace of mind and, if problems are found, can be used as a negotiating tool to lower the price or ask the seller to make repairs.

How Do I Know If a Property Is a Good Investment?

When buying a home, especially if you plan to live in it long-term, you’ll want to consider its potential for appreciation. Look at factors such as the location, school district, and future developments in the area. Homes in desirable neighborhoods tend to hold their value better and may appreciate more quickly over time.

Also, consider the condition of the home. If it’s a fixer-upper, calculate the renovation costs and ensure they fit within your budget. A home that needs too much work might not be the best investment unless you’re prepared for a big project.

In all, buying a home can be a complex process, but asking the right questions will help you navigate it with confidence. From determining how much you can afford to understanding the importance of inspections, being informed can make your home-buying experience smoother and more enjoyable. Remember to consult with a real estate agent and mortgage lender to ensure you have all the information you need to make the best decisions for your financial future.

Filed Under: Real Estate Accounting Services

Signs You’re Ready to Invest in Additional Properties

November 5, 2024 by Admin

Sales representatives hand out the house keys to customers after signing a contract to buy a house or rent a new home on the table. concept of buying a houseInvesting in real estate can be a lucrative endeavor, offering the potential for long-term financial stability and wealth accumulation. However, knowing when to expand your portfolio and acquire additional properties requires careful consideration and assessment of various factors. In this article, we’ll explore the signs that indicate you’re ready to take the leap into investing in additional properties.

1. Strong Financial Position

The first and most critical sign that you’re ready to invest in additional properties is a strong financial foundation. This includes having sufficient savings for a down payment, a stable source of income to cover mortgage payments and property expenses, and a healthy credit score to qualify for financing. Before acquiring additional properties, ensure that you have a clear understanding of your financial situation and are prepared for the financial responsibilities of property ownership.

2. Positive Cash Flow from Existing Properties

If you already own rental properties, positive cash flow is a key indicator that you’re ready to expand your portfolio. Positive cash flow means that the rental income from your properties exceeds the expenses associated with ownership, such as mortgage payments, property taxes, insurance, and maintenance costs. Having a consistent stream of income from your existing properties can provide the financial stability needed to pursue additional investments.

3. Diversification Strategy

Diversification is essential in real estate investing to mitigate risk and maximize returns. If you have a well-diversified portfolio that includes a mix of property types (e.g., residential, commercial, multifamily) and geographic locations, you may be ready to add more properties to your portfolio. Diversification helps spread risk across different assets and markets, reducing the impact of adverse events on your overall investment performance.

4. Knowledge and Experience

Investing in real estate requires a certain level of knowledge and experience to navigate the complexities of the market effectively. If you have successfully managed and operated rental properties in the past, you may be ready to take on the challenge of acquiring additional properties. However, if you’re new to real estate investing, consider seeking guidance from experienced investors, attending educational seminars, or partnering with a mentor to enhance your knowledge and skills.

5. Long-Term Investment Goals

Before investing in additional properties, it’s essential to have a clear understanding of your long-term investment goals and objectives. Are you looking to generate passive income, build wealth through property appreciation, or diversify your investment portfolio? Understanding your goals will help guide your investment decisions and determine the types of properties that align with your objectives.

6. Market Analysis and Research

Conducting thorough market analysis and research is crucial before investing in additional properties. Evaluate market trends, supply and demand dynamics, rental rates, vacancy rates, and economic indicators to identify promising investment opportunities. Look for markets with strong job growth, population growth, and economic stability, as these factors can positively impact property values and rental demand.

7. Risk Assessment and Mitigation

Real estate investing inherently involves risks, including market fluctuations, tenant turnover, unexpected repairs, and economic downturns. Before acquiring additional properties, assess the potential risks and develop strategies to mitigate them effectively. This may include maintaining adequate cash reserves, securing insurance coverage, conducting thorough tenant screening, and implementing property management best practices.

Conclusion

Investing in additional properties can be a rewarding venture for those who are well-prepared and strategic in their approach. By assessing your financial position, evaluating market opportunities, and understanding your long-term goals, you can determine whether you’re ready to expand your real estate portfolio. Remember to conduct thorough due diligence, seek professional advice when necessary, and approach investing with a long-term perspective for success in the dynamic world of real estate.

Filed Under: Real Estate Accounting Services

Selling Inherited Property? Tax Rules That Make a Difference

February 19, 2020 by Admin

Jackson & Associates - Real EstateSooner or later, you may decide to sell property you inherited from a parent or other loved one. Whether the property is an investment, an antique, land, or something else, the sale may result in a taxable gain or loss. But how that gain or loss is calculated may surprise you.

Your Basis

When you sell property you purchased, you generally figure gain or loss by comparing the amount you receive in the sale transaction with your cost basis (as adjusted for certain items, such as depreciation). Inherited property is treated differently. Instead of cost, your basis in inherited property is generally its fair market value on the date of death (or an alternate valuation date elected by the estate’s executor, generally six months after the date of death).

These basis rules can greatly simplify matters, since old cost information can be difficult, if not impossible, to track down. Perhaps even more important, the ability to substitute a “stepped up” basis for the property’s cost can save you federal income taxes. Why? Because any increase in the property’s value that occurred before the date of death won’t be subject to capital gains tax.

For example: Assume your Uncle Harold left you stock he bought in 1986 for $5,000. At the time of his death, the shares were worth $45,000, and you recently sold them for $48,000. Your basis for purposes of calculating your capital gain is stepped up to $45,000. Because of the step-up, your capital gain on the sale is just $3,000 ($48,000 sale proceeds less $45,000 basis). The $40,000 increase in the value of the shares during your Uncle Harold’s lifetime is not subject to capital gains tax.

What happens if a property’s value on the date of death is less than its original purchase price? Instead of a step-up in basis, the basis must be lowered to the date-of-death value.

Holding Period

Capital gains resulting from the disposition of inherited property automatically qualify for long-term capital gain treatment, regardless of how long you or the decedent owned the property. This presents a potential income tax advantage, since long-term capital gain is taxed at a lower rate than short-term capital gain.

Be cautious if you inherited property from someone who died in 2010 since, depending on the situation, different tax basis rules might apply.

Send us an e-mail or call us today at 727-544-1120 and ask for Debbie Jackson to discuss your real estate accounting needs with an experienced Largo CPA.

Filed Under: Real Estate Accounting Services

Important Facts About the New Laws on Mortgage Interest Tax Deduction

March 28, 2019 by Admin

Jackson & Associates CPA, PAIf you are one of the millions of Americans who own your own home, you should be thinking about how President Trump’s latest tax bill helps or dents your finances; particularly when it comes to the ever-popular mortgage interest deductions. This article should put you ahead of the subject.

First off, if you are a homeowner with no intentions of changing anything soon, your mortgage deductions are unaffected (with a couple of exceptions we deal with below).

The new laws apply only to those buying a home after 15th December 2017. If you fall into this category it boils down to understanding 3 key items:

  • There’s a cap of $750,000 (previously $1 million) on your total mortgage value (covering private and secondary homes in aggregate) that qualifies for interest deduction.
  • Discussing interest rate deduction on new home purchase goes hand-in-hand with the cap placed on Property Tax Deduction – now set at $10,000 (previously unlimited).
  • The Standard Deduction has been nearly doubled for all categories of tax filers in 2018 onwards.

Logically, anyone who intends buying in expensive locations or/and locations with property taxes above $10,000 should stop to think about it:

  • High property prices of course generally call for higher mortgage financing, And it often happens that premium locations are also the ones with the highest real estate taxes – a double whammy effect if you will.
  • In situations like this, it seems that the traditional enthusiasm around interest rate deductions may become somewhat jaded. It gives a whole new meaning to the popular realtor’s mantra, “location, location, location!”

The one escape hatch is to simply forget about itemizing interest payment and property tax claims; go to the expanded Standard Deduction now provided. But then again, the apparently increased relief offered by this new provision should be viewed alongside the knowledge that individual personal exemptions have been removed – which brings family size into the equation. If you have a lot of dependents (e.g. children or elderly parents) you may find yourself after all is said and done unchanged – or worse still, going backward.

Here’s another curveball that throws the cat amongst the pigeons: irrespective of when you bought or intend to buy your home/ homes (i.e. before or after the December 2017 law, it’s all the same) interest on second mortgages and on mortgages attached to unrented vacation residences is no longer deductible. Period. Given this, and all the other considerations are drawn into the conversation (as outlined above), it is impossible to provide a quick “catch-all” solution on interest rate deductibility. We can say this, however:

  • It is likely there’ll be a homebuyer movement away from expensive property purchases for the foreseeable future, resulting in a growing tendency to relocate to tax-friendlier regions.
  • The upper-middle class homebuyers will need to analyze these new tax provisions with a fine toothcomb, and even consider renting out vacation homes for part of the year to bring interest rate deduction back into the equation.
  • Those buying at home prices under the $750,000 cap limit with under-$10,000 property tax limits should have a far easier passage.

Conclusion: It’s at times like this that astute tax advice paves the way forward and dispels doubt. As you can see there are numerous considerations, especially for larger families and those fortunate enough to own more than one home. Also, those on the cusp of relocating should be looking at all the variables as well as state taxes before making the move. Our team is geared to answer your questions on every aspect of real estate related deductions. Contacting us sooner than later may be the wisest decision you can make this year.

Send us an e-mail or call us today at 727-544-1120 and ask for Debbie Jackson to discuss your business needs with an experienced Largo CPA. Click here for a Free Consultation.

Filed Under: Real Estate Accounting Services

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