5 Tax Tips to Save You Money in 2011

This month’s guest article is contributed by attorney Linda A. Winslow, J.D.

1. Investment Income: The capital gains and dividend tax rate will stay at 15% until at least the end of 2012. For any non-tax deferred investing you plan on doing, make sure you take advantage of the low 15 percent capital gains tax rate now, because the chances of it staying this low past 2012 are not great. If you are planning to reduce your real estate holdings taking advantage of this low capital gains rate will substantially increase your return on investment (ROI).

2. Small Business Capital Asset Deduction: Small businesses can benefit greatly from a few tax changes in 2011 by investing in fixed assets and equipment before December 31st, 2011. The Small Business Jobs Act signed this past September doubled the expense limitation from $250,000 to $500,000. The major advantage here is that these expenses can be fully deducted from the business' taxes if they are purchased within the year 2011. Eligible investments include office furniture and equipment, machinery, and computer software. If you flip properties, this deduction is available for any equipment you purchase. This deduction is not available for purchases of appliances for real property but can be used for such independent incomes as coin laundry equipment.

3. Roth IRA Conversion: A new change in 2011 tax laws will let anyone (no matter their income) convert a traditional IRA to a Roth IRA. In the past, there were income restrictions on who was allowed to convert a traditional to a Roth, but that has changed in 2011. If you believe that you'll be in a higher tax bracket at retirement, then converting now definitely makes sense because a Roth IRA takes in taxable money, which is then not taxed when withdrawn at the retirement age. This is a fairly complex decision, however, requiring both a good financial planner and a qualified tax professional.

4. Estate Planning: The new tax cuts and changes for 2011 can significantly save your estate money if you complete the correct estate planning. Starting in 2011, couples can add the unused estate tax exemption of their spouse (up to $5 million) to their own estate tax exemption (also up to $5 million), meaning they can transfer up to $10 million tax-free to family and heirs. For individuals with significant assets this can allow them to save big time. Remember the exemption is not automatic, individuals must plan their estate to take advantage of these exemptions before they expire. A qualified estate planning attorney can assist you with drafting your wills and trusts but the best result occurs when the estate planning attorney and your tax advisor work together.

5. Health Savings Accounts (also know as “HSAs”): HSAs are a great tool, which allow individuals and families to cover the cost of medical and health care expenses that would otherwise not have been covered by their health insurance plan. Best of all if you don’t use all the funds in any year you can keep the funds in the account until you need them. In effect, these Health Savings Accounts are tax advantaged medical savings accounts that you own. The funds that you contribute to an HSA are contributed on a pre-tax basis; that is they are not subject to federal taxes when you deposit them. Like an IRA accounts, you can contribute to your HSA account during any calendar year, through April 15th of the following calendar year.
The IRS Contribution Limits for 2010 and 2011, to a HSA plan, are $3,050 for a single individual and $6,150 for a family. If an individual account holder or the owner of a family HSA is age 55 or older, an additional “catch-up” contribution of $1,000 is also allowed.

Because any funds in your Health Savings Account not used during the calendar year, can be rolled over into the following year and continue to roll over, the balance in your HSA account can grow significantly over time.

King County Real Estate Forecast

I attended a fabulous luncheon today at the Rainier Club to hear a talk by Spencer Rascoff, CEO and one of the founders of Zillow.com. He gave a fascinating talk about his work in starting two successful internet companies, Hotwire and Zillow; and then focused on his prognosis for the future of the housing market in the Seattle area.

Housing prices in our area are down 28% from their peak. Most of the rest of the country has experienced an average decline of about 33% peak to trough. If Seattle follows suit, then prices will roll back to approximately the April 2004 level. Mr. Rascoff expects the Seattle market to continue to decline through the 3rd quarter of 2011, and then remain flat for the next two years or so.

Reasons for his forecast are that vacancy rates remain high; their is a shadow inventory of foreclosures yet to hit the market (currently at 17% of all sales in our area); there is a pent-up supply of houses from individuals who would like to put their houses on the market, but have been waiting; and he also expects mortgage rates to increase.

I have a copy of the real estate market overview from December 2010, put together by Zillow's chief economist Stan Humphries, and will try to include excerpts in future blogs.

Investor Offer on Ballard Bungalow

Here is a case study of a typical investor deal in Seattle. The subject property is a 1911 bank-owned one-bedroom, one-bath 590sf bungalow on a 3300sf lot in the highly desireable Ballard neighborhood of Seattle. It was listed on the NWMLS for $185000 for seven days, until which the bank was accepting offers. Offers were due by midnight yesterday.

My clients are investment partners who decided to submit an offer of $155,000 on the property with no inspection contingency, no financing contingency and no escalator clause. Their exit strategy was to secure a conventional mortgage with 20% down, clean up the property, replace the roof, and then rent it out for $1100-1200 per month. They estimated their monthly payments at $1076.

Last week we learned that there were five offers on the property. But while the agent shows the listing as pending, the bank has asked each of the bidders to submit their "best and highest offer." My clients have already done that, but I suspect that the bank was unhappy with the bids received. I suspect also that there may have been a number of low bids with escalator clauses, and the bank has now asked that bids be submitted without the escalator.

My clients have decided to hold tight. Will they be the successful bidders on this property? We will find out tomorrow!

But there are many such deals that investors can find on the NWMLS today, many short sales, pre-foreclosures, distressed properties, and REOs, in all price ranges in Seattle. A savvy buyer can find some fantastic bargains, especially those willing to do a bit of sweat equity. The biggest competition is in these lower price ranges, but a successful buyer makes offers!

If you want to jump into the game, be sure to drop me a line here or give me a call, text or email. Let's make some deals!

Who is My Customer?

Home Land Investment Properties, Inc. specializes in single family homes in Seattle priced under the median home sales price, currently $375,000 in King County. Who is our typical buyer in this price range?

Our target buyer actually consists of two categories of buyer. One typical buyer would be a first-time homebuyer, aged 25-35, buying a starter home in a good neighborhood where they plan to stay long enough to start a family. They plan to have or have 1-2 children under the age of six-years old. They want the excitement, richness and diversity of urban living, but would like to be in a safe neighborhood with room for property value appreciation. Their favorite home is a 3 bedroom 2 bath older home of approximately 1200-1500 square feet in a good working class or better neighborhood. They love the idea of community, and the ability to walk to cultural and other amenities, including parks, trails, library, community center, stores, groceries, and other shops and businesses. They like short commutes, support public transit, but want easy access to freeways and highways. They are educated, young working professionals, most likely members of the creative class that includes knowledge workers, designers, developers, innovators, and inventors. They are attracted to the creative and technological energy of Seattle, and most likely work in downtown Seattle - or maybe across the bridge, at Microsoft. They are willing to do some cosmetic work to build sweat equity in their home.

Another typical buyer would be an investor, looking for urban fixer properties, the closer to jobs and the urban core as possible. They are looking for homes priced competitively to acquire, most likely for under $200k, that require a great deal of updating, remodeling or renovation. Their favorite home is a 3 bedroom 2 bath fixer of approximately 1200-1500 sf in a good, working class neighborhood or better. They are looking for quick cash homes to fix and flip; or homes to keep that would make great rentals. The typical investor is a young male with some construction experience aged 23- 40.

The typical seller is our first time homebuyer above, 7-10 years later. They want to get a bigger house in a better neighborhood, possibly moving to the East side for better schools.

Another typical seller has been in their home for more than ten years, and has lots of deferred maintenance, which is attractive to first-time homebuyers or investors. They do not have the resources to fix up the house, and may be upside down in their mortgage. They tend to be elderly, and facing medical or financial problems. They just want to be done with the house, tend to be highly motivated to sell, and anxious to move on with their lives.

Each of these clients are looking for solutions that help them transition to a new phase in life. Home Land Investment Properties provides solutions by facilitating real estate transactions, offering property management, or guaranteeing sales through cash purchases of these properties.

Improved Land with Sunset Water Views - FSBO

Beautiful, private, wooded lot with west-facing views to Rocky Point tidal waterfront. Enjoy serenity and tranquil evening sunsets!

Includes a 754 sf three-car garage with a two-car door, and one-car door (already rented) both with shop space; and an additional 225 sf tall carport with concrete pad for RV parking. Mostly level site, has sloping meadow that contains neighbor's drainfield.

Deep water moorage at Bremerton Yacht Club is 1/2 mile away.

Buy this buildable lot, to put in septic and build your dream home with water views, or hook up your RV! Zoned UL ("Urban Low Density"), which allows for 5-9 units per acre; Indigo Septic Design says parcel will support a standard 3-bedroom septic system.

Owner financing is available, for $8500 down. Ask about terms.

Feel free to drive by, get out and walk the property! Located between 2525 and 2527 Rocky Point Rd NW. Owner/Agent.

Why Didn't Your Home Sell?

If your home has just come off the market and hasn't sold, don't be discouraged. The reason it didn't sell may have nothing to do with your home or the market. In reality, your home may have been one of the more desirable properties for sale. If your listing has expired and you still want results, before you put your home back on the market, take a step back and review your situation.

Q Where should you begin?

A. Start by making a commitment to do what it takes to market your house to get it sold. With the right system, the home sale you want is still well within reach.

Q. Why didn't your home sell?

A. Review your previous selling plan and you'll discover that an expired listing usually reflects a problem in one or more of these four major areas:

1. Teamwork,
2. Pricing,
3. Condition of Your Home, and
4. Marketing.

❶ TEAMWORK
Your home is a major financial investment, and your relationship with your Broker should be a full partnership where your needs and wishes are heard, and you receive detailed and dependable feedback on the progress of your sale. Your broker has a responsibility to source this feedback from the agents who have shown your home, and to communicate this to you so together you can make the right decisions about what to do next. How well did this occur the last time you had your home up for sale?

❷ PRICING
Did price work for or against you?

The "right" price depends on market conditions, competition and the condition of your home. Pricing it too high is as dangerous as pricing it too low. If your home doesn't compare favorably with others in the price range you've set, you won't be taken seriously by prospects or agents.

You'll get the facts when you see the statistics!
To help you to establish a realistic selling price for your home, ask your agent to provide you with an up-to-date competitive market analysis to give you:

- a review of comparable homes recently sold or currently for sale,

- an idea of how long other homes have been listed, in order to calculate an average time in which a home can sell in today's market,

- a review of homes whose listings have expired, to understand what issues were at play.

Note: There is no mention of how much you paid for your home or its improvements. Like any other investment, the market value is determined by what a willing buyer will pay and a willing seller will accept.

❸ CONDITION OF YOUR HOME Show Case Quality!

Is your house someone else's idea of a dream home? When buyers enter are they inspired? Do they think, "I love this house!" Remember, the decision to buy a home is based on emotion, not logic.

A house in move-in condition invites a sale. You need to consider: - fixing all the little squeaks and cracks - keeping it clean for all showings - making it uncluttered - brightening it up - what your home shows like from the street concentrating on outside curb appeal.

Plus - Consider taking care of major items, such having your home painted. Offering an allowance to your prospective buyers, so they can have painting completed is not the same as having done it for them. Now, as they're trying to imagine what that new paint job will look like, they may also be discounting the price even further because of the less-than- perfect look of those walls.

Remember....
A house that presents well, sells for the best price because it outshines the competition.

❹ MARKETING
....Marketing Your Home To Sell! Some Questions You Should Be Asking!

One of the first steps in your marketing plan involves finding an agent who will best represent you. When interviewing agents, test and compare their knowledge and ask each to demonstrate how they will market your home to buyers. Compare, too, how much money each spends on advertising the homes s/he lists, in what media (newspaper, magazine, etc.) and the effectiveness of one medium over the other. Remember, it's not just how much they spend, but how they spend it.

Say goodbye to any real estate agents using old, traditional methods to sell your home because they don't work in today's market!

To be competitive in today's marketplace, agents who use new and innovative, non- traditional marketing approaches are the ones who are getting more homes sold fast and for top dollar.

For more information on homeselling tips, visit my www.HomeLandSeattle.com website.

Great Seattle Real Estate Newsletter!

The latest version of our HomeMarketWatch Insider newsletter
is now available on our website at:
http://HomeLandSeattle.com/redir.asp?page=gold_newsletter.asp&t=sicNews

Each month, we publish a series of articles of interest to
homeowners -- money-saving tips, household safety checklists,
home improvement advice, real estate insider secrets, etc.
Whether you are currently in the market for a new home, or not,
we hope that this information is of value to you. Please feel
free to pass these articles on to your family and friends.

This month's features...

FEATURE REPORT:
- Should You Have the Air Ducts in Your Home Cleaned?

ALSO THIS MONTH:
- Don't Pay Another Cent in Rent To Your Landlord
- 10 Questions To Ask When Choosing A Financial Planner

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