December 2007

Monthly Archive

12 Dec 2007 07:28 am

Defining A Real Estate Investor Rather Than A Real Estate Agent

For tax purposes, the IRS classifies those who invest, or work in real estate into four distinct and separate classifications. The tax laws for real estate investors won’t work for dealers, developers, or agents. The same tax laws that for other professionals do not always work for those that look to profit from real estate transactions. Investors need to know where to maximize tax savings and minimize tax liabilities.

According to the IRS, a real estate investor is someone who passively invests in real estate for long-term periods; that is, longer than one year. Any type of real estate investment can occur, single family homes, condos, industrial parks, undeveloped land and many other types. There can be properties involved in rent-to-own programs. The properties can have a sitting tenant and/or there can be an ongoing purchase option.

To be categorized as a real estate professional, there needs to be 5% or more ownership of a real estate business, or a minimum of 750 hours per year working exclusively on real estate activities, or more time on real estate activities spent than anything else while still meeting the 750 hours per year rule.

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11 Dec 2007 07:21 am

Insurance Fraud Predicted To Rise Due To Mortgage Problems

Florida’s homeowner insurers brace for an outbreak of home arsons set by cash-strapped homeowners looking for insurance money to escape from foreclosure. Homeowners are convicted of setting fire to their property face felony charges including arson, conspiracy and fraud. The charges could be much greater if someone is harmed. If the charges stick, homeowners who set their homes ablaze likely will be jailed.

The Coalition Against Insurance Fraud fears current market conditions could trigger an arson outbreak beyond normal levels. Falling home values and tighter lending rules are making it difficult for many people to refinance their way out of trouble, get loan work outs or otherwise escape foreclosure.

Central Florida law enforcement officials have tied an unusual crime spree of auto arsons to the housing market as homeowners try to “burn off” excess debt in order to make the mortgage payment. The right way to approach an impending default on a mortgage payment or foreclosure isn’t with a box of matches. At the first sign of trouble, work closely with the lender for a workout or refinance or seek other assistance, consumer experts advise.

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10 Dec 2007 07:58 am

Florida’s Mortgage-backed Fund Under Pressure

The depressed real estate market now seems to claim another victim — local governments. As with many government entities, city, county and state governmental units across Florida have invested in a fund containing mortgage-backed assets.

Florida’s State Board of Administration, which oversees the local government investment pool, recently froze the fund after worried investors sapped $10 billion from it within two weeks. That created financial bedlam for some investors, particularly small municipalities and school districts that rely on the fund to make payroll, bond payments and other obligations.

The plan that Governor Crist has approved will split the fund into two parts, the largest containing its securest assets. Investors will be able to withdraw $2 million or 15 percent of their holdings. They will have to pay a fee to withdraw more than the cap, which will expand gradually and eventually be lifted. This “clean” portion of the fund will comprise 86 percent of it. The plan also calls for establishing a public-private partnership with financial institutions to allow pool investors to borrow against their shares in the fund.

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09 Dec 2007 07:42 am

South Florida Real Estate Market Won’t Be Helped By Bush Plan

Many South Florida real estate owners won’t benefit from the White House subprime mortgage plan because they’re investors or homeowners at least 90 days late on their house payments. To qualify for help under the program , residents must be living in their homes and current on their mortgage payments.

Some economists say there’s nothing in the president’s proposal that will trigger a rebound in a South Florida housing market that has been mired in a slump for almost two years. It’s not going to help areas that need help the most, and Florida certainly is one of those. Palm Beach County had 1,387 residents behind on their home loans last month, up from 515 a year ago.

Relief is designed for homeowners holding adjustable-rate subprime mortgages they took out between Jan. 1, 2005, and July 31, 2007, and are facing a steep increase in their interest rates before July 31, 2010. People facing foreclosure typically are behind on their mortgage payments at least three months and have been notified by lenders that they intend to take back the properties.

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08 Dec 2007 07:41 am

Subprime Mortgage Holders Won’t Get A Free Ride

The recent President Bush plan unveiled to help subprime mortgage holders is criticized for not doing enough. The thousands of subprime borrowers eligible for the rate freeze are still being “punished” for reckless behavior in the past. But the punishment is just not by as much as they would if their adjustable-rate mortgages were allowed to move to unaffordable levels.

Subprime borrowers had higher rates to begin with and will still pay more than those who took out more conventional mortgages. Estimates vary on how many borrowers would be eligible for the freeze from around 150,000 to 240,000. Some 2 million subprime borrowers have ARMs that will reset to higher levels in 2008 and 2009.

To qualify for assistance from their lien holders, backed by the Federal government, those borrowers have to be current on their loans and lenders have to determine that the owner can’t refinance or afford an adjustment. The freeze will only affect those whose payments would increase by more than 10 percent with an adjustment.

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For more information on this and other real estate matters, your first source for Palm Beach real estate should be licensed agent and long-time resident Caesar Parisi.

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07 Dec 2007 07:19 am

Florida Property Tax Amendment To Be Ballot Question

Donald Trump is helping Gov. Charlie Crist raise money Thursday for a ballot question that could cap all property taxes. The same amendment would also provide cuts for most homeowners. Trump is on-board the amendment bandwagon as he pays $1 million a year on his Palm Beach County mansion.

During the campaign trail last year, Crist promised to reduce property taxes and has made the issue one of his highest priorities since taking office in January. The governor will be making a significant push to get support for the Jan. 29 ballot question that would double the homestead exemption and place a 10 percent assessment cap on all properties.

The amendment would also double exemptions on primary homes to $50,000. And, it would cap assessments on other properties. Businesses, rentals and second homes like Trump’s Palm Beach mansion, which is appraised at $58 million would have their taxes lowered. In 2005, the assessed value of Trump’s mansion was $41.4 million. It jumped to $56 million the next year, or a 35 percent increase. Had the cap been in place, his tax would have been based on a $45.5 million assessment in 2006.
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In the market for Delray Beach real estate? Consult with licensed agent Caesar Parisi. Caesar has assisted hundreds of buyers and sellers, giving sound advice on how to most effectively buy and sell property.

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