Taxes

How Property Taxes and Mortgage Interest Affect Yearly Tax Returns

When it comes to owning a house, there are some benefits homeowners may see when they do their annual taxes.  Along with other expenses related to your home that may be deducted, homeowners can deduct the cost of their property taxes and mortgage interest from their federal taxable income.  

Mortgage Interest

Mortgage interest is the amount of money homeowners pay in interest on their mortgage.  Since interest rates vary depending on the terms of each individual mortgage, this number is different for every homeowner, and many rates will change throughout the life of the loan.  When it’s time to prepare annual taxes, the amount of money that was paid in interest on a mortgage can be deducted from total income.

Property Taxes

Property taxes are determined by the county in which you live.  These taxes can include different taxes such as school, and city government taxes, combined into one payment.  The county sets the property tax percent and the amount a homeowner pays depends on the value of their home. For example, if the property tax is 3%, a house worth $100,000 will pay $3,000 per year, while a house valued at $300,000 will pay $9,000.  The taxes paid can vary if a home increases in value, or vice versa.

When you do your taxes, the money you paid for mortgage insurance and property taxes can be deducted from your total taxable income.  If your taxable income is $50,000, and you paid $5,000 in insurance and taxes, you new taxable income is $45,000. The more deductions you have, the lower the taxable income is, and the more money you may potentially receive in a tax refund.  Your accountant will know what can and cannot be deducted, so the best course of action is to keep track of all interest, taxes, and monies spent on your home.

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Investing, Rentals

How to Find Good Tenants

Finding the right tenants in the Maryland location, Virginia location, or Washington DC location is essential to having a good renting experience.  Your property is an asset and you need to be able to trust your tenants to take good care of it.  Approaching the search for tenants in a businesslike way is the key to finding the right people. Here are some tips to help you fill your rental with good tenants.

Know the Law

Every state, town, and county has its own rental laws.  Make sure you understand the laws for the location your property is in.  This will help you create a lease document that is lawful and fair for both you as the landlord, and your tenants.

Select Advertising

Advertising your open property is a must to finding the right tenants, but be selective where you post your listing.  There are sites such as rentals.com or zillow.com that may charge you a fee for your post, but will bring you better results than free sites such as Craigslist.  Put up a sign in the window or lawn of the property, and advertise locally in stores or newspapers. Provide details and the rent to get responses from people who are actually interested.

Application

Always have a rental application asking for names, social security numbers, income, and previous landlord references.  Run a background check on potential tenants. Many renters expect to pay for this, so you can charge a one time fee to do so.

Strong Lease Agreement

Spend the time before you look for tenants drawing up a strong lease agreement that clearly details the responsibilities of both the landlord and the tenants, late rent fees, occupants, and terms for evictions.  Even if something seems obvious, spell it out in the lease.

Set the Bar High

Just because ten people have applied doesn’t mean you have to choose one of them.  Don’t lower your standards for a tenant just to get your property rented. Keep looking until you find a tenant you feel good about.

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Investing, Rentals

Landlord and Tenant Laws in Maryland

When it comes to renting a house in the Maryland location, every state has its own laws laid out for both landlords and tenants.  These laws protect both parties in various situations and provide the framework for rental agreements. If you’re looking to rent a house in Maryland, here are a few of the most important laws you need to know.

Security Deposits

Maryland law puts a limit on how much money a landlord can require for a security deposit.  A landlord cannot hold more than two months’ rent as a deposit and is required to return money owed within 45 days of the tenant vacating the property.  A landlord who asks for more than the total of two months’ rent is breaking the law.

Withholding Rent

Did you know that in some cases, it is within your rights to withhold your rent?  A rental agreement between a tenant and landlord lays out all the responsibilities of both parties.  If the landlord does not uphold their end of the bargain, you can hold your rent money until they do.  For instance, if a landlord refuses to take care of an imperative repair, such as a broken water heater, you can keep your rent until they do.

Tenant Protections

A number of laws are specifically geared toward protecting the tenant.  One example a law that protect tenants from retaliation of the landlord when practicing their legal rights.  If a tenant complains to the authorities about unsafe living conditions, landlords are not allowed to take action against them.  Evictions, handling abandoned property, and fair housing rights are also all covered through Maryland laws.

In addition to state and federal laws, Maryland cities or counties could have their own laws as well.  When looking for property to rent in Maryland, take the time to read tenant/landlord laws for the state as well as the county and town you’re looking to move to.  

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Uncategorized

How to Plan a Major Home Renovation

Whether you’re planning to build an addition to your home, finally finish that basement, or add some bigger upgrades to boost your home’s value, home renovation projects can sometimes seem like nothing more than huge headaches.

But, no matter what your renovation needs are, if you’re properly prepared ahead of time with a smart home renovation plan, then your renovation project can go smoothly!

Design a Project Budget

Before you do anything else, create a project budget!

If you’re taking out a loan to pay for your renovation, decide what type of loan, how much to borrow, and how long it will take you to pay back so you can judge whether your renovation ideas are financially responsible or whether they’re a bit overambitious.

Make sure to plan an “emergency funds” section into your budget in case of any unpleasant surprises discovered during renovation!

Decide What You’re Doing Yourself

While home improvement shows may glamorize DIY renovations, look at your plans realistically before deciding to take on any tasks in your renovation.

Hiring a professional contractor might be a better financial decision than taking a week off of work to mini projects yourself.

Do Your Local Research

Before making any major changes to your home, check your local bylaws to see if there are any specific fees or other surprises you might run into after renovation. Checking with the building code and municipal bylaws of your area may also help you decide on a plan that further increases your home’s value by taking into account the neighborhood value.

Prepare for Life During the Renovation

Renovations can take a while, and can be quite loud and uncomfortable! Make a game plan for how you’ll adapt to your living quarters being transformed into a construction zone while the renovation is going on, or plan to move out temporarily!

Next time you’re thinking about that big renovation project, don’t dismiss the idea! With good planning and preparing, a major home renovation project can be a success!

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Investing

The Next Housing Market Downturn: How to Weather the Storm as a Homeowner

While we can’t ever predict the fluctuations of the market with absolute accuracy, it’s always a good idea to explore ways to be prepared for the next possible real estate market crash!

So, how can you protect yourself and your investments to weather the next real estate storm?

BE CAREFUL TAKING OUT LOANS

Buying a home is an investment. For many, it’s the single most expensive thing they’ll buy in their lives. But, in an unstable market, it’s much more difficult to judge whether your home with appreciate with time or not. It’s always smart to only take out a loan for what you can reasonably pay.

DIVERSIFY YOUR INVESTMENT PORTFOLIO

Don’t put all your eggs in one basket, as the saying goes! If you want to be prepared for a housing market downturn, you may want to diversify your portfolio with stocks, bonds, as well as with home equity.

CREATE A SAVING PLAN

To be better prepared for a sudden market downturn, it’s best to start saving for it. Build up an emergency savings account. You should save enough money for 3 to 6 months’ mortgage payments so you don’t need to worry as much about defaulting or a foreclosure.

LOCATION OVER DESIGN

If you’re worried you won’t be able to sell your home when the market crashes in the Maryland location, Virginia location, Washington DC location, or anywhere else, remember this simple phrase: “location over design.” Even when the housing market turns sour, people still need to buy homes. Good neighborhoods won’t suffer in a market downturn as much as bad neighborhoods.

GET A FIXED-RATE MORTGAGE

This is possibly the most important piece of advice to take away from this article. Fixed-rate mortgages give you a huge amount of security because, if the market goes down, your mortgage won’t go up. This is something worth sacrificing a bit of square footage over!

If you’re bettered prepared for the next housing market downturn, you can ride out the storm in relative security and comfort even while others scramble to sell their depreciated homes and try to find a way to pay their rising mortgages.

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Buying a New House, Sell Your House

Realtor Commission: How They Get Paid

If you’re working with a real estate agent in the Maryland location, Virginia, location, Baltimore location, or Washington DC location, you may have wondered how your realtor will be paid.  For those buying a home, it’s a surprise to learn that your realtor’s commission comes from the seller’s end of the table.  Let’s take a look at how commissions break down and how realtors earn their living.

Commissions

If you’re unfamiliar with this term, a person who works on commissions is paid a percentage of the final sale price.  For realtors, this means that all those hours they put in to help you buy or sell your home are not covered by an hourly wage.  If your house fails to close, they don’t get paid for the work they put in.  While commissions are negotiable, the standard rate for realtors is 6%.  At this percentage, if a house closes at $250,000, the commission is $15,000.

Buyer’s Agent

The commission for agents comes from the seller’s proceeds at the close of their sale.  As a buyer, if you work with an agent, their fee is also part of that commission.  Using the previous example, if the commission is $15,000, that amount is split between the listing and buyer agents at whatever percentage they’ve negotiated.  Most often the commission is split evenly with each agent earning 3%, but it can be negotiated differently.  Agents work with buyers knowing that they might not see a paycheck because they hope that when it’s time for you to sell, you’ll choose to work with them again.

If you’ve worked with a real estate agent, you’ll know the amount of time, energy, and work they put into each and every house.  Realtors know that unless your home closes, they won’t get paid.  It’s why they do everything they can to help you find the home you love and close the deal.

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Uncategorized

Choosing a Real Estate Agent Dos and Don’ts

Choosing a real estate agent may be the most important step towards selling your house in the Maryland location, Virginia location, Baltimore location, and Washington DC location successfully.  With so many companies and names out there, how do you choose the best agent for you?  Here are our top dos and don’ts for finding the perfect real estate agent to list your home!

DO Interview

Don’t just pick up the phone book and choose the first name that you see.  Search online for local realtors and read the reviews.  Come up with a short list of promising agents and then interview three or four of these.  You need to choose a realtor you can work with because selling your home may not be a short process.

DON’T Hire Family Just Because They’re Family

If you have a family member that’s a realtor, you don’t have to hire them.  Sure, there may be some pressure to do so, but if you’re uncomfortable with having them represent your home, go with your instincts!  If you’re considering hiring them, interview them with your other realtors and see if their skills match what you need.  Make sure that whatever happens with your home, you’ll be able to maintain your relationship with your family member.

DO Hire Locally

Realtors need to show your home, neighborhood, and community in the best light possible.  To do this, you need a realtor who is from that community and knows it like you do. They’ll have the information buyers want about schools, restaurants, community activities, etc.

DON’T Choose an Agent Based on Commission

Often, choosing an agent comes down to money.  If you have three agents you’re considering and one offers you a much lower commission rate, ask yourself why.  How hard is an agent going to work for less than standard market commission?  And what buyer agent is going to want to take their clients to see your home?  A good realtor is worth their fee.

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Buying a New House, Investing, Sell Your House

Buying/Selling Your House: 1031 Exchange

When you sell your house in the Maryland location, Virginia location, Washington DC location, or Baltimore location, any profits you make are subject to capital gains or recapture taxes.  To avoid paying those taxes, you can reinvest the profits in a new property under 1031 exchange.  To do this correctly, you’ll have to have a properly structured exchange.

There is a timeline for completing this exchange and you have just 45 days to find a property of similar or greater value than the one sold.  You only have 180 days total to complete the purchase of the new property.  This timeline is a bit tight if you want to take your time to shop around.

Like-kind Property

Another restriction on the 1031 exchange is the type of property purchased.  You can’t sell your business property and buy a house, or vice versa.  The property that is sold must be of like-kind to the property purchased.  They don’t have to be exact though.  You could sell a business and buy a business, or sell land and buy an apartment complex.

Debt and Equity

The 1031 exchange needs to be 100% in order to defer the taxes.  This means that the equity or profit from selling the property needs to be reinvested 100%.  If you make $50,000 on the sale of your house, you need to put that full amount back into the new property.  If you owed $200,000 on the property, you need to replace that same amount of debt as well.  You are exchanging the equity and the debt of one property for another.

Hire a Professional

Unless tax law and real estate are areas you considered yourself to be an expert in, you may want to consult a professional when looking at a 1031 exchange.  There are risks involved and if not done properly, you’ll still have to pay the taxes you’re trying to defer.  This is a great option for many people selling and buying a home, but to find out if it’s right for you, take the time to really learn the ins and outs of 1031 exchanges.

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Sell Your House

How to Determine the Market Value of Your House

Pricing your home can be difficult. To figure out how much your house is worth before you list it, there are several things you can do. Here are our tips to calculate your asking price.

Search for Comparable Homes

House value are determined by the price similar properties recently sold for. Some real estate websites, such as Trulia, Zillow, and Realtor.com, make this information easy to find. Start with a search of your part of town or zip code and keep track of the price homes like yours sold for. Make sure the houses you check are comparable, meaning they have the same number of bedrooms, bathrooms, and are close in square footage and lot size. These sites do not always have the most accurate information so make sure to check other sources as well.

Call the Tax Assessment Office

The tax assessment office in your town or city will have records of what comparable homes recently sold for in your neighborhood or town. Using these records will give you a second set of numbers that are more reliable than what you may find online. Using both figures together, you can come up with a better estimate of the value of your home.

Get in Touch with a Realtor

Realtors are the market experts and will be able to help you price your home. They can either do it for you, or help you identify the key items to look or in your search and estimation. They’ll also be able to give you information on how the market is in your area. When there are more buyers than houses available, the price of listed homes will increase and vice versa. A realtor will know what to expect and help you set your price right.

If you’re ready to list your home for sale in the Maryland location, Virginia location, Baltimore location, or Washington DC location, or are just curious about how much it may be worth, you can make an informed estimate with just a little effort and time.

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Sell Your House

Best Ways to Prepare Your Home to Hit the Market

Selling a house takes plenty of work and time. Before listing your home for sale, put the time in to help it show at its best. There are lots of things you can do to get your house ready, but these four are the most important steps you NEED to take.

1. Remove Personal Touches

When a potential buyer comes into your home, they want to be able to see themselves and their family living there. Family photos and knick-knacks are distracting and shoppers will wondering what kind of people live there, not how they can make the house their own. De-clutter your space, including closets, and pack up anything that you don’t need. You want your house to look open and inviting.

2. Pack Up What You Want to Keep

If a buyer sees an antique chandelier or handmade ceramic sink in the house, they’ll think it’s part of the bargain. Things can get dicey if an offer is made and then those items are removed. Either tag big items as “not for sale” or pack up and replace what you can. You want to make sure you keep your great-grandmother’s vintage cabinet pulls and handles.

3. Clean, Clean, Clean!

A house for sale can never be too clean. Consider hiring professionals if you can, or put the work in yourself and do all those chores you may normally neglect. Wash your windows, wipe down door jambs and floorboards, and get under those appliances. While you’re at it, you can make minor repairs to cracks in the flooring, patching up small holes, and re-caulking if you need to. Some tasks like vacuuming and dusting should be done daily while the house is on the market.

4. Curb Appeal

The exterior of your home is the first thing potential buyers see. Cross the street and take an objective look at your house. Does it look appealing? You may need to touch up paint and clean up your landscaping. Clean the driveway, sidewalks, and windows. Pack up the kids’ toys and make sure you clean up after your pet everyday. Dress your house for the season, either with tasteful holiday decorations, or fresh flowers to give it that extra shine.

If you take these four steps, you’re home in the Maryland location, Virginia location, Washington DC location, and Baltimore location will show better and you’ll be more likely to get your house sold at the price you want. A little time now can pay off big later!

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