RE/MAX Executive Realty



Posted by RE/MAX Executive Realty on 6/6/2021

Image by Nattanan Kanchanaprat from Pixabay

Owning a home can be an amazing experience. But interest from your mortgage accumulates over time, leaving you to seemingly pay an arm and a leg to finance your home. But while you may think that paying off your mortgage early is a great idea, that isn’t always the case.

You May Have Other Debt

Paying off your mortgage early can save you on interest costs, but you more than likely have other debt to deal with. If you have other debts — like car loans, student loans or credit card debt — then these should be paid off first. Try to focus on your debts with higher interest rates; these tend to be associated with credit cards. After you’ve paid those debts off, then moving on to pay off your mortgage could be a good choice.

You Don’t Want to Go Broke

Paying off your mortgage may sound great and all, but you must consider all of your expenses, including possible emergencies. Saving on interest is very tempting, but it shouldn’t come at the expense of your emergency fund. You never know when something serious will happen, so do your best to set aside some cash. If you have hefty savings and all of your expenses are accounted for every month, then you can move on to paying off your mortgage early.

Consider Your Future

Many people try to pay as much as they can towards their mortgage, only to find out that they used up all of their money. While they have some big expenses and big life changes that cost money, now they have to save up in order to cover those costs. That being said, it’s best to think about your future before paying more towards your mortgage. Are you planning on having kids? Thinking of going back to school? With how frequent life changes, you never know when you could use money down the road. While it might seem like a great plan to throw money at your mortgage payment, think about your life goals and how your finances fit in that equation.

It Can Be Beneficial

Although we’ve made some points above that suggest that you shouldn’t pay off your mortgage early, it can still be very beneficial to do so. Let’s say your household is doing very well with finances and money is pouring in quickly. If your other debts and finances are taken care of, then paying off your mortgage early can help you save on interest; the larger amount you pay, the more you’ll save on interest. However, this can be a tough choice. Be sure to consider the points mentioned above before paying this loan off early.





Posted by RE/MAX Executive Realty on 2/14/2021

Image by Steve Buissinne from Pixabay

Suppose you’ve inherited your parents’ longtime home. Suppose they paid $100,000 for it, and it’s now worth $300,000. Had they sold it while it was in their possession, they would have avoided paying capital gains tax due to the Taxpayer Relief Act of 1997.

Now that it’s yours, has that tax avoidance opportunity been lost? If you sell it for $300,000, will you have to pay taxes on the $200,000 gain?

The answer is no, and the reason is step-up basis.

What is step-up basis?

When you sell an asset, you may owe capital gains tax. For example, if you buy stock for $10,000 and sell it 10 years later for $15,000, you owe tax on the $5,000 you profited. The original cost, the $10,000, is your basis, and you are taxed on your sale proceeds minus that basis.

If you buy stock, the original cost is your basis. But if you inherit stock, your basis is stepped up to what it’s worth when you inherit. If your mother leaves you that same stock, now worth $15,000, your basis is $15,000, not the $10,000 she paid. The IRS looks at it as if you acquired the stock for $15,000. If you sell it later for $18,000, your taxable gain is ($18,000 - $15,000) or $3,000.

Real estate works the same way. Going back to our example, your basis in the inherited home is $300,000, not the $100,000 your parents paid. If you sell it immediately for $300,000, you've made no taxable profit and you keep everything. You pay no capital gains tax at all. If you sell in a few years for $350,000, you pay tax only on the $50,000 difference. The appreciation that happened while your folks were alive never gets taxed.

Depreciation Benefit

If you decide to rent that house out (or if you inherit an apartment building) there’s yet another benefit. You can depreciate the dwelling at the step-up value, even if the previous owner used it as an income property and depreciated it. For that $300,000 building, you can deduct $10,909 a year from your rent income over the 27 ½ year depreciation period, rather than the $3,636 if your basis had been $100,000. You’d pay taxes on $7,273 less every year for a long time.

Step-Up During Your Lifetime

Under special circumstances you can take advantage of step-up basis on real estate when you give it away. You can donate property to a charity and deduct the step-up amount rather than your original basis. However, rules are strict. There are appraisal requirements, limitations based on taxable income and the charity must use the property in its work rather than resell it.

There is an even more specialized opportunity under the recent Tax Cuts and Jobs Act to sell appreciated property, invest in a designated opportunity zone, and defer or avoid taxes on your gain.

In both of these specialized cases, you must follow stringent regulations. Don’t wade in without the help of an expert.





Posted by RE/MAX Executive Realty on 7/7/2019

House flipping is a lucrative real estate investment venture that requires a lot of skills, planning, and sometimes luck to pull off. Any wrong decision when flipping a house can lead to disaster. When done right, it could also bring in a lot of money. If you can make smart decisions to buy the home at a great price, and keep renovation costs down to the minimum while maximizing the reach, then you can sell the house at a much higher rate than you paid for it. 

If you are looking to flip a house, you are looking to make a profit, so you need to make sure you are aware of the steps to take when investing in house flipping:

1. Invest in the house flip with cash

House flipping is a risky venture, and you do not want to add more debt to increase your financial risk. Flippers that borrow money with interest to finance a house flip often end up having to pay several months of interest which adds to the effective selling price of the house, making the project tighter than it already is. Using cash only to fund a house flip also means that you can wait out a slow market until you find the right buyer for the house at the best price for it.

2. Know the neighborhood market

It is normal to get excited during a house flip, but you must be sure that you never lose sight of the figures behind the investment. Know the neighborhood well so that you can buy houses that are around 80% of the average market value or less. Have the vision to know how the finished house will compete with homes already on the market and how best to price the house for a quick sale.

3. Have a strict budget for your house flip

Speak with your contractor to work out a good idea of how much the renovations will cost. It is good to have an estimate even before buying the house so that you do not overspend and become desperate with the house. Identify all structural, electrical and other issues the house may have before starting the project so that you can know if you can afford the house flip, even if unknown expenses crop up.

4. Plan for smart renovations

Aim for renovations that are low on cost and high on value. Instead of shiny floors and custom cabinets, you can refinish the existing cabinets, add granite countertops and replace all appliances to new stainless-steel ones. Things like painting and thorough cleaning can help increase the house value.

Your real estate agent will guide you on how to finish and renovate your house to meet local expectations and have a quick sale.





Posted by RE/MAX Executive Realty on 8/26/2018

Personal financial in your twenties comes with a steep learning curve. One minute youíre studying for your finals and the next youíre expected to suddenly know about APR financing, 401(K)s, and fixed-rate mortgages.

If youíre in your twenties and are facing these new challenges, youíre probably equal parts terrified and excited for the future. And, although it can be anxiety-inducing to step into the world of personal finance, you have one tool to your advantage that your parents and grandparents didnít have: the internet.

So, in this article, weíre going to give you some tips about buying a home and managing your finances in your twenties.

Have an emergency fund

You probably have a lot of things you want to save for. Down payments on mortgages and auto loans, saving money for traveling, beginning your retirement funds, and maybe even starting a family; theyíre all important investments that will take time and financial planning to achieve.

However, one thing that many young people neglect when they first start saving is an emergency fund. There are any number of things that can throw a wrench in your plans in your twenties. You might lose a job and have to live off of savings while hunting for a new one. Maybe something goes wrong with your car and it costs hundreds to repair. Or, you could have unforeseen medical expenses that arenít covered by your insurance. Regardless of the reason, having an emergency fund will help you stay out of unnecessary debt.

Itís recommended to have at least 6 months of living expenses saved in your emergency fund. Once you have this amount saved, itís a good idea to keep it in a separate account to avoid spending it on things that arenít exactly an emergency.

Donít live above your means

We all know that buying a house, going to college, and even buying groceries are all exponentially more expensive than they used to be. However, itís still important to try to adjust your lifestyle to the things you can afford.

This includes the vehicle you drive, the first home you buy, and even smaller purchases you make.

Avoiding lifestyle creep

Related to our last point about living above your means, lifestyle creep is the phenomenon that occurs when you get a raise or a higher paying job: the more we make, the more we spend. However, itís possible to avoid this trend by keeping your finances in check.

The next time you get a raise, make sure that money is put to use in either your retirement fund or savings account. This method is based on the goal of ďgiving every dollar a job.Ē When every dollar you earn has a purpose, youíre less likely to spend it on new video game consoles every six months.





Posted by RE/MAX Executive Realty on 6/10/2018

Your thirties are a time of many important financial decisions. Many people are starting families, buying homes, and getting settled into their careers by the time they turn thirty. The following ten years are often marked by salary increases, moving into larger homes, and saving for retirement.

Itís vital to have a solid grasp on personal finance in your thirties, as it is in many ways the foundation of your finances for the decades to come. So, in this article weíre going to give you some advice on buying a home and managing your money in your thirties.

Straighten out your credit

If your twenties were a volatile time of incurring debts from student loans, car loans, and other expenses, then itís paramount to get your credit in order in your early thirties. Having a high credit score can secure you lower interest rates on a home loan or let you refinance your loans at lower rates.

Start by making sure your bills are on auto-pay, and be sure to settle any older debts from your younger years. You can also use a credit card for recurring expenses, such as gas to get to work or groceries, and then pay them off in full each month. This way, youíll build credit and avoid accruing  interest at the same time.

Reevaluate your lifestyle and long term goals

A lot can change from the time you turn 25 to the time you turn 35. Your goals might shift from finding a home near the ocean to finding a home near a good school district for your children. You might also have the shocking realization that your children will be heading to college sooner than it might seem, and that youíre still working on paying off your own student debt.

Consider things like the size house youíll need for your family, where you want to live and whether that involves being close to aging parents, and reallocating money depending on your retirement goals.

Rethink your insurance coverage

Gone are the days when all you needed was a car insurance policy to get by. As you age and your responsibilities grow, youíll need to think about the future for you and your family. That may include a more comprehensive health insurance plan for your family, a life insurance policy for yourself, or increased covered for home and auto insurance.

Automate the headaches away

With all of these growing responsibilities, it can be easy to get frustrated with the time youíre losing to keeping your finance in order. Fortunately, there are many tools at your disposal in the internet age that will make all of those responsibilities an afterthought.

First, get a budget planning app, like Mint or You Need a Budget (YNAB). Next, set up your bills to auto-pay if you havenít yet. Then, put reminders in your phone to periodically check your credit score and reassess whether you need to pay for certain monthly services (do you still watch Hulu?). Finally, if you havenít yet, make sure you have your paychecks direct deposited into the accounts youíd like them to enter so you donít have to worry about them.




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