Bargain Markets For Homebuyers and Investors

Since 2007, foreclosures and short sales have littered the real estate market and drove down the price of property and home values. The upside to the down housing market is that homebuyers and investors can find sweet deals in some of the nation's most sought after cities.

If cities like Milwaukee, Memphis, Baltimore and the Big D interest you, then you'll find a honey of a home in any of these metro areas. Though the initial listing price may begin at what properties are currently valued, they are often reduced from 26 to 33 percent. The top ten U.S. cities with the listings discounted the most include the following:

* Milwaukee, WI - 33 percent
* Phoenix, AZ - 31 percent
* Mesa, AZ - 31 percent
* Memphis, TN - 31 percent
* Baltimore, MD - 30 percent
* Jacksonville, FL - 30 percent
* Dallas, TX - 29 percent
* Minneapolis, MN - 29 percent
* Tucson, AZ - 27 percent
* Columbus, OH - 26 percent

Falling in the first quarter by 4.3 percent, Milwaukee home values continue to lose ground, but the number of home listings is huge. In fact, Milwaukee has the most real estate listings of any city in the state. As of April 2010, the average home in Milwaukee was valued at $144,609, which is making buying real estate in this city much more affordable. Add to it a 31 percent reduction on the listing, and you could buy a home there for only $99,780.

Phoenix was on a top ten list in 2008 for being one of the cities hardest hit by the real estate bust. In the first quarter of 2009, property values were still going down, tumbling by almost 20 percent. Economists predict that the city has a looming shadow inventory getting ready to hit the market soon and will drive values down even further. Standard & Poor's Case Schiller Study showed Mesa home values were on the ever-so-slight rise by last quarter 2009 and into first quarter of 2010. As of April, the average estimated value of Mesa homes is around $133,664.

According to the most recent Clear Capitol market report, the River City was noted with the most sales in the nation of foreclosed property by lenders in the first quarter of 2010. It resulted in an 18.1 percent drop in Memphis home values from year-end 2009. Baltimore and Jacksonville tie for having a 30 percent reduction in the listing price. The median listing prices are $250,000 and $189,900, respectively.

In earlier 2010, foreclosures were still climbing in Dallas; although, at a slower pace than in the recent past. By May, foreclosure filings dropped for the second straight month. That's good news for Dallas real estate value and could indicate the beginning of a recovery. Minneapolis showed a 24.7 decrease in inventory compared to the same time in mid-April 2009. It looks like the housing market in the Twin City might be leveling out, since new listings are still on the decline. What that means for buyers is that home listing prices could soon be on the rise, so now would be the time to buy.

Median home values for Tucson continue to decline and currently sit at around $192,000. That's almost a 4 percent drop since January 2010. Housing inventory is about the same as it was this time the previous year. Columbus appears to be leveling out somewhat in median home values staying steady at $159,900 since the beginning of year. That's still a decline of 5.9 percent from the same time last year, but the inventory is decreasing, so these may be indicators that the market is beginning to level off. The dream of buying a quality, affordable home has become much more attainable. Falling home values, along with reductions in listing prices, lowers the cost to a more manageable price point.

Meanwhile, there are four other markets that did not experience a decline in home values in 2010 that were among those hardest hit nationwide by the housing bust. San Diego and Detroit both showed an increase, along with Los Angeles and San Diego. These cities, along with previously mentioned Phoenix, are now at the top of the list for cities recovering in the housing market.

Tax Deductions - Tips For Individual Real Estate Investors

Tax deductions are not the top priority for most individual real estate investors. They often work out of their home with no employees, other than those on-site at the property. Challenges (aside from tax deductions) include selecting what property to purchase, screening tenants, repairs, managing expenses, obtaining financing, and deciding when to sell. This article addresses tax deductions sometimes over-looked by real estate owners.

Tax deductions reduce taxable income but do not directly reduce taxes. For example, $10,000 in additional tax deductions will generate $3,500 in federal income tax savings ($10,000 X 35%), assuming a 35% federal income tax rate. Since most require a cash expenditure, increasing actual expenses to increase tax deductions is not desirable. Let's review fine-tuning the depreciation schedule and reclassifying existing expenditures to increase deductions.

Real estate depreciation is a potent but underutilized source of tax deductions Real estate depreciation schedules are commonly established by just separating land from the improvements. This is analogous to asking a world-class pianist to play a piano which is not tuned and has several keys which are not functioning. The results are just not as good as they should be.

Congress has provided depreciation as a tax deduction to encourage real estate ownership and investment. Numerous court decisions have provided clear guidance for accurately and precisely depreciating real estate. Cost segregation can typically increase real estate depreciation by 50-100% in the first 5-7 years of ownership.

Owners can claim a tax deduction windfall for properties owned more than one year by "catching-up" previously under-reported depreciation. After obtaining a cost segregation report, you can "catch-up" depreciation without filing any amended tax returns.

Another meaningful source of tax deductions is to scrutinize any cash expenditures which are being capitalized. Have minor repairs been capitalized in error? Are there more significant repairs which do not clearly extend the life of a component? Discussing these items with your accountant can yield additional tax deductions Also review items which were capitalized in prior years; can you claim any of them as current year tax deductions?

Child labor can be good when they are your children and you claim a tax deduction. Consult your accountant or CPA but this can generate additional tax deductions of $5,000 per child, upon which they pay no taxes. (If they are feeling generous, they may return the money as a tax-free gift.)

A tax-deductible vacation is an attractive option to make an expenditure deductible. Simply plan a vacation around a business trip for a meeting or seminar. Your airfare and hotel for the business period are deductible. Hotel before or after the business activity and your spouse's airfare (assuming that your spouse is not involved in business) are not deductible. Half of meals during period with business activity are deductible.

Reviewing personal expenditures can generate additional tax deductions Items used for business such as computer, printer, office supplies, seminars, association dues, and business publications can be deducted. Long distance business phone calls can also be deducted. Self-employed persons can deduct the entire cost of health insurance premiums.

Record keeping for tax deductions does take a modest effort. However, the federal income tax savings make it worth the effort.

Cost segregation produces tax deductions and reduces federal income taxes across the country and in every size market. Below are just a few examples of cities where cost segregation generates meaningful tax deductions.

City:

Las Vegas, NV

Boston, MA

Tampa, FL

Hartford, CT

San Francisco, CA

Memphis, TN

Miami, FL

Denver, CO

Phoenix, AZ

Orlando, FL

Boise, ID

Chicago, IL

El Paso, TX

Oxnard, CA

Rochester, NY

Cincinnati, OH

Jackson, MS

San Jose, CA

Fresno, CA

Charleston, SC

Omaha, NE

Oklahoma City, OK

Buffalo, NY

Albuquerque, NM

San Antonio, TX

Charlotte, NC

Allentown, PA

Austin, TX

Baton Rouge, LA

Jacksonville, TN

Cost segregation produces tax deductions for virtually all property types, including the following:

Property Type:

Used car lot

Research and development

Nursing home

Lumber storage

Truck stop

Tennis club

Hospital

School

Movie theatre

Lodging

Almost every industry, including the following, can generate cost-efficient tax deductions by using cost segregation.

Industry:

Golf courses and country clubs

Textile product mills

Nondurable good wholesalers

Durable good wholesalers

Real estate lesser

Electrical component manufacturing

Textile mills

Laundry facilities

Automotive parts distributors

Plastic and rubber products manufacturing

New HUD Measures on Foreclosed Properties Are a Great Opportunity For Investors

HUD Secretary Shaun Donovan announced on January 15, 2010 a temporary policy that will expand access to FHA mortgage insurance. Investors will now be allowed to quickly resell foreclosed properties.

Previously FHA would not insure a mortgage on a home owned by a seller for less than 90 days. This ruling has been temporarily lifted and will give investors access to a wider range of foreclosed properties. The waiver will take effect on February 1, 2010 and will be effective for one year. HUD has reserved the right to stop or extend the program at any time.

The FHA found that buying and preparing foreclosed properties for resale usually took less than 90 days. By not allowing the use of FHA mortgage insurance for a quick resale within 90 days of purchase they found it stopped sales to investors. Investors do not want the extra expense of holding costs or the threat of vandalism that could happen during the 90 day holding period.

This change in policy will allow investors to use FHA Insured Financing to purchase HUD Properties, bank owned properties, or private sale properties. As a result homes should sell quickly, aiding in stabilizing prices in real estate and rejuvenating neighborhoods and communities.

To protect buyers against predatory practices of "flipping" these homes at inflated prices, certain conditions have been set:

All transactions must be arms-length. There can be no relationship between the buyer and seller or anyone participating in the sales transaction.

If the sales price is more than 20 percent of the seller's purchase cost, the waiver will only apply if specific conditions are met.

The waiver is limited to new mortgages.

To find out more about this program go to HUD's website or contact your local Certified Distressed Property Expert.