Information provided courtesy of James D. Brown, CPA
If you own rental real estate, you should be aware of a provision of the recently enacted Small Business Jobs Act. Under the provision, which is scheduled to take effect on January 1, 2011, owners of property who receive rental income will be required to issue Forms 1099 to service providers for payments of $600 or more during the year.
The act will require rental income recipients making payments of $600 or more to a service provider in the course of earning rental income to provide an information return (typically, Form 1099-MISC, Miscellaneous Income) to the IRS and to the service provider. This provision will apply to payments made after Dec. 31, 2010, and will cover, for example, payments made to plumbers, painters or accountants in the course of earning the rental income.
While the required 1099s need not be issued until January 2012, property owners will need to start keeping adequate records of payments starting January 1, 2011, so they will be prepared to issue correct 1099s. They will also need to obtain the name, address and taxpayer identification number of the service provider, using Form W-9 or a similar form.
The law does provide an exception for individuals who can demonstrate that the required reporting will create a hardship. However, to date, the IRS has not issued any guidance as to what would constitute such a hardship or how it would be demonstrated. There is also an exception for individuals who receive income of “not more than a minimal amount,” but again no guidance has yet been issued as to what constitutes “not more than a minimal amount.”
Failure to file the information returns on a timely basis can result in substantial penalties to the business owner. On November 16, the American Institute of Certified Public Accountants sent letters to the House of Representatives and the Senate expressing its concerns about the burdens created by this requirement and another 1099 reporting requirement included in the act, urging the repeal of both requirements.
In light of the absence of any guidance regarding the above noted exceptions, and the uncertainty of the repeal of the new provisions, rental property owners should take steps to insure that the proper record keeping is in place so that they are prepared to issue 1099s in January, 2012.
James D. Brown, CPA
Accounting, Taxes, Consulting, Business Advisory
(201) 357-5228 – Office
(201) 490-1788 – Fax
Why do I need a Real Estate Agent?
Doing the work yourself can save money, but it could end up being more costly than a realtor’s commission in the long run. – Tara Struyk
Several months ago, I meet a woman looking to purchase a condo in Harlem. She had just looked at two other buildings, new developments, and was working with an agent from another company. I asked her to fill out my questionnaire and using that information proceeded to look up properties for her. Soon I identified 95 units within her price range in the Harlem/Morningside Heights area.
She was very surprised at that number, so I spoke with her in detail about her experience with her current agent. During our conversation, I stated that she must have a lot of time to walk around on Sundays looking at property. She said that it was quite the opposite, she did not have anytime at all except Sundays to look at property. People that know me well understand that I am straight to the point. I feel that if we speak our minds we can actually achieve more than being evasive or indirect. I told her that as standard practice the person she was “working with” for the past 6 months should have access to the same information I do and could have found her several properties by now. It was obvious she did not have much confidence in the agent, or else she would not feel the need to walk through Harlem to find property that “you are missing.”
I take pride in being a full service broker. I pinpoint the best property to fit your criteria based on the information you give me. Within 48 hours I pick the top 10 properties in your price range. Our database is vast and updates itself regularly. The rest of the properties (i.e., #11, 12, 13…) on the market fall outside your criteria and therefore there is less of a chance of purchasing them.
By the end of the conversation my new client asked me to find her first home. She has been looking a long time and wanted to buy before year’s end. From a practical standpoint, I told her next year looked good also. Property on the market now will drop in price by the Spring and Summer, or sooner, to encourage sales. All I asked her was for her to be prepared with her documentation so we could act promptly when opportunities presented themselves.
Why do I need a Real Estate Agent? The answer is Time. How much time do you have to do the legwork yourself? Even if you have the all the time in the world, a lack expertise can leave you exposed to an ill-informed (and very expensive) purchase. A broker’s job is to provide educated counsel to their clients, so please seek professional help.
I ran across this Forbes article months ago and kept it in my blog vault. The piece goes into more detail highlighting addition points people should keep in mind when searching for property with a reputable agent: Five Reasons Why You Still Need A Real Estate Agent
Image courtesy of The Real Deal.
From The Real Deal comes news that Prudential Douglas Elliman is buying John Edwards Real Estate and merging its operations, according to John Edwards, owner of the Riverdale agency. Once finalized, Elliman will have a presence in the Bronx neighborhood, where it currently has listings, but no office.
Read the complete article here. Update (11/13/10) for some reason the link to the Real Deal is disabled.
Manhattan Apartment Sales Stabilize?
Although the data points to the market evening out, some individuals still believe that the home sales prices will drop. I spoke with a buyer of mine that has been looking for a year (off and on) to find her perfect place and she read that a bank was attempting to stop foreclosures so in her opinion this was a good sign that prices would drop lower. I think that it gives her more hope that she can find an even cheaper priced apartment than commit to something now. I raise this point because good information is on the Internet, but who interprets it for you is very important. You should rely on an industry professional or source to explain what you see online. While data does not lie, how that data is interpreted can be misleading.
read more…
Image courtesy of Bloomberg
In a recap of recent news, it seems that the big corporations are finally looking into using some of their money to help home owners. Hopefully other banks will follow. It is very disturbing to me that one person signs 10,000 documents a month, but that’s their “procedure.” Humans make mistakes, but I would like to believe that in the case of someone potentially losing their home extra special attention is given to the document review. This will definitely hold up the Bank R.E.O. / short sale process, but the cause is good….to save someone’s home.
What are your thoughts? Have you experienced issues with the forclosure process? See this Bloomberg story for more details.
According to Realtor.org, price reductions on properties for sale have increased for the third consecutive month to 26%, according to statistics provided by Trulia.com. While home sellers in some cities cut prices aggressively, those in 24 of the 50 cities tracked by Trulia held steady.
“We’re seeing gradual improvement in many U.S. cities–several for consecutive months. What this shows us is that while we’re in for a long climb to bring stability back to the housing market and while it’s going to take time, that climb appears to at least be underway in some parts of the country.” Pete Flint, CEO, Trulia
House Hunting Tips
Image courtesy of Homes & Property
When house hunting, keep these tips in mind:
- Location counts. You’ve probably heard the old real estate joke about “location, location, location,” but the point still bears repeating. Location is crucial. How far are you really willing to commute to your place of employment? How good are the local schools, shopping centers, public transportation, seniors services and other public amenities? Will your new home be next to a vacant lot or a commercial property? Even a picture-perfect dream home can be a mistake if it’s in an undesirable location, and a poor-location home can be a particularly bad choice if you anticipate reselling the home within a few years.
- Make a list. Do you really know what you need and want in your home? You’ll save yourself many hours of shopping (and potentially arguing) if you make a list ahead of time. Zero in on the features you must have, would like to have, definitely don’t want and would prefer not to have. Your goal is to find the right home for your family without falling in love with one that doesn’t suit your needs. Tip: Start compiling your wish list by thinking about what you like and dislike about your current home.
Getting Your Home Ready to Sell
When conversing with real estate agents, you will often find that when they talk to you about buying real estate, they will refer to your purchase as a “home.” Yet if you are selling property, they will often refer to it as a “house.” There is a reason for this. Buying real estate is often an emotional decision, but when selling real estate you need to remove emotion from the equation.
You need to think of your house as a marketable commodity. Property. Real Estate. Your goal is to get others to see it as their potential home, not yours. If you do not consciously make this decision, you can inadvertently create a situation where it takes longer to sell your property.
The first step in getting your home ready to sell is to “de-personalize” it. read more…
Image courtesy of G.J. Gardner Homes
This post discusses, briefly, the loan closing documents you must keep, your mortgage loan responsibilities and what to do if you have questions about your loan plus home maintenance tips.
A home purchase is likely the single largest asset most persons will obtain in their lives and the given the ability to pass on property to heirs, it is vital that you keep a copy of every document you sign at the closing meeting. It’s especially important to keep a copy of your settlement statement form. You will find it useful when you file your taxes and if you sell your home. For example, the real estate taxes and loan discount points you paid as part of your closing costs are tax deductible. So, when you file your taxes, you will need to refer to your settlement form to get these amounts.
In addition to the closing documents, you should keep all insurance records, such as homeowner’s and title insurance. You would need to have access to your homeowner’s policy if, for example, someone were to sue you because they were injured on your property. You would refer to your title insurance policy if you were to find a flaw in the title after you bought the house. Keep these important records in a safe place such as a safety deposit box or bank vault in addition to keeping a copy in your home. read more…
When purchasing (or renting) property consider insuring it. After all it may very well be the most expensive item you will ever purchase in your life. Do not let a sudden event (i.e., a flood or fire) or theft occur in order to make insurance an important item. Instead, be proactive. As with your health care, practicing preventative medicine is less expensive in the long run. Insuring your property upon purchase (or rental) reduces your degree of loss and personal expense.
read more…
