Archive for May, 2009
Real Estate And Property Investment Strategies – Grow Your Equity And Wealth
May 12th, 2009
Syd Z. Nohcud asked:
The first step to building wealth through real estate investing is to buy your own home. Instead of making rent payments that pay off someone else’s property, it makes more sense to make mortgage payments to pay off your own.
This way you not only are not only investing your payments in a property, you are able to take advantage of capital gains.
As you increase equity in your home, you will be able to use it to help you purchase other properties.
After purchasing your own home, the next most common step in real estate property investing is to buy a rental property. If you buy well and get a good rental return with minimal outgoings you will not only take advantage of capital gains but the rent you receive will go along way to paying your mortgage.
As you gain equity in your property and pay down your mortgage, you will be in a position to purchase yet another property and repeat the process.
You need to be careful to minimize the risk by buying properties at below their market value, preferably when market prices have dropped.
This is because real estate prices increase over time and if you are prepared to hold onto property, you will always make money in the long term.
Unless you are wealthy, you will need to take out a mortgage to buy real estate property. A mortgage loan uses property as security for a loan on the property.
A mortgage allows you to purchase real estate with a down payment and repayment terms so that you do not have to pay the full value of the property immediately.
If you default on the payments, foreclosure requires a judicial proceeding which provides the borrower with some protection.
Real estate has historically offered investors far better returns than most other investment options.
With most banks prepared to finance ninety percent of the value of property values, you only require a deposit of ten percent and the ability to make the monthly payments to repay the loan.
Therefore, if you buy conservatively you place yourself in an ideal position to make excellent profits. In fact, real estate has traditionally returned substantially more than average stock market investments over time.
As well as building long term wealth, property investment can offer tax advantages under certain circumstances.
Get advice from your accountant as to whether your circumstances would allow you to claim tax benefits.
Another advantage of real estate investing over stock market investing is that the prices are flexible. With real estate you can make an offer that is lower (sometimes substantially so) than the asking price.
Stock market prices are set and do not allow you any room to move. As a result, you can sometimes get excellent property buys when the seller needs to sell quickly and is prepared to accept your offer.
All in all, investing in real estate is a wise choice that offers excellent long term returns and sometimes even substantial short term gains.
You can begin small with a ten percent deposit on an affordable property and gradually accumulate investments in your property portfolio.
Real estate investment is generally a safe pathway to personal wealth and retirement funding as long as you behave conservatively and wisely.
The first step to building wealth through real estate investing is to buy your own home. Instead of making rent payments that pay off someone else’s property, it makes more sense to make mortgage payments to pay off your own.
This way you not only are not only investing your payments in a property, you are able to take advantage of capital gains.
As you increase equity in your home, you will be able to use it to help you purchase other properties.
After purchasing your own home, the next most common step in real estate property investing is to buy a rental property. If you buy well and get a good rental return with minimal outgoings you will not only take advantage of capital gains but the rent you receive will go along way to paying your mortgage.
As you gain equity in your property and pay down your mortgage, you will be in a position to purchase yet another property and repeat the process.
You need to be careful to minimize the risk by buying properties at below their market value, preferably when market prices have dropped.
This is because real estate prices increase over time and if you are prepared to hold onto property, you will always make money in the long term.
Unless you are wealthy, you will need to take out a mortgage to buy real estate property. A mortgage loan uses property as security for a loan on the property.
A mortgage allows you to purchase real estate with a down payment and repayment terms so that you do not have to pay the full value of the property immediately.
If you default on the payments, foreclosure requires a judicial proceeding which provides the borrower with some protection.
Real estate has historically offered investors far better returns than most other investment options.
With most banks prepared to finance ninety percent of the value of property values, you only require a deposit of ten percent and the ability to make the monthly payments to repay the loan.
Therefore, if you buy conservatively you place yourself in an ideal position to make excellent profits. In fact, real estate has traditionally returned substantially more than average stock market investments over time.
As well as building long term wealth, property investment can offer tax advantages under certain circumstances.
Get advice from your accountant as to whether your circumstances would allow you to claim tax benefits.
Another advantage of real estate investing over stock market investing is that the prices are flexible. With real estate you can make an offer that is lower (sometimes substantially so) than the asking price.
Stock market prices are set and do not allow you any room to move. As a result, you can sometimes get excellent property buys when the seller needs to sell quickly and is prepared to accept your offer.
All in all, investing in real estate is a wise choice that offers excellent long term returns and sometimes even substantial short term gains.
You can begin small with a ten percent deposit on an affordable property and gradually accumulate investments in your property portfolio.
Real estate investment is generally a safe pathway to personal wealth and retirement funding as long as you behave conservatively and wisely.
Posted in Real Estate | 
Tags: Capital Gains, Investment Options, Investment Strategies | 
No Comments »
Real Estate in Second Life
May 11th, 2009
Kelly Brandon asked:
Americans love games. Maybe it’s a cultural thing, and of course the passion for games isn’t limited to this country. From the beautiful simplicity of tic-tac-toe to board games like checkers and Monopoly, card games and on up to the sophisticated gaming systems like Xbox and Wii, the quest for entertainment has been a constant.
Grand Theft Auto rolled into stardom with its high-tech portrayal of a futuristic city that mimicked New York, called Liberty City. Names ranging from The Statue of Happiness, GetaLife Building and Rotterdam Tower are obvious tips of the hat to the Big Apple. But Grand Theft Auto is a bit darker and more violent than many gamers prefer and for many the search for a virtual world with nearly infinite possibilities and less crime has lead to Second Life, or SL.
Now with the current near historic real estate and housing market slump, it’s only natural that Second Life, arguably one of the most popular virtually reality games, might be even more appealing to new gamers tired of the gloom and doom of real life real estate.
Second Life started up in 2003 and is owned by Linden Lab. The whole premise of the game is based on virtual real estate, and just like in real life, money can be made by it. That’s real money, converted from the Linden Dollar currency used in the game. If you want to really enjoy the possibilities offered and have some serious fun in Second Life, you have to own land to do it. In reality players are leasing the virtual land, they don’t really own it, but the premise is the same.
A player wants a small parcel of land pays a fee every month, similar to rent. As you move up in land ownership, you pay more per month. The more land you own, the more you can do in Second Life. It’s the ultimate in real estate speculation without the risk. You have to be premium member of Second Life to own land, and the more land you own the higher your monthly fee is to Linden Lab. Players can own small parcels without paying any more than the basic monthly fee or you can opt for your own island. Linden auctions off parcels of land or you can buy and sell with other residents of Second Life.
There have been undocumented cases of residents generating a secondary income or even making their living off of real estate deals in Second Life. Reselling virtual land or renting out parcels can generate a monthly income, as strange as it may seem. If you think about it, besides the monetary aspect, it could become very addictive to some players. You would have all of the excitement of real estate deals, speculation and potential profit or loss without the headaches of insurance, mortgages or taxes. That has to be a major draw for some residents of the virtual game.
The value of land in Second Life can be increased much the same way as in real life. Residents can improve the land by building houses, adding businesses or even landscaping the property. A resident of SL could purchase enough land to develop projects as big as these luxury condos in Chicago http://www.chicagocondodirectory.com/luxury-condos and rent or sell the units for an income.
By the same token, Linden reserves the right to add more land to the game under the Acts of Linden, which can suddenly decrease the value of land by increasing the supply, should the market get out of hand.
There also used to be a First Land program to entice new players. You could join with a premium account and get a small parcel of land without having to pay a monthly fee. This practice was shut down in early 2007, however. And just like in real life, there are abandoned parcels of land that are thrown back into the rotation and come up for auction.
There are also other factors at play in Second Life that mimic real life, such as obnoxious neighbors. Some residents have been accused of creating offensive parcels of land in an effort to lower the value of neighboring parcels and force sales. To try and limit disputes, Linden started allowing covenants in 2007. A covenant basically allows anyone owning a region of land (which is supposed to hold up to 100 residents) to set rules that have to be followed or else loss of land will occur. This keeps residents who rent or own within that region from defacing property.
Of course with any type of land rush, you’ll find real estate agents and Coldwell Banker was the first company to jump on the Second Life bandwagon. The company set up shop in the virtual world in 2007 and purchased a large amount of land tracts on the mainland of SL. Its plan was to divide up the land into 520 units, with half being for sale residential homes and the other half as rental property. Coldwell planned to market the homes(which buyers won’t be able to customize or change) well below the going rate on SL and also offer everything from helicopter tours to information on real life condos, houses and property.
Coldwell Banker was not only the first large real estate company to join SL, it was the first to actually put a real life property up for sale on Second Life. Complete with a three dimensional replica of a $3.1 million estate located on Mercer Island, Washington.
With the popularity of virtual home tours and the power of the Internet growing, coupled with the housing market slump of 2008, Second Life may become an escape and even an investment for more people.
Americans love games. Maybe it’s a cultural thing, and of course the passion for games isn’t limited to this country. From the beautiful simplicity of tic-tac-toe to board games like checkers and Monopoly, card games and on up to the sophisticated gaming systems like Xbox and Wii, the quest for entertainment has been a constant.
Grand Theft Auto rolled into stardom with its high-tech portrayal of a futuristic city that mimicked New York, called Liberty City. Names ranging from The Statue of Happiness, GetaLife Building and Rotterdam Tower are obvious tips of the hat to the Big Apple. But Grand Theft Auto is a bit darker and more violent than many gamers prefer and for many the search for a virtual world with nearly infinite possibilities and less crime has lead to Second Life, or SL.
Now with the current near historic real estate and housing market slump, it’s only natural that Second Life, arguably one of the most popular virtually reality games, might be even more appealing to new gamers tired of the gloom and doom of real life real estate.
Second Life started up in 2003 and is owned by Linden Lab. The whole premise of the game is based on virtual real estate, and just like in real life, money can be made by it. That’s real money, converted from the Linden Dollar currency used in the game. If you want to really enjoy the possibilities offered and have some serious fun in Second Life, you have to own land to do it. In reality players are leasing the virtual land, they don’t really own it, but the premise is the same.
A player wants a small parcel of land pays a fee every month, similar to rent. As you move up in land ownership, you pay more per month. The more land you own, the more you can do in Second Life. It’s the ultimate in real estate speculation without the risk. You have to be premium member of Second Life to own land, and the more land you own the higher your monthly fee is to Linden Lab. Players can own small parcels without paying any more than the basic monthly fee or you can opt for your own island. Linden auctions off parcels of land or you can buy and sell with other residents of Second Life.
There have been undocumented cases of residents generating a secondary income or even making their living off of real estate deals in Second Life. Reselling virtual land or renting out parcels can generate a monthly income, as strange as it may seem. If you think about it, besides the monetary aspect, it could become very addictive to some players. You would have all of the excitement of real estate deals, speculation and potential profit or loss without the headaches of insurance, mortgages or taxes. That has to be a major draw for some residents of the virtual game.
The value of land in Second Life can be increased much the same way as in real life. Residents can improve the land by building houses, adding businesses or even landscaping the property. A resident of SL could purchase enough land to develop projects as big as these luxury condos in Chicago http://www.chicagocondodirectory.com/luxury-condos and rent or sell the units for an income.
By the same token, Linden reserves the right to add more land to the game under the Acts of Linden, which can suddenly decrease the value of land by increasing the supply, should the market get out of hand.
There also used to be a First Land program to entice new players. You could join with a premium account and get a small parcel of land without having to pay a monthly fee. This practice was shut down in early 2007, however. And just like in real life, there are abandoned parcels of land that are thrown back into the rotation and come up for auction.
There are also other factors at play in Second Life that mimic real life, such as obnoxious neighbors. Some residents have been accused of creating offensive parcels of land in an effort to lower the value of neighboring parcels and force sales. To try and limit disputes, Linden started allowing covenants in 2007. A covenant basically allows anyone owning a region of land (which is supposed to hold up to 100 residents) to set rules that have to be followed or else loss of land will occur. This keeps residents who rent or own within that region from defacing property.
Of course with any type of land rush, you’ll find real estate agents and Coldwell Banker was the first company to jump on the Second Life bandwagon. The company set up shop in the virtual world in 2007 and purchased a large amount of land tracts on the mainland of SL. Its plan was to divide up the land into 520 units, with half being for sale residential homes and the other half as rental property. Coldwell planned to market the homes(which buyers won’t be able to customize or change) well below the going rate on SL and also offer everything from helicopter tours to information on real life condos, houses and property.
Coldwell Banker was not only the first large real estate company to join SL, it was the first to actually put a real life property up for sale on Second Life. Complete with a three dimensional replica of a $3.1 million estate located on Mercer Island, Washington.
With the popularity of virtual home tours and the power of the Internet growing, coupled with the housing market slump of 2008, Second Life may become an escape and even an investment for more people.
Posted in Real Estate |
Tags: Infinite Possibilities, Reality Games, Virtual Real Estate |
No Comments »
Purchase Income Property through an Investment Loan
May 11th, 2009
David Nalin asked:
Buying income producing property is becoming a popular choice for people seeking to supplement their income creating an additional revenue stream. Real estate purchases will typically grow in value. Yet, many properties acquired through a structured financial plan using funds from an investment loan can produce income both part time and a full time.
An Investment Loan as Part of a Personal Growth Plan
As part of a strategic personal financial growth plan, an investment loan can be a valuable method toward obtaining financial independence. The actual structure of your investment loan is an important aspect affecting the return on your investment. Options available to investors today are quite similar in the same loans available for owner-occupied dwellings. A person seeking to invest in a secondary, or income-producing, property can use the same standard fixed and variable rates for home purchase. Not only will the same rates be available but the same loan features as well.
What are Investment Loan Features?
Just as is available for owner-occupied home loans, an investment loan will have the following features:
Redraw – allows access to additional funds paid into an investment loan if extra funds are needed. It is generally nit available with a fixed-rate loan. Additional repayments – This feature allows an investor to make extra loan repayments reducing the interest charged due to reducing the loan length term. This feature also is typically not available for fixed-rate loans. Repayment holiday – allows many borrowers the opportunity to forego repayments during specified periods. Although not making repayments during these times, interest still accrues on the balance. This feature may compel the need to make additional advance payments before the deferred period or may require a lump sum repayment after the deferred time. Investment loan repayments may need to be increased to activate this feature. Parental leave – allows to either reduce or defer repayments for a mutually agreed upon period after the birth or adoption of a child. Interest still accrues on the balance and a fee may be charged to activate this feature.
Planning Considerations for Investment Loan Funds
There also exist many traditional tax advantages when obtaining an investment loan. Before venturing into the world of purchasing property through the funds available from an investment loan, consulting a financial planner to ensure any purchase from you investment loan is a financially wise long-term choice. There are key factors to consider when investing in property including:
Sufficient infrastructure in place. Is a targeted investment property in an area with sufficient access to schools, medical facilities, shopping areas, freeways and other main roads? Capital growth has historically increased steadily during the past 20 years. Check out any potential growth plans including housing density increases or planned roads for increased traffic flow. When examining investment in new subdivisions, always check for similar planned developments nearby that may have a direct impact on the value of your targeted purchase. Many people prefer renting new homes compared to any three years or older. Establish an investment exit plan that will free you from financial consideration in any property purchased. For example, purchasing a new home in a new subdivision may call for sale of the property within three years when it outlives its rental popularity potential.
Use Internet resources to locate an investment loan suitable for your wealth creation planning needs.
Buying income producing property is becoming a popular choice for people seeking to supplement their income creating an additional revenue stream. Real estate purchases will typically grow in value. Yet, many properties acquired through a structured financial plan using funds from an investment loan can produce income both part time and a full time.
An Investment Loan as Part of a Personal Growth Plan
As part of a strategic personal financial growth plan, an investment loan can be a valuable method toward obtaining financial independence. The actual structure of your investment loan is an important aspect affecting the return on your investment. Options available to investors today are quite similar in the same loans available for owner-occupied dwellings. A person seeking to invest in a secondary, or income-producing, property can use the same standard fixed and variable rates for home purchase. Not only will the same rates be available but the same loan features as well.
What are Investment Loan Features?
Just as is available for owner-occupied home loans, an investment loan will have the following features:
Redraw – allows access to additional funds paid into an investment loan if extra funds are needed. It is generally nit available with a fixed-rate loan. Additional repayments – This feature allows an investor to make extra loan repayments reducing the interest charged due to reducing the loan length term. This feature also is typically not available for fixed-rate loans. Repayment holiday – allows many borrowers the opportunity to forego repayments during specified periods. Although not making repayments during these times, interest still accrues on the balance. This feature may compel the need to make additional advance payments before the deferred period or may require a lump sum repayment after the deferred time. Investment loan repayments may need to be increased to activate this feature. Parental leave – allows to either reduce or defer repayments for a mutually agreed upon period after the birth or adoption of a child. Interest still accrues on the balance and a fee may be charged to activate this feature.
Planning Considerations for Investment Loan Funds
There also exist many traditional tax advantages when obtaining an investment loan. Before venturing into the world of purchasing property through the funds available from an investment loan, consulting a financial planner to ensure any purchase from you investment loan is a financially wise long-term choice. There are key factors to consider when investing in property including:
Sufficient infrastructure in place. Is a targeted investment property in an area with sufficient access to schools, medical facilities, shopping areas, freeways and other main roads? Capital growth has historically increased steadily during the past 20 years. Check out any potential growth plans including housing density increases or planned roads for increased traffic flow. When examining investment in new subdivisions, always check for similar planned developments nearby that may have a direct impact on the value of your targeted purchase. Many people prefer renting new homes compared to any three years or older. Establish an investment exit plan that will free you from financial consideration in any property purchased. For example, purchasing a new home in a new subdivision may call for sale of the property within three years when it outlives its rental popularity potential.
Use Internet resources to locate an investment loan suitable for your wealth creation planning needs.
Buying income producing property is becoming a popular choice for people seeking to supplement their income creating an additional revenue stream. Real estate purchases will typically grow in value. Yet, many properties acquired through a structured financial plan using funds from an investment loan can produce income both part time and a full time.
An Investment Loan as Part of a Personal Growth Plan
As part of a strategic personal financial growth plan, an investment loan can be a valuable method toward obtaining financial independence. The actual structure of your investment loan is an important aspect affecting the return on your investment. Options available to investors today are quite similar in the same loans available for owner-occupied dwellings. A person seeking to invest in a secondary, or income-producing, property can use the same standard fixed and variable rates for home purchase. Not only will the same rates be available but the same loan features as well.
What are Investment Loan Features?
Just as is available for owner-occupied home loans, an investment loan will have the following features:
Redraw – allows access to additional funds paid into an investment loan if extra funds are needed. It is generally nit available with a fixed-rate loan. Additional repayments – This feature allows an investor to make extra loan repayments reducing the interest charged due to reducing the loan length term. This feature also is typically not available for fixed-rate loans. Repayment holiday – allows many borrowers the opportunity to forego repayments during specified periods. Although not making repayments during these times, interest still accrues on the balance. This feature may compel the need to make additional advance payments before the deferred period or may require a lump sum repayment after the deferred time. Investment loan repayments may need to be increased to activate this feature. Parental leave – allows to either reduce or defer repayments for a mutually agreed upon period after the birth or adoption of a child. Interest still accrues on the balance and a fee may be charged to activate this feature.
Planning Considerations for Investment Loan Funds
There also exist many traditional tax advantages when obtaining an investment loan. Before venturing into the world of purchasing property through the funds available from an investment loan, consulting a financial planner to ensure any purchase from you investment loan is a financially wise long-term choice. There are key factors to consider when investing in property including:
Sufficient infrastructure in place. Is a targeted investment property in an area with sufficient access to schools, medical facilities, shopping areas, freeways and other main roads? Capital growth has historically increased steadily during the past 20 years. Check out any potential growth plans including housing density increases or planned roads for increased traffic flow. When examining investment in new subdivisions, always check for similar planned developments nearby that may have a direct impact on the value of your targeted purchase. Many people prefer renting new homes compared to any three years or older. Establish an investment exit plan that will free you from financial consideration in any property purchased. For example, purchasing a new home in a new subdivision may call for sale of the property within three years when it outlives its rental popularity potential.
Use Internet resources to locate an investment loan suitable for your wealth creation planning needs.
Buying income producing property is becoming a popular choice for people seeking to supplement their income creating an additional revenue stream. Real estate purchases will typically grow in value. Yet, many properties acquired through a structured financial plan using funds from an investment loan can produce income both part time and a full time.
An Investment Loan as Part of a Personal Growth Plan
As part of a strategic personal financial growth plan, an investment loan can be a valuable method toward obtaining financial independence. The actual structure of your investment loan is an important aspect affecting the return on your investment. Options available to investors today are quite similar in the same loans available for owner-occupied dwellings. A person seeking to invest in a secondary, or income-producing, property can use the same standard fixed and variable rates for home purchase. Not only will the same rates be available but the same loan features as well.
What are Investment Loan Features?
Just as is available for owner-occupied home loans, an investment loan will have the following features:
Redraw – allows access to additional funds paid into an investment loan if extra funds are needed. It is generally nit available with a fixed-rate loan. Additional repayments – This feature allows an investor to make extra loan repayments reducing the interest charged due to reducing the loan length term. This feature also is typically not available for fixed-rate loans. Repayment holiday – allows many borrowers the opportunity to forego repayments during specified periods. Although not making repayments during these times, interest still accrues on the balance. This feature may compel the need to make additional advance payments before the deferred period or may require a lump sum repayment after the deferred time. Investment loan repayments may need to be increased to activate this feature. Parental leave – allows to either reduce or defer repayments for a mutually agreed upon period after the birth or adoption of a child. Interest still accrues on the balance and a fee may be charged to activate this feature.
Planning Considerations for Investment Loan Funds
There also exist many traditional tax advantages when obtaining an investment loan. Before venturing into the world of purchasing property through the funds available from an investment loan, consulting a financial planner to ensure any purchase from you investment loan is a financially wise long-term choice. There are key factors to consider when investing in property including:
Sufficient infrastructure in place. Is a targeted investment property in an area with sufficient access to schools, medical facilities, shopping areas, freeways and other main roads? Capital growth has historically increased steadily during the past 20 years. Check out any potential growth plans including housing density increases or planned roads for increased traffic flow. When examining investment in new subdivisions, always check for similar planned developments nearby that may have a direct impact on the value of your targeted purchase. Many people prefer renting new homes compared to any three years or older. Establish an investment exit plan that will free you from financial consideration in any property purchased. For example, purchasing a new home in a new subdivision may call for sale of the property within three years when it outlives its rental popularity potential.
Use Internet resources to locate an investment loan suitable for your wealth creation planning needs.
What You Need to Know About Property Auctions in the UK
May 8th, 2009
Parmdeep Vadesha asked:
For both first-time and seasoned property investors, one of the best bets for scoring a great deal on a prize property is through an auction. An auction is a good place to start if you want to get up on the first rung of the property ladder. For the more experienced investor, auctions are also helpful in securing a reasonable property to add to your investments portfolio.
The greatest lure of auctions is that properties are sold at a price well below market value. How is this possible?
Well, most auctioned-off properties are repossessions and rundown properties.
Repossessions are those homes or properties than have been used as collateral for a loan which the owner defaulted on. Thus, banks or lending institutions have called in the loan and are now the new owners of the repossessed property. Since banks are not in the property business, they want to dispose of the property fast and recoup their cash investment. Thus, many of these repossessed properties are sold at auction for a bargain price and sometimes for a price well below market value.
On the other hand, auctions are also a great avenue to pick up a rundown property that you can repair and refurbish to sell at a higher price. The attraction of a rundown property is, of course, its very low price. Though it is unsellable in its current state, by doing the necessary repairs and a little fixing-up, that once-shabby house could turn into a dream home. Look for rundown properties that have potential and factor in the cost of the repairs to determine whether the asking price is still a bargain.
While auctions can be a great place to score a bargain and save some money, there are some things to keep in mind and be conscious of. A property auction is a heady and thrilling experience and most people get so caught up in the process that they end up paying more for a property than they would have liked. Remember that your ultimate goal at the auction is to score a bargain, and not win a game. Go to the auction house with a maximum price bid in mind and stick to it and stop when the price gets too high. Also, choose properties well. You do not want to get stuck with an investment that it impossible to resell. Stay away from properties that are in severe disrepair, have unclear legal titles or those without proper legal access to the property or land.
If you have never been to an auction before, then now is a good time as any. It is definitely a good idea to do a little visiting and scouting around to see how auctions all across the United Kingdom are being conducted. If you are a first-timer, check out the auction scene first and attend as a viewer and not as a serious bidder. Take an experienced companion with you or someone who knows the ropes of an auction sale. More importantly, research on your potential purchase. What is the current asking price of similar properties in the same location? What is the neighbourhood like? Determine neighbourhood safety, noise level and the adequacy of private parking as these are the usual clinching points that make the property easier to resell.
For both first-time and seasoned property investors, one of the best bets for scoring a great deal on a prize property is through an auction. An auction is a good place to start if you want to get up on the first rung of the property ladder. For the more experienced investor, auctions are also helpful in securing a reasonable property to add to your investments portfolio.
The greatest lure of auctions is that properties are sold at a price well below market value. How is this possible?
Well, most auctioned-off properties are repossessions and rundown properties.
Repossessions are those homes or properties than have been used as collateral for a loan which the owner defaulted on. Thus, banks or lending institutions have called in the loan and are now the new owners of the repossessed property. Since banks are not in the property business, they want to dispose of the property fast and recoup their cash investment. Thus, many of these repossessed properties are sold at auction for a bargain price and sometimes for a price well below market value.
On the other hand, auctions are also a great avenue to pick up a rundown property that you can repair and refurbish to sell at a higher price. The attraction of a rundown property is, of course, its very low price. Though it is unsellable in its current state, by doing the necessary repairs and a little fixing-up, that once-shabby house could turn into a dream home. Look for rundown properties that have potential and factor in the cost of the repairs to determine whether the asking price is still a bargain.
While auctions can be a great place to score a bargain and save some money, there are some things to keep in mind and be conscious of. A property auction is a heady and thrilling experience and most people get so caught up in the process that they end up paying more for a property than they would have liked. Remember that your ultimate goal at the auction is to score a bargain, and not win a game. Go to the auction house with a maximum price bid in mind and stick to it and stop when the price gets too high. Also, choose properties well. You do not want to get stuck with an investment that it impossible to resell. Stay away from properties that are in severe disrepair, have unclear legal titles or those without proper legal access to the property or land.
If you have never been to an auction before, then now is a good time as any. It is definitely a good idea to do a little visiting and scouting around to see how auctions all across the United Kingdom are being conducted. If you are a first-timer, check out the auction scene first and attend as a viewer and not as a serious bidder. Take an experienced companion with you or someone who knows the ropes of an auction sale. More importantly, research on your potential purchase. What is the current asking price of similar properties in the same location? What is the neighbourhood like? Determine neighbourhood safety, noise level and the adequacy of private parking as these are the usual clinching points that make the property easier to resell.
Tax Facts
May 7th, 2009
Harris R. Sherline asked:
With the due date for filing individual income tax returns having recently passed, this seems like a good time to reflect on the annual ritual of self-flagellation that Americans are forced to endure at this time of the year. The April deadline has become a sort of rite of passage for citizenship, although as things stand today almost half of all workers don’t pay any income tax at all.
Following are some random facts (in no particular order) about our income tax laws, who pays and who doesn’t, and the impacts our system of taxation has on the nation’s productivity.
When the 16th Amendment to the Constitution established the federal income tax in 1913, the intent was to tax only the very rich. Rates began at 1% and increased to 7% for taxpayers with income in excess of $500,000. Less than 1% of the population paid any income tax at all, compared with almost 50% of taxpayers paying as much as 35% of their taxable income today.
The top 5% of wage earners pay over 50% of total individual income taxes, while the top 10% pay almost 66%, and the top 50% pay approximately 97%. Translation: Just half of all taxpayers pay almost 100% (96.54%) of all income taxes, while almost 50% pay no income taxes at all.
The Internal Revenue Service (IRS) has approximately 115,000 employees (FTEs or full-time equivalents), and a total budget of $11.6 billion.
Estimates of unreported commercial activity in the U.S. amount to as much as one trillion dollars a year, and the IRS Oversight Board report for fiscal 2007 notes that the tax gap, “the difference between what is owed and what is collected…is estimated at $345 billion of lost revenue annually.” Question: If it’s an underground economy, how does the IRS know how much income is not reported?
The Cato Institute reported that businesses and individuals now waste over 6.4 billion hours on federal tax compliance activities each year, which the Tax Foundation estimated amounted to $265.1 billion in 2005. That’s equivalent to over three million people working full time, just to deal with tax compliance. This amounted to a 22% tax compliance surcharge on the total amount collected through the tax system.
In the 1920s the federal tax code was comprised of about 40 pages of rules. Today, according to the Virginia Chapter of NRSTA (Interesting Tax Facts), the tax code, regulations and IRS rulings now require over 66,000 pages to document. Between 1986 and 1996, there were over 5,000 changes in the tax code. In 1996 alone over 700 pages of tax law changes and regulations were adopted by the IRS.
When the General Electric Co. filed the corporation’s tax return electronically, it took 24,000 pages to document. The Associated Press (June 1, 2006) noted, “If GE had sent paper forms, the return would have staked up eight feet high…”
In 1993, the General Accounting Office (GAO) audited the IRS for the first time in its history and found widespread evidence of financial malfeasance and gross negligence, including the fact that the agency was not able to account for 64% of its congressional appropriation.
The Alternative Minimum Tax (AMT) “was created in 1969 to target 21 – yes, 21 – millionaires who had managed to avoid paying any taxes at all.” (Wall Street Journal, April 14, 2007). “This year more than three million taxpayers will be hit by the Alternative Minimum Tax on the(ir) 2006 income. But next year (2007) that number could rise to 23 million…”
The federal income tax, currently as high as 35% of taxable income, is increased by as much as 11% in state and local income taxes, plus another 6.20% and 1.45% in social security and Medicare taxes, which makes the total tax burden for some taxpayers almost 54%, not including excise, sales and property taxes, along with a host of other taxes, assessments and fees to numerous to mention. Medieval serfs were required to give only one-third of their production to the lord of the manor, and they were considered slaves.
Households in the lowest 20% of income received about $8.21 in federal, state and local government spending for every dollar of taxes paid (in 2004), while those in the top 20% received only 41 cents in benefits. (Tax Foundation Working Paper No. 1, March 2007).
Our tax laws have become so complex and contradictory that no one, not even the most brilliant tax professionals, including IRS experts, fully understand them.
It’s worth noting, I think, that when I started practicing public accounting in the early 1960s, the filing deadline was March 15, not April 15, and only one 90-day extension was permitted. Today, the first filing date is April 15, and it is possible to obtain a six-month extension – to October 15 – all because of the increased difficulty of obtaining the necessary information and the complexity of preparing and filing tax returns.
Many societies view taxation as a contest between tax collectors and citizens, with payment or avoiding payment of taxes as the prize. But we are different we are told, because Americans voluntarily, that is, willingly, file tax returns and pay their taxes.
Baloney! If that’s true, why do we hear so much about taxes not being paid by people who work or do business in the “underground economy”? Would you file a tax return if you were not afraid of the consequences of not filing?
Putting aside the government’s hype and PR initiatives, the reason our income tax system is so successful is FEAR. Fear of being audited, fear of being assessed, fear of tactics employed to collect unpaid taxes, fear of intrusion into our personal affairs, fear of not being able to defend ourselves against the unlimited power of government in general and the IRS in particular.
I believe the IRS has carefully cultivated this image over a period of many years. Who can say that they don’t have a sudden, albeit perhaps brief, fearful reaction when they find a letter or notice from the IRS in their mail? I know I do, and I’m a retired CPA. I don’t want to hear from them, ever! When I do get some sort of communication from my friendly tax agency (federal or state), I just know it’s going to cost me time, money and aggravation. Perhaps you’ve noticed over the years that around tax time it’s common to see a spate of media stories about prosecutions for tax fraud. In my opinion, that’s no accident.
One of Ronald Reagan’s many sage observations, “The taxpayer: That’s someone who works for the federal government but doesn’t have to take the civil service examination,” seems to sum up the situation rather neatly. For my part, I believe Americans are over-taxed and under served by their government, while our politicians are constantly looking for ways to impose new taxes under the radar of public scrutiny and awareness. Will it ever end? Probably not, until we have taxed ourselves into near or complete oblivion.
© 2008 Harris R. Sherline, All Rights Reserved
NOTE: Read more of Harris Sherline’s commentaries on his blog at “opinionfest.com.”
With the due date for filing individual income tax returns having recently passed, this seems like a good time to reflect on the annual ritual of self-flagellation that Americans are forced to endure at this time of the year. The April deadline has become a sort of rite of passage for citizenship, although as things stand today almost half of all workers don’t pay any income tax at all.
Following are some random facts (in no particular order) about our income tax laws, who pays and who doesn’t, and the impacts our system of taxation has on the nation’s productivity.
When the 16th Amendment to the Constitution established the federal income tax in 1913, the intent was to tax only the very rich. Rates began at 1% and increased to 7% for taxpayers with income in excess of $500,000. Less than 1% of the population paid any income tax at all, compared with almost 50% of taxpayers paying as much as 35% of their taxable income today.
The top 5% of wage earners pay over 50% of total individual income taxes, while the top 10% pay almost 66%, and the top 50% pay approximately 97%. Translation: Just half of all taxpayers pay almost 100% (96.54%) of all income taxes, while almost 50% pay no income taxes at all.
The Internal Revenue Service (IRS) has approximately 115,000 employees (FTEs or full-time equivalents), and a total budget of $11.6 billion.
Estimates of unreported commercial activity in the U.S. amount to as much as one trillion dollars a year, and the IRS Oversight Board report for fiscal 2007 notes that the tax gap, “the difference between what is owed and what is collected…is estimated at $345 billion of lost revenue annually.” Question: If it’s an underground economy, how does the IRS know how much income is not reported?
The Cato Institute reported that businesses and individuals now waste over 6.4 billion hours on federal tax compliance activities each year, which the Tax Foundation estimated amounted to $265.1 billion in 2005. That’s equivalent to over three million people working full time, just to deal with tax compliance. This amounted to a 22% tax compliance surcharge on the total amount collected through the tax system.
In the 1920s the federal tax code was comprised of about 40 pages of rules. Today, according to the Virginia Chapter of NRSTA (Interesting Tax Facts), the tax code, regulations and IRS rulings now require over 66,000 pages to document. Between 1986 and 1996, there were over 5,000 changes in the tax code. In 1996 alone over 700 pages of tax law changes and regulations were adopted by the IRS.
When the General Electric Co. filed the corporation’s tax return electronically, it took 24,000 pages to document. The Associated Press (June 1, 2006) noted, “If GE had sent paper forms, the return would have staked up eight feet high…”
In 1993, the General Accounting Office (GAO) audited the IRS for the first time in its history and found widespread evidence of financial malfeasance and gross negligence, including the fact that the agency was not able to account for 64% of its congressional appropriation.
The Alternative Minimum Tax (AMT) “was created in 1969 to target 21 – yes, 21 – millionaires who had managed to avoid paying any taxes at all.” (Wall Street Journal, April 14, 2007). “This year more than three million taxpayers will be hit by the Alternative Minimum Tax on the(ir) 2006 income. But next year (2007) that number could rise to 23 million…”
The federal income tax, currently as high as 35% of taxable income, is increased by as much as 11% in state and local income taxes, plus another 6.20% and 1.45% in social security and Medicare taxes, which makes the total tax burden for some taxpayers almost 54%, not including excise, sales and property taxes, along with a host of other taxes, assessments and fees to numerous to mention. Medieval serfs were required to give only one-third of their production to the lord of the manor, and they were considered slaves.
Households in the lowest 20% of income received about $8.21 in federal, state and local government spending for every dollar of taxes paid (in 2004), while those in the top 20% received only 41 cents in benefits. (Tax Foundation Working Paper No. 1, March 2007).
Our tax laws have become so complex and contradictory that no one, not even the most brilliant tax professionals, including IRS experts, fully understand them.
It’s worth noting, I think, that when I started practicing public accounting in the early 1960s, the filing deadline was March 15, not April 15, and only one 90-day extension was permitted. Today, the first filing date is April 15, and it is possible to obtain a six-month extension – to October 15 – all because of the increased difficulty of obtaining the necessary information and the complexity of preparing and filing tax returns.
Many societies view taxation as a contest between tax collectors and citizens, with payment or avoiding payment of taxes as the prize. But we are different we are told, because Americans voluntarily, that is, willingly, file tax returns and pay their taxes.
Baloney! If that’s true, why do we hear so much about taxes not being paid by people who work or do business in the “underground economy”? Would you file a tax return if you were not afraid of the consequences of not filing?
Putting aside the government’s hype and PR initiatives, the reason our income tax system is so successful is FEAR. Fear of being audited, fear of being assessed, fear of tactics employed to collect unpaid taxes, fear of intrusion into our personal affairs, fear of not being able to defend ourselves against the unlimited power of government in general and the IRS in particular.
I believe the IRS has carefully cultivated this image over a period of many years. Who can say that they don’t have a sudden, albeit perhaps brief, fearful reaction when they find a letter or notice from the IRS in their mail? I know I do, and I’m a retired CPA. I don’t want to hear from them, ever! When I do get some sort of communication from my friendly tax agency (federal or state), I just know it’s going to cost me time, money and aggravation. Perhaps you’ve noticed over the years that around tax time it’s common to see a spate of media stories about prosecutions for tax fraud. In my opinion, that’s no accident.
One of Ronald Reagan’s many sage observations, “The taxpayer: That’s someone who works for the federal government but doesn’t have to take the civil service examination,” seems to sum up the situation rather neatly. For my part, I believe Americans are over-taxed and under served by their government, while our politicians are constantly looking for ways to impose new taxes under the radar of public scrutiny and awareness. Will it ever end? Probably not, until we have taxed ourselves into near or complete oblivion.
© 2008 Harris R. Sherline, All Rights Reserved
NOTE: Read more of Harris Sherline’s commentaries on his blog at “opinionfest.com.”