Term
| Deductibility of real estate taxes |
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Definition
| All of the real estate taxes paid on a primary and secondary residence are to be deducted on the homeowner's federal income tax return |
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Term
| Interest from a mortgage loan for a first or second home |
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Definition
is deductible on federal income tax return When:
home is a house, condo, co-op, mobile home, house trailer, boat, or similar property that has sleeping as well as cooking and toilet facilities
the owner must use the 2nd home for more than 14 days, or 10% of the number of days rented at fair rate
After oct 13 87, interest on home acquisition debt up to 1,000,000 is deductible
Interest on home equity debt up to 100,000 and the total debt is no more than the fair market value of the home. |
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Term
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Definition
this is needed when selling limited partnership interests in real estate, sheares in Real Estate Investment Trusts, or condominium units in a resort hotel engaged in a rental pool and managed outside the control of the unit investors.
A real estate liscensee cannot sell secruities |
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Term
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Definition
| more than one investor investing in a common enterprise over which they exercise no management control, yet have the expectation of profits derived from the efforts of others |
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Term
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Definition
| enhancements to a property that add value or usefulness and are not annual property maninenance expenses. ex: room additions, landscaping, new roof, heating system, flooring, waterheater, security system, driveway, etc. |
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Term
| Capital gains on income producing property |
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Definition
the amount of accrued depreciation must be subtracted from the purchase price to calculate the amount of the adjusted basis
100,000 purchase price
+6,000 closing costs
+4,000 capital improvements
-25,000 accrured depreciaion
=
85,000 adjusted basis
Selling price
200,000
-10,000 selling costs
=190,000 Adjusted sale price
190,000-85,000= 105,000 capital gain which if you are in the 15% tax bracked is equal to a 15% taxation. |
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Term
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Definition
sale price minus the selling costs
or
the amount realized upon sale |
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Term
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Definition
| Purchase price + closing costs +capital improvements |
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Term
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Definition
Satisfied by:
appreciation
mortgage loan balance reduction
ablility to use leverage |
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Term
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Definition
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Term
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Definition
the use of credit to enhance one's speculative capacity
a loan, not your own money but rather money coming from someone/someplace else |
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Term
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Definition
| when tax deductions, exceed the cash flow and other income can be sheltered from taxes |
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Term
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Definition
a ficticus loss for tax purposes only and not an out of poket loss and has nothing to do with the acutal value of the property.
Primary residence and land cannot be depreciated. Only improvements to land. |
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Term
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Definition
The recovery period determines the amount of depreciation per year under current tax law. 27 1/2 years for residential
39 for non-residential |
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Term
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Definition
| losses during the first several years of ownership are at a greater rate than the straight line rate. Not recommended for real estate. Good for appliances and tractors. |
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Term
| Straight line depreciation |
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Definition
an equal amount of loss each year.
annual amount of depreciation X recovery period = improvement value
Therefore the annual amount of depreciation on a $100,000 property at currenty recovery period is $3636.36 or 3.63% annual loss. |
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Term
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Definition
cash flow % acquisition costs(downpayment and closing costs) = cash on cash return
$9000 cash flow % $90,000 Acquisition cost = 10% cash on cash return |
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Term
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Definition
Gross operating income
Total gross income (all capable income vending+rents)
- vacancy and credit allowance |
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Term
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Definition
Net Operating income
Gross operating income
- (minus)
Expenses of property (utilities, maintanence, snow removal etc.) |
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Term
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Definition
net operating income
- (minus)
Debt service/ mortgage payments
= cash flow before taxes |
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