Despite the downturn nationally and in the Tampa Bay area, real estate still remains a solid long-term investment.

Here are ten (10) reasons why:

1. Baby Boomers. National demographics point to an aging U.S. and developed market population.  Older Baby Boomers in the U.S. love the sun and great amenities Florida has to offer. Baby boomers are one of the most economically advantaged groups in the nation and consistently list Florida among the top retirement destinations.
2. Retirement Mecca. According to research conducted by the U.S. Census, Florida, California and Texas will account for 46 percent of total U.S. population growth by the year 2030, much of this is because these warm weather states are where retires want to live.
3. No Personal Income Taxes. Florida is one of nine states without a state income tax.  Our annual influx of vacationers and Snow Birds pay much of the tab for residents through a number of sales and use related taxes.  This is very attractive for Tampa residents, especially when there is discussion of raising U.S. income taxes or eliminating loopholes.
   

   Downtown St. Pete

4. Continued Growth. Florida is growing again after its first decline since the 1940s.  According to the University of Florida’s Bureau of Economic and Business Research, Florida added more than 21,000 residents between 2009 and 2010. The second greatest growth in new Florida residents came in Hillsborough County, home to Tampa.  This growth means demand for real estate and, therefore, greater resale values.
5. Affordability. Tampa homeowners have experienced roughly a 50% adjustment in value, making property more affordable than they have been in years.
6. Interest Rates. Interest rates remain at historic lows making the cost of borrowing a great long-term value and it allows housing to remain highly affordable.
7. Long Term Price Increases. Long term demand coupled with declining housing starts will create long term upward pressure on prices.  Historically low Federal Reserve Funds rates are creating inflationary pressures that should drive prices higher.
8. Tightening Lending Standards. The sub-prime mortgage situation has resulted in banks tightening lending, which should guarantee future price appreciation once current inventories are absorbed without further bubbles.
9. Waterfront Living. Great real estate really comes down to one thing: Location, location, location and the Tampa area has some of the best waterfront values in the nation.  There is only so much waterfront property and it always seems to be in high demand. (You can search here for MLS listings in the St. Pete, Clearwater and Tampa areas)
10. Portfolio Diversification. You have got to live somewhere and real estate has historically been a great diversifier for an investment portfolio.  Of course, there are simple ways to own real estate such as via a REIT or REIT mutual fund, but the real opportunities to profit still come to those who buy the right property, at the right price and at the right location.

Jeff Diercks, CPA is Managing Director of InTrust Advisors, a boutique wealth management firm helping busy, affluent individuals achieve their goals and dreams through a unique planning and investment process that allows them to profit in almost any market environment.  You can find out more at www.InTrustAdvisors.com.

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• Tampa Housing Market Shows Increased Sales Activity. (thetamparealestateinsider.com)

5 Reasons it still makes sense to buy a home:

By Jeff Diercks, CPA, Tampa Fl

President Obama has proposed a cap on the deduction for mortgage interest for high income taxpayers and a rollback of the recently extended Bush tax cuts.

According to CNNMoney, “under his proposal, taxpayers in the 33% and 35% tax brackets would only be able to deduct their mortgage interest payments at the 28% rate. It would affect those with taxable income of $250,000 and up and bring in $321 billion over 10 years, according to the White House.”

But does the capping of the mortgage interest deduction really matter to people who want to buy real estate?

Here are 5 reasons why purchasing a home still makes sense:

1. Banks have, in general, raised home equity requirements on new home purchases, thereby reducing the overall loan to value on such properties. In other words, loan amounts are generally smaller and therefore interest costs are lower.

Congress is also proposing a plan whereby mortgages with 20 percent or more down payments are deemed safe and therefore saleable. This will push lenders, who do not want to hold mortgage paper on conventional loans, to seek larger down payments from new home buyers, further reducing mortgage loan sizes.

2. Property values are down and mortgage rates are very low historically. Once thought of as unthinkable, property values have declined 30-50% across the country, again reducing loan sizes on new properties.

This means home values, and therefore home mortgage loans, are likely to be smaller than earlier in the decade and could stay lower in the near term. This makes a cap on mortgage interest deductions less meaningful.

3. The President’s proposals do not target the mortgage interest deductions directly; instead it caps the rate of all itemized deductions for the wealthy. So with some clever tax planning, deductions can be prioritized and transactions structured to minimize the effect of such limits.

Under the President’s proposal, married taxpayers with adjusted gross income greater than $250,000 would normally see a $35.00 benefit for every $100 in itemized deductions but instead under would receive only a $28.00 benefit for every $100 in itemized deductions. The benefit is smaller, but smart taxpayers will find ways to augment these itemized deduction limitations by accumulating deductions in some years for such things as charitable deductions, while in other years deducting very little of such costs to stay under such limitations.

4. Such legislation would only affect about 2% of home buyers. According to a 2009 study by the Realtor’s Association, an analysis of Internal Revenue Service data found high-income taxpayers who claim the mortgage interest deduction comprise about 2% of all tax filers, according to the Los Angeles Times. This is just a very small subsector of the entire real estate market

5. The wealthy generally don’t carry a mortgage on their homes. I don’t have empirical data here, but from my experience of working with the wealthy and the ultra-wealthy for over a decade, the wealthiest 1% (and maybe 2%) do not carry mortgages on their homes anyways.

So the bottom line, is that you have to live somewhere and, even if Congress and the President cap interest rate deductions via a limitation on itemized deductions, it will have very little affect on the average new home buyer in Tampa or nationally.

Jeff Diercks, CPA is Managing Director of InTrust Advisors, a boutique wealth management firm helping busy, affluent individuals achieve their goals and dreams through a unique planning and investment process that allows them to profit in almost any market environment. You can find out more at www.InTrustAdvisors.com.

So, What Are You Waiting For?  Search All Homes For Sale In Tampa Bay here

The rental conditions are very strong here in Tampa Bay.  About 40% of our  housing inventory is a short sale or foreclosure, which makes for the ideal rental market.   Those that have chosen to let their homes go are stuck renting because they won’t be able to purchase another home for at least 3 years.

Sunset Beach, Fl

Another reason we have a great market for investors is our close proximity to MacDill AFB.  Military personnel have a guaranteed housing allowance and they usually rent before they buy.  Here are some neighborhoods close to the Air Force Base here in Tampa

Now that you’ve heard of the positive side of being a landlord, here are some obstacles you may face:

Don’t count on buying a condo:

Many condos have restrictions on the percentage of renters vs. owner occupied.  If the association has restrictions, the building is most likely at their maximum allowable rental capacity.

Currently, The Towers of Channelside does not have restrictions on rentals, however I suspect that once the owner’s take over the association that may change.  Most of the condos I’ve seen only allow 20% of the building to be alloted for rentals.  You’ll want to check with your Realtor first if you are thinking of investing in condos, as they may already have knowledge of which communities will allow rentals.

How much will I need to put down?

You need 30% to put down on Condos if it’s going to be used as investment property.  There is an exception if the development has a portfolio lender that is willing to finance a larger amount.

If you only have 20% to put down, a Single family homes would be a better option for buying an investment property. It just makes sense when you consider it will be easier to get a loan, and there are no restrictions on rentals.  You’ll want to double check if the house is located in a mandatory homeowner’s association, as sometimes they can enforce restrictions on lease terms.

What can I rent the home for? Here’s an example of single family home Rental Rates for South Tampa You’ll see our supply is low and the demand is high.

You can search all our MLS Listings here to get an idea of what homes cost in the Tampa, St. Pete and Clearwater areas.

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NEW YORK – March 22, 2010 – More home buyers are snapping up properties with cash, a trend driven in large part by investors returning to the market after four years of falling prices around the country.

Many home buyers also are paying cash, but investors are largely using cash so they can avoid paying interest charges on loans and get a larger return on their investment.  

NAR data also show a pickup in investment activity. Home purchases made by buyers identified as investors climbed to 17 percent in January, up from 15 percent in December and 12 percent in November.

“We bottomed out in 2008, and in late 2009, prices stabilized and investors have returned,” says Mark Fleming, chief economist at First American CoreLogic. “It’s a different type of investor going after foreclosed properties and expecting to hold on for longer time frames.”

Many investors say they’re financing their purchases with cash on hand, rather than borrowing. Evan Spinrod of San Francisco bought three rental properties in November and February and now owns 21 in four states. The rent he collects gives him an 8.5 percent annual return on his investment. Some of his homes are worth about $165,000.

Hello Everyone:

Do you know of anyone looking to sell Tampa Real Estate in Bulk?  I received a call from an investor today and here is the criteria.

Bankrupt developments, distressed situations, etc.. in the Tampa Bay area, including the Beaches, Clearwater, St. Pete etc..

 Buyer has cash and can close quickly

 The criteria is as follows:

• 10+ units min
• Townhome, Single Family Home tracks, Multi Family
• Condos (depending on size of complex, occupancy and financing situation for end user)
• Needs to be a wholesale deal to flip
• Up to 325K per unit.
• New Construction, never lived in.

Please let me know if you have any opportunities that I can pass on to my client.  Even better, share with your Facebook friends and ReTweet if you can!

 Thanks so much!
 

Rae Catanese, PA