I am working with a first-time buyer family who is considering purchasing new construction as their primary residence. I advised them to look into the $10,000 tax credit offered by the State of California Franchise Tax Board. For all the info and requirements click on this Franchise Tax Board webpage. There is no income limitation on this tax credit.
One of the most important aspects of this credit to keep in mind is that it must be applied for within one week of close of escrow. This credit is limited to the first 10,000 new construction homes sold in California between March 1, 2009 and March 1, 2010. It is given on a first-come first-served basis. As of this morning when I checked the Franchise Tax Board link given above, there were 4,880 applications received by the Board, and it's only May 2nd. Better hurry if you want to take advantage of this!
1. The $10,000 tax credit is not a loan and if the home remains your primary residence for 2-years, you do not have to pay any portion of the tax credit back.
2. The tax credit is for new homes only.
3. The tax credit is good for 5% of the home's price or $10,000, whichever is less.
4. Home buyers will receive the tax credit, in equal amounts, over 3-years.
5. Unlike the $8,000 federal tax credit, the California state tax credit is not limited to first-time home buyers.
6. There are no maximum income limitations so any buyer purchasing a previously unoccupied home can qualify for the tax credit.
7. The tax credit only applies if the purchased home is your primary residence.
8. There is no down payment requirement to receive the $10,000 tax credit.
9. The $10,000 state tax credit can be used along with the $8,000 federal tax credit for home buyers. If you're a first-time home buyer, and you purchase a new home in California that costs more than $200,000, you'll get $18,000 in tax credits.
10. The tax credit is limited to the first 10,000 new home purchases.
As we saw in my previous Investment Property Case Study 3, south Santa Clara County real estate can be purchased for investment purposes and have a positive cash flow from the income received from rent. Not only will there be a positive cash flow, but there is great potential for gains in equity appreciation. The home that will be analyzed here is a short sale home in a PUD in Morgan Hill.
The property chosen for this case study is 17495 Carriage Lamp Way, Morgan Hill, a 25 year old attached home in a Planned Unit Development with a large park, pool and clubhouse and monthly HOA dues of $300. This is a 4 bedroom, 2.5 bathroom 1797 sq. ft. home on a 3920 sq.ft. lot. The current list price of this home is $369,500. This property has been on the market for 92 days and the beginning list price was $454,500. I will make the assumption that the short sale lender will accept $350,000 for the purchase of this home.
Here are the assumptions that I made:
Using the above assumptions, the property can be analyzed as an investment, taking into account tax depreciation, cash flow before and after taxes. We will also look at the eventual sale of the property, looking at the total gain on the sale.
Looking at my assumption of selling the property in seven years with a conservative guess of 3% appreciation in value per year:
Please consult your tax advisor for more information regarding the tax implications of buying, leasing and selling investment real estate.
El Toro is the famous Morgan Hill landmark seen from most areas in town. Every spring the Morgan Hill Historical Society sponsors a hike up the 1403 ft. peak. The hike is correctly described as moderate to difficult due to the very steep portion up towards the top. Thank goodness for Boy Scout Troop 799 (of which my son used to be a member) who set up ropes the day before the climb every year to aid in climbing the steep portion.
This annual climb is the only time that the mountain can be climbed officially as it is private land. The group of hikers meets at the library and a local geologist, Peter Anderson, gives an interesting talk on how El Toro was formed. The approximately 200 hikers were rewarded this year with a warm, sunny morning and spectacular views.
Hope to see you on the hike next year!
Another very busy week of sales in south Santa Clara County last week. With the new federal stimulus package approved in congress, buyers may be feeling encouraged. Investors should take heart in that the number of property loans they will be allowed to hold will increase from 4 to 10 beginning March 1, 2009. First-time buyers also received good news. The first time buyer credit was increased from $7500 to $8000 and it is to be a true credit and not an interest free loan to be paid back over 15 years.
The number of residential sales increased again in the south Santa Clara County towns of Morgan Hill, San Martin and Gilroy. There were 47 residences that went from active to pending status as compared to 44 last week. Of all the sales last week, 44 were single family homes and 3 were townhouses/condominiums. 68% of the sales were priced below $500,000.
Of these sales, the list price ranges were:
Below $200,000 = 2 sales (4% of total)
$200,000 - $500,000 = 32 sales (68% of total)
$500,000 - $800,000 = 8 sales (17% of total)
$800,000 - $1,200,000 = 4 sales (9% of total)
$1,200,000 - $2,000,000 = 1 sale (2% of total)
As of February 15, 2009, there are 561 residential (single family homes and condos) listings active on the market in Morgan Hill, San Martin and Gilroy. There are currently 281 pending residential listings. Therefore, 33% of the total listings are pending under contract as of this date. Many of the pendings are short sales and therefore take a long time to close. This could keep our pending percentage up artificially high.
When serving real estate buyers, the question of which school the residents of a particular home at a particular address would go to often comes up. Although I feel I know the school boundaries pretty well, I don't like to rely on my own knowledge in case the boundaries have changed, which they occasionally do. I go online to find the answer.
The southern portion of Santa Clara County is home to two school districts: Morgan Hill Unified and Gilroy Unified. Morgan Hill's school district covers a large area. From the MHUSD website,
"The Morgan Hill Unified School District encompasses nearly 300 square miles and serves the ethnically diverse population of Morgan Hill, San Martin, portions of San Jose, and unincorporated areas of the county. We are comprised of 15 schools: nine elementary, two middle, two high school, a continuation high school, and a community adult school as well as a Home Schooling Program."
Gilroy Unified serves the residents of the City of Gilroy and consists of eight elementary, three middle, currently one high school with a second scheduled to open next fall, one community day alternative and one continuation high school.
To find which school boundaries a particular address feeds into in Morgan Hill and San Martin, click on:
http://www.locatemyschool.com/WebLocator/WebLocatorForm1.aspx
From that website, choose "Morgan Hill" from the drop down window under "School District" on the left-hand side. Then enter in the address and then click "search."
For addresses located within Gilroy Unified School District, use the following website to input the address you are interested in:
http://schoolvisionsoftware.com/schoolfinder/GilroyUSD/
These website are a great tool for me and for my buyer clients to get the straight scoop on which schools belong to which addresses. If you have any questions about this please contact me.
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