Transunion reports today that South Dakota has one of the lowest credit card delinquincy rates in the country. Nevada was highest at near 2%, while South Dakota was second lowest at about 0.7%.
This probably says something about how we manage debts and pay them off, in general. Which probably also helps expain why our home prices are holding relatively steady while the rest of the U.S. market goes on roller coaster real estate thrill rides.
Posted by Lee Alley, www.BHhomes.INFO, Rapid City, Black Hills, SD at 7:20 AM
Labels: Market Conditions
As we reported here on Black Hills mortgage delinquincy rates last quarter, our mortgage delinquincies continued this quarter at near the lowest in the entire country according to Transunion. If anyone still dreams that real estate in the Black Hills is for bottom-fishing, this should be a wake up call.
Our volume of new listings and unsold inventory is way down. Foreclosures in the Black Hills are near the lowest in the entire nation. But for the lower-volume market we do have, prices remains quite strong when compared to the rest of the U.S.
We won't belabor the point. It's already been made. Rapid City real estate is consistently one of the strongest in the U.S. during this so-called downturn. We'll just revel in the sweet feel of our unique market for real estate investments and sales.
In fact, with interest rates near the lowest in many years, highly motivated sellers, and some of the finest investment property in the United States just waiting for you to move...this might be "the time to act."
If you have questions or opinions, please let us know.
Posted by Lee Alley, www.BHhomes.INFO, Rapid City, Black Hills, SD at 1:34 PM
Labels: Market Conditions
It just got better and also more complicated. On November 6 President Obama signed the Extended Homebuyer Tax Credit. The November 30 deadline is gone. The $8,000 cash incentive for first-time buyers has been extended to next year. Congress even added a $6,500 credit for current and former owners to buy again.
This new program is considerably more complicated because the number of eligibility criteria for both you and for the home you purchase, have increased. There are also many more policy guidances, to cover various scenarios for your income, purchase type (e.g., contract for deed), your relationship with the seller (brother?) or with a co-signer (parent?). It would be great to summarize it here, but it's just too extensive and complex now to synthesize to a few paragraphs. In fact, even the IRS hasn't even figured it out yet. As of this writing, the online IRS description of the extended homebuyer tax credit simply says "more to be added soon." So we'll just advise you to get professional assistance, starting with a realtor, mortgage lender or tax adviser.
Don't get too excited about the $6,500 repeat-homebuyer aspect just yet, though. You must have lived in your current principal residence at least five of the past eight years. That's right. A whole bunch of Americans haven't lived in one home for five years, ever, and never will. One wonders if this exclusion was a way for Congress to announce the new goodie-giveaway program without it actually costing so much. Or perhaps they intended this five year limit, aligned next to the first-time critiera, might be intended to result in equal numbers of takers for each of the two programs.
Still, here are some very helpful overviews:
But please be careful what you read online. We have seen one particular detailed description of the program, claiming IRS policies on the homebuyer tax credit, posted and re-posted on dozens if not hundreds of blogs all over the country by blog authors who somehow forgot to give credit from where they copied the entire blog post. That means you can't know who was some 7th grader who may have written the original post as a hoax. That is one reason we are not trying to explain it here. If the IRS doesn't yet know the IRS policies, how would we? Be sure you go right to the source (e.g., IRS) for the only real dependable source of information.
And we wait...
Posted by Lee Alley, www.BHhomes.INFO, Rapid City, Black Hills, SD at 5:44 PM
Labels: Financing
The 1031/Starker Exchange is one way to avoid or defer capital gains on property. But the IRS also recognizes the "Reverse-1031." We believe the Reverse-1031 can become more attractive in this real estate market, particularly if you suspect the valuation outlook for your next property is rosier than your current property.
The more familiar ("regular") Delayed-1031 exchange involves selling your current investment now, then replacing it within 180 days with like-kind property(s). If all the criteria are met the IRS recognizes this sale as a non-taxable capital gain (for now). The IRS Publication 544 gives more details. The Internal Revenue Code itself provides more guidance (see Section 1.1031, the identifier from which the policy gets its name).
In a Reverse-1031/Starker Exchange, Internal Revenue Procedure 2000-37, you don't have to wait until you sell your current property before finding the replacement property. But when you find the replacement property you'll need to involve an "accomodation titleholder" to take possession until you sell your current property. (You cannot own both properties simultaneously.)
This seems to be a very handy way to handle a situation where you suspect you've already found the next, replacement property and you're concerned about it's purchase price escalating faster than your presently held property while you try to sell the present property.
And then, there's the risk that you'll have difficulty selling the current property, in which case the IRS plays arson on your 180-day burning platform.
Posted by Lee Alley, www.BHhomes.INFO, Rapid City, Black Hills, SD at 10:25 AM
Labels: Retirement Investments
Most people assume that an IRA is synonymous with stocks and mutual funds. Not true. When Congress set up the IRA tax deferral concept, they deliberately left it wide open for us to invest our IRA's in many kinds of assets other than stocks. But most stock brokers sure don't tell you about this.
In fact, when Congress established the IRA tax-avoidance/deferral program, Internal Revenue Code 4975, they said we could invest in any type of asset, except for five very specific things:
So that means Congress intended we could invest our IRA's in just about anything else, such as French gas stations, American fast food resturaunts, or...Black Hills real estate. (Full disclosure: I have transferred much of my lifelong retirement savings out of gambling in the stock market, over to investing in Western-U.S. real estate. And done very well, thank you.)
As it turns out, real estate is one of the easiest forms of asset to invest in with your IRA. And buying real estate with my IRA was no more complicated than buying my last home.
However, keep in mind that the IRS is real persnickity about not violating a few specific "prohibited transactions", which they enumerate very clearly in IRS Publication 590, Individual Retirement Arrangements. The IRS penalties for violating one of these prohibited transactions can be severe. But it is not difficult to steer clear of problems if you don't play games against the IRS.
It has helped me to think of it this way (I hope this is right). The IRS seems to treat my IRA account as the domain of virtually another person, separate from me. The IRS knows that my "Lee's IRA" does not pay taxes. So the IRS gets real interested if this guy "Lee's IRA" starts slipping assets to the real Lee. Reason is, the real Lee is not tax exempt. And if a tax exampt entity has avoided paying taxes, then if that entity (my IRA) starts shuttling money or beneficial use of assets to me, then the IRS regards it as a "taxable distribution.
In fact, that is why it is important to invest in things that will not transfer virtual benefits directly to you. For example, if your IRA invests in a campground, don't go camping there without paying. Or if you invest in a gas station, don't get caught with the gas station giving you gas. Otherwise, it a taxable event, to transfer assets from your non-taxed IRA to your taxable self.
However, it's not that difficult to avoid these violations. In my case, I pay a small fee to my bank's trust department (Great Western Bank in Rapid City) to help me manage my self-directed real estate IRA account. I make all the decisions, to buy or sell or select or enhance a real estate holding. But I run it by the trust officer ("custodian" in IRS parlance) first, so that he can make sure I'm not violating an IRS rule. This has been a simple and convenient relationship. In fact, for the fee involved, I have greatly appreciated having a partner on my side to talk over investment ideas.
If you are contemplating a switch from gambling in the unruly stock market, and moving in to investments in Black Hills real estate, you are welcome to call me to chat. But keep in mind, you really need to consult with professional tax advice and engage the services of a custodian for your account. You could also consult with one of the self directed/real estate IRA services companies such as Pensco Trust Company. You may also be interested in the IRA Association of America.
Now, just for fun, let's start considering the matter of leveraged investments within your IRA. That is, borrowing part of the purchase price of an investment in a real estate oriented business, such as strip malls. That gets much more interesting, due to the IRS' prohibition agains the IRA using collateral from outside itself, or relying on your personal income for securing the loan. That's where "non-recourse loans" come in. In a non-recourse loan, the lender has no recourse to go outside the IRA to recover bad debts (to your IRA). In fact, when I talked with Roger St. Pierre of First Western Federal Savings Bank here in Rapid City, he had surprisingly minimal interest in my personal credit record or FICO score, because if my IRA were to default on the non-recourse loan, the bank would not have recourse to my personal assets.
Posted by Lee Alley, www.BHhomes.INFO, Rapid City, Black Hills, SD at 5:58 PM
Labels: Retirement Investments
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