Practical Real Estates

Get the best-looking house on the block and ratchet up its value with smart exterior upgrades.

Fetching front porch

After

1. Porch: An airy pergola runs almost the length of the facade, adding square footage and symmetry.
2. Entry: Shifting the opening towards the center and adding a wider door with sidelights make the front door more proportional and inviting.
3. Siding and windows: Varying the type, shade, and direction of the new taupe-colored cedar siding adds visual interest. The vertical boards on top also complement the muntins in the new, historically accurate windows.
4. Landscape and lighting: A stone wall framed by lush greenery creates a terraced front garden, and corrects what had been an awkwardly sloping lawn. Prairie-style lanterns brighten the front walk and portico.

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Get the best-looking house on the block and ratchet up its value with smart exterior upgrades.

Fetching front porch

Before

• The entry – and what surrounds it – are key to making a home welcoming. So the “Grey Poupon” yellow aluminum siding and tiny off-kilter portico on this Clarendon Hills, Illinois, house had to go.
• In fact, such “updating” had left the 1909 four-square looking like a shell of its former self. Relying on a vintage photograph, the homeowner set about restoring the facade’s original charm.
• Architect David Raino-Ogden drafted the plan for the facade, and a landscape-design course helped the homeowner devise her own plan and hardscape scheme.

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One asset of urban homes is the nearby commercial communities. This provides easier access to schools, dining places, shopping malls, churches and even hospitals. Almost everything that a family needs would be within close range. Also, amenities such as clubhouse, swimming pool, playground, etc. are provided by some urban homes. Although this feature may not be available to all, it gives an option of making a little amusement available for the children, especially in the absence of the working parents

An installment sale is a sale of property where you receive at least one payment after the tax year of the sale. If you dispose of property in an installment sale, you report part of your gain when you receive each installment payment. You cannot use the installment method to report a loss.

General Rules

If a sale qualifies as an installment sale, the gain must be reported under the installment method unless:

• You elect out of using the installment method

• You are not a qualified accrual method taxpayer

References/Related Topics

• Form 6252, Installment Sale Income (PDF)

• Publication 537 , Installment Sales

• Tax Tips – Real Estate

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Real Estate Tips
Some handy advice for those buying property.

With the main traditional buying season approaching, here are some tips for those of you on the house hunting trail.

1. Don’t be put off by bad weather. It’s a good time to check the potential property for leaks and poor drainage.
2. Visit the area to check out the proximity of schools, nightlife, transport, shopping centres, etc. These can have an effect on your lifestyle, both now and in the future (ie.children).
3. Contact local agents to research recent sale values in the area.
4. Always obtain building and pest reports on any property in which you are seriously interested.
5. Before you buy, get in touch with your potential neighbours, to ascertain suitability and see if there are underlying disputes or problems.

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You may qualify to exclude from your income all or part of any gain from the sale of your main home. Your main home is the one in which you live most of the time.

Ownership and Use Tests

To claim the exclusion, you must meet the ownership and use tests. This means that during the 5-year period ending on the date of the sale, you must have:

* Owned the home for at least two years (the ownership test)
* Lived in the home as your main home for at least two years (the use test)

Gain

If you have a gain from the sale of your main home, you may be able to exclude up to $250,000 of the gain from your income ($500,000 on a joint return in most cases).

* If you can exclude all of the gain, you do not need to report the sale on your tax return
* If you have gain that cannot be excluded, it is taxable. Report it on Schedule D (Form 1040)

Loss

You cannot deduct a loss from the sale of your main home.

Worksheets

Worksheets are included in Publication 523, Selling Your Home, to help you figure the:

* Adjusted basis of the home you sold
* Gain (or loss) on the sale
* Gain that you can exclude

Reporting the Sale

Do not report the sale of your main home on your tax return unless you have a gain and at least part of it is taxable. Report any taxable gain on Schedule D (Form 1040).

More Than One Home

If you have more than one home, you can exclude gain only from the sale of your main home. You must pay tax on the gain from selling any other home. If you have two homes and live in both of them, your main home is ordinarily the one you live in most of the time.

Example One:

You own and live in a house in the city. You also own a beach house, which you use during the summer months. The house in the city is your main home; the beach house is not.

Example Two:

You own a house, but you live in another house that you rent. The rented house is your main home.

Business Use or Rental of Home

You may be able to exclude your gain from the sale of a home that you have used for business or to produce rental income. But you must meet the ownership and use tests.

Example:

On May 30, 1997, Amy bought a house. She moved in on that date and lived in it until May 31, 1999, when she moved out of the house and put it up for rent. The house was rented from June 1, 1999, to March 31, 2001. Amy moved back into the house on April 1, 2001, and lived there until she sold it on January 31, 2003. During the 5-year period ending on the date of the sale (February 1, 1998 – January 31, 2003), Amy owned and lived in the house for more than 2 years as shown in the table below.

Five Year Period — Used as Home — Used as Rental
2/1/98-5/31/99 — 16 months
6/1/99-3/31/01 — 22 months
4/1/01-1/31/03 — 22 months
38 months 22 months

Amy can exclude gain up to $250,000. However, she cannot exclude the part of the gain equal to the depreciation she claimed for renting the house.

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People who have second homes often fail to get good prices for them due to urgent needs for cash to maintain their first homes. Falling victim to the credit crunch and housing market crisis, people are opting to sell at lower than normal prices to prevent foreclosure on their other properties, unloading inventories fast. The statistics are showing that people who would have normally fared better are not doing so mainly because of the surprising length of time it is taking the market to recover. Mortgage payments that are more than two months old are subject to auction but owners sell at low price to avoid losing them, paying the rest of their obligations with the proceeds of the sale, but often ending in debt rather than out of trouble. One luxury homes, now foreclosed are offered to the highest bidders in auctions by lenders who like you need cash to stave off collapse.
People were just too unprepared for the crash and many are in trouble, the bailout being caught up in red tape comes too late often right after homeowners have lost their homes. People fail to realize that they can negotiate for better deals by re-financing their existing mortgage, taking action before they are deep in trouble from these lenders. Scams are also on the rise due to desperate homeowners who risk all simply to keep their existing homes intact.

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If you feel that families are a sure market for your rental property, then by all means purchase property in a community that caters to families and furnish it to accommodate children – meaning it would be great to have swimming pools and lifeguards, lots of recreational items in the house such as indoor or board games, movies and an endless supply of baby caregivers. Be certain that there are no restrictions to the property like the ones for retirement communities where children are not allowed. If you are thinking of attracting couples and singles instead of families, point out the seclusion, quiet and other romantic aspects of both the location and the property – which means the property must not be next to a playground. Remember that vacation homes should always be a win-win situation for renters looking for comfort at a reasonable price.

The decision to rent or to buy your own home isn’t usually such a difficult decision under normal circumstances. Almost always, it’s better to own your home rather than to rent. Owning your own home allows you to build equity. You even get to write off your mortgage interest and may be eligible for a tax breaks. On the other hand, with the high interest rates and deteriorating property values, it may be a better idea to rent for a while.
Buying property in today’s market may also mean that you should be prepared to hold on to your property for a while, else you lose your principal. Owning your own property also means fees to upkeep the place and property taxes. Renting your home, however, your run the risk of annual rent increase eventually outpacing inflation. In sum, if you have the financial capability to pay for the mortgage and all additional costs, it will still be better to buy your house, but if you are financially hanging by a thread, then renting is the better option for you.

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An estate plan is a legal system for the disposal of your property upon your death. It recognizes your wishes, such as those regarding the care of minors, and it legally minimize taxes. It can take into account your views regarding future medical care; for example, it may state you have no wish to have your life sustained by a life support machine.

Estate planning may or may not involve tax planning. The single most important document associated with estate planning is a will.If you own property, there are basic questions which need to be answered upon your death. If these answers are not set out in the form of a will, then the courts have the right to decide what happens to your assets. The end result may well coincide with your wishes, but often it will not. The value of your estate will be substantially reduced, as professionals such as accountants and lawyers will argue as to what the law of succession means.