Tag Archives: Investing in Real Estate


Florida Cities Top List of 'Hot Spots' for Retiring, Investing

Although Florida is often recognized for its high foreclosure rate, the state also holds a handful of cities that are retirement “hot spots” due to their real estate opportunities, according to RealtyTrac.

On Thursday, RealtyTrac released a list of the top 15 markets for retiring. In order to be considered, at least one-third of the population in the markets had to be aged 65 or older. Overall, 40 fit that criteria, and 15 of those markets stood out due to their strong annual price growth.

Out of the 15 markets, seven were in Florida.

Dunnellon, Florida, came out ahead of other cities, with a 31.4 percent annual increase in home prices. Naples, Florida ranked second with a 26.8 percent annual increase in prices.

Other Florida cities on the list include North Fort Myers (+19 percent), Punta Gorda (16.7 percent), Sun City Center (14.7 percent), Venice (11.5 percent), and Orange City (8.8 percent).

Cities outside of Florida that were placed high on the list included Hot Springs Village, Arkansas (+25.9 percent), Douglassville, Pennsylvania (22.3 percent), and Sun City, Arizona (19.9 percent).

RealtyTrac’s ranking also included other data that might be of interest to retirees such as capitalization rate, median sales price in May 2013, annual chance of sunshine, among other factors.

Florida cities were also strong candidates for those who are considering the option of owning rentals into retirement. Orange City, for example, held the highest capitalization rate of 12.9 percent, followed by Dunnellon (10.3 percent) and North Fort Myers (9.4 percent).

“These popular retirement cities will very likely be an area of growth in the housing market over the next 15 years as baby boomers retire in greater numbers,” said Daren Blomquist, VP at RealtyTrac. “The baby boomer generation started retiring in 2011, a trend that will continue at least through 2029, ensuring plenty of demand for both rentals and owner-occupant purchases in these markets for the foreseeable future.” 

By: Esther Cho with DSNEWS

 


How the New 3.8% Tax Works

The 3.8% tax on net investment income beginning Jan. 1 applies to dividends, interest (except from municipal bonds), net capital gains, rents, royalties and investment annuities for most joint filers with adjusted gross income of $250,000 or more ($200,000 for singles).

Example: A couple has adjusted gross income of $240,000, not counting their investment income. If they have $2,000 of interest, $4,000 of dividends and $1,000 of net capital gains, the 3.8% tax won’t apply. But if they have the same interest and dividends plus a $10,000 net capital gain, then they’ll owe a new tax of $228 on $6,000, the amount of their investment income above $250,000.

Things get more complex for retirees. Defined-benefit pension payments and individual retirement account payouts aren’t themselves subject to the 3.8% tax, but they can raise adjusted gross income.

Example: A widow has $210,000 of adjusted gross income from pensions and IRA withdrawals, so she doesn’t owe the new tax even though that income is above $200,000.

But if instead she has $120,000 from pensions and IRA payouts, plus a $100,000 net taxable gain from the sale of her home—after subtracting her cost basis and the $250,000 exclusion—then she will owe $760 of new tax on $20,000.

“For people under the thresholds, the timing of investment income will become very important,” notes Sharon Kreider, a CPA in Sunnyvale, Calif., who has studied the new levy.

By: Laura Saunders, Wall Street Journal


Why Real Estate May Be The Buying Opportunity of the Decade

No one knows what the economy or the stock market will do over the next six months. But when your time horizon is 20 years, the outlook is actually a lot clearer. And right now, all the trends are lining up to make real estate a fantastic long-term buy.

Of course, if you look at recent real estate statistics, the picture is a total catastrophe. Home prices are down by a third, and the decline recently exceeded that of the Great Depression. Across the country, 2 million homes are in foreclosure and another 2 million are more than 90 days behind in their payments. The backlog of foreclosures could last two or three years.

Falling home prices plus the foreclosure backlog probably mean a flat-to-down market over the next couple of years. But beyond the current desolation, the outlook is exactly the opposite. In fact, three different trends are aligning that figure to produce a major home-price boom over the next 20 years.

1. The Economic Cycle. Admittedly, the current recession is far worse than a typical cyclical downturn. Nonetheless, the economy has grown for seven straight quarters. It is possible that there could be a double-dip recession – triggered perhaps by the default of Greece or Portugal. But the worst damage to the U.S. economy appears to be behind us. Home prices are largely driven by demand, which depends on the number of people working, their prospects for salary increases and the availability of credit for mortgages. All three of those things are bad right now, but they typically lag the economic cycle for GDP. Once the economy finally recovers, the factors that drive housing demand will follow.

2. The Real Estate Bust. The collapse in housing prices has destroyed confidence among home buyers and left perhaps a quarter of all properties worth less than the mortgages they carry. But the experts see prices within 5% to 10% of a bottom. Once the process is done, prices will have been knocked all the way down. As a general rule, the worse the crash in a market, the longer the subsequent recovery can last, because there is nowhere to go but up.

3. The Inflation Outlook. The combination of a cyclical economic recovery and the end of the housing bust is by itself reason enough to buy real estate. But in my view, there is an even more compelling long-term argument – the near-inevitability of higher inflation, as I have argued before. Basically, if the U.S. continued building up debt at its present rate, the country would eventually end up where Greece is today. The reason that won’t happen is that while Greece’s debt is in euros, a currency it can’t control, U.S. debt is in dollars. The U.S. will always be able to pay its debts because the Federal Reserve and the Treasury can simply work together to create more dollars (what people used to call “printing money” in the days before electronic funds).

The catch is that creating money that way would eventually lead to inflation and the devaluation of the U.S. dollar. In such an environment, any kind of tangible property appreciates rapidly. The last time such a pattern occurred was in the 1970s as inflation soared into double digits. Of course, ’70s-style inflation might not recur if federal spending is slashed, taxes are raised and oil prices fall. But that’s not how I would bet.

The real estate market may not quite have bottomed out yet. And the boom I’m talking about will probably take more than a decade to unfold. It also may not apply as directly to real estate stocks. Home builders have more complex problems and real estate investment trusts often depend on commercial properties that are sensitive to business conditions. But the next two or three years should offer exceptional opportunities for buying actual real estate – primary residences and vacation homes – preferably somewhere that’s green.

This article is from Time Moneyland.