The Stimulus Package & Its Impact on Real Estate

Real Estate News & Commentary by Chris McLaughlin, February 16, 2009
http://www.shortsalesriches.com/welcome.html

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President Barack Obama’s senior advisor assured the American public that the President has a “solid” housing plan that will stabilize housing prices and help prevent the tsunami of foreclosures that have come.  Speaking on Fox News Sunday Alexrod said that the President would announce this coming Wednesday his plan that will start “raising home values that have been plummeting.”  Axelrod said that the President’s plan will commit $50 to $100 billion to stem future foreclosures.

And the financial markets were closed this holiday, so instead of reviewing financial news that impacts real estate we’re going to provide you a quick overview of the Stimulus package in terms of the impact it will have on real estate investors and Realtors:

Homebuyer Tax Credit: The bill increases the $7,500 tax credit to first time homebuyers to a maximum of $8,000, but in a major change it does not require repayment of the $8,000.  The credit is available to those with adjusted gross incomes or no more than $75,000 or $150,000 if married and phases out up to $95,000 and $170,000 if married.  The definition of “first time” homebuyer is actually someone who hasn’t purchased a house in the last 3 years. 

In an effort to assist with home stabilization, the bill will force a recapture of the entire $8,000 tax credit if they home is sold within 3 years of purchase. 

FHA, Freddie Mac & Fannie Mae Loan Limits: The bill extends the increase in loan limits that were passed in 2008.  The limits are 125% of the median home price for the local area for FHA and $417,000 for Fannie and Freddie.  There are certain areas of the country where these limits are higher, however.  For example, Ventura County, California has a limit of $729,750 for both FHA and Fannie & Freddie—the maximum cap allowed.

Neighborhood Stabilization: An additional $2 billion has been allocated to the Neighborhood Stabilization Program (NSP).  This is an extension of the Community Development Block Grant whereby Realtors and investment groups can team with municipalities to purchase foreclosed homes in blighted areas and then resell them to families at or below 120% of the area median income, with 25% of the funds being used to families below 50% of the area income. 

USDA: There’s another $500 million for the existing USDA Rural Housing program.  That’s basically the only 100% program out there, so the extra half a billion sure will help get more people financed.

Now, on to our real estate investing section…

Confiscation of Wealth

Throughout history there have been those that learn how to preserve and even expand their wealth despite (or some may say because of) tough economic times while others merely persevere. The remaining masses find themselves growing ever less wealthy with each passing year through the confiscation of their hard earned wealth. Learn how short sales allow the average person to hold on to what they have earned by avoiding these common wealth confiscation culprits:

1. Taxes. You have heard the saying there is nothing certain in life except death and taxes. While it may be true that you cannot avoid paying taxes, it is perfectly acceptable to minimize the amount of taxes that you legally are required to pay. Consider this, if you work for a living, the harder you work the less you bring home – proportionately speaking. That is because labor is taxed at a higher rate than other forms of profit. Transfer the source of your cash flow and instantly save 10, 20 or even 30 percent on every additional dollar you make.
2. Inflation. As if taxes weren’t enough to grapple with, inflation is a slow force that steadily decreases the purchasing power of your dollar. As the government prints more and more money, it decreases the value of each original unit. Things like food, housing, raw materials and other basics become more expensive over time. Lest you think inflation doesn’t matter, consider this….the dollar has lost more than 90 percent of its purchasing power in the past 100 years. On the other hand, those who own tangible assets such as real estate are able to keep pace with the rate of inflation. It may go up or down for short periods of time, but eventually tangible assets always return to an inflation adjusted rate.
3. Savings. This may initially sound counter-intuitive; after all, you have probably been told to save money and put it into an interest bearing account in preparation for retirement or a rainy day. Unfortunately, saving money puts it at risk for the dual hardship of both taxes and inflation rather than putting it to work. Consider this, if you placed $100,000 into a savings account that always kept perfect pace with inflation you would still lose money once you paid the taxes on the earnings. Add in transaction costs, holding fees and other expenses to realize you are unlikely to ever break event. The only way to build wealth is to generate an excess above and beyond inflation, taxes, transaction fees and other associated costs…this means you must put your money to work. The most common method has been via debt or leverage. By using a low interest fixed rate loan you can minimize volatility and risk while maximizing your ability to increase long term returns.

Chris McLaughlin

http://www.shortsalesriches.com/welcome.html  

P.S.

This weekend’s webinar replay is right here…

http://www.webinarwizards.com/custom/index.cfm?id=170879

P.P.S.:

Find out how a widowed ex-Marine left with 2 children figured out how to make it work with commercial real estate by clicking here:

https://commercial.infusionsoft.com/go/invite/a181/

Copyright Loss Mitigation Institute 2009.
All Rights Reserved.

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About the author:

Chris McLaughlin is widely known as America’s top
Real Estate Attorney and Investment Consultant.

    * As the top Florida foreclosure and pre-
      foreclosure expert, he oversees more than
      100 short sale & REO closings each month

   * Long-time authority on real estate investing
      and rapid flipping of distressed homes.  Owns
      portfolio of nearly 100 high-value, high-profit
     properties

    * Owner and Supervising Broker of one of Florida’s
     largest Real Estate firms, running 4 different
     offices, supporting nearly 450 agents, uniquely
     positioning him to help thousands of investors
     make money in the biggest market opportunity ever!

     * Highly sought-after speaker, consultant, and
      seminar leader for current trends and hot topics
      in Real Estate Investing, Entrepreneurship, and
      Wealth Building

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