Archives for January 2011

Formula for Real Estate Profit by Joe Szabo, Scottsdale Real Estate Team

January 31, 2011 szabogroup

By Joe Szabo, Scottsdale Real Estate Team

When setting out on your adventure of real estate improvement, there are an infinite number of things to keep in mind to help your bottom line. Here are some major ideas…

Calculate how much future buyers will pay before starting your renovations. Many people buy a house, fix it up, and then try to sell it for what it cost them to fix plus ten or twenty thousand dollars more. It’s better to reverse engineer that thinking. Find out what the house should be worth in the future timeframe you’re thinking of selling, this way you can plan and strategize on which improvements you will make and how much to spend.

Try to discover or create hidden value. Feel free to negotiate for bargain prices, but don’t limit yourself to properties you can buy at a steep discount. Be persistent in your efforts to reduce the costs of enhancements while maintaining focus on increasing appeal. Never accept a contractors gross bid for a project. Carefully revue each line item. Savvy cost management can turn a so-so deal into a real moneymaker!

You might be able to tap your retirement account(s) for real estate investments. Also, you may be able to reduce taxes. Make sure to check with you financial advisor about these possibilities.

It’s very important to keep in mind to not become emotionally involved with renovation decisions. For example, if you are a “kitchen lover”, but it is the bathrooms that need most attention in your rehab project, don’t let your enthusiasm for one area distract you from another. Work on what is right for the future buyer, not what is most appealing to you. One of the best ways to determine what should be improved is by asking Joe Szabo, of Scottsdale Real Estate Team.

The Szabo Group offers first class real estate services to clients in the Scottsdale Greater Phoenix Metropolitan Area. Award winning Realtors and Re/MAX top producers, The Szabo group delivers experience, knowledge, dedication and proven results. Contact Joe Szabo at 480.688.2020, [email protected] or visit www.scottsdalerealestateteam.com to find out more about Scottsdale Homes for Sale and Estates for Sale in Scottsdale, Arizona.

Invest in Real Estate Tax-Free Through Your IRA by Joe Szabo, Scottsdale Real Estate Team

January 28, 2011 szabogroup

By Joe Szabo, Scottsdale Real Estate Team

Though it isn’t well known, it’s possible to structure your IRA to buy and sell real estate through it, thereby deferring taxes on capital gains and rental income or, in the case of a Roth IRA, making it all completely tax-free.The first step in using an IRA for tax-free or tax-deferred real estate investment is to set your IRA up to be self-directed, which simply allows the investor greater control over how the funds are invested.

A growing number of companies today offer self-directed IRA administration services. Likewise, many independent financial advisors are starting to offer this service as well. Generally, any traditional IRA, Roth IRA, Simple, or Keough type retirement account can be converted in to a self-directed IRA. Sometimes employer-sponsored accounts can be converted as well. Ask your IRA administrator if this is possible.

Once you have a self-directed IRA, the purchasing process for real estate is essentially the same as it is otherwise, although your IRA administrator has to purchase the real estate on your behalf. A special fee is usually charged for this service.

The following are transactions that won’t qualify for IRA-advantaged tax treatment:

1) The sale, exchange, or leasing of any property between the IRA and a disqualified person.

2) Lending money or other extension of credit between the IRA and a disqualified person.

3) Furnishing goods, services, or facilities between the IRA and a disqualified person.

4) The transfer to, or use by or for the benefit of, a disqualified person.

5) Any act by a disqualified person who is a fiduciary whereby that person deals with the income or assets of an IRA in his or her own interest or own account.

6) The receipt of any consideration for his or her own personal account by any disqualified person who is a fiduciary from any party dealing with the IRA in connection with the transaction involving the income or assets of the IRA.

A “disqualified person” means yourself and any other person or entities in close relation to you that are likewise prohibited by transaction rules. The best way to maximize IRA real estate investments is usually by leveraging property, but IRA rules state that any debt-financed property that produces income is considered “unrelated business income” (UBI). Any IRA that earns more than $1000 of UBI in a single tax year must file a special form and pay taxes on that income. An easy way to avoid this problem is simply to structure the investment so that the available property depreciation and annual operation expenses offset the property’s income.

An even better method, however, is to use any excess UBI each year to make a lump sum principal reduction on the debt. Once the debt’s paid off, the income from the investment isn’t considered UBI any longer because the investment isn’t debt-financed property.

Disclaimer: This article is provided for information use only. It does not take the place of an attorney, a tax advisor, or an accountant. Always seek out the advice of a licensed professional before undertaking any significant change in your financial situation.

Investment Alternatives by Joe Szabo, Scottsdale Real Estate Team

January 24, 2011 szabogroup

By Joe Szabo, Scottsdale Real Estate Team
When determining what type of real estate to pursue, potential investors should consider their areas of interest and expertise, their monetary goals and the market they will be operating in. Real estate investments are generally categorized as keepers and flippers.

As the name indicates, properties you buy and intend to keep in the long term are keepers. Such properties are held for income, future appreciation value and/or tax benefits. While flippers are those you buy with the intent to sell for a profit as soon as possible. The price paid is much more critical when buying a flipper rather than a keeper.

Single-family homes…

Single-family homes were long considered a poor investment because of their small income potential in relation to the price paid. In terms of appreciation, however, these homes have increased in value at a greater rate than any other type of real estate. Moreover, single-family homes are the most liquid real property investments. They can be sold or rented, and the equity earned can be used as collateral for other loans. There is also a tremendous amount of financing available for purchasers. When investing in a home for resale, look for good floor plans, solid construction and appealing architectural styles. It’s also important to buy in a familiar area so you can manage the property yourself.

Buying prior to subdivision approval…

A deposit on a home or condo that’s still being built can be re-sold for a profit in many states. Before a housing project is complete, buyers can make reservations on properties they intend to buy. Until the subdivision or condo project has received their final local and state approvals, the buyer holding the reservation can back out of the purchase and regain their full deposit. Some investors speculate these reservations by waiting until demand increases and the properties sell out, then selling off their reservation for a profit. The only downside would be losing the deposit.

Vacation homes…

After their primary residence, many investors purchase a vacation home for enjoyment and even future retirement purposes. The property taxes and interest are tax deductible. The property can be rented for profit in the off-season; and, owners can take depreciation on the home if they live in it less than 14 days a year.

Condominiums…

Compared to single-family properties, condos and planned unit developments have the advantage of being relatively easy to rent. They also tend to have less problems because the grounds and common areas are maintained by a homeowner’s association. On the down side, condos tend to appreciate slower than other properties and may have restrictive covenants prohibiting rental of the unit.

Fixer-Uppers…

Investors can often find great deals on properties in need of repair. However, unless you are a contractor, it’s best to avoid anything that requires major structural work. Consider the costs of making cosmetic repairs, improvements and renovations against the potential demand for the finished product. What seemed like a bargain when you bought it may not turn a profit if it’s located in an undesirable area – regardless of the work you put into it.

Apartments…

Excellent financing is available for purchasers of smaller buildings where the owner occupies one of the units. The other units in the building provide cash flow from rent payments and those units can be depreciated to lessen the owner’s tax liability. Smaller buildings are also easier to sell than larger complexes. Disadvantages to consider: maintenance and repair to do or pay someone else to do; you give up the privacy of a single-family home to live on the premises or you must constantly monitor the property. Problem tenants and their difficulties are hard to avoid, even with an on-site manager.

Future Income Streams by Joe Szabo, Scottsdale Real Estate Team

January 21, 2011 szabogroup

By Joe Szabo, Scottsdale Real Estate Team

Future Income Streams

The best way to ensure future income is to continually invest in real estate – it’s always a great investment because of its tax advantages and long-term reliability. You might consider accepting equity interests in clients’ property as a commission – it’s an easy way to avoid paying income tax as well as gaining future appreciation.

Get your clients involved – investing in the stock market is risky, so encourage clients to invest in real estate for its tax benefits and reliability:

1) Create stock-size investment opportunities in real estate to satisfy the stock market investor’s desire to easily diversify and buy-in with small contributions.

2) Create an investment pool for stock market weary investors. They’ll supply the initial capital while you’ll convert your commission, put the deal together, manage the investment, and receive a commensurate ownership interest.

3) Attract like-minded professionals to the pool, and let them contribute their time in exchange for equity.

Decide whether a limited partnership (LP) or a limited liability company (LLC) best suits your business needs. Consult a lawyer or accountant who specializes in this area. Retirement funds can also be invested in co-owned real estate, as long as the retirement funds are safely segregated in its own ownership interest. You’ll have to hire a retirement account custodian to manage this process. Selling your business is the final way to ensure future income. In order to facilitate that sale:

1) Keep your client base well organized.

2) Maintain good accounting records.

3) Have all your systems in place; be able to show reliable rates of return.

4) Have competent personnel in place.

5) Incorporate your business.

6) Offer your services for a period of time to help with the transition.

7) Hire a business broker to list your business, which will help you find the right match.

Everything You Want to know about Novelty Flooring by Joe Szabo, Scottsdale Real Estate Team

January 17, 2011 szabogroup

By Joe Szabo, Scottsdale Real Estate Team

Material Options – Novelty Floorings

There are many offbeat flooring options available that can take your home from fun to fabulous! Some, like rubber, have been around for a while, while others, like cork, have become more popular recently for environmental reasons. Here is a helpful summation of the types of novelty flooring available.

Rubber

Rubber is available in tile form, as well as rolls and runners. Many colors and patterns are also offered.
It’s a good insulator and warm to the foot.
It’s durable and water/burn resistant.
It’s naturally resilient and sound absorbent.
Some recycled rubber may contain latex, which is an allergen. Ask about the contents before purchase.
It’s usually inexpensive.
It’s easy to install and maintain.
It’s susceptible to grease and oil stains.
Its appearance can be unappealing.

Cork

Cork is a natural, environmentally friendly product.
Cork should be sealed to protect against dirt and moisture.
It’s available in a variety of colors and patterns in tiles, sheets, and strip flooring. It can also be installed over existing wood, ceramic, or concrete flooring.
It’s durable and easy to maintain.
It’s resilient and comfortable underfoot.
It’s non-slip, even when wet.
It offers sound and heat insulation.
It’s insect-resistant.
It’s easy to install.
It can, however, dent and tear.
It can’t be used over radiant heat because the tiles will lift.
It requires re-finishing with polyurethane every eight years.

Bamboo

Bamboo is another natural, environmentally friendly flooring.
It’s usually unfinished or pre-finished. The finishing products may contain allergens, so check with the manufacturer before purchase.
It’s supplied with tongue and groove configurations that can be glued, stapled, or nailed down.
The vertical laminate style is harder than oak and maple; the horizontal style is almost as hard as red oak.
It rarely expands or contracts due to humidity, but wet areas should be avoided.
It can be used with radiant heat.
Quality can vary widely, so check for references and warranties.

Coconut Palm

Coconut palm is another renewable resource. It comes in three-ply planks.
It’s very durable, harder than red oak and hard maple.
No formaldehyde is used in its manufacture.
It shouldn’t be used in very moist areas, like bathrooms.

Leather

Leather for flooring is specially dyed and tanned for resilience, needing only an annual wax buffing for maintenance.
Tiles are available in many colors, sizes, textures, and shapes.
It shouldn’t be placed in moist or busy areas, or those with direct sunlight.
It’s warm, comfortable, and smells nice.
It’s beautiful.
It’s sound absorbent.
It’s durable and its appearance improves with age.
It’s expensive.

Metal

Metal has traditionally been found in industrial settings, but has recently become fashionable in domestic ones.
Metal tiles come in a variety of colors, shapes, and sizes. They can work on their own or serve as accents for other flooring materials, like wood, stone, or ceramic.
It’s usually made from recycled material, so it’s environmentally friendly.
It’s easy to maintain.
It lends a modern look to any home.
It’s cold and noisy.
Some varieties rust.

Everything You Want to Know about Laminate Material Floor Options by Joe Szabo, Scottsdale Real Estate Team

January 14, 2011 szabogroup

By Joe Szabo, Scottsdale Real Estate Team

Material Options – Laminate

Once mostly a cheap wood imitation, today laminate can convincingly mimic stone, brick, ceramic, and many other looks. Most laminate floors come with fifteen-year warranties.

Laminate comes in four layers:

1) Surface is melamine impregnated with aluminum oxide.

2) Design layer can have any type of design or photo.

3) Substrate is the core material that gives it rigidity.

4) Backing paper balances the board and resists moisture.

Most laminate floors aren’t attached to the subfloor (floating), but come in a variety of shaped locking mechanisms.More costly laminates will reduce noise, prevent water infiltration, and resist denting, staining, and scratching.

Some companies offer a surface treatment to prevent the growth of bacteria and fungi. Chemicals and UV rays won’t affect laminates.

They’re easy to maintain. They’re made from recyclables, making them environmentally friendly. They’re comfortable underfoot.

Self-installation is possible; damaged panels can be easily replaced.

They can’t be used in frequently moist areas, however, like swimming pools or steam rooms.

Everything You Want to Know about Hard Flooring Materials by Joe Szabo, Scottsdale Real Estate Team

January 10, 2011 szabogroup

By Joe Szabo, Scottsdale Real Estate Team

When it comes to materials for your floors, Joe Szabo and Scottsdale Real Estate Team offers this helpful comparative analysis.

Material Options – Hard Floors

Hard floors help create a healthy home environment because they don’t have any fibers to trap dirt, germs, or dust mites. Hard floors are usually cold, but can be warmed by the use of rugs or under-floor heating systems.

Hard floors are durable, but also tend to be heavy and amplify sound. Hard floors aren’t resilient; things dropped on them will easily break.

Brick:

1) Waterproof.

2) Slow to warm but retains heat well.

3) Requires little maintenance.

4) Requires professional installation and solid subfloor for support.

Natural Stone:

1) Usually identified by the location where it’s found, such as Portland (Maine) limestone or York (Yorkshire, England) sandstone.

2) Can be cut with a machine or hand-worked.

3) Can look formal (marble) or rustic (irregular slate).

4) Can be slippery, especially when polished.

5) Often expensive due to finishing and transport costs.

6) Professional installation usually necessary.

Reclaimed Terra-Cotta and Stone:

1) Warm, antique appearance.

2) Minimal maintenance.

3) Expensive.

4) Require professional installation.

Terrazzo:

1) Waterproof.

2) Minimal maintenance.

3) Cold to the feet.

4) Expensive.

5) Professional installation required.

Engineered Stone (Natural Quartz):

1) Very hard.

2) Large variety of colors and designs.

3) Not porous.

4) Simple maintenance.

5) Professional installation required.

6) Expensive.

7) Noisy and cold to the feet.

Ceramic Tile:

1) Easy to work with.

2) Durable.

3) Usually waterproof.

4) Noisy and cold to the feet.

5) Slippery when wet.

6) Professional installation required.

Mosaic Tile:

1) Durable.

2) Large variety of colors and styles.

3) Easily contoured to irregular floors.

4) Less slippery than other tiles.

5) Easy maintenance.

6) Expensive installation.

7) Like all tiles, can be noisy and cold.

Glass Tile:

1) Beautiful appearance.

2) Many colors and designs.

3) Impervious to stain and easy to clean.

4) Breakable and some are easy to scratch.

5) Professional installation required.

6) Expensive.

Concrete:

1) Minimal maintenance.

2) Easy to change its appearance.

3) Gets stronger over time.

4) Environmentally friendly ingredients.

5) Professional installation.

6) Not resilient, will chip and break.

7) Cold on feet.

Feng Shui your Bedroom by Joe Szabo, Scottsdale Real Estate Team

January 7, 2011 szabogroup

By Joe Szabo, Scottsdale Real Estate Team

Since you spend one-third of your life sleeping, your bedroom’s feng shui is very important. And the key to your bedroom’s feng shui, of course, is your bed. The ideal placement for your bed is the room’s Command Position (facing the entrance, with equal room on both sides and a solid wall behind it), but not directly in line with the door. This causes sha chi.

The side of the bed should also not be directly exposed to chi coming in from the door, as this can cause health problems. Don’t place your bed under an exposed beam, ceiling fan, or other causes of sha chi. If necessary, use a mirror to provide a view of the entrance while you sleep. If placing your bed by a window is unavoidable, hang a faceted crystal or a guardian image nearby, so it can watch over you while you sleep. The bed should be placed so that a wall traps neither side. That arrangement ensures that both partners in a relationship have equal freedom; it also helps ensure that single people aren’t blocked access to future partners.
Placing your bed against a wall that has a fuse box, stove, or toilet on the other side is also a source of sha chi.

If it’s not possible to avoid sha chi, there are plenty of feng shui cures available to protect against it: hanging crystal balls, using low furniture as buffers, colors to alter energy, or mirrors to reflect it. It all depends on the circumstances.

A bed with a solid headboard and frame will help make your life more secure. Chi should be able to flow freely around and under the bed to help you sleep. If you have a king-size bed, place a long piece of red fabric down the split between the two box springs and tuck it underneath. This will help ensure that you and your partner won’t become divided. If you’ve recently separated from a partner, buy a new mattress and bedding because the old ones will have absorbed a lot of chi from the relationship.

Anything you store under your bed can affect you while you sleep, so it’s best to keep the area empty. Don’t bring your work belongings or exercise equipment in to the bedroom because their energy can also affect you while you sleep. If you must have a TV in your bedroom, keep it covered or in a cabinet while you sleep. Your bed should always be the room’s focus of attention. The area across from your bed should have pictures or artwork that represent your ambitions. Romantic relationships are all about pairing, so placing lots of pairs of things in your bedroom – and in all the Marriage areas throughout your house – will help strengthen your current relationship, or attract a partner if you’re single.

Feng Shui and Your Home by Joe Szabo, Scottsdale Real Estate Team

January 3, 2011 szabogroup

By Joe Szabo, Scottsdale Real Estate Team

Modern feng shui recognizes that our relationship to a space is most strongly influenced by how we move through it. Therefore, the entrance to a room should be located so that it aligns with the Career area (our life path) of the ba gua map, while the Fame area (meaning future vision) lies ahead:

Wealth	Fame	Marriage
Family	Tai Chi	Children & Creativity
Knowledge	Career	Mentors & Travel

The ba gua map applies to your entire property as well. The beginning of your driveway is the “entry” to your property Keep in mind that each area occupies roughly one third of the length and width of each room. They blend in to each other, rather than changing abruptly. As you identify how the ba gua fits over your floor plan, use the walls and hallways to identify which rooms are in which areas.

Each level in a multi-story house will have its own ba gua. If there’s more than one entrance to a level, it’s okay to apply ba guas for every room. If your house is irregularly shaped, some parts may stick out from the ba gua. Extensions expand the energy of the area they extend from, and are often a good place for feng shui enhancements.

If the extension seems to be pulling positive energy away from the house, however, one cure would be to place a large mirror in the back wall of the room. If you live in a house that’s missing a certain area, it may have a negative effect on that aspect of your life. The best way to cure this problem is by adding a porch or patio, or if that’s not possible at least adding feng shui enhancements, like plants, wind chimes, or crystals, to the corresponding areas in the other major rooms of the house. These will help balance and stabilize the house’s energy. We hope you enjoy the information provided by The Szabo Group as we strive to offer information valuable to homeowners and prospective homeowners in the Scottsdale area.