Deciding What to Do With the House after Divorce

News Source: http://firstmortgagerates.ca

Divorce can be painful enough, but it can be worse when you are faced with losing your home at the same time. Finding a suitable replacement can be tricky, particularly if you don’t have a good credit rating and have less income coming in.

It can be a difficult time, but an article in realtybiznews.com points out there are things you can do to help get a new mortgage, and explains what you can reasonably expect. The first thing to do is to decide if you want your name or your ex’s name off the mortgage, depending on the circumstances. If you intend to buy your own property and your ex is still living in the marital home then ideally they need to take over the mortgage in their name only. This will increase your chances of being able to get your own mortgage.

However this might not always be possible, particularly if this is your family home and they can’t refinance the loan on their own. In this case you might need to leave your name on the mortgage for a while, while your ex and kids still live there. This is incredibly common, especially in cases where one partner has worked part-time or not at all in order to look after a young family. It can sometimes be better to agree a time frame where the kids and your ex are able to remain in the home, perhaps until they go to college.

If you do decide to choose this option it is important to agree in advance how the profits will be divided once the house is finally sold. This might not necessarily be an equal split as it is likely one ex-partner will be making a more significant financial  contribution to mortgage payments and maintenance for the home. Not surprisingly this choice only tends to work well if the ex who left the old marital home has sufficient funds to buy a new home of their own in the meantime.

Apparently it is also not a good idea to buy a new home while divorce proceedings are on-going. This is because there could still be question marks over the amount of alimony and child support payments, and some people have lost money on house purchases after being unable to get credit from lenders under these circumstances.  If one of you is unable to buy immediately then you are faced with having to live together a bit longer, which is becoming far more common, or with renting an apartment near the family home until the dust has settled.

Tax Lien Investing Pros and Cons

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Tax lien investing has long been a popular method of investing in real estate but it should not be taken lightly. Although potential returns are huge, so are the risks.

Approximately $425 billion in state and local real estate property taxes are owed across the U.S. each year. Of that, about $6 billion goes delinquent. In 28 states, Washington, D.C., Puerto Rico, and the U.S. Virgin Islands these delinquent taxes allowed to be sold to private investors. The reward to investors is the chance to collect the delinquent tax, a penalty, and interest. Depending on the state, the accumulative return on investment can range between 12% and 36%. If the taxes and penalties remain unpaid, the investor can potentially end up owning the property through foreclosure but regulations for this vary greatly from state to state.

Pros to Tax Lien Investing Tax lien laws vary greatly from state to state and you absolutely must understand the laws in the state and even the county before investing. Basically, a lien is placed against a property when the owner fails to pay the property tax. Counties are highly dependant on property taxes to deliver the services people depend on. To maintain a reliable income stream from property taxes, many counties sell these liens to investors. These liens carry a high interest rate that then becomes owed to the investor. That’s on the pro side of tax lien investing.

How long property owners have to pay the delinquent taxes varies across the county from six months to three years. Also, the final solution to collecting the taxes varies. Some states allow the lien holder to foreclose on the property. Taking ownership can be attractive to investors if the property is significantly more valuable that what was paid for the tax lien. Other states auction the property and repay the investor for the back taxes plus the interest owed.

But there can be serious cons to this…

Cons to Tax Lien Investing

The biggest risk when paying someone else’s property taxes is the property owner could very well be going into or already be in bankruptcy. You might think that’s no big deal since the property can be auctioned. However, people in bankruptcy typically also owe IRS taxes. The IRS will place its own lien on the property and IRS liens override all other liens. If the property doesn’t sell for more than what is owed to the IRS the investor ends up with nothing and a loss on the back taxes he or she paid.

Also, consider why an owner might not being paying the property taxes. The value of the property may be significantly less than it once was. The owner may have been trying to sell the property for months or even years. The property simply will not sell or is worth less than what is owed on the mortgage, so the owner stops paying taxes and allows the property to go into foreclosure. If this is the case, the probability of the investor recovering the tax lien is not realistic.

Tax liens are auctioned off. Reality is there is stiff competition for these liens. These auctions are handled differently in different states and counties. At some auctions, you bid the amount of taxes you’re willing to pay and at others you bid down the interest rate you’re willing to take. Any interest owed that you don’t get, the county receives instead.

Other risks include other liens on the property or a clouded title. While investing in tax liens can be very lucrative, be sure you fully understand the downside before handing over your investment money. Tax lien investing can be very lucrative but you absolutely must understand the local regulations. Successful investors tend to specialize in specific states and counties or at least in states and counties with similar regulations.

Mortgages for the Self Employed

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http://www.consolidatemydebts.ca/

There are benefits to being self-employed. Not having to answer to a boss is a big one, as is being able to set your own work hours. However, when it comes to qualifying for a mortgage, being self-employed has drawbacks. The “stated income” loan application was originally intended to help the self-employed qualify for a traditional loan. However, leading up to the height of the real estate bubble, so many people abused this method that it has been discontinued by all traditional lenders and some private lenders.

Here’s How the Self Employed Qualify for a Mortgage

You need to prove your income using your tax returns. There are two typical problems this causes the self-employed. First, most self-employed maximize their expenses on their income tax returns to minimize the taxes they pay. That means they show the lowest amount of income possible. Second, the process requires that the two most recent tax years be averaged to determine your stable income. Due to the slow recovery of the economy, previous year incomes were likely low and will bring your income average down compared to what you are currently earning.

Stated income loans are making a small come back on the secondary private lending market but only for the most qualified borrowers. Those with a credit rating of 720 or higher. You’ll also likely need a 30% down payment and have to have six months of financial reserves available to cover all monthly obligations.

Showing Income From Your Tax Return

Your more likely option is showing income from your tax returns. Self employed loan applicants have to complete and submit Form 4506-T to the IRS. This form authorizes lenders to access your tax records. The lenders must receive the tax records directly from the IRS rather than a copy from you.

It’s not unusual for the self-employed to report $90,000 in income but have $80,000 in expenses (or something similar). Of course, at the bottom line, this means only $10,000 of adjusted income is being shown. You’re not at all likely to be given a mortgage if that’s what your tax return is showing.

However, all is not lost if you can show an unusual expense such as a one time purchase of equipment or something else that will help you earn more income going forward. You might also still qualify if you can show a one time loss that is unlikely to happen again.

Other Options

The bottom line is that in today’s economy, the self-employed need to decide if avoiding taxes is more important than qualifying for a larger mortgage. You also need to plan at least two years in advance so that you can qualify under the two year averaging requirement. Your best first step is speaking with a qualified loan officer who can help you understand your options based on your personal financial situation.

You may also want to contact a community lender that holds their loans in their own portfolio instead of selling them to Fannie Mae or Freddie Mac. These lenders have more flexibility in how they qualify borrowers. The last option is searching the internet for private lenders. There are more out there than you are probably aware of. Individuals that have given up making a decent return from the stock markets are using retirement accounts to make personal loans. However, these private lenders charge interest rates north of 10% to compensate for the perceived increased risk.

Purchasing, Renovating, Marketing, and Selling

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   A full time rehab investor needs to manage the four phases of every deal. Becoming a rehab millionaire means having at least 16 deals in work every month and maybe more. Four deals turning a $20,000 profit each month will bring in $960,000 each year. If you’re only turning two houses each year, you’re going to need to keep your day job. If you want to be a serious, full time, professional real estate investor, you shouldn’t be swinging a hammer or even licking envelopes, you need to be managing a team that is doing the work for you. The Million Dollar Pipeline There are four major categories to your million dollar real estate pipeline . You should have four properties in each category at any given time. During each month, you should be purchasing four houses, which immediately go into the rehab phase. On an average of once a week, you should have one property finishing rehab and going onto the market. At the same time, you should be collecting a paycheck approximately once a week as your investments are sold to both pay you and invest in the next project. The novice investor focuses all of his or her energy on one stage at a time. That’s an “onsie-twosie” investor. In other words, he or she may only do one or two deals in a given year. If that fits your goals then great! Go for it! But if you want to be a million dollar real estate investor, you’ll systematize the process to keep the pipeline full. You’ll have several projects going at the same time. Have a Plan Having four deals in each phase will be a full time job managing your own business. You’ll need a system to keep it organized. You’re going to need a plan. Decide on your target market. Decide on your target buyer. Decide your price level to flip it. Organize your tools. Get your spreadsheets together. Decide how much time you are going to dedicate to this business. Line up your funds. Raise the capital to do your deals. Start making offers! It all starts by putting the first deal together and then growing your business one deal at a time. Get started by finding some seed money and putting your effort into finding the right house to renovate. These are houses that sit on the market for months because the retail buyer wants a house that is already in “perfect” condition. Your job is taking the less than perfect house and turning it into the perfect house that retail buyers will pay you top dollar for. Of course, you will have competition. There will be others fixing and flipping houses. The houses you want, won’t actually sit on the market for months. The aggressive real estate investor has a constant eye on everything coming onto the market. Making fast, low-ball offers for less than desirable houses is one of the secrets to success. Patience is another part of being successful. Your low-ball offers probably won’t be accepted right away. But when retail buyers don’t show any interest, your offer will become more attractive to sellers that either won’t fix the house or can’t afford to. A couple of months later they come back showing interest in your low-ball offer. In summary, today is a great time to be in the fix and flip business. Just remember that it’s a means to an end. The income potential is very real. But in the end, it’s not only about the money. Once you have a system in place, the money will consistently roll in. You’ll have plenty of time to do, be, and have everything you want in life!