Jersey City Real Estate

Who is better off at the end of the year? Buyer or renter?

2008-07-08T10:50:00.001-04:00

Renter, paying $3000/mo.

Purchaser of a $500,000 condo with $8000/yr. in taxes and $500/mo. Maintenance. (assuming a $450,000 mortgage w/ a 30-year fixed rate mortgage @6.5%, which comes out to a monthly payment of $4,011)

Okay, this was probably a no-brainer. I'm a real estate agent…

The purchaser spends less. But how much less?

Less than $1000
$1000-2000
$2000-3000
Over $3000?

The answer is over $3000. ($3,328.09) The difference is due to your Federal income tax payment. If you earn over $78,850 (single) you are in AT LEAST the 28% tax bracket. (A dollar earned puts 72 cents in your wallet.) The purchaser can take a tax deduction of $37,250. The monthly income tax reduction is $869 and the principal on the mortgage is paid down by $419, so the purchaser pays $277 LESS each month than the renter does.

Put another way, over the course of a year, the renter pays more than 13 months rent (Taxtember? Your Uncle Sam thanks you for the additional $869/mo.)

If this makes sense to you, let me know. You can buy a VERY nice condo in Jersey City for $500,000.

Real Estate Strategies for the New Year

2007-01-19T13:32:00.000-05:00

The Holidays are over. As you prepare your tax returns for 2006, don't forget that, even if it's too late to affect what you owe for last year, one of the best ways to lower your 2007 taxes is to buy a personal residence. The sooner you buy, the larger the deduction is going to be -- it's going to be prorated seeing you won't own for the whole year.

In the market for a vacation home or investment property with positive cash flow? I just returned from a meeting of real estate professionals and have some great recommendations for you. I'll be including this information on my website shortly. For now, contact me by email mailto:joan@joanprout.com .

http://www.JoanProut.com
joanprout@remax.net
Blogs: http://jerseycityre.blogspot.com
http://centraljerseyrealestate.blogspot.com

Could you use a substantial tax deduction from your 2006 income?

2006-11-03T07:10:00.000-05:00

Buy a home.

There's still time to buy a home before the end of the year. There are more properties to choose from than any time in recent years, and many are selling for close to 2004 prices. Mortgage rates are still low; the economic news is good: Wall Street is hiring; the Dow is at record levels; gas prices are down.

Recent studies are predicting that housing prices will probably begin to rise again early next year. This would be consistent with historical trends in home values which, like stock values, increase over time, with temporary dips being normal and major crashes being unusual.

To take advantage of deducting your closing costs from your 2006 income, you'll have to hurry. From contract signing to closing generally takes from 60-90 days, and the process moves slower during the 4th quarter of the year (so many holidays). I can, however, recommend lenders, inspectors and attorneys who can shepherd deals through to closing quickly.

If you can close before in December, your first mortgage payment probably won't be due until February.

If your family wants to give you a perfect holiday gift, they can help with your purchase.

Destressing closing -- when you're a buyer

2006-06-08T17:13:00.000-04:00

Avoiding the closing day rush to get certified funds. If the terms of your purchase involve bringing the balance of funds for downpayment and closing costs to the closing, you'll have to provide that money in the form of certified funds. Generally you won't know to the penny how much that will be until 24 hours before the closing. This really becomes stressful because gee, you're packing, doing a walk through on the property you're buying and possibly even closing on the sale of the place you're living in. The last thing you need is to also have to make a trip to the bank.

What I do when I buy a house in New Jersey, and what I also suggest to buyer clients, is, a week or so before closing, I write a personal check for more money than will be necessary to the trust account of my attorney. The closing will be taking place at her office and she will be disbursing the funds from her escrow account for everything that isn't already in the seller's attorney's trust account. I make sure that there's a couple of hundred dollars more than I will need, and she just cuts me a check for the difference at the closing. It not only removes one big headache from my closing day To-do list, but it means I also get to go home from the closing with a check in my hand, like everyone else. And, so long as there is plenty of time for the personal check to clear, there is no additional bank fee for a certified check or bank wire.

Real life experience: A couple of years ago, I had buyer clients whose closing had to be postponed from Friday until Monday because they didn't get their "final number" in time to get to the bank for certified funds that day. They had had painters scheduled to come in over the weekend, before the furniture was to be delivered. Ironically, they had had these funds in their account for months. They could easily have deposited a bit more than they would need to their attorney's account weeks in advance.

Real Estate is local

2006-06-07T10:56:00.000-04:00

The longer I'm in the business and the more I interact with colleagues around the country, the more I find that the way real estate is bought and sold is truly a local phenomenon. Of course, each state has its own licensing rules, but even the way real estate agency is practiced and how contracts are presented and the protocol for getting property transferred from the seller to the buyer can be very different in New Jersey than in New Mexico or even in New York or Connecticut.

I'll be posting only about how things are handled in residential real estate sales in New Jersey, although I might bring in information from other states to contrast. You can also narrow down my posts to relate to Northern and Central NJ, where most buyers and sellers are represented by attorneys. (In South Jersey it works differently.)

I'm not an attorney and I'm not going to give legal advise; I'm just going to comment about things I've observed while selling a few hundred houses over the last 20 years. These are things that have surprised both me and my clients over the years.

Contract closing dates are like stop signs... In NJ, they sometimes seem to be mere suggestions. (If you've driven here, you'll know what I mean.) Regardless of what date it says in the contract that both buyers and sellers have signed, obviously some very important items have to be completed first. The biggest item is making sure the money is there in time, but there are other certificate of occupancy and title items that sometimes hold things up. There IS usually verbiage in the contract that if it doesn't close "on or before" the date on the contract, any date acceptable to everyone is okay too. Unfortunately for the sellers and the buyers who are trying to plan for movers and perhaps trying to coordinate another closing on another property, it's more of the exception than the rule that the date gets moved around.

Don't forget to compare the property taxes

2006-06-02T11:55:00.000-04:00

This is especially important when comparing condominiums for sale in Jersey City. Unlike in some other areas of the country, NJ property taxes are high (the highest in the country, I'm afraid). It gives the politicians something to rant about every election.

At about $46 per $1000 of assessed valuation, a unit that's assessed at $100,000 will cost you $383/mo. in addition to what you pay in principal and interest on your mortgage and the monthly maintenance charge.

Earlier conversions (especially pre-1990) can be a bargain. The increase in property values since 1996 has been dramatic. Condo buildings built or converted more recently are assessed (valued for tax purposes) as of the time they are first certified for occupancy as condos.

Developers of downtown Jersey City properties almost always apply for a tax abatement from the city. This allows buyers to at least temporarily reduce their property taxes. A recent property I sold was assessed at $159,000 (newly converted condo that sold for almost $400,000). A tax abatement reduces that assessment by $25,000 for the next 5 years to just under $135,000. Current (abated) taxes are just over $500/mo. After the 5 years are up, that would go up by another $100.

A similar sized unit sold recently for $375,000. It was a 1980s conversion and could use some updating. ($20,000 in updates would make the unit at least as nice.) The assessment is just over $60,000 so the monthly taxes are just over $200/mo. (that's $300 less per month…every month…) True, property taxes are deductible, but while that lessens the pain, it doesn't eliminate it.

Say you were buying one of these units with a $330,000 mortgage (6% for 30years). Your monthly payment on the 1st unit would be $2733 ($1980 + $240 maint. + $513 tx). The second unit would cost you $2424 ($1980 + $206 maint. + $238 tx). Looking at it another way, $300 per month could pay for a condo priced $50,000 higher.

So, if you're considering purchasing a condo in Jersey City, be sure to
Check the property taxes
Check to see if the unit is under an abatement
If it is, find out for how much longer (the abatements vary greatly by complex.)