If You Pay a Mortgage That is Higher Than Your Current Rent, You Can SAVE Money

No one enjoys paying taxes. Some people may feel it is their duty as Americans to contribute to the wasteful, bloated system that we call government. If you let them, the IRS will take your money and redistribute it to someone else through a government contract, a government job, or an entitlement program. The only way someone can create wealth is by controlling when and how they pay taxes.

Many people are not clear on the tax rules that allow home owners to save money. So here is the first explanation of how owning Real Estate saves you money and creates wealth in a tax advantaged way.
How does the mortgage interest tax deduction work?
For each dollar you pay in interest on your home, you reduce your taxable income by that amount. That is it.
An simplified example: You make $100,000 per year. You pay $50,000 in mortgage interest. Your taxable income is reduced to $50,000.
Compared to renting: If your tax rate is 25%, and you still make $100,000 per year. If you were renting, no matter how much you pay for rent, you will owe $25,000 in taxes to the government. If you instead are paying a mortgage interest payment of $50,000 you would only owe the government $12,500 in taxes.
How do you pay more on your mortgage than you do in rent and save money? Say that you pay $1,000 per month in rent and your tax rate is still 25%. Your $1,000 rent is actually costing you $1,250 after taxes. You could pay this same amount in mortgage interest tax free. So if you instead pay mortgage interest of $1,100 per month, you are saving $150 each month AND you get to own your own home.
Look forward to the next simplified tax lesson on capital gains exclusions and like kind exchanges.
Disclaimer: I am not an accountant. Tax laws change all the time. This law has been in effect for a very long time, but could change or disappear at any time. This is meant only as an informative introduction and you should always follow the advice of a qualified tax accountant.

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If You Want To Buy Foreclosures, This Is What You Need To Know

We got a great response from the write up on short sales, so naturally we need to educate you about the other side of the same coin: Foreclosures
Foreclosures are homes that have been "repossessed" by the banks for nonpayment of a mortgage. They tend to sell at less than market price for multiple reasons.
Why foreclosures sell for less:
1) The property has not been properly cared for or even vandalized by the former owners
2) The property has been sitting, without care, for months
3) Vandals and thieves have stolen valuable parts of the home, like copper wiring and plumbing, or have graffiti on the home, vagrants have or do still occupy the home, used the toilets without water services to flush, etc
4) The property may have been a failed business such as a half way house, sober living home, child care, boiler room, etc and odd alterations have been done
5) Massive amounts of unpermitted, improperly completed, and/or unfinished construction has been done
6) The banks who now own the property do not understand the local market for the home, and the employees of the bank do not have a vested interest in getting top dollar for the home
7) The Real Estate agents who sell these homes are inundated with work, are underpaid by the banks, and do not have a vested interest in getting top dollar for the home
8) The banks demand very specific terms of sale, will completely rewrite your offer, will not do ANY repairs/credits after agreeing to an offer, and have a take it or leave it attitude
With that said, why would you want to buy a foreclosure? The bank is effectively paying you for the work, permit compliance, management, and maintenance that they are not willing to do.
The way that they pay you is through a reduced purchase price, which may result you actually having equity in the home after the pricing downturn is over.
While foreclosures are a good source of investments, even better deals can possibly be found in traditionally marketed homes. Some homeowners will price their homes for sale at foreclosure prices. BUT, these homes do not have all of the drawbacks that I listed above. So, you can buy a turn-key home (one that does not need any work to live in or rent out) for a foreclosure price.
Both of these types of homes are great buying opportunities. For the investor who is shy about making repairs and renovations, buying traditionally marketed homes can be a much easier undertaking.

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