….From: Accounting Today for the Web CPA, March 9, 2011 By: Michael Cohn

The Internal Revenue Service has agreed with recommendations in a newly released government report urging the agency to increase its examinations of individual tax returns that report losses from rental real estate activity. The report, by the Treasury Inspector General for Tax Administration, was conducted because a Government Accountability Office report in August 2008 found that at least 53 percent of individual taxpayers with rental real estate activity for tax year 2001 misreported their rental real estate activity, resulting in an estimated $12.4 billion of net misreported income. The objectives of TIGTA’s review were to evaluate the IRS’s scrutiny of individual tax returns with rental real estate activity and to recommend changes to help identify, select and examine tax returns with rental real estate activity. TIGTA found that during fiscal years 2008 and 2009, the IRS’s rental real estate Compliance Initiative Program examined only a small percentage of the 318,339 examinations conducted by revenue agents and tax compliance officers. TIGTA projected that if the IRS were to increase the percentage of rental real estate CIP tax returns it examined, it could increase potential tax assessments by $27.3 million over a five-year period. “Given the magnitude of underreporting in our voluntary system of tax compliance, even small improvements in the IRS’s examination of tax returns with rental real estate activity could increase taxpayer compliance and generate substantial additional revenue to the federal government, helping reduce the tax gap,” said TIGTA Inspector General J. Russell George in a statement. IRS management agreed with all of TIGTA’s recommendations, disagreeing only with the report’s proposed monetary outcome measures. In its report, TIGTA recommended that IRS officials conduct an analysis to determine the population of tax returns with rental real estate activity that meets the criteria for inclusion in the CIPs. The IRS should also revise the instructions for Form 8582 to require all taxpayers with prior-year unallowed passive activity losses to submit the form with their tax return. The report also recommended that the IRS ensure that the information taxpayers provide to report the net amount of income earned or losses incurred from being a real estate professional is transcribed. IRS management agreed with all three recommendations. The IRS, in connection with the development of compliance strategies, plans to consider whether additional CIP examinations are appropriate. In addition, the IRS plans to revise the 2011 instructions for Form 8582 and transcribe the information taxpayers provide to report the net amount of income earned, or losses incurred, from being a real estate professional. “We will ensure the information taxpayers provide to report the net amount of income earned, or losses incurred, from being a real estate professional is transcribed,” wrote Christopher Wagner, the commissioner of the IRS’s Small Business/Self-Employed Division. “These changes will assist in selection of the most high-risk returns for audit.” However, the IRS disagreed with the proposed monetary outcome measures. “Since the dollars per hour figures were calculated based on actual examinations that were ranked and selected for examination based on their potential yield, the characteristics of these cases are not necessarily an accurate representation of the entire remaining population,” Wagner wrote. “Therefore, because the results of the cases examined do not necessarily represent results from cases not selected, projecting differences in revenues across unexamined cases does not produce accurate revenue estimations.” TIGTA said it computed the outcomes conservatively using historical data from the examination program. TIGTA officials maintained that the potential $27.3 million of increased revenue over a five-year period is reasonable considering the assumptions used to calculate the estimate.

Robert J Bonahoom

651-485-3710

NLMS#209013

As expected, Existing Home Sales fell in February, slipping 30,000 units versus January’s numbers. It’s the 4th straight month in which Existing Home Sales were lower, month-over-month.

An “existing” home is one that is previously owned and lived-in (i.e. not new construction).

Existing Home Sales peaked in November 2009, just as the First-Time Home Buyer Tax Credit was set to expire. Immediately thereafter, according to the National Association of Realtors®, monthly sales plunged 17 percent in December, then another 7 percent in January.

Comparatively, February’s dip is a modest 0.6 percent and is more in line with the pre-tax-credit Existing Home Sales trend.  The real estate market is rediscovering its normal. 

But “normal” may not last for long.

When the federal home buyer’s tax program was extended last year, the new rules stated that home buyers must be under contract for their new, respective homes on, or before, April 30, 2010 in order to claim up to $8,000 in federal money.  That deadline is approaching and many markets — Minneapolis included — are experiencing a surge in buyer traffic as April 30 nears.

The Existing Home Sales data doesn’t reflect this new demand, nor the number of new contracts written. It only accounts for home closings and, in February, closings were down.

For today’s buyers, the market looks favorable. The federal tax credit is in place, mortgage rates stubbornly stick near all-time lows, and home prices are staying in check.

Existing Home Sales should gain through March and April, pressuring home prices higher. And, by the time the press reports the gains, the best deals in the city may already be gone.  Consider acting sooner rather than later.

I hope not but I think you will need to find other kinds of opportunities to focus on. The next wave of foreclosures is coming, but it won’t be in the same areas as before. The Minnesota Home Ownership Center posted an interesting blog article about the next wave of foreclosures.

Click Here to Read Article

According to this article, the suburban communities in the Twin Cities have a large number of homes the have the dreaded “Option Arm Mortgages” that are due to reset in 2010. Statistically, these mortgages have a default rate as high as 80%.

Realtor/Blogger/Investor Scott Ficek is taking aim at where he thinks the next pot of money will be made. (He was certainly right the first time around with Minneapolis) He is doing a seminar at our office in Burnsviile next week entitled “Renting Homes for more than $1500 plus per month.” His new strategy is to focus on higher priced homes with bigger rents and bigger upside potential.

Check out Seminar Here:

There is going to be some great deals on homes between $300,000 on up. The cash flow on these larger home purchases won’t be as good as the little guys, but if this market ever turns around, the appreciation could be really attractive.

Happy Investing!

Read Full Article Below:
Star Tribune Article on Housing

This is just one more example of how Government intervention is changing the appetite for lending.

Here are some of the stipulations and highlights:

* No Mortgage lates in the last 12 months.

* No limit on the number of financed properties you currently have – This is really nice!

* Your current mortgage cannot have mortgage insurance on it or you have to contact your current servicer for the refinance.  

To get a quick estimate of your property’s current value, I like to go to www.zillow.com

This program will benefit only a small handful of the investors out there looking for low long-term rates, however, maybe your one of the lucky ones who will fit.

For an analysis of your property, please give me a call at 651-485-3710.

First Time Home Buyer Tax Credit Extension Details

If the Democrats version of the Senate bill is passed when it comes to vote in the next few weeks (as it is expected to), the first-time home buyer credit extension would have the following details:

• The credit would be available for homes that go under contract by April 30, 2010. However, you would still have 60 days afterward to close.
• It would be attached to a bill to extend unemployment benefits that is expected to be voted on in the next few weeks.
• First-time buyers (those who have not owned a home for three years) can claim an $8,000 credit, the same as before the extension.
• Income limits would be expanded: $125,000 a year for individuals (up from $75,000) and $225,000 (up from $150,000) a year for married couples who are filing a joint return.
• The proposal will include anti-fraud measures, including minimum age requirements and additional authorities for the IRS.

First Time Home Buyer Tax Credit Expanded to Existing Home Owners

Existing homeowners who buy a new principal residence after living in their current home for at least the last five years can claim up to a $6,500 tax credit.

I am excited to see the credit continue and really excited to see it expand into the non-first time home buyer arena. This will help the upper bracket market which is suffering the worst right now. We will know for sure in the weeks ahead.

For now, happy investing!

Now it’s late August 2009, six months after Fannie’s annoucement, and very few lenders have decided to take Fannie up on it’s generous offer. Call it fear or something else, at the end of the day, lenders like Wells Fargo and JP Morgan Chase who are actually making the loans to consumers decide which policies they want to adopt and thus far, lending on more than 4 financed properties is not one of them.

I work for Cornerstone Mortgage, a Houston based company that funds about $150 million in loans monthly. We have lending relationships with every major lender in the country and so far, none of them are allowing us to originate borrowers with more than 4 financed properties through our normal correspondent lending channels.

I can however broker them, currently, I have two outlets on the broker side. The downfall of brokering loans is that I have no control over the appraisal or underwriting. The loan gets shipped and underwritten by people who don’t know me or my clients and sometimes even my market. I don’t like to do this, but right now. it’s the only option I have.

Hopefully soon, the lenders will follow Fannie’s guidance and start lending on these loans again.

Make is a great day!

Rob Bonahoom

Mortgage Coach

952-808-2820.

Basically this new policy means that loan orginators like myself will no longer be allowed to choose which appraiser we will use to complete an appraisal and the appraiser will no longer be given a “target value” that needs to be hit.  This could mean that a borrower may have to spend up to $650 (for a duplex appraisal) only to find out that the value is too low for him to refinance.  In the past, “comp checks” were used by loan officers to help a borrower get a fairly accurate idea of the value of their property before spending any money on a refinance. This new law will prohibit the abilty to do comp checks.

To view a full copy of this policy click below:

NEW HVCC CODE

The mortgage industry continues to tighten guidelines in order to give investors (on Wall Street) more confidence in the quaility of the loans being written. Have they gone too far this time or do you feel this is a good integrity check for appraised values?

Rob Bonahoom

Mortgage Coach

* 1 to 4 Units

* Rate and Term refinanced only.  (No Cash out)

* Your loan must currently be backed by Fannie Mae (Contact your servicer or go to Fannie Mae’s website)

* Fixed 15 years or 30 years are available

* If your loan currently has mortgage insurance, it has to be originated though your current servicer.

* Income requirements: One Pay stub (if W-2 employee) or One Years Tax Returns (If Self Employed)

* No limit on the number of mortgages you currently have

* No mortgage lates for the last 12 months

Some tips -

You can’t be upside down on your property. (You owe more than the property is worth)

If you need help determining if you qualify for this program, please fill out an application on line at

Check Here to See if You Fit the Obama Plan

I continue to be impressed by the government and their desire to try new things to help our economy.

Happy Investing!

Rob Bonahoom

Mortgage Coach