The 90% bonus tax is RIDICULOUS. High bonus is the market rate for bankers. Bankers have a choice of London, Hong Kong etc. With this tax, New York (hence the US) will lose talent to other countries and the US would no longer be the financial capital of the world.
Hong Kong's tax rate is 15%. New York's tax is 40%+. Add that crazy 90% bonus tax, who wants to work here?! On bailouts, the government should let banks fail and start over. Bailouts will result in major inflation and weakening of the US dollar. The 90% bonus tax was annouced AFTER the bailouts were received. it shudl have been announced as a criteria BEFORE the bailouts were handed out. Recall that some companies did not want the bailouts.
Finally, who owns the Federal Reserve? It's owned by the consortium of banks that make up the board of directors. These are the same banks getting the bailouts. Hence, the bailouts were given by the Fed to it's own owners. Of course the banks would take the bailouts in the first place. But the employees get penalized after the fact.
Friday, April 3, 2009
Wednesday, March 25, 2009
2009 First Time Home Buyer Tax Credit
The 2009 First Time Home Buyer Tax Credit is part of the American Recovery and Reinvestment Act signed by President Obama into law on February 17, 2009 to revive the housing market. By providing a $8000 tax credit to first time home buyers, this credit aims to increase the number of buyers and consequently stimulate the slumped housing market in the US.
This 2009 Tax Credit differs form the 2008 Tax Credit in two major ways.
(i) The 2009 Tax Credit allows for a credit of up to $8000 while the 2008 credit allows for only up to $7500
(ii) The 2008 credit has to be repaid over 15 years, effectively making it a loan. The 2009 credit does not have to be repaid
Essentially, there was a tax credit introduced in 2008 but the 2009 version of the tax credit is even better. The key points for the 2009 Tax Credit are below:
Credit Amount:
The 2009 Tax Credit allows for a credit of 10 percent of the home value to a maximum of $8000. For example, if the property value is $75,000, the credit is only $7500. But if the property is $200,000, then the credit is the $8000 maximum.
First Time Home Buyer:
The credit is for First Time Home Buyers, which is defined as someone who has not owned a primary residence the past 3 years. The home has to be purchased between January 1, 2009 and November 30, 2009, inclusive. The home buyer has to live in the home for 3 years or the credit will have to be repaid.
How to Claim the Credit
The credit is claimed along with filing your tax return. This is a refundable credit which means that if your total tax liability is less than $8000, the IRS will send you a refund for the difference. For example, if you purchase a home that qualifies you for the total $8000 but your tax liability is only $7000, then the IRS will refund you $1000.
Who is Not Eligible
The following categories of buyers are not eligible:
(i) Your Modified Adjusted Gross Income exceeds $170,000 for joint filers and $95,000 for single filer. The credit phase out starts at $150,000 for couples and $75,000 for single filers.
(ii) You buy your home from a close relative
(iii) You stop using your home as your main home
(iv) You sell the home before the end of three years
(v) You are a non-resident alien
For those who bought their home in 2008, the old $7500 tax credit applies which means it has to be repaid.
Since the average price of a home in the US is about $200,000, this means that the US government is contributing $8000 or 4 percent of the purchase for the home buyer. In the New York City metro area where the average price is around $500,000, it means buyers get a 2 percent contribution from the government.
This 2009 Tax Credit differs form the 2008 Tax Credit in two major ways.
(i) The 2009 Tax Credit allows for a credit of up to $8000 while the 2008 credit allows for only up to $7500
(ii) The 2008 credit has to be repaid over 15 years, effectively making it a loan. The 2009 credit does not have to be repaid
Essentially, there was a tax credit introduced in 2008 but the 2009 version of the tax credit is even better. The key points for the 2009 Tax Credit are below:
Credit Amount:
The 2009 Tax Credit allows for a credit of 10 percent of the home value to a maximum of $8000. For example, if the property value is $75,000, the credit is only $7500. But if the property is $200,000, then the credit is the $8000 maximum.
First Time Home Buyer:
The credit is for First Time Home Buyers, which is defined as someone who has not owned a primary residence the past 3 years. The home has to be purchased between January 1, 2009 and November 30, 2009, inclusive. The home buyer has to live in the home for 3 years or the credit will have to be repaid.
How to Claim the Credit
The credit is claimed along with filing your tax return. This is a refundable credit which means that if your total tax liability is less than $8000, the IRS will send you a refund for the difference. For example, if you purchase a home that qualifies you for the total $8000 but your tax liability is only $7000, then the IRS will refund you $1000.
Who is Not Eligible
The following categories of buyers are not eligible:
(i) Your Modified Adjusted Gross Income exceeds $170,000 for joint filers and $95,000 for single filer. The credit phase out starts at $150,000 for couples and $75,000 for single filers.
(ii) You buy your home from a close relative
(iii) You stop using your home as your main home
(iv) You sell the home before the end of three years
(v) You are a non-resident alien
For those who bought their home in 2008, the old $7500 tax credit applies which means it has to be repaid.
Since the average price of a home in the US is about $200,000, this means that the US government is contributing $8000 or 4 percent of the purchase for the home buyer. In the New York City metro area where the average price is around $500,000, it means buyers get a 2 percent contribution from the government.
Friday, March 20, 2009
Dubai Real Estate Burst
CNN video talks about Dubai real estate bursting, declined 25% recently. People losing jobs, more For Rent signs...
http://www.youtube.com/watch?v=SI8fuI2pYZ4&feature=related
http://www.youtube.com/watch?v=SI8fuI2pYZ4&feature=related
Thursday, February 19, 2009
Am I a real estate agent?
When I started buying property, I'd make appointments with real estate agents who will be take us on tours to view properties. They'd spend a lot of time and effort to answer questions and hope to get a sale. When viewing with these agents, I'd think to myself that I would never want to be a real estate agent. Simply because majority of the people they bring around are not serious buyers and that means 90 percent of their time is wasted. In simple statistics, they have to show as many as possible because the conversion rate is only 10%. This is why you see real estate agents running around all the time.
But a few years later, I found myself taking the real estate broker test! The reason is so I can represent myself on my own deals and make the buyer commission that would otherwise go to the buyer broker. If I knew a market better than the broker, my reasoning goes, then I may as well represent myself. Consequently, I spent 1 week to study for and to take the Salesperson exam. And another 2 weeks studying for and taking the Broker's exam. That was in November 2007. I became a Broker after 3 weeks of exams and test taking.
The difference between a Salesperson and Broker is that a newbie needs to take the Salesperson exam and work under the supervision of a Broker. After the Salesperson has completed about 10 transactions, he could take the Broker exam and become a Broker. Being a Broker means he can work for himself or start his own firm. Hence, the Broker license is the higher level license.
In my case, I could take the Broker's license without first becoming a Salesperson and selling X number of properties because New York State allows experienced developers and investors to go directly for the Broker's license. Less than 5 percent of Brokers get their license this way.
This is why I never see myself as a real estate agent. I don't like showing properties to strangers and have never done it. I don't like wasting time with people who are not serious. I don't like talking about granite countertop kitchens or marble bathrooms. I hate being viewed as a salesperson because I'm not one.
However, what I enjoy is buying property as investment. I enjoy bringing friends to view property and giving them an honest opinion about whether I think their long term net worth will increase as a result of buying a property. I enjoy looking at price per square foot. At potential rent increases. At whether real estate prices increase with inflation and to what extend. I enjoyed speaking to investors about investing in real estate compared to gold, both tangible assets with different attributes. I enjoy looking at cashflow projections of real estate and comparing the yield to Johnson&Johnson's dividend yield. And of course, I enjoy the high end show rooms of luxury Manhattan condos. I enjoy working with my international connections, going to country clubs and having a good time.
Based on the above, then why not become a commercial broker? Well, it's because I am not a salesperson. And commercial brokers, all very financially savvy, are even more sales-like than residential brokers. They just push numbers while their residential counterparts push granite countertops. Most commercial brokers make 50-100 cold calls a day to solicit business. This is something I can never do.
Hence, using the extra free time available now that the market has slowed down, I've narrowed the focus of my real estate advisory business. Note that I called it an advisory business instead of a brokerage business.
1. Help clients grow wealth through real estate
2. Only accept referrals
3. Leverage my financial analysis strength
4. Focus on my international clientele
These will be guiding principles as I re-brand and reposition my firm for the next phase of growth. My good friend told me yesterday that the key is to speak as if you've already achieved your dreams. In the present tense. By doing this, one's brain becomes wired to make the dream a reality. Hence, I now have a firm that is focused on real estate advisory and that caters to an international clientele.
Best,
Wei min
But a few years later, I found myself taking the real estate broker test! The reason is so I can represent myself on my own deals and make the buyer commission that would otherwise go to the buyer broker. If I knew a market better than the broker, my reasoning goes, then I may as well represent myself. Consequently, I spent 1 week to study for and to take the Salesperson exam. And another 2 weeks studying for and taking the Broker's exam. That was in November 2007. I became a Broker after 3 weeks of exams and test taking.
The difference between a Salesperson and Broker is that a newbie needs to take the Salesperson exam and work under the supervision of a Broker. After the Salesperson has completed about 10 transactions, he could take the Broker exam and become a Broker. Being a Broker means he can work for himself or start his own firm. Hence, the Broker license is the higher level license.
In my case, I could take the Broker's license without first becoming a Salesperson and selling X number of properties because New York State allows experienced developers and investors to go directly for the Broker's license. Less than 5 percent of Brokers get their license this way.
This is why I never see myself as a real estate agent. I don't like showing properties to strangers and have never done it. I don't like wasting time with people who are not serious. I don't like talking about granite countertop kitchens or marble bathrooms. I hate being viewed as a salesperson because I'm not one.
However, what I enjoy is buying property as investment. I enjoy bringing friends to view property and giving them an honest opinion about whether I think their long term net worth will increase as a result of buying a property. I enjoy looking at price per square foot. At potential rent increases. At whether real estate prices increase with inflation and to what extend. I enjoyed speaking to investors about investing in real estate compared to gold, both tangible assets with different attributes. I enjoy looking at cashflow projections of real estate and comparing the yield to Johnson&Johnson's dividend yield. And of course, I enjoy the high end show rooms of luxury Manhattan condos. I enjoy working with my international connections, going to country clubs and having a good time.
Based on the above, then why not become a commercial broker? Well, it's because I am not a salesperson. And commercial brokers, all very financially savvy, are even more sales-like than residential brokers. They just push numbers while their residential counterparts push granite countertops. Most commercial brokers make 50-100 cold calls a day to solicit business. This is something I can never do.
Hence, using the extra free time available now that the market has slowed down, I've narrowed the focus of my real estate advisory business. Note that I called it an advisory business instead of a brokerage business.
1. Help clients grow wealth through real estate
2. Only accept referrals
3. Leverage my financial analysis strength
4. Focus on my international clientele
These will be guiding principles as I re-brand and reposition my firm for the next phase of growth. My good friend told me yesterday that the key is to speak as if you've already achieved your dreams. In the present tense. By doing this, one's brain becomes wired to make the dream a reality. Hence, I now have a firm that is focused on real estate advisory and that caters to an international clientele.
Best,
Wei min
Sunday, January 18, 2009
Let Inflation Work For You
An investment strategy for these times is to buy real estate with borrowed money, let inflation raise rents and property value over the years and pay off your fixed mortgage with weakened dollars. Assuming you put 30% down and property values increased 60% over five years because you’re getting a good deal now and there’s inflation, you could double your money just from the appreciation alone, rental income increases not considered. The recent 2009 Forbes Investment Guide talked about this strategy in its editorial letter.
Inflation
A key assumption is that the US will face inflation in the coming years because the government is now printing money excessively to fight the recession. Where do you think the bailout money is coming from? It’s coming from the printing press and the government is creating money out of thin air! When the supply of dollars increases, its value decreases. Maybe not now because of the recession but it will happen after the recession, when a dollar is not worth what it was 2 years ago. Simply because at that time, there will be a lot more dollars out there, as result of the printing machines running round the clock these days.
The Bretton Woods international monetary system in 1944 fixed the value of the dollar to gold. Effectively, this maintains an intrinsic value for the dollar because its value is based on the value of a real asset. However, this peg to gold was removed in the 1970s. Without pegging the dollar to a real asset, the dollar’s value is now just based on the government’s promise to pay. Our government is creating money out of nothing, money that is backed by a government’s seal and strong words of promise to pay. We now know that merely promises and reputation, whether those of the US government or those of the formerly powerful financials companies, is not enough to maintain value. Value has to be based on a real, productive, in demand asset.
Economics tells us that when there is too much supply, value decreases. This is expected for the US dollar. The US government is now printing billions and perhaps trillions to bail out companies and stimulate the economy. These days, numbers like $700 billion is thrown around like it’s a small amount. In the near future, numbers thrown around will be in the trillions. The resulting inflation means prices will increase. Prices of eggs will increase because of inflation. Prices of milk will increase because of inflation. Rents will increase because of inflation. Prices of real estate will increase because of inflation.
Why buy real estate instead of stocks, bonds or simply keep your money under the mattress? I’m proposing real estate because it’s a real asset and prices of real assets keep pace with inflation. Buying a stock is just buying a promise that you own a piece of a company. We’ve seen 5 years of stock market wealth vaporize in 1 year. High dividend paying stocks, ones that because of low stock prices, are yielding 7-9 percent divided, still do not escape inflation. If inflation is at 5 percent, a 7 percent dividend is only 2 percent in real terms. The same applies to bonds.
But with real assets, whether real estate or gold, prices rise with inflation.
Fixed Mortgage Payments Will Stay the Same
If you purchased a property with a fixed mortgage, the monthly mortgage payment will stay the same. While you benefit from increased rents and higher property values because of inflation, the lender that lent you fixed rate money gets paid back the same amount for the next 30 years. In real terms, your income increases because of inflation while your debt payment decreases because a $1000 mortgage in 5 years is worth a lot less than $1000 now.
How to Proceed?
Another key assumption is that you have to buy at the right price, not at the bubble price. You need to buy in areas where property prices have declined significantly and where the values are justified. A rule of thumb is that prices are reasonable if, with 30 percent downpayment, your rental income can cover your carrying costs. Otherwise, prices are still too expensive. Using this formula, prices in New York City are still too expensive. You may find better deals in places with a ton of For Sale signs and where prices have decreased 30 to 40 percent from its peak. Do your homework.
The savvy investor buys now to take advantage of the large supply of For Sales out there. At the right price, your rental income will at least be able to cover your carrying costs if not generate a positive cashflow.
This is an opportunity of a lifetime and if you believe the US will see inflation in the near term, this is a strategy worth considering. Most people know real estate is about location. Few know it’s also about inflation and currency valuations because real estate is a real asset, not just a piece of paper with a fancy seal and promise.
Weimin Tan is a real estate entrepreneur with businesses focused on investments, property management and brokerage. He can be reached at tan@twgroupny.com
Inflation
A key assumption is that the US will face inflation in the coming years because the government is now printing money excessively to fight the recession. Where do you think the bailout money is coming from? It’s coming from the printing press and the government is creating money out of thin air! When the supply of dollars increases, its value decreases. Maybe not now because of the recession but it will happen after the recession, when a dollar is not worth what it was 2 years ago. Simply because at that time, there will be a lot more dollars out there, as result of the printing machines running round the clock these days.
The Bretton Woods international monetary system in 1944 fixed the value of the dollar to gold. Effectively, this maintains an intrinsic value for the dollar because its value is based on the value of a real asset. However, this peg to gold was removed in the 1970s. Without pegging the dollar to a real asset, the dollar’s value is now just based on the government’s promise to pay. Our government is creating money out of nothing, money that is backed by a government’s seal and strong words of promise to pay. We now know that merely promises and reputation, whether those of the US government or those of the formerly powerful financials companies, is not enough to maintain value. Value has to be based on a real, productive, in demand asset.
Economics tells us that when there is too much supply, value decreases. This is expected for the US dollar. The US government is now printing billions and perhaps trillions to bail out companies and stimulate the economy. These days, numbers like $700 billion is thrown around like it’s a small amount. In the near future, numbers thrown around will be in the trillions. The resulting inflation means prices will increase. Prices of eggs will increase because of inflation. Prices of milk will increase because of inflation. Rents will increase because of inflation. Prices of real estate will increase because of inflation.
Why buy real estate instead of stocks, bonds or simply keep your money under the mattress? I’m proposing real estate because it’s a real asset and prices of real assets keep pace with inflation. Buying a stock is just buying a promise that you own a piece of a company. We’ve seen 5 years of stock market wealth vaporize in 1 year. High dividend paying stocks, ones that because of low stock prices, are yielding 7-9 percent divided, still do not escape inflation. If inflation is at 5 percent, a 7 percent dividend is only 2 percent in real terms. The same applies to bonds.
But with real assets, whether real estate or gold, prices rise with inflation.
Fixed Mortgage Payments Will Stay the Same
If you purchased a property with a fixed mortgage, the monthly mortgage payment will stay the same. While you benefit from increased rents and higher property values because of inflation, the lender that lent you fixed rate money gets paid back the same amount for the next 30 years. In real terms, your income increases because of inflation while your debt payment decreases because a $1000 mortgage in 5 years is worth a lot less than $1000 now.
How to Proceed?
Another key assumption is that you have to buy at the right price, not at the bubble price. You need to buy in areas where property prices have declined significantly and where the values are justified. A rule of thumb is that prices are reasonable if, with 30 percent downpayment, your rental income can cover your carrying costs. Otherwise, prices are still too expensive. Using this formula, prices in New York City are still too expensive. You may find better deals in places with a ton of For Sale signs and where prices have decreased 30 to 40 percent from its peak. Do your homework.
The savvy investor buys now to take advantage of the large supply of For Sales out there. At the right price, your rental income will at least be able to cover your carrying costs if not generate a positive cashflow.
This is an opportunity of a lifetime and if you believe the US will see inflation in the near term, this is a strategy worth considering. Most people know real estate is about location. Few know it’s also about inflation and currency valuations because real estate is a real asset, not just a piece of paper with a fancy seal and promise.
Weimin Tan is a real estate entrepreneur with businesses focused on investments, property management and brokerage. He can be reached at tan@twgroupny.com
Saturday, January 3, 2009
Weimin Tan article on buying foreclosures, in Epoch Times Chinese
Published article in Chinese
http://epochtimes.com/gb/9/1/2/n2383220.htm
http://epochtimes.com/gb/9/1/2/n2383220.htm
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