Did you know that conforming loan limits are higher on multi-residential properties?

The Office of Federal Housing Enterprise Oversight (OFHEO) set the criteria on what constitutes a conforming loan limit. Lenders offer the lowest interest rates on conforming loans because they can be later sold to Fannie Mae or Freddie Mac. At the time of this writing the FHA loan limit in California is $625,000 for single family and condominium home. Loans above this amount are referred to as jumbo loans and have a higher interest rate. However, small multi-residential properties have higher limits. The FHA loan limit, at the time of this writing, for duplexes is $800,775, for triplexes is $967,950 and for four-plexes is $1,202,925.

If you are thinking about purchasing a multi-residential income property and would like to discuss loan options, I will be happy to refer you to a knowledgeable and trustworthy mortgage consultant. 

What is a 1031 Exchange?

One of the benefits about investing in residential income property over the stock market is section 1031 of the Internal Revenue Code, otherwise known as a 1031 tax deferred exchange.  When you sell a stock investment in order to purchase a different stock investment, for example you sell your old Apple stock in order to purchase some new Facebook stock, you will pay the appropriate capital gains tax on any profit you made from Apple and the remaining proceeds can go towards your Facebook investment.

When investing in real estate, if done according to the 1031 tax code, you may sell one real estate investment in order to purchase a different real estate investment without paying income tax on the profit you made from the sale. The taxes from the sale can be deferred sale after sale, until you do a non 1031 exchange sale, or when the property goes into your estate. You have numerous exchange options. You can sell one property to buy another, sell one to buy several or sell several to buy one. You can mix residential, commercial and land properties. So if you wanted to expand your rental income you could sell your condo to buy a duplex, or sell two duplexes you own to buy an small apartment building.

However, to qualify for  the 1031 tax deferred exchange you must strictly follow the rules which include  very specific buying and selling time periods and how funds must be transferred. You should always consult with your tax consultant regarding the specifics of the tax code and, use a knowledgeable real estate agent to help you navigate through the exchange transaction. More information can be found on my web site at http://tommartinswebsite.com/1031Exchange.

Housing Crisis to End in 2012 as Banks Loosen Credit Standards

DSnews.com  - Housing Crisis to End in 2012 as Banks Loosen Credit Standards

Do you own a residential income property with 5 or more units?

The Renter’s Right to Recycle Act (AB 818) was authored by Assemblyman Bob Blumenfield and signed into law by Governor Jerry Brown in September 2011. 

The law mandates that owners of multifamily dwellings, defined as a residential property that consist of 5 or more living units, provide adequate areas for collecting and loading recyclable materials and arrange for recycling services for their tenants.

Although the law is mandatory, it does have a provision for properties to receive a waiver, if the property meets certain qualifications that make it impossible to recycle within the property.  According to Assemblyman Blumenfield, if no recycling plan can be agreed upon for a certain apartment building, it can be exempted from the law --- if the building's inability to institute recycling is certified by the recycling companies.

The Renter’s Right to Recycle Act takes effect in 2012.

How much security deposit can I collect on my residential income property?

Under California law the security deposit cannot exceed the amount equal to two months’ rent for an unfurnished unit and three months’ rent for a furnished unit.  If the tenant has a water bed, the security deposit can be increased in the amount equivalent to a half months’ rent.

The security deposit may be called last month's rent, security deposit, pet deposit, key fee, or cleaning fee. The security deposit may be a combination, for example, of the last month's rent plus a specific amount for security. No matter what these payments or fees are called, the law considers them all, as well as any other deposit or charge, to be part of the security deposit.

The only exception that the law allows is an application screening fee. The landlord may require a tenant to pay an application screening fee to cover the cost of obtaining information about the tenant, such as checking references and obtaining a credit report.

A California lease or rental agreement cannot say that a security deposit is nonrefundable. This means that when the tenancy ends, the landlord must return to the tenant any payment that is a security deposit, unless the landlord properly uses the deposit for a lawful purpose. Unpaid rent, damage to the rental unit beyond normal wear and tear, or cleaning a unit that was not left as clean as when the tenant moved in, are the most common lawful purposes for retaining a portion or all of a tenant’s security deposit.

Mountain View, CA – a good location for your residential income property

While most communities throughout Silicon Valley have a solid track record for the residential income property investor, I believe Mountain View is now positioned to grow in property appreciation, as wells as rental rates, above average for the area.  The city of Mountain View and the school districts of Mountain View have made tremendous strides over the past 10 years or so, which have created a highly desirable community in which to live.

• Downtown Mountain View is vibrant with many restaurants, shops and night life. Check it out: Mountain View Downtown Guide.
• You can hop on the light rail to see a Sharks game in San Jose or take Caltrain to watch a Giants game in San Francisco.
• Home of many large employers including Google, Microsoft, Intuit, LinkedIn and Symantec that invest in the community and with employees desiring to live near work.  Read this: Google gives to local schools in 2011.
•  Most significant to the community is the continued growth in the school test scores. The Academic Performance Index (API) score for most schools is now in the 800 range with several exceeding into the 900 range. If you drill down in these reports you will find that many of the schools have subgroups of students in the 900 range, a good indicator that the education being delivered is on par with the surrounding communities like Los Altos and Palo Alto.  Take a look:  API scores for Mountain View-Whisman Elementary School District.

The property values and rents in a community are determined by the demand to live in that community. In Mountain View the schools, employers, transportation facilities and local businesses have melded together to create a community that will be in high demand, a good location for your residential income property. Contact me to explore properties for sale in Mountain View.