Archive for the ‘Financing’ Category

By Michael C. Zari

For those of you who have been here since the beginning, it seems like it was just the other day when you could do some good and get rewarded for your efforts; a win-win situation for all! I am talking about the GO Zone tax benefits put in place by the Internal Revenue Service after Hurricane Katrina destroyed the Mississippi Gulf Coast.

Many people have moved on to new headlines that occupy their days:

• Trapped miners recently rescued in Chile;
• Election Season is here again;
• The Earthquake in Indonesia;
• The BP oil spill;
• and still others.

However, with the window for the GO Zone benefits quickly coming to an end (I will reiterate below), there is one topic that should be at the forefront of your mind:

• Getting a HUGE and legitimate Tax break from the IRS!

That is right, you may have forgotten but with a the purchase of a qualified GO Zone property, you may get a huge tax benefit from the IRS this year. Specifically, you can see up to 50% bonus depreciation available the year that you purchase. This means (as will show in the below example) a tax benefit of $60,000 for purchasing just one single single-family home this year.

The catch? The offer from the IRS ends soon (see below).

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By Michael C. Zari

I have been asked recently for some clarifications on the recent changes from Fannie Mae on Reserve Requirements when purchasing Investment Properties. As you may know, Fannie Mae has repeatedly changed its guidelines on this topic. Staying on top of this information is key as a real estate investor.

Per Fannie Mae’s February 6th Announcement:

1.  When the borrower will own one to four financed properties (including the subject property) the reserve requirements are:

• Two months of reserves on the subject property if it is a second home,
• Six months of reserves on the subject property if it is an investment property, and
• Two months of reserves on each other financed second home or investment property.

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By Michael C. Zari

To help support the needed financial recovery, Fannie Mae has announced that they are changing their recent investor cap on the total number of mortgages under the same borrower.  In the later part of 2008, Fannie Mae reduced the total number of mortgages that an investor can have from 10 down to 4!  This resulted in investors scrambling for higher-rate in-house programs and even higher rate private funds for investing.

Now with the issuance of Announcement 09-02 by Fannie Mae, the cap has been temporarily lifted back up to 10 properties.  While still sorting to the details, for properties #5 to 10, it looks like 75% LTV with a minimum of 720 credit score and above. The requirements apply to any investment property or second home loan being delivered to Fannie Mae, regardless of whether Fannie Mae is the investor on the borrower’s other mortgages.

You can read more details on this by clicking on the below link: http://www.gozoneonline.com/FannieMae0902.pdf

Remember that most banks, even with this rule, may still limit the total number of mortgages that you have with their institution.  However with this said, it greatly opens the doors back up for investors in the GO Zone trying to take advantage of the benefits before the end of this year.

Given this temporary reprieve from Fannie Mae, the timing of the remaining GO Zone benefits, and based on previous Fannie Mae changes over the past 9 months, I suggest that any serious investor who has been wanting to invest in the GO Zone do so now before the cap rules change back and while you can still find high-quality and affordable opportunities.