Real Estate

Are you already working as a real estate agent or working in a real estate office? Do you want to get a better job in real estate or maybe open your own real estate office or consulting business? Getting a Real Estate bachelor’s degree can help you accomplish your professional goals in real estate. A Real Estate bachelor’s degree is a new course of study that schools are offering now mostly to real estate professionals who want to take their real estate careers to the next level. With the housing market in a slump right now a lot of real estate agents are looking for ways to take their careers in a different direction while still using all the valuable experience they have gained in real estate. A Real Estate bachelor’s degree is a good degree to have if you want to open up your real estate career options. Most Real Estate bachelor degree programs focus on teaching fundamentals of business as well as specific real estate topics like how to appraise property, marketing, real estate management, property law and more. Once you have a Real Estate bachelor’s degree you can open your own real estate office or you can open your own consulting office and work with other real estate agents to give them expert advice. You can also become a property appraiser or go into real estate management. Once you have a Real Estate bachelor’s degree you could even teach courses for other real estate agents or develop your own real estate agent training program. There are a lot of job possibilities that come with having a Real Estate bachelor’s degree.

If you are new to the real estate field then getting a Real Estate bachelor’s degree can help you get a better understanding of the real estate industry and can give you the knowledge you need to get established as a reputable real estate professional. Lots of people choose to go into real estate as a second career so if you have been in the working world for awhile but want to switch careers getting a Real Estate bachelor’s degree is a great way to see what the real estate industry is really like and to see if you want to pursue a career in real estate. Since having a Real Estate bachelor’s degree gives you a lot of choices when it comes to areas of specialization within the real estate industry it’s possible that you could find an area of the real estate industry to work in that will also use your skill set and experience from your previous career. If you have any previous business experience at all that experience will definitely help you when it comes to starting a new career in real estate although the education that you get when you pursue a Real Estate bachelor’s degree will also be crucial to starting a new career in real estate. Most Real Estate bachelor degree programs are offered online so that you can attend classes and do course work when it’s convenient for you.

Even if you have strong positive cash flow from your rental real estate, chances are you still have a loss for tax purposes due to the depreciation deduction.

This is a great tax strategy because your positive cash flow is sheltered from tax. But, it can be even better if you are able to take your losses against your other income (like your income from your job or the business that you run).

The general rule for rental real estate losses is that they are passive. This means they can only be taken against passive income. The income from your job and the business you run is active income so your rental losses cannot shelter this income. However, there are two exceptions to this rule.

** Exception #1: “Active Real Estate” exception. **

The Background on the Active Real Estate Exception

Rental real estate, in many cases, is held to provide financial security to individuals with moderate incomes. Because of this Congress believed that a rental real estate investment in which a taxpayer has significant responsibilities and which served a significant non-tax purpose should be treated differently than the activities meant to be limited under the passive loss provisions. So Congress created the active rental real estate exception.

- How It Works -

If you are active in your rental real estate activities you may be able to deduct up to $25,000 of your rental losses against other ordinary income. We say may be because there are income limitations which phase out the $25,000 deduction. The phase out will start when your adjusted gross income exceeds $100,000 and end when your adjusted gross income is at $150,000. This means that for every $2 over $100,000 of adjusted gross income you will lose $1 off the $25,000 deductible amount. For example if your adjusted gross income is $120,000 you will have to reduce the $25,000 exception by $10,000 and the most rental real estate losses you can deduct will be $15,000 for that tax year.

Don’t let your high income penalize you! Learn my tax secrets to increase your cash flow by uncovering the hidden cash flow in your real estate. Several of my secrets reveal how to legally get around these income limitations!

What constitutes active participation?

Active participation exists so long as you participate, in the making of management decisions or arranging for others to provide services (such as repairs), in a significant and bona fide sense. Also, you must have at least a 10% interest in the activity at any time during the year.

** Exception #2: “Real Estate Professional” exception. **

What is a Real Estate Professional?

First, let’s dispense with one myth: Real Estate Professional status does not mean you have to hold a real estate license. Rather, it is a designation you obtain by meeting certain specific requirements. If you qualify as a real estate professional you can deduct all your current year rental real estate losses against other income without limitations.

Requirement #1

The first requirement is that you spend more than 750 hours in real estate trades or businesses in which you materially participate.

What is a real estate trade or business? A real estate trade or business is defined as ANY real estate development, redevelopment, construction, reconstruction, acquisition, conversion, rental, operation, management, leasing, or brokerage trade or business.

The 750 hours test must be met for each activity. So for example, say you have three rental properties. The general rule is that you have to perform at least 750 hours on activities related to EACH of those three properties. Fortunately, there is an exception to this rule. If you make the election to aggregate all of your rental real estate activities into one activity, you only have to meet the 750 hours requirement once for the tax year.

What types of activities qualify as real estate professional activities? Activities such as:

- Searching for possible rental properties

- Attending real estate seminars or reading real estate books

- Meeting with real estate agents and viewing properties

- Meeting with mortgage brokers with regards to getting loans on properties

- Travel time to and from the seminars and your property searches

- Preparing your bookkeeping and tax information for your rental properties

- Time spend buying or selling properties (i.e. signing the closing documents)

- Studying and reviewing financial reports (Investor-type)

- Preparing summaries or analyses for personal use (Investor-type)

- Monitoring finances or operation in a non-managerial capacity (Investor-type)

An important note to the investor-type activities mentioned above is that these activities can only be counted towards real estate professional time if you are involved in the day-to-day operations or management of the activity for which you perform those tasks. Essentially, this means that if you have an independent property manager and your only real estate business is your rental properties, you probably will not qualify as a real estate professional.

Requirement #2

The second requirement is that you spend more time in your real estate trades or businesses than in ALL OTHER trades or businesses combined. Time spent as an employee in real estate activities is counted only if you are a more than a 5% owner in that business.

- What You Need to Do -

You have to meet the above requirements each year. So, you could be a real estate professional one year but not the next. Only one spouse needs to meet the requirements in order for a married couple to take advantage of the benefits provided by the real estate professional status.

The extent of an individual’s participation in an activity may be established by any reasonable means. Contemporaneous daily time reports, logs, or similar documents are not required if the extent of such participation may be established by other reasonable means. Documentation required includes the identification of services performed over a period of time and the approximate number of hours spent performing such services during such period, based on appointment books, calendars, or narrative statements.

If you are audited, the IRS will ask you to prove your real estate professional status. For more on how to be prepared, see my recent article titled: “Three (3) Things You Can Do To Be Prepared For An Audit”

In a nutshell, that is the basic question at the back of our collective subconscious when we talk about the real estate bubble. If you turn on the TV, listen to the radio, or even surf the internet, you’ll notice that there is a lot of people talking about the “Real Estate Bubble”, and asking the question, “when is it going to burst? With property prices seemingly on the rise and rising quickly in Tampa. There is a lot of talk about a real estate bubble in the US and dire predictions that the so-called bubble could burst, leading to a lack of confidence on the part of investors and people seeking a second home.

At the root of the Real Estate Bubble Myth is the fact that interest rates are on the rise and the inexplicable truth is that, all of a sudden, everybody is so worried and concerned about it. Contrary to the belief of many ‘bubbleologists’ and the uneducated guesses of ill-informed consumers, a rise in interest rates is actually a welcome variable for the economy and, moreover, it is specifically the tool needed to keep a bubble from bursting. In conclusion, the three reasons the real estate bubble is bursting are higher interest rates; first-time buyers being priced out of the market; and the psychology about the real estate market is changing.

You can profit in any real estate market, bubble or not, when you do your research, understand your location, buy smart, improve the property, and sell with Marketing Psychology strategies. These folks have been conditioned to believe what they believe most likely from the experience of the stock market bubble of 2000, and maybe the 1990’s when the real estate market was hit hard in many large metropolitan areas across the country. While diversity is always a good idea and placing all of your investment funds in one vehicle, such as real estate, is never a good idea; there is reason to believe that the real estate bubble in the US is not about to end any time soon.

So therefore, there is no valid reason to believe, under the circumstances, that consumer confidence applies to everything but real estate and that an economic bubble would affect only real estate markets and nothing else. Whitney says that while there is no national real estate bubble, we may see some changes in local markets ranging from a slow-down in the rate of valuation increases to some slight declines in value. Another part of the answer is in the fact that the real estate bubble is extremely localized – and it’s localized in some of the larger media centers around the country.

Among other things, it means that the dangers of a real estate ‘crash’ are as localized as the effects of the real estate bubble. It’s a fact that talk of a real estate bubble has the attention of consumers. Before you give any substance to warnings about a “real estate bubble,” look closely at the source.

After looking at the numbers, it’s clear that Phoenix AZ real estate bubble concerns are overstated. Given these facts, it’s no wonder so many people are jumping on the real estate investment bandwagon. In San Diego in particular and most other major metropolitan real estate markets, it’s quite acceptable to acknowledge and embrace the double-digit real estate appreciation of the past.

In conclusion, the three reasons the real estate bubble is bursting are higher interest rates; first-time buyers being priced out of the market; and the psychology about the real estate market is changing. You can profit in any real estate market, bubble or not, when you do your research, understand your location, buy smart, improve the property, and sell with Marketing Psychology strategies. These folks have been conditioned to believe what they believe most likely from the experience of the stock market bubble of 2000, and maybe the 1990’s when the real estate market was hit hard in many large metropolitan areas across the country.

There has been some speculation that the wild investment in the real estate market and they hype of outrageous investment returns has no where to go but crashing back down to Earth. Two of the strongest industry trade associations, banking and real estate, have been waging a battle over the right of banks to offer real estate brokerage to consumers in addition to other financial instruments such as mortgages, securities and insurance which they currently market to customers. The headlines threaten a correction in real estate prices, projectionist real estate trade associations, traditional versus Internet brokerage business models and a consumers right to a competitive marketplace for real estate services.

Before you give any substance to warnings about a “real estate bubble,” look closely at the source. Try to obtain at least 2 points of view before coming to a conclusion. Don’t let fears of a real estate bubble stop you from reaching your financial goals.