Quiz Answers

• What is the current unemployment rate in your local market and what impact does it have on home values?

  The current unemployment rate in your market can be found at http://www.bls.gov/lau/home.htm. This is the single largest factor in determining home values and their fluctuations. Housing prices also tend to be volatile in markets with high levels of speculative activity such as Vegas and Florida.

• What are mortgage rates based on? (Answer is not the Fed or the 10 yr Treasury Note)

  Mortgage-Backed Securities

• Where are mortgage rates headed in the days and months to come and what are the trends and economic reports that will drive them up or down?

  The movement of mortgage rates can be determined by carefully analyzing key economic indicators that affect Mortgage Backed Securities and the broader bond market:

  • Jobs and employment reports
  • Inflation reports
  • The Consumer Price Index (CPI)
  • Personal Consumption Expenditures (PCE)
  • Gross Domestic Product

• How do you help clients evaluate various real estate settlement options during a divorce?
  • Evaluate the options related to disbursement of their real estate assets prior to the divorce settlement.
  • Evaluate the cash flow and home equity protection implications of various financial decisions before, during and after a divorce.
  • Enhance their liquidity and protect their real estate equity from legal liability prior to going through a divorce by working together with your CPA, CFP, attorney and other advisors.

• How can your clients save money on income, estate and capital gains taxes when buying and selling real estate?
  • Improve after-tax cash flow through mortgage planning strategies.
  • Save money by understanding the impact of the "gift tax" when gifting or receiving real estate property and/or down payment funds
  • Save money by understanding the benefits and limitations of mortgage interest deductions when you buy or refinance a property
  • Save money by taking advantage of the proper tax deductions during the home buying or refinancing process
  • Reduce or otherwise avoid paying capital gains taxes when selling a property
  • Reduce taxable estate or avoid paying estate taxes on an inheritance involving real estate
  • Find tax-advantaged investment strategies
  • Utilize the lowest after-tax debt planning strategies when borrowing funds
  • Calculate and compare the after-tax rate of return on an investment property

• What are the specific financial strategies for caring for elderly parents / senior citizen mortgage strategies?
  • Reverse Mortgages
  • Home Equity Lines of Credit
  • Interest-Only Mortgages / Cash Flow ARMs
  • Home Equity Management Techniques in Conjunction with Investment Management
  • Strategies that involve: Annuities, Tax Free Bonds, Investment Grade Life Insurance, Other Safe, Guaranteed & Diversified Investments.

• What are the specific financial strategies for clients who are changing jobs or careers?
  • Establish a reserve emergency account by refinancing or debt restructuring plan that takes place over a period of time
  • 72t distribution from retirement accounts instead of borrowing or withdrawing funds prior to age 59½

• How do you help clients determine how they can most effectively finance a vacation home?
  • By providing information on acquisition indebtedness and what a qualified residence is.
  • If the client is not utilizing it for personal use, evaluate the cash flow implications. Additionally, by working as a team with your CPA, help determine the tax consequences.
  • Restructure other debt to free up more monthly cash flow that enables the client to improve their vacation home buying budget.
  • Help the client understand the before and after-tax monthly payments.
  • Determine how much cash to use as your down payment and where to get these funds.

• What are the top 5 tax benefits of investing in real estate and the mortgage planning techniques that make these strategies even more profitable for real estate investors?
  1. Reducing Capital Gains
  2. Reducing Income Taxes
  3. Deferring Taxes
  4. Tax Deductions for losses
  5. Tax Credits

• Are you aware of the top 3 mortgage planning strategies that work well with 1031 Exchanges?
  1. Do not receive cash at the closing by putting a larger mortgage on the new replacement property than you had on the old one.
  2. Cash-out refinance to pull equity out of the property either before or after the exchange as this is not considered a taxable event as long as it is not a "sham transaction."
  3. Cannot exchange into or from primary homes and vacation homes, must be investment property; therefore, you could turn a vacation home into an investment property and exchange into another investment property to avoid/defer paying Capital Gains taxes on the equity appreciation.

• How do you help clients calculate, compare and increase their rate of return on real estate investments?
  • Determine level of liquidity, marketability and the impact of leverage
  • Evaluate the investment management issues
  • Consider the tax impact of investment decisions
  • Evaluate investing with the right entity
  • Evaulate and reduce investment risk
  • Use Internal Rate of Return (IRR) calculation

• If you were given the opportunity to consult with or speak in front of financial advisors or high net worth real estate investors, do you have the knowledge, skills and presentation tools to impress your audience and turn them into profitable clients?

  Ask yourself this question