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Investing in real estate has long been a way to generate wealth and passive income for investors. If you are thinking about investing in rental property, you may want to create positive cash flow from the beginning. However, another strategy, known as negative gearing, could actually work out better for you. What is negative gearing and how can it help you in your property investment pursuits?

Negative Gearing

Negative gearing is a process in which you borrow money to buy an investment property. Once you borrow the money and purchase a property, the cost of the interest on the loan and other related fees then exceed what you make from the rental income on the property. When you realize a loss on an investment property, you can then use that loss to offset other money that you have made from other endeavors. This gives you a realized loss that you can take advantage of when it comes time to file your taxes.

Advantages

The advantage of using negative gearing is that it reduces your taxable income for the year. If you make good money from some other source, you may have to pay a lot of money in taxes. By using negative gearing, you can reduce your taxable income, and reduce your taxes for the year. This makes it a lot easier to handle your tax bill than it would be otherwise.

Another benefit of using this type of system is that the government and the rental income from the property essentially helps pay for the property. With the combination of the rent and the tax savings that you receive from this type of investment, you get the equity from the investment paid down. After a certain amount of time, the equity built up so that you can access it through a loan or by selling the property. If you hold onto the property for the long-term, the property could eventually be paid off and then you’re left with a tangible asset that you can use at any point. You could then keep renting the property out and collecting passive income or you could sell it to generate a lump sum of money. Regardless of what you do, you’ll be in a good position financially because of the tax savings and rent that you have been receiving all this time.

Considerations

Although negative gearing can be an advantageous way to invest in property, you have to be careful when getting involved. You have to make sure that the numbers are just right to make it work. If you borrow too much money to buy a property and the mortgage payment is too high, your strategy may be difficult to keep up with.

In 2012, the HARP refinance program for underwater homeowners was revamped.  New guidelines have been set forth by the government and they are soon expected to be adopted by lenders.  But, will the HARP program 2.0, as it has been nicknamed, live up to the expectations?

First, let’s take a look at what this program was designed to do.  HARP was designed as a way for underwater homeowners to refinance their mortgages to current interest rates.  This is assuming that their current interest rate on their mortgage is higher than todays rates, which is usually the case.

Homeowners who are current on their mortgage payments and have a loan that is backed by Freddie and Fannie will be able to refinance the loans.  Homeowners who have late payments will not qualify and must look to other options such as loan modification or a short sale to avoid foreclosure.

The original HARP program placed a cap on your loan to value ratio, which eliminated many homeowners as participants in the program.  Too many people had homes that were worth far less than they owed.  With the new program, this cap has been lifted so that anyone who is upside down on their mortgage and meets the other requirements should be able to qualify and refinance.  Exciting, right?

Sure, if you believe everything that you read.

Here is the main problem I see with the HARP underwater refinance program:  The government does not control what lenders do.  They only set the “guidelines” for the program and expect lenders to adopt them.   The lenders have to agree to these guidelines and use them.

Why they won’t agree to these guidelines

Loans are backed by investors.  For lenders to agree to these guidelines, investors must agree to these guidelines as well.  Wall Street must agree to these guidelines!  Do you think an investor will let someone who owes $300,000 on their home that is worth $125,000 refinance to a lower rate? I for one, do not.

What I think will happen with HARP

When the guidelines are officially adopted by lenders there will definitely be a “feeling out” period.  Sure, HARP refinances will happen, but the majority of those refinances are going to be loans with an LTV (loan-to-value) of 125% or less.  This is what investors are looking for.  I think some lenders may be able to push up the cap to 135% or maybe even 145%, but I just don’t see it getting any higher than that.

HARP can say that they have new guidelines and no LTV cap for underwater homeowners looking to refinance, but it doesn’t mean it’s going to happen.

I imagine we will see similar problems with HARP that we saw with the HAMP loan modification program.  Sounds great, but not many homeowners will qualify and get the help that they need.

About the author:  Jeff G. is a prolific financial writer who has composed numerous articles relating to loan modification and the HARP refinance program.

Landlords have more to worry about than homeowners. As well as the building, they need to protect their tenants as well as themselves. With these things in mind, looking for the right landlord insurance can be tricky at best. It needn’t be a hassle, though, so keep these tips in mind when you’re shopping around to find the best cover for you.

Covered inside and out

Stripping it down to basics, landlord home insurance is split into two types: buildings and contents. Buildings insurance is a given (and compulsory if you have a mortgage). If the building itself is damaged by fire, flood or similar events then you’ll need to be covered to repair and rebuild. Depending on the insurer, this might also cover you for earthquakes and subsidence. Be sure to check if you live in a high-risk flood area, as you may need a more specialised flood-based cover for your property.

Contents insurance will cover the contents that you own in the property, not your tenants. This includes white goods and furniture. If you are letting a furnished property, this is a good idea in case anything damages your items. Everything that your tenants move in with or buy themselves, they will have to get separate home contents insurance of their own. Typically, contents insurance protects you against fire, theft and water damage.

Get specialist

Do you need specialist landlord insurance?  Well, it’s not legally compulsory, but it’s a very good idea. The specifics vary between insurance companies, but buy to let insurance gives you some kind of public liability cover as part of the policy. So for example, if your tenant trips over your carpet and takes legal action, you won’t have to pay the expensive legal fees. You can also get covered for loss of rent, if for whatever reason the property becomes inhabitable or if your tenants are unable to pay. Your standard contents insurance cover may not cover accidental damage, so if you’re letting out a furnished property then it might be worth taking out additional accidental damage cover for your items.

Stay sharp

Be sure to check the ins and outs of the policy details to make sure that you know what is and isn’t covered. As a general rule, landlord insurance policies don’t cover any malicious damage or theft by your tenants. This is why it’s important to make sure that you’ve either got an appropriate tenancy deposit or are satisfied with their character.

Also, low-premium landlord insurance might come with a hefty excess attached. Check that you’re happy with the amount of excess against the premium and the benefits of the policy before you accept, otherwise any claim that you make could leave you in the lurch.

Make sure that you take a look around and find the best policies that are right for you – there’s nothing worse than paying through the nose for cover that you don’t need in the first place.

As you decide to sell your home it is necessary that you will also have some knowledge on things that you need to consider in selling it so that you can be sure that you will not encounter any troubles with regards of the transaction with the potential buyers.

1. Ways of advertising. The very first thing you need to make sure in selling your home is the way that you are going to advertise it. You need to make sure that the way you promote your home will be very effective so that you can sell it fast. You can ask the help of a real estate agent in advertising or promoting your property. Another advertising strategy that you can do is by listing your property in local newspapers or by putting ad on the Internet.

2. Setting up a valuable price. It is really very necessary that you have the knowledge about the market value of your property so that you can set up a valuable price that isn’t bias to you and to your potential buyer. Set a price in which your buyer can still negotiate, give them a chance to at least bargain on the price that you have. Remember that, price is mostly the first thing that is asked by the buyers and if they find your price is too expensive compared to your competitors surely that they will not waste their time to look at your home. Be reasonable in giving price to your property, a price that is upon the real value of your home.

3. Consider having home inspection. It is an added value that you can have once you decide to sell your house. Remember that having a home inspection will give you ideas on the things that needs’ to be improved and repaired. Buyers are more willing to purchase a house that undergo a home inspection this is for the reason that they feel more secured. Having home inspection gives a chance to your buyer to realize that it is better to stay in your place because they don’t have to worry anymore on the problems that may arise once they choose your property.

4. Legal issues. It is best if you are going to fix and resolve all legal issues on your property before moving on selling it. That way you don’t have to think on the possible problems that you may encounter on the process of selling it. You can freely deal and have legal transaction with your buyer especially if you have settled all the legal issues on your property.

These considerations that you need to have whenever you plan to sell your house are very important to make sure that in the long run of transacting with your problem you will not have any problem. Consider these things even before you start dealing or advertising your property to make sure that you will have a smooth flow of transaction with your buyers.

Most consumers start their home buying process by visiting preexisting houses and evaluating their worth for a potential purchase. However, there is an alternative to this old fashioned way of thinking. What if the buyer could put his or her input into the actual construction of the home, right down to the electrical outlet placement? Enter the house and land package.

A house and land package allows the buyer to purchase the land that the new home will be built upon. Once the home is built, he or she owns both the land and physical structure. There are a number of different benefits that pertain to these packages. Let’s take a look.

Investment opportunity

Since the home has not been built yet, buyers can be vocal about additions and substitutions to the actual construction process. By customizing the home, buyers can begin to advertise the house’s features as a selling point. Large skylights in the living room? The buyer can make sure to have these installed for a potential customer. The fact that the home is brand new is another selling feature; buyers can stress this selling point for a fast sale, as well as the fact that no surprise repairs will be needed after the purchase since every part of the home is unused.

Saving Money Initially

Another benefit to house and land packages is the initial investment amount. Buyers do not purchase the combination of the home and land in the beginning; the house does not yet exist to be an asset for sale. As a result, the buyer simply puts down a deposit for the land only, not the house. This process can save the buyer thousands of dollars in the beginning.

Customizing Your Own Home

Many buyers are extremely picky about their home features; some prefer carpeting, while other prefer hardwood. However, purchasing the house and land package will allow buyers to customize their own home. In fact, they can choose almost any material option within the home since it has not built yet. As a result, the paint color, flooring choice, and even the amount of bedrooms can be personalized for the buyer. The resulting home will be the perfect dream house for the buyer.

In the end, a house and land package is a smart choice for savvy investors and particular homeowners. Buyers should research the seller, or developer, so that the real estate process is smooth; construction of the home should stay within budget, as well as on time. The benefits of these packages will make a happy home for the buyer.

If you’re int he market for beautiful house and land packages in award winning residential estates, see LWP property development Perth. LWP offer house and land packages in a number of popular locations across W.A, both north and south of the river. Visit a display village for yourself and you’ll be impressed.