Lecture 16 Ch 7 Single Family Housing - March 12 09

Lecture 16 Ch 7 Single Family Housing - March 12 09 -...

Info iconThis preview shows pages 1–8. Sign up to view the full content.

View Full Document Right Arrow Icon
1 Single Family Housing Pricing Investment Tax Considerations
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
2 Housing has long been perceived as providing a dual role Shelter Investment
Background image of page 2
3 Congress has encouraged home ownership by providing tax incentives Deductibility of mortgage interest Favorable tax treatment on sale
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
4 You can exclude up to $250,000* of the gain on the sale of your main home if all of the following are true: You meet the ownership test You meet the use test During the two year period ending on the date of sale, you did not exclude gain from the sale of another home. *$500,000 if married and file a joint return
Background image of page 4
5 Growth in house prices Direction on demand Influence/concept and home prices with an increase in the factor (1) Population Growth + (2) Household formations + (3) Employment + (4) Household income + (5) Interest rates - (6) Federal income tax rates - (7) Cost of renting vs. house prices + What drives each variable? Why do changes in variables vary by city?
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
6 Rent v. Own Goal Analyze the costs of renting versus owning the same residence Method Compile all cash flows associated with renting/owning Calculate rate of return on equity (down payment)
Background image of page 6
7 Exhibit 7-2, Page 179, Part 1 Property Information Loan Information Purchase price $150,000 Loan-to-value ratio 80.00% Initial rent $12,000 Loan amount $120,000 Rental growth rate 2.00% Interest rate 7.00% Property growth rate 2.00% Loan term 30 years Insurance $500.00 Payments 12 per year Maintenance $500.00 Annual debt service (payment) $9,580 Expense growth 2.00% Annual loan constant 7.98% Marginal tax rate 28.00% Equity investment/down payment $30,000 Property tax as % of value 1.50% Selling expenses 7.00%
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 8
This is the end of the preview. Sign up to access the rest of the document.

Page1 / 34

Lecture 16 Ch 7 Single Family Housing - March 12 09 -...

This preview shows document pages 1 - 8. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online