REAL ESTATE NEWS...Pending home sales inch up 1.3% in July but prices still high

By Diana Olick

Homebuyers inched back into the market in July, but are still frustrated by higher home prices and very few choices of homes for sale.

Signed contracts to buy existing homes rose 1.3 percent to the second highest level in over a decade, according to the National Association of Realtors' Pending Home Sales Index. June's reading, however, was revised down. This indicates more closed sales one to two months from now. Pending sales are just 1.4 percent higher than July of 2015.

"Amidst tight inventory conditions that have lingered the entire summer, contract activity last month was able to pick up at least modestly in a majority of areas," said Lawrence Yun, chief economist for the Realtors. "Buyers still have few choices and little time before deciding to make an offer on a home for sale. There's little doubt there'd be more sales activity right now if there were more affordable listings on the market."

The sales gains were driven entirely by the buyers in the West. Pending sales there jumped 7.3 percent in July compared to June. In contrast, sales rose just 0.8 percent in the Northeast, fell 2.9 percent in the Midwest and edged up 0.8 percent in the South.

Homebuilders had been focused mainly on the higher end of the housing market after the recession, because that was where the bulk of the buyers were. With more demand from younger buyers today, builders are moving slowly back to the entry-level market.

"Realtors in several high-cost areas have been saying for quite a while that there is robust demand for single-family starter homes and town homes at an affordable price point for young buyers," added Yun.

Realtors have been reporting slower traffic through listings, which they track by looking at how many times a front-door lock box has been opened. Sticker shock is arguably one reason why. Home prices continue to rise and are now just one percent below their former peak of the housing boom a decade ago, according to Black Knight FInancial Services.

The first a half of 2016 saw stronger home sales, as mortgage rates dipped near record lows, and employment improved. Mortgage applications to purchase a home, however, have weakened in the last few months, signaling slower sales in the fall.

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"We're going to have about five and a half million home sales this year, and that's an increase of about two hundred thousand home sales over the previous year," said David Stevens, CEO of the Mortgage Bankers Association on CNBC's Squawkbox. "I think that's fully reflective of household formation, this sort of emerging millennial generation that is continuing to drive and will drive the next generation of housing."

REAL ESTATE TOPICS...Why you may want to reconsider becoming a long-distance landlord

By Ilyce Glink and Samuel J. Tamkin

We are currently living in Atlanta in a large single-family home that was built in 2001. We have a mortgage of less than 50 percent of what our home is worth, and we just refinanced to a 5/1 ARM at 2.75 percent interest. Our son is going to be a sophomore in college this coming school year, and we’ve begun to contemplate whether it makes sense to move to a smaller home, maybe even a townhome.

Our situation is kind of unique in the sense that we may go back to India after four more years in the United States and then live a hybrid life where we spend eight months in India and four months in the U.S. each year.

One idea is to move to a townhome, stay there for three years and then rent it out once we move to India. If we decide to move we’ll need to spend about $25,000 in upgrades. It’s likely the new townhome may also need some upgrades and new appliances.

With keeping all the upgrades and expenses in mind, would it make sense to just stay put for the next three to four years in our current house or should we sell and move? With the equity in the house, we may be able to either buy the townhome outright or quickly pay off the small mortgage that we take out for the townhome.

You certainly packed a lot of issues in one question. We’ll start with your current home and your current loan. You recently paid several thousand dollars to refinance your loan and you have a great interest rate on that loan. So your housing expenses are probably quite low. We imagine the issue is that your large home has other expenses that would be higher than they would in a smaller home or a townhome.

It probably costs more to cool, clean and care for a large home, not to mention paying the property tax bill. As you scale down, your heating and cooling bills should go down as should some of the other expenses of maintaining the home.

Financially, it appears you have the income to support staying or going. Given the cost of moving, and the repairs and upgrades you plan to make in both homes, you have to think about which home you’d rather rent: a large family home or a smaller townhouse.

One issue for you to ponder is why you’d want to be a landlord in the United States if you plan to live most of the year in India. If it’s for the investment in real estate, then you have to evaluate the townhome as an investment and determine if having that investment is right for you. Certainly, if you are living in India, you’re not going to be readily available to handle tenant issues or handle the ordinary affairs of owning a piece of real estate. You would need to hire someone to manage the property and handle those issues that you, as a landlord, won’t be able to handle on the other side of the world.

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If you rent your townhouse (or single-family home), where do you plan to live when you do come back to the United States?

From the limited information you have given to us, we don’t know why you would want to go through the expense of handling all the repairs needed to your home only to sell it and then handle all the upgrades and repairs you anticipate in the smaller townhome you might buy. We believe that if you make upgrades and improvements to a home, you might as well stay and enjoy them for a while.

If you make those improvements, yes, you’ll have higher expenses in owning your current home. But you’d be smart to calculate what those expenses are relative to the townhome. If the difference isn’t as big as you thought, you might continue to enjoy your home for the next several years.

Of course, as we said, much of your issues are not financially but emotionally driven. So you have to sit down, write down what you like about living in your home, how a move to a different home would affect you, your wife and your son, how it affects your finances and if the effect on your finances is greater than the benefit you get out of keeping the home.

If, after you analyze your situation, you find that the financial burden of owning your larger existing home is too great and the benefits to you of having a smaller townhome for the next several years are likely much greater, then consider moving.

But we aren’t big fans of buying a townhome now for your future ability to rent it out and become landlords. You’ll need to give that some thought and see if being a landlord is what you really want to be.

REAL ESTATE TOPICS...What to Do When You Can't Sell Your House

By Geoff Williams


Not getting any offers on your home? Try these strategies

Your house is cursed. Not really, but you may think that if you have a home that's been on the market for a year or two – or more.

Having a house that isn't selling now can be especially painful, since the housing market appears to be healthier than it has been for some time. For instance, the U.S. Census Bureau and the U.S. Department of Housing and Urban Development released a joint report on Aug. 23, showing that July was a very good month for the industry, with a 31.3 percent jump over the number of homes sold one year earlier.

If your house isn't selling at all, and you're losing hope that it ever will, these are your most probable options.

Keep improving your home. It isn't what you want to hear, but maybe people aren't buying because they don't like what you're selling. So make your home better.

"In the fall, contractors are looking for smaller jobs to complete before winter. Winterizing a porch or adding a deck might be cost-effective and also might bolster your asking price," says Colby Sambrotto, the New York City-based president of USRealty.com, a real estate website.

And if you can't afford to put more money into your home or lack the will to do it, here's another idea from Sambrotto:

"Get plans, estimates and outline the permit process for adding, say, a second bathroom. If buyers can see exactly how much hassle and money it will cost to address the defect, it might not look so scary," he says. (This, of course, assumes it won't be too much hassle and money.) "Plus, you then have hard numbers for negotiating the cost of the fix into the price."

Slash the price. If your home is really the pits and you almost don't care what you get for it, as long as it's something, you may want to do that and see what happens.

"We had a first-floor loft we were selling two years ago next to a very loud nightclub and facing a busy street," says Ari Harkov, a licensed associate real estate broker in New York City. Making matters worse, he adds, the bedroom wasn't considered legal, and it was in the basement, which means it was considered a studio apartment.

"We finally got a buyer and signed a contract only to have the deal fall through two months later as they could not get financing. The loft with no bedrooms made it impossible for an appraiser to comp out anywhere near the price," Harkov says.

So that's when they started slashing.

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"We made a big price cut, got several good offers and ended up selling to a cash buyer who didn't mind the drawbacks," he says.

Harkov adds that money always talks: "There is always a buyer at the right price."

Rent your home. It may be the best of your options if you desperately want to move, or, say, need to move due to a job offer.

And renting out the space a good option, according to Bill Golden, an Atlanta-based real estate agent with RE/Max Metro Atlanta Countryside. But he warns: "Renting is the first option, though it's one with which you should proceed with caution."

For starters, ask yourself how badly you really want to be a landlord. But even if that doesn't bother you, Golden points out that if you think your house is hard to sell now, it could be even more difficult after your tenants leave.

"No matter how well you screen tenants, they are never going to maintain it the way you did, so you have to be prepared, both emotionally and financially, to deal with that once they move out," he says.

But Golden says if you're willing to take those chances, it can be a lucrative way to make money on your house in the meantime.

Golden notes that if you can keep your home furnished, you could utilize a service like Airbnb and offer temporary rentals to generate some income. But if you do a lot of short-term rentals, he says you may still deal with similar wear-and-tear issues.

Embrace the defects. There's no use pretending a defect doesn't exist. If your house is next to a garbage dump, ignoring the problem won't make it go away. In fact, there's even a name for that problem.

"Flaws like a location under a flight path are called 'incurable defects,'" Sambrotto says. "There's nothing to be done except offset the defect with other features. For instance, you might show how you have installed extra-soundproofed windows on the side of the house facing a highway."

You could even market your house to a niche category of buyers who might not care about a problem or may even like it, he points out.

So if your house is under a flight path, you could boast in an ad that you're selling the perfect home for an aviation enthusiast.

Highlighting the defects is a risk, Sambrotto admits, since you will turn off more buyers than you will attract. "For instance, that faraway garage might be perfect for noisy hobbies like woodworking, but many buyers won't be interested in woodworking," he says.

But if these are desperate times ...

Walk away. You may be tempted to move, anyway, and keep trying to sell the home. That's probably your least desirable option, though it may work out well enough if you have someone mowing the lawn and looking after the place while a real estate agent brings in prospective buyers whenever. But if you plan on leaving without a process in place to get your house sold, you will likely regret putting your house out of your mind for any period of time, Golden cautions.

"Just letting it sit there empty is very rarely a good idea. There are always carrying costs [like property taxes and homeowners insurance], even if you have no mortgage, and it's much harder to keep it properly maintained without someone living there on a daily basis keeping an eye on things," he says. "If it didn't sell before, giving it even less TLC is not going to help matters." 

REAL ESTATE NEWS...The Housing Markets in the Hamptons, Aspen And Miami Are All Crashing

By Douglas A. McIntyre
One month ago, we said that “it is not looking good for the US housing market”, when in the latest red flag for the US luxury real estate market, we reported that sales in the Hamptons plunged by half and home prices fell sharply in the second quarter in the ultra-wealthy enclave, New York’s favorite weekend haunt for the 1%-ers.

Reuters blamed this on “stock market jitters earlier in the year” which  damped the appetite to buy, however one can also blame the halt of offshore money laundering, a slowing global economy, the collapse of the petrodollar, and the drastic drop in Wall Street bonuses. In short: a sudden loss of confidence that a greater fool may emerge just around the corner, which in turn has frozen buyer interest.

We concluded this is just the beginning, and sure enough, several weeks later a similar collapse in the luxury housing segment was reported in a different part of the country. As the Denver Post reported recently, high-end sales that fuel Aspen’s $2 billion-a-year real estate market are evaporating, pushing Pitkin County’s sales volume down more than 42 percent to $546.45 million for the first half of the year from $939.91 million in the same period of 2015.

The collapse in transactions means that Aspen’s high-end real estate market “one of the most robust in the country, with dozens of options for buyers ready to spend more than $10 million” finds itself in its first-ever sustained nosedive, despite “dense summer crowds, soaring sales tax revenues and high lodging occupancy.”

Like in the Hamptons, the question everyone is asking is “why”? There are many answers:

Ask a dozen market watchers why, and you’ll get a dozen answers. Uncertainty around the presidential election. Fear of Trump. Fear of Clinton. Growing trade imbalances with China. Brexit. Roller-coaster oil prices. Zika. Wobbling economies in South America. The list goes on.

“People are worried about all kinds of stuff these days,” says longtime Aspen broker Bob Ritchie. “I’ve never seen anything like this before.”

The speed of the collapse has been stunning. Until just last year, the local market was beyond robust, with Pitkin County real estate sales hitting $2 billion in 2015, a 33% annual increase driven largely by sales of homes in Aspen,where prices average $7.7 million.

This year, however, “a slowdown in January turned into a free fall.” Sales volume in Pitkin County is down 42%, according to data compiled by Land Title Guarantee Co.

Almost all of that decline is coming from Aspen, where the market is frozen. Sales in the Aspen-Snowmass market in the first half of the year were the bleakest since the first half of 2009, and inventory soared to levels not seen since the recession.

The statistics are stunning: single-family home sales in Aspen are down 62% in dollar volume through the first-half of the year. Sales of homes priced at $10 million or more — almost always paid for in cash — are down 60%. Last year, super-high-end transactions accounted for nearly a third of sales volume in Pitkin County.

“The high-end buyer has disappeared,” said Tim Estin, an Aspen broker whose Estin Report analyzes the Aspen-Snowmass real estate market.

“Aspen has never experienced such a sudden and precipitous drop in real estate sales,” according to the post.

Worse, it’s not just the collapse in the number of transaction: even more disconcerting for brokers who have always trumpeted Aspen as a safe and lucrative place to park a huge pile of money: Prices are dropping.

In the first half of this year, the average price per square foot of Aspen homes dropped 22 percent to $1,095 from $1,338 in 2015. Recent Aspen sales also closed at more than 15 percent below listing price, a rare discount.

Some brokers suspect that the frenzied sales and pricing pace of 2015 was not sustainable. The present decline is a correction, they say. “I think a lot of people thought we would go to the next level in 2016. Take the next step up and that step got resistance from buyers,” said longtime Aspen broker Joshua Saslove, who just put an Aspen home for more than $10 million under contract. If it closes, it will be just the fourth sale above $10 million in Aspen this year, compared with more than a dozen by this point last year.

“I think a lot of developers thought they would push their, say, $5 million properties to $6 million this year, but no one is buying,” Saslove said. “I don’t see that nonchalance or cavalier attitude any more.”

To be sure, Saslove is hoping that a rebound is coming; that however, may be overly optimistic and first far more pain is in store especially if one considers what is taking place in yet another formerly red-hot housing market, where suddenly things are just as bad, because as Mansion Global reports …

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Luxury condo sales in Miami have crashed 44%.

According to the latest report by the Miami Association of Realtors, the local luxury housing market is just as bad, if not worse, than the Hamptons and Aspen.

The latest figures out of Miami this week showed residential sales are down almost 21% from the same time last year. But as bad as this double-digit decline may seem, it pales in comparison to what’s happening at the high end of the market.

A closer look at transactions for properties of $1 million or more in July shows just 73 single-family home sales, representing an annual decline of 31.8%, according to a new report by the Miami Association of Realtors. In the case of condos in the same price range, the number of closed sales fell by an even wider margin: 44.4%, to 45 transactions.

The Miami housing market, and its luxury segment in particular, has been softening for the past year with high-end condos sitting on the market for twice as long as they did a year ago and sellers offering bigger discounts amid an increased supply.

In July, townhouses and condos of $1 million or more waited, on average, 162 days for a buyer, a 1.9% increase over a year ago and the longest time of any other price range, according to the report.

As in the previous two markets, the locals want something to blame, in this case the strong dollar, which has significantly increased the value of properties in other currencies, has been blamed, and perhaps rightfully so as sales to foreigners—an important client base, since international buyers  acquire more homes in Florida than in any other state, according to the National Association of Realtors – have tumbled.

Real estate appraiser and data expert Jonathan Miller said that Miami is behaving like most of the rest of the U.S. housing market, which is in fairly good shape overall “but soft at the top.”

As noted here over the years, In the case of Miami, like in other most other coastal markets such as New York and Los Angeles, the housing boom was heavily boosted by foreign buyers, who used US luxury real estate as their new form of anonymous “offshore bank accounts” courtesy of the NAR’s exemption from Anti-Money Laundering Provisions. However, after the recent drops in commodity prices and the spike in the USD, they have scaled back their purchases.

“The international component is not as intense,” Mr. Miller said.

Depsite the slowdown deals are still being done, with cash the preferred form of payment of foreign buyers in the U.S., – some 43% of all sales in Miami in July were closed in cash, however down from 48.1% the same month last year, according to the latest figures.

Other potential buyers are also stepping back: cash sales for townhouses and condominiums, an indicator of investor activity, hit their lowest level in a year last month: 633 transactions, representing a 30.4% year-over-year decline, according to the report.

As for the forecast for the coming months, sales activity doesn’t look likely to surge. There were 1,272 pending sales of townhouses and condos in Miami in July, which means 25.4% fewer transactions waiting to close than in the same month in 2015 and the lowest number so far this year. Meanwhile, as a result of a building boom, luxury condo inventory is up 47.8% from last year, with 2,482 units worth $1 million or more waiting to change hands; this means that sellers of high-end condos will continue to face stiff competition, prompting even fewer transactions and/or lower prices.

So far, the collapse at the luxury end has failed to transmit to the broader market, less impacted by lack of foreign demand, however as we documented two weeks ago, it is only a matter of time before the overall US housing market suffers as well. The only question is whether the NAR and the US Census Bureau, who tabulate the “goal-seeked”, seasonally adjusted data, will admit it before or after the presidential elections. The likely answer: it depends on who the next president is.

REAL ESTATE TOPICS...Don't Fall Victim to These 3 Real Estate Investing Myths

By Sean Williams

If you're considering buying real estate for investment purposes, make sure you aren't duped by these misconceptions.

Rising home prices and historically low lending rates can mean only one thing: the real estate investor is back in full swing. According to John Burns Real Estate Consulting, the number of single-family homes being rented out has jumped 35% since 2006 to 15.2 million, largely as a result of real estate investors taking advantage of what appear to be ideal buying conditions. 

However, buying real estate and counting on it to fuel your retirement, or provide you substantial monthly income, may not be a wise move. We asked three of our Foolish contributors what they believe are the biggest real estate investing myths prospective real estate investors and homebuyers should be wary of. Here's what they had to say.

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Sean WilliamsArguably the most pervasive myth when it comes to investing in real estate is the belief that buying a home is a great investment. To be clear, buying multiple homes and relying on rental income from those homes can actually be a good investment. However, purchasing your primary home and relying on it to fuel your retirement is rarely ever a good idea.

I know what you're probably thinking: "But home prices always go up, so why is this a bad idea?" Most homeowners likely remember the doubling in home prices between 1997 and 2007, but this was an anomaly. Based on data from Robert Shiller's Irrational Exuberance, between 1890 and 1990 home prices did go up at a rate that outpaced inflation, but only by an average of 0.21% per year. Between 1950 and 1997 home prices rose by an even more depressing 0.08%.

In other words, while a house is likely to deliver nominal monetary gains over time, those gains will more or less match the rate of inflation, giving you no more buying power in 10, 20, or 30 years than you have today. Your house isn't an investment, it's a place to live in. Don't forget that. 

Selena MaranjianIt can be easy to convince yourself that you can get rich by buying and renting out properties. Simple math can certainly seem to suggest that: buy a home with a $1,200 mortgage payment, collect $1,600 in rent, and boom -- profits and growing equity in the property.

Not so fast, though -- there are about a zillion other things to consider. For starters, not all properties will appreciate in value while you own them, so you might end up selling the home for less than you paid for it. That has happened to many, many people. Meanwhile, while you own the home, you might be collecting rent payments, but you'll also be making property tax payments and paying for insurance, maintenance, and repairs. Many homeowners across America enjoy tax breaks on the homes they live in, but those discounts disappear when it comes to investment properties. 

Being a landlord is also trickier than it can seem. You might have been a model tenant in your own renting days, but many renters don't, or can't, make payments on time. It can take a forceful personality to deal with troublesome tenants, and it's not always easy to evict them. Many states have strong laws protecting tenants. You'll also have to deal with calls at inopportune times to fix a leaky roof or replace a refrigerator that stopped working.

Even good tenants aren't perfect. They won't necessarily take as good care of your property as you would, and when they leave, you may face unexpected necessary repairs. Even without that, you'll likely need to freshen up the place with new paint, etc. It can take a while to find a new tenant, too. It can be costly if the property is empty for a few months between tenants.

Many people do make money as landlords, but it's not nearly as easy as it might appear.

Dan CaplingerThere's a common misconception that the only way to invest in real estate is by directly owning properties. As a result, while many people are comfortable with the idea of buying residential properties like vacation homes or even duplexes or small apartment buildings, the prospect of venturing into the commercial real-estate realm seems out of reach due to the greater complexity involved in working with business tenants to meet their needs.

Yet real-estate investment trusts make the commercial real-estate world a lot easier to navigate. With various types of REITs, you can concentrate on commercial investment in areas like retail space, office buildings, industrial facilities, or even niche areas like hospitals and healthcare facilities or rental storage units. REITs have management teams that will handle all the ins and outs of property ownership, and while they will take a cut of the profits, the REIT structure typically also means that you'll have part-ownership of a wide array of different properties, giving you diversification that's hard to achieve with your own personal real-estate portfolio. For those who are intrigued by the opportunities that are available in the commercial real-estate industry, taking a look at real-estate investment trusts can be the easy way to get access without making it a second profession.

REAL ESTATE TOPICS...renters are taking the plunge into homeownership

By Bill Lewis

As monthly rent payments and home prices inch higher, many renters are taking the plunge into homeownership.

A one-two punch of ever-higher monthly rent payments and rising home prices is convincing many renters that now is the right time to buy a home.

“We are in the perfect market to buy a home. Rents are high and you can get into a home for less,” said Christie Wilson, managing broker of the Wilson Group Real Estate Services.

That’s what Ja'Mesha and Markà Manning discovered when their landlord told them their apartment rent was about to go up $150 a month to $950.

“It would have eaten into the budget,” said Ja'Mesha Manning.

They purchased a home in Old Hickory Commons, a neighborhood developed by Ole South close to Cain Ridge High School in Antioch. The mortgage payment on their 1,175-square-foot townhome is less than they paid to rent an 800-square-foot apartment.

“It was cheaper to own than to rent, and we have pride in ownership,” she said.

'A bigger check every month'

The Mannings' experience is not unique, said Trey Lewis, vice president of Ole South.

“The cost of renting is outpacing the cost of ownership. There’s no price protection for renting. You have to write a bigger check every month,” he said.

The average apartment rent in Nashville was $1,395 in July. Rents increased $100 per month in the first half of the year, according to rentjungle.com, which tracks markets across the country.

Rising home prices are another factor motivating renters to become buyers. Buying now, before the prices go higher, saves them money, said Wilson Group Realtor Libby Bruno.

“The cost of waiting, when home values are rising anywhere between $19,000 and $25,000 a year, makes buying now an even more timely decision for many of my clients,” said Bruno.

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Building equity

The median price of a home in the Nashville region was $267,000 in July. It was $234,900 in July 2015. Someone who purchased a home a year ago would have paid $32,100 less. And, as their home increased in value, they would have built up equity.

“Rising rents are probably one of the biggest factors among my clients. They either have lived and rented here for a long time and have seen their rents skyrocket in recent years, or they have moved here from out of state and are excited to buy and take advantage of the growth that Nashville is experiencing every day,” said Bruno.

“That means money on their investment instead of flushing rental dollars down the drain month after month, reducing their ability to further their future,” she said.

People rent for a variety of reasons, said Wilson. Some have never owned a home. Others rent briefly after moving to Nashville. Occasionally, someone sells a house faster than expected and has to become a renter while looking for something to buy. Still others lost their homes in the recession.

“During the recession, many people had to sell their homes. A lot of them are renting until their credit is cleaned up," said Wilson.

Pride of homeownership

During the downturn, Realtor Stephanie Lowe was busy helping clients find rental housing. Most of them bought a home as soon as they could.

“Most of them rent and save until they can afford the down payment. Once they meet with their lender and realize how much they will be saving on a monthly basis, they are astonished,” said Lowe, who is an agent with the Wilson Group.

When they purchased their townhome, the Mannings participated in the Tennessee Housing Development Agency’s (THDA) Great Choice program. The agency, whose mission is to help make homeownership affordable, offers qualified buyers assistance making down payments of up to 4 percent of their mortgage loan.

There are income limits, and participants are required to complete a homebuyer education course that prepares them for the difference between renting and owning.

One of the greatest differences is pride and a sense of independence, said Ja'Mesha Manning.

“If something goes wrong in an apartment, you nonchalantly call maintenance,” she said. “In a house, you have to pay. So you have pride in ownership.”

REAL ESTATE TOPICS...Sell Your Rental Property For A Profit

By Andrew Beattie

Unlike selling a stock, investment properties can't be unloaded in a few seconds with a click of your mouse. The time between the decision to sell and the actual date of sale is often measured in weeks or months. Selling your own home can be an intimidating process if you don't know where to start, but selling an investment property requires even more work.

The amount of capital and the taxation issues surrounding the realization of that capital are complex when dealing with investment real estate. It is not, however, impossible to accomplish on your own. In this article we'll look at the process of selling an investment property and focus on how to limit taxes on the gains.

Why Sell?The reasons for selling a rental property vary. Landlords who personally manage their properties may move and want to buy a different investment property near their new residence. Or, a landlord may want to cash in on the appreciation of a rental property rather than accumulating money through rent. It may even be a case of a property that is losing money, either through vacancy or not enough rent to cover the expenses. Regardless of the reason, real estate investors looking to sell will have to deal with taxes. (To read more about rental properties, see Investing In Real Estate and Five Things Every Real Estate Investor Should Know.)

The Tax Man ComethThe capital gains taxes on a rental property sale are much steeper compared to the straightforward sale of a personal use property. The basic capital gains that you have to pay on the profit from the sale are increased by any depreciation you claimed against the property. This means that if the property lost money and you used the loss against your tax bill in previous years, you will have a larger tax bill when the sale goes through. (To read more about capital gains and taxes on your rental property, see Smart Real Estate Transactions and Tips For The Prospective Landlord.)

Example - Capital Gains Tax and Depreciation
Let's say you have a rental property that you bought for $150,000 and it sells for $200,000. Usually,
this means that you pay capital gains on $50,000. If you deducted $20,000 in depreciation over the
time that you owned the property, however, you owe the difference between the sale price and your
purchase price minus depreciation: $200,000 - ($150,000 - $20,000). Instead of owing capital gains
on $50,000, you now owe capital gains on $70,000.
Note: This shouldn't discourage you from claiming depreciation losses. It is almost always better to
realize tax breaks sooner rather than later.

Incorporating as a ShieldIncorporating is becoming increasingly popular for real estate investors. By incorporating, investors can lessen their personal liability making the corporation act as a shield between you and the potential that a tenant may sue you. Your house and personal finances cannot be claimed in any kind of court settlement when you incorporate. Corporations also have different tax rules that are quite favorable, especially with the capital gains from selling a property.Rolling OverThe Internal Revenue Code Section 1031 allows real estate investors to avoid taxes on their gains by re-investing them in a like-kind property. With the help of a lawyer or a tax advisor, you can set up the sale so that the proceeds are put into an escrow account until you are ready to use them to buy a new property. There is a time limit of 45 days to choose the new property and six months to complete the transaction. If you intend to do a rollover, you should start looking for the new property before you sell the old one.

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The 1031 exchange works great if you intend to re-invest in another property. If you merely want to stop being directly involved with property, you can either hire a professional manager for your current property, or sell it and buy a professionally managed property. If your goal is purely to raise capital, however, you will just have to eat the capital gains tax.

For a certain type of real estate investor, incorporation makes sense. If you are employing people to find and manage a wide range of income-producing properties and making significant profits at it, incorporation will lessen your tax bill and then you will see the profits through the share structure of your corporation. For most real estate investors, there are better ways to get the benefits of incorporation without complicating how income is realized.

Incorporation can create a barrier between you and the earnings from your property so that if you depend on that income in any way, you may not be able to access it as easily as you'd like - particularly with large profits such as those from selling a property. It is comparatively easy to incorporate, requiring only some professional advice and paperwork, but getting your properties out of a corporation (for example, to sell them off and retire) is more complex because you are walking the line of intentional tax evasion/fraud unless you sell the corporation instead of the properties that make it up. This is, of course, much harder than selling a house.

In contrast, if you are personally managing two or three properties and have even one or two more that are professionally managed, you may not benefit from incorporation. If the income from your rentals isn't outpacing your expenses for each property by a large margin, you are better to hold them as is and use depreciation's and write-downs where you can, or change your real estate holdings into a small business.

In addition to using a small business as an alternative to incorporation, some states allow real estate investors to open a separate limited liability company for each property they own. While this doesn't necessarily lessen the taxes, it does protect your own finances, as well as each individual property, from any litigation that may be carried against one of your properties.

ConclusionSelling a rental property can be challenging, and it is even harder if you are hoping to avoid a large tax bill on the proceeds. If you are selling in order to invest in a different property, then you can simply do a 1031 rollover and put off the tax bill. If you are selling because you need the capital, you will have to pay some taxes. The best-case scenario, as with stocks, is to put off selling an investment property, especially a rental that is breaking even or better, unless you offsetting credits or losses to take some of the bite out of the capital gains. This way, you will have a chance of reducing your overall tax bill and pocketing more of the cash.

REAL ESTATE TRENDS...Dashing tiny houses from France will set you back $50K

BY JENNY XIE 
Lest you thought the tiny house phenomenon is only an American thing, these adorable models from France are here to prove you wrong. Designed and built by Baluchon, based near Nantes in Western France, these tiny houses sport a pitched roof and sit on wheels per usual, but a closer look reveals some appealing details.

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Shown here are Baluchon’s two newest designs: the Odyssey (above), priced at about $49,000 fully furnished, and the Escapade (farther down the page), priced at roughly $48,000 fully furnished. The 220-square-foot Odyssey features a small, sheltered porch at the front entrance, rounded counters, a built-in folding oak table, small window that opens right over the kitchen, and mezzanine "living room."

The 185-square-foot Escapade offers a compact lounge area separated from the kitchen and bathroom to the back, while stairs lead to a well-lit lofted bed. What say you, Curbed readers? Impressed ou non?

REAL ESTATE TOPICS...Millennials Pessimism Could Spell Trouble For The U.S. Housing Market

By Troy McMullen

Home prices in many places have been steadily rising, buoyed by a growing economy, low interest rates and a chronic lack of inventory in some markets.

While that spells good news for homeowners – and home sellers – it is creating worry for many first-time buyers who are watching prices steadily get out of reach. That is particularly true for millennials, a sector critical to the future of the housing market.

A study out this week from national realtor Redfin shows worry about affordability is growing more predominant among home buyers, but the fear is more acute among young people.

Just over 28% of buyers said they were most worried that “prices are rising or are too high,” the largest percentage to cite this concern in more than a year, according to the Redfin survey, which was conducted in August and includes more than 1,800 home buyers. Among millennials — buyers 35 and younger — 32.5% said affordability is a big concern.

The gap between affordability and other concerns is also widening, the study finds. The second-most cited top concern was “too much competition from other buyers,” at only 13%. In previous surveys, the second- and third-most cited concerns made up a far higher percentage of total responses. Last year it was 31.4 percent, while in May it was 33.5 percent.

Despite lower mortgage rates and increased employment, millennials aren’t touring open houses or scouring online listings in search of their new homes, research suggests. Their tendency to live at home with parents and delay getting married has raised concerns about long-term homeownership trends.

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Millennials who end up living with their parents has been on the rise steadily since the Great Recession, peaking at about 36%, according to the Pew Research Center.

REAL ESTATE TIPS...Secrets Real Estate Agents Wish You Knew About Your Master Bedroom

By AMY DANIEWICZ

It's no joke that psychologists put "moving" ahead of "death" on the list of life stressors. If you find yourself about to list your home for sale, this usually means that 1) your life is in major transition, and 2) your biggest investment is about to be put to the test.

So we turned to Erika Mehrer of Marin Modern Real Estate to find out what buyers really look for in a master bedroom. Working in the Bay Area's Marin County, home to the exclusive communities of Sausalito and Mill Valley, Erika sees (and sells) some of the country's most gorgeous homes.

If our master is less than perfect, does it need a major remodel? And if that's just not going to happen, what can we do to fake it?

Keep reading to hear Erika's expert tips to get your master bedroom into move-ready shape.

POPSUGAR: What is the most important thing buyers are looking for in a master bedroom?
Erika Mehrer: Buyers are really looking for a master bedroom with large closets and room enough for a king bed.

PS: Have you noticed any trends emerging in bedroom decor in the last year or so? Are there any trends that you have seen starting to fade? 
EM: Wallpaper has made a comeback — nice metallic designs that are modern and classy. Centerpiece chandeliers are now replacing boring overhead lighting.

PS: Help us out with the wood floors versus carpet debate. Is there a consistent winner here?
EM: YES! Wood floors win every time, especially if the wood flooring is used throughout the home. It's a clean look, easy to clean, and you can accent with stylish area rugs — which can then be changed out anytime you change your decor. Some buyers prefer carpet in the bedrooms as it feels nice when you are barefoot, but if the carpet is not there, the buyers won't miss it. They can always add it later.

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PS: Is tile in the bedroom ever a good idea?
EM: No, unless it's over radiant heat and has a warm look and feel. Tile is cool on the feet and it gives a cool aura. Bedrooms are made to be cozy. Wood and carpet provide that warmth a bedroom needs.

PS: What about the matching bedroom set — soothing to the eye, or shudder-inducing throwback?
EM: Ha! It's not a deal-breaker, but the style now is mix and match so that the design looks custom.

PS: Sellers are often told to remove all personalization from a home. But then it can just look like a hotel. How do we strike the right balance?
EM: Add art, candles, pillows, and other items to make the home feel inviting.

PS: Of course, no one likes a cramped and dark bedroom. But apart from a major remodel, we're often stuck with our bedroom's size and level of natural light. What can a seller do to make the most of what they've got?
EM: Paint the bedroom a bright off-white color and remove big dressers to the garage temporarily. Basically limit the amount of furniture and accessorize the room with bright bedding, pillows, and curtains.

PS: Is a bad view out a bedroom window a deal-breaker for buyers? What can a seller do in this situation?
EM: In a seller's market like we have in Marin, a bad view out of a bedroom window is not a deal-breaker. Usually you can resolve that with window coverings or outdoor landscaping.

PS: Of course, we're dying to hear your horror stories. What's the worst bedroom you've ever seen?
EM: The worst bedroom I have ever seen was one with green shag carpet from the '50s — it was not only hideous but also dingy and dirty. That's 60+ years of dirt. This bedroom also had paint peeling from the walls and smoke stains on the walls from the owner smoking in bed. My clients, who were the buyers, were both architects, and with a lot of creativity and sweat equity, they remodeled it beautifully.