Homeowners insurance covers a variety of risks to a homeowner, including damage to the property and the belongings within it, as well as liability coverage in the event that someone else is injured on the property. It does not include coverage for flood or earthquake damage, so people living in areas where that might be a problem will need to find a separate policy for those coverages. Homeowners insurance is highly advisable for any homeowner, and most mortgage lenders will require it. Continue reading...
Most people think of an abandoned car or even a house when abandoned property is mentioned, but it also applies to investment accounts. If physical property such as a car is left for a long enough time in a public space or privately owned space such as a storage building, the property can be deemed abandoned and the person who discovers it can become the new owner. Through a process called escheatment, investment accounts, savings accounts, bank CDs, and employee 401(k) accounts can all become assets of the state if they are determined to be abandoned. Continue reading...
An income property is also called an investment property, which is a piece of developed commercial or residential real estate that is used by a third party tenant who makes rental or lease payments for the use of it. Income property can be a good source of income for an individual or business. It can include single- or multi-family residential or commercial properties. Sometimes people co-own income properties together, and receive a proportionate share of the proceeds according to the amount of the start-up capital they paid in. Continue reading...
Investment property is real estate that an individual or entity owns without the intention to directly use it, but rather to benefit from its ownership. Investment property is not directly used or inhabited by the owner. Its purpose is to provide income through rental or lease, or to be sold at a later time after the property has appreciated. Sometimes this involved building upon the property, or otherwise renovating or improving it. The property might be commercial or residential, with multiple tenants or a single one. Continue reading...
Assessed value is used to determine the property taxes due on real estate. Assessed value is normally lower than the appraised value of a residential property, because it is not looking as much at the value of the home, but rather the value of the property, for property tax assessment. While the assessed value does have to do with the market value of real estate, most calculations only use average home prices the area, found in local real estate listings, as part of the valuation. The “ask” prices are going to be higher than the prices at which they’ll sell. Continue reading...
An Abandonment Clause primarily refers to maritime insurance contracts in which a lost vessel can be replaced without the expectation of recovery or salvage, or the terms by which a construction contract or lease agreement can be dissolved. This is not to be confused with an Abandonment Option contract between a financial advisor and his or her client. It can also refer to a frequently used clause in construction law, in which the contractors define an abandoned project and give their counter-parties the right to move on and find another contractor to finish the job. Continue reading...
IIE is deductible from taxes, and is usually used to deduct the interest paid on a margin loan used to buy taxable securities, when there is a gain to offset. Investment interest expense is the term for interest which has been paid in order to hold an investment position. It comes into play when filing taxes. An individual can list interest expenses on a Form 1040. The most common place to incur an interest expense when investing is through the use of margin in an investment account. Continue reading...
An Assessor is a government employee who finds the value of properties and other assets for tax and insurance purposes. The assessor’s office is responsible for coming up with the assessed value of real estate property in a municipality, for the purpose of assessing property taxes. Assessors may have other roles, but this is the main one. Considering that assessors have to determine a value of every piece of real property in their district, it can certainly be an overwhelming task. Continue reading...
A non-current asset is an asset on the balance sheet that is not expected to convert into unrestricted cash within a year’s time. Non-current assets may include such things as intellectual property and production/operations equipment - meaning they likely do not have a need to convert to cash. From a balance sheet standpoint, non-current assets are capitalized rather than expensed - meaning the company can allocate the asset’s cost of the asset over the number of years for which the asset will be used, instead of allocating it all in the year it was purchased. Continue reading...
The HPA was enacted to protect consumers from the unscrupulous practices of some private mortgage insurance companies, which were not informing consumers of the consumer’s right to cancel their mortgage insurance at least by the time the individual had paid off 80% of their home. Consumers may be required to pay for private mortgage insurance to protect the lending institution if the borrower makes an initial payment of less than 20% of the value of the home. By law, lenders cannot require borrowers to have PMI after 80% of the original value of the mortgage has been paid off. Continue reading...
Appraisal is a valuation conducted by a certified professional to assess the value of property, especially real estate. Appraisals are an important service in the real estate industry in particular. Where mortgage loans are being taken out from banks, including original mortgages, refinancing, home equity loans and lines of credit, as well as in business and estate valuations, the property appraisal will play an important role. Continue reading...
IRS Link to Publication — Found Here Owning multiple properties and receiving rent or lease income from those which are not personally used is a common way to increase wealth. Some individuals also own a vacation home which they use some of the time and rent out the rest of the year. Both of these sources of income addressed in Publication 527. Publication 527 describes how to report income from residential property, as well as how to depreciate it, what forms are needed for different situations, and categorizes different types of arrangements where individuals might own or rent only part of a property or only for certain times of the year, as well as not-for-profit rental. Continue reading...
A homeowner’s association (HOA) will exist in many planned communities and subdivisions, and the association will usually expect dues to be paid from all residents in a community. They will have a board of directors, usually, who make it their business to help maintain the quality of the neighborhood by making sure common areas are taken care of and that residents are complying with the community rules. A HOA may have rules in place that make a place unpleasant to live in for some people. Continue reading...
Bond insurance is a contract that protects the issuer and the holder of bonds from the risk that bond payments will not be made. Bond issues from the corporate or municipal world, or from derivative sources as with asset-backed securities and CDOs, come with the risk of default-- that is, that payments will not be made on time. The major credit ratings agencies (CRAs) assign a risk of default to each bond issue with proprietary analysis methods and ratings. Continue reading...
A lien is a legal filing through which a third party lays claim to certain assets, such as a person’s home, until an amount owed to them is paid. There are mechanic’s liens, judgment liens, and tax liens, any of which could be applied to a person’s home. A lien is a document serving as notice that a significant amount of money is owed to a third party and that certain assets of the debtor may be used to cover the obligation, becoming the property of the lien-holder if the debt is not paid in time. Continue reading...
Residual income is a stream of income that persists from one work project or investment. Residual income is also known as passive income, and is income which comes from an investment of money or work in the past, where minimal or no additional money, work, or maintenance is required. Residual income could come from investments such income-generating real estate, or work completed such as a published book or acting in a commercial. Continue reading...
Universal Life Insurance is a permanent cash value insurance that has a term-insurance component and a savings component as well. The savings component is invested in a tax-deferred account, designed to create a cash build-up that can increase the death benefit or to be used at the discretion of the policy-owner. The cash grows inside the policy tax-deferred, and if money is taken out as a loan, it avoids taxation as income. Continue reading...
Whole Life Insurance provides lifelong death benefit coverage as well as a tax-deferred savings account. A large portion of your premium goes into the general account of the insurance company, and this increases the cash value available to the policy holder at a growth rate dependent on the investment and sales experience of the company. Every dollar and amount of interest which is credited to the policy cash value is vested with the policy-owner and will not decrease. Continue reading...
As a rule of thumb, life insurance should not be considered an investment at all, since it’s primary purpose is to provide insurance coverage. That said, some cash value policies have attractive features that can be appealing in certain circumstances. We will say that a smart investor who has done research and gotten good advice will generally not end up with a permanent cash value life insurance policy. Continue reading...
Second-to-die policies are also known as survivorship policies, and are primarily used by married couples to provide a guaranteed legacy to their children after they have both passed away. These come in handy for estate planning, when an estate tax bill might be looming for the heirs. To be clear, this insurance covers the lives of two individuals and provides a death benefit to a listed beneficiary only after the last surviving insured individual dies. Continue reading...