DC's New $7500 First-Time Home Buyer Credit-A true credit or a loan?

The Housing and Economic Recovery Act of 2008 that was passed in July 2008 included an added incentive for DC home buyers who purchased property in the District from April 9, 2008 through July 1, 2009.

Now, you can apply for a tax credit of up to $7500 towards a dollar for dollar reduction of your federal tax burden. However, unlike the District's long standing First-Time Homebuyer Income tax credit of up to $5000, this is not a reduction, but a loan that you will have to pay back. Unfortunately, you can't claim both the $5000 and the $7500 credit, so you'll have to choose between the two programs.

Here are the pros and cons of both programs:

New First-time Home Buyer Tax Credit ($7,500):

• You must be a first time homebuyer in DC, and this is defined in this act as someone who has not owned property in DC for the past 3 years.
• The property must be your primary residence.
• Credit is up to $7500, or 10% of the purchase price of your new home up to $7500. Full credit is given to individuals making $75,000 or less and couples making $150,000 or less. If your income is over these limits, you may be eligible of a partial credit.
• You must have purchased your home between April 9, 2008-July 1, 2009
• The credit is an interest-free loan, and must be repaid to the government. It's established to give you a break on your taxes during your first year of homeownership. Re-payment will begin the second year after you claim your credit, and will be repaid in installments of $500/year over 15 years OR if you sell your home prior to the 15 years, the remainder of the loan will be repaid from your equity at closing. If you do not sell your house for a profit, and you sell at a loss of break even, your debt on this loan will be forgiven.

For more information and frequently asked questions, go to these links:

http://www.federalhousingtaxcredit.com/faq.php

http://www.realtor.org/wps/wcm/connect/7e7d71804ace5fd5a1c3e9d8d4cd799b/final+brochure+Language.20080808.pdf?MOD=AJPERES&CACHEID=7e7d71804ace5fd5a1c3e9d8d4cd799b

The original First-time Home Buyer Tax Credit ($5,000):

• You must be a first-time home buyer. For this credit, a first-time homebuyer is defined as someone who has not owned property in the District for a year prior to their new purchase.
• The property must be your primary residence.
• Credit is up to $5000. To receive the full credit, an individual must make $70,000 or less and a couple must make $110,000 or less. For every $1,000 made above the income limits, $250 is shaved off of the credit-the maximum amount you can make to obtain any credit is $90,000 for an individual or $130,000 as a couple.
• This is a true credit, and not a loan as the new tax credit is organized. So you will not have to repay this credit to the federal government.

For more information, please visit the links below:

http://www.fanniemaefoundation.org/programs/pdf/dctaxcredit_rpt_execsumm.pdf

http://otr.cfo.dc.gov/otr/cwp/view,a,1330,q,594156.asp

Of course, with any tax issue, you should consult with your accountant. There are many factors that can effect your eligibility, and since you must decide between the two programs, you should consult with a professional to be sure you are choosing the right program for you.

Another great article on the two programs can be found at: http://www.washingtonpost.com/wp-dyn/content/article/2008/10/23/AR2008102304029.html

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DC Rent Control Laws

Recently I have listed a 6 unit building in Dupont Circle with my associate Martha Williams, located at 1610 19th Street NW. We have many inquires regarding DC rent control laws. In DC, if a landlord owns more than 4 rental units, their units are subject to rent control.

Rent Control in DC is very complex, and here's my understanding-for an existing tenant, you can charge the current CPI (Consumer Price Index) plus 2%-but not more than 10% from year to year. The 2008 CPI is 3.4%. Therefore, for an existing tenant, the maximum increase on a lease renewal this year is 5.4%. So, if you are renting an apartment at $1000/month in DC and the unit is subject to rent control, your landlord can only increase your rent to $1054/month at the time of renewal.

If there is a vacant apartment, the landlord can go up on rent a little more. The maximum increase in rent is 10% from the previous tenant's rent or rent for a comparable unit not to exceed 30%. A comparable unit is defined as same square footage and floor plan, location, and height in the building. Rent can only increase once in a 12 month cycle-even if the apartment is vacant more than once a year.

There are a few exceptions to the rule, but they become more complicated. For an overview on DC rent control laws, go to http://ota.dc.gov/ota/cwp/view.asp?a=3&q=573352&otaNav=33325

For more information on the 6 unit for sale in Dupont, including all of the cash flow statements, Certificate of Occupancy and Rent Roll, go to www.DupontInvestment.com

Thanks!
Rachel

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Evers & Co. April 2008 Real Estate Sales Report

Here's Ever's & Co. April 2008 Sales Report for the close-in (inside the beltway) DC Metropolitan Area.

April sales in the close-in Washington Metro area showed continuing improvement in the market. First of all, there is less than a 6 months' supply in inventory, with a market that went all the way from a 9 months' supply in December to 5.7 months' supply in April! The average price has been fairly flat during the past few years, with modest gains each year of around 1 to 2%, so April's gain of .57% over April 2007, is no surprise. However, the aspect of the market that has been in the sharpest decline, the volume of sales, has shown a dramatic improvement in April. Volume of sales declined 20% in 2006 and another 10% in 2007. This year started out even worse, with dollar volume of sales in January 42.7% lower than January 2007; February was 35% lower than the previous year; March was nearly 40% lower; but in April, volume of sales was just 18.45% lower than April 2007.

If these trends continue, we could be looking at the bottom of the close-in market as having occurred in the first quarter of 2008. The second quarter of the year is traditionally the "prime time" spring market, and the strength of May and June sales will be a strong indication of whether or not we are looking back at the end of the recent real estate slow- down.

* Statistics are taken from the Metropolitan Regional Information System for three areas: Washington, DC; Montgomery County, Maryland; and Fairfax County, Arlington, Alexandria and Falls Church in Virginia.

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One Happy Homeowner

Meet Ed.

Ed and I in 2008

Ed is one of my all time favorite clients, and I have many favorites. I meet Ed in 2001, after I helped his close friend sell a small one bedroom condo and buy a renovated two bedroom condo. Ed and I met and instantly became close friends. As a first time homebuyer, he was cautious and a bit nervous, but I knew we would find the perfect place for him to call home.

Ed and I looked for a year. Yes, a year. Many agents would have given up, and in fact, a couple had with Ed before I came into the picture. They got frustrated with his search and tried to push him into buying a home that wasn't right for him-before he was ready. Finally, I heard about a great unit that he could customize with the developer through the grapevine before it came on the market. The developer was willing to make the home custom fit for him with his choices of paint colors, granite, closet space, etc. I worked side by side with the developer by creating a punchlist of items, dropping by to check up on the progress, and making sure the right paint chips went into the right rooms.

Ed's First Home in 2004

Ed ended up settling into his condo for two years, just down the street from my house. We saw each other in the neighborhood and as with many of my clients, we remained friends. He helped me with my restoration projects and even helped paint some of the condos that I restored. I could tell he was getting the itch to start a new restoration project of his own...and soon, I was listing his custom condo. We staged the home, did a fantastic marketing job and I arrived early to the open house with a crowd at the door. The condo sold on the first day, proving, if you price a home right and it looks beautiful, it will sell-fast. Ed bought a gorgeous home with me in an adjoining suburban neighborhood with plenty of space for his dog to play and a nice vegetable garden. He was living the American dream.

Ed's Second Home in 2006

Ed's new home was wonderful, and this time, he renovated the entire place. The home was really his own, but after another couple years, he decided to move back to the neighborhood where it all began. Surburban life was fun while it lasted. This time, the market had shifted, but because he put so much sweat equity into his new home, and it looked even nicer then the first, he still sold relatively quickly, and with a small profit!


As you may imagine, Ed and I were pretty close by this time. We both had helped each other with our various renovation projects, and he was a fantastic source for paint color consultation. He had really gotten the real estate bug, and decided to become a Realtor. He started working at the firm I was with. Ed is now a fantastic agent, working with homebuyers and sellers through the daunting process of buying and renovating their homes. He has modeled his business habits after mine, and has espressed to me on numerous occasions the lesson we both learned and all Realtors should live by-with the right amount of patience, guidance and a knack for matchmaking, any client can be a happy homeowner.

And he truly is.

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