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Ouch, they dropped fees for exterior BPO from $40 to $35.  I rarely accepted at $40 unless it was close by.  No way would I accept a BPO for $35.   This comes at a time when several others raised their fees.  One went from $50 to a varied fee depending on area to $55 to $65.  I do desktop BPOs for $40 - $50 without leaving the house!  One company went to $63 exterior and $95 for interior.  The BPO gets taken at $35 since it goes away.  Lots of hungry Realtors out their I guess.

Does anyone know anything about SmartVal Vendor ? They are looking for Broker for BPO.

Roth IRA is one of the well-known and oftentimes considered best IRA for self employed. If you are looking for reliable financial investment and retirement account, it is imperative to know more about this plan. Nowadays, you might find it more challenging to decide what retirement account to choose. There is a big difference as well as similarities for 401k vs IRA. Sense Financial Services LLC, the leading provider of premier retirement plan Solo 401k and Self-Directed IRA offers valuable information about these two topmost investment ventures. For Roth IRA, there are essential benefits from this account that you must learn and understand.

Roth IRA plan is not subject to Required Minimum Distribution Rules

One of the reasons why Roth IRA is considered the best IRA for self employed is that it is not required to comply with RMD rules unlike traditional retirement accounts. The Required Minimum Distribution rules subject the account holder to pay taxes on distributions. This is a requirement which takes effect as soon as the plan holder reaches 70 ½ years old. If you are not subject to RMD, tax-free income is accumulated, allowing the account to boost its accumulated and tax-free income throughout the duration of the owner’s lifetime.

401k or Best IRA for self employed: Which is best - distribution extension for surviving spouse

Roth IRA is not only the best IRA for self employed account holders but also a lucrative and useful investment for the surviving spouse. That’s because the account beneficiary of the retirement plan can still opt to continue the contribution to the plan. Or the beneficiary could opt to combine this Roth IRA to their own retirement plan, basically the same Roth IRA. This means that the surviving spouse could take over and benefit from the account particularly the growth on investment with its tax-free features. On the other hand, traditional retirement plans are not allowed to be combined and merged into the surviving spouse’s IRA. The beneficiary is also not allowed to opt for an additional contribution to the existing account.

Roth IRA account holders do not pay 10% early distribution withdrawal penalty

Account holders who decide to withdraw their account contribution before they reach the age of 59 ½ are not subject to the 10% payment of the early withdrawal penalty. Account holders could basically withdraw their converted or contributed amounts to their Roth IRA retirement account without the hassle of paying taxes or the penalty as long as they comply with the 5-year wait period making it the best IRA for self employed.

As an agent with 10 years experience with BPO/REO companies I'm finding the fees and commissions getting extremely low. Just last week I had several requests from companies I have worked with for years offering fees as low as $35.00. I did request fee changes for $45. to $50. which I still think is low. I did not get one order. I have a license, continuing education, MLS and board dues  not to mention things that go with being self employed. Office, gas, health care, paper computers and the like. So I think we deserve a fair fee. I also understand everything changes and we have to evolve to the ever changing market. With that being said my question is this? What is the next big thing for agents that like to work in this industry, providing services. I need a fee that can feed my family? They like to eat to! Maybe make video home tours, go back to working with clients in the traditional market? Any suggestions before going broke slowly?

Thanks in advance for your feedback.   

While it may seem as if it is hard to determine what is happening in the downtown San Jose condo real estate market, there are some majors metrics that are quantifiable that can help you see where the market is going. These markers include:

1.      Sales to list price ratio
2.      Days on Market
3.      Months of inventory
4.      Number of active listings vs number of pending listings.

We can learn something from each of these metrics.

1.      Sales to list price ratio: When the San Jose condo market is appreciating, the sales price will be higher than the list price. In Jan of 2017 the sales price of Downtown San Jose condos is 101% of the list price. This is obviously very healthy, but in Feb 2015 the sales price on average was 105% of the list price which was a much hotter market.
2. 
3.      Days on market is a very good way to look at how the market is doing. The stronger the market the shorter the days on market. In Feb 2016 the average days on market was 15 and it increased to 28 in Jan 2017. Things are obviously slowing, but the San Jose condo market has not tanked.
4. 
5.      Months of inventory: Months of inventory tells you how long it would take to sell all the homes currently on the market at the current pace of sales. When months of inventory goes up it means the market is slowing, most of time.  The months of inventory in downtown San Jose has been less than 2 all through 2016 and into Jan 2017. It has gone up to 7 months in Feb., but there have only been 2 days so we can not count that yet.
6. 
7.      Number of active listings vs number of pending listings: this one is my favorite. You look at the number of active sales and compare to pending sales. When inventory is low and sales are brisk there will be more pending sales than active sales. When there are 4 or more times as many pending sales as listings it is a really hot market. When there are more active listings than pending sales it is a buyer’s market, or trending that way. There are currently 21 active listings and 32 pending  sales of downtown San Jose condos.

So how is the market of downtown San Jose condos?

Looking at all the metrics I would say it is good, but slower than in the first part of 2017.

If you have any questions about buying or selling a condo in downtown San Jose please feel free to call me.

Marcy Moyer

Keller Williams Realty

Specializing in Probate and Trust Sales

650-619-9285

marcy@marcymoyer.com

www.marcymoyer.com

Bonjour,

  We all feel the pain as do appraisers, so if you did BPOs for Wells between 2005-2010 those BPO companies were cleaning up while we were getting peanuts. Take a minute to view these guys adding humor to current issues. http://thenationalrealestatepost.com/another-50mm-from-wells-for-overcharged-bpos/

While I am on a rant, AMC- appraiser clearing houses where appraisers have to pay the middle man for their appraisals, in my neck of the woods a SFR appraisals are $450-500, those AMCs take around $125, in the video link above these guys talk about.

  In a nut shell New York Governor Cuomo in my eyes is behind the AMC mess http://mandelman.ml-implode.com/2009/08/cuomo%E2%80%99s-crossing-an-outsider%E2%80%99s-appraisal-of-the-new-hvcc-rules/

Also remember Dodd- Frank not the bill , a.k.a. Chris and Bernie were on the Senate finance committee 2000-2007, these are the guys that started this mess along with Graham -leach bill of 99'.  We do need more reform removing the finders/referral co, all these banks have to do is set-up web-portal date entry site, agents get on the approved list, code the fields like we do now on quality and condition may be other fields, less people involve, more efficient. 

Very likely these finders might be editing our BPO's after we submit too? Is that right, how do we know?

Where is the fine money?  Govt has received in excess of billions from these financial institutions.

 Summary can we collect on that 50 million if we did BPOs for Wells? Class action suit?

Thoughts!!

Happy Selling,

Paul 

“The beauty of diversification is it's about as close as you can get to a free lunch in investing.” Barry Ritholtz

How do you feel about staking your entire future on the stock market? Risky, right! Who would do that? Surprisingly enough, a lot of investors are putting their money in the stock market directly or indirectly. If you rather invested in bonds to minimize the risk, you’re unlikely to gain the returns necessary to fund your retirement. That along with the changing federal interest rates makes bonds an unattractive investment option. So, how do you invest for retirement while minimizing your risk and still pocketing handsome returns? Investing in alternative assets with a self-directed IRA is an option to look into.

Why invest in alternative assets?

The alternative investment strategies have helped smart investors gain competitive returns over the years. Here are some reasons to add them to your portfolio:

• True diversification & security: Investing in alternative assets allows you to achieve true diversification. You can minimize your risk profile by choosing different alternative asset classes. Real estate, precious metals, mortgage notes, tax liens, private equity, and real estate investment trusts (REITs).
• Competitive returns: Unlike security bonds, you can earn better returns by investing in alternative assets. If you’re a realtor, imagine the sort of returns you can achieve by using your expertise and industry knowledge.

For an average investor, investing in alternative assets might pose some challenges, especially in choosing assets classes that can achieve your retirement goals. It’s best to seek professional help and make sound financial decisions.

What is a self-directed IRA?

Since you are investing for retirement, you’ll require a retirement tool that can invest in alternative assets with minimal custodial red tape around it.

Self-directed IRA comes into picture.

A self-directed IRA is a retirement solution that offers investment discretion/control to the plan owner. Depending upon your plan custodian, you can access most of the asset classes discussed above. Some of the popular self-directed retirement options include self-directed IRAs, Solo 401k plans, and 401k plans.

What are your investment options through a self-directed IRA?

• Real estate: The IRS allows real estate investing within retirement accounts. The trick is that it is not mandatory for financial institutions to offer it as an asset class. However, with a self-directed IRA, you can invest in real estate starting with residential, commercial, and third-party real estate LLC investments
• Private equity: If you have experience in business, you can use your retirement accounts to purchase private equity. While it is an exciting proposition, make sure to test the basics of the company and take professional advice.
• Mortgage notes/tax liens: If you’re looking for passive growth/returns, mortgage notes, and tax liens are the perfect additions to your portfolio. You don’t have to fret about property maintenance and utility bills.
• Precious metals: Gold and most of the precious metals are cyclical. They allow investors to hedge their investments against inflation, stock market movements and any financial fiasco.
• Stock, bonds, mutual funds: Self-directed IRAs allow you to put your money in traditional investment options, including stocks, bonds, and mutual funds. With a self-directed IRA, you as the account owner can initiate transactions without going through custodians. This also minimizes transaction costs and fees. In order to retire with sufficient money, create a balanced portfolio and restructure it routinely.

Who should choose self-directed retirement accounts?

The financial goals of every individual vary and so does their investing strategies. If you have a limited understanding of the investment realm, you may want to use a professional’s help. A self-directed IRA is good for you if you are:

• Ready to take control of your retirement account.
• Tired of having brokers handle your money.
• Wanting to diversify your investments
• Tired of paying high custodian fees and transaction costs.

It is your retirement at stake, so take your time and make the right choice!

This is a question I get asked all the time. When an owner has passed and has rental property should the heirs sell the Palo Alto probate or trust home with the tenants in place, or wait until the lease is up?

While most years I would say wait until the tenants are gone but with the uncertainty of how interest rates will affect prices and what will happen to a Palo Alto market that has already shown signs of slowing, even with very tight inventory, the answer is not clear cut.

Sell Palo Alto Probate or Trust Home With Tenant: Pros:

1.      Palo Alto school Priority 1 Registration goes from Jan 12 thru Feb 15th. That is the best chance of getting your child in the school closest to you. There is always a space in a Palo Alto school for a resident, but getting the one closest to you is best obtained if you are a resident during this period. Selling with tenants in a  Palo Alto probate rental may allow the buyer to get a leg up on school registration for the next year.
2.      Interest rates are lower now than they will be next summer, or even in March and maybe Feb. A 3 million dollar Palo Alto probate home has a very good chance of having a loan on it so the less a buyer has to pay for the mortgage the more they can afford for the home. For every 1 point increase in interest rates there is a 10 % increase in payment.
3.      The inventory is very low and the Palo Alto housing is market still active. It is unknown what will happen as the year goes on. The market could go down as interest rates go up, or if there is a natural disaster, a world event, or terrorist attack.
4.      Some people who buy Palo Alto homes in Probate or Trust early are happy to rent the house out until the end of the school year because they do not want to move until school is out if they are relocating.

http://www.marcymoyer.com/trustandprobatesaleshttp://www.marcymoyer.com/trustandprobatesales With a Tenant Cons:

1.      Harder to show house
2.      You will not be able to make interior upgrades or stage with a tenant in place so it may depress the price somewhat
3.      The tenant may be messy or say inappropriate things to potential buyers which could depress the price.
4.      If the tenant does not have beautiful furniture the professional pictures will not look as good.

Sell Palo Alto Probate or Trust Home After Tenant Lleaves Pros:

1.      You can have the interior painted, wood floors refinished, new carpet, and any other cosmetic upgrades you want that will help bring in more money.
2.      You can professionally stage the property and the photos will look much better.
3.      Much easier to show the house and have open houses which bring in more people and help bring in a better price.

Sell Palo Alto Home in Probate or Trust After tenant leaves Cons:

1.      Interest rates will be higher which will depress the price. It is unknown by how much because it also depends on how the stock market is doing, most likely for Apple, Google, Facebook, and Linkedin.
2.      If there is a trade war with China tech stocks could be hurt more than other sectors. This would make less money available for down payments for most of the buyers in the area.
3.      If the dollar continues to be strong foreign investors will be much less likely to be buying homes in Palo Alto.
4.      The best time to sell a home in Palo Alto in from Jan thru early June. The second best is the fall. If the tenants are out in June and the home is prepared in July and Aug and on the market in Sept you have missed the best time, but may get the second best time, but only by waiting until Sept to put home on market.

So as you can see the answer is not clear. No one can say for sure what will happen to the real estate market in 2017. If you are in this situation now it is probably a good idea to add your own Pros and Cons to this list to get a feel for what may work best in your situation.

If you have any questions about selling a home in Probate or Trust please feel free to contact me.

Marcy Moyer

Keller Williams Realty

Specializing in Probate and Trust Sales

650-619-9285

marcy@marcymoyer.com

www.marcymoyer.com

Developers don’t build condos with the intention of sloppy work that they hope no one will notice. But never the less, they almost always get sued in about year 8-9.

In California, new construction comes with a 10 year warranty on latent defects on the structure. In plain terms home owners and homeowner associations have 10 years to sue a developer if they find problems with the structural components of a building such as the roof, walls, plumbing or electrical systems, garages, decks, etc.

So, around year 8, if no problems have emerged, many HOA communities will hire a company to look at the building and see if there are potential problems that can happen due to faulty construction. If there are known problems they hire someone to try to figure out the fixes to the issues.

The communities will approach the builder to fix the discovered issues, and if the builder does not feel there is a problem, or the problem is not their responsibility then a law suit may be filed.

Once the suit is filed most lenders will not make loans on the property. The few who do will charge interest rates 1 to 2 pts higher than a traditional lender.

This can put the brakes on sales in the development, and will temporarily depress the price.

If you are a cash buyer, buying a San Jose Condo in litigation for a rental property can be a good idea if you follow these steps:

1.      Look at the report that explains what the problems are that need to be addressed. If the issues are ones that do not need immediate attention that is better. If the plumbing system has failed, or there is major water intrusion into the building the homeowners may be hit with a special assessment during the multi year lawsuit. Even if the HOA of the San Jose condo in litigation wins the individual homeowners may not be reimbursed.
2.      Find out what the estimated cost to repair the issues are for the San Jose condo in litigation. Take that number and divide by the number of units, or if available the percentage of ownership the condo in question has. So if the estimate is 10 million dollars, and there are 500 units with equal shares then each unit would be responsible for about 20 thousand in repairs if all units pay condo fees equally.
3.      Find the market value of the condo you are interested in by looking at the most recent sale of that model before the San Jose condo litigation.
4.      Subtract the amount of potential assessment.
5.      If the market is slowing down overall subtract more.
6.      Explain that you are taking the risk that the HOA of the San Jose Condo in litigation will not prevail in court, and even if they do the homeowners may be assessed before then. You are taking that risk, and buying when most others are not able. You are betting that you will not be assessed.
7.      Even in a very hot market, this is a good way to get a better price on a San Jose condo in litigation than you would otherwise be able to.
8.      It is safest to do it when the builder is a very large and stable company, rather than a less well capitalized entity that is more likely to go bankrupt.

There is obviously risk involved, but since such a large percentage of builders get sued, it can be a good long term investment. For example, The Brickyard in San Jose was in litigation in 2011-2012. During 2011 one bedroom condos sold for $140,000-$180,000. The litigation was setteled and in 2016 one bedrooms condos sold for $365,000-$395,000. If you bought a condo for at The Brickyard with cash in 2011 for  you would have at least doubled your money in 5 years plus get an additional $800 to $1500 a month profit in rent over the last 5 years. And this was a building with serious problems that have now been fixed with proceeds from the successful law suit.

Most suits are settled, the deficiencies are fixed, and the San Jose condos in litigation go on to appreciate.

If you have any questions about buying a San Jose condo in litigation as a rental property please feel free to contact me.

Marcy Moyer

Keller Williams Realty

Specializing in Probate and Trust Sales

650-619-9285

marcy@marcymoyer.com

www.marcymoyer.com

I am frequently asked by San Jose real estate investors, both veteran and new, what is best for San Jose rental investments, multi- family homes, single family homes, or condos.

My first answer has been the same for decades: “Are you most concerned with appreciation or cash flow?”

The answer to this question depends on a variety of individual goals. What has changed over the years is what is best for cash flow.

Historically San Jose rental property appreciation has been best in this order:

1.      Single family home
2.      Condo
3.      Multi family home

Historically San Jose rental property cash flow has been best in this order

1.      Multi family home
2.      Condo
3.      Single family home

This long held wisdom that a multi- family home is the best San Jose rental for cash flow is being disrupted by the latest market forces. Right now, CAP rates are better on newer condos than older multi- family homes, and are much easier to take care of.

The CAP rate on a San Jose rental property is a measure of cash flow. To figure it out you take the income minus expenses (assuming no loan) and see what percentage of the price of the property the expenses are. 4% is on the high end of what you can expect in this market, and many investments are in the 2% range for single family homes and 3% for multi family homes.

Let’s take a sale of a duplex in Japan town as an example of a San Jose multi- family sale in 2016.

Sales price was $1,000,000

Expenses including property tax, utilities, garbage, repairs, insurance total $15,200

Income is $43,200

Cash flow:  $43,200-15,200 is $28,000

Cap rate is the what percentage of $1,000,000 is 28000 or 2.8%

At this time duplexes are not covered by rent control, but that may happen in the future,

This duplex, like many of the homes in downtown San Jose, is very old. This one was built in 1930. While charming, they need a lot of repair and in many years repairs will be over $2000 a year which was this years estimate.

Now take that same $1,000,000 and apply it to two studio condos in a beautiful downtown San Jose building called Axis. I have a client who does own 2 studio condos at Axis that are rentals so these are real numbers.

Market value: $500,000 each $1,000,000 for both

Expenses including HOA, HO6 insurance, property tax and repairs is $24,000 for both

Income: $

Cash Flow: 57200- $24,000 = $33,200

Cap rate: 3.3%

In this case this new building needed very few repairs, there will never be rent control per California state law, and the HOA covers most of the insurance, water and garbage, and the repairs of the common area.

Here is another example of a clients cash flow at The Brickyard, a less expensive building than Axis San Jose, but a great downtown San Jose rental with the best HOA management company I have ever experieinced.

2 condos worth $370,000 each or $740,000

Expenses including property tax, HOA, HO6 insurance, repairs $19,400

Income: $48000

Cash flow: 3.9 % 

Things to watch out for as the building ages is making sure there is enough in the building reserve fund to cover expenses as the building ages.

When the reserves are healthy the future looks brighter for the condos because:

1.      There is no fear of rent control
2.      There will be no needed foundation repairs, earthquake upgrades, termite issues etc for the individual San Jose rental investor to deal with in the future as the building is new and the HOA covers these issues.

Of course every case of San Jose rental properties is different, but if you are thinking about buying a San Jose rental property a condo can be a great investment for cash flow, not just appreciation.

If you have any questions about buying a rental property in San Jose please feel free to contact me.

Marcy Moyer

Keller Williams Realty

Specializing in Probate and Trust Sales

650-619-9285

marcy@marcymoyer.com

www.marcymoyer.com

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On Nov. 8th Mountain Voters approved Measure V, commonly known as the Rent Control Measure. If you are the Administrator of a Mountain View Probate Estate that has rental property to sell this is a huge deal. You need to know the rules in order to make sure the property is sold without breaking any new laws.

What does restricting rental price increases have to do with selling a Mountain View rental in Probateyou may ask? Well, I’ll tell you.

The reason is MOUNTAIN VIEW JUST CAUSE EVICTION.

Measure V relates to not only rent control, but also JUST CAUSE EVICTION.

Just Cause Eviction means that tenants cannot be asked to vacate just because the lease is up or they are on a month to month rental and you give 30 or 60 days notice (if they have been there a year or more).

Tenants can only be told to leave a Mountain View Rental Property under the following circumstances:

1.      Failure to pay rent or other breach of lease
2.      Continuing failure to give landlord access
3.      Repairs that will last over 30 days that are needed for code upgrades or health and safety reasons. NOTE: COSMETIC REPAIRS ARE NOT INCLUDED IN THIS EXEMPTION. This would include a kitchen or bath re-model to make the property more valuable.
4.      Owner or family member going to occupy the entire property
5.      Withdrawal from rental market with 120 day notice to tenant, unless over 62, disabled, or a tenant for 5 years or more. In these circumstances you need 1 year notice.

The good thing is that single family homes, condos, and duplexes are exempt from both rent control and Mountain View Just Cause Eviction. If you are an Administrator of a Mountain View Probate Estate that has a four- plex or more units to sell Mountain View JUST CAUSE EVICTION rules will apply to the estate.

Some things you should NOT do before selling the building are:

1.      Try to evict the tenants because they make the building look messy.
2.      Try to evict the tenants because the property is dated and you want to upgrade it before putting it on the market.
3.      Raise the rents above the allowable rent increase so the CAP rate looks better and makes the property more valuable.

Some things you can do when you are selling a Mountain View Four-Plex  or larger building in Probate.

1.      Paint the exterior
2.      Make sure the tenants do not leave personal property outside the building
3.      Upgrade the landscaping
4.      Give the tenants an incentive to keep their apartments clean and allow showings.

This law is new, and takes effect Dec 23rd. There is an emergency ordinance that was passed Nov 16th to keep landlords from evicting tenants in order to raise rents on vacant apartments before that date, so if you are reading this before Dec 23rd you are out of luck anyway.

Just remember the Mountain View rental market is strong, and even with rent control and Just Cause Eviction there will be buyers for your Mountain View Apartment in Probate so relax, hire a great real estate agent who knows Probate (like myself) and let the process work itself out.

If you have any questions about selling or buying Probate property in Santa Clara or San Mateo County please feel free to contact me.

Marcy Moyer

Keller Williams Realty

Specializing in Probate and Trust Sales

650-619-9285

marcy@marcymoyer.com

www.marcymoyer.com

The Stock Market Surges to 20K And The Masses Applaud Their Own Doom

Make no mistake folks, the stock market surge is based on credit and at some point, that credit is going to default. The scary part is, we all know this, we all know our country is borrowing to pay debt, our citizens aren’t saving, it’s not a secret and yet, we are applauding this credit driven stock market boom, to our own demise.

I heard it once said…or read it somewhere which is more likely…, “we can’t avoid the final collapse of this boom from credit expansion. The only choice we have is should the bust happen sooner because we voluntarily stop borrowing or later as the currency system collapses on its own”

Essentially, the problem is, our debt is growing faster than our GDP. Folks, it’s just not possible to grow the debt faster than what we make. Guys, it’s simple math…it’s going to stop.

As I read about this some more, it was put this way to me…… “So let’s run the math experiment as ask what will happen if the Fed is successful and total credit grows for the next 30 years at exactly the same rate it did over the prior 30. That’s all. Nothing fancy, simply the same rate of growth that everybody got accustomed to while they were figuring out ‘how the world works.’ What happens to the current $57 trillion in TCMD as it advances by 8% per year for 30 years? It mushrooms into a silly number: $573 trillion. That is, an 8% growth paradigm gives us a tenfold increase in total credit in just thirty years:” Chris Martenson with PeakProsperity.com

To drive this home….the GDP of the ENTIRE GLOBE was only 85 Trillion in 2012. It’s going to crash….it has to and when it does, the dollars in our pockets will be worthless…literally not even worth the paper they are printed on. So….when you see all these people cheering and raising the roof over the stock market, don’t forget, it’s got to bust at some point and maybe sooner than later considering we are now over the 90% debt to GDP threshold.

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Among the available retirement options, Solo 401(k) plans are worth considering, due to their relatively high contribution limits, flexible investments and the ability to make after-tax Roth contributions.

Here are some reasons self-employed business owners should consider Solo 401(k) plans.

Higher limits

Because the self-employed professional wears the dual hat of the employer as well as the employee of the business, the contribution limits for a Solo 401(k) include both employee deferral (up to $18,000 annually, plus up to $6,000 in catch-up contributions for those over 50) and profit-sharing employer contributions (up to 25% of business income, depending upon the structure or type of business).

Combining these two, the Solo 401(k) limits for 2016 are $53,000, plus a $6,000 catch-up contribution for professionals 50 or older for a total of $59,000.

Under an alternative retirement savings plan for business owners, the Simplified Employee Pension (SEP) IRA, the contributions are limited to the lesser of 25% of the business income or $53,000 for 2016. The absence of elective salary deferrals or catch-up contributions restricts the overall contribution limits of a SEP-IRA when compared with a Solo 401(k) plan.

Here’s an example of how the Solo 401(k) leads to higher limits: Let’s say you had a business income of $100,000. With a Solo 401(k), you can make profit-sharing contributions of up to $25,000 along with employee-deferral contributions of $18,000, totaling $43,000. On the other hand, a SEP-IRA would allow you to make only a profit-sharing contribution of $25,000, hence limiting retirement savings.

Alternative investment options

A self-directed Solo 401(k) retirement plan offers alternative investments, including real estate, tax liens, tax deeds, mortgage notes, private equity, personal lending, precious metals, and the traditional stock or bond investments. These alternative investments help you diversify your portfolio while achieving competitive returns.

However, these investment vehicles and alternatives require an understanding of their core operating principles. Make sure to educate yourself before investing in them and, if necessary, get an expert opinion.

Tax-deferred growth

Like all 401(k) plans, with a Solo 401(k) plan your retirement savings enjoy tax-deferred growth. Thanks to compound interest and the steady rise of equities over time, this should be a solid investment. Compound interest is one of the key factors that decide the size of your retirement fund. In the purported words of Albert Einstein, “The strongest force in the universe is compound interest.”

Roth savings option

You can opt for the Roth feature in your self-directed Solo 401(k) retirement plan, which allows you to diversify your tax strategy with after-tax investments that will not be taxed when you withdraw your funds in retirement.

And unlike the regular Roth IRA, there are no income phaseout limits in a Roth Solo 401(k) plan. Under a Roth IRA, a single filer over 50 making less than $117,000 can contribute up to $6,500 in 2016 ($5,500 under 50), but as the salary grows, eligible contributions decrease proportionately. If you make $132,000 or more, you will be ineligible to contribute to a Roth IRA in 2016. A Roth Solo 401(k) has no such phaseout.

Last chance to set up a Solo 401k for 2016

If you want to benefit from the higher contribution limits of a Solo 401(k) plan in 2016, set up your retirement plan before Dec. 31, 2016. You can make actual contributions for 2016 until the regular tax-filing deadline, but an account has to be set up before the year’s end.

This article was originally published on NerdWallet.com

Over 2016, Goldman Sachs has become a major player in the default loan industry buying all the bundles of Fannie Mae loans throughout the year.  I have noticed that the properties are now starting to pop up in my area but the agents are from about a hour or more away.  So the question it does anyone know who to get into Goldman Sachs?

Anyone who has looked for acreage in places like Pescadero, Gilroy, or Morgan Hill has probably come across a situation where a neighbor or friend has horses or goats or cows who graze the property. You ask to see the lease and the response you get is often, “There is no lease, they have an informal agreement that Ms X gets to keep her livestock on the property in exchange for the livestock grazing Mr Y’s land.

Mr Y does not have to pay the high cost of keeping the grasses and weeds cut and Ms X does not have to pay the high cost of boarding and feeding her livestock. It is a win win, and for decades no one has formalized the agreement.

Then, unfortunately Mr Y dies and his heirs need to sell the Probate acreage in Pescadero, or Gilroy, or Morgan Hill. There is no documentation of the agreement and no one is sure what Ms X’x rights are, or what the estate has to do to terminate the relationship. Or maybe the buyer of the Pescadero Probate acreage’s , Mr and Mrs Z’s don’t understand what their  responsibilities are if they want Ms X to continue grazing, but don’t want her to have full tenant’s rights. In other words, Mr and Ms Z still want to use the land, so they do not want to lease out a portion of the Pescadero or Gilroy, or Morgan Hill land. They just don’t want to have to pay someone to mow it.

The answer to this dilemma is for Mr and Mrs Z to grant Ms X a license for Ms X’s horses to graze on a portion of the Pescadero Probate property they are buying. The license can be terminated at any time by the owners of the property. There are no tenant’s rights for exclusive use and Mr and Mrs Z do not need to give any notice or have any cause to terminate the agreement. The right to graze horses is a personal privilege and is not tied to the property in question. The horses do not have any exclusive use and Mr and Mrs Z can use the grazed property any time they want.

If Ms X had a lease then she and her horses would have exclusive right to use the property and Mr and Mrs Z would have to give notice to enter that portion of the property and could not tell Ms X to leave whenever they want.

It is a distinction that is important to preserve the rights of Mr and Mrs Z to use their new Probate property in Pescadero, or Gilory, or Morgan Hill.

I suggest if you are going to do this you consult a lawyer before closing escrow on that gorgeous view property in Pescadero, or Gilroy, or Morgan Hill, or anywhere else you may find it.

If you have any questions about buying or selling property, especially in Probate in San Mateo, Santa Clara, or Alameda County please feel free to contact me.

Marcy Moyer

Keller Williams Realty

Specializing in Probate and Trust Sales

650-619-9285

marcy@marcymoyer.com

www.marcymoyer.com

“Compound interest is the 8^th wonder of the world… Those who understand it earn it… Those who don’t pay it.” ~ Albert Einstein

Thanks to the efforts put in by financial gurus, a lot of people are aware of the concept of compound interest. For those of you a little dubious about the same, here’s a quick definition:

‘Compound interest is interest calculated on the initial principal and also on the accumulated interest of previous periods of a deposit or loan. Compound interest can be thought of as “interest on interest,” and will make a deposit or loan grow at a faster rate than simple interest, which is interest calculated only on the principal amount.’ ~ Investopedia

Being a retirement solution provider, we help our clients realize the benefits of compound interest and one of the best ways to do so is to contribute towards a tax-deferred retirement account.

Why invest in a tax-deferred retirement account?

• Compounding of your money: Your money enjoys tax-deferred growth for several decades, accumulating more interest with every passing compounding cycle.
• Qualified deductions: By contributing to a tax-deferred retirement account, you are eligible for qualified tax deductions, hence reducing your tax bills right away.

Couple compound interest with a Roth Solo 401 k & Get Tax-free Distributions*

How about combining the magic of compound interest with a Roth Solo 401 k account?

A Roth Solo 401k account is a retirement plan for self-employed professionals and owner-only businesses, allowing after-tax contributions. Under the plan, the account owner pays taxes upfront and in return, they receive tax-free distributions.

• Annual contributions: $24,000 in 2016 (including catch-up contributions of $6,000 for professionals above 50 years)
• No income restrictions: Unlike a Roth IRA, there are no income restrictions for making eligible contributions to a Roth Solo 401k plan.
• Tax-free withdrawals: If your Roth Solo 401 k account satisfies certain conditions, you can receive tax-free eligible distributions in retirement.

Here is a short Infographic to highlight some of the primary features of a Roth Solo 401k plan:

After the election I started watching Bloomberg TV instead of the news/opinion channels I had been watching.  I guess I just got tired of all the yelling, in addition to the fact that I felt the need to try and get some clarity on what might happen to the economy, and more specifically the Silicon Valley housing market.

Besides the much needed civility I found on Bloomberg, I quickly came away with the understanding that no matter who the different reporters and commentators said they thought would be winners and losers in a new political environment, there was one thing everyone agreed on. Interest rates are going up. PERIOD, end of story. Janet Yellen was going to raise interest rates anyway, due to the favorable economic environment. But added to what would have happened, regardless of the election outcome, everyone agrees that we appear to be headed for an inflationary period.

I am old enough to have purchased my first home when interest rates were 19% and the most valuable homes were those that had assumable mortgages as 13% or less. Hopefully we are not going back to those days.

But we are going from interest rates in low 3% to now over 4% and presumably still rising. So what does this mean to the Silicon Valley housing market?

Common wisdom is that as interest rates go up housing prices go down since the ability for a borrower to pay also goes down. We have seen this in the past, but the decrease in price is not always proportional to the increase in rate.

Take this example.

A Million dollar loan: 30 year fixed

At 4.150%:  $4861 a month

At 5%:  $5368

At 6%:  $5996

At 7%:  $6653

The difference for each jump of 1% in interest translates into about a 10% increase in monthly payment.

For a conforming loan of $400,000 30 year fixed

At 4%:  1910

At 5%:  2147

At 6%:  2398

At 7%:  2661

Again, the difference for each 1% in increased interest rates equates to about a 10% increase in monthly payment.

So, in order to make waiting a money saver, If interest rates go up 1% pt. housing prices must go down over 10%. At a 2% pt hike housing prices must go down over 20%, and at a 3 pt climb they must go down over 30%.

Do we expect this to happen in the Silicon Valley housing market in the near future?

No one can say for sure, but let’s look back at housing rate drops during the big crash of 2008-2010/2011 in some different neighborhoods.

These are average prices for all residential real estate. Some segments fell more than others, but on average I looked at what the mean sale was for single family homes, town homes and condos in four locations: Palo Alto, East Palo Alto, 94087 (Sunnyvale west of El Camino), and Willow Glen.

Palo Alto: 

High before crash:  $1.3 million

Low after crash       $1.2 million

East Palo Alto

High before crash:   $628,000

Low after crash:       $295,000

94087

High before crash:    $779,000

Low after crash:        $717,000

Willow Glen: 

High Before crash:     $793,000

Low after crash:         $637,000

What so these numbers tell me about the Silicon Valley housing market, and by extension you?

If you are planning on buying in one of the areas where prices held up fairly well during the crash, then waiting for prices to drop as interest rates rise may not be to your advantage.

If you are planning on buying in a location that did not hold up well during the crash then an increase in interest rates may get you some savings in the long run or maybe bigger, better property.

My only concern would be that places like East Palo Alto that suffered so badly during the crash may not drop as much with higher interest rates since the location is so convenient to Facebook and Google. That may put enough pressure on these east of 101 neighborhoods to keep the prices supported more than they were in the crash.

I believe the same may be true in San Jose as companies like Google and Apple move south where there is more available space. In neighborhoods like Alum Rock or South San Jose where there is a lot of investor activity it may be better to wait until prices fall.

If you have any questions about buying or selling a home in the Silicon Valley please feel free to contact me.