Tax Time is Coming!

It can be daunting to figure out what documents you need to give your CPA or tax preparer in regards to your home, mortgage and real estate investment properties, so I’m here to make your preparation a little bit easier by answering some common questions I get.

Q: I own a house that I live in full-time as my primary residence, what are the basic documents you need each year?

If you have a mortgage, you should get a form 1098 from your mortgage lender showing the total interest that you paid during the year in Box 1. If your lender pays your property taxes on your behalf (aka you ‘escrow’ for your taxes) then your real estate taxes for the year should also be on this form (check out Box 10).

If you handle paying your own property taxes then you’ll also want to locate a copy of your tax bill. If you can’t find the original copy that was mailed to you around September, then you can look it up on the county website by your address.

Q: I bought or sold my house in 2020, do you need anything additional?

Yep! We’ll want a copy of the Closing Disclosure (CD) that you signed at the Closing Attorney’s office when you bought and also when you sold. Your costs to close on the home may be deductible on your taxes whether you are the buyer or the seller in the transaction. Also, depending on when during the year you purchased or sold the home there may be some information relating to the proration of property taxes that we’ll need to take into account when preparing your taxes.

If you sold your home we may ask you for a copy of the CD from when you originally purchased it. This can appear tedious, but please know that if we’re asking for this it’s very-very important. We’re calculating how much gain you earned on the sale of your home. If you sold your home for much more than you originally purchased it for, there are exclusions for the gain with the amount of the exclusion being tied to whether or not you’re married for tax purposes. We may also ask you for a listing of improvements you made to the house during the time that you owned it. These expenses can help to minimize how much of the gain you have to pay taxes on.

Q: I refinanced my house, how does this impact my taxes?

The costs you paid to close on the new loan may be deductible for tax purposes, so please provide a copy of the Closing Disclosure (same as above). If you took out a line of credit (also known as a second mortgage) on your home, the costs to set this up and the interest you pay might be deductible for taxes but only if you used the money to expand or substantially improve your home.

Did you take a LOC on your home to pay off credit card debt or something outside of home improvements? Then it’s not deductible on your taxes.

Q: I have a rental property, what do you need to include it on my taxes?

Assuming that you don’t own the rental property within another entity, the income and expenses will be included on your personal tax return. We’ll want a schedule showing all of your rental revenue and all of the related expenses you paid for the property during the year.

If you made any improvements or repairs that cost over approximately $500 and have a useful life greater than one year, (for example: a kitchen remodel, a new furnace, new roof, etc.) we’ll want a listing of those items and amounts paid as well. Instead of claiming the expense deduction all in one year, we will claim the expense ratably over the next few years that you theoretically use the improvement.

Q: I currently rent, does this impact my taxes?

Nope, renting does not give you any tax benefits. There are no writeoffs for renters like there are for people who own their home. This could be a really good reason to look into buying a home instead of dealing with increasing rental prices on a yearly basis.

Q: I have a question about real estate and taxes that you didn’t answer here. What do I do?

Reach out to your tax professional or shoot me an email at erincoffey@kw.com I will try to answer general questions as best I can. Please note that anything I say here is not to be construed as tax advice. If you have a question about your specific tax situation it’s best to reach out to someone who has all of your details, I’m only discussing general ideas and information here.

Broken Hearted

I’ve been going back and forth for the past few days about whether or not I would write about this here, and ultimately I’ve decided that this space is here for me to be a multifaceted and dynamic human with personal heartbreak and struggles behind my professional persona. As humans we bond through the common ground of our imperfections and our struggles, not our perfectly-curated social media lives. Isn’t it odd that we spend so much time stressing over perfection when it isn’t what brings us together in support of one another?

I’ve known for some time now that I would soon be losing Snoop Dog, my beloved Italian Greyhound that I’ve had since I was 19 years old. Knowing that a loss is coming doesn’t make it any easier to handle. On Sunday, the day I had been dreading came true and things moved much quicker than I had anticipated.

I thought that I would have control over timing and saying goodbye, but I didn’t. At 11am with him wrapped in our favorite blanket, laying next to me in bed as I made one of a million different phone calls of the day, Snoop stopped breathing and my world came to a crashing halt.

Snoop has been the constant presence in my daily life for over 15 years. Since picking him up from the breeder at 12 weeks old, he has been connected to me at the hip, usually quite literally. He has been my stage 5 clinger, best friend, cuddle buddy, partner in crime, chief invader of personal space, bed warmer, blanket stealer, the list can go on and on. He was the unwavering emotional support as I walked through the good and the bad of my life. I thank him every day for watching over me as I battled the most difficult depression of my life as I lost myself and my marriage, to then stand alongside me as I built myself back up again piece by piece. He was the only one with me each day and each moment in a little downstairs apartment in Asheville as the deepest, darkest emotions took hold of me and all I could concentrate on was continuing to breathe in and then back out again. He was the one thing that I brought from my old life in Rochester to my new life here in Charlotte.

Anyone who knew Snoop, knew that he was so much more than a dog. He was a feisty ball of energy that would make sure I knew his feelings on everything and everyone that we encountered. He had a huge personality and he always stood his ground. He knew how to joke and be silly, and always made me laugh. He loved a good puzzle but would only perform tasks for treats, and even then they needed to be good ones. If they weren’t up to par he would let me know. He was the only dog I’ve known that could be passive aggressive when he didn’t get his way and it cracked me up. Every. Single. Day.

Last year as I noticed his physical decline I got him his very own pitbull. He was NOT happy about it and he let it be known until he realized 1- she’s soft and warm to cuddle with, 2- he could boss her around and 3- she came into our lives to takeover as my canine caretaker. He no longer had to push himself to keep a close eye on me and make sure that I was ok. She took over as my shadow as I worked on projects at my home, became my hiking buddy and my protector from fierce predators like the Amazon delivery guy and any man who dared to take me on a date.

Words cannot begin to describe how much I miss my guy and the vast impact he’s had on me and my daily routine. Even the simplest task of opening the fridge door to make breakfast has ended tearfully as he would’ve been right under-foot letting me know that he was present and ready to steal anything that he could possibly reach out of the deli drawer. It has only been a few days, but I know that this sadness will be lingering. I miss my guy and I miss the joy he brought to our home.

Rest peacefully Mr. Man, until we meet again.

Can You Flip? Or Will It Flop?

It’s amazing how much financial security that real estate can bring, and the popularity of HGTV show a very rosy and glamorous side of real estate investment. This gives many people dreams of buying homes under value, putting in some sweat equity and selling it a few months later for a nice profit. It’s like the American Dream… or is it?

With the tight market in Charlotte and such a high demand with new people moving here each year, finding a low-priced house in a good neighborhood that needs a little TLC is rare these days. A lot of the flips that garner big returns in a few months have already been flipped and re-marketed, so it’s important to branch out from the 3 bedroom/2 bathroom in a well-known neighborhood where grandma lived for 40 years and didn’t update.

Location

Once upon a time the neighborhoods like Plaza Midwood and NODA were the up-and-coming areas, but now they have clearly “arrived” and the prices of homes reflect this. So it’s time to branch out and look for the next great area. Yes, it is a bit of a gamble, but so was buying in South End circa 1990 which was once an industrial park fraught with environmental issues (curious? Brush up on your South End history here.)

Bottom line: What’s old is now new and what was once an EPA nightmare is now highly-sought after real estate. The next great neighborhood won’t look like much today, but buying in a lesser-known area where you see potential for gentrification could pay off big in the future.

Investment Timeline

While flips are often viewed as short-term projects and investments, there’s something to be said for a buy-and-hold property. Going along with the possibility of area gentrification, having a longer view on the investment and generating rental revenue both before and after the renovation could allow significant growth in the home’s value and a steady stream of income during that time period. Make sure you’re prepared to be a landlord or you find a great property management company to handle all of the ins and outs of tenant relations, maintenance and repairs, collection of rents and navigating the scary world of evictions.

Price Point

Flips don’t only occur in the 100k-250k range, though that’s where most people think of them. There are opportunities at all price ranges, even million dollar homes if you’ve got that kind of investment capital to spare. At higher price points the profit margins may be smaller, but they’re still there for savvy investors that are happy to stick to a budget and always plan for an unknown expense.

To find a home that is a good contender for a flip like this, look for a home priced under the median price for the neighborhood, like a 300,000 home for sale in a neighborhood that usually hovers around 500,000 for a home. The difference can often be one was updated to reflect current tastes and the other is in the same aesthetic it was when it was built, whether it was built in the 1980s or the early 2000s.

Oftentimes when a buyer purchases a home in a new construction community they are doing so because they don’t want to make updates or take on improvement projects. So, when they go to re-sell the home 10 years later there can be a dip in price because it looks and FEELS like a 10 year old home. Older paint, brass bath fixtures, and Formica countertops are all tell-tale signs of a below-market price home.

I believe that there are always opportunities in the real estate market, however, those opportunities may look a bit different from what you see on HGTV. Different markets, different factors, different strategies needed.

Happy flipping!

The Wall That Started it All

When it comes to home projects and posting my adventures to social media, I am in what Brene Brown lovingly calls an FFT — a F*cking First Time. Everything is new, and scary, and VERY overwhelming. One small detail can (and will) take hours of research, planning, stress and maybe some tears. Spoiler Alert: I have no idea what I’m doing. But with struggle comes learning, and if you keep struggling long enough success will come.

The board and batten wall brings visual interest to this space that was once feeling boring and blah. The addition of a rug and updated lighting (both the fan overhead and the bedside reading lights) adds personality without adding anxiety-inducing busyness. I wanted this space to be light, calming and uncluttered. Aside from the wall, most updates to the space are items I already had, aside from lighting fixtures, the full-length mirror and a few new bedding pieces. The grey throw blanket was a whopping $7 in the ikea final sale section you walk by right before checkout.

Nothing worth doing is easy, and one of the most difficult parts of the lesson might just be smiling through criticism from those not on the journey. Everyone’s life is in a constant state of shifting and change. During my most-recent big shift I came to the realization that I’m sick of things being “just good enough” in all areas of my life. There are many areas that I can’t immediately change, but I could make baby steps in creating a space and a home that I love.

As I researched where to start on my home, I realized that I already knew a lot more than I thought. Whether it was from selling real estate, quizzing my favorite home inspector, or watching endless Instagram stories of other women designing, demoing and recreating all sorts of spaces, I already knew things. And I wasn’t giving myself enough credit for it.

Before this project I did not know how to use, nor did I even own: a mitre saw, a nail gun or a caulk gun. I had never cut a piece of wood with a power tool in my entire life. My father was (and likely still is) scared for me. Maybe it’s best that he’s quarantined in New York while I do all of this crazy stuff that he can’t come and save me from. Regardless, he and many other people held my hand (virtually) throughout the process and answered some ridiculous questions on FaceTime along the way.

I do not pretend to have come up with the coolness that is this board and batten wall project, so go visit Angela Rose Home for the full tutorial, which I followed like it was my new religion. As I dream up big ideas don’t be surprised if you find my own tutorial here (those pendant lamps are 100% me and definitely started life as ikea planters), but until then, I’ll enjoy learning the tools of the trade and sharing some photos and styling ideas!

This wall project taught me that I can do big, scary things. You can too. If you’re stuck in an FFT, keep going. And push yourself to share your triumphs and your struggles along the way. You will surprise yourself, and you’ll be surprised by how many people will be cheering you on.

Know Thy Neighbor… and Neighborhood too

When searching for a home it’s great to shop online, and honestly, that’s the only way to be successful these days for the average homebuyer. While you can find out many details about the house you’re interested in, it’s almost impossible to learn about the area and the neighborhood unless you KNOW the area and the neighborhood. In Charlotte, one street can make all the difference between luxury living and “wouldn’t walk my dog there on a dark night,” so what can you do?

Many of my clients will ask my opinion, which I am always hesitant to give out for two reasons: one, anything I can say can be construed as trying to steer you one way or another (which is illegal), and two, I don’t have a good baseline of what you consider “safe” or “good” so any opinion I have might not align with what you’re looking for.

Case in point: I had a friend live with me for a few months and after the first week she said that she couldn’t believe that I lived in such a “rough” area. For context, I do live on the edge of two distinct neighborhoods, if you turn one direction out of my driveway you will see new homes ranging from 600-800k, and if you go out the other direction you will see questionable characters standing on street corners. I generally understand where my friend was coming from, but I also don’t agree with her. Alas, this is why I am so finicky about sharing my personal opinion, and instead I offer some options for my clients to make their own best decisions.

Safety

As with my friend, one person’s “safe” is another person’s “no way” so there are tons of online resources that I give to my clients including the Charlotte-Mecklenburg police department website, CrimeMapping.com and AreaVibes.com. It’s important to know that negative reports will always outweigh the good and it’s equally important to see what a rating would be for a city you know and are familiar with. You might just see that your lovely hometown doesn’t fair as well as you thought it did in these website ratings.

What’s most important, and something I stress that all of my clients do, is to drive around a neighborhood that they may be interested in. And I don’t just mean a quick drive on a sunny Sunday afternoon. What I actually mean is go there around dusk on a Friday night, drive through at midnight, take an extra few minutes one morning and drive what your commute to the office would be from that neighborhood. You would be surprised what you can find out about a neighborhood by taking a few extra minutes there.

Also, during your drive through I recommend taking a walk down a few streets during a time when people have just gotten out of work and will be the most active outside. This gives you an opportunity to say hello to the neighbors. While it can be a bit uncomfortable to speak to someone, most people are happy to talk about their neighborhoods and to connect over the mutual interest. They will also tell you the good and the bad, and will be much more candid with you than the sellers or their agent will be with me.

Fun example: in that 600k-800k part of my neighborhood there are a few older homes sprinkled throughout. One of those homes illegally keeps chickens on the property. This is a well-known detail within the neighborhood, they’ve been there for eons but how would you feel if your first Saturday morning in your new half-million dollar home started with a rooster crowing at 6:30am? While I’m certain it’s against city ordinances to keep farm animals within the city limits, there’s also something to be said for getting grandfathered in because you’ve been around for the last 25 years living your best chicken-keeping life in the same house, on the same block. Who are we to stop them?

Schools

A parent’s choice for their child’s education is deeply personal and has a hefty impact on that child’s future, so it’s a big deal. I have had appointments on the same day with different families, and one family thinks school X is absolutely amazing but only a few minutes later I hear that school X is absolutely terrible and this second family only wants their child to go to school Y. Both sets of parents are right. Everyone is entitled to their opinion and everyone is entitled to pick their child’s education. Do not give me or any other real estate professional the power to tell you otherwise. Again, jump online and look at some school ratings, find the PTA and parent groups on social media, and talk to someone who has their kids in that school. You can ask all of the questions and get the unfiltered answers from the people who really know, and then make the best decision for you and your family.

It’s also important to note that school districting lines change every few years around here, so if there’s a school that you would like your child to be in it’s imperative that you go the extra mile. I can confirm with the seller’s agent and call the school district to double-check, however, there may be changes in the future that I’m unaware of. Parents and students that are going to be directly impacted by a change are the best to know details, so again, talk to your school’s PTA and parent groups for any pending details.

Here are some additional school resources, and of course there are more out there depending on where in Charlotte you’re interesting in buying:

  • Greatschools.org – widely known for rankings
  • MeckEd – shows some additional statistics for rankings in Charlotte-Mecklenburg and where they’re expected to go over the next few years
  • SchoolDigger – includes data from National Center for Education Statistics, U.S. Department of Education, the U.S. Census Bureau and the North Carolina Dept of Public Instruction
  • Charlotte-Mecklenburg School District