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| Current Value | This is the market value, the appraisal value or the estimated price the property would sell for in the period determined. |
| Purchase Price | This is the price the property was purchased for and is used to establish a basis for the property. If there were any major improvements that could be added to the basis such as rehab costs than you should add this to your purchase price. It is up to you to determine whether the improvements are allowable additions to your property basis based on IRS code. |
| Down Payment | This is the down payment applied to the purchase price and is deducted from the purchase price in deterimining the amount financed. |
| Original Mortgage Balance | This is the original mortgage balance of your most current first mortgage loan. So if you have refinanced the original loan used to acquirer the property, then you would enter the starting balance of the most current loan. This is used to calculate you current mortgage payment, hence this amount should reflect the original principal amount of your current mortgage loan. |
| Remaining Mortgage Balance | This is the remaining outstanding balance on your mortgage. This is used to determine the net equity in the property by subtracting the remaining mortgage balance from the estimated sales price. |
| Mortgage Term | This is the term of the current first mortgage loan. |
| Mortgage Rate | This is the rate of the current first mortgage loan. Only a fixed rate amortizing loan can be processed using any of these models. |
| Rent | This is the annual rent the property generates. |
| Real Estate Taxes | This is the annual real estate taxes. |
| Maintenance | This should include the annual insurance, water, maintenance and repairs or any other expenses that you want to include in the analysis. |
| Ordinary Income Tax Rate (A) | This would be an estimate of your ordinary income tax rate and is used in this analysis to determine any benefit from deducting allowable homeowners expenses such as mortgage interest and real estate taxes. It is up to you to determine this tax benefit as a percentage of mortgage interest and real estate taxes. The benefit of deducting mortgage interest and real estate taxes can vary sustancially depending on each individuals circumstances and in some cases may present NO benefit at all. |
| Can You Deduct Mortgage Interest and Real Estate Taxes From Your Personal Income Taxes? | Select YES if you would like to apply ordinary income tax rate (A) to the sum of mortgage interest and real estate taxes in estimating a tax benefit for these personal expenses. Select NO if you would not like to calculate any tax benefit from personal mortgage interest and real estate taxes. |
| Ordinary Income Tax Rate (B) | This would be an estimate of your ordinary income tax rate and is used in this analysis to determine any taxes on net rental income after deducting operating expenses and depreciation. If you have a net operating loss from rental property operations and you are allowed to deduct operating losses from rental property activities rather than carry them forward, then this number is used to calculate the benefit associated with those losses. It is up to you to determine this tax benefit or tax liability as a percentage of rental property operating gains or losses respectively. |
| Can You Deduct Operational Losses From Your AGI? | Select YES if you believe that you can deduct operating losses from real estate activities against your personal income taxes. Select NO if you believe that you are not eligable to deduct operating losses from real estate activities against your personal income taxes. If you select NO operating losses from real estate activities will be carried forward until the property is sold. Once the property is sold accumulated loss carry forward will be applied to and gain you have on the sale for business property. |
| Federal Capital Gains Tax Rate | This figure is used to determine the amount of federal taxes due as a percentage of any gain on the sale of the property after any allowable tax exclusion. It is up to you to determine the tax rate that would apply to you. |
| State Capital Gains Tax Rate | This figure is used to determine the amount of state and local taxes due as a percentage of any gain on the sale of the property after any allowable tax exclusion. It is also used to determine the amount of state taxes due as a percentage of any depreciation recapture on the sale of the property. It is up to you to determine the tax rate that would apply to you. When people discuss the federal capital gains tax, they often overlook their state may tax the gain on the sale of property as ordinary income as well. When people discuss the federal capital gains tax, they often overlook their state will tax the gain on the sale of property as ordinary income as well. |
| Will you qualify for the $250,000/$500,000 capital gains tax exclusion at the time of sale? | This model assumes that your state allows for the exclusion if you qualify for the federal exclusion. You need to check and see if your state allows for an exclusion. In summary the IRS allows an exclusion of up to $250,000 for single individuals and $500,000 for married couples filing jointly on the sale of a principle residence. The exclusion can usually be claimed only once every two years. In order to qualify you must have owned and lived in the residence (as your primary residence) for two of the last five years before the sale. The ownership and use periods need not be concurrent and can consist of 24 months or 730 days. For homeowners that are not married the exclusion of up to $250,000 each would apply as long as both individuals meet the qualifying exclusion requirements. The tax law provides for an exemption of the two year rules for use and ownership, when the primary reason for the sale is health, change in place of employment, or “unforeseen circumstance” as defined or determined by IRS regulation. This information comes from the www.irs.gov website and can be found under http://www.irs.gov/newsroom/article/0,,id=105042,00.html titled, “IRS Issues Home Sales Exclusions”. |
| Depreciation Recapture Federal Tax Rate | This figure is used to determine the amount of federal taxes due as a percentage of any depreciation recapture on the sale of the property. It is up to you to determine the tax rate that would apply to you. |
| Any Prior Year Carry Forward Losses | This figure is used to either offset any subsequent years profit or to offset any taxes due from a gain on the sale of the property at a later date. |
| To Date Accumulated Depreciation | This would be the depreciation that was taken on the property in any of the previous years up to and including through the time of sale. Depreciation must be recaptured and taxed at the federal, state and sometimes the local level. In most instances the federal depreciation recapture tax rate is 25% and the depreciation recapture is taxed at the state and local level using your state and local ordinary income tax rates. This number can NOT be greater than building value. |
| Building Value | For depreciation purposes you must seperate building value from land value. Depreciation is calculated on a straight line basis for 27.5 years. For depreciation purposes you must seperate building value from land value. Depreciation is calculated on a straight line basis for 27.5 years. Do NOT adjust for the percent which is residential non rental. This will be automatcally calculated using the percentage you entered at the top for residential non rental property. |
| Appreciation/Depreciation of Asset | This what you estimate to be the percentage of annual increase or decrease in value of the property over the next 5 years. |
| Increase/Decrease Rent | This what you estimate to be the percentage of annual increase or decrease in rent over the next 5 years. |
| Increase/Decrease Real Estate Tax | This what you estimate to be the percentage of annual increase or decrease in real estate taxes over the next 5 years. |
| Increase/Decrease Maintenance | This what you estimate to be the percentage of annual increase or decrease in maintenance over the next 5 years. |
| Any Prior Year Carryforward Losses | If you had losses in prior years and answered "NO" to the previous question then you may have had losses that you carried forward. This number can NOT be greater than "Building Value" multiplied by the percentage of the asset that is rental property. If you had losses in prior years and answered "NO" to the previous question then you may have had losses that you carried forward. |
| Percent Residential Non Rental Property | Percent of the property you occupy as your primary residence. As an example if you own a four family home and occupy one of the units while renting out the other four units, then 1/4 or 25% of the building would be considered residentcial owner occpied property while the other 3/4 or 75% would be considered rental property. |
