Hogan Administration offers Student Debt Relief Act.

Governor Hogan introduces the Student Debt Relief Act.

Hogan Administration Celebrates Anniversary of SmartBuy 2.0

Over $6 Million in Student Debt Eliminated Through Program

ANNAPOLIS, MD—The Hogan administration today celebrated the one-year anniversary of the launch of the Maryland SmartBuy 2.0 initiative. Managed by the Maryland Department of Housing and Community Development (DHCD), this nationally recognized homeownership program enables prospective homebuyers to eliminate up to $40,000 in student loan debt while purchasing an eligible home through the Maryland Mortgage Program. After a successful pilot of Maryland SmartBuy in 2016, Governor Larry Hogan announced an extension of the initiative in July 2018, greatly expanding the number of homes eligible under the program.

“In Maryland, nearly 60 percent of all of our college students are graduating with thousands of dollars in student debt. This financial burden prevents many young Marylanders from achieving financial security and is a roadblock to homeownership and saving for retirement,” said Governor Hogan. “Today, our administration is proud to celebrate a very successful inaugural year of Maryland SmartBuy 2.0, through which Maryland homebuyers have eliminated millions of dollars in student debt while settling down right here in our great state.”

To support Maryland SmartBuy 2.0, Governor Hogan provided $3 million for the program in his Fiscal Year 2019 budget. Due to demand, DHCD provided an additional $3 million in bridge funding through the Down Payment and Settlement Assistance Program, eliminating a total of $6 million in student debt, an average of $28,000 per participant. For Fiscal Year 2020, Governor Hogan has doubled the program’s original funding to $6 million.

In addition to this critical initiative, Governor Hogan introduced the Student Debt Relief Act for both the 2018 and 2019 legislative sessions. This legislation would have allowed Marylanders to deduct 100 percent of the interest paid on their student loans from their income tax return and would have expanded the Maryland Community College Promise Scholarship Program to include four-year Maryland public institutions. The legislature failed both times to act on these proposals.

“Maryland SmartBuy is the first program of its kind in the nation designed to address the decline in homeownership rates among younger, millennial Marylanders,” said Maryland Department of Housing and Community Development Secretary Kenneth C. Holt. “The program was an immediate success, quickly becoming a national model for similar programs, and, under Governor Hogan’s leadership, we have continued to expand and adapt this innovative initiative to empower more Maryland homebuyers to erase their student debt while securing their piece of the American dream of homeownership.”

Maryland SmartBuy’s mortgage loans are provided through DHCD’s Maryland Mortgage Program, the state’s flagship homeownership assistance program for nearly 40 years. Traditionally, the program provides fixed-term mortgages, primarily to first-time homebuyers, along with down payment and closing cost incentives.

Hussmore Properties

Hussmore Properties Inc.

Hussmore Properties Inc. is a Maryland registered company

It is licensed by the Maryland Real Estate Commission to transact any all business pertaining to real estate listings, sales and rentals.

It is a development company that provide professional services in the following areas:

• ·         Vision Plan Development
• ·         Development Programming
• ·         Land Development Feasibility Studies
• ·         Development Proformas
• ·         Land Planning Engineering Analysis
• ·         Zoning, and Building Permits – Develop all necessary plans for outline approval, Detailed Site Development Plan, Storm Water Management Plan, Environmental Plan and other requirements as per the requirements of the local jurisdiction

Managing Principal

Mr. Outram J. Hussey

Licensed Architect and Real Estate Broker.

For further information visit: https://www.linkedin.com/in/outram-j-hussey-9b256092

Flipping Properties

By Outram J. Hussey

To the investor, Flipping Houses can be profitable, however, full disclosures, ensuring quality renovations and abiding by the laws are necessary prerequisites for long term success.

To the Buyer, proper due diligence is absolutely essential to not only protect your investment but also to ensure peace of mind and quiet enjoyment of your property.

Buying property as an investment and renovating it for sale to realize a good profit has always been with us. I have seen many investors, architects, realtors and building contractors working together to provide valuable  products, services  and who have developed great reputations as a result.  I have also encouraged people to invest in property, to buy, improve and resell at a profit. There are also many programs on Cable Television such as HGTV’s Flip or Flop, Masters of Flip, The Property Brothers and an old favorite of mine, This Old House that indeed  challenge’s us to take up the hammer and build . This can be very positive, rewarding and have acted as a catalyst in many community revitalization projects across the country.  There are times, however, when market forces create a perfect storm for flippers to flood the market.  Sadly for some, the incentive lies in pure profit and sometimes at any cost.

According to Realtytrac, 179,778 single family homes and condos were flipped in 2015 accounting for 5.5% of all such homes sold. In that same time period in Baltimore, Columbia and Towson, MD.  Gross Profit on flipping (per unit) was reported at $91,542 with a gross  ROI (return on investment) of 84.8%,  having  a  median purchase price of  $107,958 and which accounted for 6.8% of total sales.

During the same time period in Washington D.C., Arlington and Alexandria, Va. Gross Profit on flipping was reported at  $96,000 with a gross  ROI of 48%, having  a  median purchase price of  $200,000 and which accounted for 5.5% of total sales. With the type of returns posted for flipping properties it is not difficult to see why so many flippers flooded the market.

Regarding flippers, I have come across four  basic types as follows. Local operators trying to make quick profits via renovations, Out Of Town flippers converging on a region to extract quick profits, large companies  operating in multiple regions sometimes the entire eastern seaboard and  other operators buying , holding for a short period and selling during times of rapid appreciation, sometimes without doing anything to the property.  Smaller out of town flippers enter an area, buy depressed property, hire a contractor and renovate the property. This may also be without a permit if they can get away with it.  After the sale of the building many of these operators disappear. The larger more corporate types buy distressed properties and may or may not monitor closely the renovation process.  This can cause compromises in the construction especially if less than reputable contractors are used to execute the work.  I also want to state that there is nothing wrong with flipping properties per se, as long as there are proper disclosures, ethical practices, a regard for neighborhood and a system of accountability. I also want to state that there are times when bad contractors hurt flippers that want to do the right thing. Irrespective, buyers need to have the assurance that they are not buying a lemon and that their health, safety and welfare remains paramount throughout the transaction.

There are also times when a home owner decides to improve the property themselves in the hope of increasing property value only to end up with shoddy work by a less than reputable contractor.  I always recommend to home owners in these cases that they  a) Document their communications with the contractor, b) Institute regular weekly meetings to discuss the work and  c) To have a contract designed whereby the contractor can be fired if the work is being compromised. I also recommend to everyone doing renovation work to ensure they secure all the required building permits and to ensure that they are not renovating or buying a property where there is  work beyond that which is approved by the permit.

For those buying a flipped property, remember that they  are designed and staged to look great. Good paint with flashy accent colors, fancy kitchen equipment, granite counter top, nice flooring etc.  They have all the buzz that people are looking for. The “New Look”, “Curb Appeal”, A La Mode Finishes such that a buyer may even be tempted not to get a Home Inspection. As a buyer of a flipped property you will always want to do proper due diligence and to thoroughly inspect the property. Shoddy workmanship is a sure tip-off that there may be problems lurking.  Get copies of all issued permits. Ensure that all additions are covered in the permit as there are many reports of additions that had to be demolished as they contravened the zoning regulations.  Get a Home Inspection done and if there are any references to structural issues, get an engineer to check it and issue a corresponding report.  Watch for signs of mold and water penetration and remember to turn on all pipes and let run for a few minutes to ensure there are no blocked drains etc. Also try to secure warranties where possible and ensure that a Certificate Of Occupancy was issued for the building.  This is usually issued by the governing jurisdiction after all permit inspections have been signed-off.

In closing, I hope that this will be helpful to my clients that have engaged me on the subject as well as to the general public. I believe in most cases the motives are honorable, that is, wanting to do the right thing and being financially rewarded for the effort.  As in everything, we need to be vigilant.

 For those of you wanting to hire a contractors or a handyman, the FHA  recently issued a  “Guide To Hiring Good Contractors And Handymen”  that can be found at the following link:  http://fha203kstreamline.org/blog/

Title Considerations

Everyone rushes to buy property. Few question how it 

should be titled.

By Outram J. Hussey

A look at current trends in real estate shows an increase in properties being bought and sold not only by individuals or married couples, but also by three or four persons pooling their resources to buy property. I also see couples buying property with the hope of getting married only to separate (without a marriage) and this, after the purchase of the property. If this couple wanted to be prudent, for example, they may have considered taking title as Tenants in Common coupled with the provisions of a Will.  In addition, given that real estate transactions are being processed faster than ever before, many do not take the time to evaluate the type of title most appropriate for a particular transaction. Executing the right title can achieve significant benefits to the owner, co-owners, heirs and can eliminate the need for probate among other legal benefits. The wrong title can cause significant hardships as well as legal issues. In this blog post, I thought it important to share my perspective on the issue.

Before going any further, however, I want to state that given the importance of title and corresponding legal ramifications, purchasers shall consult legal counsel to avail themselves of the appropriate type of ownership and corresponding title for their particular situation and especially regarding how one may want ownership to pass should there be death, divorce or sale. Keep in mind that escrow and title service providers usually shy away from offering or recommending what type of title may be appropriate as they do not want to be guilty of practicing law. I reiterate, therefore, consult with an attorney knowledgeable in these matters.

When buying property in Maryland, Title can be held in two ways, namely, Sole Ownership or Co-Ownership.  Co-Owners may consist of two or more persons and can hold title in one of three ways. As Joint Tenants, Tenants in Common, and Tenants by the Entirety.

Sole Ownership or Ownership in Severalty is ownership by an individual or other legal entity having capacity to do so. It can be a single man or woman. It is also applicable to a married man or woman who want to own property as a sole owner (which excludes the spouse) however, the spouse not holding title must expressly consent to and disclaim their right to title, usually via a Quit Claim Deed. It is recommended that such an owner executes a Will to avoid problems upon death or incapacitation.

Regarding Co-Ownership. In Maryland, if a married couple buys property and do not specify the type of title desired, The State, by default, specify that the title automatically be given as Tenants by the Entirety. This is a very special title afforded only married couples. What makes it so special is that it has the Right of Survivorship, in that, title passes to the surviving spouse in the event of death. Also, and importantly, a creditor of one spouse do not have an attachable interest in the property unless the debt is uncured by both. Recognize also that in Tenants by the Entirety, a spouse cannot transfer their half of the property without the consent of the other. In the event of a divorce, Tenants by the Entirety is shattered and converted to Tenants in Common.

The other type of Co-Ownership is Tenants in Common which involves two or more owners. Each tenant in common secures an undivided interest or put another way, owns a part of the value of the property. 

This is a very important distinction in that although they may own an undivided interest they may also have unequal rights in the property. For example, one party may own 25% interest in the property while the other may own 75%.

Note that Tenants in Common have the right to sell or transfer property rights to anyone without the consent of the other.  There are no rights of survivorship afforded other tenants in common. Each tenant in common ownership interest passes to his/her heirs upon death.

The remaining type of Co-Ownership is Joint Tenants. Very different from tenants in common in that each Joint Tenant owns an equal share of the property that includes the right of survivorship. This is a most important provision in that if for example two people own a piece of property as joint tenants. If one dies and wills his/her interest in the property to another, the property would pass in its entirety to the surviving joint tenant irrespective of the provision of the will, because of the right of survivorship. Finally, in the event of a three way Joint Tenancy, the tenancy can be broken for a Co-Owner upon transfer his/her interest to a third party. Note that the other two co-owners who did not transfer interests to another remains in the Joint Tenancy with the right of survivorship. The co-owner that transferred property interest now holds a tenancy in common.

In conclusion property can also be deeded to Corporations, Partnerships or Trusts. Given the above, it is my sincere hope that this information will be helpful as you consider your next real estate transaction. Remember to hire a knowledgeable attorney to guide you through the legal requirements, the pros and cons as well as to advise on tax issues and consequences. By doing this you can invest with confidence and power.

At the top of this post I inserted a visual of a house and a Deed. Remember that a Title is a term that means ownership while a Deed is a legal document that transfers title from one party to another. Many of you will also remember that when you went to close on your home you had to sign a "Note". A Note also known as a Real Estate Lien is a promisory Note secured by the mortgage that state the loan amount, rate and time to fulfill the promise to repay.

In some jurisdictions Co-Owners that hold title to property but still paying on a Note may be able to enter into a TIC (Tenant in Common) structure with a third party  thus creating Fractional Ownership. In this scenario a mortgage company will want each of the TIC participants to sign the Note solely. In the event that one of the co-owners default on the loan, the mortgage company will only be able to foreclose on that owners share.

Upcoming Legislation

To all my Clients

.

I was recently appointed  to serve on the Prince Georges County Association of Realtors Legislative Committee. In this position I will be better able to serve the general public in reviewing, debating and recommending changes to proposed Bills slated to be passed into law. This to ensure  no adverse effect on residents and to ensure that passage of the Bill brings the greatest benefits to the region.

I had advocated for this committee position given my long track record in the region arguing before various zoning boards to change existing zoning and land uses.  Recognized as an expert in these matters I wanted to serve to bring about meaningful, positive and  fiscally responsible changes while improving the quality of the various communities in the region.  

Upcoming Legislation:

Review of Local Legislation (Prince George’s County House Delegation & County Council)

a. PG 407-17 Property Tax Exemption for Economic Development Projects - Sunset

    Repeal

b. PG 409-17 Video Lottery Terminal Proceeds-Use of Local Impact Grants-Community

    and Homeowners Assoc.

c. PG 410-17 School Facility Surcharge Exemption-Veteran Housing

d. PG 411-17 Tax Sales - Limited Auction and Foreclosure for Abandoned Property

e. PG 413-17 Tax Sales - Release of Liens on Vacant Property

f. PG 416-17 Academic Revitalization and Management Effectiveness Task Force

g. PG 418-17 Municipal Authority to Regulate Fences

h. MCPG 108-17 Prince George's County-MNCPPC Budget and Operation Study

i. MCPG 109-17 WSSC - Polybutylene Connection Pipe Replacement Loan Program

j. CB-59-2016 An Act Concerning Landlord–Tenant Code Drug Activity and Prostitution 

Please remember to contact me to advocate your position on any of the above.

A New Day For MRIS

A "BRIGHT" day for Real Estate

By Outram J. Hussey

The Metropolitan Regional Information System (MRIS) encompassing the District, Maryland, Northern Virginia, Delaware, West Virginia and parts of Pennsylvania  has consolidated with eight other Mid-Atlantic multiple-listing services to cover  approximately 40,000 square miles and over 10 million property records. The Listing Services consolidated are Sussex County, Del.; Cumberland County, N.J.; and Philadelphia, Harrisburg, and York, Adams, Lebanon and Lancaster counties in Pennsylvania.  The new entity “Bright MLS” is now the largest MLS in the nation.

What does this mean for you.

The new Bright MLS will mean that I can get quicker access to listings in a much broader geographic area. This combined with new technologies allow for better services to both buyers and sellers.  This is in response to industry demands for the MLS to break down barriers and provide real estate professionals with expanded property information exceeding what consumers can get from publicly available websites.

Bright also provide more access to information, more  reporting  capabilities and products as well as  streamlined data analytics.   This equates to more power to explore, expand and be of greater service to our clients.

Creating Assets out of Liabilities - Rental Properties

Profit From Owning Residential Rental Properties.

By Outram J. Hussey

Because I have invested in residential properties for over  30 years, many have asked me about the investment advantages as well as about  contractual and management challenges.  Many times, before answering,  I try to assess the temperament of the person, leadership qualities and the ability to manage outcomes effectively. 

Why is this important? 

Because investment property, to be a good investment depends not only on the numbers but also in good management ability. So, if you are ready to take on the challenge, you will find that residential rental properties can lead to wealth, independence and freedom. Before going any further, however, I must state that I am not a real estate lawyer or an accountant  who specialize in rental/investment properties and thus you must seek such professionals for legal and tax advice before undertaking such investments.

Why The Investment?

When you own a home and live in it you carry a liability. That is, you take money from your income and pay another (The Bank) for its use. In other words, you pay the bank for which your home is an asset, and for you a liability.  For the home owner,  it is not an investment, at least not the type we are about to discuss, and yes, for the average person a home  will overtime become the single most important investment .  For the purposes of this blog, however, we are setting out how the average person can transform the liability into an asset by renting . An asset (capital) works for you. Once this is done you would have effectively become an investor. This sound all wonderful and good but there are strict guidelines to follow to realize the benefits.

Other Investors

Be cognizant of the fact there are other investors that also invest in residential property such as professional out of town investors or local investor groups. For whatever reason they turn to residential property to edge their investment bets,  these groups  assess  rate of returns and conduct their negotiations and acquisitions accordingly. Many of these are not Passive but Active investors. We will discuss this again later in the blog. Be careful if competing with these groups as their investment needs may be different from yours. Know what you want to achieve and negotiate to your best interest.

The Magic of Income Property

Many discover very quickly that rental property makes money (rental income) and carry expenses such as taxes, insurance, mortgages, repairs etc. They also discover that the IRS allows them to depreciate the property (Building, not land) over 27.5 years. That is, the IRS say that properties lose value over time and they allow you to write off that as a loss. The IRS also allows you to write off mortgage interest on your mortgage as well as travel expenses, operating expenses etc. but not capital improvements.

The Magic Of Appreciation.

As an investor you want to always assess future appreciation. That is, the property’s potential to increase in value over time. If you buy right, appreciation can be significant. If you buy wrong, it may not be good.  Therefore as an investor, rental property has the potential to reduce your taxes, provide income, increase your asset base, edge against inflation and put you in the driver seat of your own investment portfolio.  It should be noted that this do not apply to flipping properties. The IRS considers rental property income to be “passive income” and it is only in passive income that these so called tax loop holes exist. If you are aggressive and get into flipping, that is referred to as “Active” income and does not get the same perks.

Management

Once you decide to invest in rental properties there are important requirements to follow, such as:

• Have a properly executed contract drawn-up  by an experienced attorney in these matters
• Ensure the property passes a rigorous property inspection
• Ensure there is no mold or other environmental issues.
• Ensure that Lead Paint issues and notifications etc. are properly addressed.
• Be active in good management principles, if not, hire a property manager.
• Address issues promptly.
• Maintain proper accounting records.
• Utilize an accountant skilled in these matters to do your taxes.
• Ensure all Fair Housing requirements are met.
• Ensure your Rental License is current.

Tracking The Efficacy Of Your Investment.

 As an investor you will begin to track your investment. This means managing expenses, keeping vacancies to a minimum, assessing tax advantages and brackets and tracking returns on the invested dollar.  If you decide to sell you will need to figure taxes and its impact on returns. When dealing with investment properties we usually refer to the calculations as “Running The Numbers” In our case we will need to” Run The Numbers”  to show the Return on the Investment (ROI).  Recognize that many first time home buyers wanting  to move-up, may purchase another property, rent the first and repeat the process. In so doing they enter the investment arena and will ultimately do better at investing by proactively calculating their ROI. Given that many people ask what is the ROI and how can it be figured, I thought is best to give a simple example as follows.

  

ROI for Real Property (When financed via a mortgage)

For this scenario let’s figure a 20% down payment on the sale of a house for $240,000.00.

In addition, let’s say we will be paying (out of pocket)  $48,000 ($240,000 sales price x 20% down payment), plus $14,000 for remodeling and closing costs, for a total of $62,000 (out of pocket expense) The amount therefore financed is $192,000 ($240,000 - $48,000 down payment), and if we were to place a  30-year loan at 4.0%  the principal and interest (P&I) would be $916.64 per month.  If the taxes and insurance comes to  $450 per  month,  then our  total monthly  payment would be $1,366.64. Lets say the tenant pays rent each month for 12 months, then each month we would realize a positive cash flow of $733.36 ($2,100.00 rental less $1,366.64 mortgage payment). 

Multiply $733.36 x 12 and the annual cash flow = $8,800.32. To find the ROI (Return On Investment) divide $8,800.32 by $62,000 (cash in) which equates to 14.19 or 14.19% ROI.  Therefore, the ROI from the annual cash flow is 14.19%. Remember ,however that the mortgage payment included for principal pay-down which actually builds equity into the deal every month.  By printing the amortization schedule you will notice that a total of $3,094.24 would be paid over the 12 month period toward principal (equity). Therefore by adding the $8,800.32 (Cash Flow) for 12 months to the $3,094.24 (Principal pay-down or equity build-up)  we get  $11,894.56. Recognize therefore that instead of an ROI of 14.19%, the  ROI is increased to 19.18% . 

Finally, your accountant will factor in the depreciation on Line 18 (Schedule E) of the IRS Form 1040. This is listed as an expense which  may allow for income losses further boosting your ROI. Remember to always check with your accountant regarding tax/investment  issues.

Young investors and sadly even mature investors need to be reminded constantly of tracking the key elements that makes a successful investment. That is, always be conscious of the relationship between acquisition costs, terms of the agreement (loan type, rate, time, points etc.),  carrying costs, potential for appreciation and taxes. Each of these affect the ROI over time and a movement in one element means a change in another to maintain the desired ROI for the investment objective.