How to buy a home in 10 basic steps
DEAR MR. MYERS: We are buying our first home. You recently wrote that all buyers should make their purchase offer contingent on getting a satisfactory report from a professional home inspector, but how can we be sure that we hire a good one? We have both heard “horror stories” about buyers who wound up with lots of problems after they moved in because their inspector overlooked serious defects.
ANSWER: There is no way to guarantee that you’ll be happy with your inspector’s performance, but there are plenty of steps you can take to find a good one.
Perhaps the best way to start the quest for a reliable inspector is to ask a local real estate agent whom you trust for at least two or three referrals. Relatives and friends who have recently hired an inspector and were happy with the service they received also can provide some names.
Be prepared to ask the inspectors you contact lots of questions concerning their education, years of experience, training and insurance coverage. Also ask how much they would charge for an inspection and which components of the house it would include.
It’s usually best to hire an inspector who works full time, because some part-timers aren’t able to stay abreast of changes in local building codes or take professional courses to help them perform their job better.
Make sure the inspector will allow you to be present when the inspection is conducted. Some inspectors and realty agents don’t like buyers to tag along when the house is examined, but it’s an important opportunity for you to learn about the home’s regular maintenance requirements as well as its current or potential problems.
Finally, you should never hire an inspector who won’t agree to put his or her report in writing: If you simply accept the inspector’s word that the home is in good physical condition, you’ll have little legal recourse if problems are discovered after you move in.
DEAR MR. MYERS: I am in the U.S. Marine Corps and would like to purchase a house near my base for me and my family. Am I eligible for a VA loan, or are they available only to those who have retired from the military?
ANSWER: You are eligible for a no-money-down mortgage backed by the Department of Veterans Affairs now. The VA is happy to insure loans for active military personnel, as well as for those who have retired from service.
The VA will need one of two documents to establish your mortgage eligibility: An official Form DD, a “Statement of Service,” or a letter on military letterhead from your commanding or personnel officer that states your name, serial number, the amount of time you have been on active duty and some other basic information.
Contact your regional office of the VA or visit va.gov on the Internet for more information.
Semper Fi. Thank you for devoting part of your life to keeping our nation strong and our people free.
DEAR MR. MYERS: We moved last year, but rented our old home to tenants instead of selling it. We collected about $3,400 in rental income, but we also had a lot of expenses. What Internal Revenue Service form do we use to report the money we received from our tenant? What deductions can we take against the rental in order to reduce the taxes on the profit?
ANSWER: Income derived from a rental investment must be reported on Internal Revenue Service’s Schedule E form, “Supplemental Income and Loss.”
The IRS permits most rental-property owners to claim many writeoffs that aren’t available to homeowners who live in their own property. In addition to deductions for mortgage-interest payments and property taxes, landlords also are eligible to write off the cost of insuring the rental property; any marketing costs involved in finding a tenant, including the expense of running credit checks on prospects; utility bills that the landlord pays; and the cost of traveling to and from the rental.
Fees paid to a professional management company also are deductible, as are repair bills and expenses paid to an accountant, attorney or similar pros involved in the rental investment.
Most landlords also are eligible to take depreciation deductions for their property, which allows them to shelter even more of their income by writing off their purchase price over a 27.5-year period. In your particular case, though, your future depreciation deductions likely would be based on the value of the home on the date that you converted it from your personal residence to a rental.
Of course, tax laws are complicated, and some investors can’t claim all of the valuable deductions listed above. Consult a tax professional for more details.
David W. Myers’ column is distributed by Cowles Syndicate Inc.