Looking for what's new and what's now in the real estate world. The Jersey Group and Bob The Broker have joined forces on this blog dedicated to all aspects of the real estate business.

The “bubble” is bursting; the housing market is crashing; doom and gloom in the housing industry. Yes, everyday we open the paper and see new headlines like these. With all this negative publicity, am I really going to come out and tell you that now is a good time to invest? Yes I am…

In the short term, Real Estate makes a great investment simply because the numbers are so large. It is not like buying a $200 watch and reselling it for $250. Yes, the return percentage will be high, but you still only made $50. With Real Estate, a decent rate of return can mean big profit dollars. This is especially true when you take into consideration very little of the funding for the investment comes out of your own pocket.

In the long term, historically, Real Estate property has shown a consistent growth in value, even when some other investment choices were less stable. If there is an increase in value and you are paying down your mortgage balance, it’s pretty simple: You increase your equity in the property and add to your net worth. In addition, there may be tax advantages available to you when you deal in a long term Real Estate Investment. Although there are definite limits to these potential advantages, they can be substantial. Consult a tax or legal professional to see how this opportunity could impact your situation.

Why invest in Real Estate now? With so many investment avenues available (and with Wall Street riding a multi-year bull market) it is a legitimate question. It is true this past year has seen appreciation rates level off in several areas where prices have been skyrocketing the highest, even declining in some of these areas. That being said, since 1968, houses averaged an appreciation rate of 6.34% a year (National Association of Realtors). With prices coming down in the short term, while mortgage rates continue to remain near all time lows, why not buy as an investment?

Building up real wealth in real estate takes time. You need patience, knowledge, and the assistance of an excellent real estate agent who can help you find good deals. Then, you need a real estate attorney to make sure you're crossing your "Ts". You also need a great mortgage broker who can work with you over time.

Creating a home buying team is an important step toward giving you confidence. I would also urge you not to bite off more than you can chew. Start off with a condo or a single family house that you can make minor improvements to (paint, carpet) and rent out for enough to cover the mortgage. With a single family house there is no inter-tenant squabbles to mediate; no extra systems to worry about because there's only one furnace, one electrical panel, one gas meter, etc; and best of all, because you are renting out an entire house, tenants tend to take care of it as if it were their own.

Deducting Mortgage Interest. Mortgage interest on a primary residence is usually fully tax-deductible, unless your mortgage balance exceeds $1 million or you took out a mortgage for reasons other than buying, building or improving a home.

To claim this tax deduction, you should fill out Schedule A, labeled "itemized deductions." Your lender should send you a "Form 1098" that tells you how much mortgage interest you paid for the year. You should record your interest deduction on line 10.

Late payment charges also may be deducted as home mortgage interest if not for a specific service received in connection with your home loan. The same is true for mortgage prepayment penalties—if you pay off your mortgage early and incur a prepayment penalty, you can deduct that penalty as home mortgage interest (subject to the same requirements for late payments).

Deducting Real Estate Taxes. Real estate taxes, which are annual taxes based on the assessed value of a property, also are tax deductible. Your mortgage interest statement may list the amount of real estate taxes you paid if your taxes and homeowners' insurance were placed in an escrow account when you closed on your mortgage. If real estate taxes aren't included, you could review your cancelled checks to determine your total real estate tax deduction.

Deducting Loan Points Paid on a Purchase. The points you pay on a purchase mortgage are deductible the year you made the purchase. You can deduct any points you paid—and that a seller paid on your behalf*—if you meet the following criteria:

• The loan is secured by your primary residence and the loan was used to buy, improve or build the home.
• Paying points (and the amount of points paid) is not an irregular practice in the seller's geographic area;
• The points are computed as a percentage of the loan principal;
• The points are clearly delineated on the buyer's settlement statement; and
• You put cash into your home purchase in an amount at least equal to the points you were charged.

*Seller Paid Points are Deductible by the Buyer. When a seller pays points for the buyer (or in other words, buys the mortgage rate down) the buyer gets a lower mortgage rate.

Deducting Loan Points Paid on a Refinance. If you refinanced last year, you may be able to write-off any points you paid to buy down the mortgage rate. To do so, you deduct the points proportionately over the life of the new loan. For example, if you took out a 30-year loan, you would deduct 1/30th of the points you paid each year.

Have you refinanced more than once in recent years? Many homeowners may have overlooked an important opportunity. Say, for example, you refinanced in 2003 and paid points. You can deduct 1/30^th of those points in that tax year. However, say you refinanced again in 2006, paying off that 2003 loan. The remaining points from the 2003 refinance-that is, those that hadn't yet been deducted-can now be deducted in full since that loan has been paid off.

Deducting Interest on a Home Equity Loan. The interest on a home equity loan is usually tax-deductible*. However, if your home equity loan when combined with your first mortgage amount, increases the debt on your home to an amount more than the property's actual value, there may be deductibility limits. Usually, you can deduct the smaller of interest on a $100,000 loan or your home's value less the amount of your existing mortgage.

As always, you should check with your tax advisor to determine
which of these deductions apply to you!