My Wealth Journey

I got back my tax return for my personal and corporation from my CPA and I’m getting money back this year instead of owing money! To be fair, I made more money from my affiliate marketing in 2005 than 2006 but I also was able to take advantage of my rental properties’ depreciation and added money to my SEP IRA to reduce my taxes I would have to pay. The CPA charged $600 for the corporate return and $250 for my personal.

For those of you who don’t have real estate holdings, see if you can pick up something that cashflows to take advantage of depreciation and build up equity. Finding properties that cashflow will be tough unless you head to the midwest and put down 5-20% on a property. Again, don’t buy a property solely for tax depreciation but if the deal makes sense, and can get a good deal, a rental property is great come tax time. Obviously, be careful about buying homes in warzones and areas you wouldn’t feel comfortable living in unless you feel you can handle it. My holdings are all out of state so I try to avoid those area. There are people who make a ton of money buying in warzones but I don’t think I have the heart for it.

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I have a gambling nature. Not the kind that likes to go to the casino and just gamble away thousands of dollars but I love taking chances when it comes to money. Last week I shorted AKAM at the wrong time and ended up losing about $1,200 in a few days. Note to self, never short something when just about everyone and their mom are bullish on the stock.

On Tuesday, I decided to short New Century (NEW) and made back around $700 today when the stock just plunged. I do realize this isn’t a bright idea but I only do this with less than 10% of my SEP IRA.  Losing any amount of money hurts… I just bought a bit of money to my SEP IRA and bought some shares of a healthcare ETF (VHT)  at $57.30 so that I won’t try to do anymore stupid gambling with my money.

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The subprime market has officially imploded. Fremont General has physically closed its doors in their Orange County offices while looking for a buyer for their subprime lending unit. New Century is facing possibly criminal charges. Stocks of Fremont, New Century, Novastar, Countrywide and other subprime lenders have dropped like the world coming to an end. New Century went from a little over $30 to $15 to under $5 in less than a month.

Most experts saw this coming. Heck, it doesn’t take an expert to see this coming. It is only common sense to realize that someone making $30,000 a year can’t afford to pay for a $600,000 home. Even at $90,000, a mortgage for a $600,000 home will be tough.

I don’t think we have seen the worse yet as there will be certainly borrowers  with good credit will stretched the truth in their loan application in order to afford a $800,000 home.

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I met with my CPA to go over my personal and corporate taxes and we were able to reduce my taxable income enough for me to receive a refund back from the IRS.  Here are some quick tips to reduce your taxes:

• Rental Properties (does not mean buy rental properties solely for tax purposes)  – You can deduct the depreciation of these properties if you are under 100k in taxable income or if you qualify as a real estate professional then there are no real limits. A $10,000 depreciation lost can mean a savings of as much as $4,000 depending on your tax bracket. Of course the amount depreciated will have to be recapture when/if you sell unless you do a 1031 transaction.
• Self Employed/Own Your Own Business – Travel expenses to Las Vegas or to San Francisco no longer are personal expenses and *may* become a business expense if you *conduct business activities* during your trip. Your *business* trips now only cost a smaller faction of what you actually paid out.
• Contribute to SEP IRA and 401K t to reduce your taxable income.
• Take advantage of the one time phone tax credit offer. Up to $60 in tax credit which is basically free money.
• Personal property taxes
• Give to charity
• Pay your kids for doing work
• Deduct mortgage interest off your personal residence

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What a headline for the housing market. Over at CNN, they said a government report said that new home sales saw its biggest decline in 13 years. I’m not getting too concern with my rental properties just yet. A slowing market is actually a good thing right now. Someone has to slow down the number of homes being built. Areas such as Boise are seeing high MLS inventory along with the left over inventory in Phoenix.  I’m hoping for a slow down in new housing while the market corrects itself. If builders keep building at the fast pace, the drop will just be a bit more steeper and people will think a lot harder about buying any home.

CNN Money’s Post

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I’m planning to meet with my CPA this afternoon to do my taxes for 2006. I’m hoping with a few investment properties and contribution I made to my own 401k Profit Sharing Plan will actually mean I get a refund back. This is a new CPA that I’m using from the past. The last few years I had to pay my share of taxes from my affiliate earnings and was hit hard with the self-employment taxes since I was doing business under a LLC so this year I had a S-Corp formed to help cut back on the self-employment taxes. This sold reduce my taxes by a decent amount.

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Wow, last night, China’s Shanghai’s Composite Index dropped by over 9% because of valuation concern. I unfortunately held a small position in FXI and CHL. This drop just reminds you that some foreign markets can be volatile and to be properly diversified. Oil also dropped because of the perception that China’s demand for oil will be decreased because of possibly slowing in the economy due to possible action taken by their government to curb inflation.

I think this is a healthy correction and still see China’s market heading higher over the next few years.

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A coworker that reserved a preconstruction home in the Phoenix area (even after my recommendation not to) told me that his real estate agent called and told him the home he signed a purchase contract at $350k is now being sold for around $280k. I’ve been telling him not to close, which was due for May and now he may actually listen. It is a good thing he only will lose 3k in earnest money.

That is some serious drop! Imagine being a homeowner who closed on the $350k price and now sees the $280k price for a new home!

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What do you guys do about people hot linking images off your site? I just noticed that one of my affiliate sites that hardly gets traffic has had its bandwidth used up a little more than normal because of someone from myspace hotlinking the image. I bandwidth is very minimal so I’m not concerned about that.

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Am I the only one not seeing the housing market bottom? More and more foreclosures are being filed, especially in the subprime market, prices dropping in areas AND incentives that are NOT factored into the prices. On homes around 300k in the Phoenix area, it is not surprising to see incentives of 25K or more in closing costs and upgrades.

The head guy at the NAR has officially called a bottom and they just released a national advertising blitz saying now is a good time to buy. Isn’t it always a good time to buy according to the realtors?

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