Lake of the Ozarks condo sales were up from 17 million in April of 2006 to 18.2 million in April 2007.  This is good news for condo sales, and the year to date totals for 2007 have almost caught up to the YTD totals for 2006, lagging behind at $54,530,355 versus $58,748,060 for 2006.  Price per square foot from April 2006 was $129.72, increasing to $142.50 in 2007.  Condo sales had been waaay off the first few months, but much of that can be attributed to the inclimate weather.

Condo sales appear to be right back on pace, and the early May returns look very strong.

UPDATE 2011 here are more current numbers

Search Lake of the Ozarks Foreclosures here!   RE/MAX Lake of the Ozarks sales numbers once again show strength.  April 2007 sales were up an amazing 29% over April of last year!  There’s no slump or bubble in this market – from our perspective.  Our amazing run in 2006 ended with over 300 million dollars in sales, and we are already past 85 million year to date this year – even with the poor weather to start 2007!

The dollar volume for the entire Year to date is up 12%, and the number of sales is quickly catching up to the record pace of 2006, with 339 closed transactions through April.

John Garrett Real Estate broker Lake of the Ozarks now works for Prudential Lake Ozark Realty and can be reached at 573-480-6420.  Updated 2011

The Lake of the Ozarks has a booming condominium rental business and many investors are looking to capitalize on this growing sector.  The best part is that you can do the majority of the work yourself, now with multiple sites that allow you to display your unit to renters and even take reservations online. 

One of the challenges of doing it yourself is to keep adequate documentation.  As a Lake of the Ozarks landlord, here are some things you need to keep track of:

* Purchase price of the condo you are renting out,
* Accumulated depreciation, and current annual depreciation on your property
* Rental income,
* Security deposits you received.

In addition, you will need to keep track of various expenses associated with your rental condo, including:

* Commissions or property management fees,
* Advertising costs,
* Cleaning, maintenance, and repair costs,
* Homeowners insurance and HOA dues,
* Real estate taxes and mortgage interest expenses,
* Security deposits reimbursed to the tenant.
* Various other expenses, such as utilities, landscaping, garbage, and so forth. 

Travel expenses for the trip where you work on the condo should be documented as well.  Not only might this be deductible, it will also help you with the documentation showing how many personal use days you have for the unit. 

TIP: Days you spend working on, repairing, or remodeling the property are not considered a personal use day.  Keep good documentation and receipts and you can avoid running up the number of days of personal use on your property.  This will avoid you have to split your expenses between personal use and rental time, allowing you to maximize your deductions. Aim for 15 days or less of personal use, and you get the full tax deductions.

If you have any questions about buying or selling Lake of the Ozarks real estate, you can always contact John Garrett at 573-480-6420 or e-mail me for a fast response.

The most important step for a Lake of the Ozarks real estate buyer is to hire the best Buyer’s Broker in the area.  The next most important step for buying a Lake of the Ozarks home is to get a CLUE report.  CLUE stands for Comprehensive Loss Underwriting Exchange. It is a comprehensive database of personal property information relating mainly to insurance claims on private property.  You can’t order a CLUE report on another property, however, I can assist you in getting one on a particular property.  If the property is a foreclosure for sale, you are on your own trying to find out the home’s history, and you must rely solely on the home inspector at that point.

Why is this important to see this report on a home before you buy at the Lake of the Ozarks?  Lake homes often sit unoccupied for long periods of time, and often over long cold winters.  When a pipe breaks or a leak develops at your primary home, the usual maximum amount of time before it is discovered is a few hours.   When this happens at a vacant home, it might be months before it is discovered, allowing for much more damage and a higher insurance claim.

A CLUE report contains information about either an insured or a property. The key information on the report is the claims history of the individual or the property. This section includes a list of all claims made in the last 5 to 7 years. The claim history report includes the date of the claim, the name of the insurance company involved, policy number, claim number, address, cause of loss, amounts paid, status of the claim, and the name of the insured and the claimant. The report also identifies parties that have received a copy of the report, typically over the most recent 2 years. It is important to note that the CLUE report details the “claim history” of a given consumer. Adverse information that is more than seven years old generally may not be reported.

You should, with the help of a knowledgeable buyer’s broker, want to verify this information against the Sellers Disclosure that is provided on the property to gauge a seller’s level of disclosure and honesty.  Another reason to verify this information is that the claims made by the seller can have an adverse effect on the buyer’s ability to get affordable insurance on the property.

I’d speculate that less than 1% of buyer’s agents at the Lake of the Ozarks recommend their clients get a CLUE report as part of the inspection process when buying a home.  Using a buyer’s agent doesn’t cost you anything, because the commission is paid by the seller, but it can sure save a lot of time, heartache, headaches, and money.  Call John Garrett today at 573-480-6420

Can I use a 1031 exchange to sell my vacant land to buy a Lake of the Ozarks home or condo?

The answer is yes.   If you are selling investment property to buy a Lake of the Ozarks home or condo as a rental, then you can complete this exchange with relative confidence it will be seen as a “Like-Kind” exchange by our friends at the IRS.  With appreciation rates from ten to thirty percent a year, low property tax and strong projected demand, why not get into this market? (Update, this number was true in 2006, call me to see where values are now)

The replacement property must be equal or greater in price than the selling price of the relinquished property. Otherwise you will have to pay tax — called “boot” — on the difference between the two properties.  Also, you must identify a replacement property within 45 days and close on that property within 180 days to make this transaction valid.  A few other options exist where you could actually use the property with some personal use while it is a rental, giving you both a vacation home and a solid real estate investment. There is even a way creatively combining Internal Revenue Code (IRC) Sections 1031 and 121 to convert this property to your primary residence, live in the property for at least two years, and then take the principal residence exclusion and make the capital gains tax disappear forever!

There are many other considerations, and some pitfalls along the way, so you need to work with an agent that is experienced with these types of transactions to make sure you don’t do anything to jeopardize your exchange.  I am very experienced at 1031 exchange and it can get a great source of tax savings when selling highly appreciated real estate.  Call John Garrett for consultation. 

The “death tax” carries big and serious implications for many Lake of the Ozarks homeowners. The tax requires payment based on the value of a person’s estate above a certain value. The current maximum rate is 46%.   What if you bought a Lake of the Ozarks foreclosure at a great price and it went up drastically in the next decade.  You could be facing the same scenario, or worse!  The government is going to target you to pay for their spending!

Like many taxes that are put in place to “tax the rich,” this tax really burdens the middle class and the wise real estate investor, because of long term appreciation of real estate. When you add in a person’s IRA, 401k, and life insurance policies, it’s not hard to see where this tax can hit a large segment of the population.

I recently listed a Lake of the Ozarks waterfront house for sale that had a by-pass trust in place to avoid the estate tax. Typically a by-pass trust is worded so that at the time of death assets equivalent to the current legal estate tax exemption go to the trust, generally benefiting the children. At the time you set this up, you probably assumed that would be about $675,000, the current legal exemption. If $1 million is funneled away from the surviving spouse, that could leave her with much less than you intended.

Say your estate is worth $1.5 million. You might want to direct $700,000 to the by-pass trust. Your spouse would receive $800,000, rather than the $500,000 she would get if you diverted the maximum legal exemption. More than likely, both of you would still leave your children a tax-free inheritance. You should consult an estate planning expert for more information since this is areal estate site, and nothing on this site constitutes legal or tax advice.

If you have any questions about buying or selling Lake of the Ozarks real estate, you can always contact John Garrett at 573-480-6429 or e-mail 

Use the powerful combination of buying real estate with your IRA in conjunction with a 1031 Exchange?

Using an IRA for real estate requires a special Self-Directed IRA. Your Self-Directed IRA at say Charles Schwab probably does NOT permit you to hold real estate or any asset other than securities. This can be solved by moving your IRA to a custodian that allows for real estate in the plan document. With the right Self-Directed IRA  and proper structuring, you partner with your IRA to buy leveraged real estate. When it comes time to sell, you can 1031 exchange your portion of the gain while the IRA gets its portion of the gains tax exempt.  You can buy raw land, rental properties, commercial real estate.   The advantages of real estate in a retirement plan are its potential high rate of return, added diversification and its lower risk over the long run.

Perhaps the biggest drawback to investing in real estate for a retirement account is the loss of the depreciation deduction. It’s useless inside a retirement account.  Again, using 1031 exchange, when it comes time to sell, you can 1031 exchange your portion of the gain while the IRA gets its portion of the gains tax exempt.

If you have any questions about IRAs in real estate or buying or selling Lake of the Ozarks real estate, you can always contact John Garrett at 573-480-6420 or e-mail me for a fast response.

One main difference in the tax treatment of your vacation condo is that on the surface, you cannot use a 1031 Starker Exchange to defer the capital gains if you used this property strictly as a vacation condo for your own personal use.  One solution to this is to convert the condo to a rental property.

Conversion of a vacation condo to a rental property is a nontaxable event.  Once a property owner starts renting the condominium, the treatment of the property for income tax reporting changes as well.  Depreciation, expenses, rents received, will all be reported on your tax return.  It is then eligible for a like kind exchange of property.  Like kind meaning anything that is not your primary residence, so it could be exchanged for raw land, investment property, buy Lake of the Ozarks foreclosures, and other real estate investments.

There are so set in stone rules as to how long you must rent the condo before it is considered converted to a rental by the IRS.  One year is often cited as probably long enough, but this is a decision for you and your tax advisor to consider.  Once the property is converted to rental, is the owner prevented from ever using the property for personal use?  The answer is no, they are not prevented from using the property, but they are limited.  The easy and quick answer is that owners can use the property for 14 days without altering its designation as a personal use property, or 10% of the number of days during the year for which the unit is rented at a fair rental.  The days you spend working on the property, or performing maintenance on the property do not count as personal use days.

The other solution might be to convert the condo to your primary residence, and this involves occupying the property for a minimum of two years.  At this point, you can use the $500,000 exemption for married individuals to avoid capital gains tax.

If you have any questions about 1031 exchanges or buying or selling Lake of the Ozarks real estate, you can always contact John Garrett at 573-480-6420 or e-mail me for a fast response.

What are the tax breaks you receive when buying a Lake of the Ozarks home or condo? If done correctly, you can ensure that your weekend retreat becomes a source of equity, maybe a source of income, a shelter from taxation and a valuable inheritance for your children.  Make sure to use an agent like John Garrett, that understands the tax code as it pertains to Lake of the Ozarks real estate.

Just like your primary home, a second home at Lake of the Ozarks gives you a deduction depending on how you financed the purchase, regardless of residency. The easiest way to explain this is to give an example. If the principal and interest portion of your mortgage and property taxes amount to $1,000 a month (P&I payment + your annual tax bill/12), the federal government’s subsidy amounts to $270, assuming you’re in the 27 percent tax bracket. Thus, the tax-savings effectively reduces the out-of-pocket cost to $730 a month ($1000 – $270 = $730.) Not a bad deal at all. If you are using an interest only payment, you can maximize your deduction as the whole payment is deductible. While you can deduct the interest on a second home, it can be only on one second home.

Many Lake of the Ozarks owners rent out their places part of the time. Besides extra cash to help with the monthly payments, renting also has some extra tax benefits as well. The good news is real estate has some unique and quite generous tax breaks. Here’s an informative publication IRS Tax Topic(HTML) or IRS Form 527 PDF which also covers vacation and second homes.
Most vacation home owners can qualify for the same tax breaks as landlords who own normal rental properties. But to qualify for the breaks, you’ll need to carefully watch how much personal use you make of your vacation home each year. In some cases, exceeding the prescribed limits by a single day can cost you thousands of dollars in deductions. You’ll also need to crunch some numbers to see whether you’re really better off trying to qualify for the rental tax breaks. Upper-income owners who classify their vacation home as a rental property usually wind up with fewer deductions than they would if they simply treated it as a second home.

As a second home, most people can write off all their mortgage interest and property taxes just as they can on their principal residence. The law allows homeowners to deduct interest on the first $1 million in mortgage debt used to acquire a first and second home. How much more of a tax shelter your vacation home can be depends on how much you rent it out, how much personal use you make of the place, how much rent you collect and who you rent your Lake of the Ozarks home or condo to.

If you rent out your home/condo no more than a 14 days a year, you get a simple break. Any rental income you collect is tax-free, and that is always good news! You don’t even have to report the income on your tax return. Besides benefiting from the tax-exemption, you’ll be eligible to deduct mortgage interest and property taxes on your second home. But you won’t be eligible for any additional deductions for your rental-related expenses.

If you rent out your vacation home more than 14 days a year, all of your rental income is subject to tax including the first 14 days of rent. But you’re allowed to write off rental-related expenses such as utilities, maintenance and depreciation up to certain limits. How much you can deduct depends partly on how much personal use you make of the place. Rental expenses can be deducted only to the extent of your rental income if you and your family personally use the place more than 14 days a year or 10 percent of the number of days it’s rented out, whichever is greater. The deductions have to be apportioned between personal use and rental use. So, say you used the property for 15 days and rented it for 200 days. Every deduction would be apportioned between personal use and rental use. You would be able to take 200/215 (days rented over total days used, they don’t need to equal 365 days) times each deduction to determine what you can claim as a deduction related to the rental activity. The mortgage interest and real-estate taxes that are allocated to personal use would be claimed as itemized deductions on your Schedule A with the remainder claimed as a deduction against the rental income on Schedule E for Form 1040. But if you keep your personal use within those limits, your vacation home would qualify as a rental property. That status makes most owners eligible to write off much more of their rental expenses as much as $25,000 in excess of rental income. This extra $25,000 deduction allowance, however, is reduced if your adjusted gross income exceeds $214,050 (for married filers) and is phased out completely at $336,550. These numbers can and do change, talk to your tax professional.

Vacation homes do not have all the tax benefits available for principal residences. For instance, “points” paid to a lender to obtain mortgage financing on a vacation home aren’t immediately deductible. These one-time fees can usually be deducted in full when buying a principal residence. But for vacation homes, deductions for points must be spread over the life of the loan. Points have not been as prevalent with the low interest rates, but as they creep up, we will start seeing them again.

Every Dollar Saved in Taxes Will Allow an Investor to Purchase 4 to 5 times as Much Real Estate

Tax deferment increases leverage. Consider that 10% appreciation is converted to a 50% profit with a 20% down payment. Let me illustrate:

An investor sells a fully depreciated property and the capital gain is $200,000. This amount is subject to taxation. Assuming a 35% tax bracket, the Tax would be

$200,000 x 35% = $70,000

If the investor sold the property outright rather than exchanging it, they’d have $130,000 to re-invest. If the investor exchanged the property pays no capital gains and has $200,000 to re-invest.

Both investors purchase a new property using 20% down payment. The sale investor can purchase a building worth $650,000 while the exchange investor can purchase a building worth $1,000,000. That amounts to a $350,000 loan from Uncle Sam to invest in real estate! This is one transaction. If 1031 exchanges are utilized again on the new property, the leverage will again be increased.

The Lake of the Ozarks has an abundant supply of properties that qualify for tax free exchanges. You can sell your rental or investment property, even raw land, and buy a vacation home or even a retirement home at the Lake of the Ozarks legally. It is even possible to sell this as your personal residence and eliminate the capital gains altogether! You must follow certain guidelines, but it can be done. The key is to make sure you have an agent that knows what is going on, and is experienced with these matters.  Call John Garrett 573-480-6420