Posted by Bob Yale on Wed, Dec 10, 2008 @ 09:27 AM
In recent months, the slowing market and tightening of credit has now made apparent the uncertainty of demand in the commercial real estate market. Thus far, the commercial real estate market for investors has held up relatively strong; however, the affects of the housing market turmoil is now trickling down to the once robust commercial real estate market.
The long term outlook still remains strong for investors that can bear a significant slowdown. However, for those that are looking to sell in the short term, this might be the best to time to weigh your options and consider implementing tax deferral strategies like the Deferred Sales TrustTM.
The Deferred Sales TrustTM is a strategy that allows our clients to sell appreciated assets such as commercial real estate and businesses, receive the proceeds as liquid cash and pay capital gains over many years rather than immediately. This tax deferral strategy is the way out for many of our clients.
This article was submitted by our friend and colleague, Alex Ruggieri of Sperry Van Ness in Champaign, IL. Feel free to read more of the details about the way this technique will let you sell a real estate asset in today' market, take payments on an installment sale paying taxes only as the cash is received, yet be able to reinvest the remainder at any time without further tax payments.
Posted by Bob Yale on Sun, Nov 16, 2008 @ 09:29 AM
Is an auction the right way to sell your real estate? There's a popular impression that auctions in real estate are just a way to get rid of distressed or foreclosed properties. Can I change your thinking? There's a concept known as "Accelerated Marketing" which actually does do some distressed sale auctions, but more typically handles real estate for some very positive reasons.
What are some of these reasons?
- When a seller wants to sell with a "time certain"
- Or when the seller wants to gain maximum exposure for his property .
Have you heard about three different methods of auction? Open outcry is the best known, but what about sealed bid or dual bid systems?
There may be a good reason to consider an auction right now. The economy is making some properties more difficult to sell, and the reality is that it takes longer these days to create a conventional sales process.
We've posted more information about the Sperry Van Ness Accelerated Marketing system. Take a look and feel free to contact us if you'd like more information, or if this might be a good alternative for the sale of your property.
Posted by Bob Yale on Mon, Jun 16, 2008 @ 11:22 PM
What to do? Should I pay the 15% Capital Gain tax on my real estate
investment now? Or should I exchange my gain into another investment
and pay my taxes later?
This question doesn't bother everybody, but it does occur to those
who own investment real estate. Since investment real estate is a
catch-all term ranging from a small 3 decker apartment building in the
inner city to raw land to retail buildings, office buildings,
warehouses - any real property held for use in your trade or business,
then a lot of Americans can ask this question. We've posted a separate article on tax deferred exchanges.
This is a great way to sell a property that's appreciated in value and
would expose the seller to a capital gains tax when sold. It allows the
seller to roll all the sale proceeds into a replacement property and
defer payment of the tax.
But some are now questioning whether they should sell now and pay
the tax. Sound absurd? Not really. The federal capital gains tax is
15%, the lowest it's ever been. At this writing we don't know who will
be president next year, but we've heard threats from various candidates
to raise the capital gains tax rate next year. If that happens, then a
question is raised as to whether the deferred tax would actually be
paid in the future at a higher rate than 15%.
For more information about paying those taxes now or later, take a
look at the attached article from Mark Van Ness, CEO of Sperry Van
Ness. He's considering this same question on a personal as well as
client level. Just click here.
Posted by Bob Yale on Sat, May 03, 2008 @ 10:33 AM
Real estate exchanging has become a mainstream way of disposing of one property & acquiring another in its place. Sophisticated investors commonly use this technique. For those who haven't yet exchanged, here are a few thoughts.
The government (IRS) allows a taxpayer currently owning real property held for use in their trade or business (such as investment property, retail, office, industrial, multi-family, new land, etc.) to be exchanged for other real property to be used in their trade or business.
The technique may not be used for a primary residence, nor for a second home except under certain circumstances. Read more...
Posted by Bob Yale on Thu, May 01, 2008 @ 02:17 PM
Where is the real estate market heading? Nobody knows, but there are a lot of educated guesses in play - and the guesses seem to fall into categories. First, the doomsayers would like to predict a total bust, a wipe out with a loss of a great deal of value. And there are the Pollyannas who would like to think that this economic climate change is going to be short lived. I'm a "middle of the road" type of guy. The economy has historically gone in cycles of up and down motion just like the stock market.
In the late '80's and early part of the '90's, we were in a downer. The savings and loan instituions had made crazy loans to residential and commercial borrowers. Appraisals weren't always in line with real values and too much money was handed out too easily. The feds had changed the ground rules on investment property depreciation with the Tax Reform Act of 1986. After the fact, the government tried to clean up what had happened, but often used Draconian measures to do so. We had a new term called "performing non performing loans" in which the borrower was making payments on time and was financially healthy, but their property had been devalued by market conditions. Banks and thrifts had to tighten up their own reserves and therefore refused to renew loans that came up for renewal and funds weren't available elsewhere. Result? Foreclosures, low ball sales and market devaluation.
The economy began to improve in the spring of 1991 and the beginning of 1992 saw us in recovery. The rest of the '90's were aglow with good news until the last couple of years when the dot com bust put a damper on.
Now comes the 21st century. We survived 9/11 with all of its trauma - physical, psychological and economic. 2002 through 2006 saw a robust real estate economy. So robust, in fact, that we forgot the recent history lessons and began to believe that it would always last. Sub prime, interest only and other mortgage vehicles crept into the residential mortgage market inducing many to buy homes that perhaps should have remained renters - at least for a while longer. These mortgages were pooled into the securitized mortgage market and swallowed up on Wall Street without regard for the extremely thin equitysupporting the investments.
On the commercial investment side, mortgage rates and CAP rates dropped to serious low points inducing a flood of investment including condo conversions of former apartment buildings and other facilities. 55 and over housing projects boomed. As the subprime issue began to surface and reality struck, condo conversions stopped and people planning to sell their family home and move into the 55 and over planned communities found they had to delay or change their plans.
Now, how about adding your educated guess as to where the real estate economy is heading, when you feel we'll begin to seriously improve and when will it again be "robust". And also, are there steps that you feel private parties and the government can take to ease the pain being felt by so many today?
Posted by Bob Yale on Wed, Apr 30, 2008 @ 02:12 PM
When it was first suggested to me that we should offer a blog I had to ask "what is it?" And as the answer to my question became clearer I began to realize what a fantastic way this is to informally chat with our friends, clients and customers and those folks who might just want to learn a little more about commercial real estate.
It also becomes clear that I'll learn more about my own field through the responses that will likely come to us. It's not our plan to be outrageous or off the wall (at least not right now. Who knows what will develop if I get into a whimsical mood?). But we would like to offer some insights into how to buy, how to sell, how to lease, what to look for, what other professionals you'll want to bring into your planning to help you accomplish your own goals smoothly and avoid future problems.
If you'd like to visit our web site http://www.svncomvestrealy.com/, we'd welcome you there. At this time we're offering a free Market Report to visitors. It's necessarily broad in scope, but for those people that would like to get more information for their projects close to home, we're also offering a follow-up report.