• How Might the New Health Care Law Affect Your Investment Property?

  Facing capital gains on investment property? Here’s one way to defer taxes. WASHINGTON – Feb. 13, 2012 – “Taxation with representation ain’t so hot either.” – Gerald Barzan, humorist

  If you own investment property, and you sell it this year, you will have to pay 15 percent capital gains tax to the Internal Revenue Service.

  This does not include the up-to-25 percent recapture tax on any depreciation that you took over the years. Next year, unless the Supreme Court throws out the new health-care law, the tax rate will be 18.8 percent.

  Why? Because of a special 3.8 percent Medicare surtax on unearned income, which includes the sale of rental properties and even your second home at the beach. This will kick in Jan. 1.

  There is a way to defer your tax obligation. It is called a Starker exchange, named after a man who successfully convinced the courts that based on the exchange of real estate, no tax was immediately due.

  The law establishing this like-kind exchange can be found in Section 1031 of the Internal Revenue Code. The rules are complex, but here is a general overview of the process.

  Section 1031 permits a delay (non-recognition) of gain only if the following conditions are met:

  First, the property transferred (the “relinquished property”) and the exchange property (“replacement property”) must be “property held for productive use in trade, in business or for investment.” Neither property in this exchange can be your principal residence, unless you have abandoned the property as your personal house.

  Second, there must be an exchange; the IRS wants to ensure that this is not really a sale and a subsequent purchase.

  Third, the replacement property must be of “like kind.” As a general rule, all real estate is considered “like kind” with all other real estate. Thus, a farm can be exchanged for a condominium unit, a single-family home for an office building, or raw land for commercial or industrial property.

  There are some tax consequences. If you do a like-kind exchange, your profit will be deferred until you sell the replacement property. However, the cost basis of the new property in most cases will be the basis of the old property. Discuss this with your accountant to determine whether the savings by using the like-kind exchange will make up for the lower cost basis on your new property.

  A simple exchange (A and B swap properties) rarely works. Not everyone is able to find replacement property before they sell their own property. In the case involving Starker, the court held that the exchange does not have to be simultaneous.

  However, it is not an open-ended interpretation. There are two major limitations:

  • The replacement property must be identified within 45 days after you transfer the “relinquished property.” You may identify more than one property as replacement property. However, the maximum number of replacement properties that the taxpayer may identify is either three properties of any fair market value or any number of properties as long as their aggregate fair market value does not exceed 200 percent of the aggregate fair market value of all of the relinquished properties.

  Furthermore, the replacement property or properties must be unambiguously described in a written document. According to the IRS, real property must be described by a legal description, street address or distinguishable name (e.g., “The Excalibur Apartment Building”).

  • The replacement property must be purchased no later than 180 days after the taxpayer transfers his original property, or the due date (with any extension) of the taxpayer’s return of the tax imposed for the year in which the transfer is made. These are very important time limitations, which should be noted on your calendar when you first enter into a 1031 exchange.

  In 1989, Congress added two additional technical restrictions. First, property located in the United States cannot be exchanged for property outside the United States.

  Second, if property received in a like-kind exchange between related people is disposed of within two years after the date of the last transfer, the original exchange will not qualify for non-recognition of gain.

  There is an interesting loophole that might be attractive to many owners of rental property. Say you have found your dream retirement house in Florida, or Delaware, or anywhere in the United States, for that matter. If you do a 1031 exchange now, and obtain title to the replacement property where you ultimately want to live when you retire, you can rent out that property until you decide to move. Then, once you have established the new property as your principal residence, if you live in it for at least two years – and more than two years have elapsed since you sold your last principal residence – once again you can exclude up to $250,000 (or $500,000 if married and you file jointly) of the gain you have made.

  Although the IRS has given us no guidance as to how long you have to use the replacement property as “investment” property, the general consensus is that you should rent out the property for at least one complete tax year.

  Thus, depending on the numbers and the facts, you may ultimately be able to avoid some – or even all – of the capital gains tax which would normally be due when you sold your investment property.

  The IRS has also authorized taxpayers to engage in “reverse Starkers,” where you buy the replacement property first and then exchange (sell) the relinquished property. This is much more complex, and you should consult your own legal and tax advisers.

  Benny L. Kass is a Washington lawyer. This column is not legal advice and should not be acted upon without obtaining legal counsel.

Here is some great information, call Len for your next home inspection. Call me for your next real estate need!

WASHINGTON – Jan. 18, 2012 – Builder confidence in the market for newly built, single-family homes continued to climb for a fourth consecutive month in January, rising four points to 25 on the NAHB/Wells Fargo Housing Market Index (HMI). It’s the HMI’s highest level since June 2007.

“Builder confidence has now risen four months in a row, with the latest uptick being universally represented across every index component and region,” says Bob Nielsen, chairman of the National Association of Home Builders (NAHB). “Policymakers must now take every precaution to avoid derailing this nascent recovery.”

Each of the HMI’s three component indexes registered a fourth consecutive month of improvement in January. The component gauging current sales conditions rose three points to 25, which was its highest point since June 2007. The component gauging sales expectations in the next six months also rose three points, to 29 – its highest point since September 2009. And the component gauging traffic of prospective buyers rose three points to 21, its highest point since June 2007.

The HMI also posted gains in all four regions in January, including a nine-point gain to 23 in the Northeast, a one-point gain to 24 in the Midwest, a two-point gain to 27 in the South and a five-point gain to 21 in the West.

“Builders are seeing greater interest among potential buyers as employment and consumer confidence slowly improve in a growing number of markets,” says NAHB Chief Economist David Crowe. “That said, caution remains the word of the day as many builders continue to voice concerns about potential clients being unable to qualify for an affordable mortgage, appraisals coming through below construction cost, and the continuing flow of foreclosed properties hitting the market.”

Derived from a monthly survey NAHB has conducted for more than 20 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores from each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

© 2012 Florida Realtors®

MIAMI – Jan. 16, 2012 – Condo Vultures founder Peter Zalewski sees more confidence in the real estate market this year, as high-rise towers return and prices for luxury real estate inch off a bottom. That could be a problem.

“My biggest concern for 2012 is bravado,” he told an audience during a Friday morning panel discussion on the development industry. “You are starting to see some egos return. You’re starting to see some optimism in pricing.”

Optimism – or what passes for optimism in the post-bust South Florida – set the tone for the Greater Miami Chamber of Commerce’s second annual economic forum.

Bankers said they had money to lend, but few businesses profitable enough for safe loans. Builders said they were almost certain housing prices have finally hit a bottom.

Trade and tourism watchers said foreign buying power continues to shield South Florida from the full impact of domestic economic woes.

Zalewski, who started his Vultures brokerage six years ago in anticipation of a historic real estate bust, specializes in distressed real estate. With condo towers in pre-sales once again and some going vertical, he warned that developers may once again be over-estimating demand for pricey apartments.

“There’s been a lot of hoopla. If these things stall in their tracks, it could create some bad buzz that I think would take us a long time to recover from,” said Zalewski, who also writes a monthly column for The Miami Herald’s Business Monday magazine.

Several speakers at the daylong event at Jungle Island shared an outlook that conditions have improved enough to make 2012 a turning point, with growth slowly gaining steam toward normalcy. But memories of past optimism tempered some of the rosy comments.

Ramiro Ortiz, a Miami banker turned consultant, opened a finance and retail discussion by reminding the audience that, in the same room last year, speakers were bidding good riddance to 2010 and expecting a strong 2011.

“Here we are a year later,” he said. “I would say good riddance to 2011.”

Among the highlights from Friday’s forum:

• Miami-Dade’s retail industry is performing well. Allen Morris, CEO of the Allen Morris Co. commercial brokerage, said retail vacancies were a fraction of the office sector. Only about 4 percent of Miami-Dade’s retail space is available, compared to about 14 percent for office. Industrial space falls roughly in the middle at 8 percent vacant.

• Bank executives insisted they want to lend money, but that demand from small businesses is too low.

“Whoever wants it, come and get it,” said Adolfo Henriques, president of Gibraltar Private Bank in Miami. “We are flush with cash.”

He said his staff rarely hears from stable businesses looking for a loan to fund growth. Instead, most loan requests come from marginal companies needing cash to survive.

• Don’t expect a housing rebound to spark a big return to hiring in the building industry. Carlos Gonzalez, head of the Southeast Florida division for Lennar, said the national homebuilder expects to expand in 2012. But its payrolls won’t, at least not locally.

“I don’t see any hiring this year,” he said. “I am growing my business.”

• The construction industry shakeout continues. Ed McNeil, head of Florida operations for Turner Construction, said the widespread failures of contractors in commercial building did not materialize in 2009 and 2010, despite a nearly idle industry. But in 2011, firms began to go bankrupt and he expects more in 2012. “How long can you hold your breath in this distressed market?”

• Presidential politics looms large in predicting the future of finance. Ken Thomas, a local banking consultant, said he expects the Federal Reserve to continue pumping cash into the financial system by launching a third effort called “quantitative easing” or “QE3.”

Thomas said the influx of cash should help the economy in the short term, boosting President Barack Obama’s reelection chances. The president appoints the Fed chairman, currently Ben Bernanke.

“Ben Bernanke wants to keep his job,” Thomas said. “No Republican will keep him. The only one who will is Obama.”

• Corporate America seems extremely poised for major hiring and spending.

James Glassman, an economist with JPMorgan, presented data showing national business profits were up at levels far above past recoveries. He expected that to spark more hiring, particularly among younger workers, who have been hit hardest by the unemployment crisis. As younger workers feel secure in their careers, first-time homebuyers should surge after years of delayed purchases.

He compared the current dynamics to the 1950s, when homebuying soared as an entire generation of young people made up for lost time.

“The recession is doing to our young people what the war did to the baby boomers,” he said, referring to the generation born after World War II as the country returned to normalcy. “Young people are seeing their situations improve the most.”

Copyright © 2012 The Miami Herald, Douglas Hanks. Distributed by MCT Information Services.

WASHINGTON – Jan. 4, 2012 – While international buyers have been heralded as the leaders of a Florida real estate rebound, a recent Census Bureau report on migration trends indicates that U.S. residents from northern climates are once again heading to Florida for retirement.

Between April 1, 2010, and July 1, 2011, Florida welcomed 256,000 new residents, or roughly 560 new Floridians each day. Texas grew by 529,000 residents, and California came in second with 438,000.

In total population, Florida retained its No. 4 status, but its 19.1 million residents moved closer to bumping New York, with 19.5 million residents, from its No. 3 spot.

Florida ranked No. 3 for attracting new international residents, behind only California and Texas. However, the Sunshine State ranked No. 2 in attracting residents from other U.S. states. During the 15 months of the Census study, 119,000 moved to Florida from other states, a number surpassed only by Texas’ 145,000 new residents.

The state’s growth according to the Census Bureau surpassed earlier estimates by the University of Florida’s Bureau of Economic & Business Research, and Sarasota’s Herald-Tribune dug a little deeper to find out why. They found that the UF study relies mainly on new electric utility hookups to judge population growth, while the Census Bureau relies largely on tax returns and Medicare data.

Since the Census Bureau numbers were roughly twice UF’s figures, the Medicare data may have made a difference – implying greater demand from retirees – said University of Central Florida Economist Sean Snaith. “I think with the recovery of the wealth, at least through the rebound of the stock market, that has helped the flow of retirees resume,” Snaith said.

Source: Herald-Tribune, Dec. 21, 2011, Doug Sword

© 2012 Florida Realtors®

http://www.tournaplesrealestate.idxco.com/i/12201/Wilshire_Lakes_Courtyard_Home
(If the above link does not work, please copy and paste the link into the address bar of your browser.) 

http://www.tournaplesrealestate.idxco.com/i/12201/Wilshire_Lakes_Courtyard_Home

3 Bedrooms, 3 Baths, $142,000 in owner and builder upgrades! Imported pool Tile, Awesome Cabana, Neat and clean, rarely used. Nicest home available in Wilshire Lakes, one of the nicest I’ve seen period.

A PDF of PowerPoint slides used during the 2012 Real Estate and Economic Forecast Conference is available on the floridarealtors.org research page.

One click to review SW Florida property listings.

  Here is a link to see more of this lovely home at 6023 Shallows Way in Wilshire Lakes.  

3 Bedrooms 3 Baths  $142,000 in owner and builder upgrades! Imported pool decking, Awesome Cabana, Neat and clean, rarely used. Nicest home available in Wilshire Lakes, one of the nicest I’ve seen period.

Mark W. Simoff, ABR
Mobile (239) 839-7219
Fax      (239) 263-4218
E-mail  MSimoff@yahoo.com
Downing-Frye Realty 3411 Tamiami Trail North  Naples, Florida 34103  

The Effect Of Low Mortgage Rates: Is a Sustained Housing Recovery Finally Underway? 

Maybe low rates matter after all!  After months of near-4 percent mortgage rates, a collection of housing data all points to the same conclusion -- the housing market recovery is underway.

 Pending Home Sales Index: +10% In October

 (Here is a one click look at Naples area real estate listings.)

After 3 months of a slow, steady fade, the Pending Home Sales Index rebounded sharply in October jumping 10 percent on a month-over-month basis.  In addition, today’s government payroll report is up significantly higher than originally predicted and unemployment took a dive to 8.6%.

 A "pending home sale" is a home under contract to sell, but not yet closed. October's reading is the highest for all of 2011, and the second-highest dating back to April 2010 -- the last month of the last year's federal home buyer tax credit.

 The Pending Home Sales Index is published by the National Association of REALTORS®.

 Pending Home Sales Project Housing Market "Future"

 If you're a home buyer or seller in San Francisco, Washington, D.C., or Naples, FL, the Pending Home Sales Index is a housing metric worth watching. In fact, the index may give the most reliable answer to the question "How is the market?"

 Unlike the Existing Home Sales report or the Case-Shiller Index which report on past market activity, the Pending Home Sales Index is a forward-looking housing indicator. Because 80% of homes under contract close within 60 days, we can look at the Pending Home Sales Index and get a good idea what "closed sales" will look like 2 months into the future.

 By region, Pending Home Sales fared as follows:

 ·         Northeast Region : +31.5% from September

·         Midwest Region    : +16.7% from September

·         South Region         : +8.1% from September

·         West Region          : -5.0% from September

All 4 regions made year-over-year improvements which means that this year's year-end closings will be even stronger than last year's.

Seem improbable?  Talk to your friends in the mortgage or title business. We'll each tell you the same thing -- December is busy, busy, busy.

Housing Strength Projected by Builders As Well 

October's Pending Home Sales Index foretells a strong Existing Home Sales report for November and December, but this should not surprise us. 

First, home builders have been telling us for weeks that the market is strengthening. The National Association of Homebuilders reports homebuilder confidence at 18-month highs and builders report huge amounts of foot traffic -- much more as compared to even just 3 months.

 Second, home supplies for both new homes and resales have dropped to multi-year lows.

And, third, although low mortgage rates don't directly cause people to "go out and buy homes", it's definitely a factor -- especially for first-time and 2^nd home buyers that are prevalent here in Naples.  When you can buy homes on the cheap and finance them the same, it makes for a compelling conversation.

Higher Home Prices Coming For 2012

 There's a growing pool of evidence that demand for homes is rising as the stock of homes for sale is falling. It portends higher home prices ahead.  The best time to buy a home may be right now.

Buying or selling a home in the next 6 months?  Get a feel for what your next housing payment could look like based on today's mortgage rates by calling one of your fine Summit Mortgage Loan Officers listed below.

 As always, your Summit team is here to help you.  Below is contact info for your 24/7 Summit Home Mortgage team.

 

William Dukes   wdukes@summit-mortgage.com

Jonathan Schulman - jschulman@summit-mortgage.com

                                                                               

 

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