This is a great article by Ron Ricard, Certified Exchange Specialist at IPX if you have an investment property in California:
If you own California real estate and are planning on deferring taxes when you sell your investment by
purchasing property in another State via a 1031 Exchange, be aware that California will soon be tracking your
future real estate transactions to determine if, at some point, you owe California previously deferred State taxes.
Over the past few years there has been an increase in the number of investors who have looked to minimize
their exposure to the steep tax rates that the State of California has imposed. Many investors have utilized 1031
Exchanges to move their investments, tax deferred, out of California and into States with no State taxes or more
favorable tax rates. At a future date some investors will sell these new “non-California” properties and choose to
take their profits rather than participating in another 1031 exchange. These investors, of course, anticipate
paying Federal Capital Gains Tax, Depreciation Recapture and Healthcare Surtax on their profits, but what
about the State of California tax that was originally deferred?
Recently, the State of California Assembly passed a Bill which added new sections to the California Tax &
Revenue Code. These sections provide that taxpayers in a 1031 Exchange that sell California Property and
purchase NON-California Replacement Property will be required to file an annual information return with the
California Franchise Tax Board (FTB), reporting this NON-California property. The California State taxes that
were previously deferred will be due when and if taxpayers sell their new properties and elect to take their profits
rather than continuing to defer taxes through another 1031 Exchange. If taxpayers fail to file the annual return,
the FTB may estimate taxes due and assess tax, interest and penalties. The new law shall apply to exchanges
of property that occur in taxable years beginning on or after January 1, 2014. The text of Assembly new Bill is
available at: http://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=201320140AB92.
At IPX1031®, we pride ourselves on not only being the industry leader in service and security, but also strive to
help our clients and their advisors keep current on issues of interest. We aim to be your valued information
resource. For more information or if you have questions, please feel free to contact me at your convenience.
Ron Ricard can be reached at ron.ricard@ipx1031.com or 408-483-1031
Tuesday, August 13, 2013
Friday, June 7, 2013
Which Shorter Term Loan Offers the Best Savings?
Wednesday, May 29, 2013
6 Unit Japantown San Jose Apartment Building for Sale
We just saw a very well maintained 6 unit building on a great street in the Japantown area of San Jose for sale. This very well maintained building is fully occupied and has been a very stable asset. Paired with outstanding long term interest rates, this property will provide cash flow and stability for years to come. This is an excellent area of Silicon Valley and the Bay Area for an apartment building purchase. For more details, please call today.
Tuesday, May 28, 2013
Maximum Number of Loans for Rental Homes Now Up to 20
The lending world is opening its doors up to investors who want to
purchase single family homes as investment properties in greater
numbers. (This applies to other 1- 4 units rental properties too -
condos, townhouses, PUDs, duplexes and fourplexes.)
In 2007 it was impossible to find a lender that would loan to an investor with more than 4 investment property loans in his portfolio. A few years ago, select mainstream lenders lenders bumped the number to 10 loans per investor. Finally there is at least one lender who will allow 20 loans in a portfolio.
This number is aggregate even if a couple loans are with Bank of America, some with Wells Fargo, a few with Citibank, etc. Four was a very restrictive number, 10 is better, but there definitely are investors out there that own dozens of financed rental properties. Their ability to refinance was also stymied.
Outside of that restrictive box are hard money lenders, portfolio lenders, commercial lenders and lenders in the 5+ unit apartment market
We have solutions for you if you are interested in buying or refinancing a rental property.
In 2007 it was impossible to find a lender that would loan to an investor with more than 4 investment property loans in his portfolio. A few years ago, select mainstream lenders lenders bumped the number to 10 loans per investor. Finally there is at least one lender who will allow 20 loans in a portfolio.
This number is aggregate even if a couple loans are with Bank of America, some with Wells Fargo, a few with Citibank, etc. Four was a very restrictive number, 10 is better, but there definitely are investors out there that own dozens of financed rental properties. Their ability to refinance was also stymied.
Outside of that restrictive box are hard money lenders, portfolio lenders, commercial lenders and lenders in the 5+ unit apartment market
We have solutions for you if you are interested in buying or refinancing a rental property.
Thursday, May 23, 2013
Home Loans for Foreign National Buyers
Home loans for foreign nationals have been difficult to get
recently. CS Financial has an excellent source for financing these
buyers.
We have partnered with lenders that are enthusiastic about lending to foreign nationals. Down payments tend to be higher but rates are very competitive to traditional financing. If you are interested in purchasing a home in California without permanent residency, let's talk!
We have partnered with lenders that are enthusiastic about lending to foreign nationals. Down payments tend to be higher but rates are very competitive to traditional financing. If you are interested in purchasing a home in California without permanent residency, let's talk!
Wednesday, May 22, 2013
Building a Home? You May Need a Construction Loan.
Many lenders have left the home construction marketplace. It is too risky for them and entails a huge amount of work.
Construction lending is mostly limited to a property that will be owner-occupied upon completion. "Spec" financing (financing a speculative development for sale) is far more difficult to achieve. The risks are higher and the lenders are of a different breed. Developers who are building new single family construction will pay higher rates for this type of loan - and justifiably so.
That being said, there are a couple great lenders who can provide a loan for your single family construction project.
They are industry veterans who understand the intricacies of lending to someone building a house. Call us for an introduction to the right lender.
Construction lending is mostly limited to a property that will be owner-occupied upon completion. "Spec" financing (financing a speculative development for sale) is far more difficult to achieve. The risks are higher and the lenders are of a different breed. Developers who are building new single family construction will pay higher rates for this type of loan - and justifiably so.
That being said, there are a couple great lenders who can provide a loan for your single family construction project.
They are industry veterans who understand the intricacies of lending to someone building a house. Call us for an introduction to the right lender.
Wednesday, March 27, 2013
4 Los Angeles Apartment Buildings for Sale
The San Francisco bay area is a very hard place to buy an apartment building these days. This has also been true ever since I have been in the business - some 22 years now! If you are considering a 1031 tax deferred exchange or a straight investment purchase, the $59 each way fare on Southwest to LAX may be beneficial.
I am currently tracking 4 buildings that are excellent opportunities in very strong rental markets in western Los Angeles.
Locations are in Hollywood, Beachwood Canyon and Koreatown. Price ranges for 9 units to 26 units range from $2,900,000 to $4,185,000 and cap rates on current rents are 4.7% to 5.2% at asking prices.
These are deliverable, managed and fully occupied buildings in strong demand areas - all with good rent upside due to older rents and rent control. Of course, with rent control, going to market rate rents is not possible - but realistically you get modest increases every year and vacancies are very beneficial as you can raise that unit's rent to market.
Better returns are also possible in secondary areas of LA too.
Tuesday, March 19, 2013
Do Google, Apple and Facebook Stock Prices Affect the Market?
Google is the darling of the stock market right now at $808 from a 52 week low of $556!
Apple went from $700 a share to $450 today in less than one year.
Facebook stock opened at $38 and is now at $26 per share.
How does this affect the real estate market?
Silicon Valley is healthy. There are some winner companies and some losers (there always has been). There are winner stock bets and losers. These are not always related.
The personal residence market is hot for the most part. Although I would bet that over $2,000,000 the market is hesitant. There have to be Apple employees rethinking their net worth over this year's steep decline. Are Facebook employees feeling the pinch? That all depends on whether they evaluated their gains from $38 or from $0. I expect some will be selling now to lock in their gains at $26 and many more will be holding tight - expecting growth over the next few years. Regardless, it will dampen the flow of cash into real estate (nice homes).
And the investment market???
Let's assume less exuberance and some conservation:
1. The single family home market will taper off - meaning lower demand/prices for SFRs. Which in turn makes the investment cash flow better since rents will maintain the same levels.
2. Silicon Valley economy still very healthy - high demand for the tech workforce - so apartment buildings will not be affected by SFR demand or lack of it.
3. Retail - not to be affected much - household expenditures are not impacted by new worth of stock portfolios much. Household spending is linked to monthly household earnings.
4. Industrial - healthy market in Silicon Valley - hard to find space for many larger and mid-size users.
5. Office - Not as strong as Industrial. Overall, still healthy and not tied to household net worth.
Overall, the investment market will do well and not feel the impact of household wealth fluctuations via high flying and low flying stocks. What say you?
Apple went from $700 a share to $450 today in less than one year.
Facebook stock opened at $38 and is now at $26 per share.
How does this affect the real estate market?
Silicon Valley is healthy. There are some winner companies and some losers (there always has been). There are winner stock bets and losers. These are not always related.
The personal residence market is hot for the most part. Although I would bet that over $2,000,000 the market is hesitant. There have to be Apple employees rethinking their net worth over this year's steep decline. Are Facebook employees feeling the pinch? That all depends on whether they evaluated their gains from $38 or from $0. I expect some will be selling now to lock in their gains at $26 and many more will be holding tight - expecting growth over the next few years. Regardless, it will dampen the flow of cash into real estate (nice homes).
And the investment market???
Let's assume less exuberance and some conservation:
1. The single family home market will taper off - meaning lower demand/prices for SFRs. Which in turn makes the investment cash flow better since rents will maintain the same levels.
2. Silicon Valley economy still very healthy - high demand for the tech workforce - so apartment buildings will not be affected by SFR demand or lack of it.
3. Retail - not to be affected much - household expenditures are not impacted by new worth of stock portfolios much. Household spending is linked to monthly household earnings.
4. Industrial - healthy market in Silicon Valley - hard to find space for many larger and mid-size users.
5. Office - Not as strong as Industrial. Overall, still healthy and not tied to household net worth.
Overall, the investment market will do well and not feel the impact of household wealth fluctuations via high flying and low flying stocks. What say you?
Tuesday, March 12, 2013
Ron Ricard - 1031 exchange expert - Top 10 mistakes
TOP TEN MISCONCEPTIONS ABOUT 1031 EXCHANGES
1. “Like-kind” means I must exchange the same type of property, such as an apartment building, for another apartment building.
No! Like-kind is an unfortunate misnomer within the context of real property. 1031 exchanges are often called “like-kind exchanges” because that is the language used in the tax code. And there’s the rub: “like-kind,” in effect, simply means that as long as you’re selling real property
somewhere in the USA and then buying/exchanging into some other real property located somewhere in the USA, then you’re OK. Exchanges can be done anywhere in the country and can cross state lines. If you sell a rental condo, you do not necessarily have to exchange into another rental condo! You could exchange into raw land, or a strip shopping mall, or a commercial office building, etc. So let’s recap: all real property is like-kind to other real property. Although most 1031 exchanges are done with real property, exchanges can be done with aircraft, artwork, machinery, business vehicles… just about anything that has a capital gain tax can be exchanged. We call these non-real property items “personal property.” The term “like-kind” means that you can’t exchange real property for an aircraft. You can’t exchange machinery for artwork. But in the context of real property, always remember that all real property is like-kind to all other real property.
2. A 1031 exchange means that the sale and the purchase have to happen at the same time. In other words, the seller has to find someone willing to swap properties.
No! The odds of you finding someone else with the exact property that you want – and who wants the exact property you have – are slim. For that reason the vast majority of exchanges are “delayed exchanges” in which you can sell your investment property to anyone wanting to buy it. You need to use a special “middleman” called a Qualified Intermediary (“QI”) or Accommodator who is required to hold the sale proceeds for you and who then uses those proceeds to buy any replacement property that you want.
3. My attorney can handle the exchange for me as my Qualified Intermediary. Or, my accountant
knows all my tax stuff – I’m going to use my CPA as my QI.
No! If the seller’s attorney or accountant has provided any legal or accounting related services (or any service not exchange-related) in the two-year period before the exchange, they are disqualified and may not act as the Qualified Intermediary.
4. To do a 1031 exchange I just need to file a form with the IRS with my tax return and “roll over” the proceeds into a new investment. As long as the seller doesn’t touch the sales proceeds, he can do an exchange any time.
No! A valid exchange requires much more than just reporting the transaction on Form 8824. One of the biggest “no-no’s” in structuring an exchange is allowing the taxpayer to have actual or constructive receipt of the sale proceeds. This could trigger a taxable event. The QI must hold the sale proceeds during the course of the exchange. There are specific deadlines that must be adhered to as well. You have 45 calendar days, starting from the date you close on your sale, to simply identify the possible replacement properties you might want to buy. Then you have 180 days (again, starting from the day you close on the sale) to close on the purchase of one or more of the properties identified.
5. The capital gain tax rate is only 15%. I’ll just bite the bullet and pay the taxes now.
Think twice about that! Capital gain tax rates have changed significantly starting in 2013. Your capital gain tax rate might be 15%, or possibly 18.8% or even as high as 23.8% (depending on your income level, and subject to the new 3.8% Medicare surtax). And since you are selling investment property, there is probably the recapture of depreciation. The depreciation recapture tax rate is 25%. A non-exchanger will also have to pay the tax at the state level as well. In most cases, the state tax on the sale of real estate can also be deferred by doing a 1031 exchange. In summary, if you do not exchange and simply pay the tax now, you could have an effective or blended capital gains rate as high as 35% to 40% (State tax + depreciation recapture + new capital gains rates).
6. All of the funds from the sale of the relinquished property must be reinvested.
Not necessarily! A taxpayer or exchanger can buy down in value. Or a taxpayer can choose to withhold funds or receive other non-like-kind property in an exchange. But the amount that they buy down, or money they withhold, or any other non-like-kind property received, is considered “boot” which means the exchanger likely will have to pay some taxes.
7. You must replace the debt that you had on the relinquished property with at least the same amount of debt on the replacement property.
Not necessarily! The exchanger can always bring their own cash to the closing table for the replacement property to offset any reduction in debt.
8. Exchanges are complicated and are only for big investors.
Again, No! Exchanges don’t have to be complicated! A good Qualified Intermediary will work with you and your tax or legal advisers to make sure the process is done correctly and as seamlessly as possible. And exchanges are not just for big investors: anyone owning investment property that has a gain (the market value greater than its adjusted basis) should consider a
1031 exchange.
9. When I sell my home – where I live with my spouse and the kids and our pets – I should do a 1031 exchange.
Tax-deferred exchanges are not for real property held for only personal use. 1031 is for investment property only: you cannot 1031 exchange your personal primary residence for another home. There is another part of the tax code that already allows you to sell your home and avoid capital gain tax. But there are ways to use 1031 to exchange mixed-use rental / vacation homes within certain parameters. Consult your QI and tax adviser for more information.
10. If you sell one property, you can only exchange into one property.
No. You can sell one property and exchange into multiple replacement properties. And the other way around as well: you could sell multiple properties and exchange into one larger and more easily managed property. You can buy or sell any number of properties in an exchange. The devil is in the details, so choose a good QI to help you.
*** Ron Ricard is my go-to guy for 1031 exchanges - let me connect you! ***
1. “Like-kind” means I must exchange the same type of property, such as an apartment building, for another apartment building.
No! Like-kind is an unfortunate misnomer within the context of real property. 1031 exchanges are often called “like-kind exchanges” because that is the language used in the tax code. And there’s the rub: “like-kind,” in effect, simply means that as long as you’re selling real property
somewhere in the USA and then buying/exchanging into some other real property located somewhere in the USA, then you’re OK. Exchanges can be done anywhere in the country and can cross state lines. If you sell a rental condo, you do not necessarily have to exchange into another rental condo! You could exchange into raw land, or a strip shopping mall, or a commercial office building, etc. So let’s recap: all real property is like-kind to other real property. Although most 1031 exchanges are done with real property, exchanges can be done with aircraft, artwork, machinery, business vehicles… just about anything that has a capital gain tax can be exchanged. We call these non-real property items “personal property.” The term “like-kind” means that you can’t exchange real property for an aircraft. You can’t exchange machinery for artwork. But in the context of real property, always remember that all real property is like-kind to all other real property.
2. A 1031 exchange means that the sale and the purchase have to happen at the same time. In other words, the seller has to find someone willing to swap properties.
No! The odds of you finding someone else with the exact property that you want – and who wants the exact property you have – are slim. For that reason the vast majority of exchanges are “delayed exchanges” in which you can sell your investment property to anyone wanting to buy it. You need to use a special “middleman” called a Qualified Intermediary (“QI”) or Accommodator who is required to hold the sale proceeds for you and who then uses those proceeds to buy any replacement property that you want.
3. My attorney can handle the exchange for me as my Qualified Intermediary. Or, my accountant
knows all my tax stuff – I’m going to use my CPA as my QI.
No! If the seller’s attorney or accountant has provided any legal or accounting related services (or any service not exchange-related) in the two-year period before the exchange, they are disqualified and may not act as the Qualified Intermediary.
4. To do a 1031 exchange I just need to file a form with the IRS with my tax return and “roll over” the proceeds into a new investment. As long as the seller doesn’t touch the sales proceeds, he can do an exchange any time.
No! A valid exchange requires much more than just reporting the transaction on Form 8824. One of the biggest “no-no’s” in structuring an exchange is allowing the taxpayer to have actual or constructive receipt of the sale proceeds. This could trigger a taxable event. The QI must hold the sale proceeds during the course of the exchange. There are specific deadlines that must be adhered to as well. You have 45 calendar days, starting from the date you close on your sale, to simply identify the possible replacement properties you might want to buy. Then you have 180 days (again, starting from the day you close on the sale) to close on the purchase of one or more of the properties identified.
5. The capital gain tax rate is only 15%. I’ll just bite the bullet and pay the taxes now.
Think twice about that! Capital gain tax rates have changed significantly starting in 2013. Your capital gain tax rate might be 15%, or possibly 18.8% or even as high as 23.8% (depending on your income level, and subject to the new 3.8% Medicare surtax). And since you are selling investment property, there is probably the recapture of depreciation. The depreciation recapture tax rate is 25%. A non-exchanger will also have to pay the tax at the state level as well. In most cases, the state tax on the sale of real estate can also be deferred by doing a 1031 exchange. In summary, if you do not exchange and simply pay the tax now, you could have an effective or blended capital gains rate as high as 35% to 40% (State tax + depreciation recapture + new capital gains rates).
6. All of the funds from the sale of the relinquished property must be reinvested.
Not necessarily! A taxpayer or exchanger can buy down in value. Or a taxpayer can choose to withhold funds or receive other non-like-kind property in an exchange. But the amount that they buy down, or money they withhold, or any other non-like-kind property received, is considered “boot” which means the exchanger likely will have to pay some taxes.
7. You must replace the debt that you had on the relinquished property with at least the same amount of debt on the replacement property.
Not necessarily! The exchanger can always bring their own cash to the closing table for the replacement property to offset any reduction in debt.
8. Exchanges are complicated and are only for big investors.
Again, No! Exchanges don’t have to be complicated! A good Qualified Intermediary will work with you and your tax or legal advisers to make sure the process is done correctly and as seamlessly as possible. And exchanges are not just for big investors: anyone owning investment property that has a gain (the market value greater than its adjusted basis) should consider a
1031 exchange.
9. When I sell my home – where I live with my spouse and the kids and our pets – I should do a 1031 exchange.
Tax-deferred exchanges are not for real property held for only personal use. 1031 is for investment property only: you cannot 1031 exchange your personal primary residence for another home. There is another part of the tax code that already allows you to sell your home and avoid capital gain tax. But there are ways to use 1031 to exchange mixed-use rental / vacation homes within certain parameters. Consult your QI and tax adviser for more information.
10. If you sell one property, you can only exchange into one property.
No. You can sell one property and exchange into multiple replacement properties. And the other way around as well: you could sell multiple properties and exchange into one larger and more easily managed property. You can buy or sell any number of properties in an exchange. The devil is in the details, so choose a good QI to help you.
*** Ron Ricard is my go-to guy for 1031 exchanges - let me connect you! ***
Friday, February 22, 2013
Coming Soon - Apartments & Homes for Sale
Investment properties coming soon:
1. 9 units for sale in an excellent area of Los Angeles - $1,800,000 price range.
2. 8 units for sale in a strong part of Santa Clara - $1,600,000 price range.
3. Short sale single family home - perfect rental property - Mission Viejo, CA - $390,000 range.
4. Short sale single family home - great rental - south San Jose, CA - $450,000 range.
For any of these opportunities, please contact us for details.
1. 9 units for sale in an excellent area of Los Angeles - $1,800,000 price range.
2. 8 units for sale in a strong part of Santa Clara - $1,600,000 price range.
3. Short sale single family home - perfect rental property - Mission Viejo, CA - $390,000 range.
4. Short sale single family home - great rental - south San Jose, CA - $450,000 range.
For any of these opportunities, please contact us for details.
Thursday, February 21, 2013
Single Family Home Investments Restricted by Lender Rules
It may not be the worse problem in the world but owning more than 4 rental homes may start to be a problems with lenders. Most lenders these days limit an investor to have 4 non owner occupied homes loans. Some lenders will allow up the FNMA maximium of 10 home loans outstanding. This 5-10 home loan window is restricted to only Rate & Term refinances and no cash outs typically.
There are other sources for financing when you hit this limit - but these are portfolio lenders and the rates and hoops to jump through become more difficult.
Alternative products such as 5+ unit apartment buildings and retail investment commercial real estate are non-restricted options if an additional single family home rental may not be.
It is always a good idea to talk to a reputable lender - especially one who deals with investment properties on a regular basis - before taking on the next investment property purchase.
There are other sources for financing when you hit this limit - but these are portfolio lenders and the rates and hoops to jump through become more difficult.
Alternative products such as 5+ unit apartment buildings and retail investment commercial real estate are non-restricted options if an additional single family home rental may not be.
It is always a good idea to talk to a reputable lender - especially one who deals with investment properties on a regular basis - before taking on the next investment property purchase.
Tuesday, January 15, 2013
Single Tenant NNN for Sale in Palm Springs, CA
9+ year corporate lease remaining
"Recession proof" corporate tenant
In place tenant for over 15 years
Shadow Anchored by excellent grocery store
6% cap rate
Share a center with McDonald's, Taco Bell, Dollar Tree, Stater Bros. & Arco.
$2,375,000
Now let's talk about selling that apartment building and trading into a solid single tenant NNN investment property!
"Recession proof" corporate tenant
In place tenant for over 15 years
Shadow Anchored by excellent grocery store
6% cap rate
Share a center with McDonald's, Taco Bell, Dollar Tree, Stater Bros. & Arco.
$2,375,000
Now let's talk about selling that apartment building and trading into a solid single tenant NNN investment property!
Wednesday, December 19, 2012
Single Tenant NNN Corporate Lease 10+ years Southern California for Sale!
7-11 signed corporate lease store plus gas station available for sale in a most-southern California location at the US-Mexico border.
$2,200,000 purchase price for a 5.45% cap rate absolute NNN investment property with a new 10 year lease + 15 years in options. The 7-11 corporation has over 8,000 locations in the US and a AA- S&P rating! Internationally 7-11 operates another 40,000+ stores in a variety of countries. The subject property location boasts high vehicle traffic counts and excellent exposure to the main expressway.
This is a very good 1031 exchange property or a solid investment option to consider in comparison to "secure" investments. Call for details.
$2,200,000 purchase price for a 5.45% cap rate absolute NNN investment property with a new 10 year lease + 15 years in options. The 7-11 corporation has over 8,000 locations in the US and a AA- S&P rating! Internationally 7-11 operates another 40,000+ stores in a variety of countries. The subject property location boasts high vehicle traffic counts and excellent exposure to the main expressway.
This is a very good 1031 exchange property or a solid investment option to consider in comparison to "secure" investments. Call for details.
Monday, December 3, 2012
Single Tenant NNN for Sale in Orange County
Corporate signature single tenant NNN investment property for sale in Huntington Beach, CA Orange County.
10 year new lease renewal for a well known 80+ location casual dining restaurant in a major power center off the 405 freeway in Orange County.
This 5.5% cap rate, 10 year lease is a solid investment property with low landlord responsibilities. For a commercial property which has highway visibility off off the 405 and situated in a shopping center with the likes of Costco, Macys and more, this property will have strong appeal for years to come. Excellent vehicle for a tax-deferred 1031 exchange or as a straight investment property to add to your portfolio.
The straight numbers are: $5,235,000 purchase price. $287,693 net operating income per year. If this is an all-cash purchase then it is a 5.5% rate of return. This is an excellent rate of return when compared to other investment options. In addition, tax depreciation is taken on the income received for a better after tax rate of return.
When financed with 65% leverage, the rete of return increases significantly.
Further things to consider: Southwest Airlines from San Jose or San Francisco to LAX round trip range from $140 - $225 and takes about 1 hour flying time. Investment properties within your state of residence do not require an out of state tax filing.
Call for more details.
10 year new lease renewal for a well known 80+ location casual dining restaurant in a major power center off the 405 freeway in Orange County.
This 5.5% cap rate, 10 year lease is a solid investment property with low landlord responsibilities. For a commercial property which has highway visibility off off the 405 and situated in a shopping center with the likes of Costco, Macys and more, this property will have strong appeal for years to come. Excellent vehicle for a tax-deferred 1031 exchange or as a straight investment property to add to your portfolio.
The straight numbers are: $5,235,000 purchase price. $287,693 net operating income per year. If this is an all-cash purchase then it is a 5.5% rate of return. This is an excellent rate of return when compared to other investment options. In addition, tax depreciation is taken on the income received for a better after tax rate of return.
When financed with 65% leverage, the rete of return increases significantly.
Further things to consider: Southwest Airlines from San Jose or San Francisco to LAX round trip range from $140 - $225 and takes about 1 hour flying time. Investment properties within your state of residence do not require an out of state tax filing.
Call for more details.
Tuesday, November 27, 2012
Don't Wait to Buy Real Estate!
The old adage, "Don't wait to buy real estate, buy real estate and wait" is very true today as it was when it was first spoken by the great guru of real estate Donald Trump (actually probably not him, maybe Warren Buffett, or perhaps it was Joe Blow - this part is not relevant!)
There are a crazy number of private equity funds, family trusts with lots of cash, hedge funds and single investors in the marketplace looking for that bank owned, 12% cap rate deal in the best of the best neighborhoods with stable cash flow and a corporate 10+ year lease. This asset does not define the word "distressed". It is also non existant.
What is available are stabalized apartment deals with 6% cap rates in decent neighborhoods that you can finance with 4% money. Positive leverage all over those numbers.
Also, think about 1031 exchanges of high equity properties that have a low rate of return. Get that equity working again. A single family home rental with a 3% cap rate can be sold and traded into the 6% cap rate apartment building just mentioned. You get more tax sheltering with additional depreciation and added leverage too.
And in non-residential investments:
1. Single Tenant NNN deals with strong tenants and 6%+ cap rates
2. Neighborhood strip centers with 7% cap rates - this add diversity of tenants and invests in stable mom and pop businesses that tend to stay well occupied.
3. Do you own a business? Time to use amazing SBA financing and buy your own space.
4. And there are more - talk to us about all the options.
The actual topic of this post is this: It never seems like an amazing deal today. Next year you will look back and be very happy.
Let's talk options now.
Friday, October 26, 2012
West Los Angeles Class A Office Building for Sale
Multi Tenant almost fully occupied office building for sale in prime
West Los Angeles location. This nearly 100,000 square foot modern office
property has been very well maintained and upgraded through the years.
Excellent street visibility, great parking, stone and glass exterior
and a loyal tenant occupancy. Financing rates will allow for positive
leverage on this class A office building. Excellent 1031 tax deferred exchange replacement property. Pride of ownership asset. Call for details.
Friday, September 14, 2012
To Pay a Point or Not to Pay a Point?
Should a home loan borrower pay an additional point - think 1% of the
loan amount - to lower the rate of the loan over its amortization
period? The answer is: maybe....
The answer is in the arithmetic and what you think of the future.
First - if you pay an additional point - how much will the loan interest rate and the loan payment decrease of the life of the loan? And what is the recoup time to cover the point? If your loan payment goes down by $50 per month on a $100,000 loan and it costs you $1,000 to get this reduction - then the recoup time is 20 months. So, on a strictly numerical basis, if you keep the loan for more than 20 months, then the payment of the $1,000 is well worth it. If you happen to sell the home or refinance the loan before 20 months, then you have not achieved a full benefit of paying the point.
Second - What is interest rates move lower and you want to refinance to get a better rate. Your break even point is now $1,000 further away. This is neither good nor bad - just an issue of checking the arithmetic again.
And finally - who ever holds their loan for 30 years??? OK - that was a separate issue, but one that should be considered when thinking Rate, Term and Points.
For more info on lending:
www.HouseLoansLosAngeles.com
or www.CondoLoansLosAngeles.com
The answer is in the arithmetic and what you think of the future.
First - if you pay an additional point - how much will the loan interest rate and the loan payment decrease of the life of the loan? And what is the recoup time to cover the point? If your loan payment goes down by $50 per month on a $100,000 loan and it costs you $1,000 to get this reduction - then the recoup time is 20 months. So, on a strictly numerical basis, if you keep the loan for more than 20 months, then the payment of the $1,000 is well worth it. If you happen to sell the home or refinance the loan before 20 months, then you have not achieved a full benefit of paying the point.
Second - What is interest rates move lower and you want to refinance to get a better rate. Your break even point is now $1,000 further away. This is neither good nor bad - just an issue of checking the arithmetic again.
And finally - who ever holds their loan for 30 years??? OK - that was a separate issue, but one that should be considered when thinking Rate, Term and Points.
For more info on lending:
www.HouseLoansLosAngeles.com
or www.CondoLoansLosAngeles.com
Friday, August 31, 2012
Palm Spring Area Single Tenant NNN Investment Property for Sale
An outstanding opportunity to acquire a single tenant NNN investment
property with stable cash flow and a unique business model is available
in the Palm Springs area. This premier restaurant chain with a loyal
international following has a 15 year lease with annual increases. The
business is owned by a 1500+ location restaurant corporation that knows
how to operate successful enterprises. 6% cap rate on a <$5M
purchase price. Consider this - $292,000 net operating income per year
for a rock solid asset that will increase in cash flow yearly based on
CPI. For someone looking for a stable asset within a short flight of the San Francisco Bay Area, this is ideal. Perfect vehicle for a 1031 tax-deferred
exchange. Call for details on this or other NNN investment properties throughout the Golden State.
Monday, August 20, 2012
Office Investments for Sale in California
The MPIRES group is tracking a handful of excellent investment properties for sale:
1. West Los Angeles: 94,500 square foot building, 96% occupied by professional office tenants and medical tenants. 1990's construction, class A glass building with an excellent address and street exposure. 6% cap rate at $27,000,000. This is a solid investment property with future rent growth in a strong market.
2. North San Francisco Bay Area: 100,000 square foot single tenant medical building. 6.75% cap rate. Highly rated credit tenant in place. Long term lease. Modern building in growth location. $21,000,000.
3. West Los Angeles: single tenant NNN investment property with highly rated credit medical tenant. 6.5% cap rate, $14,000,000 price.
All three opportunities represent solid 1031 exchange replacement properties. With apartment building cap rates selling in the 4-5% range, these properties provide an exchanger with higher cash flow, lower management and modern buildings.
1. West Los Angeles: 94,500 square foot building, 96% occupied by professional office tenants and medical tenants. 1990's construction, class A glass building with an excellent address and street exposure. 6% cap rate at $27,000,000. This is a solid investment property with future rent growth in a strong market.
2. North San Francisco Bay Area: 100,000 square foot single tenant medical building. 6.75% cap rate. Highly rated credit tenant in place. Long term lease. Modern building in growth location. $21,000,000.
3. West Los Angeles: single tenant NNN investment property with highly rated credit medical tenant. 6.5% cap rate, $14,000,000 price.
All three opportunities represent solid 1031 exchange replacement properties. With apartment building cap rates selling in the 4-5% range, these properties provide an exchanger with higher cash flow, lower management and modern buildings.
Tuesday, August 14, 2012
Put Your Property in a Trust!
In many cases, a trust is the better way to hold real estate for tax
benefits and probate avoidance. We just had an elderly client move her
property into a trust so that the aforementioned benefits can be
achieved. With the right tax planning - and rest assured that I am NOT
an expert in this at all - your heirs can receive far more than what
would be left them if no planning is involved. Also, aside from tax
liability, is the issue of when control over a property will occur. If a
property - such as your rental fourplex - needs to go through the
probate process, who will manage it and the tenants? Can a mismanaged
building deteriorate in value over a few months? Yes, of course this is
true. Trust planning, insurance, checking your loan costs, preventative
property maintenance - these may not be fun parts of owning an
investment property - but they yield great benefits when done correctly.
Your internal rate of return relies heavily on these important aspects
of ownership. Call me for great professional recommendations to experts
in any of these areas.
Subscribe to:
Posts (Atom)