 |
|
|
|
| Columnists |
|
|
|
»
IN YOUR SPACE
|
|
Investment real estate comes in all shapes and sizes. These “shapes and sizes” can be broken down to basic asset classes; each with a unique set of characteristics that address a wide range of investor needs.
|
»
REAL ESTATE 101
|
|
So you finally did it, you purchased a rental property! If you purchased one in Los Angeles County, you know that you can not simply evict tenants because you want to increase the rents. However, other strategies exist to increase income while properly safeguarding tenants’ rights.
|
»
DAYS ON THE MARKET
|
|
No one’s arguing that the heady years of double-digit property appreciation have come to an end, but just how far prices may drop seems to be somewhat less certain.
|
»
REAL ESTATE 101
|
|
How can I start investing in real estate without any cash? I have been asked this by many people and to be honest the most important thing in real estate investing is knowledge. Second and third places go to financing and cash on hand. Because of this, you can use a strong knowledge base and identify opportunities other investors fail to see. One way to invest in real estate with little or no cash is to become a syndicate.
|
»
IN YOUR SPACE
|
|
A Tenants In Common (TIC) sponsor is an individual or entity that locates a property to buy “wholesale,” packages it and sells it to multiple investors at a “retail” price. The multiple investors hold title as Tenants in Common. The difference between the wholesale and retail price is what the sponsor is paid for their services. Typically this is between 5 percent to 7 percent of the total value of the investment.
|
»
DAYS ON THE MARKET
|
|
Economists generally agree that although the national housing market may not have reached bottom just yet, the residential real estate downturn will be slight, with a recovery beginning in the second half.
|
»
IN YOUR SPACE
|
|
A common way to own investment real estate is as a member of a partnership. Being in a partnership has many advantages, but does present a challenge if one of the partners wants to cash out using a 1031 exchange.
|
»
DAYS ON THE MARKET
|
|
The experts are predicting good prospects in commercial real estate in 2007 ... and even better news locally. Stan Ross, chairman of the board of the University of Southern California’s Lusk Center for Real Estate cites New York and Los Angeles among the “leading metropolitan markets” where properties will continue to command top dollar.
The Lusk Center also suggests that, in addition to investing in traditional office, retail, industrial and hotel assets, speculators will examine alternative investments, including urban infill, adaptive reuse and multifamily retail developments near inner city transit centers.
|
»
IN YOUR SPACE
|
|
The strict and short timelines for 1031 transactions can be challenging for investors. The requirement to select replacement property within 45 days of the close of escrow of the property being sold must be carefully planned for. This is especially true if the investor is seeking replacement properties that require little or no management, such as Triple Net Leased (NNN) or Tenant in Common (TIC) properties. Even during a “slower” real estate market, attractively priced NNN and TIC properties sell quickly; and simply designating a property as a potential replacement does not mean it won’t be sold to another investor.
|
»
REAL ESTATE 101
|
|
Do you like the idea of owning real estate, but not actually doing any work aside from writing a check? If so investing in a REIT may be what you are looking for. A REIT —or real estate investment trust — is a type of company that is formed to exclusively invest in real estate. Most REITs invest in commercial properties. The company then sells shares, like a stock, to individual investors. REITs break down into three categories — equity, mortgage and hybrid. However, before you can understand the different types of REITs, it is important to know how they work.
|
»
DAYS ON THE MARKET
|
|
Time for some national housing statistics. At the end of the third quarter of 2006, the median home price in the U.S. was $231,000, according to the National Association of Realtors. Money magazine reported that Newport Beach had the highest median home price, at $1.36 million, followed by Greenwich, Conn., at $1.13 million, and Santa Barbara, at $979,500.
|
»
DAYS ON THE MARKET
|
|
As the housing market boomed, so has availability of so-called “exotic” or “nontraditional” mortgage loan products. New research suggests that middle and moderate-income borrowers with less-than-stellar credit scores are carrying the brunt of these riskier loans. Most of the non-traditional mortgages have been written in strong real estate markets — like Southern California — where continued home price appreciation is anticipated. Nontraditional mortgage products typically offer initial lower monthly payments than traditional fixed-rate loans to ensure that the initial monthly payments are affordable. Of course these borrowers are aware of the fact that most of these products have payment structures which reset the loan terms rest, usually two to five years down the line. Researchers fear that this new and enlarged payment could adversely affect some homeowners, making their homes potentially unaffordable.
|
»
IN YOUR SPACE
|
|
A Tenant in Common (TIC) property generally qualifies as a replacement property for a 1031 transaction under the Internal Revenue Service Revenue Procedure 2002-22. Under this procedure there are 15 factors which determine whether a TIC interest qualifies as like kind replacement property. In general, the TIC investment must not be a partnership and each owner must have deed ownership, retain control over the management and maintain the ability to change management companies at least once a year.
|
»
IN YOUR SPACE
|
|
A 1031 exchange — also known as a “Starker” exchange or a tax-deferred exchange — permits investment property owners to sell a property and defer tax payments by reinvesting the proceeds into a “like-kind” investment property or properties. A 1031 exchange is enabled by Section 1031 in the Internal Revenue Code.
|
»
THE HOA ADVISOR
|
|
I am a licensed real estate agent working for a large franchised brokerage firm. I was recently seriously injured in connection with my work, which I reported to my broker. I was advised that the company does not carry workers’ compensation insurance because it considers its agents to be independent contractors. Do I have any recourse?
|
»
DAYS ON THE MARKET
|
|
When last we met, you read about identifying fixer properties with the greatest profit potential, and we noted how, using Internal Revenue Code 121, you can fix and flip your primary residence every 24 months, without limit, as per your accountant’s advice. This week, we’d like to enlighten you to ways to pay for these properties with the least out of pocket expense.
|
»
THE HOA ADVISOR
|
|
I am seriously considering investing in short-term notes secured by deeds of trust. What documents should I receive from the mortgage company?
|
»
DAYS ON THE MARKET
|
|
Lots of people are looking for properties with short-term profit potential. They have this dream of finding a mildly run down property (”cosmetic fixer,” as it’s often called), rehabbing the kitchen and bath, putting in new floors, painting and, voila — a $100,000 profit!
|
»
IN YOUR SPACE
|
|
Do you believe the IRS is Santa Claus? If your answer is “no", then read on.
|
»
REAL ESTATE 101
|
|
How do you protect yourself from a lawsuit if you own real estate?
|
»
DAYS ON THE MARKET
|
|
A deed is the document that transfers ownership of real estate. It contains the names of the old and new owners and a legal description of the property, and is signed by the person transferring the property. Several different types of deeds can be used to convey real estate.
|
»
IN YOUR SPACE
|
|
Investors are attracted to Tenant in Common (TIC) investments for several reasons, including; reduced risk through diversification, the ability to own a small portion of a higher quality property that otherwise would be unavailable to them, little to no management responsibility and a high certainty of close (an important consideration when doing a 1031 exchange).
|
»
REAL ESTATE 101
|
|
People always want to know the secret to real estate investing. I do not know the secret, but I do know that one of the simplest ways to create wealth through real estate is to use the buy and hold method. The buy and hold method, as simple as it sounds, is purchasing property, such as an apartment, at any price and holding it for the long term, usually in excess of 10 years. After several years, the property should have appreciated, as long as it did not fall into disrepair. “Is this the only strategy?” you ask. No. I will explain another strategy later in the article. No matter the strategy, real estate should be looked at as a vehicle for wealth, with cash, in the form of a down payment, acting as a tool.
|
»
DAYS ON THE MARKET
|
|
One small step for California, one giant leap for South Africa. Earlier this month, as Gov. Arnold Schwarzenegger signed a bill allowing gay couples to file joint state tax returns, South Africa became the first African nation to give legal recognition to same-sex partnerships.
|
»
IN YOUR SPACE
|
|
Holding title as a Tenant In Common is defined as a form of asset ownership in which two or more persons have an undivided fractional interest in the asset in which the ownership interests are not required to be equal, can be inherited and each company owner has a separate deed.
|
»
THE HOA ADVISOR
|
|
In reviewing the bylaws and CC&Rs (Covenants, Conditions and Restrictions) of our homeowner association, our board has noted several conflicts. Which document takes precedence?
|
»
DAYS ON THE MARKET
|
|
Oh, the things architects and builders used to get away with. When Abbott Kinney and Charles Looff set about building pleasure piers along the Southern California coast, do you think there were city authorities telling them how to do it? No, they were entrepreneurs with an idea. Can you imagine if a building like the Looff Hippodrome went before the planning commission now? It would take months of architectural modification before the planning commission and architectural review boards would approve such a structure.
|
»
IN YOUR SPACE
|
|
Investment in commercial real estate can provide cash flow, appreciation or both. When assessing the likelihood of consistent cash flow or appreciation there are a variety of considerations.
|
»
THE HOA ADVISOR
|
|
Our homeowner association was recently sued by one of our members claiming that our board of directors failed to enforce the CC&Rs against another member who allegedly caused a nuisance. The member who is suing has subpoenaed our executive committee minutes. I thought these minutes were confidential?
|
»
DAYS ON THE MARKET
|
|
If you’re a home owner, at some point you’ve probably thought about remodeling or selling. According to Money magazine, since 1994, the cost of buying a home has increased approximately 3.7 percent per year nationally. The cost of remodeling has increased about 2.8 percent annually.
|
»
REAL ESTATE 101
|
|
This may be intuitive, but I feel compelled to remind my readers that banks lend out money primarily to make additional money in the form of interest. Banks and other lenders are not in the business of owning or managing real estate. It may seem illogical that these entities would not want to own real estate, but, after I explain why, you will see that banks are not interested in holding real estate.
|
»
REAL ESTATE 101
|
|
Every now and then, I get a phone call from a potential borrower who wants to buy a 100 percent financed apartment building. I try to explain that the property must support the loan by itself, without any help from the owner. I usually get one of two answers: the “Oh, OK, thanks,” with a hang-up, or the “Why? I don’t get it.” When they ask why, I usually run through a scenario with a hypothetical property.
|
»
IN YOUR SPACE
|
|
Many Southern California property owners find themselves trapped by management responsibilities while earning only a fraction of the monthly income they desire. With good investment planning, they can frequently double and sometimes triple their monthly income, reduce the risk of their investment portfolio and minimize management responsibility all while avoiding taxes in the process.
|
»
THE HOA ADVISOR
|
|
Our homeowner association has serious water intrusion problems in the common areas. We have attempted several times to obtain a set of plans from the developer without success. What should we do?
|
»
DAYS ON THE MARKET
|
|
As financial guru Suze Orman asserts, “You have to have a relationship with your money.”
|
»
IN YOUR SPACE
|
|
The key to successful investing is understanding risk. All investments, by their nature, have risk associated with them. Understanding risk can be especially daunting if the investor is trying to transition into an asset class they are not familiar with.
|
»
THE HOA ADVISOR
|
|
<b>During the recent rains, the roof to my condominium leaked through a crack, causing damage to my furniture and other personal property. I have been informed by the association’s insurance company that the master policy excludes coverage for my personal property. I don’t have insurance. Can the association be held liable for not maintaining the roof?</b>
|
»
DAYS ON THE MARKET
|
|
California is full of what can be termed as “superstar cities” — places where a certain percentage of Americans would like to live, no matter the price.
|
»
REAL ESTATE 101
|
|
The world of real estate is filled with complex terminology. The loan documents prepared by the many lenders in the marketplace use many specific terms that have financial and legal consequences within their loan documents. When attaining a loan, you should be aware of each term and be a savvy consumer who understands what everything means.
Given the complexity of this world, I want to help you along the road toward the land of confidence and consistency. Thus, I am giving you — the smart investor that you are — a few real estate definitions and examples below:
|
»
IN YOUR SPACE
|
|
Owning investment real estate as a tenant in common (TIC) provides investors with several advantages of which diversification and a lack of management responsibilities are primary. The two most common disadvantages involve the questions of liquidity and control.
|
»
THE HOA ADVISOR
|
|
Q The condominium above ours has a defective shower pan that leaks into our home. Our management company insists that we must deal directly with the person above us and will offer no assistance. Their position is that the association has no power to act. Are they correct, or should they take action to force the owner with the leaking pan to repair it?
|
»
DAYS ON THE MARKET
|
|
The demand for industrial warehouse and distribution space has brought the national industrial vacancy rate down to a five-year low of 9.7 percent — and a local vacancy rate of about 5 percent. The average vacancy rate in the nation’s 30 leading distribution markets at mid-year was down .8 percent to a solid 8 percent from the mid-year 2005 rate of 8.8 percent, according to the most recent Commercial Real Estate Outlook from the National Association of Realtors Commercial Alliance.
|
»
REAL ESTATE 101
|
|
What is an AITD? What does it mean for a seller to carry paper? The real estate world is filled with interesting, creative concept financing, some of which become trendy when a real estate market begins to change. During slowing or lean times, many types of real estate financing become available, such as AITD, seller carry and lease option, just to name a few.
|
»
IN YOUR SPACE
|
|
Owning investment real estate as a Tenant In Common (TIC) provides investors with several advantages of which diversification and a lack of management responsibilities are primary. The two most common disadvantages involve the questions of liquidity and control.
|
»
THE HOA ADVISOR
|
|
Q After my recent election to the Board of Directors of our homeowners association, I carefully reviewed our governing documents. I noted that while the CC&Rs require that all buildings be repainted one of five alternative colors, at least two prior boards have ignored this provision of the CC&Rs. This has resulted in several members using unapproved colors. The current board wants to enforce the CC&Rs from this point forward. Are there any problems with this?
|
»
DAYS ON THE MARKET
|
|
The year 2006 will stand as a record year for institutional investment in office and industrial real estate. The National Association of Realtors’ third quarter Commercial Real Estate Outlook confirms that large institutions (life insurance companies, pension funds, etc.) — known to be the extremely cautious and risk-adverse with commercial real estate investments — are making a record level of investments in the office and industrial real estate this year. Through the third quarter, institutional investors had purchased a record $12 billion worth of office acquisitions.
|
»
IN YOUR SPACE
|
|
When involved in a 1031 exchange, generally, expenses that are considered non-recurring, such as real estate commissions, will reduce the value requirement of the replacement property and not create a tax liability.
|
»
THE HOA ADVISOR
|
|
Q I am a new real estate agent and would like to specialize in selling condominiums. What types of disclosures are required to be made before a condominium can be sold?
|
»
DAYS ON THE MARKET
|
|
The numbers just keep growing. At last check, California home sales were down almost a third from a year ago, with numbers falling for the 10th straight month. But, as curiosity would have it, the median existing-home price rose 1.6 percent in L.A. County to $576,360. Those in the know say price levels are reaching a plateau.
|
»
REAL ESTATE 101
|
|
The quick and dirty answer is no. Real estate does not crash like the stock or bond market. However, the real estate market can and does correct itself. The one thing to keep in mind about real estate values is that price is relative to the rest of the economy. It is highly unlikely that a $750,000 house will ever be valued at $7,500 unless everything else is similarly devalued. This means if your 4,000 square foot house dropped to a value of $7,500, from $750,000, than the value of your $40,000 Hummer would drop to $400 or less.
|
»
IN YOUR SPACE
|
|
How and by whom a property is managed in addition to its economics are the “nuts and bolts” of any real estate investment. If the goal is to minimize management for income-producing real estate, there are three basic approaches — own a triple net lease property outright (the tenant does the management and pays a fixed monthly amount), invest in a fractional interest Tenant in Common that uses a Property Management Company or invest in a Tenant in Common that uses a Master Lease structure.
|
»
THE HOA ADVISOR
|
|
Q In reviewing the Bylaws and CC&Rs (Covenants, Conditions and Restrictions) of our homeowner association, our board has noted several conflicts. Which document takes precedence?
|
»
DAYS ON THE MARKET
|
|
Last week, we spoke about preventative maintenance for the rainy season ... so continuing along that line of thinking, we thought we’d go one step further and talk about overall preventative maintenance for investment properties.
|
»
REAL ESTATE 101
|
|
As a land owner, you have many rights. Those rights are a theory known as the “bundle of rights.” The bundle of rights can be thought of as a bundle of paper with each sheet representing a separate right. The bundle of rights theory says that you have the right to sell, mortgage, bequeath, lease, use, occupy, grade, fill or excavate, install new roads, install new lake(s), occupy/use existing improvements, subdivide and develop, farm, etc.
|
»
IN YOUR SPACE
|
|
A properly structured 1031 Exchange provides real estate investors with the opportunity to defer 100 percent of both federal and state capital gains taxes on the sale of their existing properties.
|
»
THE HOA ADVISOR
|
|
Q How can I determine if my homeowner’s association has been suspended by the California Secretary of State?
|
»
DAYS ON THE MARKET
|
|
Autumn is upon us and as you might expect, we will soon have our first good rain. As all property owners are fully aware, it’s time to implement the annual preventative maintenance measures to best prepare your property for the rainy season.
|
»
REAL ESTATE 101
|
|
When acquiring a property, knowing how to take title can save a lot of heartache down the road. The variety of vestings can have a variety of consequences, including legal and estate planning issues. California, along with several other states, is known as a community property state. Community property means anything you or your spouse own is assumed to be held in shared ownership by both of you. Title can be taken several different ways. Sole ownership, tenancy in common, joint tenancy, and an entity are the most common vestings today.
|
»
IN YOUR SPACE
|
|
Investors frequently ask what “boot” refers to in a 1031 exchange. There is no mention of boot in the IRS code, so what exactly is boot?
|
»
THE HOA ADVISOR
|
|
Q Our homeowner’s association is not being run properly by the board of directors. Is there a government agency that has the power to oversee homeowner’s associations?
|
»
DAYS ON THE MARKET
|
|
Last week we discussed the tangibles of building your rental empire. This week, it’s all about the intangibles — tenants and repairs.
|
»
REAL ESTATE 101
|
|
When acquiring a property, knowing how to take title can save a lot of heartache down the road. The variety of vestings can have a variety of consequences, including legal and estate planning issues. California, along with several other states, is known as a “community property state.” Community property means anything you or your spouse own is assumed to be held in shared ownership by both of you. Title can be taken several different ways. Sole ownership, tenancy in common, joint tenancy, and an entity are the most common vestings today.
|
»
IN YOUR SPACE
|
|
One of the most frequently asked questions regarding 1031 exchanges is how long an investor should hold his property to qualify for an exchange. Key to understanding the answer is that the investor’s intent of the exchanger must be to hold the property for investment or use in a trade or business.
|
»
THE HOA ADVISOR
|
|
Q Our homeowner’s association was recently sued by one of our members claiming that our board of directors failed to enforce the covenants, conditions and restrictions (CC&Rs) against another member who allegedly caused a nuisance. The member who is suing has subpoenaed our executive committee minutes. I thought these minutes were confidential?
|
»
DAYS ON THE MARKET
|
|
A lot of people entertain the fantasy that it would be great to invest in real estate. For many, the first step is becoming a landlord.
|
»
IN YOUR SPACE
|
|
A 1031 transaction creates many opportunities for hospitality owners. In a 1031 transaction, a party defers capital gains taxes on the sale of the asset by having the sales proceeds held by a qualified intermediary; identifying replacement property within 45 days and closing on the replacement property within 180 days of sale.
|
»
THE HOA ADVISOR
|
|
Q Our homeowner’s association has serious water intrusion problems in the common areas. We have attempted several times to obtain a set of plans from the developer without success. What should we do?
|
»
DAYS ON THE MARKET
|
|
Those in the know keep saying that it’s an excellent time for apartment building owners.
“Monthly rents have definitely moved up, especially in Los Angeles County, but also in Orange County,” said Delores Conway, director of the Casden Real Estate Economics Forecast for the USC Lusk Center for Real Estate.
|
»
No bubble bursting in SM
|
|
Despite concerns about the imminent implosion of the high-end housing markets in California, Santa Monica continued to show strength in the first half of 2006.
|
»
IN YOUR SPACE
|
|
With historically lower rates on fixed-income investments and a volatile stock market, many investors are seeking meaningful alternatives.
|
»
| | |
full story
printer version
