Study: Retailers, Commercial Real Estate Companies Optimistic About Strong Recovery in 2021

Close to 88% of shopping centers are being used to fulfill online orders, and 99% of retail respondents reported their stores fulfilled online orders to some degree.

Nearly 60% of commercial real estate Continue reading “Study: Retailers, Commercial Real Estate Companies Optimistic About Strong Recovery in 2021”

Seven Ways 1031 Exchanges Can Help Strengthen Businesses

1031 Exchange transactions can help business owners leverage valuable cash to finance critical growth strategies.

At least once a week I get asked:   What are the benefits of doing a Section 1031 Exchange?  I normally give the usual answer:  Deferral of Taxes resulting in more funds to spend on possible Continue reading “Seven Ways 1031 Exchanges Can Help Strengthen Businesses”

Florida Hotel Sales are Down, is a Spike in the Horizon?

Florida hotels are changing hands much less frequently lately, thanks to COVID-19’s negative impact on the local economy. Orlando’s 500+ lodging properties are dealing with severely reduced revenue due to sparse tourism, and this is only contributing to the ongoing mass layoffs within the hospitality industry. Continue reading “Florida Hotel Sales are Down, is a Spike in the Horizon?”

2021 Mortgage Rates Leading Many Homeowner’s Towards Refinancing

Mortgage rates were on a steady path of decline in 2020, allowing many people the opportunity to become Homeowners or adjust their current property loan values. These historically record low rates are being projected to stay low for at least the first few months of the New Year but are expected to slowly rise again towards the end of 2021.

What does this mean for current property owners? The ability to take advantage of record-low rates on their mortgages and to save funds that can be put towards other investments.

So, when does it make sense to go through with a refinance?

  • When it lowers your monthly interest rate and/or payment
  • If you can reduce loan term/remaining payments with minimal increase in monthly payment
  • If you can use debt consolidation from the refinance to lower overall monthly obligations
  • Using a cash-out refinance for home improvements or some other major purchase.

The most important thing to note is that a refinance may sometimes have costs associated with them. Homeowners should calculate their break-even point to see how long it would take to recoup the costs. The decision to start this process is solely in the hands of the property owner, and if the savings outweigh the initial costs then it may be a smart financial move.

Take advantage of great rates & have Premier Florida Title help with your title needs. As a property owner, you are allowed to select your own title company for the title work. Call us today so we can help guide you through this process!

A New Mortgage Refinancing Fee. Here’s What You Should Know!

As of December 1, 2020, a new refinance fee is now in effect. This comes at a time when we are having record-low mortgage rates, a great time to refinance. “The Federal Housing Finance Agency (FHFA) will begin charging a mortgage refinance fee that could impact the cost of your mortgage.”

What is the fee and how will it affect me?

The “adverse market refinance fee,” of 0.5%, will be added to any new refinanced mortgages beginning December 1, 2020. This new fee is designed to help Fannie Mae and Freddie Mac offset some of the COVID-19 related losses.

“In light of market and economic uncertainty resulting in higher risk and costs incurred by Fannie Mae, we are implementing a new loan-level price adjustment,” Fannie Mae explained in a letter announcing the fee.

The new fee could potentially increase the interest rate homeowners are quoted if they do not negotiate with the lender to waive the fee.

“On the whole, borrowers don’t seem too concerned about this fee because it’s baked into the rate they’re being offered by their lenders.” However, our team at Gulati Law, like our borrowers to be well informed of the potential increased costs on your mortgage.

Below are a few things borrowers should know:

  • Some Borrowers are exempt if they fall under the following:
    • If your principal is less than $125,000;
    • Borrowers refinancing VA or FHA loans; and
    • If you are buying a home and taking a new loan.
  • Lenders might find different ways to charge the fee.
    • The FHFA charges the fee directly to lenders. Some may role it into the interest rate, while others may role it into the closing costs.

This fee should not deter you from refinancing, as the rates are the lowest on record. This new fee may still be negotiated with your lender. It is advisable to discuss with your Real Estate Attorney, to make sure all fees charged by the lender are reasonable and if it is even worthwhile to refinance based on how much the borrower can potentially save.

The fee may not last, however, it is still here for now! Stay informed and discuss it further with an Attorney at Gulati Law.

Source: Forbes 

 

Service Animals and the ADA!

Under the Americans with Disabilities Act (“ADA”), a “service animal” is only a dog that is individually trained, works or performs tasks for individuals with physical, sensory, psychiatric, intellectual or other mental disabilities. The task(s) performed by the dog must be directly related to the person’s disability.

It is important for the hospitality industry to understand what qualifies are a service animal under the ADA. The ADA does not recognize comfort animals, therapy animals, or companion animals. An animal whose sole function is to provide therapy is not a “service animal” under ADA.

How to verify?

In situations where it is not obvious that the dog is a service animal, staff may ask only two specific questions: (1) is the dog a service animal required because of a disability? and (2) what work or task has the dog been trained to perform? Staff are not allowed to request any documentation for the dog, require that the dog demonstrate its task, or inquire about the nature of the person’s disability.

The ADA requires that service animals be under the control of the handler at all times. In most instances, the handler will be the individual with a disability or a third party who accompanies the individual with a disability. The service animal must be harnessed, leashed, or tethered while in public places unless these devices interfere with the service animal’s work or the person’s disability prevents use of these devices. In that case, the person must use voice, signal, or other effective means to maintain control of the animal.

For example, a person who uses a wheelchair may use a long, retractable leash to allow her service animal to pick up or retrieve items. She may not allow the dog to wander away from her and must maintain control of the dog, even if it is retrieving an item at a distance from her. Or, a returning veteran who has PTSD and has great difficulty entering unfamiliar spaces may have a dog that is trained to enter a space, check to see that no threats are there, and come back and signal that it is safe to enter. The dog must be off leash to do its job, but may be leashed at other times. Under control also means that a service animal should not be allowed to bark repeatedly in a lecture hall, theater, library, or other quiet place. However, if a dog barks just once, or barks because someone has provoked it, this would not mean that the dog is out of control.

There are specific rules under the ADA that are tailored specifically to hoteliers and public service accommodations. Please contact us, your business law attorneys for more information. Staying informed helps limit ingenuine service animals and support and welcome your guests and comply with ADA.

Source: ADA

SECTION 1031 (TAX DEFERRED EXCHANGES)

SECTION 1031 (TAX DEFERRED EXCHANGES) VS. SECTION 1033 (INVOLUNTARY CONVERSIONS) ON INVESTMENT REAL ESTATE

More and more people are having their property taken by a governmental agency through eminent domain proceedings.  So, let’s briefly discuss some of the information that will help during this process.

Question: What options are available to me as the Taxpayer, when my investment real estate is involuntarily converted (taken from me)?

Answer:  The Taxpayer has two major options.  They can either use Section 1031 and transact a Tax Deferred Exchange or use Section 1033 for tax deferral purposes.

Question:  What are the basic rules for a Section 1031 exchange?

Answer:     There are 6 basic Rules on a Section 1031 Exchange:

 (1)  Both the property sold  and the replacement property (the new property) must be held for use in a trade or business or have been held for investment purposes. IMPORTANT NOTE: the replacement property can be any type of investment real estate.  So, you could sell a condominium unit and replace it with a piece of raw land, as long as they were both investment properties or used in a trade or business.

(2)  The 45 day identification time requirement.  The Taxpayer has up to 45 days from the day of closing to identify what the Taxpayer may want to purchase.

(3)  The 180 day purchase of replacement time requirement.  The Taxpayer has up to 180 days from the closing to close and purchase the replacement property.

(4)  Taxpayer cannot touch the funds from the sale of the relinquished property.  As a result, the funds from the closing are given to an independent third party to handle the exchange portion of the transaction.  That independent third party is called a Qualified Intermediary.  Liberty 1031, LLC is a Qualified Intermediary.  Liberty 1031, LLC is also responsible for preparing all of the 1031 documentation.

(5)  The Same Taxpayer Rule.  The Taxpayer of the relinquished property must be the purchaser of the replacement property.  There are some possible variations to this rule.  Be sure to discuss this item with your Qualified Intermediary and your Legal and/or Financial Advisor.

(6)  Replacement Property.  In order to defer paying any taxes (Long Term Capital Gains, Depreciation Recapture Tax, and Possible State Taxes), the Taxpayer must purchase investment replacement property of equal value or more than the property that was relinquished (sold) and must reinvest all of the cash proceeds into the new replacement property.

Question:  What are the basic rules for a Section  1033 transaction?

Answer:     There are 4  basic Rules on a Section 1033 taking:

(1)  There is no requirement to hire a Qualified Intermediary.

(2)  The property is involuntarily converted when one of the following events occurs: the property is destroyed by fire, earthquake, hurricane or some other destructive event;  or the property is seized, without governmental compensation, which makes this type of conversion somewhat irrelevant;  or a governmental agency exercises it power of eminent domain or there appears to be an imminent threat of a requisition or condemnation (the property owner must be aware of the threat and must reasonably believe that a condemnation is likely to happen).

(3)  There is a Partial Conversion—occurs when  a portion of the property is involuntarily converted.  Important Note: If the taking of the real estate portion taken renders the operation of the business or use of the property economically impractical, then the Taxpayer could sell the whole property and defer taxes on the entire property when obtaining a replacement property.

(4)  Timelines for Property Held for Productive use in a Business or Trade or for Investment Property.  The Taxpayer has up to 3 years from the date the converted property was disposed of or the date of a threat or imminence of requisition or condemnation.

 Question:  So which Section should a Taxpayer use?

Answer:  A number of knowledgeable CPA’s have advised their clients to use BOTH sections.  By using both Section 1031 and Section 1033, the Taxpayer would first use Section 1031, where the funds would be distributed to the Qualified Intermediary.  The Taxpayer will then have 45 days from the closing of its relinquished property, to identify their possible replacement property(ies).  Taxpayer also would have 180 days from the closing of the relinquished property to purchase a replacement property. The advantage of doing a Section 1031 tax deferred exchange for the Taxpayer is that the replacement property can be any type of investment real estate, for example:  a commercial piece of real estate for investment raw land.  Should the Taxpayer fail to complete its 1031 exchange, then the escrowed funds would be distributed back to the Taxpayer.  The Taxpayer could then continue with a Section 1033 Tax deferral to find and close on another property.  BUT, under Section 1033, the replacement property must be very similar to or related in service or use, to the property that was taken, in order to have no gain recognized and  not taxed.

One final comment:  It is ALWAYS advisable that the Taxpayer speak with their Legal and Financial counsel whenever dealing with an involuntary conversion.

Source: Liberty 1031

Post-Hurricane Scams Targeting Real Estate Owners!

ATTENTION all Real Estate Owners!

BEWARE OF SCAMMERS
There have been talks of some individuals attempting to take advantage of real estate owners post-hurricane recovery situations. Insurance, debris removal, and tree removal scammers are actively working in storm affected areas.

Do not sign anything regarding an “assignment of benefits” from a potential contractor.

If you have any questions regarding reviewing paperwork to be signed, please reach out to your Real Estate or Business Law Attorney.

 

#GulatiLaw

Big Moves in the Hotel Industry

Marriott plans to remove plastic straws Worldwide by July 2019!

Marriott International today announced that it has adopted a plan to remove disposable plastic straws and plastic stirrers from its managed and franchised properties by July 2019. The move will impact 6,500 properties across 30 brands around the world, and could eliminate the use of more than 1 billion plastic straws per year and about a quarter billion stirrers. The company says that its timeline gives hotel owners and franchisees time to deplete their existing supply of plastic straws, identify sources of alternate straws (which hotels will offer upon request), and educate staff to modify customer service.

Here are Gulati Law we strive to protect our enviroment, and are also following the same plan.

Not so Fun Fact: According to Google, over 100 million marine animals are killed each year due to plastic debris in the ocean. Currently, it is estimated that there are 100 million tons of plastic in oceans around the world.

#GoGreen #SavethePlanet

Source

Non-Tax Reasons to do a Section 1031 Tax Deferred Exchange

The majority of our clients and referral sources are aware that doing a Section 1031 tax deferred exchange allows Taxpayers the privilege of deferring the payment of their federal capital gains taxes, depreciation recapture taxes and state income taxes (if any) on the property they held for investment or on the property that they used in their trade or business.  

So, deferral of payment of taxes is a major reason astute Taxpayers use Section 1031 of the Internal Revenue Code.  But there are numerous Non-Tax reasons to do a 1031 exchange.  I will try to cover some of these reasons in this 1031 information missive.  Let’s begin:  Non-Tax reasons to do a Section 1031 Exchange:

1. Taxpayers may want to sell a property that they have fully depreciated and exchange into a more expensive property that can have additional depreciation.

2. Taxpayers may want to exchange a property that is not producing income into a piece of property that does produce an income stream.  A typical example would be the exchanging of a piece of raw acreage into a replacement property, such as an office building, that would produce a positive cash flow.   A lot of retirees do this type of exchange, because they are looking for an additional income stream in their retirement years.

3. Taxpayers’ “Property of Their Dreams,” becomes available and so they exchange an investment property they are not particularly fond of for the “Property of Their Dreams.”

4. Taxpayers exchange a property that is not producing a satisfactory cash flow for another that will produce a larger cash flow.

5. Taxpayers want to diversify their investments.  They might own one large property.  They could sell the large property (relinquish it) and purchase (replace) with numerous investment properties.   They may want to diversify because they would like to have properties in various different states, so that if one state has an economic problem, the rest of their assets are not affected.  Or they might want to own different types of property.  For example, they could exchange a large office building and replace it with a small strip shopping center, an office condominium, and other property–all being different types of real estate.  Remember–the property sold (relinquished) must be “like kind” to the property purchased (replaced).   In the case of real estate, all investment real estate is “like kind” to any other type of investment real estate.

6. The Taxpayers may want to exchange a property that is not appreciating at the rate they would like for another property that has a better possibility for increased appreciation.

7. The Taxpayers may decide to do a 1031 exchange because the present property they own may be harder to sell in the future and the replacement property may be easier to dispose of in the future.

8. The Taxpayer decided to relocate to another state and would like to have all of their investments within a reasonable distance from where they live.   This becomes especially important to the Taxpayer who must manage and oversee their investments personally.

9. Consolidation is an important concern to many of our clients.   They own a number of investment properties and managed them for a number of years.  They have decided that it would be better to own fewer, but more expensive investments.   This could decrease the Management responsibilities, as a larger/more expensive property is more conducive for hiring a management company to take care of the investment.

10. Multiplication and Leverage–no I’m not talking about 3 x 3 = 9.  Many Taxpayers are hoping that through their investments, their net worth will appreciate.  For example:  A Taxpayer who owns a piece of property valued at $500 that will appreciate 10% in a year, will have an investment worth $550 at the end of the first year (appreciation of $50 that year).  A Taxpayer who exchanges that $500 (I am presuming there is no debt on the property to make this example easy to understand) for a $2,000 investment (that would be 25% down–$500–with the remaining $1,500 in borrowed money) would have at a 10% appreciation factor, a $200 appreciation that year.  We know which is more–$200 is more than $50.  So, through multiplication and Leverage–the Taxpayer’s net worth can appreciate at a much quicker pace.

11. Reduced Management Responsibilities–I know I have intimated this reason above, but it is a very important reason that many Taxpayers transact a 1031 exchange.  They exchange the property they presently own and replace it with one with less management headaches, or replace it with a property that they don’t have to manage at all, such as a Tenant-in-Common/Delaware Statutory Trust type of property–that is professionally managed by others.

12. Exchange out of a property they own a partial interest in–and exchange into a property they will own just by themselves.  That way they no longer have to get an approval to do anything to or with the property from their “co-owner.”

13. Estate Planning is a major reason Taxpayers should do a Section 1031 exchange.  Although this 1031 Information Missive is titled Non-Tax Reasons–I just had to sneak this one in because, if done correctly, most Taxpayers will pay NO tax when doing a Section 1031 exchange and at the Taxpayers’ demise, their heirs will receive these assets at a stepped-up basis—-and it’s very likely that there will be no estate taxes.

Courtesy of: Liberty 1031

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