Frank Miller Joins EXP Realty Advisors, Inc.

Frank Miller has joined EXP Realty Advisors as a Director of Sales and Financing.  Frank formerly served as a Managing Director at Sperry Van Ness where he specialized in the sale of shopping centers and net leased properties.  Frank brings with him strong client relationships and a solid pipeline of transactions.  In addition to sales, Frank will be working to originate loans at EXP and has secured mortgage transaction with a total value of $250 million in his career.  Prior to joining Sperry, Frank ran the investment sales division at the Carlton Group.  Please join us in welcoming Frank to EXP Realty Advisors, Inc.

Frank Miller
Director of Sales and Financing
Phone: (646) 998-8119
Email: frank@exp1031.com

1031 Exchanges and the Recent Tax Rate Extension

What Does This Mean for Real Estate Investors?

The December 2010 tax cut extension maintains the President Bush-era tax cuts and provides new certainty for estate and tax planning — at least for the next two years. So what does this mean for investors and real estate brokers who want to help clients improve investment returns? 

Income Taxes and Capital Gain Taxes - 2011/2012 

The lower federal income tax rates applicable in 2010 that were set to expire on December 31, 2011, have been extended for another two years. Similarly, capital gains tax rates will remain at a maximum tax rate of 15% over the same period. Prior to the extension, some real estate investors may have remained cautiously on the sidelines given the uncertainty as to future tax rates. Now is the time to get involved!With the temporary extension of the Bush tax cuts, investors have greater certainty and should be more willing to participate in the improving real estate market. Indeed, some economists are saying that real estate values have already bottomed out making this the ideal time for real estate investors to jump back into the market. While current real estate prices may not have risen as much sellers would prefer, a tax deferred exchange can alleviate the tax burden on sale and permit the seller to capitalize on the tremendous buying opportunities that exist in today's real estate market. Moreover, historically low mortgage rates provide an opportunity to lock-in low financing costs and improved cash flow as rents begin to rise. On the flip side, a seller continues to face low capital gain tax rates for at least the next two years if no suitable replacement property is acquired to complete a tax deferred exchange. 

Estate Taxes - 2011/2012 

Prior to the tax cut extension, estate taxes were also a significant concern for investors and advisors. Fortunately, the tax cut extension established a federal estate tax exemption of $5 million and a lower maximum tax rate of 35%. Had the extension not been passed, the exemption would have been only $1 million and the top tax rate would have been 55%! The extension also restored the step-up in basis that occurs on the owner's death that applied under prior law. With the return of the basis step-up rules, investors can effectively bypass paying capital gain taxes altogether. Given the higher estate tax exemption (a married couple can now pass up to $10,000,000 to heirs free of estate tax), the new estate tax rules have given investors an increased potential to turn a tax deferred exchange into a tax-free scenario.

To recap, with the extension of the Bush-era tax cuts:By properly using 1031 exchanges, investors can never pay capital gain taxes on the exchange of properties held for investment. As an estate planning strategy, heirs will inherit property with a full step-up in basis and without federal estate taxes up to the $5 million estate tax threshold. The combined benefit: Never pay capital gain taxes and never pay estate  taxes. Call Asset Preservation, the leading national resource for 1031 exchanges, to learn more.

1031 Basics:  Identification Rules   

An exchanger has until midnight of the 45th calendar day following the sale of replacement property to properly identify the replacement property. To learn about the three different ways to identify replacement property, click on this link  Identification Rules.

Bonus Depreciation and Summary of H.R. 4853 Tax Benefits   

Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 (H.R. 4853) includes an extension of the Small Business Jobs and Credit Act of 2010 “bonus depreciation” allowance through the end of 2011 and increases the amount from 50 percent to 100 percent. Under this bonus depreciation schedule, businesses may immediately write off 100% of the cost of depreciable property acquired from September 8, 2010 through January 1, 2012. To be eligible, the equipment must be depreciable under the Modified Accelerated Cost Recovery System (MACRS) and have a depreciation recovery period of 20 years or less. Click on Summary of H.R. 4853 Benefits to see a partial overview of additional tax related highlights.

IRS Extends Tax Filing Deadline to April 18, 2011   

Taxpayers will have until Monday, April 18, 2011 to file their 2010 tax returns and pay any tax due because Emancipation Day, a holiday observed in the District of Columbia, falls this year on Friday, April 15. By law, District of Columbia holidays impact tax deadlines in the same way as federal holidays so all taxpayers will have three extra days to file their return in 2011. Also, some taxpayers – including those who itemize deductions on Form 1040 Schedule A – will need to wait until later in February to file their tax returns as a result of the IRS needing time to reprogram its processing systems. For more information, visit  irs.gov/newsroom.

Source: www.apiexchange.com

CRE Sales Deal Volume Returning to 'Normal' Levels

Encouraged by Continued Improvement in General Economic Indicators, Investors Widening Their Geographic Parameters, Taking on More Risk

By Mark Heschmeyer from CoStar Group, Inc.

January 5, 2011

If the third and fourth quarters of last year are any indication, then deal volume is returning to the commercial real estate investment sales markets.

According to CoStar COMPs, sales volume for commercial property nearly doubled from about $22 billion of deals in the first quarter of 2010 to almost $36 billion in the fourth quarter - a number that will likely increase as CoStar finalizes its quarterly tally and confirms the flurry of deals signed at year-end and those that surface in public records.

Several industry outlooks released in the last few weeks expect that a heightened level of deal volume is primed to continue.

"After rising by an estimate 60% in 2010, commercial property sales volume is expected to increase by another 25% to 20% in 2011," predicted William E. Hughes, senior vice president and managing director of Marcus & Millichap Capital Corp. "The expected improvement [in 2011] will move the investment market closer to a more 'normalized' level."

The current transaction pace is very similar to that of the second half of 2002, with nearly identical third quarter volumes and likely comparable fourth quarter trading levels as well, according to Jones Lang LaSalle. The activity in both time frames is representative of more normalized, sustainable levels - much lower than the unprecedented lofty levels of the 2005 to 2007 boom, and much greater than the sales drought in 2009.

The level of liquidity in the U.S. capital markets has improved dramatically over the course of 2010, as investors have regained confidence, particularly in stable, well-leased and located properties in the traditionally best-performing markets, Jones Lang LaSalle noted. Activity will continue to trend upward throughout 2011 as investor interest grows amid a very favorable monetary environment and an improving macroeconomic picture.

"Total investment transaction volume in apartments, office, retail and industrial will increase by a projected 36% over the 2010 figure, which at an estimated $92 billion would represent an 80% increase over the low reached in 2009," projected Josh Gelormini, vice president of capital markets research for Jones Lang LaSalle.

The deals in 2011 are likely to look different than the deals in 2010, too. There is an increased willingness to look for buying opportunities beyond either super core markets and trophy assets or vastly distressed properties, according to the fourth quarter 2010 findings of the PwC Real Estate Investor Survey.

The report notes that interest in secondary locations, Class-B properties, and value-added Class-A plays is heating up and that buyers are becoming more comfortable with taking on slightly more risk, suggesting that both investors and lenders are gaining more confidence in the overall performance of both the economy and the real estate industry.

"This time last year investors were solely focused on 'treasures' or 'traumas', properties that were either top-notch quality or significantly discounted due to sellers in distress, and there was no appetite for assets in the middle of the spectrum," said Mitch Roschelle, partner, U.S. real estate advisory practice leader, PwC. "Now, many of them are looking to widen their investment parameters and take on additional risk as they see signs that the economy and the industry are slowly healing."

And at the outset of 2011, CoStar COMPS shows that more than 6,700 property sales are pending with a combined asking price of more than $9.5 billion. Of that dollar volume, about $1.49 billion is reportedly in escrow; another $6.41 billion under contract and $1.59 billion listed as pending.

Where office properties have dominated the 2010 sales landscape, retail, multifamily and industrial properties are the three leading property types in pending deals with asking price volumes of $2.49 billion, $2.08 billion and $1.94 billion respectively. Office properties make up just about $1.91 billion of pending deals. Mixed-use properties come in at about $535 million; flex properties at $268 million, hospitality at $165 million.