Saturday, March 29, 2008

U.S. Now Becomes More Ecomonical for Commercial Businesses

Interesting article from the FAR...U.S. is now a cheaper place to do business because of the weakened dollar...Perhaps this will bring about more opportunities from outside countries, create more U.S. jobs and help our economy.

Harris W. Gilbert
The Keyes Company
(786) 371-4431

Report: U.S. now a steal as a place to do business


NEW YORK (AP) – March 28, 2008 – Thanks to the weakened dollar, the U.S. has leapfrogged France, Britain and other European countries as a cheaper place to do business.

A new study released Thursday by the auditing and consulting firm KPMG shows that the U.S. moved up on the list of places around the world that are the most cost-efficient. Researchers compared 136 cities in 10 countries in North America, Europe and Asia, but did not include fast-growing China.

Mark MacDonald, the global director of KPMG Competitive Alternatives, said the survey authors found the U.S. to be more cost competitive than they’d ever seen because of the plunging dollar.

In 2006, the U.S. lagged behind four other G7 countries. This year, though, the U.S. surpassed Britain, the Netherlands, Italy and France, leaving only Canada as being more cost-effective among the major industrial nations.

“Now the cost of business is considerably higher in these countries due largely to the depreciation of the U.S. dollar,” MacDonald said in a statement.

Mexico, which is new to the study, was cheapest overall. The study is done every two years.

Among the larger cities, the cheapest cities in which to operate were Puebla, Guadalajara and Monterrey, all in Mexico. In the U.S., the cheapest places were Atlanta, Tampa (Florida), and the Dallas-Fort Worth area.

The San Francisco Bay Area – which includes Silicon Valley and San Jose – was the most expensive in the U.S., edging out New York for that dubious distinction. London, Frankfurt and Manchester, England, were all more expensive than San Francisco.

Paris was slightly less expensive than New York.

The study measured competitiveness using labor costs, taxes, real estate and utilities, as well as non-monetary factors. It included Australia, Canada, France, Germany, Italy, Japan, Mexico, the Netherlands, Britain and all 50 states in the U.S. Those were all compared against a benchmark developed by taking the average cost of doing business in U.S. locations.

Tuesday, March 25, 2008

Meltdown Creates Opportunities for Timely Investors

Interesting article from the FAR...

Focus: Vulture funds preying on the U.S.

NEW YORK – March 25, 2008 – The subprime meltdown in the United States is creating great prospects for opportunistic investors and causing a lot of funds to be set up to scoop up properties on the cheap.

In the Reuters Housing Summit held last month in New York, it was noted that many distressed debt investors and vulture funds are starting to “hover over residential real estate” as they sense the U.S. housing bubble is about to burst.

Corcoran Group chief executive Pamela Liebman said this is even happening in Manhattan, which is among the few U.S. real estate markets still buoyant.

She said, however, the funds are not interested in individual houses but in the unsold inventory in large apartment projects.

“They are prepared to buy the unsold stock, hold them for rental and then sell (when the market recovers),” she said.

Liebman said although many New York developers are hesitant to sell at a discount, they should face up to the current situation, as over time, prices might sink even lower.

In states such as Florida, several vulture funds have already been set up to buy real estate for immediate rental income.

Real estate powerhouse The Related Companies (TRC) chief executive officer Stephen Ross said “the biggest problem today is that people don’t recognize how bad things are ... and it’s only going to get worse.”

Ross expects more economic stress to occur once a new U.S. president enters the White House next year.

“Whenever a new president is elected, they’ll want to get all the bad news out of the way in their first year ... I think things will be somewhat unstable in the first couple of years.”

To prepare itself, he said TRC sold its project sites in Las Vegas in 2005 and 2006 for a profit instead of pursuing construction, fearing market demand was based on investment buyers rather than people planning to live there.

“It was all speculative ... we thought ‘This is crazy’ and got out,” he said.

Not all the speakers at the Reuters summit felt the same way, though. C.P. Morgan Communities head Tom Eggleston, for instance, said he doesn’t see the struggling U.S. housing market hitting rock bottom until mid-2010 and even then, “the recovery would not be a sharp ‘V’.”

As one of the largest privately owned U.S. home builders, he said house prices would fall another 20 percent and land by 25 percent.

In Europe, the European Mortgage Federation (EMF) secretary-general Annik Lambert said except for the United Kingdom, property owners are not at risk of a U.S.-style subprime mortgage crisis and, thus, do not need more regulations to protect borrowers.

She said EMF, which also advises the European Central Bank and Basel Committee on mortgage industry matters, has so far noted “little fallout” from the $8.4 trillion European mortgage market as a result of the U.S. debacle.

Sunday, March 16, 2008

White Building Prime Commercial Lease!!!

The historic White Building in downtown Miami has available a 5 office suite with large window offices and newly renovated wood floors. The space also includes a kitchen (or additional window office), 2 administrative staff areas, receptionist area, 24 hour access, electricity and other amenities included in the price of rent. The space is approximately 3,000 square feet and is a perfect fit for a professional office such as a law firm or any other mid size professional company. Follow this link to view the property.

http://sef.mlxchange.com/Pub/EmailView.asp?r=466606602&s=SEF&t=SEF

Contact me directly at (786) 371-4431 if you, or anyone you know may be interested in leasing this beautiful space.

Harris W. Gilbert

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Harris W. Gilbert
Commercial Sales & Leasing
The Keyes Company Commercial Division
2121 SW 3rd Avenue
Miami, FL, 33129
Direct: (305) 779-1902
Cell: (786) 371-4431
harrisgilbert@keyes.com
http://www.hwgmiamirealestate.com/

Tuesday, March 11, 2008

Commercial Real Estate Market Holding Strong

Despite the subprime crisis in the residential market, the commercial market has been holding strong. The key to the continued success of the commercial market is that a commercial property makes cash for it's investor, which enables the mortgage to continually get paid from those proceeds. This differs from a residential property, which is dependent upon the valuation of the property. In Florida, it is said that housing values are estimated to fall potentially another 40% in some areas off the current values. For people that made housing purchases between 2005 and 2007, when the values were at their peak, it is understandable why the foreclosure rate is at it's highest level in the last century.

However, in the commercial real estate market, this is not the case. Property owners continue to make cash on their cash investments, and the property values are holding strong as a result. The lack of credit has put a slight dip into the activity of the market as the banks are not lending as easily. If you are able to qualify for a loan in this credit crunch, an investment in the commercial market still makes a great deal of sense. Not to mention the capital gains, which is the greatest asset of the property.

Contact me today to find a commercial investment property for you.

Harris W. Gilbert
The Keyes Company
(786) 371-4431

Monday, March 10, 2008

Great Time to Buy In Florida

Here is a great website with a positive spin into today's real estate market.

http://media.floridarealtors.org/GreatTimeToBuy/

The key to thriving in today's market is taking advantage of the market while it's down. If your an investor, or looking to get a great deal on a home, then this "buyers" market is ideal!

Contact me today at (786) 371-4431 to find the deal for you.

Harris W. Gilbert
harrisgilbert@keyes.com

Sunday, March 9, 2008

1031 Like-Kind Exchange Article from IRS

FS-2008-18, February 2008
WASHINGTON — Whenever you sell business or investment property and you have a gain, you generally have to pay tax on the gain at the time of sale. IRC Section 1031 provides an exception and allows you to postpone paying tax on the gain if you reinvest the proceeds in similar property as part of a qualifying like-kind exchange. Gain deferred in a like-kind exchange under IRC Section 1031 is tax-deferred, but it is not tax-free.

The exchange can include like-kind property exclusively or it can include like-kind property along with cash, liabilities and property that are not like-kind. If you receive cash, relief from debt, or property that is not like-kind, however, you may trigger some taxable gain in the year of the exchange. There can be both deferred and recognized gain in the same transaction when a taxpayer exchanges for like-kind property of lesser value.

This fact sheet, the 21st in the Tax Gap series, provides additional guidance to taxpayers regarding the rules and regulations governing deferred like-kind exchanges.

Who qualifies for the Section 1031 exchange?

Owners of investment and business property may qualify for a Section 1031 deferral. Individuals, C corporations, S corporations, partnerships (general or limited), limited liability companies, trusts and any other taxpaying entity may set up an exchange of business or investment properties for business or investment properties under Section 1031.

What are the different structures of a Section 1031 Exchange?

To accomplish a Section 1031 exchange, there must be an exchange of properties. The simplest type of Section 1031 exchange is a simultaneous swap of one property for another.

Deferred exchanges are more complex but allow flexibility. They allow you to dispose of property and subsequently acquire one or more other like-kind replacement properties.

To qualify as a Section 1031 exchange, a deferred exchange must be distinguished from the case of a taxpayer simply selling one property and using the proceeds to purchase another property (which is a taxable transaction). Rather, in a deferred exchange, the disposition of the relinquished property and acquisition of the replacement property must be mutually dependent parts of an integrated transaction constituting an exchange of property. Taxpayers engaging in deferred exchanges generally use exchange facilitators under exchange agreements pursuant to rules provided in the Income Tax Regulations. .

A reverse exchange is somewhat more complex than a deferred exchange. It involves the acquisition of replacement property through an exchange accommodation titleholder, with whom it is parked for no more than 180 days. During this parking period the taxpayer disposes of its relinquished property to close the exchange.

What property qualifies for a Like-Kind Exchange?

Both the relinquished property you sell and the replacement property you buy must meet certain requirements.

Both properties must be held for use in a trade or business or for investment. Property used primarily for personal use, like a primary residence or a second home or vacation home, does not qualify for like-kind exchange treatment.

Both properties must be similar enough to qualify as "like-kind." Like-kind property is property of the same nature, character or class. Quality or grade does not matter. Most real estate will be like-kind to other real estate. For example, real property that is improved with a residential rental house is like-kind to vacant land. One exception for real estate is that property within the United States is not like-kind to property outside of the United States. Also, improvements that are conveyed without land are not of like kind to land.

Real property and personal property can both qualify as exchange properties under Section 1031; but real property can never be like-kind to personal property. In personal property exchanges, the rules pertaining to what qualifies as like-kind are more restrictive than the rules pertaining to real property. As an example, cars are not like-kind to trucks.

Finally, certain types of property are specifically excluded from Section 1031 treatment. Section 1031 does not apply to exchanges of:

  • Inventory or stock in trade
  • Stocks, bonds, or notes
  • Other securities or debt
  • Partnership interests
  • Certificates of trust

What are the time limits to complete a Section 1031 Deferred Like-Kind Exchange?

While a like-kind exchange does not have to be a simultaneous swap of properties, you must meet two time limits or the entire gain will be taxable. These limits cannot be extended for any circumstance or hardship except in the case of presidentially declared disasters.

The first limit is that you have 45 days from the date you sell the relinquished property to identify potential replacement properties. The identification must be in writing, signed by you and delivered to a person involved in the exchange like the seller of the replacement property or the qualified intermediary. However, notice to your attorney, real estate agent, accountant or similar persons acting as your agent is not sufficient.

Replacement properties must be clearly described in the written identification. In the case of real estate, this means a legal description, street address or distinguishable name. Follow the IRS guidelines for the maximum number and value of properties that can be identified.

The second limit is that the replacement property must be received and the exchange completed no later than 180 days after the sale of the exchanged property or the due date (with extensions) of the income tax return for the tax year in which the relinquished property was sold, whichever is earlier. The replacement property received must be substantially the same as property identified within the 45-day limit described above.

Are there restrictions for deferred and reverse exchanges?

It is important to know that taking control of cash or other proceeds before the exchange is complete may disqualify the entire transaction from like-kind exchange treatment and make ALL gain immediately taxable.

If cash or other proceeds that are not like-kind property are received at the conclusion of the exchange, the transaction will still qualify as a like-kind exchange. Gain may be taxable, but only to the extent of the proceeds that are not like-kind property.

One way to avoid premature receipt of cash or other proceeds is to use a qualified intermediary or other exchange facilitator to hold those proceeds until the exchange is complete.

You can not act as your own facilitator. In addition, your agent (including your real estate agent or broker, investment banker or broker, accountant, attorney, employee or anyone who has worked for you in those capacities within the previous two years) can not act as your facilitator.

Be careful in your selection of a qualified intermediary as there have been recent incidents of intermediaries declaring bankruptcy or otherwise being unable to meet their contractual obligations to the taxpayer. These situations have resulted in taxpayers not meeting the strict timelines set for a deferred or reverse exchange, thereby disqualifying the transaction from Section 1031 deferral of gain. The gain may be taxable in the current year while any losses the taxpayer suffered would be considered under separate code sections.

How do you compute the basis in the new property?

It is critical that you and your tax representative adjust and track basis correctly to comply with Section 1031 regulations.

Gain is deferred, but not forgiven, in a like-kind exchange. You must calculate and keep track of your basis in the new property you acquired in the exchange.

The basis of property acquired in a Section 1031 exchange is the basis of the property given up with some adjustments. This transfer of basis from the relinquished to the replacement property preserves the deferred gain for later recognition. A collateral affect is that the resulting depreciable basis is generally lower than what would otherwise be available if the replacement property were acquired in a taxable transaction.

When the replacement property is ultimately sold (not as part of another exchange), the original deferred gain, plus any additional gain realized since the purchase of the replacement property, is subject to tax.

How do you report Section 1031 Like-Kind Exchanges to the IRS?

You must report an exchange to the IRS on Form 8824, Like-Kind Exchanges and file it with your tax return for the year in which the exchange occurred.

Form 8824 asks for:

  • Descriptions of the properties exchanged
  • Dates that properties were identified and transferred
  • Any relationship between the parties to the exchange
  • Value of the like-kind and other property received
  • Gain or loss on sale of other (non-like-kind) property given up
  • Cash received or paid; liabilities relieved or assumed
  • Adjusted basis of like-kind property given up; realized gain

If you do not specifically follow the rules for like-kind exchanges, you may be held liable for taxes, penalties, and interest on your transactions.

Beware of schemes

Taxpayers should be wary of individuals promoting improper use of like-kind exchanges. Typically they are not tax professionals. Sales pitches may encourage taxpayers to exchange non-qualifying vacation or second homes. Many promoters of like-kind exchanges refer to them as “tax-free” exchanges not “tax-deferred” exchanges. Taxpayers may also be advised to claim an exchange despite the fact that they have taken possession of cash proceeds from the sale.

Consult a tax professional or refer to IRS publications listed below for additional assistance with IRC Section 1031 Like-Kind Exchanges.