Category Archives: Real Estate

Neediest Homebuyers in U.S. Lifted by Japan: Mortgages

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U.S. homebuyers are getting an unexpected boost from the Bank of Japan.

As Governor Haruhiko Kuroda’s efforts to spark inflation by doubling the central bank’s bond purchases shrinks the available debt in his country, traders are betting that will bolster demand for U.S-owned Ginnie Mae’s mortgage securities, pushing up prices and lowering yields that guide home-loan rates.

Japanese investors venturing into the U.S. home-loan market typically favor debt from Ginnie Mae, which helps financeborrowers with down payments as low as 3.5 percent, because it carries an explicit government guarantee, unlike Fannie Mae and Freddie Mac notes. Bond buyers from the Asian nation that has suffered three recessions in five years may increase their Ginnie Mae holdings by $50 billion annually as a result of the BoJ’s easing, Nomura Securities International estimates. Continue reading

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Is Rent-To-Own Homes and Seller-Financing the ‘New Bank’ for Americans?

Rent-to-own is known by many names, be it land contract, contract for deed, rent with option, owner carry back, owner’s terms, seller financing, lease with option and so forth. The terms are similar in their mission-i.e., a seller of real estate offers creative options to tenant/buyers. The means of accomplishing that goal may be with any of the aforementioned terms, many of which have legal definitions that may vary state by state. For this article I will stick to the more commonly known “rent-to-own’ and offer to the reader a broad overview of the elements of the concept.

In any real estate (rent-to-own) transaction there is a buyer and a seller, an agreed upon price and the terms. In a typical sale (bank financed) the parties agree on a price, a closing date is set and a lender steps in (if needed). Seller gets the cash, buyers gets the deed and it is a done deal. Not so in rent-to-own.

For example, a rent to own agreement can have a variable price. This is a common practice amongst investors like this author who sell rent to own properties. So what does a ‘variable price’ mean? A few years back when home prices headed up yearly there was significant value created simply by prices inching higher. A $300,000 house might climb to $360,000 in just two or three years. A savvy rent to own buyer who locked in three years earlier could cash out and many did.

The variable price idea basically was a negotiation between the parties to establish how that future value would be apportioned. The seller may have a clause in the agreement that states that for each year the tenant is in a rent-to-own agreement the price of the home shall be adjusted by the CPI (consumer price index). Or it may have a clause that says the actual selling price would be set at some future point in time (say three years) as determined by a reliable appraisal. In either scenario buyers and sellers can negotiate all the variables.

The other areas of negotiation are the payment amount and down payment. The monthly payment can be treated as simply rent with nothing going toward future equity, or it can be that the entirety of the payment goes towards the principal thereby reducing the balance owed by such amount as is the payment.

As for a down payment it is another area of slicing and dicing the rent-to-own recipe. Though there are many scenarios the most typical is a buyer who is usually a bit short of a cash down payment (not always of course) and may negotiate with the seller for down payment terms. I have seen buyers trade things of value, such as classic cars for a down payment. The down payment can be anything of which the two parties agree. In some rent to own agreements a seller may accept a portion of the monthly payment to go towards a down payment thereby giving the buyer a future ‘bank account’ on which to draw for the purpose of paying off the seller by obtaining a traditional bank mortgage.

One of the keys and the beauty of rent to own is this ‘flexibility’ between buyers and sellers, which is generally unheard by institutional lenders at this level of residential borrowing. The buyers and sellers have all this room to negotiate and it is all well and good yet it is in the end game where agreements often fall apart.

In the end game it is that portion or clause(s) of the sales agreement that states when and how the buyer shall cash out the seller. Now it may be that in an owner financed agreement where the seller creates a mortgage note, deeds the property to buyer and the seller is essentially ‘the bank.’ And this can be structured as a loan of whatever terms are agreed upon, say a 7% interest rate amortized over a 30-year mortgage.

On the other hand an agreement can be more of the typical deal where the buyer agrees to a term (say 2-5 years) and at the end of the term shall cash out the seller. How the buyer cashes out the seller should always be clearly defined in the agreement. The agreement might read that the buyer shall pay off the balance owing on such and such a date, the penalty (or fee) of which for not abiding by the terms of the agreement is the foregoing of any down payment monies, rent credit and actual cash value of home repairs incurred by the tenant/buyer.

It is in this end game that is more of a burden on the buyer. For if the buyer cannot come up with the money to complete the terms of the agreement the seller may be able to simply evict the tenant at that point in time and repeat the entire process with another tenant/buyer.

It is important to remember that this is but a broad stroke of the entirety of the rent to own home industry. There are many laws that discuss rent-to-own (be it lease purchase, land contract, etc.) and they vary by state. These laws can and will have the final say in the event of a dispute between buyers and sellers.

In many situations a seller can be an investor who with respect to the practice of selling in this manner has ‘been there, done that’. Most buyers, if new to the game are clearly at a disadvantage, simply because they are usually the more excited of the parties, and it is he who bears the emotional attachment to a deal who is at risk of not taking the time to examine the deal.

That being said it is always recommended for each party before signing on the dotted line to obtain the review of their agreement by at least an rto expert, and when needed a legal opinion, preferably by an attorney who specializes in real estate.

At the end of the day the rent-to-own program is a win-win as long as the parties to a deal go in with eyes wide open with a clear understanding of the path they will soon travel together. When banks are not lending the rent to own seller can often be the best choice as the lender of last resort.

Be safe my friends.

Bud Spofford,

http://www.Realtyrto.com

Article Source: http://EzineArticles.com/?expert=Buddy_Spofford
Is Rent-To-Own Homes and Seller-Financing the ‘New Bank’ for Americans? 2013, Feb 18. By Buddy Spolford. Retrieved from http://ezinearticles.com/?Is-Rent-To-Own-Homes-and-Seller-Financing-the-New-Bank-for-Americans?&id=7512338.

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Congress May Tighten The Belt On Cute Tax Tricks

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We haven’t seen the end of estate tax reform.

That’s the consensus of lawyers meeting in Orlando this week at the Heckerling Institute on Estate Planning, the annual Super Bowlon the subject sponsored by University of Miami School of Law.

The good news is that the New Year’s day passage of the American Taxpayer Relief Tax Act Of 2012 or ATRA ended 12 years of uncertainty about how much could pass tax free; what the tax will be on transfers above that amount; and even whether there would be an estate tax at all. Going forward,  it’s possible to transfer $5 million during life or at death, and this amount is adjusted for inflation — in 2013 it’s $5.25 million per person ($10.5 million for married couples). For a summary of the changes, see my post “After The Fiscal Cliff Deal: Estate And Gift Tax Explained.”

What’s still in play are the cute tax tricks that some of the best minds in the field have devised to leverage or pack more into the tax-free amount. The Obama administration took aim at a bunch of old standbys and some new targets in its 2013 budget issued last February. Nothing became of it in the New Year’s day tax package–much to the relief of rich folks and their financial advisors. But we can expect renewed interest as the legislators tackle part two of the fiscal cliff crisis: cutting spending and raising revenue.

Don’t expect thoughtful estate tax reform — we’re talking congressional horsetrading, perhaps done incrementally.(Heads up: watch those transportation funding bills.) The following estate planning tools were mentioned in the last Obama budget, and might be expected to show up in the next one, which is likely to be issued in March.

Grantor trusts. This is not a single variety of trust, but a set of characteristics that can be incorporated into various types of popular trusts. The term refers to the fact that the person who creates the trust, known as the grantor, retains certain rights or powers. As a result, the trust is not treated as a separate entity for income tax purposes and the grantor, rather than the trust or its beneficiaries, must pay tax on trust earnings.

A 2004 Revenue Ruling made it clear that paying the tax is not considered a gift to the trust beneficiaries. Yet this tax, on income that the grantor probably never receives, shrinks his estate. At the same time, assets can appreciate inside the trust without being depleted by ordinary income taxes or capital gains taxes.

Until now, another attractive feature of these irrevocable trusts is that assets placed in the trust are removed from the senior family member’s estate. From an estate and gift tax perspective, the transfer is treated as a completed gift. The value of the assets is frozen at the time of the transfer, so that future appreciation is not subject to estate or gift tax. These hugely popular trusts have been used for a broad range of people, from young entrepreneurs with mushrooming assets to elderly couples with securities portfolios.

The President’s proposal would eliminate this additional feature of these trusts. This an enormous change that would wreck havoc with an important tax-saving tool. Going forward, Obama would like these trusts to be taxable as part of the grantor’s estate. And distributions from the trust to beneficiaries during the grantor’s life would be subject to gift tax.

Dynasty trusts. Some states allow trusts to continue in perpetuity (or for a very long time) and pass wealth through multiple generations without incurring estate, gift or generation-skipping transfer taxes. These trusts are allowed to continue in perpetuity only in states that have abolished the rule against perpetuities. These include Alaska,Delaware, South Dakota and Wisconsin. Residents of other states can choose one of these states as the situs, or location, of a trust; in most cases, some connection to the state is needed and certain conditions apply.

The president’s proposal would do away with dynasty trusts, limiting the generation-skipping transfer tax exemption to 90 years.

The low-risk grantor retained annuity trust or GRAT. This device allows someone to put assets into an irrevocable trust and retain the right to receive distributions back over the trust term. The annuity is equal to the value of what’s been contributed plus interest at a rate set each month by the Treasury called the Section 7520 rate (named after the section of the Internal Revenue Code that applies).

If the value of the trust assets increases by more than the hurdle rate, the GRAT will be economically successful. In that case, the excess appreciation will go to family members (the remainder beneficiaries) or to trusts for their benefit when the GRAT term ends. If the appreciation never occurs, the trust can satisfy its payout obligations by returning more of the assets to the grantor—the person who created the trust.

For the moment, it is possible to form what’s called a zeroed-out GRAT, in which the remainder is theoretically worth nothing so that there is no taxable gift. The President’s proposal would do away with zeroed-out GRATs. It would also require that a GRAT have a minimum term of 10 years, compared with the current two-year minimum.

This greatly accentuates what is called the “mortality risk” of a GRAT: If the grantor dies during the trust term, all or part of the trust assets will be included in her estate for estate tax purposes. Rich folks would no longer be able to use short-term GRATs to minimize that risk.

Using family entities to achieve discounts. Some people use closely held enterprises, such as family limited partnerships, or FLPs, and limited liability companies, or LLCs, to discount assets before transferring them to family members or trusts for their benefit.

Here is how these family-controlled entities work: A senior family member puts assets, such as marketable securities, real estate or shares of an operating business, into the entity, which is most often an FLP but may be a LLC (some lawyers are more familiar with that structure). Then the individual sells or gives away shares in the entity that holds the assets – not the assets themselves. Since the interests can’t readily be sold outside the family, their value is discounted for both lack of marketability and lack of control (typically a total discount of 20% to 30%).

By reducing the value of partnership units or membership shares for gift tax purposes, discounts enable you to minimize the tax cost of transferring assets.

Valuation discounts  have been the subject of multiple and protracted tax court battles, and the outcome of some cases are hard to reconcile. The budget proposal suggests that the Administration wants to scale back on the use of discounts, though the contours are not clearly spelled out. However, it clearly indicates that whatever restrictions emerge would apply retroactively to October 8, 1990 (the effective date of section 2704 of the Tax Code).

Congress May Tighten The Belt On Cute Tax Tricks. 2013, Jan. 16. By Deborah L. Jacobs retrieved from http://www.forbes.com/sites/deborahljacobs/2013/01/16/congress-may-tighten-the-belt-on-cute-tax-tricks/?utm_campaign=forbestwittersf&utm_source=twitter&utm_medium=social .

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Historic Estate on William Penn’s Land Listed at $2.99 Million

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A historic estate situated on land that once belonged to English financier and philosopher William Penn, who founded Pennsylvania in 1681, has been listed for sale by Christie’s International Real Estate affiliate Long & Foster at $2.99 million. Located in Chester Springs, Pennsylvania, Pickering Spring Farm is situated on six picturesque acres that were formerly part of a vast land grant given to Penn by King Charles II. The estate, centered on the five-bedroom, four-bath main residence built of stone and dating back to 1760, is a significant piece of American history. Additions to the property were made in 1850 and again in 1960, transforming it into the luxurious estate it is today.

Key features include an elegant two-story marble foyer with the original staircase and a balcony, original fireplaces in the living room and formal dining room, original hardwood floors, crown moldings, and beamed ceilings. The gourmet kitchen’s original stone hearth now houses the modern range, offset by custom cabinetry and granite counters. The living room opens on to a spacious brick terrace and the in-ground swimming pool surrounded by a slate patio. An impressive master suite with exposed ceiling beams and ornate window moldings is located on the second floor complete with his and her en suite baths and a dressing room. The four additional bedrooms and three full baths are on the second level as well.

A brick walkway from the outdoor terrace leads the way to a gazebo overlooking a 15-acre protected pond and the surrounding grounds with their lush landscaping and historic stone walls. The luxury real estate property also features a large six-stall barn as well as a fenced paddock for horses, a silo, and a detached over-sized garage that can easily be converted to an entertaining space or guest house.

Historic Estate On William Penn’s Land Listed at $2.99 Million. 2012, Dec. 5, By Jared Paul Stern, Retrieved from http://www.justluxe.com/lifestyle/real-estate/feature-1861985.php.

SEE ORIGINAL WILLIAM PENN HOME Continue reading

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Shifting Tides Of Panama Real Estate Echo Miami Trends

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PANAMA CITY, Panama — As a real estate agent shows off a model apartment — white leather sectional, stainless steel appliances, open concept, ocean views — in the 59-story Yacht Club Tower, and touts its fitness center and pool deck designed to mimic a ship floating on the sea, he makes a telling statement:

“We tried to emulate the Miami style in this building.”

Approaching this Central American capital from the air, the first thing a traveler notices is a skyline on steroids — gleaming towers jutting skyward like so many pickets on a fence. There’s even a Trump high-rise here — the sail-shaped 72-story Trump Ocean Club International Hotel & Tower. And it’s not uncommon for those active in Miami real estate and development circles to try their luck in Panama or move back and forth between the markets.

Although Miami is nearly 1,200 miles from Panama City, the real estate markets of the two cities share certain similarities. Both went through booms and overbuilding and then had way too many empty condominiums. Wealthy Latin American buyers were a salvation in both cities when traditional segments of the market fell off.

“Now that things are starting to pick up in the States, they are picking up here too. Now that there’s not as much economic uncertainty in the United States, people feel more confident about Panama too,’’ said Morris Hafeitz, general manger of Emporium Developers. He used to work in Miami as a project manager for Odebrecht, the Brazilian conglomerate
Now Hafeitz is trying to sell Allure at the Park, a 50-story building Emporium developed in Panama City’s Bella Vista neighborhood. The building is chock full of amenities — gym, teenage game room, adult lounge, toddler playroom, pool, squash court and even miniature golf on the roof — but one of its main selling points is that it overlooks a park and two low-rise historic buildings. “In the heart of the city without the hassles of the city,’’ said Hafeitz.

During the boom, many buildings in central Panama City went up practically on top of each other. “In the beginning of the boom there were no regulations on density,’’ said Mauricio Saba, a project manager at Zoom Development in Panama City and another Miami real estate alum. “I have a friend who said he could watch his neighbor’s TV from his balcony.’’ Continue reading

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Available Now!! The Cosmopolitan-110 Washington- Miami Beach

PRICE: $615,000
BEDS: 2 BATHS: 2.5
110 Washington Avenue #1308
Miami Beach, Florida 33139
SQUARE FT: 1,247

LARGEST FLOOR PLAN IN THE COSMOPOLITAN! SPECTACULAR 2 BED 2.5 BATH PLUS DEN WITH A LARGE PRIVATE TERRACE BOASTING MORE THAN 250 SQ FT OF OUTDOOR SPACE! GORGEOUS LAYOUT FEATURING A WIDE OPEN KITCHEN, STAINLESS STEEL APPLIANCES, GRANITE COUNTER-TOPS  WASHER & DRYER IN UNIT AND MARBLE FLOORS THROUGHOUT. ALSO INCLUDES 2 TANDEM PARKING SPACES AND INVALUABLE STORAGE SPACE. THIS UNIT IS A MUST SEE! LOCATED IN COVETED SOUTH OF 5TH, JUST A 2 BLOCK STROLL TO THE BEACH, THE BEST RESTAURANTS IN SOUTH BEACH AND SOUTH POINTE PARK. A+ ELEMENTARY SCHOOL DISTRICT!

HOWARD CHASE REAL ESTATE
P: 305 532-7470
F: 305.532-7471
E: howard@howardchaserealestate.com
Address: 1354 Washington Avenue Suite #220
Miami Beach, FL 33139

 

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FOR SALE NOW!! THE DECOPLAGE- MIAMI BEACH


PRICE:$570,000
1 Beds, 1.5 Baths
2301 Collins Avenue #1507
Miami Beach, Florida 33139
SQUARE FT: 1,230

BEST LOCATION ON SOUTH BEACH! ROLL OUT OF BED ON TO LINCOLN ROAD OR THE BEACH! LARGE FULL 1 BEDROOM 1.5 BATHROOM WITH SPECTACULAR OCEAN VIEWS AND A MONSTER BALCONY. BUILDING OFFERS 24/7 SECURITY AND VALET, STATE-OF-THE-ART GYM AND A NEWLY BUILT OLYMPIC SIZE POOL SET IN A TROPICAL GARDEN. LIBERAL RENTAL POLICY IN THE BUILDING MAKES THIS UNIT A GREAT INVESTMENT!

HOWARD CHASE REAL ESTATE
P: 305 532-7470
F: 305.532-7471
E: howard@howardchaserealestate.com
Address: 1354 Washington Avenue Suite #220
Miami Beach, FL 33139

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