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Is Paying for a Cost Segregation Analysis Beneficial?

Is Paying for a Cost Segregation Analysis Beneficial?
If you were told as a real estate professional that there was a tax credit that could save you thousands in taxes, increase your cash, and allow you to allocate your funds for new investments. You would not only be asking the question: 'Is Paying for a Cost Segregation Analysis Beneficial?' but also 'Why have I not heard of this money-saving benefit?' Cost segregation has been around for some time. In 1997, the Hospital Corp of America and Walgreens Pharmacy appealed that shorter periods should be available, rather than waiting for 27 ½ to 39 years to get their tax returns. These schedules now follow a five-year, seven-year, 27 ½ years and 39 year depreciation time frame. Here is a breakdown of the classifications and depreciation periods. Breaking Down the Cost Segregation Classifications Classification 1 - Building and Personal includes the items added to the property, such as window treatments, moldings, wall coverings, and appliances. These have a five-year depreciation time frame.  Classification 2 - Site Work and Land Improvements include the work done before the foundation is laid down. These works include soil grading, removal, and all the work done around the construction site's surrounding areas. An example of what falls in this classification are driveways, irrigation systems, patios, and landscaping. These have a 15 year depreciation time frame.  Classification 3 - Building Structure includes the building, its foundation, roofing system, exterior facade, plumbing, windows, doors, and frames. These have a 27 ½ years depreciation time frame.  Reasons Why Paying fo......
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11 Types of Common Notices for Managing Rental Property

Managing a rental property involves knowing when to send out notices in order to communicate with tenants and protect yourself legally as a landlord or property manager. Whether you have a tenant who has failed to pay rent or need to let a tenant know about upcoming renovations, it’s important to familiarize yourself with the types of notices property managers and landlords send out. Notice of Repairs – This type of notice informs tenants that repairs or renovations will be made on the property on a certain day. It also lets tenants know about any outages that will occur, such as having the electricity shut off. Notice to Enter – With this type of notice, landlords let tenants know that they will be entering the property. Whether landlords are doing an inspection or checking on repairs, most states require this notice to be sent to tenants at least one day before visiting the property. Notice of Lease Amendment – This notice informs tenants that there has been a change to their lease. If the change was negotiated between the landlord and tenant beforehand, this serves as a formal document stating that the lease has been amended. Notice of Rent Increase – This type of notice announces an upcoming rent increase that will take effect on a certain date. These notices must be sent to tenants between 30 and 60 days before the new rent takes effect, depending on state laws. Offer of Renewal – This notice lets tenants know that their lease will ......
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Why Both Agents and Buyers Should Use an Exclusive Representation Agreement

An exclusive Buyer/Tenant (“Client”) representation agreement is an agreement that says that a specific Broker/Agent will represent the Client for the purchase or lease of real estate. It can be for a designated duration of time, a specific geographical area, a particular type of property, one specific property or a combination of any of the above.  The Agreement creates no obligation on the part of the Client to purchase or lease real estate yet it assures that the Broker/Agent will be paid a commission in the event a transaction occurs for the Client.   The fee may or may not be paid by the Client, many times the agreement specifies that any commission due by the Client is offset by any fee collected from the other side of a transaction (Such as a Seller offering a commission). For the Broker/Agent it will spell out how they will perform their obligations under this agreement through the individual signing on behalf of the Broker, another real estate licensee assigned by Broker, who is either the Broker/Agent individually or an associate-licensee (an individual licensed as a real estate salesperson or Broker who works under Broker’s real estate license). This is of course subject to the Client’s approval, which shall not be unreasonably withheld or delayed. Broker and the Client will agree that the Broker’s duties are limited by the terms of this. For the Client the agreement gives representations to the Broker/Agent that there are no other Broker/Agents that the Client may be working with for this ......
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Are Environmental Investigations Always Necessary When Buying a Property?

The short answer is no, the federal regulations do not obligate property buyers to conduct environmental investigations or in more correct terms, to perform a Phase I Environmental Site Assessment (ESA) in every case that there is a commercial real estate transaction. However, there’s more to this than a simple yes or no answer, which is why we will have to go deeper into this important topic. What Are Environmental Investigations or Environmental Site Assessments? A Phase I ESA is a report made for real estate that suspects potential for existing environmental contamination liabilities. These assessments are performed on both the land and the improvements made upon it. In most cases, these assessments are there to mitigate the environmental concern any side has when a real estate transaction is involved. The fear may be from the seller, the buyer, or even the bank. In rare cases, a Phase I ESA report will find problems that will create cause for another study – Phase II ESA that looks to perform chemical analysis of any hazardous substances that were found in Phase I. As these cases are rare, we are here to look only at Phase I ESA. When Are Phase I ESAs performed? As we previously mentioned, Phase I ESA is performed when there’s worry that an environmental risk might exist in connection to the property. Let’s take a look at the reasons which prompt the initiation of Phase I ESA: If any hazardous material such as gasoline, heating oil, fuel, etc. has or ......
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Should You Consider Real Estate Investment Trusts?

Pulling the trigger on your first real estate investment is daunting and not everyone has the risk appetite to go it alone.  If you want to start investing but don’t want to take a leap of faith, you may want to consider a Real Estate Investment Trust (REIT). A REIT is an investment vehicle that can invest in any real estate class and they’re operated by experienced executives. The benefit of investing in a REIT is that you do receive some of the benefits of real estate ownership/investing, but you have seasoned professionals managing the properties.  Since you’re really buying stock in the company, your investment is spread out over a portfolio of properties along with other investors, which helps to mitigate risk. REITs are required to pay out substantially all (90%) of their taxable income and most pay above-average dividends, so consult your CPA to see if this may affect your tax position. Of the 172 publicly traded REITs listed on the major U.S. exchanges with market capitalizations greater than $500 million, 94% have higher dividend yields than the average S&P 500 company. REITs are excellent stocks to add to any long-term investment portfolio. Not only are REITs income generators, but as property values rise they have the potential to produce some impressive returns over time. Similar to when you look for your own properties, you need to look into the assets that the REIT has that have an interest in buying. Due to the strong dividend income REITs provide, they ......
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How Real Estate Can Be Socially Responsible


Partners Joe Killinger and George Pino were recently guests of the "Lifetime Cash Flow Through Real Estate Investing with Rod Khleif" podcast. We've broken up the podcast into segments for convenience.

First topic of conversation is how #realestate brokerage can also be socially responsible.

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How Can Cities Address the Affordable Housing Crisis

A few weeks ago I wrote about the prospect of the repeal of Costa-Hawkins act in California.  This measure is being pushed by tenant rights groups claiming it will help with affordable housing.  Although I do believe there is an affordable housing crisis, I do believe that the repeal of Costa-Hawkins  would only be a short term relief and significantly hurt affordable housing in the long term.  So what can cities do to address the affordable housing crisis? Cities have many tools available to them, and if utilized correctly can significantly positively impact the affordable housing market.  It boils down to simple economics, if a developer can build affordable housing, and make money doing so, then they will.  How can cities promote the development?  It starts first with the approval process.  After the cost of land and actual hard construction costs, the time cost and soft costs are the highest expenses for a developer.  The city of Dallas did this earlier last year.  They passed measures to streamline the process to construct affordable housing.  By streamlining local administrative review of plans, and lowering the costs of permits they have made it easier for developers to develop low income housing.  With faster approval processes and lower costs affordable housing becomes that much more attractive to a developer.  Another benefit for streamlining the process is that it minimizes the risk to a developer, and like any other investment development is a risk vs. reward calculation, with lower risk translating to lower demand for r......
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Understanding Renters Insurance Coverage

Around 95% of all homeowners presently have homeowner’s insurance. But, in 2016, just 41% of renters had renter’s insurance, despite the multiple benefits it brings to policyholders. Unlike the name suggests, renters insurance plans do more than just cover your personal items or protect you from the cost of damaging your apartment. They bring a bundle of benefits that make it well worth the small monthly charge. This article will discuss what renters insurance actually is and isn’t, who and what is covered by the typical renters insurance policy, and how you can calculate the extent of coverage you are likely to need. What Is (and Isn’t) Renters Insurance? Simply put, renters insurance covers you, anyone named on your policy (like your partner and children), your stuff, and additional costs. These could include temporary living expenses or medical and legal fees that might be incurred if you had to vacate your home for a short period or pay for damage caused to someone else or their property. May people think they don’t need renter’s insurance for a number of reasons. The three most common are listed below: Your landlord has insurance. While this may be the case, it will only cover the structure and any items that belong to them – it won’t cover you or your possessions. It costs too much and you don’t have anything worth covering. Renter’s insurance can cost as little as $5 per month. If you think you don’t have anything worth covering, just imagine for a moment what it would cost you to r......
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Why You Should Invest In Multifamily Instead Of Single Family Homes

Many Investors that are starting out seem to think that buying a home and leasing it out is the best way to go.  Although there are some advantages in acquiring a Single Family Residence (“SFR”) there are as many disadvantages as well.   The most pressing advantage for an SFR is that you can typically purchase them  for less money down, allowing you to make use of today’s low interest rates and leverage the return.  The low down payment can be the difference between investing now, and waiting years until you’ve saved up a larger down payment.    However, keep in mind that lenders typically consider anything that is 4 units or less to be an SFR, so you can purchase a 4 unit building for as little down as you would a house.  Of course, the main risk of investing in an SFR comes from the simple fact that if the property goes vacant you are covering 100% of the mortgage payment, taxes and insurance. My experience with newer investors in the industry tends to drive them more toward smaller multifamily investments.  Properties that have less than 5 units still fall under the guidelines for a residential mortgages so you still have the smaller down payment. The learning curve that comes with smaller properties is probably the best way to learn how you should be handling your larger investments.  As you gain industry experience and expand your portfolio, or even if you choose to hire a management company you will then know what th......
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The Effects Of The Blockchain On Real Estate

  Blockchain is an emerging technology which will transform the way we buy, sell and lease real estate. “A blockchain is a digitized, decentralized, public ledger of all cryptocurrency transactions. Constantly growing as ‘completed’ blocks (the most recent transactions) are recorded and added to it in chronological order.  It allows market participants to keep track of digital currency transactions without central recordkeeping. Each node (a computer connected to the network) gets a copy of the blockchain, which is downloaded automatically. Originally developed as the accounting method for the virtual currency Bitcoin, blockchains – which use what’s known as distributed ledger technology (DLT) – are appearing in a variety of commercial applications today. Currently, the technology is primarily used to verify transactions, within digital currencies though it is possible to digitize, code and insert practically any document into the blockchain. Doing so creates an indelible record which cannot be changed; furthermore, the record’s authenticity can be verified by the entire community using the blockchain instead of a single centralized authority.” (1) Real estate will not be passed over when it comes to the blockchain disruption either. There will be a need for education in order to transition from the current standard analog norms into the digital space for high value assets such as real estate. Blockchain technology introduces smart contracts on its platform. This allows assets like real estate to be tokenized, and be traded in the same vain as cryptocurrencies, like bitcoin and others. You will be able track all information on real estate,......
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