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Are “Income Tax-Free States” a Better Investment Opportunity?

Are “Income Tax-Free States” a Better Investment Opportunity?
Paying taxes is always a tedious thing to do; that is why some Americans specifically look for tax-free states to call home, so they can avoid one of the biggest contributors to their annual tax bill, especially if they want to improve their finances. Although they can save money in one way by living in income-tax-free states, people are risking to pay more in other ways because losing revenue is usually compensated with other taxes. Keep reading to understand what it means to live in a tax-free state and if it can be financially beneficial to you: Which Are the ‘Income Tax-Free’ States? The following states are tax-free states: Alaska - The state of Alaska has not had an income tax since 1980, despite several attempts to reinstate it.  Nevada - The state of Nevada doesn’t have a personal or corporate income tax. One reason for it is that Nevada brings a large source of revenue from gambling and tourism. Florida - The state of Florida does not have a statewide personal income tax, but it has a corporate income tax. Texas - The state of Texas doesn’t have an income tax, mostly because of its lawmakers and taxpayers who have fiercely fought to maintain this policy over the years. South Dakota - The state of South Dakota hasn't had an income tax since 1943, but it has a variety of special taxes, such as alcohol occupational tax, precious metal and energy mineral severance tax, various licensing fees, and more. Wyoming - The s......
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Common Metrics/Terms an Investor Uses to Analyze Commercial Real Estate

Common Metrics/Terms an Investor Uses to Analyze Commercial Real Estate
It’s not a secret that numbers drive real estate investment decisions. But the real question is, which metrics are valid? Which metrics matter? Depending on your investment goals and property type, some metrics are more important than others. The following metrics/terms real estate investors commonly use when making portfolio decisions: 1. Capitalization Rate (Cap Rate) Cap rate is mostly used for apartment complexes and commercial buildings. Capitalization rate can also be used for houses and small multifamily properties, but the flip side is that operating expenses are unpredictable with houses since you can’t know how often or how bad your turnovers may be. Cap rate allows you to compare properties in the same asset class with different characteristics that make direct comparison impossible. The disadvantage of the Cap rate is that it’s only a snapshot. It says nothing about the expected growth in expenses, rents, property value, and whether using leverage will increase your return. 2. Cash Flow When evaluating rental properties, it’s vital to figure out your expected monthly cash flow. When determining total expenses, you should include: Property taxes Flood and hazard insurance Water Sewer Garbage Electricity Property management General maintenance and upkeep Capital expenditures Vacancy rate 3. Return on Investment (ROI) RoI is helpful for analyzing how well a deal did in the past. This measurement is always good to have because you can’t adjust your future investing unless you know how your previous investments performed. 4. Internal Rate of Return (IRR) The internal rate of return is used to m......
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How Reverse 1031 Exchanges Work

If you have an investment property and are thinking about selling it and purchasing another property, you need to know about the 1031 tax-deferred exchange. This procedure allows the investment property owner to sell it and buy like-kind property while also deferring capital gains tax. In this article, you’ll find a summary of the main points of a reverse 1031 exchange—an often overlooked sub-section of a 1031 tax-deferred exchange. What Is a Reverse Exchange? A reverse exchange is a property exchange when the replacement property is bought first, and then the current property is sold or traded away. It was created to help buyers buy a new property before being selling or trade-in an existing property. This may allow the seller to keep the current property until the market value increases, thereby choosing the right time to sell for maximum profit.  Things you need to know about the reverse exchange: Reverse exchanges are different from delayed exchanges, where the replacement property has to be purchased after selling the current property. Timing issues still apply, so check with your accommodator as to what time frames you must meet. “Reverse exchanges only apply to 1031 properties and are only allowed when investors have the means to make the purchase. Like-kind” exchange rules usually don't apply to reverse exchanges. How a Reverse Exchange Works Standard like-kind exchange rules typically do not apply to reverse exchanges. Such rules usually allow a property investor to discontinue capital gains taxes paid on a property they have sold, as long......
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Which Commercial Real Estate Sectors Are Approaching Oversupply?

2020 and the years ahead won't come without difficulties for the commercial real estate market. In the United States, certain Commercial Real Estate sectors may be affected by oversupply. the Urban Land Institute states that construction during the current cycle has been below historical trends, but as the cycle matures, we need to look at whether markets are becoming overbuilt. Oversupply may be around the corner for these Commercial Real Estate Sectors: We expect to see some risk of oversupply in Class A multifamily and industrial properties, but the changes that have heightened the demand compared to historical norms should lessen the material impact on fundamentals, which are expected to stay solid. Please NOTE:    This is a general overview of the market sectors across the nation, your specific sub-market may be having substantially different experiences, please consult with a professional commercial real estate agent in your specific sub-market for more details. Industrial Real Estate Sector Industrial real estate also shows signs of overbuilding. Demand stays ahead of supply in both Europe and the U.S, leading to lower vacancy rates. However, as consumers continue to shift toward e-commerce, companies still have to adapt their supply chain strategies and drive the demand for well-located and high-quality logistics facilities. The industrial real estate sector is also heading for slower growth, according to a forecast by the Deloitte Center for Financial Services. The sector, which includes warehouses, flex spaces, distribution centers, and other industrial properties with storage facilities, has been facing sustained demand over......
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Which Commercial Property Sectors are Doing the Best During the Pandemic, and Which Ones Are Hurting?

Together with almost every other sector of the economy, commercial property has been disrupted by Coronavirus and social distancing. For many years, the main declining CRE sector has been retail. However, this sector is no longer suffering alone, since the pandemic is hurting most other CRE sectors: hospitality, office, multi-family, personal services, restaurant, entertainment, and construction. A decline in retail space may result in greater demand for industrial space. For the industrial sector properties, demand for storage space from online stores may continue to increase after the coronavirus pandemic. The online shopping industry has created a strong demand for logistic space and warehouse, increasing record asset values and rental rates for industrial properties, while reducing demand for some retail properties.   However, it’s worth noting that some areas of retail are still doing well. Shopping centers are still open because they have supermarkets that are all trading exceptionally well.  The non-discretionary retail segment will probably emerge from this crisis as one of the most resilient commercial property sectors. The performance of commercial office buildings depends on the underlying resilience of the tenant’s business. For instance, where tenants are government departments and big multinational companies with employees working from home, the effects are likely to be minimal. However, those with tenants whose business model has been significantly disrupted by social distancing are being deeply affected.  The aftershock is likely to affect various types of commercial property differently. Shopping malls will probably take some time to return to full capacity, as people remain worried abo......
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What Is a “Leed Certified” Building, and Are Tenants Willing to Pay More Rent for One?

What Is a “Leed Certified” Building, and Are Tenants Willing to Pay More Rent for One?
LEED (Leadership in Energy and Environmental Design) is a green building certification system that is internationally recognized and provides third-party verification that a community or a building was built and designed using strategies for improving performance across all the most important metrics: energy savings, CO2 emissions reduction, improved indoor environmental quality, water efficiency, and stewardship of resources. It can be applied to all building types – both commercial and residential. LEED includes a point system to score green building construction and design. The system is categorized into five main areas: Sustainable Sites, Energy and Atmosphere, Materials and Resources, Water Efficiency, and Indoor Environmental Quality. Buildings get points based on how successful sustainable strategies are achieved. More points mean a higher level of certification, which range from Silver, Gold, to Platinum. Leadership in Energy and Environmental Design is focused primarily on new, commercial buildings. The more points you get, the higher your rating will be. Getting the LEED status can require significantly higher costs on the part of a company or a builder but can also provide huge cost savings over time, including higher rents, state and local tax breaks, and many other perks.  It is certain that green buildings are becoming increasingly popular, and tenants are looking for more sustainable solutions. LEED certification will improve your building’s image and establish you as a green building leader. And because sustainable green buildings are more positively viewed in today’s market, you will be able to charge higher rates. These buildings are also cheaper to op......
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If zoning or codes change while I own a property, do the changes automatically apply to my property?

If zoning or codes change while I own a property, do the changes automatically apply to my property?
Can a city change my property zoning without my permission? Yes, a city can change your zoning classification without your permission. Legally speaking, zoning is an exercise of what is known to be police power. It does not happen often, and we’re not saying it is a fair practice. But it is possible. “Police power” is used in the sense that a city's general powers under state constitutions can do what they think is necessary for general safety, health, and welfare. The most common case of rezoning is when a property owner, or a future land purchaser, asks for a more advantageous classification. In many cases, this is called a rezoning petition.  Usually, cities do this when they have some kind of policy goal to maximize. For instance, they might have decided that a specific part of town needs more or less residential density (which means housing units per acre). However, If the rezoning makes your property less valuable, this could be a downzoning. You might want to research that idea. Will zoning amendments negatively impact what you can do with your property or your ability to refinance, enlarge, or sell it? Can You Be “Grandfathered” into the Old Zoning? Typically, these amendments increase minimal dimensional requirements, or they decrease the kinds of uses permitted on the property. These regulations can severely restrict existing owners’ use of their land. Accordingly, municipalities can often protect the owners from difficulties caused by zoning amendments by “grandfathering” current building lots. The local zoning bylaw may provide tha......
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Do I need an attorney for my commercial real estate deal, or is my broker enough protection?

Does a seller or a buyer of commercial real estate really have to hire an attorney? The unmistakable answer is, "Yes!" A broker is a licensed professional who you hire to negotiate the sale or purchase of a real estate for a fee or a commission. However, they are typically not attorneys. Many of them will clearly state that real estate brokers are not providing legal advice. Real estate brokers don’t usually get paid unless they close the deal (or unless you are somehow obligated to pay a commission, for example, by withdrawing from a deal). Therefore, brokers are usually not going to take care of the legal details and may even try to push a deal to close as fast as possible. Be sure that separate legal advice from a good real estate lawyer is usually worth the additional cost. It's much more cost-effective to hire an attorney to get the deal done right than to get involved in an expensive lawsuit. A good attorney can also be crucial to getting a beneficial purchase. Also, keep in mind that it’s best to hire an actual commercial attorney who deals with this kind of transaction daily. It may cost a bit more than a general lawyer, but it’s well worth it. What does a real estate attorney actually do? The job of a real estate lawyer is to negotiate and make a transaction happen in a peaceful way that's amenable and fair to all parties. A real estate lawyer takes over after......
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Benefits of investing in Real Estate over the Stock Market

Investors often turn to the stock market as a place to invest their dollars. However, not everyone knows that real estate is also considered a form of investment. In fact, real estate can yield higher returns, be lower risk, and offer better diversification. Start by comparing the benefits of real estate investment and buying stocks. Market stability The stock market can experience extreme ups and downs. It may even cause you to lose all your money if the company you invested in goes under. Even big international companies can crash overnight. However, the real estate market is much more predictable since it is hard for a real estate business to fail. Property can always be sold to keep a real estate company afloat during economic difficulties.  Asset management You can physically check the property you are investing in and decide if you want to buy it or not. This means it’s harder to be defrauded. On the other hand, stocks are non-physical assets, and you have fewer options. When you choose a company to invest in, you cannot choose which stocks you want, because all stocks are the same. Another one of the benefits of real estate investments is that you are the owner of your property. When you buy stocks, you depend on other people’s management. Cash flow The cash flow from rental properties in real estate acts as a monthly income that you can live on. On the other hand, you will not see any cash until you sell you......
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How Will a Rise in Interest Rates Affect the Commercial Real Estate Market?

In the past couple years, overall interest rates have risen several times in the United States. According to many experts, they are likely to finally stabilize in 2020. However, they have already risen sufficiently enough in 2018 and 2019, and we cannot be sure that the same won’t happen by the end of 2020, or especially the year after. With that in mind, the commercial real estate market needs to start preparing for a possible rise that can have significant effects.  But what are those effects? How does a rising interest rate affect the commercial real estate market? If you want to know the answers, you've come to the right place, as this article aims to give you all the information you need. Let's take a look. How Interest Rates Affect Real Estate Values For those who are unaware, interest rates, like the ones on Treasury bills and interbank exchanges, have a massive effect on the value of commercial real estate and all property, for that matter.  That’s because they influence the ability of people to buy property by increasing or decreasing mortgage capital costs. However, that’s only one part. Interest rates also affect capital flows, supply and demand, and much more. When all of that is considered, we can conclude that interest rates have a profound effect on the commercial real estate market in a wide variety of ways.  However, we are only interested in the higher interest rates and how they affect the commercial real estate market. And that is a ......
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