Real Estate Ambassador by Ark Rhowmine » Real Estate Investment Strategies

New Medicare Tax Imposed on Real Estate Sales of “High-Income Earners” | Health Care Reform

arkrhowmine — Wed, 29 Sep 2010 21:45:44 +0000

New Medicare Tax Imposed on Real Estate Sales of “High-Income Earners”. Many of you have heard about the new Medicare Tax on investment income, including income from real estate. However, based upon several calls the Wisconsin Realtors Association has recieved, confusion still exists about when the new tax goes into effect, who it applies to, and what types of real estate will be impacted.

Here are the facts:

Beginning in 2013, a new 3.8% tax will be imposed on investment income of “high-income earners” — single households with adjusted gross incomes (AGI) over $200,000 and married households above $250,000. The tax applies to the smaller of the household’s net investment income or the excess of AGI over the thresholds. Capital gains are treated as investment income.

If a household’s AGI exceeds the thresholds, the household will be required to pay the 3.8% tax on the following types of real estate:

	the gain from the sale of a primary residence, if the gain on the home exceeds $250,000 for single households or $500,000 for married households (Note – For primary residences, the tax applies only to the gain over these amounts.)
	the gain from the sale of second homes
	the gain from the sale of investment and commercial real estate
	net rental income from investment properties

Medicare vs. Medicaid:

Medicare, not to be confused with medicaid, is the social health insurance program administered by the Federal Government under the Social Security Act of 1965. Medicaid is the U.S. health program for eligible individuals and families with low incomes and resources. It is jointly funded by the local state and Federal governments and is managed by the states.

For more information on the new Medicare Tax, please visit:

http://www.realtor.org/small_business_health_coverage.nsf/pages/health_ref_faq_med_tax?opendocument

Disclaimer and Source: The above information was provided by the National Association of Realtors (NAR) and the Wisconsin Realtors Association (WRA). This post is intented as an informative article. I am not a CPA nor a financial advisor. Therefore, I would recommend you to contact your personal CPA or financial advisor for more information and personal advise and counsel.

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For your Commercial & Investment Real Estate needs, hire the Commercial Broker.

Grubb & Ellis | Pfefferle
Independently Owned & Operated

The ONLY National Commercial Real Estate Brokerage located in North Central Wisconsin.

Local Presences | Global Reach

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Serving: Marathon County, Portage County, Wood County, Lincoln County, Langlade County, Clark County, Taylor County, Oneida County, Shawano County, Chippewa County, Eau Claire County and other points of Wisconsin.

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Why Use a Commercial Real Estate Broker | Wausau, Wisconsin

arkrhowmine — Fri, 04 Jun 2010 19:22:42 +0000

Why Use a Commercial Real Estate Broker?

Commercial Real Estate Brokers are Business Minded people who understand there commercial clients’ needs and are driven by the economics of a transaction.

Commercial Real Estate Brokers have an in-depth knowledge of commercial properties, valuations, financial alternatives and available economic incentives. In addition, they are connected with the decision makers of the community and work regularly with Towns, Villages, Cities and the State regarding zoning, conditional use, wetlands, CSM’s and building permit processes.

Commercial Real Estate Brokers have developed sophisticated property databases and have access to a wide variety of material that will assist them in marketing, searching, negotiating and representing their clients in the most professional manner possible.

Commercial Real Estate Brokers are professionals who specialize exclusively in commercial real estate.

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For your Commercial and Investment Real Estate needs hire the professionals. Grubb & Ellis | Pfefferle is the ONLY National Commercial Real Estate Broker in North Cenrtal Wisconsin. Independently Owned and Operated

View Ark Rhowmine’s Commercial Listing.

Cap Rate a Method to Determine the Value of Investment Properties

arkrhowmine — Fri, 23 Apr 2010 19:02:43 +0000

Cap Rate a Method to Determine the Value of Investment Properties. Many investors and appraisers use a Cap Rate (Capitalization Rate) to determine the value of investment property.

The Cap Rate is calucaled by determining the ration between the purchase price (Value) and the Net Operating Income (NOI) of the property. The formula being: Cap Rate = NOI / Value or R=I/V. Likewise, the Value or purcahse price of the property can be determined by using this formula as well. Value = NOI / Cap Rate or V=I/R.

The benifit to using Cap Rate as a measurement of the value of property is that it is easily calculated and accounts for the operating expenses of the property. It can also allow the buyer – investor to compare and indentify with comparable transations and data sources with the market. However, once an investment property is found or pirks the interest of a buyer by it’s Cap Rate, they should to further calculate the return on investment as well. This is known as Return on Cash or Cash-on-Cash. I will discuss this in a future blog.

View Ark Rhowmine’s Commercial Listing.

Self-Directed Retirements Plans & Opportunies for Small Accounts | IRAs & 401kS

arkrhowmine — Wed, 14 Apr 2010 20:41:54 +0000

Self-Directed Retirment Plans & Opportunies for Small Accounts | IRAs & 401Ks: Tax Liens on Raw land, Building lots, Single-family homes, Multi-family homes, Vacation properties excellent opportunies for those investors with small accounts to start investing in real estate properties.

While some investments require a large amount of cash, tax liens can provide investment options for small accounts. Here’s how it works: When a property owner does not pay his property taxes, the taxing entity will place the property up for a “tax sale.” An investor will pay the amount of past due taxes, and the homeowner has a pre-defined period of time to pay their taxes (and thus repay the investor) before they lose their rights to the property. The investor typically receives a pre-determined interest rate on the investment he made.

If the property owner does not pay the past due taxes, then the investor can proceed with foreclosure to recoup his investment. While the likelihood of acquiring a property through this process is very low, investors use this investment to earn a good pre-determined rate of return. Rules governing tax liens vary among local, county and state governments so be sure to research the municipality before investing.

For more information Join Security Trust Company and their guest speaker, Nicheole Amundsen, as she shares investment opportunities for retirement account owners with small account balances.

You’ll learn the basics of self-directed retirement accounts and Ms. Amundsen will discuss both ownership and notes in mobile home investing.

Reserve your webinar seat now for April 20th 7:00 p.m – 8:00 p.m. EDT
Click Here for more information.

To learn more about real estate investing opportunities contact Ark Rhowmine, Broker.

Changes in Lending and Obtaining Commercial Financing | Commercial Real Estate | Wausau WI

arkrhowmine — Thu, 31 Dec 2009 22:51:38 +0000

Changes in Lending and Obtaining Commercial Financing: The following are notes taken at a presentation by a regional bank to Grubb & Ellis | Pfefferle Commercial Brokers on December 8, 2009

Profile of Banking Past:

Assumption that bank funding will be available
Little to no equity
Push for limit or no personal guarantee
High appraisal values
Many banks actively lending – - multiple bank competition for new projects
Lack of a strong dialogue and good communication between all parties
2^nd Mortgages as collateral to support projects
Mini perm loans with no principal payments for up to 3 years
Short lead times to obtain financing
Project only cash flow’s
Transactions done based on projections

Profile of Banking Present:

Need to plan, discuss, interview and strategize prior to seeking financing
Owner’s equity is a critical part of funding a project – equity needs to be cash
Personal guarantees are part of the banking terms. Limited guarantee structures can be negotiated
Fewer banks active in lending
Capital costs are low – - historically low rates
Great opportunity for developers and bankers to collaborate
Many alternative low interest rate programs like the Midwest Disaster Act tax-exempt bonds for Winnebago County and 504 debenture bonds. Both programs are designed for owner-occupied projects.
Global cash flow’s required
Debt service requirements of at least 1.15 on new projects
Very few, if any, loans are being done on projections
No more interest only loans

What can be done:

Early communication with lenders
Present deal to multiple financial institutions
Be realistic in your loan request
Foster good relationships with lenders of all types
Coach and educate both buyers and sellers as to the changing landscape
Become knowledgeable of government loan programs

The Commercial Environmet:

Regulatory crack down on commercial real estate lending. Developer and investor loans can no longer exceed 300% of a bank’s capital position.
- Community banks have historically obtained significant amount of their growth via CRE financing. With new regulations, the ease of financing for some projects is expected to decline.
Commercial Mortgage Backed Securities markets and other alternative lenders are gone or have become less attractive.
- $1.4 trillion in CMBS financing maturing over the next few years. This could lead to significant sales activity.
- Sellers’ expectations are still in excess of where the market is today. I would expect that over the next 6-12 months they will reset their expectations closer to market conditions.
Clients are now questioning their banks and their ability to continue to service their needs.
Some banks’ capital position has deteriorated to where they must shrink their loan portfolios or significantly increase pricing at renewal to achieve new required return levels.
- Expectations for some of the marginal/average deals to experience difficulty in renewal. This may force an injection of capital to “right size the deal” or encourage sales.
- At tenant renewal time, rent reductions are being negotiated due to the tenants seeing a reduction in their revenue, increase in CAM charges and overall deterioration in their business operations. Landlords are more likely to accept lower rents versus a tenant loss. Typical negotiation includes lower rent with a longer-term lease (or exercising of option).
Appraised values have seen approximately 30% decline in values compared to 2007 levels with an expectation for further decline. 5/10% additional drop in investment values; larger drops in industrial properties.
From 2007 to the end of 2010 will see in the area of a 50% drop in values of industrial buildings from the 2007 levels.
Speculative commercial financing, residential lot development and project redevelopment financing is essentially dead for now.
Banks are seeing 9-10% cap rates on 5-year lease terms.
Expectation of more stress in the commercial real estate industry. New development will be minimal as vacancies are expected to increase.
- Retail Sector should obtain some clarity upon completion of this Christmas time –Potential for additional shake out.
- Industrial Sector should continue to see some contraction as company’s look to bring as much internally to reduce outside rental costs.
- Office Market remains soft with tenants able to drive their rental rates.
As we continue in this economic cycle, those with liquidity and/or low leverage will be able to capitalize on opportunities within the marketplace.
Assessed valuations are not indications of values.

To view commercial properties listed by Ark Rhowmine , Commercial Real Estate Broker click here.
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Ark Rhowmine | Commercial Real Estate Agent | Broker
Grubb & Ellis | Pfefferle
P.O. Box 865 | Wausau | WI | 54402-0865
C: 715.297.1953 | O: 715.355.6060 | F: 715.355.6044

IRS Issues Commercial Real Estate Loan Modifications Guidance

arkrhowmine — Fri, 18 Sep 2009 17:05:38 +0000

Today, I was reading an e-newsletter from Reinhart Headlines in Real Estate Law regarding new guidelines Commercial Real Estate Loan Modifications issues by the IRS. I felt this would be of interest to some and thought it worth passing on.

“On September 16, 2009, the Internal Revenue Service issued highly anticipated guidance that will allow some commercial mortgage loans held by Real Estate Mortgage Investment Conduits (REMICS) and investment trusts to be modified prior to default without triggering adverse tax consequences to the holder. This guidance may be of great assistance to borrowers who have conduit financing (securitized loans)…” click to read the full article.

Also for more information the Revenue Procedure 2009-45 is available at: http://www.irs.gov/pub/irs-drop/rp-09-45.pdf

To view Commercial Real Estate & Investment Properties listed by Ark Rhowmine click here.

Become a Financial Detective When Investing in Real Estate | Commercial Real Estate | Wausau WI

arkrhowmine — Fri, 14 Aug 2009 21:52:36 +0000

Become a Financial Detective When Investing in Real Estate: When comparing real estate investment purchases due diligence is of the utmost importance to your efforts. Like any business or investment, owning real estate has risks. You may accept higher or lower risk levels but you need to know the facts in order to weigh the risk/reward opportunity. How can you know if what you are about to invest your hard earned money into is a good deal if you do not have all the facts? You need to know the facts. Do not going to a transaction with your heart and not your brain. Your emotions can cause a lot of grief if you do not invest wisely and due diligence in finding the facts.

Topics and select questions to ask when researching a property:

Seller’s Motivation: Ask a question of the seller, why are they selling? It might be a simple reason. They are planning to retire or they want to invest into a different type or property.
Operating History: Find out how long they have been in the business. Did they buy the business from someone else? And how long has the business itself been in existence? Also going to community and find out what the reputation of the business has been.
Profit / Loss statement (3 years)
Balance Sheet (3 years)
Schudule “E” (3 years)
Accountant: Have your business accountant reviewed the three documents above. They will be able to analyze the financial history of the property/business and give you their opinion.
Financing: Maybe, the seller would be willing to finance a portion of the sale.
Tax Issues: Again, have your accountant review and give you their opinion.
Market Study: Do a market study. Is there a great demand for this type of business that you are but to invest in? Do you have compotion, if so can you bring a better product?
Demographics: While performing a market study, note the demographics of the area of which this investment is located and asked these questions. Is the target market nearby? In five years from now can I sell the business or will the area change?
Leases/Tenants: If the business has tenants, how long are there leases for? Get copies of the leases.
Appraisals: Always get an appraisal, the lending institution will want an appraisal, it is a good tool to see the current value of the investment.
Building and property condition: Even though you have walked through the property it is always a good practice to hire a home inspector or commercial property inspector who will provide inspection report of their findings. You never know what they might find.
Capital Improvements (Past, Present and Future): Ask what improvements they have made to the business or property and what they recommend. This again will give you somewhat of a history and a better idea of what you could possibly expect.
Legal: When writing an offer to purchase on an investment property or commercial business it is highly recommended that both parties have a real estate/business attorney review the contract.
Underwriting: Contact an insurance agent who has experience in the underwriting capabilities of providing coverage for this investment or type of business.
Title: All property sales in the state of Wisconsin need to have title filed in the county records. It is highly recommended to use an abstract / title company who will file these documents for you, do property background checks and provide a title insurance and warranty deeds. This will protect you as the buyer from any hidden liens on the property or any unknown claimants to the property.

After researching these topics, and you are staified with the answers, you will be well on your way to understanding what is really going on and if this property is truly worth acting on. These tasks may seem overwhelming, however a good commercial and investment real estate agent will guide you through these processes.