The following two pieces of information and summary are brought to you via The Multifamily Site and Titan Team. To learn more about Titan Research Team, CLICK HERE <<<<<
➊ Job openings remain high: U.S. job openings reached 11.24 million in July, nearly one million above estimates and almost two times the number of available workers. July’s hot job report is another inflationary signal that the labor market is still extremely tight despite the Fed’s rate hikes.
Titan’s Takeaway: July’s job report comes a week after Powell’s bleak speech in Jackson Hole and is further evidence that rate hikes are not slowing growth as much as the Fed had hoped. With a material shortage of workers, employers are forced to continue offering competitive wages, only adding fuel to the fire as prices rise at their fastest pace in 40 years.
➌ Gopuff looks for more cash: The instant-delivery service, Gopuff, is looking for a $300 million line of credit as it tries to stay alive amid falling valuations and slower growth. Earlier in the year, Gopuff delayed its IPO. The company that strives for “30-minute or less” delivery was a beneficiary of the tech boom raising $2 billion just in 2021 and seeing its valuation soar to $15 billion last year.
Titan’s Takeaway: Gopuff is just the latest casualty of a startup world battling higher financing costs and lower company valuations. With fundraising slowing, the startups that can conserve cash could prevail… but the ones blowing through $400 million in three months might not be so lucky.
Now can be a good time to look at investment real estate as an option to hedge against forthcoming economic factors and early indicators.
Click Here to visit DPCRE LLC and see what options are available today.
Two key economic pieces of information from Titan and their research team. If you’d like to learn more about Titan, CLICK HERE <<<<<<
➊Futures fall 200 points: After a brutal sell-off for Wall Street on Friday, stock futures fell Sunday evening, with the Dow sliding 0.7%, and the S&P 500 and NASDAq 0.8% and 0.9% respectively. Both Friday and Sunday’s drops can likely be attributed to Fed Chair Jerome Powell’s statement that the Federal Reserve remains committed to rate hikes to combat stubbornly high inflation, even if it causes economic pain. Titan’s Takeaway: Inflation still isn’t going away, so neither are rate hikes. Friday’s sell-off and Sunday’s slide indicate that investors remain cautious about the markets and the appetite for risk has shrunk. Hopefully Powell’s firm stance will start to pay off, and the futures will look brighter soon.
➋ Drought discoveries persist: Severe droughts across the globe are exposing both historical secrets and food supply problems. In Texas, a dried up river revealed 113 million year old dinosaur tracks. Low water in the Danube led to the discovery of a sunken warship from WW2. Winemakers in France just recorded the earliest harvest ever in wine country due to drought conditions, and farmers worldwide have seen diminished harvests this season. Titan’s Takeaway: While re-discovering ancient relics is exciting, a global food crisis is not. With grain supply already threatened due to Russia’s ongoing war against Ukraine, drought conditions affecting harvests only adds more pressure to the problem. We’ll be curious to see how this affects food prices in the coming months.
Partial Exchange? Strategies to achieve 100% tax deferral.
How to protect your investments – 1031 Tax Free Exchange Options
A 1031 Exchange allows a taxpayer to defer 100% of their capital gain tax liability. To do this, the exchanger must buy new Replacement Property equal to or greater than in value to the property sold and reinvest all the proceeds from the sale of their old property.
But what happens if a taxpayer desires to purchase property lower in value or takes a portion of the cash from the closing of the sale and only invests a portion of their proceeds towards a 1031 Exchange? The good news is that these transactions still qualify for tax deferral under Section 1031 of the Tax Code. They simply become “partial” 1031 Exchanges where the taxpayer has a partially tax deferred transaction rather than deferring all their taxes.
The portion of the exchange proceeds not reinvested is called “boot” and is subject to capital gains and depreciation recapture taxes. Usually, boot is in the form of cash, an installment note, debt relief or personal property and is valued to be the “fair market value” of the non-like-kind property received. It is important to understand that the receipt of boot does not disqualify the exchange; it merely introduces a taxable gain into the transaction.
Whether your 1031 goal is full or partial deferral, work with your tax and legal advisors to strategically make your 1031 work best for your situation.
Here are a few scenarios to illustrate partial and full deferral strategy:
If you fit into these scenarios:
Taking cash at the sale of the Relinquished Property Example: Lila is selling her rental townhouse for $1,000,000. At the close of escrow, she wants to receive $100,000 to invest in the stock market and utilize her remaining funds for her 1031 Exchange. The $100,000 is not part of the tax deferred exchange. If the seller takes any cash from the sale, that amount becomes taxable boot.
Buying Down in ValueExample: Lila is selling her rental townhouse for $1,000,000 and plans to utilize a 1031 Exchange to defer her taxes. However, she can only locate new property with a sales price of $800,000 that she desires to purchase. The $200,000 not reinvested into like kind property will be taxable.
but your goal is to defer 100% of your taxes, consider these potential solutions:
Instead of taking cash from the sale of the old Relinquished Property, reinvest all the proceeds into new Replacement Property and then do a cash out refinance in a separate transaction after the closing. It is generally considered less risky to refinance the new Replacement Property (rather than the old Relinquished Property) through a separate post-closing transaction.
Offset the gain on part or all of cash withheld with carryforward losses or expensing deductions for that tax year.
If you cannot locate enough property that equals or exceeds the value of your old Relinquished Property, consider acquiring a fractional interest in additional Replacement Property, such as a beneficial interest in a Delaware Statutory Trust (DST). DSTs allow taxpayers to acquire small fractional interests in portfolios of properties such as multi-family housing, student housing, storage locker facilities, etc.
The important point is to not assume that you need to pay taxes if you cannot locate property at the right values or have a need for cash. Everyone’s tax situation is different so always seek the guidance of a tax advisor prior to beginning your transactions.
If you need assistance in your acquisition goals or in selling your assets, please contact Sean Dreznin at DPCRE LLC www.DP-CRE.com
IPX1031. There are quite a few options to handle your 1031 and IPX1031 is one of them.
IPX1031 is the largest and one of the oldest Qualified Intermediaries in the United States. As a wholly owned subsidiary of Fidelity National Financial (NYSE:FNF), a Fortune 500 company, IPX1031 provides industry leading security for your exchange funds as well as considerable expertise and experience in facilitating all types of 1031 Exchanges. Taxpayers’ funds are held in segregated accounts using the Exchanger’s taxpayer identification number. Our nationwide staff, which includes industry experts, veteran attorneys and accountants, are available to help you and your legal and tax advisors. For additional information regarding IPX1031 and questions on 1031 Exchanges, please review:
Unless you’re a highly experienced real estate investor, or you already own a property management firm, you’ll likely need to hire a property management company to manage any commercial or multifamily properties that you own. While property management services aren’t cheap, a good property management company can reduce your expenses and increase your income, improving your property’s profitability in the long run. In general, commercial and multifamily property management fees will range between 4-12% of the property’s overall rent. However, in some situations, these numbers may go as low as 3% and as high as 15%. In other cases, especially when a building is very large, a company may charge one flat, monthly fee. A hybrid fee structure is also sometimes used, in which a company will charge a flat fee combined with a lower percentage of a property’s monthly rental income.
What Factors Impact Commercial and Multifamily Property Management Fees?
A variety of factors can impact the fees that a building owner will be charged for property management services. In general, these include the size of the property, its location, and the number and type of tenants that the property currently has. Fees will also typically depend on the average local property management rates, as well as the exact nature of the services that the company is expected to perform. Property management services often include:
Property leasing and marketing
Resident customer service and dispute resolution
Tenant billing and rent collection
Property maintenance, including taking care of utilities
Basic bookkeeping and accounting
Evicting non-paying tenants
In general, the more a property management firm is responsible for, the more they will be paid.
Additional Property Management Fees and Costs for Commercial and Multifamily Properties
While we already mentioned that most property management firms are paid on either a percentage-based or flat fee structure, there are still additional costs that property owners will generally need to pay. In general, these include marketing and advertising fees, as a property management firm may either directly do marketing themselves or hire one or more outside firms to market a property to new tenants. As one might expect, these fees will be more expensive for new properties that are starting from 0% occupancy, and much less for properties that are already mostly occupied. In addition to marketing costs, fees often also include lease-up fees for locating new tenants, as well as lease renewal fees, paid when a current tenant renews their lease.
Finally, maintenance fees are another important property management cost to watch out for. Management companies will often (but not always) charge a 5-15% markup on all maintenance costs for the property, particularly for property repairs.
No matter what, property owners should make sure to stay informed of all fees, and ask a lot of questions before hiring a property management firm. Otherwise, they could be taken off guard by unexpected expenses. While it may be tempting to try to do everything yourself, hiring a property management firm is usually a smart move — and is often required in order to get a commercial or multifamily loan (particularly for borrowers with limited multifamily ownership experience).
If you would like some references for Quality and Reputable Property Management Companies in your area, please visit Dreznin Pappas Commercial Real Estate by Clicking HERE <<<<<<
This information and summary perspective are pulled from Titan Team where I am a member as well. If you would like to know more about them or what they can do for you, CLICK HERE <<<<
➊ Biden to relieve student debt: The White House announced sweeping student loan forgiveness, relieving up to $10,000 for most loan borrowers who earn less than $125,000. The President will also extend the moratorium on paying student loans through December 31 this year. In addition, recipients of the Pell grant will receive $20,000 in debt relief.
Titan’s Takeaway: More than 43 million people owe a combined $1.7 trillion in student loan debt, so the new action could drastically alleviate debt burdens for millions of people overnight. But it isn’t without costs, nothing ever is. The relief could cost up to $300 billion.
➋ California to ban gas cars: The plan, set to take effect by 2035, would ban the sale of new gasoline-powered vehicles to fight against climate change and accelerate the transition towards electric vehicles. The interim targets for 2035’s complete ban include a 2026 mark that 35% of all new cars would produce zero emissions, which would climb to 68% by 2030.
Titan’s Takeaway: California is the largest auto market in the United States and is typically a leader in auto emission standards – more than a dozen states are expected to follow in setting their targets. What’s more, with Tesla’s Model Y already the best-selling car in California, the race for electric market share is already well underway.
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