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Sep 14

Crossing That Bridge: Understanding the Pros and Cons of Bridge Loans

Investors and home buyers generally use bridge loans until they can secure long-term financing. As with any form of financing, there are advantages and disadvantages. This article summarizes what exactly bridge loans entail, and then delves in to the pros and cons of this type of financing.

Aug 17

Trend Analysis Is Trendy

Appraisers are increasingly incorporating trend analysis when valuing real estate. Property owners, as well as potential buyers, need to understand the role trend analysis, also known as market analysis, can play when determining value. As always, one needs to consider the income, cost and market approaches when trying to assess fair market value.

Jul 24

Performing Preventive Maintenance is Key

Do you know the physical condition of the properties that you own? As the owner, you need to understand how things are working and what needs improvement at your residential and commercial properties. A comprehensive preventive maintenance program inventories all interior and exterior equipment “hotspots” and tracks when routine maintenance should happen. This article shows how to create a formal schedule and budget for fixed asset repair and maintenance, taking into account labor requirements and tax considerations.

Jun 16

Eminent Domain: Understanding the Tax Treatment Issues

Eminent domain is the process by which a government or entity has the ability to take private property for public use. Any property claimed through eminent domain must be fairly compensated. This triggers a process by which “fair compensation” is determined. Once this process is complete, there will be an award to the owner of the property, based on “severance damages” for either loss in value of a larger parcel of property that was not acquired, or the value of the portion of the property that was taken. This article covers the intricacies and tax treatment issues behind eminent domain.

May 30

Gross-up Provisions: Good News for Both Landlords and Tenants

In an uncertain economy, commercial landlords understandably look for ways to protect themselves from financial exposure. One approach is the inclusion of gross-up provisions in leases. This article explains that a properly drafted gross-up provision can help ensure that tenants pay their share for operating expenses when some units are vacant, while also protecting tenants from unexpected cost increases.

Mar 28

Alternative Financial Metrics to Consider in Real Estate Purchases

When approaching each transaction, real estate professionals anticipate to achieve the best possible outcome. The property’s net operating income (NOI) is often the first metric they will assess in determining whether an investment is going to generate cash inflow. However, this metric will not be enough for a savvy investor. In most cases, investors need to evaluate the property’s highest and best use. This article discusses the fallbacks of NOI, as well as introduce two alternative financial metrics worth considering when investing in real estate property: Net present value (NPV) and internal rate of return (IRR).

Feb 27

Could the Small Taxpayer Safe Harbor Work for You?

Although the final property repair regulations have been in effect since 2014, the question we still are asked most is how a property owner can tell the difference between a repair and an improvement to a unit of real estate. Stated differently, which costs can be deducted, and which must be capitalized and depreciated? This article focuses on the Small Taxpayer Expensing Election and the Small Taxpayer Safe Harbor Rule which allows a “qualifying small taxpayer” to treat costs as deductible expenses. We will also look at the other safe harbors applicable to real estate: The Routine Maintenance Safe Harbor and the De Minimis Safe Harbor.

Jan 19

Ask the Advisor: Is Defeasance Right for Me?

As the real estate market has improved in many parts of the United States, and interest rates are poised to climb in the near future, many property owners are considering pursuing defeasance to exit their loans. Many, however, do not really understand what is involved. This article provides input on how defeasance works and when it is best to use it.

Nov 23

How to Use Less-than-Perfect Comparables to Estimate Value

In today’s volatile real estate market, it is often difficult to obtain a meaningful estimate of what a parcel of commercial real estate is currently worth. This article discusses how taxpayers can deal with distressed sales and rely on comparables to arrive at the best estimate.

Nov 17

Lease with a Purchase Option … or Sale? It Matters to the IRS

Landlords who really wish to sell will often enter a lease with a tenant that includes an option to purchase the property. A lease option is a traditional lease with a purchase option that gives the tenant the exclusive right to buy the property at the price typically set from the beginning. However, the IRS might recharacterize the arrangement as a sale in the form of a contract for deed. This article explains how lease options work.

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