Easements 101

EasementsAn easement is a legal agreement between the property owner and a non-owner to utilize the property in some fashion and an important concept to understand when buying investment land.  Two examples would be a shared driveway easement or a utility easement. Your name is on the deed, but your neighbor or utility company has the right to use a portion of your land as the easement states.  It is important to be aware of the easements that affect your property or property you are about to purchase.

So how do you go about finding easements?

Easements are typically recorded at the county recorder’s office and they are public record if you would like to research easements for yourself.  Searching for easements can be difficult, especially if parcels have changed owners multiple times.  Some easements can go back over 100 years and require some extensive legwork to find.  Ordering a title report with your local title company or the services of a real-estate attorney would be well advised.

What are the different types of easements?

The most common are utility easements and private or right-of-way easements.  Utility easements may include the use of power, either underground or overhead, phone/data, gas lines, well/public water and sewer lines.  Private easements could include driveways, walkways or paths and access to bodies of water.  Some of these easements require some sort of service agreement to be recorded with the easement.  One example would be a shared driveway.  The service agreement would state who is responsible for proper maintenance of the driveway and how often service is to occur.  It would also include any costs associated with servicing the driveway and who is responsible for them.

How does one gain, remove or adjust an easement?

Easements are typically granted or removed by a binding written document between the parties involved in the home sites or property.  Some examples would be a shared well that is no longer in service or a shared driveway that is no longer in use.  If the original easement was recorded, it is required for the removal or adjusted easement to be recorded, as well.  Typically, some form of compensation is given to the property owner that is allowing the easement.

Easements can be difficult to find and are often overlooked. This can sometimes be costly in cases of adding to a home or pouring a concrete driveway. To learn more about easements contact an expert member of the Gratia Group team at (239) 333-2221.

 

 

Oversized, Gulf Access Lot in Cape Coral: The Gratia Group Lot of the Week

2341 NW 39th Avenue, Cape Coral, Fl 33993

It’s a big week for investors as we feature a beautiful oversized lot in highly desirable Northwest Cape Coral as the Gratia Group Featured Lot of the Week.  This Cape Coral lot is located at 2341 NW 39th Avenue, Cape Coral, Fl 33993.

This lot isn’t only located in one of the most up and coming areas in the “Cape”, but also feature gulf access, a rarity in this area.  Lots are selling quickly in the NW Cape and listed at $69,800.00 this lot is sure to close fast!  Investors have found great success in Cape Coral land, particularly the northern section of the largest city in Southwest Florida.  A hot spot for boaters, golfers, fishing enthusiasts and those that love the natural beauty of South Florida, Cape Coral is home to a large population of foreign investors.

Don’t miss out on owning a piece of paradise!  Contact Gratia Group today to find out about this ROI producing Cape Coral lot or others in our land catalog by calling a member of the expert land team at (239) 333-2221.

Owning Land can Lead to Worthwhile Tax Deductions

Tax Deductions

FL land has long been viewed by many as an attractive investment.  After all, it’s the stuff they’re not making any more of.  You usually earn no income from  land, but you do have expenses for such items as property tax, interest and other carrying costs.  Can you deduct these costs?  It depends.

First of all, for tax purposes there are two types of people who own vacant land: investors and real estate dealers.  Real estate dealers are in the business of buying and selling land.  A dealer buys property and resells it, usually at a price higher than the purchase price, and normally after only a short holding period.  A good example is a subdivider who buys large tracts of vacant land, divides them into smaller lots, and then resells the lots separately.  Numerous and continuous sales over an extended time period are the hallmark of a real estate dealer.

Real estate dealers are entitled to much the same deductions as any other business owner.  They can deduct all the expenses of owning the vacant land they buy and sell, including interest, taxes and other carrying costs.  If a sole proprietor, these are deducted on IRS Schedule C.

On the downside, all the profits real estate dealers earn from their business are taxed at ordinary income rates instead of capital gains rates.  Moreover, they must pay Social Security and Medicare taxes on their net self-employment income, as well as income tax.  Also, real estate dealers are not allowed to take depreciation deductions.  So if land has structures on it, their cost cannot be deducted.

A person who purchases real estate as an investment is not in the business of buying and selling vacant land on a continuous and extended basis.  Rather, he or she purchases land and usually holds on to it for some time in the hope that it will appreciate in value.

Since an investor is not engaged in a business, he or she is not entitled to business deductions and does not file Schedule C.  However, many investment expenses are deductible as personal itemized deductions on Schedule A.  These expenses are an ordinary tax deduction that results in tax benefits at your regular income tax rate, which can be as high as 39.6 percent (43.4 percent if you’re subject to the Medicare net investment income tax).

Any interest an investor pays on money borrowed when buying investment land is investment interest that can be deducted only as an itemized personal deduction.  Moreover, the annual deduction for investment interest is limited to the investor’s net investment income for the year.  Any excess is carried over to future years.  You determine the amount of your net investment income by subtracting your investment expenses (other than interest expenses) from your investment income.

Example: George purchases a vacant lot on which he pays annual property taxes of $1,000 and interest of $2,000.  His only other investment is a savings account, which earns $2,000 in annual interest.  His net investment income is $1,000 ($2,000 interest income – $1,000 property tax expense = $1,000).  Thus he may deduct only $1,000 of his interest expense.  The excess $1,000 is carried over to future years.

An investor can also deduct property taxes paid on vacant land as a personal itemized deduction on Schedule A.  This deduction is not limited to the amount of net investment income.

Any other carrying costs such as legal and accounting fees, insurance, and travel expense are also deductible on Schedule A.  However, they are deductible only as miscellaneous itemized deductions.  This means that they can be deducted only if, and to the extent, they exceed 2 percent of the taxpayer’s adjusted gross income.

If you don’t itemize your deductions on your tax return, you won’t be able to deduct any of the expenses you incur from owning vacant land.  In this event, you should elect to add these expenses to your land’s cost basis.  This will reduce any taxable profit you earn when you sell the property.

Example: Jean purchases a vacant lot for $10,000 in 2009.  During 2009-2013 she elects to add $5,000 in carrying costs to the lot’s cost basis.  In 2013, her adjusted basis in the lot is $15,000.  She sells the lot for $20,000.  Her taxable gain is only $5,000 ($20,000 sales price – $15,000 adjusted basis = $5,000).

You must make an annual election to add these costs to your land’s basis — “capitalize” them in tax jargon.  You can elect to capitalize all your costs, or capitalize some and not others — for example, you could capitalize interest but not taxes.

To make this election you should add a statement like the following to your tax return:

“For tax year _____, taxpayer hereby elects under Code Section 266 and IRS Regulations 1.266-1 to capitalize, rather than deduct, property taxes, mortgage interest, insurance expenses, and other miscellaneous carrying costs on the 111 First St. vacant lot.”

You need to make this election each year you want to add these costs to your land’s basis.  If you wish, you can make the election some years you own the property, and not make it in others.

To learn more about buying land and lots for sale contact a member of the Gratia Group land sales team at (866) 501-6273.

Enjoy Sailboat and Gulf Access with the Gratia Group Featured Lot of the Week

3428 SANTA CLARA DR

Boat enthusiasts are sure to love the Gratia Group Featured Lot of the Week, a beautiful Florida lot with sailboat and gulf access.  Located at 3428 Santa Clara Drive in Punta Gorda, Florida this lot also offers river and harbor access, giving boaters access to virtually every type of waterway in the city. Listed at only $55,000 this lot is located in the popular Harbour Heights area of Punta Gorda.

Harbour Heights is a cozy community nestled along the Peace River in Charlotte County, Florida.  This secluded community is particularly attractive to retirees and Baby Boomers.  With fewer than 3,000 residents, the community has the feel of a small town, where everyone knows their neighbors.  Enjoy the Florida outdoors under shady old oak trees at Harbour Heights Park, which has a boat ramp, fishing pier on the Peace River, picnic tables and barbeque grills, basketball, tennis and shuffleboard courts.  There are numerous public golf courses nearby, and the community park provides a tranquil place to relax.  Here the Harbour Heights Horticultural Society thrives, and the Women’s Club and Civic Association sponsor town events.  The nearby Deep Creek elementary school and park playground attract families and children.

The weather is always beautiful, and naturalists and bird enthusiasts abound, reveling in the Florida landscape, and the local bird sanctuary.  Whether you long for a view of the mangrove islands or a glimpse of an egret, dolphin or manatee, you are never far from the water.  Here you can canoe and fish to your heart’s content.  You can enjoy the nearby convenience of I-75, the Fort Myers airport, and Port Charlotte and Punta Gorda, where you will find restaurants, schools, entertainment, medical facilities, and grocery stores.

To learn more about the Gratia Group Featured Lot of the Week or any of our many land and lots for sale throughout South Florida, contact a member of the Gratia Group Land Team at (239) 333-2221.