SWFL- A Popular Choice Among International Real Estate Investors

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Naples was the 10th most popular city in April for searches by international real estate for investors, according to a survey recently released by Realtor.com International. With a population of 20,000, the city is David vs. Goliath on the list, which except for Naples consists of large metro areas: No. 1 is New York, followed by Los Angeles, Miami, Orlando and Las Vegas.

Among Canadians, Naples is even higher on the wish list: fifth, after Fort Lauderdale, Las Vegas, Los Angeles and Miami. Naples and the rest of Southwest Florida have always been favored destinations for Canadians who want to escape that country’s brutal winters. Naples’ high prices and elite reputation may play a role in the popularity of that city in particular.

Among foreigners who actually buy Florida land investments and homes , Canadians are by far the largest group: 8 percent of Lee County’s properties sold each year are bought by foreigners – three-quarters of them Canadian. In Collier, of the 6 percent of homes foreign owned, Canadians make up two-thirds.

Canada’s the only country that has Naples in its top five, but Miami is on most of the other countries surveyed by Realtor.com. That’s especially true of South American and Caribbean buyers. With volatile economies in their homelands, South Florida investment real estate is considered a secure place to invest one’s money.

To learn more about the SWFL real estate scene or to view any of our SWFL land investments, contact a member of the 9 Core Realty Team at (239) 333-2221.

How to Begin Investing in Real Estate

LandInvestmentsAn unusually long and harsh winter is delaying the start of the spring real estate and land market, but for the investment-minded, continued low interest rates and high demand for rentals appear to outline an opportunity especially when buying investment land.

Institutional investors and their buckets of cash have dominated many markets for the past several years, according to real estate data cruncher CoreLogic. But at the end of 2014, cash sales declined to a national average of 36.1 percent, down from 38.8 percent in November 2013. CoreLogic also reported that the foreclosure inventory declined 34 percent at the end of 2014. That means individual investors are starting to have a shot at lower-priced properties ripe for fixing up and renting and lower priced land investments for sale, real estate professionals say. If you are thinking of tiptoeing into investment real estate, you have two basic approaches.

Buying shares in a real estate investment trust. You can invest in a REIT, but doing so involves buying shares of a portfolio of properties. It’s really more like buying a stock or buying into a fund and a completely different animal from owning real estate directly.

There are three layers of value – the real estate itself, the management and cash flow that supports the trust, and the fund based on the trust. It’s a very different vehicle than buying real estate, but most of us can’t just go out and buy 1 percent of a skyscraper.

Adding a REIT to your portfolio can complement stock and bond funds, but you must be sure you understand how the real estate fund is designed and how its managers will likely extract value from the holdings. You can buy shares of REITs and real estate-based funds, but the performance of the funds is based on both cash flow and gains from occasionally selling properties – a very different scenario from the typical performance drivers of stock and bond funds.

Direct ownership. In a direct ownership you own your investment property. When you own real property as a direct ownership you can fall in line of thinking that your investment is easy money, that there’s not a lot of work, that tenants will pay on time and that pipes never leak. As we all know from real world experience, this is a dangerous way of thinking. Land is a bit of a different story and can end up being a wiser investment as it requires less general care, maintenance and overhead. Your land investment will never call at three in the morning to report an overflowing toilet and appreciates in value much faster than a real property investment.
To learn more about investing in land real estate contact an expert member of the Gratia Group at (239) 333-2221.

Why you Should Consider Land a Viable Investment Option

Blog Photo-Land InvestingToday’s world is filled with consumers with a fair amount of disposable income that aren’t aware of their investment options. They are guided by friends and family who are often misinformed too.  The US alone has seen a rise of over 29 percent in the disposable income generated in the country between 2007 and 2012.  What are the people doing with this income?  In the search for investment options, you usually encounter a number of risks. The popular maxim of investing is that the risk you take is directly proportional to the returns on your investment.

Perhaps the starting point for most investors is the low risk option of fixed deposits, mutual funds or commodities.  The more adventurous may gamble on the high risk-high return stock options.  However, if you’re an investor with a medium risk appetite looking to get high returns, you might want to consider buying land investments.  Historically, land has only gone up in terms of value.  Over the last five years, land has shown over 100 percent value appreciation in some areas.  Such growth is indicative of the great potential land holds for investors, yet many haven’t recognized this opportunity so far.

In terms of residential land on the outskirts of cities, you should take into account that already established residential areas may be hard to penetrate owing to few available spaces and high capital that is involved.  Nonetheless, if you do your research you could find spaces that are either in the process of developing or aren’t discovered yet but have the potential to grow.  These spaces provide the best opportunities in land investment.

There are some key indicators you should base your research on before buying real estate for investors including connectivity and access to basic amenities.  Some of the major deterrents to buying land in the past have been misconceptions associated with it.  People often go by the erroneous notion that land does not produce income or produces very little of it.  According to research, land was the investment that provided over 100 percent returns on investment between 2010 and 2013.

The difference with land as compared to other investments is that it is a tangible asset that allows you to adopt a few precautionary methods that reduce the investment risk from medium to low while still maintaining high returns over a long term.  The world is short of habitable land that needs to be able to develop, accommodate, expand, scale up, build, grow or upgrade.

Nonetheless, that’s only a part of the reason investing in land should be an element of your portfolio.  All of the three primary needs for life- food, clothing and shelter – are dependent on land, which provides the investor with a host of flexible options on getting the best out of your land investment.  You could dedicate it to organic farming, tap into a small business idea or build a home on it.  At the same time, it also gives you an option to leave it alone because in most cases it still continues to appreciate steadily and surely.

Despite its promise people are often discouraged from investing in land by their perception of the amount of capital required for it.  Firstly, it is more economical to buy vacant land than a developed property, a number of investors have invested in land using their savings and entirely avoiding dealing with loans and mortgages.  Moreover, if you can find the right places to invest and get in at the right time, the returns could be great.  The additional feature is that land can be a source of passive income over the long term, meaning it requires the customer to do little actively to gain returns.  In essence, land as an investment provides a wider range of business opportunities in a sector that rarely depreciates.

Mutual funds, equities, commodities, residential property and other options all make sense in certain scenarios and so does land.  It is a long-term option that will diversify and add volume to any investment portfolio.  It’s important not to jump the gun on land investment, only venture into it if you’re willing to consider it as a serious option and treat it as a business endeavor.

To learn more about land investments contact a member of the Gratia Group team at (239) 333-2221.
 

Foreclosure Hangover in SWFL? Study Says “Yes”

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Though both the rate and number of foreclosure filings in Southwest Florida have dropped dramatically since the recession, a recent report shows the the market of property Cape Coral still suffers its aftereffects.

While the year-end report by California-based RealtyTrac showed both Naples-Marco Island and Cape Coral-Fort Myers had improving metrics since the foreclosure crisis reached its regional peak in 2009, neither area is bouncing back as quite as quickly as the country as a whole, though their performance outpaces the state average.

The report showed that in the Naples-Marco Island metropolitan statistical area, the number of foreclosure filings fell to 1.06 percent of all housing units, or 2,092 homes, in 2014. In 2009, 6.38 percent of all housing units, or 12,251 homes, were in some stage of foreclosure.

While foreclosures usually are found in the lower end of the market, currently they’re found in all price points. But because the percentage of homes in foreclosure is much smaller than it was during the recession, the banks and other institutions that own them can command market prices.

In Cape Coral-Fort Myers, 1.72 percent of all homes (including lots and land for sale), or 6,393 units, were in foreclosure in 2014. Five years earlier, 11.87 percent of all housing units, or 42,734 homes, had foreclosure filings. While the percentage of homes in foreclosure is relatively small, both Naples-Marco Island and Cape Coral-Fort Myers have a greater percentage in foreclosure than the country as a whole.

Nationally, only .85 percent of all housing units, or about 1.1 million homes, had foreclosure filings last year. That’s compared with 2.21 percent of all housing units, representing roughly 2.8 million homes, in 2009. Looked at another way, one in 118 housing units in the United States was in foreclosure last year, RealtyTrac said. By comparison, Southwest Florida fared worse. Out of 212 metro areas the company tracks nationwide, Cape Coral-Fort Myers ranked 15th, with one out of 58 housing units in foreclosure.

That’s because banks, which had been holding out for higher home prices before selling the homes they had repossessed, are finally clearing out their inventories. Naples-Marco Island saw one in 94 units in foreclosure, and was 49th on the list of metro areas nationwide. Naples’ numbers are lower because there was never as much backlog of homes as there was in Cape Coral-Fort Myers.

While both metro areas ranked relatively high nationally in terms of foreclosure rates, they ranked low compared to other places in the state. Naples-Marco Island had the lowest foreclosure rate of all the metro areas listed in Florida. But Florida tops all other states in terms of foreclosure rates, with one out of every 44 housing units in foreclosure, or 206,247 homes. That’s 2.3 percent of the roughly 9 million housing units in the state. In 2009, Florida had 516,711 foreclosure filings, representing 5.93 percent of the housing stock.

While overall, foreclosures still haven’t reached historically normal levels, the overall picture is improving. Florida’s foreclosure filings were down by 24 percent in 2014 from 2013.

Nationally, they dropped 18 percent. Over the same period, Naples-Marco Island’s filings fell 44 percent and Cape Coral-Fort Myers dropped 20 percent. The shrinking numbers are signs that rapidly rising home prices are making it easier for some owners to avoid foreclosure.

To learn more about the current state of real estate in the SWFL region, contact an expert member of the Gratia Group team at (239) 333-2221.

Researching Land in Florida for Sale

Florida Land for Sale

Getting ready to buy property isn’t as simple and straightforward as buying groceries.  For starters, it’s typically not purchased regularly.  Because of this, there are many complexities and questions that arise.

When invest in Florida land sales, you’re investing your money, time and future.  All of these are very important.  To help save you from stress and frustration,  we’ve compiled some helpful hints for how to research land for sale before you buy.

Questions To Ask Yourself

There are several questions someone must consider before they buy.  These should include:

  • Where do I want my property to be?
  • What purpose do I want this property to serve?
  • How much am I willing to spend?
  • What qualities do I want?

By compiling a list of your expectations or desires, you will be able to focus on what the important factors are to you.  This will assist you significantly as you create a good, short list of potential properties.

If You Want to Build On Your Property

If your goal is to build a house on the newly-purchased vacant lot, there are a few things to consider when conducting your research.  Most importantly, what is the zoning code for this property?  County offices record all properties, and every county differs in zoning restrictions related to FL land.  Some counties have strict size rules, only allowing construction of a building if the property is of certain acreage.  Other times, you might be able to build a single-family dwelling, but not a commercial building, or vice versa.

Installing Power, Water and Sewage

Not every property has direct access to power lines.  There are off-the-grid properties that might be too far away to set up water and sewage, preventing you from either building or living on the property.

Counties Are Your Friend

As you research lots you will find that the county the property is located in will be your best bet for the most up-to-date and accurate information regarding the Florida lot for sale.  There are many different offices within the county.  For questions pertaining to building or making any improvements to your land, the best department to contact is Planning and Zoning.  For general questions about the property (i.e. its history of owners, who currently holds title to it, etc.) the Recorder’s office will be your best bet. Lastly, questions about property taxes can be answered by the Tax Assessor’s office.

If you have general regarding land, contact an expert member of the Gratia Group land team at (239) 333-2221.  We love to share our vast knowledge of the Florida land market and are a great resource for beginner investors looking to break into the Florida land scene!

 

2015 Tax Season- What You Need to Know About 1031Exchange

1031_2015 Tax Reform

The 2015 tax season brings an end to the 1031 or like-kind exchange of property.  It means the end of dramatic tax benefits of a like-kind exchange of property.  Taxpayers using this technique in 2007 (the last year for which figures were available) deferred the tax on a total of $82.6 billion in gain, due mainly to swaps involving real estate and vehicles.

Let’s start with this basic premise:  If a client owns investment property like real estate that has appreciated substantially in value, they might owe a large capital gain when they finally sell the property.  In addition to paying the maximum 20% tax rate on long-term gains if they’re in the top ordinary income tax bracket (15% for most others), they may also be liable for the 3.8% surtax on net investment income.  Yet there is no current tax liability if they exchange the property for “like-kind” property in time.  The tax is deferred until they sell the replacement property, if ever.

Surprisingly, the IRS was quite lenient when it came to treating investment property as being like-kind under this tax law provision.  For example, you could have swapped an apartment building for a warehouse, or vice versa, and still qualify.  But both the property being relinquished and the property you were acquiring had to be investment or business property.  In other words, a personal residence couldn’t be part of a like-kind exchange on either end.

Typically, real estate swaps were difficult to consummate without involving multiple parties.  Both the IRS and the courts had approved such arrangements where the timing requirements were met.  In fact, a real estate investor could use a qualified intermediary to “park” the property until a qualified like-exchange could be finalized.

Consider the tax impact for a top-bracket investor who bought an apartment building for $500,000 years ago that is now worth $1.5 million.  If the investor sells the property for $1.5 million, the $1 million gain will effectively be taxed at a 23.8% rate (20% + 3.8%), resulting in a tax bill of $238,000, not even counting any state taxes.  However, if a timely swap of like-kind properties was arranged, the federal income tax bill is zero!

Previously, we alluded to meeting certain timing requirements.  To qualify for tax deferral on a like-kind exchange, you must:

  • Identify or actually receive the replacement property within 45 days of transferring legal ownership of the relinquished property
  • Receive title to the replacement property within the earlier of 180 days or your tax return due date (plus any extensions)

Note that the 180-day period begins to run on the date legal ownership of the relinquished property is transferred.  When the period straddles two tax years, the deadline might be shortened by the upcoming tax return due date.  For instance, if a client identifies replacement property on December 1, 2014, the exchange must be completed by April 15, 2015, absent any tax return extension.  To learn more, contact a member of the Gratia Group team at (239) 333-2221.

Foreclosures in Lee County lowest since 2006

Falling NumbersLee County foreclosures in September fell to their lowest level since the housing market collapsed in 2006 while home permits continued a slow, cautious recovery, according to recently released on Florida land sales statistics.

Lenders filed 166 foreclosure lawsuits, down from 204 in August and 239 in September 2013, a report by the Southwest Florida Real Estate Investors Association states.

Many realtors feel that it is unlikely foreclosures will return to their previous highs anytime soon because the majority of sales in the past four years have been made without mortgages.  The current market is a sustainable market that’s growing and that’s driven by cash.  If you bought property in 2010 in for $50,000, it’s running in the $120,000s now.

Foreclosures bottomed out in October 2005, when 127 were filed. They reached a high of 2,665 in October 2008 before gradually falling until settling until the 200-300 range over the past year.

Meanwhile, builders pulled 270 single-family-home permits in September – one more than in August but sharply up from 172 in September 2013.  That’s unusual in September, when relatively few people are here and the economy is at its slowest with few home sites being worked on but the region has started to see a lot of people coming back into town a little earlier.

To work with a top notch Southwest Florida realtor contact Gratia Group at (239) 333-2221.