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.

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.

SWFL Land and Home Sales See Big Jump

Blog PhotoThe median price of an existing single-family home in Lee and Collier counties increased sharply in October compared to a year earlier along with Cape Coral land prices.  In Lee County, the median rose 17.3 percent from $157,000 to $184,175, according to statistics released by the Realtors Association of Greater Fort Myers and the Beach.

Collier County’s median increased 20.1 percent from $279,000 to $335,000, according to the Naples Area Board of Realtors.

Area real estate experts feel that even with such a robust surge in Florida land sales prices, there isn’t the danger of a bubble similar to the last boom’s over-heated market in 2005.  It would take annualized increases of 20 percent for five years to get us up into the territory where the region was (at the peak of the boom and currently the area isn’t even close to a danger bubble.

The rate of increase in prices is actually slowing but the market will stay strong this winter with omens such as six feet of snow in Buffalo, N.Y.   Experts feel the region is poised to have a very, very good season.  To learn more about the SWFL real estate market 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.

Gratia Group Featured Land Package of the Week: A Hot, Rotonda West Lot

Rotonda WestRotonda West is the site of this week’s Gratia Group Featured Land Package of the Week!  The property located at 1123 Rotonda Circle Rotonda West, FL 33947 is located on a freshwater canal and listed at only $35,000.

Rotonda West contains 8,000 home sites with over 5,000 homes completed and is experiencing rapid growth and features the hottest Florida land sales.  Residents are predominantly full-time homeowners and their families, as well as tenants and those who winter in the community.  Many investors have found common ground in the city, building up portfolios through many great deals.

Thirty miles of picturesque canals, lakes and ponds wind through the community and offer fishing and boating opportunities for its residents.  Many exotic and beautiful birds call Rotonda West home, as it is a designated Bird Sanctuary.  Nearby recreation facilities, beaches, theaters, sporting events, and fine restaurants are keep residents of Rotonda West busy!

To learn more about this priced to sell Gratia Group Featured Lot Package of the Week and how to purchase land, contact a member of the Gratia Group team at (239) 333-2221.

Collier and Lee Counties See Continue Uptrend in Property Values

The property value upswing continues.  Both Lee and Collier counties are reporting expected boosts to property values in almost all areas of the counties, according to numbers released Friday.

And both had increases in nearly every area — cities, unincorporated areas and fire districts — for the first time since the recession. Only one fire district in Collier experienced a decline.

For the second year in a row, Lee County had its property values increase after several recession-era years of decreases.

Across the county, property values for 2014 are estimated to increase 5.48 percent from last year’s final appraisals.

That translates to an increase of about $2.99 billion, from about $54.6 billion in 2013 to $57.6 billion estimated for 2014.

Collier County’s property values increased by 6 percent in 2014, up by $3.7 billion to $64.3 billion from $60.7 billion, according to the Collier Property Appraiser’s Office.

The increase represents the largest annual jump since before the recession and continues an upward trend for the counties.

It’s a very good sign. There are a lot of investors and people coming in and buying, and they’re using their own money, not the banks.

And these numbers could still change for the better. Last year, Naples’ estimated 4 percent turned into a 7 percent final increase, and this year that if numbers change at all, it should be for the positive.

To buy land or real estate in Lee and Collier Counties and take advantage of the great upswing in property values, contact a member of the Gratia Group Team at (239) 333-2221.