7 Tips for real estate investing

7 Real Estate Investment Tips Beginners Should Know

We believe beginner real estate investors need all the help they can get.  We came across these tips courtesy of ImmoAfrica.net, a South African company.  They apply in the USA, too.

No matter how savvy you are when it comes to investing, the real estate business is like no other. Since your real estate investments likely measure in the hundreds of thousands, it is wise to educate yourself about investing in real estate before you transfer that next amount.

 In fact, there are at least 8 tips beginners should know before making their first investment in real estate. And, if you play your cards right, there might be a huge profit margin waiting for you.

 Let’s have a closer look at the real estate investment tips for beginners:

 #1 – Taking care of our own debt

Before you are ready to look into investment opportunities, your finances need a clean bill of health.

Namely, you should make sure there are no debts that are weighing down your purchasing power.

Everything from student loans (of which there is a crisis in the United States) to unpaid medical bills should be taken care of before your first investment.

After all, it wouldn’t be wise to purchase a property if you have a mortgage on your own home, for example.

#2 – Do the repairs on your own

If you are buying a piece of property for you and your family to live in, then it’s perfectly natural that you’re the one who’ll spruce it up.

However, when it comes to property investment, beginners get carried away and hire other people to refurbish the houses and apartments they have invested in.

Although this move seems logical, it is actually quite expensive in the long run. For this reason, try to find properties that don’t require a lot of subsequent investing and make sure you can do these repairs on your own.

Furthermore, if you have renting in mind, then be sure are up the role of the landlord that borders the job of a handyman.

#3 – The snare of high-interest rates

If you browse through the credit line of any financial institution, you might get the impression that borrowing money is cheap nowadays. However, as we have stated above, interest rates can be higher on an investment property than mortgages on residential housing.

For this reason, wise property investment includes researching the financial market in the search of low interest rates. After all, it is your profit margin that’s at stake since high-interest rates can eat it up entirely!

#4 – Calculating profit margins

Speaking of margins, if you wish to make a profit, you first need to list all your expenses.

For instance, the cost of maintenance should be around 1% (of the value of the property) or even less if you do the work yourself.

 Then there is home insurance, homeowners’ association fees, national, regional, and local property taxes. The list of expenses will never be truly populated, so always plan up to 20% extra funds. If you do everything correctly, the profit margin should linger around 10%

#5 – Start with a low-cost home

Since you are a novice in the real estate business, we recommend that you start off lightly and purchase a low-cost property.

Not only will you pay less to start with but all of the accompanying costs will be lower as well, providing you with more room to manoeuvre.

#6 – Location sells

The price of the property shouldn’t influence the location that needs to be ideal.

In fact, location takes precedence over the value the property is being sold for.

A location is much more than the physical location of a house or an apartment block. It includes the distance to the nearest school, access to medical care, the neighborhood crime rate, access to labor, etc.

You should try to get as many of these factors as possible to go in your favor.

#7 – Be fully aware of all the risks

You’re entering the real estate market to make money but be aware that this is a risky undertaking. If you invest in rental property, there is a risk of running into dodgy tenants that might be late with monthly rent. Furthermore, be prepared for the rental income to undershoot the total mortgage payment.

Also, keep in mind that property is nothing like stocks, which you might have traded with earlier. You cannot simply sell real estate when you feel like it so, don’t hope for quick returns; rather pray for them. It will take a large sum to enter the real estate market and an equally hefty sum to exit the trade.

All-in-all, there are many more pieces of advice for beginners than the ones we have listed above. Hopefully, they will be enough to keep you afloat in the first couple of months after purchasing your first property.

Once you learn the ropes of property investment, you can expect your profit margin to gradually increase. 

 From the editor - So, there you have it!  Wishing you real estate investing success!! 

We are the New Jersey title insurance agent that does it all for you. For your next commercial real estate transaction, house purchase, mortgage refinance, reverse mortgage, or home equity loan, contact us, Vested Land Services LLC. We can help!

For your real estate purchase or mortgage refinance or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Land Services LLC

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-808-6130 - Fax 973-227-0645

E-mail sflatow@vested.com

@vestedland

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New Jersey's Inheritance Tax and its lien

One of the most contentious issues we deal with as a title agency is the lien for New Jersey Transfer Inheritance Tax that affects EVERY estate in New Jersey even if no tax is ultimately owed by the decedent's estate.  Yes, that's right, even if no tax is owed, the state has a lien.

The lien is removed in all cases by the issuance by the NJ Division of Taxation of a tax waiver.

What follows is a brief explanation of the 

Lien on and Transfer of a Decedent's Property: Tax Waiver Requirements

For Tax Professionals

New Jersey Transfer Inheritance Tax, whether levied and assessed or not, is a lien on all property owned by the decedent as of the date of his/her death for a period of 15 years, unless paid sooner or secured by bond. The law provides, with certain exceptions, that without the written consent of the Director (i.e. – tax waiver), banking institutions and other institutions, corporations and persons may not deliver or transfer any assets within their control or possession which belong to or stand in the name of a resident decedent, or in the joint names of a resident decedent and one or more persons (N.J.S.A. 54:35-5, N.J.S.A. 54:35-19).

For decedents who die after December 31, 2001, the New Jersey Estate Tax is a lien on all property of a decedent as of his or her date of death and that no property owned by a decedent as of his or her date of death may be transferred without the written consent of the Director, or pursuant to such rules as the Director may prescribe (N.J.S.A. 54:38-6).

The tax waiver form issued by the Division releases both the Inheritance Tax and the Estate Tax lien and permits the transfer of property for both Inheritance Tax and Estate Tax purposes.

Tax waivers are required to transfer the assets standing in the name of a decedent or in joint names with a decedent such as:

• New Jersey real property;
• Funds held in New Jersey financial institutions;
• Brokerage accounts or mutual funds doing business in New Jersey;
• Stock or bonds of a company incorporated in New Jersey or a New Jersey institution.

For information on obtaining a tax waiver go to: Inheritance Tax Filing Requirements | Estate Tax Filing Requirements 

Exceptions to Waiver Requirements

• Non-Resident Decedents: Estate Tax waivers are not required for the estates of non-resident decedents. Inheritance Tax waivers are required only for real property located in New Jersey.
• Real Property Held as tenancy by the entirety Real property held by a husband and wife or civil union partners as tenancy by the entirety must be transferred without a tax waiver in the estate of the spouse who died first.
• The transfer of any assets, whether real or intangible, which stand in the name of a bona fide trust as of the date of a decedent's death, does not require a tax waiver.
• Transfers to savings accounts without a tax waiver
1. Funds of a decedent on deposit in a checking account in any bank may be transferred to an interest-bearing account in the same bank in the name of the decedent or his/her estate without obtaining a tax waiver.
2. Funds of a decedent on deposit in an Individual Retirement Account (IRA) or Keogh retirement plan account may be transferred to another account in the same bank without obtaining a tax waiver.
3. Any certificate of deposit or any type of a preferred account containing funds of a decedent may be transferred to another account in the same bank without obtaining a tax waiver.
4. The transfers permitted in (1) through (3) above are subject to the requirement that the banking institution promptly file a notice with the Division of Taxation Inheritance and Estate Tax Branch, PO Box 249, Trenton, New Jersey 08695-0249, containing the following information:
• Decedent's name;
• Date of death and domicile;
• Name and address of executor or administrator of estate;
• The account number, or certificate number, sought to be transferred and the balance on deposit or the maturity value as of the date of death.
5. The bank is required to retain the same control over the substituted account as the original account until the New Jersey Inheritance Tax and the New Jersey Estate Tax are provided for and paid.
• Transfers from one fiduciary to another Bonds or stock of a New Jersey corporation or a national bank located in New Jersey, or any money deposited in any trust company, bank or other institution in the name of one court-appointed fiduciary as executor, administrator, trustee or guardian, may, upon the death of such fiduciary, be transferred without a tax waiver to, or on the order of, the legally appointed substitute for the deceased fiduciary.
• Transfer from joint fiduciaries to successors Bonds or stock of a New Jersey corporation or a national bank located in New Jersey or any money deposited in any trust company, bank or other institution in the names of two or more fiduciaries as executors, administrators, trustees or guardians, may, upon the death of one or more of such fiduciaries be transferred without a tax waiver, to, or on the order of, the surviving fiduciary or fiduciaries.
• Transfer of partnership interest A tax waiver is not required for the transfer of real or personal property, tangible or intangible, owned by a bona fide partnership in which a decedent had an interest.
• Transfer of assets held by nonresident custodian: A tax waiver is not required in order to transfer any assets held by a nonresident custodian on behalf of a resident or nonresident decedent.
• Transfer of tangible or intangible personal property
1. A waiver is not required in order to transfer all other tangible or intangible personal property, including but not limited to:
• Wages;
• Salaries;
• Vacation and sick leave pay;
• Payment under pension, profit sharing, bonus plans or stock purchase plans;
• All automobiles;
• Mortgages;
• Accounts receivable;
• Household goods;
• Personal effects;
• Funds held in an account in the name of a funeral director in trust for a decedent in accordance with the provisions of N.J.S.A. 2A:102-13 (advance funeral payment); Funds to a decedent's credit in a credit union plan organized under N.J.S.A. 17:13-26 et seq. in addition to any matching sums paid under any type of credit union plan in the form of a life insurance where said matching sum is directed to be paid to a decedent's estate or his or her executor or administrator. However, funds held under the Federal Credit Union Act must be reported and a waiver obtained.
2. All property, including property that can be transferred without a waiver, must, nevertheless, be reported on a decedent's Inheritance or Estate Tax return.
• Blanket waiver
1. A banking institution, trust company or safe deposit company organized under the laws of this State, a national bank operating in this State, a building and loan or savings and loan association organized in this State, a credit union chartered by the United States and operating in this State, a corporation or person may release without a tax waiver any amount up to 50 percent of the entire amount of funds on hand to any of the following:
• An executor;
• Administrator;
• Legal representative of the decedent;
• Surviving joint tenant;
• Cestui que trust; or
• The estate of a minor where title to said funds are held in the name of a custodian for said minor without the written consent of the Director, upon the application of such proper party to the institution, association, organization, corporation or person above mentioned.
2. This section applies to each institution, association or organization, corporation or person listed above with whom a decedent has any funds on deposit, including Certificates of Deposit, and is limited to no more than 50 percent of the funds in the entire account whether such account is held in the decedent's name only or jointly with another so that where the decedent holds an account jointly, only one half of the funds may be released, not the half claimed by the joint owner and an additional half of the funds belonging to the decedent.
3. In addition to the amount permitted to be released by an institution, association, organization, corporation or person above mentioned, institutions, associations, organizations, corporations, or persons may, without written consent of the Director:
• Pay any and all checks drawn on any account owned by a decedent individually, jointly, or otherwise, when said checks are issued prior to death and presented for payment within 10 days following the decedent's date of death; except that in the event an executor, administrator, or other proper party above mentioned in this section shall apply for a release of 50 percent of the funds on deposit after 10 days from the decedent's death, the institution, association, organization, corporation, or person mentioned in this section holding the funds shall, after having deducted the amount of any checks issued prior to and presented for payment within 10 days of the decedent's death, release 50 percent of the balance in a decedent's account to the proper party upon application and without the written consent of the Director;
• Pay any checks in any amount for which there are sufficient funds held in deposit, drawn on any account owned by a decedent individually, jointly or otherwise, representing full or partial payment of any New Jersey Inheritance or Estate Taxes and made payable to New Jersey Inheritance and Estate Tax;
• Liquidate the loan of any decedent who has pledged the pass book representing a savings account as collateral for a loan, where upon the death of such a decedent the loan is in default and then make 50 percent of the remaining funds available under the blanket waiver; but
4. Securities of a New Jersey Corporation registered in the name of a decedent and issued by any bank, or savings and loan association situated in this State, are not subject to the Blanket Waiver rule provided for in this section. Therefore, the written consent of the Director must be obtained in order to transfer or release such assets.
5. The Director reserves the right to direct at any time that any sum or sums not yet paid over shall be withheld by the informant pending further order of the Director where that course is deemed imperative to protect the interest of the State.
• Funds held in a banking institution A banking institution, trust company or safe deposit company organized under the laws of the State of New Jersey, national bank operating in the State of New Jersey, building and loan or savings and loan association organized under the laws of the State of New Jersey, a credit union chartered by the United States operating in the State of New Jersey, or a corporation, or a person may, without a tax waiver, release or Transfer assets held by a decedent as custodian for a minor pursuant to N.J.S.A. 46:38-1 et seq. or as rental security deposits under the provisions of N.J.S.A. 47:8-19 et seq.
• Funds held in bank accounts Where funds are held on deposit in any bank to the credit of a person and payable on the death of such person to a named beneficiary, upon the death of the named beneficiary, no tax waiver is required to transfer or release the funds to such person. However, a tax waiver is required to transfer or release such funds to the beneficiary upon the death of the principal.
• Transfer of collateral A State bank, state banking association, trust company, national bank, national banking association, safe deposit company or other institution, having in its possession, custody or control, securities or other assets pledged as collateral for a loan of a decedent, may, for the purpose of liquidating a loan or other debt due from a resident decedent:
1. Transfer such collateral from the name of the decedent to its own name upon receiving the written consent of the director; or
2. Sell such collateral to satisfy a loan of a decedent without the written consent of the director, except that where the collateral pledged consists of the stock of a New Jersey corporation, such stock cannot be transferred on the books of such corporation without the written consent of the director. If any excess monies are received from a sale, the written consent of the Director must be obtained before delivery of such excess money to a proper party in interest; or
3. Deliver any collateral to the executor or administrator of a decedent upon the full payment of the loan or debt without the written consent of the director.
• Release of Safe Deposit Box Contents : N.J.S.A. 54:35-19 provides that the contents of a safe deposit box standing in the name of a decedent either individually, jointly or otherwise may not be released without at least a 10-day notice to the Director of the intended delivery and the retention of sufficient assets to pay any tax and interest which may be assessed on the assets. The statute provides that the Director may examine the decedent's assets contained in a safe deposit box. On December 13, 2016, the Director re-issued the blanket waiver originally issued in 1992 authorizing the immediate release of the contents of a safe deposit box. The waiver is effective for the period from January 1, 2017, to January 1, 2022.

 

At the end of the day, be sure to obtain competent legal advice in connection with the Transfer Inheritance Tax and its impact on the sale of real property and the transfer of other assets.

We are the New Jersey title insurance agent that does it all for you. For your next commercial real estate transaction, house purchase, mortgage refinance, reverse mortgage, or home equity loan, contact us, Vested Land Services LLC. We can help!

For your real estate purchase or mortgage refinance or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Land Services LLC

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-808-6130 - Fax 973-227-0645

E-mail sflatow@vested.com

@vestedland

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Virtual real estate closings - not really

Real Estate Transactions Go Virtual

The traditional real estate closings with a room full of people and stacks of documents are becoming a memory, as much of the process is now online.

The above is the heading of an article in The New York Times.  Some quotes:

Real estate transactions have gone largely digital as the pandemic has disrupted nearly every aspect of home buying, from house hunting to securing a mortgage, getting an appraisal, notarizing documents and signing the final closing documents.

Well, not so fast, pardner.  This is an oversimplification of the entire closing process.  First of all, we have to define what is truly digital.  In New Jersey, contracts have been signed digitally for several years. The column recognizes that but it's a fact that we cannot transfer title to a home or mortgage property without ink signatures.

An appraisal?  Well, lenders have ordered them remotely for years, and email just makes it easier for the  appraiser to deliver her final product.  Is that revolutionary?  I don't think so.

Notarizing of documents is done is some jurisdictions remotely, but the pitfalls are obvious to anyone who is trying to protect their property rights.

While some clients continue to prefer in-person closings, others are giving their lawyers power of attorney to sign the final documents for them or they’re executing closings on virtual platforms like DocuSign.

It is becoming quite common for sellers to sign their documents ahead of time and deliver them to a third party, usually a title insurance agent such as Vested Land Services, to be held until the buyer completes the mortgage and her loan funds.  While it's true that many seller's give their attorney a "power of attorney," we recommend that it be expressly limited to signing off on the closing statement and miscellaneous documents that may be required by the buyer's mortgage company.

By all means, read the complete article here.

Your comments are always welcome.

 

We are the New Jersey title insurance agent that does it all for you. For your next commercial real estate transaction, house purchase, mortgage refinance, reverse mortgage, or home equity loan, contact us, Vested Land Services LLC. We can help!

For your real estate purchase or mortgage refinance or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Land Services LLC

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-808-6130 - Fax 973-227-0645

E-mail sflatow@vested.com

@vestedland

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Pennsylvania resident asks: Can I deduct the ‘exit tax’ on my tax return?

New Jersey's "exit tax" again raises questions.

We recently posted another column about New Jersey's supposed "exit tax."  But out of state sellers keep asking questions about the minimum 2% of the sales price that was withheld at the time of closing and sent to the New Jersey Division of Taxation.

At NJMoneyHelp.com, a Pennsylvania resident asks if the payment can be deducted on his Federal income tax return.  Here's the answer:

Q. We live in Pennsylvania and sold a townhouse in New Jersey. We were charged the exit tax. Can this tax be claimed on our federal income tax return? — Taxed enough

A. Let’s first clarify what the so-called exit tax means.
 It’s not a special tax levied on a person who sells property in New Jersey.
 Instead, it’s an estimated income tax withholding imposed by the New Jersey Division of Taxation on the closing of a nonresident taxpayer’s sale of a New Jersey residence, said Neil Becourtney, a certified public accountant and tax partner with CohnReznick in Holmdel.
 The amount withheld is the greater of 10.75% of the gain realized or 2% of the selling price.
 Even if the residence was sold at a loss, this withholding will apply, Becourtney said.
 Becourtney said you can include this state income tax as part of your state and local income and real estate tax deduction, commonly referred to as the SALT deduction.
 “However, the Tax Cuts and Jobs Act (TCJA) imposed a severe limit on the SALT deduction: $10,000 if your filing status is single, married joint, or head of household, $5,000 if it’s married separate,” Becourtney said. “If you had more than $10,000 of state income tax and real estate tax payments during the year, the `exit tax’ will produce no federal tax benefit because you will have already reached the maximum SALT deduction.”
 This situation is predicated on your itemizing your deductions, he said. With the $10,000 SALT deduction limit, far fewer taxpayers itemize their deductions and instead take the larger standard deduction.
 “The standard deduction for a joint filer for 2019 is $24,400, with an additional increment of $1,300 for a spouse who has attained age 65,” he said. “If both spouses have attained age 65, the standard deduction for 2019 is $27,000.”

* * *
There you have it.  The answer - it depends!  But it is the correct answer.

As one of New Jersey's most experience title insurance agents, we get a lot of questions from buyers and sellers.  Have one for us?

Let us know!

We are the New Jersey title insurance agent that does it all for you. For your next commercial real estate transaction, house purchase, mortgage refinance, reverse mortgage, or home equity loan, contact us, Vested Land Services LLC. We can help!

For your real estate purchase or mortgage refinance or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Land Services LLC

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-808-6130 - Fax 973-227-0645

E-mail sflatow@vested.com

@vestedland

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Florida resident sells a home in New Jersey? What taxes will you pay?

Sold a home at a profit, what taxes will you pay?

Is it really New Jersey's "exit tax"?

Out of state residents who own real estate in New Jersey are often shocked to find that a minimum of two percent (2%) of the sales proceeds is collected at closing and sent to the State of New Jersey Treasury.  Some call this an "exit tax" when, in reality, it's nothing more than an estimated income tax payment.

This article from NJMoneyhelp.com discusses this payment:

Q. I have been a resident of Florida for the past 16 years and have just sold a two-family family house in New Jersey. Do I need to file anything other than an A3128 for a refund? We did make a substantial profit. What should I expect? — Seller

A. Congrats on your home sale.

It looks like you may need to pay taxes to New Jersey on your profit.

Unless the house was used solely as a personal residence and falls within the guidelines for the sale of a personal residence — which is unlikely given that you’ve lived in Florida for 16 years — you should expect a tax bill, said Michael Karu, a certified public accountant with Levine, Jacobs & Co. in Livingston.

You will have to file Form NJ-1040-NR as a non-resident, he said.

The profit will be calculated based on the difference between the selling price and the cost basis,” Karu said. “ If the property has been rented, there may be depreciation recapture as well.”

Upon the sale of a business, business interest, or real property in New Jersey, a non-New Jersey resident is subject to New Jersey gross income tax on the profit from that sale, he said.

“In order for the State of New Jersey to be sure that it gets paid, taxes are withheld at closing,” Karu said. “While people call it an ‘exit tax,’ the reality is that the payment is simply an estimate tax payment against the tax that gets calculated when the non-resident income tax return is filed.”

* * * *

So, there you have it, it's a tax but not an "exit tax."

We are the New Jersey title insurance agent that does it all for you. For your next commercial real estate transaction, house purchase, mortgage refinance, reverse mortgage, or home equity loan, contact us, Vested Land Services LLC. We can help!

For your real estate purchase or mortgage refinance or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Land Services LLC

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-808-6130 - Fax 973-227-0645

E-mail sflatow@vested.com

@vestedland

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Bitcoin and real estate, title company perspective

We are the New Jersey title insurance agent that does it all for you.
For your next commercial real estate transaction, house purchase, mortgage refinance, reverse mortgage, or home equity loan, contact us, Vested Land Services LLC. We can help.

Bitcoin Bonanza Hits Real Estate

June 28, 2018

By Jeremy Yohe

It’s been reported that more than 100,000 merchants worldwide accept Bitcoin. Companies such as Microsoft, Expedia, Newegg. Overstock and Subway all accept Bitcoin payments. The cryptocurrency is no longer just a risky investment opportunity for the adventurous. It’s becoming an alternative way of paying for regular things—like real estate. It was only a matter of time before the cryptocurrency made its way into real estate closings on everything from land on Lake Tahoe in California to Manhattan condos.

Bitcoin has gained traction in areas such as Miami, which is a hotbed for foreign investors. These buyers are much more comfortable with the cryptocurrency than American companies. A Miami penthouse was listed in December for 33 Bitcoins—a value of around $544,500 at the time. The seller specified they would not accept any other form of payment. In Seattle, a homebuyer just used Bitcoin and other cryptocurrencies for the downpayment on a home in January.

In September 2017, Kuper Sotheby’s International Realty reportedly became the first brokerage in Texas to close on a home purchased entirely with Bitcoin. Sheryl Lowe of Kuper Sotheby’s International Realty, the agent who represented the buyer in the sale noted, “In all of my 33 years of closing transactions, I honestly couldn’t have expected something so unique to go so smoothly. In a matter of 10 minutes, the Bitcoin was changed to U.S. dollars and the deal was done.”

Title Company Essential to Process

Lowe pointed to the team at Independence Title for keeping everything together. Jay Fitzgerald, general Counsel for Independence Title, said the company has closed a few other transactions involving Bitcoin since last year. Independence Title has educated its escrow officers on what they need to be aware of when facilitating transactions involving cryptocurrency.

“For our purposes, it’s the same as having anyone come in with some sort of currency that doesn’t constitute good funds under Texas regulations,” he said. “There has got to be a conversion. It doesn’t matter if its pesos or Bitcoin.”

While the Bitcoin satisfies the agreed-upon price of the property, Fitzgerald says difficulty can arise when handling the other settlement costs that require payment in U.S. dollars.

“There is some doubling back, and it can cause some timing issues for loan payoffs,” he added.

There are two general ways to convert Bitcoin to cash: buyers may use a payment vendor service like Bitpay or use a Bitcoin investment account. Fitzgerald said Independence Title is considering developing a relationship with Bitpay or other vendors. This would eliminate each seller having to register with the payment vendor service.

“Maybe we can arrange to work within the vendor system so the money from the Bitcoin conversion can be deposited with us,” Fitzgerald said. “That will facilitate seller payoffs or any other fees that need paid. The buyer would still tender the Bitcoin to a conversion service, which would then wire the money to us.”

While the use of virtual currency continues to gain traction, there remains plenty of nervousness around the lack of regulations and understanding as to how gains in Bitcoin are taxed.

In March 2014, the Internal Revenue Service (IRS) issued a notice on virtual currency, such as Bitcoin. The notice provides that virtual currency is treated as property for U.S. federal tax purposes. General tax principles that apply to property transactions apply to transactions using virtual currency. Among other things, this means that:

• Wages paid to employees using virtual currency are taxable to the employee, must be reported by an employer on a Form W-2 and are subject to federal income tax withholding and payroll taxes.
• Payments using virtual currency made to independent contractors and other service providers are taxable and self-employment tax rules generally apply. Normally, payers must issue Form 1099.
• The character of gain or loss from the sale or exchange of virtual currency depends on whether the virtual currency is a capital asset in the hands of the taxpayer.
• A payment made using virtual currency is subject to information reporting to the same extent as any other payment made in property.

Things to Consider

With more consumers coming to the closing table with some version of a cryptocurrency, it’s important for title and settlement companies to have policies and procedures in place to handle these transactions.

Alan Fields, director of underwriting for WFG National Title Insurance Co., said the first question a title company must ask is about the type of transfer. The deal could either require the conversion of the Bitcoin to cash or be a Bitcoin-for-Bitcoin land exchange between the buyer and seller.

If the buyer has Bitcoin, but the seller wants cash, Fields said the transaction is no different than a “normal” transaction. As title professionals, we are not concerned with what legal assets—stock, bonds, other land, or Bitcoin—may have been sold to generate the funds which are ultimately wired into our trust account. Our concern is receipt of “good funds.”

It gets tricky when it’s a Bitcoin swap for land, because escrow laws in most states say funds must be held by a title agency in a federally-insured account. Currently, there aren’t any insured Bitcoin accounts.

“If you have a buyer that says they want Bitcoin, a seller’s property and a seller that wants Bitcoin, we treat it as a property-for-property swap,” Fields said. “This is how 1031 exchanges were originally handled.”

In this scenario, the title agent will want to make sure the buyer and seller both have a Bitcoin wallet, a software program that “stores” the virtual currency. The sale consideration would be handled between the Bitcoin wallets, and outside of the title agent or escrow officer. The parties would still need to deposit funds for charges and costs that are applicable to the transactions.

Fields encourages title agents to talk with their underwriters if such a deal arises. Although it’s not within the scope of your agency agreement, underwriters are available to help agents work through the special and very detailed escrow agreements unique to a Bitcoin transaction.

An issue with Bitcoin is that its value has been very volatile. After hitting a record high close to $20,000 in December, Bitcoin’s value slipped to just above $6,000 in June. It hovered around $10,000 in March but was fell below $7,500 at the end of March. While the parties can agree on the terms of their Bitcoin for land swap—“I’ll give you 20 Bitcoins for your house”—the title agent is still expected to make various tax and governmental reports. Fields said that the title agent has some responsibility to make sure the agreed value to be reported to the government is “within reason” for the fluctuating values as of the date of closing.

Fields says a title company needs thorough escrow instructions that covers all the variables to protect itself. Instructions should specify that the seller agrees to accept a certain amount in Bitcoin. They should also indicate the Bitcoin wallet to which the currency should be sent.

Additional concerns include:

• Having enough money in U.S. currency to pay-off loans, pay taxes, releases, payoffs, recording fees and other things that require cash—and, of course, your fees.
• What value to enter on the federally mandated Closing Disclosure
• Reporting to FinCEN, the IRS and state tax authorities

Evolving Buyer

Ben Shaoul, president of Magnum Real Estate Group, said the buyer has evolved. They are now younger and want to pay in various ways.

“Cryptocurrency is something that has been asked of us—’Can you take cryptocurrency? Can we pay that way?’” he said. “And of course, when somebody wants to pay you with a different form of payment, you’re going to try to work with them and give them what they want, especially in a very busy real estate market.”

Shaoul was among the first to adopt Bitcoin for commercial real estate transactions. He recently developed hipster condos that he allows buyers to purchase using Bitcoin. In the hopes of attracting younger tenants, Development company Brookliv accepts Bitcoin rental payments for its brownstones. Beverly Hills-based Hubilu Venture Corp. accepts Bitcoin rental for apartments it acquired near the University of Southern California.

A little over a year ago—in a first for Southern California—a buyer used roughly 3,300 Bitcoins to buy a Cape Cod-style mansion in Manhattan Beach for $3.225 million. Had the buyer waited until later in the year, that same number of Bitcoin could’ve bought multiple beach houses, a few penthouse condos and a private island in the Caribbean.

Sites like Open Listings are making it easier to find properties you can purchase with Bitcoin with a search tool that allows you to look for the words “Bitcoin” or “Ethereum.” Experts warn that buying real estate with Bitcoin won’t be simple in every case. Open Listing notes, “Even if you are able to find a seller that’s willing to accept your offer in Bitcoin, it can be tricky to find title insurance and escrow companies who feel comfortable handling virtual currency transactions. To take on your home purchase, they may require you to cash out your Bitcoin so that your transaction can be treated more like a traditional house purchase.”

Ethereum is another digital currency that could disrupt the real estate industry. Ethereum is known for its “smart contracts” that are written on the Ethereum blockchain—the technology behind the cryptocurrency. Ethereum is the second-most-adopted cryptocurrency after Bitcoin, according to Joel Leslie—co-founder and partner of Propify, a blockchain-based real estate marketing solution platform. Unlike Bitcoin, when investors use Ethereum to purchase property, they can stipulate things within the smart contract that are binding and enacted as soon as buyers pay up.

For example, Leslie said sellers can stipulate Ethereum coins are to be transferred immediately following the transaction, and it will happen instantly.

“The evolution of cryptocurrencies will be exciting to see as time goes on,” Shaoul said. “Much like the Internet, we are seeing more of a commonality with just how important cryptocurrency is in the world, rather than without.”

Jeremy Yohe is vice president of communications for ALTA. He can be reached at jyohe@alta.org.

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if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Land Services LLC

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Tel 973-808-6130 - Fax 973-227-0645

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Real estate market predictions for 2016.

For your next commercial real estate transaction, house purchase, mortgage refinance, reverse mortgage, or home equity loan, contact us at Vested Land Services LLC. We can help. Located in Fairfield, NJ, we are the title insurance agent that does it all for you.

* * * * *

 

 

The New York Times real estate section takes an educated guess at what the real estate market will be like in 2016.

 

Some predictions:

 

Home price appreciation will slow down.



Buying will beat renting.

The mix of buyers will change.

 

How does that affect you?  Read the full article here.

 

 

For your next title order or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Land Services LLC

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-808-6130 - Fax 973-227-0645

E-mail sflatow AT vested.com

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Millennials investing in real estate

For your next commercial real estate transaction, house purchase, mortgage refinance, reverse mortgage, or home equity loan, contact us. We can help. Located in Fairfield, NJ, we are the title insurance agent that does it all for you.


Millennials, those in the 18-34 years age bracket, are investing in real estate. No, not to live in but to collect rent and garner some appreciation in value.  So reports the New York Times,

For all the talk about the so-called millennial generation — often defined as those between ages 18 and 34 — being slow to move toward homeownership, some young adults are, surprisingly, drawn to real estate as an investment opportunity.

I find this phenomenon interesting.  What do you think?


Read the full report.

For your next title order or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Land Services LLC

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-808-6130 - Fax 973-227-0645

E-mail sflatow AT vested.com

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Year-end dash to sell real estate

The year-end is approaching and with it some tax law changes. Add some confusion to the mix, such as the so-called Obamacare sales tax on real estate, and we can see why there’s a flurry of year-end activity, perhaps the greatest since 1986.

As the The New York Times Alexei Barrionuevo points out in A Mad Dash to Avoid a Bigger Tax Bite

NOT that anybody needs more stress during the holiday season, but sellers and their brokers and lawyers across the country have been scrambling to close deals and avoid January tax increases that will eat into their profits.

What's driving this rush?

 What is everyone so worried about? Federal capital gains taxes — the tax you pay when you sell an investment — are expected to rise at the top rate from 15 percent to at least 23.8 percent. That would include a 5 percent tax increase and a new 3.8 percent tax on investment income levied on high earners to pay for health care.

While no one knows exactly what will be decided in Washington to avoid the fiscal cliff, many people expect that the cost of selling an investment will be higher in January than in December.

There are some options.  The 1031 exchange process might help some owners postpone recognition of gain income.  But I'm not here to offer tax advice

Good luck to all those folks intent on closing before the end of the year.  It's less than a working week away.

Read the full report here.

For your next title order or

if you have questions about what you see here, contact

Stephen M. Flatow, Esq.

Vested Land Services LLC

165 Passaic Avenue, Suite 101

Fairfield, NJ 07004

Tel 973-808-6130 - Fax 973-227-0645

E-mail sflatow AT vested.com

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