Brevard County rentals

LONG-TERM vs. SEASONAL RATES
 
 
LONG-TERM RATES
 
This rate is for a year and can be modified for shorter terms; i.e.:
 
          6 month plus one day rate is yearly rental rate times 1.25;
 
          3 mo. rate is the yearly rate times 1.5 plus 11.0% tax;
 
 
 
SEASONAL RATES
 
This is a vacation rental for a furnished unit and:
 
          Is taxed if for less than 6 months plus one day; 
 
   May include averaged utility allowances;
 
          Typically includes all household items; and,
 
          On townhomes/single families, utility costs will be added.
 
 
It wastes considerable time to negotiate for pricing leverage by inappropriately applying terms for price vs. the actual
proposed rental conditions.
 
 
LENGTH OF RENTAL TERM
 
          Home and Condo Owners Associations set minimum rental periods.
          Brevard County regulates min. 3-mo. rentals in residential housing.
 
Look on website index for more information on these subjects – Thank you!
Calculate Capitol Gains: http://www.spectrusgroup.com/Capital-Gains-Calculator.aspx
1031 Tax Exchange Information
A 1031 Tax exchange can offer significant benefits to real estate investors and buyers. The Internal Revenue Code (IRC) Section 1031 states that a real property owner can sell certain property and then re‑invest those revenues into a like-kind property to defer the capital gains tax. To qualify for a 1031 Exchange, property exchanges must be completed in accordance with the rules set forth in the tax code and the treasury regulations. This site contains a wealth of information about 1031 exchanges, and additional Real Estate Investment Opportunities.
1031 Exchanges
Frequently Asked Questions (FAQ) about 1031 Exchanges
What is a 1031 exchange?
Under Internal Revenue Code (IRC) Section 1031, a real property owner can sell certain property and then reallocate the proceeds in ownership of like-kind property and defer the capital gains taxes. To qualify as a like-kind exchange, property exchanges must be done in accordance with the rules set forth in the tax code and in the treasury regulations. The 1031 exchange can offer significant tax advantages to real estate buyers.
Who should consider a 1031 exchange?
If you have real property that will net you a gain upon sale (generally property that has been substantially depreciated for tax purposes and/or has appreciated in fair market value), then you are exactly the person who should consider a 1031 exchange.
There are 5 tax classes of property:
1.        Property used in taxpayer’s trade or business
2.        Property held primarily for sale to customers
3.        Property that is used as your principal residence
4.        Property held for investment
5.        Property used as a vacation home
Section 1031 applies to the first and fourth categories, and sometimes the fifth category. Business use is defined as, "To hold property for productive use in trade or business." Property retired from previous productive use in business can be qualifying property. Investment purpose is defined as real estate, even if unproductive, held by a non-dealer for future use; or the increment in value is held for investment and not primarily for sale. Investment is the passive holding of property, for more than a temporary period, with the expectation that it will appreciate. Property held for sale in the immediate future is not held for investment.
Why should you consider a 1031 exchange?
·         Defer paying capital gains taxes. A properly structured exchange can provide real estate buyers with the opportunity to defer all or most of their capital gains taxes.
·         Leverage.
·         Upgrade or consolidate property.
·         Diversify. Own multiple properties rather than just one.
·         Relocation to a new area.
·         Differences in regional growth or income potential.
·         Change property types among commercial, retail, etc.
What are the general 1031 exchange rules?
The real property you sell and the real property you buy must both be held for productive use in a trade or business or for investment purposes, and must be like-kind.
The proceeds from the sale must go through the hands of a qualified intermediary and not through your hands or the hands of one of your agents, or else all the proceeds will become taxable.
All the cash proceeds from the original sale must be reallocated to the replacement property—any cash proceeds that you retain will be taxable.
The replacement property must be subject to an equal level or greater level of debt than the relinquished property or the buyer will either have to pay taxes on the amount of the decrease or have to put in additional cash funds to offset the lower level of debt in the replacement property.
Disclaimer – There are substantial risks associated with the federal income tax consequences of purchasing and owning real property, especially if the purchase is part of a tax-deferred exchange under section 1031 of the code. In addition, the income tax consequences of purchasing and owning real property are complex. Because the tax consequences are complex and certain of the tax consequences may differ depending on individual tax circumstances, each prospective purchaser must consult with and rely on his own independent tax advisor concerning the tax consequences of such a purchase and his individual situation.
1031 Timeline
Identification Period
Within 45 days of selling the relinquished property you must identify suitable replacement properties. This 45 day rule is very strict and is not extended should the 45th day fall on a Saturday, Sunday, or legal holiday.
Exchange Period
The replacement property must be received by the taxpayer within the "exchange period," which ends within the earlier of 180 days after the date on which the taxpayer transfers the property relinquished, or the due date for the taxpayer tax return for the taxable year in which the transfer of the relinquished property occurs. This 180-day rule is very strict and is not extended if the 180th day should happen to fall on a Saturday, Sunday or legal holiday.
Replacement Property Identification
3-property rule
You may identify any three properties as possible replacements for your relinquished property. More than 95% of exchanges use the 3-property rule.
200% rule
You may identify any number of properties as possible replacements for your relinquished property as long as the aggregate value of those properties does not exceed 200% of the value of your relinquished property.
95% exemption
You may identify any number of properties as possible replacements for your relinquished property as long as you end up purchasing at least 95% of the aggregate value of all properties identified.
Like-Kind Property
In a 1031 like-kind exchange you can exchange any real property for any other real property within the United States or its possessions if said properties are held for productive use in trade or business or for investment purposes. Examples of 1031 like-kind exchange property include apartments, commercial, condos, duplexes, raw land and rental homes*. As used in IRC 1031(a), the words "like-kind" mean similar in nature or character, notwithstanding differences in grade or quality. One kind of class of property may not, under that section, be exchanged for property of a different kind or class. Examples of qualified 1031 like-kind properties and like-kind exchanges:
·         apartment building for farm/ranch
·         office building for hotel
·         raw land for retail space
·         unimproved property for commercial property
·         airplane for airplane
Examples of non like-kind properties include primary residences, stocks and bonds, notes, partnership interests, developed lots held primarily for sale and property to be resold immediately after initial purchase or completion of improvements.
* Qualification for Section 1031 exchanges depends upon the extent of personal use.
1031 Exchange Formats
 
1031 History
Qualified Intermediary
The Role of the Qualified Intermediary (QI)
The QI is a 1031 exchange intermediary or entity that can legally hold funds to facilitate a 1031 exchange. To be qualified, the 1031 exchange intermediary must not be a relative or an agent of the exchanging party. As an exception, a real estate agent may serve as a 1031 exchange intermediary if the current transaction is the only instance in which the agent has represented the exchanging party over the past two years.
The use of a QI is essential to completing a successful 1031 exchange process. The QI performs several important functions in the 1031 exchange process including creating the exchange of properties, holding the 1031 exchange proceeds, and preparing the legal documents.
GLOSSARY - Investment Real Estate Glossary
Accommodator
A qualified intermediary who agrees to assist the exchanger to affect a tax-deferred exchange. Also described as a facilitator or an intermediary, a qualified intermediary cannot be the taxpayer, a related party, or an agent of the taxpayer.
The Role of the Qualified Intermediary (QI)
The QI is a 1031 exchange intermediary or entity that can legally hold funds to facilitate a 1031 exchange. To be qualified, the 1031 exchange intermediary must not be a relative or an agent of the exchanging party. As an exception, a real estate agent may serve as a 1031 exchange intermediary if the current transaction is the only instance in which the agent has represented the exchanging party over the past two years.
The use of a QI is essential to completing a successful 1031 exchange process. The QI performs several important functions in the 1031 exchange process including creating the exchange of properties, holding the 1031 exchange proceeds, and preparing the legal documents.
Adjusted basis
The basis of the property adjusted for any capital improvements or depreciation. To calculate the adjusted basis, take the basis (the cost of the property) and add the cost of any capital improvements made to the property during the taxpayer's ownership, and then subtract any depreciation taken on the property during the same time period. Once the adjusted basis is known, gain or loss can be computed on a transaction.
Amortization
A gradual paying off of a debt by periodic installments. Example: A $100,000 loan is arranged at a 12% interest rate. The borrower pays $13,500 in the first year. Of the payment, $12,000 is for interest, $1,500 for principal. After the payment, the loan balance is amortized to $98,500.
Amortization schedule
A timetable for payment of a mortgage loan. An amortization schedule shows the amount of each payment applied to interest and principal and shows the remaining balance after each payment is made.
Amoritization term
The amount of time required to amortize the mortgage loan. The amortization term is expressed as a number of months. For example, for a 30-year fixed-rate mortgage, the amortization term is 360 months.
Annual percentage rate
The cost of debt (such as a mortgage) that consumers pay, expressed as a single annual percentage.
Assumable mortgage
A mortgage that can be taken over ("assumed") by the buyer when a home is sold.
Basis in the replacement property
In a 1031 exchange, the deferral of the tax on the gain is accomplished by requiring the taxpayer to carryover (substitute) the basis of the relinquished property to the replacement property with suitable adjustments in the event additional consideration is paid.
Bear market
An extended period of falling value of the overall market, accompanied by anticipation of negative economic activity.
Boot
"Unlike" property included in a like-kind exchange. Example: In an exchange of property under Section 1031 of the Internal Revenue Code, Collins exchanges her warehouse worth $100,000 and receives Baker's land worth $125,000. Collins pays $15,000 cash and a car worth $10,000 in order to equalize the values of the properties exchanged. The car and cash are boot.
Broker
A person who, for a commission or a fee, brings parties together and assists in negotiating the sale of an asset between them.
Bull market
An extended period of rising value of the overall market.
Capital gain
Gain on the sale of a capital asset. There are limits on the deduction of capital losses against ordinary income. Example: Collins purchases land for investment purposes for $10,000. Thirteen months later she sells it for $14,000. She reports the $4,000 profit as a long-term capital gain on her income tax return.
Capitalization rate
A rate of return used to derive the capital value of an income stream. The formula is value equals annual income divided by the capitalization rate.
Class A property
Most prestigious buildings competing for premier office users with rents above average for the area. Buildings have high-quality standard finishes, state of the art systems, exceptional accessibility, and a definite market presence.
Concurrent exchange
Also referred to as a simultaneous exchange when the exchanger transfers out of the relinquished property and receives the replacement property at the same time.
Deferred gain
In a tax-deferred exchange, the amount of realized gain that is not recognized. Example: Donald arranged a tax-deferred exchange in which $1 million of gain was realized but not recognized (that is, it was not currently taxed). The deferred gain of $1 million carries over to the newly acquired property in the form of a reduced tax basis, to be taxed if and when the newly acquired property is sold in a taxable transaction.
Delayed exchange
A transaction in which a property is traded for the promise to provide a replacement like-kind property in the near future. The Tax Reform Act of 1984 allows investment real estate or real property used in a trade or business to be sold with the tax on the gain deferred, provided replacement property is identified within 45 days and closed within 180 days. Other strict requirements must also be observed.
Depreciation (tax)
An annual tax deduction for wear and tear and loss of utility of property. Example: Tax depreciation allows a tax deduction without a cash payment, thus providing an important benefit to real estate owners. A tax depreciation deduction may be claimed even when the property's market value increases. The annual tax depreciation deduction allowed for improvements (land is not depreciable) is 3.64% of the original cost of the building for rental housing and 2.56% for commercial and industrial property.
Depreciation
Decline in value of an asset. Property depreciation occurs due to general wear and tear.
Due diligence
This term can be applied in the following ways:
1.        making a reasonable effort to perform under contract. Example: A prospective homebuyer signed a sales contract contingent on the sale of her present residence. She is expected to use due diligence in marketing her present house.
2.        making a reasonable effort to provide accurate, complete information. A study that often precedes the purchase of property, which considers the physical, financial, legal, and social characteristics of the property and the expected financial performance; the underwriting of a loan or purchase. Example: The pension fund sent various experts to perform a due diligence study of a property it was considering for purchase. Matters to be considered included the mechanical and electrical systems of the building, local market conditions and competition for the property, and environmental hazards.
3.        examination of property to detect the presence of contamination. Example: Before lending on a shopping center, the lender insisted on an environmental audit as part of its due diligence.
Equity
A buyer's financial interest in a property. Equity is the difference between the fair market value of the property and the amount still owed on its mortgage.
Escrow
an agreement between two or more parties providing that certain instruments or property be placed with a third party for safekeeping, pending the fulfillment or performance of a specified act or condition. Example: The deed to the property and the earnest money were both placed in escrow pending fulfillment of other conditions to the contract.
Exchange period
In a 1031 exchange, the replacement property should be received by the taxpayer within the "exchange period," which ends on the earlier of 180 days after the date which the taxpayer transferred the property relinquished, or the due date for the taxpayer's tax return for the taxable year when the transfer of the relinquished property occurs (such as April 15th). The exchange period is 180 days, due to the Taxpayer's ability to extend the date of payment.
Exchanger
In a 1031 exchange, the party wishing to defer tax on gain on the exchange of investment property.
Fair market value
The highest price that a buyer, willing but not compelled to buy, would pay and the lowest a seller, willing but not compelled to sell, would accept.
Fee simple
The greatest possible interest a person can have in real estate.
Finder's fee
A fee or commission paid to a mortgage broker for finding a mortgage loan for a prospective borrower.
Fiscal year
A continuous 12-month time interval used for financial reporting; the period starts on any date after January 1 and ends one year later.
Fractional interest
Ownership of some but not all of the rights in real estate.
Full disclosure
A requirement to reveal all information pertinent to a transaction.
Gain
The amount obtained for a property minus the property's adjusted basis, and transaction costs. No matter what the adjusted basis of a property is, there's no gain until the property is transferred. There are two types of gain: "realized gain" and "recognized gain." Realized gain is the difference between the total consideration (cash and anything else of value) received for a piece of property and the adjusted basis. Realized gain is not taxable until it is recognized. Gain is usually, but not always, recognized in the year that it is realized. If gain is not recognized in the year it is realized, it is said to be deferred. In an exchange under Section §1031, realized gain is recognized in part or in full to the extent that boot is received. (See Boot.) Where only like-kind property is received, no gain is recognized at the time of the exchange.
Ground lease
A lease which keeps the ownership of the land separate from that of the improvements. The landlord leases the land to the tenant, but the tenant owns the improvements.
Growth factor
Interest earned for the duration of the exchange that is payable at the end.
Guarantee mortgage
A mortgage that is guaranteed by a third party.
High-rise
Generally a building that exceeds 6 stories in height and is equipped with elevators.
Home equity line of credit
A mortgage loan, which is usually in a subordinate position, that allows the borrower to obtain multiple advances of the loan proceeds at his or her own discretion, up to an amount that represents a specified percentage of the borrower's equity in a property.
Homogeneous
Uniform, of like characteristics or quality. Opposite of heterogeneous. The values of an area tend to be maximized when properties are homogeneous because low-valued or unusual properties are likely to reduce the value of other nearby properties of higher cost.
Holding period
The time span of ownership, often for investment real estate.
Identification period
In a 1031 exchange, the replacement property must be identified within 45 days of the close of escrow/closing the relinquished property. If the 45th day happens to fall on a weekend or legal holiday, it is not to be extended.
Income property
Real estate that generates cash flow
Interest
The fee charged for borrowing money
Interest rate
The rate of interest charged for the use of money, usually expressed at an annual rate.
Intermediary
The party who facilitates a 1031 tax deferred exchange by acquiring and selling property in an exchange. The intermediary plays a role in almost all exchanges these days. He or she neither begins nor ends the transaction with any property. He or she buys and then resells the properties in return for a fee.
Internal Revenue Code Section 1031
Section 1031 of the Internal Revenue Code allows an investor to defer his capital gain and depreciation recapture income tax liabilities when he exchanges relinquished property for like-kind or like-class replacement property.
Investment property
A property that is not occupied by the owner.
Joint tenancy
Ownership of realty by two or more persons, each of whom has an undivided interest with the right of survivorship.
Judgment
A decree of a court stating that one individual is indebted to another and fixing the amount of indebtedness.
Jurisdiction
Geographic or topical area of authority for a specific government entity.
Kiosk
A kiosk is a freestanding structure (open sides, usually multi sided) located in a shopping center or mall from which merchandise is sold. A multi-sided structure found in a shopping mall or center.
Lease
A written agreement between the property owner and a tenant that stipulates the conditions under which the tenant may possess the real estate for a specified period of time and for a specified rent.
Leverage
The degree to which an investor or business is using borrowed money.
Loan
A sum of borrowed money (principal) that is generally repaid with interest.
Loan-to-value (LTV) percentage
The relationship between the principal balance of the mortgage (i.e. the loan) and the appraised value (or sales price if it is lower) of the property. For example, a home with a value of $100,000 and an $80,000 mortgage has a LTV percentage of 80 percent.
Like-kind property
In a 1031 like-kind exchange you can exchange any real property for any other real property within the United States or its possessions if said properties are held for productive use in trade or business or for investment purposes. Examples of 1031 like-kind exchange property include apartments, commercial, condos, duplexes, raw land and rental homes.* As used in IRC 1031(a), the words "like-kind" mean similar in nature or character, notwithstanding differences in grade or quality. One kind of class of property may not, under that section, be exchanged for property of a different kind or class. Examples of qualified 1031 like-kind properties and like-kind exchanges:
·apartment building for farm/ranch
·office building for hotel
·raw land for retail space
·unimproved property for commercial property

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