New Rules For Investment Trusts In UK

Report:

The UK Government is set to tighten up the rules for real estate investment trusts (REITs), to keep out property-rich businesses - such as pubs - which do not generate at least 75 per cent of their gross income from renting property out to third party tenants...

New legislation will appear in the Finance Bill 2009. This is apparently a response to structuring which might allow businesses who should not qualify for the exemption available to Reits to become one.

The Government has made it clear that it will consult with the industry on the changes to ensure that they do not create any unintended consequences for existing firms.

Peter Cosmetatos, British Property Federation (BPF) Director for Finance and Investment, said, "While we will of course have to consult our members about this announcement, it seems consistent with the original aims behind the introduction of Reits.

"Clearly, it will be critical that the way in which the Government legislates to tighten up the rules has no adverse impact on the existing Reits. Getting this wrong could damage the longer term prospects of the UK's Reit sector, which is coping with very challenging economic conditions as it is.

AIG Investment Property

Report from New York:

"Acquiring investment property is based purely on how it’s defined--the investment and the income," Michael Fasano, regional manager for Marcus & Millichap in Elmwood Park, NJ, tells Globest.com. "In large part, how you buy those assets is leveraging a mortgage or financing, and as interest rates have climbed and underwriting requirements spread, bank requirements have changed and it’s put a lot of pressure on pricing.

"That said, as the constraints and the lending environment have evolved over the past 13 to 14 months, pricing has come down," Fasano says. "Apartment properties continue to trade, albeit at a slower pace and at slightly lower prices than a few quarters ago. Apartment fundamentals in New Jersey will soften in the months ahead, but remain strong relative to other areas of the country."

"If AIG were to put them all on the market on an individual basis, there would be great activity," Hammer says. "At the moment, there are very few buildings on the market where the sellers’ prices are realistic. New Jersey apartments have a wide range of asking prices. North Jersey could be more than $200,000 per unit for really nice buildings, but much less in Camden, Salem, Burlington and other counties."

Hammer adds, "The sale would have a very positive impact on New Jersey, but only if AIG were to sell at prices that made sense."

Investment Property In New Zealand

Report:

"We're witnessing a number of new investors coming into the market at present, some of whom are moving out of equities. With fixed-deposit rates moving down, we're also starting to see investors moving money out of the banks back into investment property."

Bayley says transactions are still being concluded in the middle segment of the market between $1 million and $10 million, but activity has slowed.

"As a consequence of the reduced amounts of finance available, we are seeing a re-emergence of the trade market where properties or other assets are exchanged to help make transactions happen. A number of our senior agents are revisiting their experiences with trades in the late 80s and early 90s to keep this sector of the market ticking over."

In a recent example of a trade deal, a property in Allens Rd, East Tamaki, has been exchanged as part of the sale of a larger industrial property in Settlement Rd in Papakura that is currently occupied by Croxley Stationary, but will be vacant on settlement.

Buying Investment Property In San Diego

Report:

Alvarez, a mother of two, bought her house on Little Lake Street as an investment property with a 20 percent down payment. Six months after buying the house, Alvarez refinanced and took out a $95,000 line-of-credit, according to county records.

“We put $100,000 down. We didn't want to lose that,” said Alvarez, who defaulted on another house in May. “A lot of people are losing their down payments. Now they don't have anything. My husband and I put it into our business. We survived with that money.”

Like Alvarez, several people who pulled equity out of their Little Lake properties say they spent it on business expenses or mortgage payments. Only when prodded, and in one case reminded, did they acknowledge using the money to buy a timeshare, new cars and jewelry.

The most common response to the question of how the money was spent was: “To pay bills.” Many could not remember what those bills were for.

Bankruptcy specialists say part of what led to the housing market collapse was systemic. Lenders set themselves up for problems by not requiring buyers to prove they could afford the loans, or to provide traditional down payments.

That stripped buyers of a tangible incentive to stay in their homes. The stigma of foreclosure and damaged credit are real, but temporary.

“Twenty years ago, individuals were doing everything in their power to save their houses,” said Radmila Fulton, a bankruptcy attorney. “Now they're more willing to walk away. Why pay now when they can rent for less than their mortgage payment?”

Floria Real Estate Prices Hit Bottom?

Report:

"North Port was hurt because there was so much speculative building," said Arthur W. Broslat, land and investment property specialist with ReMax Alliance Group. "These guys had these schemes where you put down $3,000 and they built you a house. Gulfstream Construction built 500 houses like that in North Port and nobody had any intention of living in them. A mess of houses built in North Port were purely speculative."

Englewood existing home sales held value the best in Sarasota and Charlotte counties with an average selling price of $174,000 -- down only 7 percent from a year ago.

No data was available on DeSoto because its population is too small for Zillow to track.

All is not lost in North Port and other overbuilt areas. Sales of intact, foreclosed properties are red-hot and as they disappear from the market, property values are expected to stabilize, Broslat said.

"The new houses in North Port will disappear," Broslat said. "The recent foreclosures that haven't been trashed, the turn-keys you can move into in North Port, are going off the market a week or two after they've been listed. They are going off the market very quickly."

Reflecting the foreclosure trend, one-third of all Florida homes sold in the past 12 months sold for a loss, and 14.3 percent of all homeowners have negative equity, according to Zillow.com.

Distressed sales -- foreclosures and short sales where the bank takes less than the amount owed to satisfy a mortgage -- accounted for as much as 40 percent of all real estate transactions in the third quarter, which pulled down the median sales price.

The news is not all bad. Existing home sales are trending up.

For the first quarter since year-end 2005, the Florida Association of Realtors reported existing single-family home sales were up 5 percent in the third quarter. A total of 32,203 existing Florida homes sold in the third quarter compared with 31,558 during the same period a year ago.

Finding Loans For Snagging Investment Property

Here's a view from Singapore:

Investors will find it tougher to get a bigger loan these days. Banks used to offer more than 85 per cent financing for investment properties but all of them, except DBS Bank, no longer do so, said Ms Yang.

This means buyers have to be prepared to cough up more cash for investment property buys.

Those looking at refinancing may be in for a surprise if they bought their properties in last year's booming market.

The Spring Grove unit in question was bought by a South Korean expatriate for $2.58 million or $1,442 per sq ft on a floating rate package.

He now pays 3.5 per cent interest on his 80 per cent loan and was looking to halve his interest payments by switching to a package pegged to the three- month Singapore Interbank Offered Rate, said Ms Yang.

But a check with two banks found that the valuation for his property was $2 million or $2.22 million. If he wants to refinance at these valuations, he would need to pay up to $180,000 to top up his loan, currently at $1.78 million.

Consumers seeking a loan for their property purchase should get prior approval or have more cash on hand. 'They should approach a mortgage specialist for a joint assessment if they are unsure whether they can afford the home purchase,' said OCBC's Mr Chan.

'Things are quite fluid these days so buyers should re-check their loan eligibility after one month,' said Mr Ng.

10 Tips For 1031 Exchange

Report:

The 1031 Exchange is a valuable tax deferral tool for the owners of investment real estate. A 1031 Exchange allows a taxpayer to sell an investment property and rather than paying capital gains taxes on the sale, use that money to purchase another investment property. If the IRS rules are followed and the transaction is structured properly, a 1031 Exchange can be a useful wealth building strategy.

Certain rules must be followed in the sale and transfer of the property to insure that it qualifies as a tax deferred exchange:

1. An investor can sell his investment real estate property but must use the proceeds from the sale of the ‘Relinquished Property’ to purchase a ‘like – kind’ property. Both properties must have been held for use in a trade or business.
2. The Seller must enter into a written agreement with a Qualified Intermediary (QI). The QI acts as the principal in the sale of the Relinquished Property and the purchase of the Replacement Property.
3. The Qualified Intermediary receives the proceeds from the sale of the Relinquished Property, usually placing them in a segregated account. The Seller does not touch these funds.
4. The day the sale of the Relinquished Property closes, the 45 Day Identification Period begins. There are generally no extensions to this Identification Period.
5. Replacement Property or properties must be identified in writing to the Qualified Intermediary with complete legal descriptions or addresses. For the 3 Property Rule, three properties may be identified without regard to their fair market value, although it is wise to select a property of equal or greater value than the Relinquished Property. This process must be completed within the 45 Day Identification Period.
6. The 200% Rule means that more than three properties may be selected as long as the aggregate fair market value of these Replacement Properties does not exceed 200% of the aggregate fair market value of all the exchanged properties, as of the transfer date of the Relinquished Property.
7. The 95% Rule allows any number of Replacement Properties to be selected if the fair market value of the properties actually received by the end of the exchange period is at least 95% of the aggregate fair market value of all of the identified potential Replacement Properties.
8. The Replacement Property must be identified and the exchange must be completed within 180 days from the date that the Relinquished Property closed.
9. Title to the Replacement Property must be taken in the same manner that it was held in the Relinquished Property. For example, if Joe and Mary Smith sell their investment property and implement a 1031 exchange then Joe and Mary Smith must take title to the replacement property in the same manner.