Archives

now browsing by author

 

3 Things to Know Before Buying a Rental Property

3 Things to Know Before Buying a Rental Property

By Patrick Morris| October 20, 2013 | The Motley Fool

In the name of diversification, many will seek to spread their assets across a variety of different investment platforms, and rental properties can be an attractive alternative.

For this purpose, I recently sat down with Forde Britt, a commercial real estate broker with the Nichols Company in Charlotte, NC, who is well versed in many facets of the real estate industry. He is also an owner of rental property in his neighborhood near downtown Charlotte.

Source: www.stockmonkeys.com.

At first glance, buying a rental property can seem like an appealing investment opportunity. For example, if someone bought a four bedroom home for $200,000 with a $40,000 down payment, at today’s rates, their 30-year mortgage payment would be right around $1,050 a month.

Charging $450 per bedroom would mean that property could be rented out for $1,800 a month. It’s a good rule of thumb to expect an 8% monthly management fee and an estimated 10% loss of income due to vacancy and maintenance expenses. So roughly 20% of that $1,800 will be taken off for expenses — but all in all, the owner could expect to net about $475 in his pocket each month.

Even if rent increased by just 1% per year after 30 years, the owner would collect $750,000 in rental payments, and pay a total of $375,000 in mortgage payments. If the value of the house just grew by 1%, the house would be worth almost $266,000 at the end of 30 years.

Provided the owner sold it after 30 years, he would have netted almost 2,100% return on their initial investment of $40,000 over the 30-year period, even after accounting for the 18% costs. That works out to a compounded annual return of roughly 10.7%.

Now, before you click over to Zillow to look for rental properties to buy in your area and run to Wells Fargo to get a mortgage — it’s important to note that a 2,100% return over a 30 year time horizon is eye-popping at first glance. But if you take that same $40,000 investment and put it in the S&P 500, at the historical average return of right around 8% per year, your return after 30 years would be roughly 900%. And remember, that number also excludes any potential major repairs or other expenses associated with owning a home.

In my conversation with Forde, he highlighted three things that anyone considering an investment in a rental property should keep in mind before they buy a home with the intention of renting it out.

1. You make your money when you buy it Forde noted, “The best principle to have in any real estate transaction is that you make your money when you buy it, not when you sell it — because if you pay too much for it, you’re never going to make money.”

Since many people who buy investment properties often don’t buy one in their same neighborhood, or even in their same city, it’s easy to be lured by what is perceived to be a good deal in an unfamiliar market. Yet just because a home is less expensive than those around it, or in an area on the “rebound,” doesn’t mean it’s worth investing in.

Often, investors see a home at a low price and think they’ve found a great deal, but you must do your research and your homework on the area to truly evaluate whether or not it’s a good investment.

2. Know your worst-case exit scenario Investors in any situation can be lured into thinking that only the good things will happen, and that’s what they plan for, but it’s vitally important to have an exit plan, too.

Source: Inha Leex Hale.

While investing in a rental property can certainly be a profitable and worthwhile investment — don’t allow it to be such a large part of your portfolio that losing returns from it could ultimately bring you down with it.

Forde wanted to highlight how critical it was to have an exit plan if “all of your assumptions don’t work out.” For example, if the home is unoccupied for a few months, the $800 monthly income instead turns into a $1,000 expense very quickly — and that could result in dire consequences if the investor isn’t prepared.

3. Be ready for the unexpected With any investment decision — and almost any decision at all — things can quickly take unexpected turns. For example, if the HVAC unit and the water heater each go out on the same day, repairs could be north of $10,000 — wiping out an entire year’s worth of profit. In this, investors must see that houses can be great investments — but are often full of unseen costs that correspond with them. Being both prepared and able to address those issues when they present themselves is critical.

While rental properties can be great investments, like all investments, their returns also correspond to their risks — and now you have one expert’s opinion on what to keep in mind before you make that critical decision to invest in one.

IRS Provides Guidance on Using Tenancy-in-Common Interests in 1031 Exchanges

IRS Provides Guidance on Using Tenancy-in-Common Interests in 1031 Exchanges

by Ronald L. Raitz, CCIM

On March 19, the Internal Revenue Service released Revenue Procedure 2002-22, which addresses the use of real property fractional ownership interests as replacement property in Internal Revenue Code Section 1031 tax-deferred exchanges. Commercial real estate professionals commonly refer to these fractional ownership opportunities as tenancy-in-common interests.

The potential advantages of using fractional ownership interests to complete a 1031 exchange are significant for both investors and their advisers. Tenancy-in-common interests offer increased opportunities to identify a replacement property within 45 days, the option to buy into institutional-grade product for less money, and the potential to diversify into multiple properties with fewer dollars.

Like-Kind Exchange Primer Under Section 1031, property owners may defer gain recognition on a sale by exchanging for like-kind property; however, they must meet numerous requirements to complete a successful exchange.

In order to achieve 100 percent tax deferral, the cost of the replacement property must be equal to or greater than the net sales price of the property being sold, and all the proceeds must be used. Further, the seller must identify a suitable replacement property within 45 days of the relinquished property sale. Finally, the seller must take title to the property he ultimately buys in the same manner in which he gives title to the property he sells.

In the past, tax professionals and other investment advisers were wary of recommending fractional interests as replacement properties because the IRS often considered the investor’s interest in the new property to be a partnership, thereby invalidating the exchange. Along with partnerships, Section 1031 prohibits owners from exchanging out of real estate and into a corporation or limited liability company.

This concern often prevented investors from buying shares of larger and potentially more attractive properties. In response to the need for high-quality replacement property in a range of prices, a niche group of companies began offering tenancy-in-common interests to complete 1031 exchanges. To meet the title requirements, investors receive a deed for a portion of the property, rather than a share of a partnership. To encourage referrals, many tenancy-in-common program sponsors offer referral fees ranging from 1 percent to 6 percent of the equity value placed in the product.

Fundamentals of the New Guidelines Rev. Proc. 2002-22 provides guidance on the use of fractional interests as replacement properties in 1031 exchanges. Although the IRS did not provide the ultimate safe harbor blessing for these investments, it outlined 15 minimum standards tenancy-in-common interests must meet to be considered as potential replacement property. A few of the key criteria are:

  • the number of tenants-in-common cannot exceed 35;
  • the sponsor of the interests may own the property (or an interest therein) for only six months before 100 percent of the interests are sold;
  • any decision that has material or economic impact on the property or its owners must be approved unanimously by the owners; and
  • the management agreement must be renewable annually and must provide for market rate compensation.

For the complete listing of requirements, visit the IRS Web site at http://www.irs.gov/. Investors should seek private-letter rulings on specific offerings for more concrete assurance that their fractional interest meets the specified qualifications.

Some investment advisers have found that recommending properly structured tenancy-in-common programs can result in a win-win situation for all parties. For example, one of your clients owns a small apartment building that requires an inordinate amount of time to manage. As he nears retirement, your client receives a $750,000 offer on the building and wants to exchange into an institutional-grade investment. With the amount he will be able to invest from the sale, your client doesn’t think he can afford a high-quality investment offering a strong yield and greater appreciation potential. However, in this scenario, your client should consider a tenancy-in-common program that complies with the recent IRS ruling. With his sale proceeds, your client feasibly could exchange into a 15 percent interest in a class A office building worth $5 million.

The new guidelines also open the door for investors who want to structure fractional interests in a desirable replacement property on their own. For instance, Jennifer Reed owns a high-quality rental property in suburban Atlanta worth $500,000. She notices a small strip shopping center for sale in the area and, after some due diligence, discovers the center can be purchased for $1.5 million. Though individually she cannot afford the center, she has two friends who would like to invest a portion of their portfolio in real estate. The three decide to purchase the property together. When Jennifer sells the rental property, she exchanges all of the debt and equity from the sale for a one-third interest in the shopping center as a tenant-in-common. The other two investors provide the balance of the funds necessary to close the deal.

Proceed With Caution As tenancy-in-common programs are in their infancy, commercial real estate professionals should review them carefully before advising clients to consider them as viable replacement property options. Because all programs are not created equal and may have been structured prior to the release of Rev. Proc. 2002-22, careful due diligence is essential. As more sponsors modify their programs to seek and receive private-letter rulings certifying compliance, less due diligence will be necessary.

Whether for groups sponsoring fractional interests or creative investors looking to pool resources into a larger property, the new IRS guidelines are good news for the commercial real estate industry. For investment advisers, this guidance provides exciting new options for clients who don’t want to forego the benefits of a Section 1031 tax-deferred exchange.

Consult a tax professional for further information on individual cases.

http://www.ccim.com/cire-magazine/articles/irs-provides-guidance-using-tenancy-common-interests-1031-exchanges

Tenants in Common Defined

What Is Tenants in Common?

One way for more than one person to hold property

By Moshe Pollock of Realtor.Com
There are various forms of property ownership. Tenants in common (or tenancy in common) is one of these. While the term “tenants” might imply renting, tenants in common are the owners of the property. There is no maximum number of persons who can be tenants in common, and the tenants do not have to hold equal shares. For example, one tenant in common can own 75 percent of the property and the other tenant can own 25 percent. Such an arrangement frequently reflects the portion of the purchase cost the respective tenants paid.

Features of tenancy in common
Typically the tenants sign a tenancy in common agreement that sets out the percentage of ownership for each party and other relevant matters. This is significant, because each tenant is able to sell his or her shares separately. Also, unlike joint tenancy, tenancy in common does not involve the right of survivorship. This means that in tenancy in common, each tenant’s interest does not pass to the other tenants upon death. Each tenant can bequest his or her interest by will and if there is no will, the interest passes by applicable law.

No matter what the ownership percentage of the tenants, all tenants in common have the right to possess and to have access to the property. Even if just one tenant resides in the property, he cannot exclude other tenants from entering it. The tenants are each responsible for the mortgage, taxes, maintenance and other necessary expenses. But these costs are apportioned based on the percentage of ownership.  

Advantages of tenancy in common
Tenancies in common can be created relatively easily through a simple written agreement. Similarly, the tenancy can be terminated readily in one of several manners. The tenancy can be dissolved by the tenants agreeing to sell their shares to one of the tenants. All of the tenants might sell their interests to someone who is not already a tenant. Each tenant is free to sell his or her interest to someone outside the tenancy. That purchaser would then join the tenancy in common. The individual percentage of the tenant’s contribution to the purchase price can be reflected in the ownership interest.
Tenancy in common disadvantages
Because each tenant’s interest can be passed on to the heirs, the remaining tenants may be forced to continue ownership with an undesired party. An heir might want to sell the property when the other tenants do not. A tenant’s sale of his or her interest to an outside party might also result in an unwelcome tenant in common. If the tenants cannot agree upon to whom to sell the property, there could be problems. In all of these situations, the tenants would need to turn to the courts in a partition action. A partition action involves asking the court to sell the property and to divide the proceeds among the tenants. It might result in one of the tenants buying the shares of the other tenants. In some cases, such as vacant land, it might be possible to divide the property, giving each tenant his or her own piece. In any case, partition actions are frequently lengthy, unpleasant and expensive.
Final notes on tenancy in common
Tenancy in common is one way of owning property that protects each purchaser’s interest. Each tenant holds an individual, separate share of the real estate as a whole. But there are legal ramifications of ownership by tenancy in common that might not be desirable in every situation. When considering tenancy in common as the form of ownership, purchasers should consider all the implications and obtain advice from knowledgeable professionals.

1031 Exchange – Information from the IRS

Like-Kind Exchanges – Real Estate Tax Tips

Generally, if you exchange business or investment property solely for business or investment property of a like-kind, no gain or loss is recognized under Internal Revenue Code Section 1031. If, as part of the exchange, you also receive other (not like-kind) property or money, gain is recognized to the extent of the other property and money received, but a loss is not recognized.

Section 1031 does not apply to exchanges of inventory, stocks, bonds, notes, other securities or evidence of indebtedness, or certain other assets.

Like-Kind Property

Properties are of like-kind, if they are of the same nature or character, even if they differ in grade or quality. Personal properties of a like class are like-kind properties. However, livestock of different sexes are not like-kind properties. Also, personal property used predominantly in the United States and personal property used predominantly outside the United States are not like-kind properties.

Real properties generally are of like-kind, regardless of whether the properties are improved or unimproved. However, real property in the United States and real property outside the United States are not like-kind properties.

Note: This page contains one or more references to the Internal Revenue Code (IRC), Treasury Regulations, court cases, or other official tax guidance. References to these legal authorities are included for the convenience of those who would like to read the technical reference material. To access the applicable IRC sections, Treasury Regulations, or other official tax guidance, visit the Tax Code, Regulations, and Official Guidance page. To access any Tax Court case opinions issued after September 24, 1995, visit the Opinions Search page of the United States Tax Court.

Page Last Reviewed or Updated: 2013-01-04

Video – How does a 1031 Exchange Work?

1031 Exchange Explained

1031 Exchange Explained

 By Wilhelm Schnotz

 

1031 Exchange Explained thumbnail 

<:figure>A 1031 exchange helps defer gains taxes on the sale of a property.

For real estate speculators and families who live in areas with an expensive real estate market, capital gains can pose a significant tax burden, particularly if real estate was held for a long time or through a volatile time in the market. Although it’s impossible to completely avoid capital gains assessments, a 1031 like-kind exchange allows property owners to sell one property and purchase another with the proceeds, and, if handled correctly, shields investors from immediate gains taxes.

    • The Internal Revenue Service allows investors to liquidate one property and exchange it for one of a similar kind — all domestic real estate qualifies as like-kind — and postpone gains taxes from the original sale. To qualify for a 1031 exchange, taxpayers may not take possession of the money generated by the sale of the property. To do this, investors must simultaneously sell the old property and purchase the new one, or route their funds to a qualified intermediary so they don’t take possession of the money, even if it’s reinvested in the new property. Any personal acquisition of the funds, even if it’s momentary, incurs gains taxes.

    Maintaining Equity

    • A 1031 exchange is only valid if the property owner’s equity in the new property is equal to or greater than that of the old property. Because of this, investors may not cash in equity on their old property during the exchange, though they can invest more into the new property.

    • Qualified Intermediaries
    • If property owners don’t simultaneously sell and purchase the properties involved in the 1031 exchange, a qualified intermediary — a real estate broker — must serve as a go-between for the sale and purchase of the properties. Money gained through the sale of the original property is placed into an exchange account managed by the intermediary, so taxpayers never come in direct contact with the funds.

    Time Frame

    • Property owners must identify one to three potential properties to purchase within 45 days of the original sale if a qualifying intermediary holds the funds. The exchange must be completed, with a new property purchased, within 180 days of the sale of the original property or by the date the taxpayer’s taxes must be filed.

    Reverse Exchanges

    • In the case that a taxpayer purchases a replacement property before the original one is sold, a reverse exchange may be engineered. Amendments to 1031 rules were introduced in 2000 to allow a safe harbor for reverse exchanges in this situation.

    Tax Basis and Gains

    • A successfully executed 1031 exchange allows a taxpayer to avoid paying gains on the sale of the original property, but those gains are only deferred to a later date. When a property purchased as part of a 1031 exchange is sold, its tax basis is calculated as the gains between the original property and the final one’s sale price. For example, an investor purchases a property for $100,000, and sells it as part of a 1031 exchange for $150,000, and purchases another property for $200,000. When that property is sold for $220,000, the investor’s tax basis is the difference between the purchase price of the original property and the sale of the second one. This investor faces gains taxes on $120,000 ($220,000 – $100,000) in this situation.

Wilhelm Schnotz has worked as a freelance writer since 1998, covering arts and entertainment, culture and financial stories for a variety of consumer publications. His work has appeared in dozens of print titles, including “TV Guide” and “The Dallas Observer.” Schnotz holds a Bachelor of Arts in journalism from Colorado State University.

Read more: 1031 Exchange Explained | eHow.com
http://www.ehow.com/about_7466878_1031-exchange-explained.html#ixzz2IKRtEcCu

 

Short Sale Rules May Curb Foreclosures

What to Expect When You Invest in a Short Sale Property

What to Expect When You Invest in a Short Sale Property

July 25, 2012 By

If you want to invest in short sales, then you need to learn about them first.

Want to invest in a short sale property? You need to learn what to expect before you get involved. Read the following article to learn all about the short sale process and what to expect.

Many potential investors are curious in regards to the short sale process when contemplating real estate investment. Concentrating on short sales and foreclosures is an excellent way to be a champion investor, but the procedure can be baffling to the unpracticed. The most desirable way to manage the beginning bumps is to find a knowledgable guide who can anticipate what to expect and what to do in order to endure the things that can hamper a smooth deal.

The short sale process itself has several phases. Once someone has made the decision to seek deals in short sales, the initial step must be finding a home that is risking the possibility of being foreclosed on. There are several optionss to find a home that is experiencing pre-foreclosure and might be a great candidate for a short sale deal. Searching for an experienced short sale expert that can drive an investor through the many ways out there is a fantastic plan. While it often takes some time for a financial institution to start foreclosure actions, it can begin the paperwork as soon as the day after the second missed payment on the loan. Pre-foreclosure officially starts when the lender files a public default notice.

Once a home is discovered that is in a decent situation for a short sale, it is important to converse with the homeowner and begin the documentation imperative for a short sale package. There are several varying papers that a bank or other financial institution will want to look over in order to think about a short sale, and it is critical that they be organized properly. Some of the documents need to be signed and submitted immediately, and others won’t be submitted until the full package with an official offer is ready to go.

The short sale process will take many weeks to finish. As soon as the real estate investor has authorization from the homeowner to negotiate on his or her behalf (and the paperwork stating so in writing), the bank will take some time to consider the case. Before any offers are made, the bank will want to to determine what the home is valued at in comparison to the amount of money owed through the original mortgage that has now been defaulted on. The banks use a BPO (or Brokers Price Opinion) to determine this value, and this is a critical step in crafting an offer on the home that will be acceptable to the lender as well as most beneficial to the investor.

As soon as the BPO has been determined, it is time to collect and submit the whole short sale package. While it’s helpful for a homeowners to be at least peripherally involved during the short sale process, this is the step in which their works are most needed. Part of getting a bank or other financial institution to accept a short sale offer is presenting evidence that the homeowner is beyond the power to pay the loan. They must to write a letter of hardship explaining the situations that have put them in the unpleasant financial position they are in now, as well as attach financial documents which show the contrast between their income and expenses.

After submitting the short sale package, the short sale process changes to offers and counter-offers between the bank and investor. Once a deal is decided in regards to the price, the investor moves on to a different phase of real estate investment: what to do with the home.

About the Author

Mark Sumpter is the short sale expert that can show you how to use risk-free techniques to turn a part-time business into a cash gushing part-time business. Visit http://www.getshortsaletraining.com to get a FREE report and FREE videos to find out how!

GoArticles.com © 2012, All Rights Reserved.

Top 6 Landlord Guide – Basics for the Real Estate Investor

Source: About.Com | Real Estate Business

Compared to flipping properties, landlording is a long-term commitment with demanding requirements of your time. Before you take the steps toward the job of landlord, examine your capabilities and desires, and make sure that you’re up to it. If you are, it can be a wonderful and profitable experience.

1. Are You Cut Out to Be a Landlord?

All those number-crunching skills that serve you well in selecting, buying and selling real estate properties for investment are valuable. However, as soon as you take on the roll of landlord, people skills are also quite important.

 

2. Don’t Let Your Investment Manage You – Avoid Landlord Burnout

Maintain your life’s balance, and plan your management activities to maintain profitability of your rental properties without letting your investments manage you. This is particularly important when making a decision to move up to multiple properties when one has been a positive experience.

 

3. Prepare Properly Before You Select a Tenant

One of the most important tasks confronting the real estate investor-landlord is the selection of tenants. Shortcut this process and it can cost you more than money down the road. Learn the simple steps to intelligent tenant selection.

 

4. Setting the Rent – Cover all the Bases

Some might think that deciding on the rental amount for a property is only a matter of matching the market rates. That’s an important factor, but there is room for manipulation of the rent price based on other factors. Learn how changing the rent amount at the beginning can influence tenant choices and long-term occupancy.

 

5. Things Break – Plan and Budget for It

A rental property is a home or office also. Using the property on a day-to-day basis will cause wear and tear, and repairs will become necessary. Plan and budget for these problems, and learn how to handle repairs to keep your tenants happy. How you treat the property speaks to their treatment of it.

 

6. Don’t Panic when You Get the Call About Mold – But Act Quickly

In recent years, there’s been a great deal of media coverage of property and health problems related to mold. A few large damage awards, as well as many insurance companies dropping mold coverage, have caused a great deal of concern among real estate professionals and landlords. Learn how to react to and handle a mold call from your tenants.The Author: Chris Smith is a real estate investor, founder of an online reference for investors and real estate professionals and has published articles in Corporate Finance Magazine, Euromoney, and the Business Journal Network. More about Chris Smith.

The Happy Landlord

Top 6 Landlord Guide – Basics for the Real Estate Investor

Posted by: rohanrealty | on January 18, 2013

Source: About.Com | Real Estate Business

Compared to flipping properties, landlording is a long-term commitment with demanding requirements of your time. Before you take the steps toward the job of landlord, examine your capabilities and desires, and make sure that you’re up to it. If you are, it can be a wonderful and profitable experience. <More>

Best Ways to Invest in Real Estate

Posted by: rohanrealty | on January 18, 2013

Wall Street Journal | WEALTH MANAGEMENT JOURNAL | October 29, 2012

A Real-Estate Primer

Direct ownership offers income, but REITs might be better for some
By GREGORY ZUCKERMAN

Q: What’s the best way to invest in real estate today? “Hard” real-estate investments or “soft” shares and ETFs?

A: As housing finally rebounds, investors are searching for the best ways to take advantage. Tim Courtney, chief investment officer at Exencial Wealth Advisors, says an investment portfolio of more than $10 million could benefit by including both “hard” real estate, meaning direct ownership—either full or partial—of commercial, residential or other properties, as well as “soft” real estate, such as shares of real-estate investment trusts or other securities. <More>


Simple Ways To Invest In Real Estate

Posted by: rohanrealty | on January 18, 2013

Source: Investopedia (www.investopedia.com) | October 25 2009

Buying real estate is about more than just finding a place to call home. Investing in real estate has become increasingly popular over the last fifty years and has become a common investment vehicle. Although the real estate market has plenty of opportunities for making big gains, buying and owning real estate is a lot more complicated than investing in stocks and bonds. In this article, we’ll go beyond buying a home and introduce you to real estate as an investment. <More>

Short Sale of Property

Posted by: rohanrealty | on January 18, 2013

What to Expect When You Invest in a Short Sale Property

July 25, 2012 By RealEstateInvesting.com

If you want to invest in short sales, then you need to learn about them first.

Want to invest in a short sale property? You need to learn what to expect before you get involved. Read the following article to learn all about the short sale process and what to expect.

Many potential investors are curious in regards to the short sale process when contemplating real estate investment. Concentrating on short sales and foreclosures is an excellent way to be a champion investor, but the procedure can be baffling to the unpracticed. The most desirable way to manage the beginning bumps is to find a knowledgable guide who can anticipate what to expect and what to do in order to endure the things that can hamper a smooth deal. <More>


Short Sale Rules May Curb Foreclosures

Posted by: rohanrealty | on January 18, 2013

By Marilyn Much
Investor’s Business Daily

After five years of sitting on the sidelines, Augie Byllott is ready to throw his hat in the ring and make some offers on short-sale properties. He’d bought several before the housing bubble burst. “But when the market changes, I stopped”, said Byllott, a managing member of Homeowner Resource, A Champions Gate, Fla., real  estate investment firm that buys mostly foreclosed properties. <More>

 

1031 Exchange Explained

Posted by: rohanrealty | on January 18, 2013

1031 Exchange Explained

By Wilhelm Schnotz
For real estate speculators and families who live in areas with an expensive real estate market, capital gains can pose a significant tax burden, particularly if real estate was held for a long time or through a volatile time in the market. Although it’s impossible to completely avoid capital gains assessments, a 1031 like-kind exchange allows property owners to sell one property and purchase another with the proceeds, and, if handled correctly, shields investors from immediate gains taxes. <More>


1031 Exchange – Information from the IRS

Posted by: rohanrealty | on January 18, 2013

Like-Kind Exchanges – Real Estate Tax Tips

Generally, if you exchange business or investment property solely for business or investment property of a like-kind, no gain or loss is recognized under Internal Revenue Code Section 1031. If, as part of the exchange, you also receive other (not like-kind) property or money, gain is recognized to the extent of the other property and money received, but a loss is not recognized. <More>

 

Video – How does a 1031 Exchange Work? <Watch the Video here>
By: Expert Real Estate Tips – http://www.youtube.com/user/ExpertRealEstateTips

 

Tenants in Common Defined

Posted by: rohanrealty | on January 18, 2013

What Is Tenants in Common?

One way for more than one person to hold property

By Moshe Pollock of Realtor.Com

There are various forms of property ownership. Tenants in common (or tenancy in common) is one of these. While the term “tenants” might imply renting, tenants in common are the owners of the property. There is no maximum number of persons who can be tenants in common, and the tenants do not have to hold equal shares. For example, one tenant in common can own 75 percent of the property and the other tenant can own 25 percent. Such an arrangement frequently reflects the portion of the purchase cost the respective tenants paid. <More>

 

IRS Provides Guidance on Using Tenancy-in-Common Interests in 1031 Exchanges

Posted by: rohanrealty | on January 18, 2013

IRS Provides Guidance on Using Tenancy-in-Common Interests in 1031 Exchanges

by Ronald L. Raitz, CCIM

On March 19, the Internal Revenue Service released Revenue Procedure 2002-22, which addresses the use of real property fractional ownership interests as replacement property in Internal Revenue Code Section 1031 tax-deferred exchanges. Commercial real estate professionals commonly refer to these fractional ownership opportunities as tenancy-in-common interests. <More>