Tax Consequences When Flipping Pre Construction Properties

Today a lot of people are buying pre-construction properties and flipping them. A question I get asked many many times are the tax consequences involved when you do this. In an article by Ilyce Glink for Inman Real Estate News the question was answered the following way. The question uses an example of an initial $10,000 payment and an additional deposit of 15 percent due in August.

If you make a profit by selling something that you own, you have a taxable gain. Just what kind of gain hinges on the question of what it is that you bought and when you are considered to have made the purchase under tax law.

If the initial $10,000 payment buys you a transferable contract or an option to buy the property, then your holding period begins with that payment. If you do not have a transferable contract or option until you make the 15 percent down payment in August, then your holding period begins with that payment. If you do not have a transferable option to buy until some time after August, then your holding period will begin at the point that you have a transferable option to buy.

In any case, if you sell your transferable contract or option to buy less than 12 months after you obtained it, any gain will be a short-term capital gain, taxable at your top ordinary income rate. If you sell your transferable contract or option to buy more than 12 months after it was signed, any gain may be considered a long-term capital gain taxable at the 15 percent capital gains tax rate.

Of course, if your contract or option to buy is not transferable prior to completion of construction, then your holding period does not start until you close on the purchase of either condo.

For more information, you might want to check out IRS Reg §1.1234-1, "Options to Buy or Sell," which is available for free at www.irs.gov. As the regulation explains, capital gains tax rates apply to capital assets, and real estate is considered a capital asset.

However an option to purchase real estate might or might not be considered a capital asset. Much will depend on the terms of the document you have signed and the rights it does and does not give you. What many pre-construction buyers don't realize is that often, developers will write contracts that prohibit you from assigning your rights under the contract.

The characterization of your right to buy is going to be the determining factor in finding out whether long-term gains are achieved when you signed the contract or whether you have to wait until you close on the purchase of the units.

As always, each taxpayer's position is unique and any advice offered here is by necessity, general and educational in nature. You should consult a tax professional for advice specifically tailored to this particular situation.

Amit Bhuta
Real Estate Helper
Kendall Village Homes
(305) 439-3031
www.DadeCountyMLS.com

Monthly Real Estate Report - February 2006

After speaking to many of you, I was told that the information provided in my new Monthly Real Estate Report is the type of information that you were interested in receiving monthly. I hope you enjoy the report and please feel free to post comments. To view an easier to read enlarged picture of the reports below, please click on the image and then click on the maximize symbol on the lower right side of the image.

Amit Bhuta
Real Estate Helper
Kendall Village Homes
(305) 439-3031
www.DadeCountyMLS.com

Buying a Home in South Florida

Buying a home in South Florida is what more and more people are doing each year. Shaquille O'Neal, Jennifer Lopez, Oprah Winfrey, Beyonce, and Matt Damon are just a few of the celebrities that have chosen South Florida as their home. You don't have to be a celebrity or extremely wealthy to be able to afford a home here, even though it is getting tougher and tougher each year. Besides affordability, there are many things that most people consider when they are moving to an area that they are not that familiar with - schools, local demographics and neighborhood info, weather, property values, community information, etc. The hard thing is to find all this information as well as all the other real estate related information (property search, daily updated mortgage interest rates, estimated property taxes, mortgage calculators, open permit search, etc.) in one place. After years of research, there is one web site that does all that and more. The web site, www.DadeCountyMLS.com, is very user friendly and lists the numerous resources it has on its home page. Just click on the "select page" section on the front page and you will be armed with all the information to make your dream of buying an affordable home in South Florida a reality.

Amit Bhuta
Real Estate Helper
Kendall Village Homes
(305) 439-3031
www.DadeCountyMLS.com

Real Estate Market Report (4th Quarter 2005 Miami Dade County)

Every quarter I prepare a real estate market report for Miami Dade County. The report compares a three month period of this year compared to the same time period for last quarter. I hope it gives you a better understanding of the real estate market in Miami.

Please click on the above image and maximize it (towards the bottom right of the image) when it opens so that it is easier to read.

Please click on the above image and maximize it (towards the bottom right of the image) when it opens so that it is easier to read.
Please click on the above image and maximize it (towards the bottom right of the image) when it opens so that it is easier to read.

Please click on the above image and maximize it (towards the bottom right of the image) when it opens so that it is easier to read.

Amit Bhuta
Real Estate Helper
Kendall Village Homes
(305) 439-3031
www.DadeCountyMLS.com

Happy New Year!

May health, happiness, and good times greet you each day of the new year.

Amit Bhuta
Real Estate Helper
Kendall Village Homes
(305) 439-3031
www.DadeCountyMLS.com

Seasons Greetings

Seasons greetings to all of you! I wish all of you the very best. Have a safe and happy New Year, and good luck to all of you and your loved ones for the coming year.

Amit Bhuta
Real Estate Helper
Kendall Village Homes
(305) 439-3031
www.DadeCountyMLS.com

About Kendall Village Homes

If you are not familiar with the Kendall Village Homes community, the following was taken from an article in the Pinecrest Tribune.

Conceived as a pedestrian-friendly community, Kendall Village Homes is ideally located at the Kendall Drive exit off the Florida Turnpike and within walking distance from the Bahama Breeze restaurant, Regal Cinema 16, and great shopping such as Old Navy, The Gap, Best Buy, Sound Advice, Barnes and Noble, and Bed Bath and Beyond.

And LA Fitness, the largest, most advanced workout facility in all of South Dade, is practically right outside your door. Some of the area's best hospitals and schools are also right nearby. Kendall Village Homes is definitely a one-of-a-kind community, where residents can take casual strolls and bike rides in a distinctive walled-in environment, or choose to walk to nearby shopping without any of the hassle. An oasis of serenity right in the heart of Kendall.

"The moment you drive through its elegantly landscape gated entrance, you know you have entered a masterfully designed, walled-in residential community of 87 townhome residences offering a unique level of sophistication, privacy and affordability rarely found in any other residential community," said Kendall Village Homes' developer, Mr. Jim Perez. "We have gone to great length to develop the type of residential community that offers today's home buyers with excellent overall design and livability, quality construction and an enviable location," added Mr. Perez.

Kendall Village Homes offers some of the most spacious 3 and 4 bedroom, two-story townhomes in the market today. All with plenty of quality features like a single-car garage, dramatic high ceilings and interior arches, fully-equipped, all electric designer kitchen, high-efficiency air conditioning and heating distribution system, security alarm, smoke detectors, ceramic tile floors in living areas and bathrooms, Roman bath tub in master bath, Old Chicago style brick pavers, Mediterranean style barrel tile roof, decorator selected exterior lighting fixtures, dramatic covered entryways, a swimming pool and cabana clubhouse for the enjoyment of all residents and much more.

There are four distinctive floor plans to choose from, all designed to provide the home owner with long lasting value. If you or someone you know is interested in moving to the Kendall Village Homes community, please contact me and I will let you know what is available for sale.

Amit Bhuta
Real Estate Helper
Kendall Village Homes
(305) 439-3031
www.DadeCountyMLS.com

Condo Conversion Opportunity

Interested in a condo conversion opportunity? Go to www.ColdwellBankerVirtualTour.com and www.VillageAtDadeland.com for more information.

Amit Bhuta
Real Estate Helper
Kendall Village Homes
(305) 439-3031
www.DadeCountyMLS.com

Pre-Construction Opportunity

The Professional Arts Center at Kendall Village is an incredible chance to purchase medical or other office space. The Professional Arts Center is located in Kendall Village at the crossroads of the Florida Turnpike and North Kendall Drive. 90,000 square feet of luxury office condominium space subdivided to suit your needs.

Owners of the "smart building" suites will be surrounded by a unique retail/entertainment environment. Numerous restaurants, retail shops, and entertainment facilities, including the recently opened state-of-the-art Kendall Village Regal Stadium 16-plex Theater, are all within walking distance.

The Professional Arts Center will offer its owners dramatic visibility from, and instant access to, the Florida Turnpike. Given its proximity and easy access to some of Miami's finest hospitals, including Baptist Hospital, South Miami Hospital, and Kendall Regional Hospital, The Professional Arts Center is expected to attract medical industry users.

For more information, please contact me at the number listed below.

Amit Bhuta
Real Estate Helper
Kendall Village Homes
(305) 439-3031
www.DadeCountyMLS.com

Jumbo Loan Amount Increases

According to a November 30th Sun-Sentinel article, Fannie Mae and Freddie Mac are raising the limit on the size of single-family home mortgages they will purchase by 16% to $417,000, increasing the pool of buyers who will qualify for lower cost financing. Starting January first, the loan limit will be raised from $359,650 to the $417,000 amount. If a loan amount is above this figure, it is referred to as a jumbo loan. The interest rate on a jumbo loan is typically one-quarter percent higher than a conforming loan (amount that is less than a jumbo loan). Because of the increase in the jumbo loan amount, some borrowers may be able to save thousands of dollars over the life of a loan.

Amit Bhuta
Real Estate Helper
Kendall Village Homes
(305) 439-3031
www.DadeCountyMLS.com

A Time to Give Thanks

The holiday season is upon us and I would like to take a little time to give thanks to all of you. In my daily sometimes hectic life, I don't always get a chance to thank everyone that has made my life so much better. To all my family, friends, and people I do business with, thank you so much for everything. I really do appreciate everything you guys do. Have a safe and happy Thanksgiving!

Always wishing you the best,
Amit

Amit Bhuta
Real Estate Helper
Kendall Village Homes
(305) 439-3031
www.DadeCountyMLS.com

Why Choose Amit Bhuta to Sell Your Home

Why should you choose Amit Bhuta of Coldwell Banker Residential Real Estate to sell your home? There are many reasons to do so. In our market, properties that are for sale are normally on the market for approximately 60 days before a contract is accepted. When clients list their property with Mr Bhuta, the approximate time it is on the market before the sellers accept a contract is about 31 days (nearly half the average time). Besides selling the property in half the time, Mr Bhuta is able to get more money. In our area, the percentage of the selling price to the list price that a seller receives is about 96%. Amit Bhuta normally gets 98% or more. He fights to get you as much money as possible. He never will act like many other Realtors that act as if they are working for the buyer and not the seller.

Knowledge of the real estate process is important to understand in determining how qualified your Realtor is. Marketing and getting the home ready for sale, negotiating offers, and managing the transaction until closing are the 3 steps when selling a home. Some homeowners, while trying to cut costs, can potentially lose thousands of dollars or even worse increase the chances of being suited if they choose the wrong person.

When you list your property with Amit, he will make you comfortable throughout the whole process. The first thing he will do is help you get your home ready for sale. Besides giving you his ideas, he will also give you a DVD with ideas from top experts in the field.

The next thing is the marketing of your home. He does many unique things as well as the traditional things to market your property. For example, every buyer that comes to your open house will receive a DVD slideshow of your home with music. The potential buyer will also be able to print or email high quality pictures of your home (from the DVD) to other decision makers, family, or friends. Amit knows that when buyers are comparing homes, they tend to forget what they saw. Having the pictures and DVD will make your home stand out in the eyes of the buyer. Just a few of the other things he does for you are putting your home on approximately 25 websites with up to 50 photos, have a virtual tour (see an example at www.ColdwellBankerVirtualTour.com), floor plan of your home, high quality property flyers, open houses, aggressive marketing to buyers and approximately 6000 realtors, and many other things.

Negotiating is the next step in the real estate process. Here is where many sellers will lose thousands of dollars because they tried to save money and didn’t hire a real estate professional. Many people have the misconception that the price is pretty much the only important thing that is negotiated in a real estate contract. This is definitely not the case. Amit has gone through extensive training with everything involved with real estate contracts as well as all the other processes until closing takes place. Because of this insight, he is able to get more for your home by negotiating everything, not just price. Also, prior to his real estate career, he was paid to close deals for over six years.

Managing the transaction from when it is first accepted until the closing is the last step in the real estate process. Just like the negotiating step, a seller can loose thousands and thousands of dollars or not even close if he or she tries to save money and doesn’t hire a real estate professional. There are many different things that need to be done once the offer is accepted. They have to be done in a very timely manner and there is no margin for error. Amit Bhuta will attend all important events and will create a calendar of the events for you so that both of you are on the same page. He will keep you as informed as often as you like and can be reached twenty-four hours a day. He will pick up his phone or will respond to your email.

These are just a few reasons why you should select Amit Bhuta as your Realtor. He will always look at what he can do for you and what’s in it for you rather than brag about what he has done. If you ever need to contact past clients, he will be happy to provide you their names and phone numbers. His performance based compensation is negotiable and you can choose from many plans he offers.

Real Estate Helper
Kendall Village Homes
(305) 439-3031
www.DadeCountyMLS.com

Should I Sell My Home Without a Realtor?

Why should people choose a Realtor to sell their property in today's hot real estate market? Many people feel that all they have to do is to put a FOR SALE sign in front of their house and within a few days they will get what they are asking for it. Although in some cases this may happen, it is definitely not the best thing to do.

In a very comprehensive study done in 2004 by NAR, it was determined that on average a home that was sold without the assistance of a Realtor was sold for 13% less than a property that was sold in the same neighborhood with the use of a Realtor. There are many reasons for this. The first reason is that the average home sellers aren't as familiar with their real estate market as a top quality Realtor. Therefore, many times properties will be priced incorrectly - either way too high or too low. If a property is priced too low it is obvious what will happen. It will sell very fast and the seller will lose thousands of dollars. If a property is priced too high, it will soon become stale. The wrong buyers will be looking at it and the right buyers will be looking at something else. When most people look at homes, they are comparing each home to the other. If something is overpriced, the value won't be there making the other house seem like a very good deal.

Another reason is that when buyers sees that a house is FOR SALE BY OWNER, they know that no commission is being paid. The buyers will expect to save that much and more and deduct that amount from their offer for the home. So there really are no savings.

Negotiation is another reason a Realtor should be involved. Most sellers aren't familiar with negotiating a real estate contract. Not having knowledge with this could cause the seller to lose thousands of dollars. Also, whenever a seller shows a property, there is the possibility that he or she could accidentally divulge the level of motivation. This would definitley decrease the seller's leverage he has when negotiating.

Probably the most important reason homeowners should use a Realtor to sell their property, besides getting more money, is because of liability. Because the majority of sellers do not know what they have to disclose and what they cannot disclose to buyers, there is a big chance of a law suit, especially in litigious South Florida.

Amit Bhuta
Real Estate Helper
Kendall Village Homes
(305) 794-9034
www.DadeCountyMLS.com

How to Stop Getting Credit Card Offers in the Mail

Do you constantly get pre-approved credit card offers in the mail? With today's epidemic of identity theft, receiving these offers in the mail can be very risky. If someone was to steal your mail and apply for one of these offers, there is a strong chance you would become a victim of identity theft. So what do you do? How do you protect yourself? Luckily there is a very simple solution that will definitely decrease your chances of becoming another victim.

The web site www.OptOutPrescreen.com is the official Consumer Credit Reporting Industry web site to accept and process requests from consumers to Opt-In or Opt-Out of firm offers of credit or insurance. The web site was the web site of the day for The Kim Komando Show (a top ten rated radio talk show with over 8 million viewers a week, www.komando.com). Komando states that you can opt-out at all the major credit reporting agencies. A word of warning: To opt-out, you must submit your social security number. So don't use a shared computer to submit the form. If you are still leery, use the toll-free number.

Amit Bhuta
Real Estate Helper
Kendall Village Homes
(305) 439-3031
www.DadeCountyMLS.com

Top 10 States with Million Dollar Homes

The following is a list of the states with the most homes worth a million dollars or more according to the US Census.

1. California -128,619 Million Dollar Homes
2. New York - 22,327 Million Dollar Homes
3. Florida - 18,094 Million Dollar Homes
4. Connecticut - 13,906 Million Dollar Homes
5. Illinois - 12,386 Million Dollar Homes
6. New Jersey - 11,869 Million Dollar Homes
7. Texas - 10,137 Million Dollar Homes
8. Massachusetts - 10,090 Million Dollar Homes
9. Washington - 7,384 Million Dollar Homes
10. Michigan - 5,989 Million Dollar Homes

The bottom two states with the least amount of homes worth a million dollars or more are South Dakota and North Dakota with 129 and 51 homes respectively.

Amit Bhuta
Real Estate Helper
Kendall Village Homes
(305) 439-3031
www.DadeCountyMLS.com