TaxAuthor: Staff

California offers a vast array of opportunities for real estate investors from around the world. In the San Diego area, for example, investors can participate in new residential and commercial developments, purchase distressed properties with the goal of rehabilitating and selling them, or acquire properties for rental, among many other options.

Investors from outside the United States who are considering properties or ventures in California need to be aware of certain legal requirements they must meet, including federal tax laws that specifically address foreign investors. The Foreign Investment in Real Property Tax Act of 1980 (FIRPTA) requires withholding of income tax on sales and other dispositions of property with foreign owners. This includes both individual owners who reside outside the U.S. and foreign corporations. While foreign owners are liable for payment of tax under FIRPTA, the immediate obligation to withhold belongs to the buyer.

vacation homesAuthor: Staff

Real Estate News is a new feature at Titles & Deeds. We will periodically address new developments in the real estate world that matter to real estate investors. 

For the past few years, vacation rental properties have been a controversial topic in San Diego. Real estate investors often find vacation rentals to be a lucrative source of income in many San Diego neighborhoods, and companies like Airbnb  and HomeAway offer an efficient way to match property owners with renters. Neighbors of vacation rentals, on the other hand, often complain that allowing short-term rentals of residential properties harms neighborhoods in various ways, such as by increasing noise and traffic. After a rather confusing series of events, the San Diego City Council has scheduled a hearing on a proposed set of regulations affecting short-term vacation rental properties as a form of San Diego real estate.

Reflecting PondAuthor: Staff

Successfully investing in real estate—with “success” covering a wide range of outcomes that generally all involve financial returns—requires careful research and planning. The old adage that the three most important considerations in real estate are “location, location, location” certainly holds true for San Diego real estate investing. Familiarity with the area in which one intends to invest is essential, along with knowledge of current market conditions and trends in both the area and the broader region. As of late 2017, the San Diego residential real estate market appears to offer many potential opportunities for investors, but as with any venture, it also presents risks. A few factors for prospective investors to consider are how the area compares to similar locations in other cities, property values and prices, trends in new construction, and the potential for rental income.

A “Hot” Real Estate Market

upside-down house
Author: Staff

House flipping has been a popular form of real estate investment for several years, even inspiring several television programs. Unlike many types of real estate investments, house flipping is a very “hands on” process, often requiring a significant investment of time in addition to money. This includes not only repairs and remodeling, but also extensive research into the neighborhood and surrounding area. Once a prospective house flipper has done their homework, it can be a lucrative type of investment. San Diego real estate investors should consider both the potential risks and the possible rewards of house flipping.

What Is House Flipping?

computer deskAuthor: Staff

Real estate investment in California takes many forms. An investor may, for example, simply purchase shares in a real estate investment trust (REIT), or they may contribute to a real estate syndicate. In those cases, the investor entrusts their money to others and does not get directly involved in the development or operation of the real property. Other investors might like to be more involved in the day-to-day workings of a development project. Either way, California real estate investors should have some familiarity with commercial real estate finance. The following is a very general overview, which assumes that the development project involves building a commercial shopping center on unimproved land.

Short-Term and Long-Term Loans

Real estate development typically begins with the construction of improvements and ends with a completed, fully leased facility. This lengthy process might require multiple stages of financing. Commercial loans can be broadly categorized as short- or long-term.

Short-term loans provide capital needed for the construction of the facility, as well as operating costs during the “lease-up” phase. This type of loan might have a comparatively high interest rate and might include a balloon payment. Short-term loans include construction loans, which finance the actual construction costs, and any bridge loans that might be needed during the construction and lease-up phases.
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Mortgage on CalculatorAuthor: Staff

Congress enacted the Dodd–Frank Wall Street Reform and Consumer Protection Act, commonly known as “Dodd-Frank,” in 2010 in response to the financial crisis of 2007 and 2008. Among the purposes described in the bill’s full title, Congress intended the law “to protect consumers from abusive financial services practices.” This includes provisions affecting the residential mortgage business. Dodd-Frank has led to numerous changes in how banks handle mortgage loans. It has also affected the hard-money lending market in ways that are likely to affect California real estate investments.

Hard-Money Lending

“Hard-money loans” are a means of financing a real estate purchase or development without many of the procedural hurdles associated with bank loans. Private businesses and investors offer hard-money loans on a shorter time frame, but with higher interest rates and other expenses. Unlike banks, which focus on a borrower’s ability to repay a loan, hard-money lenders usually look at the value of the collateral when deciding to make a loan. Dodd-Frank has created new obligations for hard-money lenders who loan money for residential properties in some circumstances. It has also potentially made this type of loan more appealing for commercial real estate.

Dodd-Frank

Title XIV of Dodd-Frank is entitled the Mortgage Reform and Anti-Predatory Lending Act (MRAPLA). It amends multiple existing statutes that regulate residential mortgage lenders, including the Truth in Lending Act (TILA), the Real Estate Settlement Procedures Act (RESPA), and the Home Ownership and Equity Protection Act (HOEPA).
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moneyAuthor: Staff

Real estate investing can be a lucrative source of income, but as the saying goes, one must spend money to make money. Obtaining a loan through a bank has many advantages, but the process can be slow, and a bank’s conditions for approving a loan can be steep. Investors who need a loan in a shorter time frame, or who are not eligible for a bank loan, might consider hard money lending. Hard money loans come from private companies or investors rather than banks. These loans could be advantageous for some California real estate investors, but they also carry certain disadvantages and risks.

What Is Hard Money Lending?

Disability symbolsAuthor: Staff

State law in California requires property owners to make certain disclosures as part of any lease agreement for that property. When a lease involves commercial property, lessors must disclose certain matters related to accessibility for people with disabilities and their compliance with accessibility laws. The Americans with Disabilities Act (ADA) of 1990 is perhaps the most well-known statute addressing this issue. Businesses that serve the public are required to meet various requirements under the ADA. To encourage ADA compliance, California created the Voluntary Certified Access Specialist (CASp) program. Commercial lessors must disclose to lessees whether a CASp has inspected the leased premises, along with the extent of improvements to the property resulting from an inspection. California real estate investors involved in leasing commercial property need to know about both their duty under accessibility laws and their disclosure obligations.

Accessibility Law

Black’s BeachAuthor: Staff

A typical lease agreement involves a landlord (lessor) that allows a tenant (lessee) to use real property owned by the landlord, in exchange for the payment of rent. The landlord owns the real property and all of the improvements, while the tenant owns any personal property they bring with them. This works for short-term periods, during which the landlord does not plan to make any major improvements to the property.

Another type of lease, known as a “ground lease,” allows landlords and tenants to enter into long-term agreements involving the development of real property. California real estate investors can be involved in ground leases as landlords, such as if they want to extract value from a large parcel of land; or as tenants, such as if they want to develop a property for commercial purposes.

coffee adAuthor: Staff

Real estate investment in California, as a matter of course, involves buying and selling real property. An investor may decide to sell a piece of real property as part of an investment plan, such as after purchasing a distressed residential property and rehabilitating it. A sale may also be a result of conditions that require an investor to get out of a bad investment.

Regardless of the reason for putting a property on the market, California law requires numerous disclosures about the property. Many of these disclosures required by law are ultimately the responsibility of the seller, whether or not they are assisted by a real estate broker. Real estate investors in California should be aware of these disclosures and their legal obligations.