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Hollywood Real Estate Law Blog

Protecting yourself when investing in property

Real estate is a great way for anyone to invest their assets. If you have a good knowledge of the area you are investing in or you have a good relationship with contractors who you believe could renovate a property and increase its value, you'll likely be successful in making profits when flipping or developing real estate.

However, as with any form of investment, there is always an element of risk. This is why it is crucial that any losses you make will not impact your personal finances. Real estate investors who have not mitigated risk in this way could experience real disaster and loss their personal assets.

What alternatives to a 1031 exchange exist?

If you're a real estate investor, then you've probably heard of a 1031 exchange. Its name comes from Section 1031 of the Internal Revenue Service's (IRS) tax code. It describes how investors can delay having to pay capital gains taxes when they sell an investment property. They use the proceeds from the sale to purchase a different like-kind home to add to their portfolio. Many real estate investors find it helpful not to incur taxes immediately when selling an investment home. It allows them to sustain their focus on investing.

Financial analysts generally recommend that real estate investors pursue a 1031 exchange if their home has a higher value today than when they first purchased it.

What does a pool do to a home's value?

When buying or selling a home, you have to make an accurate assessment of the home's value and the demand in the current market. Unfortunately, this is not always as static as it appears. The value may be different to different buyers.

For instance, imagine that someone has a below-ground pool installed at their house. They bought the home for 300,000 and it costs another $30,000 to add the pool. This is Florida, so they assume that a pool is going to increase the home's value by that $30,000. They feel like they have added a great amenity that makes their home more attractive to buyers than similar homes in the area that do not have pools.

If you want to invest in rentals, consider this important tip

As someone looking to invest, it's a good idea for you to learn more about buying your first rental property. Owning an investment property can be a great way to add to your portfolio and income, but it does have its risks.

When you purchase an investment property, you'll likely need to put around 20% down as the initial payment. Then, you will need to assess if you're ready to become a landlord. Not everyone is suited to this job, because it can be demanding work.

Considerations for limited liability companies

Limited liability companies (LLCs) are business entities that can be advantageous for entrepreneurs for a number of reasons. Otherwise known as holding companies, they are a top pick for many who want to create a company, because they protect the founder from personal liability in most cases.

This means that if profits turn into debts, the LLC will suffer financially, but it's unlikely that you will lose assets that you personally own due to this. LLCs are a popular choice for real estate investors because it means that individual investments can be held within a single LLC and that several LLCs can be created for the investor's real estate portfolio. When setting up an LLC for your real estate investment, you should consider the following.

Are there any cons to a 1031 exchange?

If you're planning on selling an investment property any time soon, it's likely that you'll gain a significant amount of profit when you do. If you allow this profit to become a source of income for you, it will mean that you'll be subject to capital gains tax.

Many people want to use the profits that they make from an investment property and use it as leverage to buy a new investment property. If this is your ultimate goal, you'll likely be able to do this and defer the capital gains taxes by going through a 1031 exchange. However, to be successful in this, you'll need to make sure that you follow all the rules and regulations. There's a lot to be gained by going through a 1031 exchange, but it's important that you also understand the potential downsides before committing.

Should you sublease a commercial space?

Commercial property is expensive to rent. It's also quite difficult, at times, to find a space where you need it. If an opportunity to sublease someone else's commercial property becomes available, should you take it?

Maybe. Subleases become available all the time in commercial properties. Sometimes a business goes under but the owner still has a lease to finish. Sometimes a company just has extra space. Others want to relocate to greener pastures but they can't default on their existing rental agreement. Subleases can be a win-win situation because you take over the rent without taking over a lot of other responsibilities.

Reasons to refinance your mortgage

Whether you own only a family home or you have several properties that serve commercial purposes, you likely have one or several mortgages. Mortgages are a great way to finance the purchase of a home because they tend to be flexible and offer reasonable interest rates. In many cases, gaining a mortgage on a home can be a lucrative business choice, because you may be able to earn a steady income when renting the property.

If you are considering refinancing your mortgage, it may be because you are struggling to keep up with repayments or because you want to free up some cash within the home. Refinancing your mortgage is not always the best idea, but the following are some good reasons to consider it.

Avoiding paying taxes after selling property

Investing in real estate and selling it for a profit is a great way to earn an income. Some real estate entrepreneurs solely gain their income through doing this, while others earn an additional income when selling property while holding down full-time jobs.

If you are considering selling a property and you know that you will benefit from capital gains, it is important to bear in mind that the profit you make will be subject to taxation as standard. However, there are strategies and tools that you can use to avoid taxation. Tax avoidance is completely legal when you take advantage of the laws and regulations that apply to you. The following are some of the ways you can avoid paying taxes when selling property.

Can anyone become a real estate entrepreneur?

Real estate development has become closely associated with wealthy entrepreneurs who live the dream lifestyle. For obvious reasons, many people look up to this lifestyle and want to be able to live a life like this. Flipping homes and making huge profits sounds fun, and it's possible to start with a relatively small investment. So what's there to lose?

While real estate development does have huge opportunities for extreme profit and is a great way to build an enjoyable career, it takes skill, experience and hard work. There's always a risk because real estate developers will never be able to control external factors such as market conditions. If you think that you've got what it takes to become a real estate entrepreneur, make sure that you conduct thorough research before starting out. The following are some tips for making money through real estate development.

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