Puget Sound MultiFamily Real Estate Blog

 

 

Jan. 9, 2018

Tax Reform Summary for Commercial Real Estate

On Dec. 22, President Trump signed the Tax Cuts and Jobs Act into law making sweeping changes to the tax code. There is some good news for commercial real estate with 1031 like-kind exchanges for real estate being retained. The Historic Tax Credit for certified historic structures has also been preserved, although the credit must now be taken over a 5-year period.

This summary is intended to highlight those provisions affecting commercial real estate. Please consult a tax professional regarding your individual circumstances.

 

Here are the key provisions of the new tax law impacting commercial real estate:

 

• 1031 Like-Kind Exchanges: Eliminates the use of the exchange for personal property but preserves the exchange for real estate.

• Carried Interest: The new law allows for carried interest to be taxed as capital gains for investments that have been held for three years.

• Corporate Alternative Minimum Tax: The new law repeals the corporate AMT.

• Corporate Rate: The corporate tax rate has been reduced from a top rate of 35 percent to a flat 21 percent rate.

• Depreciation: Cost recovery periods remain the same and do not include the lower recovery periods proposed in earlier versions of the legislation. Nonresidential real property, residential real property, and leasehold improvements retain the 39-year, 27.5 year, and 15-year recovery period, respectively. Separate definitions for qualified leasehold, qualified restaurant, and qualified retail improvement property are replaced with one “Qualified Improvement Property” definition.

• Estate Tax: The exemption on estate taxes has been raised from $5 million to a baseline $10 million, which was doubled from a $5 million exemption set in 2011. Indexed for inflation, this exemption is $11.2 million for 2018. The exemption amount reverts to 2017 levels (indexed for inflation) beginning Jan. 1, 2026.

• Historic Rehabilitation Credit: The 20 percent credit for the rehabilitation of certified historic structures has been retained but must be taken over a 5-year period. The 10 percent credit for non-certified, pre-1936 buildings has been repealed in the new law.

• Low Income Housing Tax Credit: The new law maintains the current low-income housing tax credit of 4 percent or 9 percent (depending on whether tax exempt bonds are used) of the eligible cost of a low-income housing project. The corporate tax rate reduction will reduce the impact of the tax credits and could negatively impact the amount of low-income housing being developed.

• Mortgage Interest Deduction: The cap on the mortgage interest deduction has been reduced to $750,000 from $1 million. Current mortgages up to $1 million are grandfathered into the new law. Through Dec.31, 2025, interest paid on home equity debt is no longer deductible unless the loan proceeds are used to “substantially improve” the home.

• Pass-Through Treatment: The new law allows a deduction for “qualified business income” from a partnership, S corporation, and sole proprietorship at 20 percent (not 23 percent as had been proposed in prior versions of the legislation). The threshold for the 20 percent deduction is at $157,000 for single filers and $315,000 for joint filers with it being phased out for individuals making up to $207,000 and joint filers up to $415,000.

• Qualified Opportunity Zones: This new incentive allows for the designation of opportunity zones in low-income communities and provides tax incentives for investments in these zones, including deferring the recognition of capital gains that are reinvested in the zones. Governors submit nominations to the U.S. Department of the Treasury for the designation of a limited number of opportunity zones.

• Qualified Private Activity Bonds: The new law maintains the deductibility of qualified private activity bonds for affordable housing construction, local transportation and infrastructure projects, and for state and local mortgage bond programs.

• Standard Deduction: The standard deduction is doubled to $12,000 for single filers and $24,000 for joint filers. The deduction is indexed for inflation. This increase in the standard deduction reduces the number of filers who will be able to take advantage of the mortgage interest deduction and property tax deduction.

• State and Local Tax Deduction: Deductions for state and local taxes will now be capped at $10,000, not indexed for inflation, which will mean a higher tax bill for property owners in high-tax states. The new law continues to allow the deduction for state and local property and sales taxes accrued in conducting a trade or business.

Posted in Market News
Nov. 10, 2017

**Just Listed**Fourplex in Tacoma | 3702 E E St.; Tacoma, WA 98404

FOURPLEX: 6% current cap rate; could easily get to 9% with market rents & utility pass-through. Well maintained; same owner for 20+ years. This is a solid, turn-key investment property, fully occupied & producing good cash-flow! 3/4 units have been remodeled with new kitchens/baths. Good roof & newer windows throughout. Onsite laundry provides additional income. Each unit is 2bed/1bath with balcony/patio. High-demand rental close to fwy access & amenities.  For more information on this property, please see our listing

>>CLICK HERE<< to search all multifamily properties for sale in Tacoma. 

Posted in Exclusive Listings
Nov. 3, 2017

**Just Listed**Fourplex in Tacoma | 3205 E D St. Tacoma, WA 98404

4-Plex: 7.4% current cap rate, 9% @ market rents. This is a solid, turn-key property with upside potential. Views of downtown Tacoma and Commencement Bay; newer roof, systems, and interiors. Units are 2bed/1bath with individual washer/dryers; very well-maintained with good tenants in place. Close to downtown, shopping, public transit, & quick access to I-5.  For more information on the property, please see our listing

>>CLICK HERE<< to search all multifamily properties for sale in Tacoma, WA 

Posted in Exclusive Listings
Oct. 26, 2017

Multifamily "Pick of the Week" | Seattle Fourplex

Multifamily Property "pick of the week" for
King, Pierce, and Snohomish Counties

In this current real estate market, competition is strong for the good deals. To help our clients, we go the extra mile. Along with hunting for off-market deals, we dig into the properties that are currently listed on the MLS to find those deals that may have been overlooked because of miscalculated numbers, poor photos, below market rents, or just improperly listed.  

Keep in mind, my calculations and assumptions are based on market averages and sometimes just educated guesses. If you are interested in any of these properties, let's put in a contingent offer to get it off the market and conduct due diligence. 

Below you will find this week's "pick".

13731 32nd Ave NE, Seattle 98125 | 4-Units, Priced at $895,000
CLICK HERE to view listing on our website

The listing shows the current cap rate at 2.8%...
  • Rents are listed between $800-$900 per unit
  • Annual property tax is known to be $6,166
  • Insurance is about $900/year
  • Utilities are around $5,100/year - Owner pays all utilities
  • Maintenance, etc around $3,000/year
  • Vacancy rates in the area are averaging around 3% right now

As-Is

  • Gross Annual Rent: $41,880
  • -3% Vacancy
  • -Annual Expense: $15,512
  • =Net Operating Income: $25,112

Value Add:

  • Median rent for 1 bedroom in the area is $1300
  • Median rent for 2 bedrooms in the area is $1600
  • Utility Chargeback $100/unit
  • Gross Annual Rent: $74,400
  • -3% Vacancy
  • -Annual Expense: $15,720
  • =Net Operating Income: $56,448

At $895,000 this would be a cap rate of 6.3%

View our analysis sheet for property as-is.

View our analysis sheet for property at market rents. 

Oct. 12, 2017

Multifamily "Pick of the Week" | Federal Way 8 Units

Multifamily Property "pick of the week" for
King, Pierce, and Snohomish Counties

In this current real estate market, competition is strong for the good deals. To help our clients, we go the extra mile. Along with hunting for off-market deals, we dig into the properties that are currently listed on the MLS to find those deals that may have been overlooked because of miscalculated numbers, poor photos, below market rents, or just improperly listed. 
 
Keep in mind, my calculations and assumptions are based on market averages and sometimes just educated guesses. If you are interested in any of these properties, let's put in a contingent offer to get it off the market and conduct due diligence. 

Below you will find this week's "pick".

 

1757 S 305th Place, Federal Way | 8-Units, Priced at $795,000
CLICK HERE to view listing on our website

 

Listing shows the current cap rate at 2.5%...

  • Rents are listed as $600 per unit

  • Annual property tax is known to be $9,242

  • Insurance is probably about $1,000/year

  • Utilities are probably around $8,000/year

  • Maintenance, etc around $3,000/year

  • Vacancy rates in the area are averaging around 3% right now

As-Is

  • Gross Annual Rent: $57,600

  • -3% Vacancy

  • -Annual Expense: $19,373

  • =Net Operating Income: $36,135

At $795,000 this would actually be a cap rate of 4.5%

 

Pro Forma:

The median rent for one bedroom units in the area is $1,125. Increasing the rents to $1,000:

  • Gross Annual Rent: $96,000

  • -3% Vacancy

  • -Annual Expense: $19,373

  • =Net Operating Income: $73,747

At $795,000 this would be a cap rate of 9.3%

  • Working in a utility charge-back could bring this even higher. 

 

View our analysis sheet for property as-is.

View our analysis sheet for property at market rents. 

Sept. 15, 2017

Multifamily Real Estate Market Report Q1-Q3 Puget Sound Region

Our Market | King County
 
 
286
2017 YTD Number of Sales.

 
$261,132 
2017 YTD Avg. Sales Price per Unit. 

 
$291
2017 YTD Avg. Sales Price per Square Foot.

 
32 
2017 YTD Avg. Days on Market.


4.2%
Average (Actual) Cap. Rate 



$1,330
Average Rent per Unit

___________________________________________________



Our Market | Pierce County

 
280
2017 YTD Number of Sales.

 
$112,132 
2017 YTD Avg. Sales Price per Unit. 

 
$132 
2017 YTD Avg. Sales Price per Square Foot.

 
36
2017 YTD Avg. Days on Market.


5.7%
Average (Actual) Cap. Rate


$880
Average Rent per Unit



 
Posted in Market News
Sept. 14, 2017

**Just Listed**Fourplex in Marysville | 95 Quinn Ave; Marysville, WA 98270

4-Plex: 6.7% Current Cap Rate / 7% @ Market. Excellent Cash-flow. Townhome-style units consisting of (2) 3bed/1.5 bath & (2) 3bed/1.75 bath, all with vaulted ceilings, skylights, fireplaces, individual washer/dryers & private fenced yards. 4800 SqFt building sits on a .25-acre lot. Interiors have all been updated; newer (2 years) roof and systems, very well-maintained property with excellent tenants in place. This is a solid, turn-key investment opportunity!  For more information on this property, please see our listing.      

>>CLICK HERE<< to search all multifamily properties for sale in Marysville, WA

Posted in Exclusive Listings
July 14, 2017

**Just Listed**8 Condos Sold Together | 1913-1921 N Oakes St.; Tacoma, WA

8 Individual condos offered for sale together by HOA (separate parcel #s). Market rents=$1250+ each/6% Cap Rate. All units are remodeled 864 SF, 2bed/1bath w/ washer/dryer, fireplace, private deck/patios overlooking a wooded greenbelt & individual covered parking. Located in the vibrant & desirable North Tacoma neighborhood w/ easy access to 6th Ave district, Ruston, Old Town waterfront, downtown renaissance & close to UPS & UW Tacoma. This solid investment property presents a rare opportunity!  For more information on this property please visit our listing.  

>>CLICK HERE<< TO SEARCH ALL MULTIFAMILY PROPERTIES FOR SALE IN TACOMA, WA.

Posted in Exclusive Listings
July 7, 2017

**Just Listed** Fourplex in Tacoma | 1122 Lafayette St S Unit 1-4, Tacoma, WA 98444

4-Plex: 8% current cap rate, 9.5% at market rents. Meticulously maintained by current owner for 20 years; fully-occupied with quality tenants; plenty of upside in rents. Fresh exterior paint, newer roof, water heaters, coin-op washer/dryer (brings add’l income), crawlspace barrier, windows & water line. All units 1bed/1bath; common laundry room includes unit storage spaces. Walking distance to PLU. Solid, turn-key investment property; you won't find a cleaner 4-plex on the market for this price!  For more information on this property, please see our listing.    

>>CLICK HERE<< to search all multifamily properties for sale in Tacoma, WA

Posted in Exclusive Listings
June 29, 2017

SOLD! (off-market sale) - 9 Unit Multifamily in Burien

Just Sold! (off market) | 9-Unit Multifamily in Burien, WA

Broker:  Charles Burnett | Sales Price:  $1,100,000 | Sale Date: 6.29.17

Burien 9-Unit

 

>>CLICK HERE<< to search all multifamily properties for sale in King County.  

 

Posted in Exclusive Listings