Real Estate Blog

Before you buy property overseas you need to know what you're doing. Here are seven fundamental guidelines for investing successfully in overseas real estate, each critically important, especially in emerging and undervalued markets.

I got this information from my longtime friend and former colleague, Kathie Peddicord. Kathie is an experienced offshore real estate consultant and author of “How to Retire Overseas.”

1. Beware of net commissions. In many countries, real estate agents (not the property owners) set the sale price. The seller specifies what amount he wants to make but tells his agent: “Sell the place for whatever you want." The agent may try to sell for 50% or even 100% more.

In foreign markets these deals are particularly dangerous for buyers, because there's no U.S.-style Multiple Listing Service. So, there's no way to compare selling prices of similar properties. The easiest way to avoid this practice is to negotiate directly with the property owner.

2. Title insurance is available for offshore real estate. Buyers will always be told by the seller and his attorney that the title is good … that there is no need to worry … that they'll do all the paperwork to register the property in your name.

Never, ever rely on verbal promises, especially since almost anywhere you can buy a title insurance policy almost identical to what you'd find in the U.S. Raising the question of title insurance early in the discussions will head off future problems. If the seller has something to hide and becomes confrontational, you should look elsewhere.

3. Always buy fully titled real estate, not “rights of possession.” Rights of possession are found in some countries like Panama. This means you get only possession of a property with the possibility that the full title may be obtained after a length of time (normally about 15 years). But such rights are subject to legal challenge by the titled owners of the land.

The owner of the land trying to sell his rights of possession and his agent may not tell you that the land is not titled. If you ask, they may tell you "rights of possession are just like title." That's untrue. Walk away from any property being sold merely as rights of possession.

4. Beware of laws that restrict foreign ownership. When buying foreign real estate, you must know the local rules governing foreign ownership of the specific land in which you interested.

In some countries, foreign buyers must purchase through a corporation. In others, foreigners are not allowed to buy oceanfront or coastal property or in other designated areas. Calculate the expense of dealing with such restrictive rules to decide if you are getting a good deal.

5. Offshore real estate markets can be difficult to navigate. In many countries there are no multiple listings, no sales histories, and often no real estate agents. For foreign buyers, the asking price may be higher than for a local because the seller assumes you don't know the market and that you have more money to spend.

To avoid this, start with local realtors and get an idea of the general market. Visit areas of interest. Look for "For Sale" signs. Stop in local bars and talk with whoever you can. It helps if you have a reliable local contact to act as your front person to be sure you're quoted true local market prices.

6. Learn the options of offshore financing. In Western Europe, Panama and Mexico, loans should be available through a local bank, especially if you're a resident of the country. Although European rates are low, you can't get the high loan-to-value loans that U.S. banks used to give before the crash. Also, don't expect a 30-year mortgage; 20 years is more typical. In less-developed countries, your options may be limited to developers who offer direct financing with terms that are generally are not appealing.

You might arrange a loan in the U.S. using U.S. collateral (a second mortgage). Some offshore private banks will lend money against the value of your investment portfolio held with them in your choice of currencies, but watch the currency exchange risk.

7. Market price, not asking price, must be your guide. For real estate in developing markets, the asking price is just a starting point; there are no multiple listings or comparative sales lists. Sellers price property based on what they'd like to make, momentary cash needs or how neighboring properties have sold, regardless of how those properties compare with their own.

Bottom line: Offer only what you believe the property really is worth, even if it’s only half the asking price. What it is really worth, the market value, is determined by the prices at which similar properties have recently sold.

Don’t Forget about Reporting

Until now, U.S. law has not required that direct ownership of real property in a foreign country be reported per se to the IRS. At the moment, a U.S. person can own an offshore vacation or retirement home with considerable privacy.

However, U.S. persons are required to report income from real estate holdings, wherever they are located, so this privacy does not apply to rental real estate.

But non-reporting of foreign real estate may be about to change.

The so-called 2010 HIRE Act contained the “Foreign Financial Assets Report” (FATCA) that requires that U.S. persons file a new (as yet unissued) IRS form with their income tax return to disclose any foreign “financial assets” with a combined value exceeding $50,000.

It appears that personally owned offshore assets, such as real estate or business assets that are not owned by a legal entity, might be excluded from this new report. But the law gives the IRS broad discretion to write the reporting rules so until those rules are issued the question remains open.
I’m watching this closely and will let you know if something changes or if we get any additional information.

Start looking for your offshore haven, and take your time to find the right realtor, lender and, most importantly, the right home where you’ll spend not just your retirement money, but perhaps your retirement itself. International living is easy if you know the ropes.

That’s the way it looks from here,

Bob Bauman
Legal Counsel and Senior Editor, The Sovereign Society

Realtor Association of Greater Miami and the Beaches, Realtor Association of Miami-Dade division ending as twin entities merge

By Yudislaidy Fernandez
   Florida's two largest realtor associations are merging into the Miami Association of Realtors and will emerge as the third-largest realty association in the nation.
   The competing Realtor Association of Greater Miami and the Beaches and the Realtor Association of Miami-Dade County become one Aug. 1, when the merger is made official for a combined almost 22,000 members.
   In the new association, Teresa King Kinney, who heads the Realtor Association of Greater Miami and the Beaches, is taking the chief executive officer role. Martha Bullman, who's led the Realtor Association of Miami-Dade County for 18 years, said she's stepping down and won't be part of the new leadership.
   The historic merger came together in about a month, developing from discussions on how together the groups could provide more services, tools and resources and create a stronger voice, leaders said. The first merger meeting was June 24.
   "At that one meeting, we reached agreements on every major decision that needed to be made to go forward with the merger," Ms. King Kinney said. The associations' leaders "voted unanimously to go forward."
   A shorter name was picked to focus on the Miami brand.
   "That's the brand that recognizes our entire marketplace," she said, adding that's how international buyers recognize this market.
   The Keyes Co.'s Victor Ulloa, Miami-Dade association president, said members favored the merger because they know, especially in these challenging times in real estate, that "there is strength in numbers."
   The 21,726-member Miami association will push past Chicago, which has 12,460, as third largest US realtor association. The newly-formed group is just 264 members short of becoming second largest by passing the Long Island Board of Realtors, with 21,990, Ms. King Kinney noted. Houston tops the list at 22,780.
   Once the merger is final, members become part of the Miami association and then will pay a single annual fee, which she said won't increase.
   The two associations failed in merger talks in 1998 after nine months at the negotiation table, Ms. King Kinney said, but now the timing is right.
   "We have gotten so intermingled in the past two to three years, it's gotten to the point where they are us and we are them," she said.
   "It was the right timing and the right leadership," added Jack Levine, the Miami-Dade realtor association's treasurer, who'll chair the new association.
   With the merger, Ms. King Kinney said there'll be little staff duplication because each has different divisions and programs, plus double the membership equals more staff needed.
   Together, the group is to have locations in five cities: Miami Springs, North Miami Beach, Coral Gables, North Miami and Plantation.
   Coldwell Banker's Terri Bersach, current chair of RAMB's board, said the union will add value and benefit all members.
   "Combining tools and resources to do business, considering what our industry has gone through, will be able to empower members," she said. "All we've heard is positive comments from all the members, and everyone seems excited about it."

http://www.miamitodaynews.com/news/100715/story1.shtml

2010 ICSC MARKED BY INCREASED OPTIMISM & ACTIVITY
Retail Traffic
Many attendees at last week's ICSC RECon 2010 event in Las Vegas displayed cautious optimism for the retail property sector. 
ARTICLE CONTINUED...

Delinquencies in commercial mortgage-backed securities continued at historical highs in May, up 40 basis points to 8.42 percent, said Trepp LLC, New York.

Trepp recorded 8.02 percent in CMBS delinquencies in April for CMBS loans more than 30 days delinquent. The firm said the overall delinquency rate would be nearly 9 percent “if defeased loans were taken out of the equation.”

Seriously delinquent loans—more than 60 days in foreclosure, real estate owned (REO) or non-performing balloons—were up 41 basis points to 7.55 percent.

Fitch Ratings, New York, said average loss severities for its U.S. CMBS rated universe will continue to exceed historical averages through the end of 2011.

In Fitch's U.S. CMBS Loss Study, the ratings agency said it expects higher loss severities for all property types this year. Annual loss severities by property type last year were at 58 percent for multifamily; 48.2 percent for retail; office at 56.9 percent; industrial at 48.8 percent and hotels at nearly 82 percent.

In its monthly delinquency report, Trepp said multifamily had the highest delinquency rate among major property types, up 28 bps to 13.34 percent, and lodging—hotel delinquencies—jumped nearly 130 bps to 18.45 percent. Office delinquencies approached 6 percent—now at 5.81 percent—after up 44 bps from April, and retail CMBS delinquencies increased 42 bps to more than 6.86 percent. Only industrial properties posted a delinquency rate decline among major property types.

Fitch said its overall view of the CMBS sector remains negative, and maturations for 10-year fixed rate 2005 to 2007 vintages are fewer than five years away.

Fitch's 2009 losses were primarily in the 1998 vintage, led by the hotel sector, and the 2006 vintage, dominated by multifamily losses.

Fitch reported underperforming properties in states with weak economies, which led to an increase in rated U.S. CMBS delinquencies for April to 7.48 percent.

Temporary Property Tax Relief for Homes with Chinese Drywall

Today, Governor Charlie Crist signed HB 965 into law, which provides temporary property tax relief for some who own properties that have been significantly affected by Chinese drywall.

When the property appraiser determines that a single-family residential property is affected by drywall with elevated levels of elemental sulfur that results in corrosion of certain metals and needs remediation to bring that property up to current building standards, the property appraiser shall adjust the assessed value of that property by taking the presence and impact into consideration. If a building cannot be used for its intended purpose without remediation or repair, then the value of the building shall be assessed at $0, but not the land. Home owners who need to vacate the property in order for the drywall to be repaired would not lose their homestead exemption under the law, provided they did not establish a new homestead elsewhere.

In cases of newly purchased properties, the relief only applies to properties in which the buyer was unaware of the issue at the time of purchase. It does not apply if the presence was disclosed. This relief is repealed on July 1, 2017, unless reenacted by the Legislature.

According to Florida's Division of Emergency Management, "As of March 1, 2010, the preassessment has determined that there are 530 homes in Florida that meet the [Florida Department of Health] threshold for being impacted (the homes have been subject to metal corrosion due to Chinese drywall). Further, county property appraisers in Florida have identified 2505 homes that have had their value adjusted downward based on damages from the presence of Chinese drywall. An additional 846 claims for adjustment due to the presence of Chinese drywall are pending."

Commercial banks and savings institutions insured by the Federal Deposit Insurance Corporation (FDIC) reported an aggregate profit of $18.0 billion in the first quarter of 2010, a $12.5 billion improvement from the $5.6 billion the industry earned in the first quarter of 2009, but still well below historical norms for quarterly profits. More than half of all institutions (52.2 percent) reported year-over-year improvements in their quarterly net income. Fewer than one in five institutions (18.7 percent) reported net losses for the quarter, compared to 22.3 percent a year earlier. The average return on assets (ROA), a basic yardstick of profitability, rose to 0.54 percent, from 0.16 percent a year ago. This is the highest quarterly ROA for the industry since the first quarter of 2008.

"There are encouraging signs in the first-quarter numbers," said FDIC Chairman Sheila C. Bair. "Industry earnings are up. More banks reported higher earnings, and fewer lost money." She added that the $18 billion in net income during the quarter "is more than three times as much as banks earned a year ago, and it is the best quarterly earnings for the industry in two years."

The primary factor contributing to the year-over-year improvement in quarterly earnings was a reduction in provisions for loan losses. While first-quarter provisions were still high, at $51.3 billion, they were $10.2 billion (16.6 percent) lower than a year earlier. Lower expenses for goodwill impairment and other intangible asset charges added $5.0 billion to pretax earnings.

The FDIC noted signs of improvement in asset-quality trends as the growth of troubled loans slowed for a fourth consecutive quarter. The percentage of loans and leases that were noncurrent (90 days or more past due or in nonaccrual status) rose from 5.38 percent to 5.45 percent at the end of the first quarter, the highest level in the 27 years that insured institutions have reported these data. However, the $17.4 billion (4.4 percent) increase in noncurrent loans was the smallest quarterly increase in two and a half years, as the amounts of commercial and industrial loans and construction and development loans that were noncurrent each declined for the second consecutive quarter. Insured banks and thrifts charged off $52.4 billion in uncollectible loans during the quarter, up from $37.9 billion a year earlier, but less than the $53.6 billion they charged off in the fourth quarter of 2009.

The extent of improvement in both noncurrent loans and charge-offs was understated because of the implementation of new accounting standards – FAS 166 and 167. These rules require banks to report on their balance sheets many existing securitized credit card and other consumer loans that had not been included in banks' loan portfolios. The rules also require reporting the noncurrent loans and charge-offs associated with these securitized loans.

Total loans and leases increased by $220.4 billion (3.0 percent) during the quarter, but the growth in reported loan balances was the result of FAS 166 and 167, which caused more than $300 billion in existing securitized loans to be included in institutions' reported loans. Most of the loan balances added to reported totals under the new rules were credit cards and other loans to consumers. Total assets of insured institutions rose by $248.6 billion (1.9 percent), but the industry's total assets and total loans would have declined in the quarter absent the new accounting rules.

Miami, FL (PRWEB) April 8, 2010 -- Capitalizing on its keen knowledge of the South Florida commercial real estate market, Kaizen Realty Partners (www.kaizenrealtypartners.com) was able to close two separate commercial industrial real estate deals for bank foreclosed property totaling over $2.7 million in the Doral - Airport West area.

"The market is going through a restructuring that will yield great opportunities for savvy investors" said Kaizen's Co-Founder and CEO-Broker Robert Meneses, "and our Distressed Asset Division enables our clients to capitalize on these opportunities".

Kaizen's Distressed Asset Division closed an all cash sale for a free standing building with over 24,000 sq. ft. of dock high office warehouse space situated on 48,000 sq. ft. of land located at 8925 NW 26th Street in Doral, Florida. Grubb & Ellis was the court appointed receiver. Kaizen Realty Partners represented the buyer and the building was sold for $2 million to a Florida corporation and a trading partner with Brazil. They also own other real estate properties in Miami.

According to Luciano Rappa, Kaizen's President and Co-Founder, "Clients of our Latin American Acquisition Division are looking for 'Bueno, Bonito y Barrato', and we deliver by specializing in finding and negotiating bank owned deals."

Working with listing broker Prudential Florida Realty, the Distressed Asset Division of Kaizen Realty Partners sold a 6,500 sq. ft. warehouse distribution facility in West Dade Miami called The Village at Beacon Lakes, a Flagler Development. The property was sold for $700,000 to an owner user in the export business to Central America. This property was financed by Mercantile Bank.

Kaizen Realty Partners is a full service commercial and residential real estate firm applying its philosophy of continuous improvement to the real estate service. The Distressed Asset Division specializes in sales of auction, bankruptcy, property valuations, bank notes, and foreclosed commercial properties. Kaizen has a well deserved reputation for combining technology, its exceptional knowledge of the marketplace and a strong commitment to customer service. For more information on how Kaizen Realty Partners can solve your real estate needs, please call 305-500-5554.

http://www.realtor.org/press_room/news_releases/2010/02/commercial_recovery

No Meaningful Recovery in Commercial Real Estate Before 2011

 Washington, February 23, 2010