So.... Broward and Miami-Dade are getting slightly more expensive. That's really the only questionably good news I can pull out of this. Although, maybe this was reflective of the uptick in rates that President Trump stopped at he end of the reporting periods in question, and before the tax exodus from the NorthEast began? To me this just reads as “getting more expensive for new arrivals” but that also means getting more expensive for those staying. I dunno… the more I think about this stuff the more I can see other variables in play. Credit is slightly more expensive and the decreases are marginal so maybe that is part of it? This mentioned nothing about the consumer price index. Macro-economic pressures are not mentioned either. This may lead to my oft-thought contention that SouthFlorida is just saturated an the model is shifting more toward a New York metro-model. Vertical construction with outlying, largely stagnating borougs, and the more I think about this that makes perfect sense. Hopefully that isn’t the case but maybe that opens the door to other opportunities in our state.
South-Florida Market Update
So.... trying to find a way to sugar-coat this. Any way one cuts it, this appears to be a slowing down, but maybe this is getting back to normal? From white-hot to just red-hot?
It Sounds Hokey, but....
First, apologies. The last several blog posts didn’t post… and I don’t know why. We’ll have to figure that out with our IT team.
Anyway, I saw this the other day. Kind of psyco-babble maybe, but I started trying to live by these tenants a couple of year ago and I have to admit, my life turned around considerably. I invite anyone struggling to do the same.
The Fed Meets... (with translations)
Press Release
January 30, 2019
Federal Reserve issues FOMC statement
For immediate release
Now
Information received since the Federal Open Market Committee met in December indicates that the labor market has continued to strengthen and that economic activity has been rising at a solid rate. Job gains have been strong, on average, in recent months, and the unemployment rate has remained low. Household spending has continued to grow strongly, while growth of business fixed investment has moderated from its rapid pace earlier last year. On a 12-month basis, both overall inflation and inflation for items other than food and energy remain near 2 percent. Although market-based measures of inflation compensation have moved lower in recent months, survey-based measures of longer-term inflation expectations are little changed.
As always, this is the “report card” paragraph where the Fed grades the US Economy. Employment gets a solid A-. Jobs are plentiful and unemployment is low. Household spending (spending by people like you and me) is growing nicely and also gets an A-. The Amazon boxes continue to pile up on our porches. Business spending gets a B. Businesses are spending – but not as much as a year ago. And inflation gets a B+. Prices are rising somewhat but well within the range that makes the Fed happy. Another refrigerator magnet-worthy report!
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. In support of these goals, the Committee decided to maintain the target range for the federal funds rate at 2-1/4 to 2-1/2 percent. The Committee continues to view sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee's symmetric 2 percent objective as the most likely outcomes. In light of global economic and financial developments and muted inflation pressures, the Committee will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate to support these outcomes.
The Fed combined what used to take two paragraphs into one – efficiency! This is the “money paragraph” where the Fed lets the world know they are keeping short term rates the same as they were before. And they also tell us how they do their job. They want to keep rates low enough to keep people working but high enough so prices don’t rise too fast. The last two sentences use a lot of fancy-sounding language to basically say, “We’re going to do a bunch of nothin’ this time around…”
This made the markets (both stock and bond) happy. Longer term interest rates dropped and stock prices went up. Win/win.
In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its maximum employment objective and its symmetric 2 percent inflation objective. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.
This is the same paragraph they always throw in where they basically say will review a lot of information (visualize hundreds of people with bad haircuts and mismatched socks) to make their future decisions. Not sure why they feel they need to tell us this. Maybe they think we believe they use their horoscope or a Ouija board to make trillion dollar monetary decisions…
Voting for the FOMC monetary policy action were: Jerome H. Powell, Chairman; John C. Williams, Vice Chairman; Michelle W. Bowman; Lael Brainard; James Bullard; Richard H. Clarida; Charles L. Evans; Esther L. George; Randal K. Quarles; and Eric S. Rosengren.
All the nerds agreed!
Do Triple Net Leases Qualify for the 199a Deduction.
As always, with emails like this, please consult a CPA or Tax-Attorney on all of these types of emails.
I am not a CPA and this should only be considered informational.
Okay.
Here's another technical one. I've gotten feedback from some of you that you appreciate the technical emails, so here you go. If this is more than you want to read, but want to know how it affects your business, give us a call or shoot an email. I'd be glad to set up a time to discuss.
If you use triple-net leases for your rental properties, you may wonder whether you’ll get your Section 199A deduction.
A triple-net lease requires the lessee to pay the landlord rent as well as take care of real estate taxes, building insurance, and property maintenance costs. Therefore, in a triple-net lease, the lessee bears all the burdens of ownership, and the landlord usually has little to no involvement in the property management.
A rental property qualifies for the Section 199A deduction if
the rental property qualifies as a trade or business under tax code Section 162, or
you rent the property to a commonly controlled trade or business.
Assuming you can’t use the commonly controlled route, your rental properties need to rise to the level of a trade or business to get your Section 199A deduction.
To meet that requirement, you’ll generally need to have regular and continuous involvement with your rental activities. And the proposed regulations require you to look at each rental activity separately when determining whether it is a trade or business—aggregation doesn’t help you with this.
Many triple-net lease rental activities likely fail the regular and continuous activity test and won’t qualify for the Section 199A deduction. For example, in Neill, the Board of Tax Appeals (the precursor to the Tax Court) held that a single property leased on a triple-net basis is not a Code Section 162 trade or business.
In the preamble to the Code Section 1411 regulations, the IRS gives you other factors to consider when determining whether your rental activity is a trade or business:
Type of property (commercial vs. residential vs. personal property)
Number of properties rented
Day-to-day involvement of the owner or its agent
Type of lease (net vs. traditional, short-term vs. long-term)
Based on the most recent guidance from the IRS, triple-net-leases do not rise to the level of active business activity and do not qualify for the deduction. No matter how many are in your portfolio. Now that we have that clarification, we're working with clients to analyze other planning opportunities to take advantage of the 199a deduction or the new lower corporate tax rates.
Dr. Martin Luther King, Jr. Day, 2019
On this day we in the USA celebrate the life of Dr. Martin King, Jr.
Of the many things he said that are oft quoted, this is a lesser known one, but one of my favorites.
Who Is The Employee Of The Month When You Work From Home?
Just a little bit of fun on a lovely Friday afternoon.
2018 First-Time Home Buyers Numbers Are In. Numbers Are Not Suprising.
The numbers are in for 2018 and what does this data tell you at first glance: 1. ‘Want’ is the primary motivator of a first purchase (read: marketing). 2. Just over half are married. 3. Single family home is the preferred choice.
Plan accordingly realtor friends. Plan accordingly.
Rich Vs. Poor
…this is almost always the case. There are reasons.
Our Biggest Day This Year!
Today I am thrilled to announce that OCF Financial, LLC just closed and funded a $20.2 million construction loan on a $5,000,000 revolving line. Over a year’s worth of hard work with our lending partners, and I can't thank them and our wonderful (and patient) clients enough. It’s a great feeling to get a call from your business banker and she says “the eagle has landed”.