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Author: Destin Life
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4th Annual NatureWalk at Seagrove Spring Fling Wing Ding!
The 4th Annual NatureWalk at Seagrove Spring Fling Wing Ding will be held April 5th, 2018 from 1 PM-4 PM. Free Family-Friendly Event will take place at NatureWalk at Seagrove 780 Sandgrass Boulevard, Santa Rosa, Fl 32459. naturewalkatseagrove.com
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How to Grow Your Real Estate Portfolio Faster
By Tad Hunter
One of the advantages of investing in real estate is provided under the Internal Revenue Service, Code 1031. The tax on the profit from a real estate sale can be delayed until a later date when you enter into a qualified exchange or purchase. Because of the tax code number that allows these transactions, you may hear people simply refer to these exchanges as “1031s”. The 1031 exchange allows for the sale and purchase (exchange) of “like-kind” real estate while avoiding immediate tax consequences. The tax deferral impact created by using a 1031 exchange helps you grow your real estate investment portfolio faster. It’s similar to the way a 401k or an IRA allows for tax deferred compounding of stock investments. You invest with pretax dollars rather than after tax dollars.
Tad Hunter The 1031 tax deferred transaction has specific requirements and timelines that must be met in order for the deal to qualify. One of the most important things to know is that you need to have a 1031 strategy in place before selling your property. You need to employ a qualified intermediary to handle the transaction. The property owner can not receive the funds from a sale directly but rather the proceeds are held by the intermediary. You will not be able to defer a gain on any monies received into your possession no matter how short the period. Expect to pay a small fee for the service of the administrator.
What are “like-kind” exchanges? In the simplest example, consider selling a vacant commercial lot and then purchasing a more expensive/larger vacant commercial lot. Selling a warehouse that housed an HVAC business and exchanging into a vacation home would likely not qualify as the purpose of the two properties is different. The idea is that you are selling one thing and replacing it with another that is similar in nature and purpose. Not all real estate transactions qualify. Vacation property and second homes can qualify but must meet specific criteria.
Regarding vacation property and second homes the IRS has offered conflicting opinions over the years. Most recently the Treasury has clarified their opinion to state that the investor’s primary intent is the critical factor in determining whether a property was held for personal use and enjoyment, or whether it was held for investment purposes.
Revenue Procedure 2008-16, which was effective beginning March 10, 2008, provides a number of safe harbor guidelines
The sale of a vacation property or a second home will qualify for tax-deferred exchange treatment if the following safe harbor requirements have been met:
- The subject property has been owned and held by the investor for at least 24 months immediately preceding the 1031 Exchange (“qualifying use period”); and
- The subject property was rented at fair market rental rates to other people for at least 14 days (or more) during each of the preceding two (2) years; and
- The investor limited his or her personal use and enjoyment of the property to not more than 14 days during each of the preceding two (2) years, or ten percent (10%) of the number of days that the subject property was actually rented out to other people during each of the preceding two (2) years.
The purchase of a vacation property or a second home will qualify as replacement property in a tax-deferred exchange transaction if the following safe harbor requirements are met:
- The subject property is owned and held by the investor for at least 24 months immediately following the 1031 Exchange (“qualifying use period”); and
- The subject property was rented at fair market rental rates to other people for at least 14 days (or more) during each of the following two (2) years; and
- The investor limits his or her personal use and enjoyment of the property to not more than 14 days during each of the following two (2) years, or ten percent (10%) of the number of days that the subject property was actually rented out to other people during each of the following two (2) years.
Always consult with your CPA, an attorney, and an exchange specialist for their professional advice and the latest regulations on these exchanges. Exchanges are highly effective in helping you to grow your real estate investment portfolio but must be used in accordance with current tax law. These professionals will help you structure complex transactions within safe harbor guidelines. Give me a call to discuss your possible need for a tax deferred exchange and assistance is locating a qualified intermediary.
Tad Hunter is a licensed real estate agent with LAH Real Estate and a partner in the RealJoy Vacations company. He and his wife and children are residents of Sandestin. Tad enjoys the Grateful Dead, Steve Martin jokes and prefers puppies over kittens. Tad can be reached at 318-308-7270 or tadhunter@hotmail.com
Personal disclaimer– do not use this article for tax advice as it is intended to be informational only and I do not offer tax or financial advice that can only be provided by licensed professionals.
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Introducing “SoWal Connections” – a Resource Guide for 2nd Home / Out-of State property owners
SoWal Life is pleased to introduce “Sowal Connections”, a guide designed to put absentee, out-of-State property owners in touch with local contractors, property managers and other local service providers 2nd home / absentee owners will need keeping their properties in tip top condition.
Each month, SoWal Life reaches via direct mail approx. 25,000 South Walton residents and businesses. Beginning in April 2018, The paper will include a new section specifically designed for 2nd Homeowners and Vacation Rental By Owners. In addition, the Paper will be mailed to 1500 Out of State property owners each month for four months, reaching every South Walton property Owner (6,000) over the four months.
Advertising rates begin at 80.00 per month for 3 months and, for a limited time, receive the 4th month free!
See rate Card Here: SoWal Connections Rate Card
Call Dave White 850-399-0228 or email dave@southwalton.life
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Vacation Rental / Home Sharing Debate Heats up
Candidate for Destin City Council Speaks in Tallahassee
There’s an important debate happening in our State’s Capital that should be of keen interest to South Walton County residents. The debate is over how to regulate and classify Vacation Rental Properties by Owner (VRBO) and other Home-Sharing arrangements. There are 2 competing Bills. The first, by Rep. David Richardson would prohibit the State from regulating vacation rental properties while the other would take the opposite approach, allowing the State to “preempt” local regulation completely. In either case, the effect on South Walton County will be profound.
Destin Resident Mark Robertson, a candidate for the Destin City Council, spoke recently at a panel discussion of the Florida Senate Community Affairs Committee in behalf of the legislation introduced by Sen. Greg Steube. The Steube version would prohibit “Home-Rule” legislation and instead require licensing by the State Division of Hotels and Restaurants. The Bill would allow Robertson to continue his Home-Sharing business through the online booking agency AirBnB, without what Robertson describes as “harassment” from the City of Destin. Below are the remarks Robertson gave in Tallahassee:
Today I — Mark Robertson of Destin, Florida, a Candidate for Destin City Council — write as a homestead property owner who hosts an Air BnB vacation rental in my home. My wife and I share our home. We share it with travelers and tourists alike — and by extension, we share it with Florida taxpayers, as they benefit too, when we earn rental income. When we share our home, there are rules. We do not allow smoking, double parking, pets or parties.
When AirBnB guests visit our home and vacation in our city, they wish to live as local residents. They wish to see and to experience the local community, not the resort community…. In our case, my wife and I purchased an abandoned house — and used the rental income to renovate it. In turn, this increased property values for our neighbors by removing the blight of an abandoned property in our neighborhood.
Not only did we use AirBnB rental income to renovate, we needed that additional rental income to pay normal living expenses after I became disabled due to a heart condition requiring open heart surgery. For my wife Lisa and I, the AirBnB rental income was a Godsend. It enabled us to keep our house — after a medical emergency and the onset of disability.
Neighborhood improvements by home-sharing micro-entrepreneurs profit everyone, especially the neighbors. Enterprising vacation rental hosts bless and benefit their neighbors with a comparable, value-added increase in neighborhood property values. VR hosts reinvest rental income to renovate and to repair their homes. Reinvestment improves their property values and increases the value of other, neighboring properties in residential neighborhoods.
Competing legislation, resisting Senator Steube’s Bill limits vacation rentals and, in my opinion, is a transparent attempt by the hotel industry to crush perceived competition: middle-class homeowners.
It’s the powerful Goliath establishment fighting the much smaller David who shares his or her home. David was smaller, but he triumphed. Likewise, we are smaller. We lack the political muscle of big, powerful lobbingy groups…
In communities with a powerful hotel industry, like Destin — their unfair manipulation of zoning, permitting, and home rule code enforcement are obvious to any interested party not already oppressed by the abuse of home rule in Destin. In Destin, what private property owners lack is protection.
We’ve seen similar efforts throughout the State of Florida, most notably in Miami and in Miami Beach, where bad actors, masquerading as municipal, home rule advocates have rebelled against Florida State laws that protect the private property rights of enterprising, middle-class homeowners.
To combat this problem of municipal over regulation and home rule overreach, the State of Florida needs to pass legislation, further protecting the owners of short-term rentals…
Vacation rental hosts know their community best — we know the best restaurants and the best, tourist-friendly businesses. Our referrals support the local, tourist economy and the “Florida brand” of tourism. Our referrals are time-honored and tax-rich. Our referrals generate tourist-tax dollars. Our referrals fill the coffers of city, county, and state governments — by promoting businesses that pay the bed tax, that pay the tourist tax, and pay Florida sales taxes. This homeowner, and home sharing in support of the local tourist economy is a good and growing trend.
The home-sharing and vacation rental movement needs legislative advocates. We must thank Senator Steube and Representative La Rosa for their forward-thinking, business-sense and their legislative endorsement.
In closing, by supporting their legislation, by supporting Senate Bill 1400 and House Bill 773, you are supporting:
- the growth of tourism,
- the protection of private property rights, and
- the stability of homeownership
SUPPORT, therefore, Senate Bill 1400 and House Bill 773.
Mark Robertson for Destin City Council
Editor’s Note:
South Walton Life does not take an editorial position on the above referenced position and invites other local residents to share their opinions on this important decision the Legislature will be making in the next few months. In view of the ongoing debate in South Walton to Incorporate as a city, what has happened in Destin, and what continues to happen, should be taken into account.
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Redeem the Time
By Tad Hunter
Ben Franklin once asked, “Do you love life? Then do not squander time, for that is the stuff that life is made of.”
As Christmas approaches once again, it seems as though we just finished celebrating the New Year! There are 86,400 seconds in every day. The seconds are placed in our daily vault each morning to be spent and never saved. It’s not that we don’t have enough time or that it’s speeding up; it’s just that we often don’t make the most of it. Too many of us stare at our cell phones and fail to realize we don’t need multiple apps to stay always and continuously caught up on the news cycle. Take time to talk with your children or have coffee with your parents. That is time well spent.
It’s readily apparent that to accomplish something new or to make changes in our life, we must begin with an end goal in mind. Self-help coaches have for years taught us goals that aren’t written down are less likely to be achieved. Things that are written down and measured, improve. Start thinking about your 2018 goals now and what you would like to see improved upon. Money can be earned and lost. Focus on your family and health. Set your goals for 2018 now and get a jump on your New Year’s resolution. Eating black eyed peas and cabbage may be a good tradition, but written goals will actually help get the job done.
How does Days on Market (time) effect your opinion on an income property that you are considering to purchase? I have heard buyers more than once ask, “how long has it been on the market?” The implication is that maybe the sellers want to “deal” if their home or condo has been on the market for an above average amount of time. I have another take on that question. Often, the best income properties are the most difficult to show because they stay rented. Don’t discount a quality property just because it’s been on the market for a while. It could be that it’s rarely available to show.
Currently, the Sandestin/ Miramar Beach real estate market remains in a healthy balance with prices up a little over 5% for the year. There are fewer properties on the market in the Sandestin/Miramar Beach area at the end of November compared to a year ago. Last month 148 properties sold or went under contract and only 108 new properties were listed. There remains an 8-month supply of inventory, down from 10 months a year ago. Year to date the number of properties sold or pending is outpacing new inventory entering onto the market. The Days on Market has shortened as well to a median of 88 days. Quality homes and investment properties, priced correctly are selling. The demand from the market, for more inventory is consistent. If you are thinking of buying or selling your home call me to discuss your options.
Tad Hunter is a Realtor serving families looking to buy and sell investment properties on the coast. He is a partner in the RealJoy Vacation company. Tad and his family, “Wish you a Merry Christmas and a healthy, prosperous New Year.”
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The Markets Can Be Like The Seasons
By Maurice Stouse
As investors continued to see higher highs in the stock market, and consistent lows in interest rates in the bond and money markets, they wonder how long each of these trends could or would continue. Looking at things historically can remind investors to think of the market like they think of the seasons.
Each of the markets has its spring, summer, fall and winter although the timing of the markets doesn’t necessarily move in locked step with the seasons. Investors wondered how long summer was going to last for stocks, and when their harvest should be (many not having seen one like this before). Was it like an extended summer (where summer would last well in to fall)? And what about the winter for interest rates? How long could winter last and does it really snow in Denver in May and even June? Yes that has happened. As a matter of fact it snows somewhere in Colorado all 12 months of the year.
Going back in time, there have been some long winters, and extended falls in the markets. Would you believe that the stock market was higher in 1971 than 1981? Or that interest rates were in the mid-teens in the 70s? Back in 2008, and well in to 2009, investors wondered just how long the fall would continue.
Investing takes patience, discipline, confidence, consistency and ultimately, time. Yes the falls can seem to last forever. When does someone know that winter has passed and the sprouts of spring have begun? Time and patience are so critical because, while it is possible to know when spring, summer, fall and winter come and go, the timing is unknown in the markets. In the summer of a market investors can be frustrated when not knowing when to harvest. Many see success by planning their strategy and allocation to account and allow for the fall and the winter.
Many successful investors have seen that time in the market is more successful than timing the market. If you aren’t in the market, you might miss the spring and come in too late in the summer. If you aren’t in the market, how do you know when is the best time to invest? We’ve heard it many times that the best time to invest is when you have the money to invest. And when it comes to confidence, it is important to remember, in the depths of winter, that growth has come again, and the spring and the summer ultimately arrive.
A word or two about allocation. Many savers and investors spread out their dollars in the stock, bond and money markets with an allocation strategy. That way they are always poised to take advantage of growth but also not over committed in any one area. Rebalancing periodically can also be important in order to maintain an allocation strategy.
Lastly, consistency through investing, by continually adding to a strategy over time (systematic investing like a 401k, IRA or college savings plan). You buy more shares when prices are low and fewer higher priced shares when prices are higher therefore your cost is the average over time. You are investing in all of the seasons, over time.
Contact or visit with your advisor today to start the conversation about the markets, seasons and your own goals and needs.
Maurice Stouse is a Financial Advisor with Raymond James and he resides in Grayton Beach. He has been in financial services for over 30 years. His office is located at Raymond & Associates, Inc., 34851 Emerald Coast Parkway, Suite 200, Destin, FL 32451. Raymond James advisors do not offer tax advice. Please see your tax professionals. Raymond James & Associates, member New York Stock Exchange/SIPC. Phone 850.460.1995. Email: Maurice.stouse@raymondjames.com.
Views expressed are the current opinion of the author and are subject to change without notice. Information provided is general in nature, and is not a complete statement of all information necessary for making an investment decision, and is not a recommendation or a solicitation to buy or sell any security. Past performance is not indicative of future results. There is no assurance these trends will continue or that forecasts will occur. Investing always involves risks and you may incur a profit or a loss. No investment strategy can guarantee success.
Diversification and strategic asset allocation do not ensure a profit or protect against a loss. Investments are subject to market risk, including possible loss of principal. The process of rebalancing may carry tax consequences.
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Real Estate Update for October 2017
By Tad Hunter
I began my draft for this month’s Real Estate update reflecting upon how fortunate we had been avoiding any serious damage from Hurricane Irma. We can now add Hurricane Nate to that list as well. It has been a decade since the Emerald Coast has seen any significant hurricane impact. We are all blessed each and every day in more ways than we can imagine. Sometimes it takes the passing of a storm to remind us of our favor.
RealJoy Vacations took several actions during Hurricane Irma to assist evacuees. First, because our in-house software adjusts rates based upon demand, our rates would normally increase automatically because of the sudden influx in travelers. We anticipated the rate hike and froze prices at lower levels so that we wouldn’t unduly “profit” from our Florida neighbors’ disaster. Secondly, RealJoy’s marketing team quickly got the word out to evacuees through social media that we had homes for rent. Occupancy within the 6-day window popped to a high of 94 %. Overall, we provided 589 guest bookings, collected rent for our owners in a normally slow period, and donated $7,500 to the Red Cross.
An interesting result of Hurricane Hermine from October 2016 occurred this summer. While we all know and love Destin and 30A, it was for many evacuees, their first visit to the area. Recall that last year Hermine was headed towards us but then moved eastward in the days before landfall. RealJoy saw many of last year’s evacuees return to vacation here this year. October in Destin is always beautiful. The secret gets out more and more each year and the number of visitors to our area is always increasing. I suspect that next summer many people who thought that all of Florida’s beaches looked like the Atlantic and southwestern coast will return to vacation. Strange how a storm can help to market your favorite beach.
An update for vacation property owners:
The popular website Vacation Rental By Owner or “VRBO” has made many changes since it was purchased by the Expedia group. It has transformed itself from a listing platform serving individual property owners into a “transaction” oriented site serving large property managers. Expedia realized that it is more profitable serving 1 management company with 300 properties than serving 300 individuals with 1 property each. The company implemented a transaction fee per reservation upsetting many long time users of the service. Expect the fee to increase this year. It has also been announced that the phone number of the property owner will no longer appear in the ad homepage. The removal of the contact information will eliminate the ability of owners to bypass the fee system in an effective way. A positive for owners with updated properties and for consumers is that better properties will appear higher in the search function. The transaction nature of VRBO will reward properties that book frequently with higher search results. Expect numerous changes between now and next Spring as the rules of vacation marketing are changing rapidly. It is becoming more difficult for small companies, individuals, and on site managers to dedicate the resources needed to stay up to date with these requirements. Pay attention or your property may disappear into a search “blackhole”.
Ask your manager how your home or condo is being marketed properly to take advantage of these changes.
Tad Hunter is a Realtor serving families in the Miramar Beach and South Walton area. He is a partner in the RealJoy Vacation company which provides property and vacation management services in the area for 8 years. Tad and his family are residents of Sandestin. Tad can be reached at 318-308-7270
Other Articles by Tad Hunter
Demand is High, it’s a great time to buy
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