INVESTING IN REAL ESTATE IN FLORIDA

Investing in real estate is one of the largest single investments an individual makes during his lifetime. Real Estate transactions can be complex and sometimes overwhelming to some buyers. There are unfamiliar terms and documents that a buyer must sign at closing that would be better handled with the help of a qualified real estate attorney. An attorney can advise the buyer of the different tax implications, potential liabilities, protection of the assets acquired in the transaction as well the most effective structure or way to hold title to the real estate.

Florida is unique among the different states in that it allows for certain privileges when owning real estate as a principal residence and such privileged should be considered carefully when structuring the way to hold title to real property. Here you will find useful information that should be considered when purchasing real estate in Florida as a U.S. person:

TAX PLANNING

Proper tax planning is essential to individuals purchasing real estate because the way the property is held determines the amount of taxes that will be paid when the property is transferred either through sale or other means. In the U.S. individuals pay estate taxes on their properties after a $2,000,000 exception. Corporations are treated differently and in some cases it can be advantageous for individuals to hold title to their properties through corporations, which can amount to substantial tax advantages.

There are also considerations that need to be made when holding income-producing properties that might be better addressed holding title through a corporation than as an individual.

This is a complex area of the law that applies differently depending on the specific needs of every individual. It is for this reason, that we recommend that you discuss the different alternatives with our office.

HOMESTEAD EXEMPTION

Florida allows for up to $50,000 exception when assessing your property for property taxes if your home is your primary residence in the U.S. Additionally, there are important advantages that come with a homestead exception in your property such as shielding your assets from potential creditors and personal liability. Furthermore, the property taxes on that property will be kept to a maximum of 3% annual increase every year.

It is also important to evaluate the advantages of holding title as a single or married individual and having a homestead status in your property. There are important considerations in how to hold title to real property even if that property does have a homestead status.

Our office can help you structure the best way to hold title to your property and explain the advantages of a homestead status.

ANONYMITY

It is important to recognize that to individuals anonymity in the ownership of real estate is essential and therefore holding title to the same through a corporate structure can be of great advantage. For this reason, to protect the anonymity of the purchaser, a corporate entity can take the place of the owner and maintain the privacy of the purchasers of the real property away from the public information.

1031 EXCHANGES

Section 1031 of the U.S. Internal Revenue Code allows investors to defer capital gains taxes on the exchange of like-kind properties including condominiums. This allows individuals to defer or postpone the payment of capital gain taxes on the gain realized on the sale of a property. Such gain must be invested in another subsequent property of the same or higher value for the tax to be postponed.

There are important rules and timeline that must be complied with in order to take advantage of the 1031 exchange. Our office can help you with structuring these type of transactions.

THE REAL ESTATE CLOSING TRANSACTION

It is important that individuals are aware of the different documents, costs as well as the rights and obligations a purchaser has at the time of closing a real estate transaction. A title insurance policy can be provided both for the lender and the purchaser, at the same time, an opinion of the marketability of the title of the property will be issued by a qualified attorney. A purchaser must receive marketable title at the time of closing to be able be assured that the property is free and clear of any indebtedness or encumbrances that can damage the quality of the title for the purchaser. Title insurance helps protect against any defects of the title that are not available in the public records at the time of closing and it protects the purchaser even after a property is sold. These are all important considerations that a Individual should consider before closing on a real estate transaction. Our firm can help you evaluate the choices and better understand and protect your investment.

Gerardo A. Vazquez, Esq