I recently came across this article in the New York Times which suggests that the housing boom is over—not only for now, but forever—and that the days of making money with real estate are over as well.  “People shouldn’t look at a home as a way to make money,” quotes the article, “because it won’t.”

Respectfully, I disagree.

It is certainly true that with real estate in such a depressed state, now is not the time to buy property and simply hope the value increases; however, now is the perfect time to purchase “rental” property that will pay for itself in the short-term, and increase in value over the long haul.

A few years ago real estate was skyrocketing and it seemed that everyone’s advice was to invest.  But the time to invest is not when everyone is buying and prices are high.  The best time to invest is when prices are low… so long as you have the time and the resources to hold onto under-valued property until the market recovers—which, as David Streitfeld mentions in his article, may take years. The question you need to ask yourself is not “Is now a good time to invest in real estate?” but “Can I afford to put the time and money that may be required into this investment to see it through?”

According to Andy Louis-Charles of The Motley Fool, the true key to real estate investing is rental value, not appreciation, “this is the only tried-and-true metric that ensures a worthy real estate purchase.” Everything else “is either speculation or indulgence.” The question of whether or not real estate is a good investment now becomes a matter not of luck but of strategy.

The key to success in the investment of rental properties is five-fold:

1. Know Your Timeline (or at least have a good idea). How long you plan keep your rental property will be a large factor in determining how much you’ll need to invest above and beyond the initial cost of purchase. Improvements, maintenance and repairs will have to be considered as part of your overall plan.
2. Have Your Financial Ducks in a Row. Owning a rental property means you’ll be dealing with people… some of whom will miss a month’s rent or leave you with unexpected vacancies.  Have enough money in reserve to comfortably deal with these crises.
3. Find the Right Location. Everybody knows that it’s all about location.  Of course some locations will be more profitable than others, but many non-traditional locations can be profitable if you know who your target rental audience will be.
4. Have Good Advisors. Agent, Mortgage Broker, Attorney, CPA, Management Company… these are just a few of the people who will be invaluable in helping you make the right moves and decisions along the way.
5. Get the Right Price. According to the old adage, “You make your profit when you buy a property, not when you sell it.” And now is definitely the time to get the right price. July of 2010 saw 325,000 foreclosure filings, that’s “the 17th month in a row total filings exceeded 300,000” according to RealtyTrac’s CEO, James Saccacio. Although this is a disheartening statistic for the economy in general, what it means for investors is that the cost of property is low and there is a higher rental demand.

The NY Times article rightfully suggests that investing in property now isn’t likely to make the quick profit it might have a decade ago, but that doesn’t mean we should throw the baby out with the bathwater.  Remember, rental property is often referred to as the “IDEAL” investment:

I: Income/Cash flow
D: Depreciation and tax deduction
E: Equity buildup from mortgage paydown
A: Appreciation in property value over time
L: Leverage; using a small amount of your own money to control a large value asset

Land is still land. People still need a place to live and a place to house their business. You can be a part of that, and my firm can help.

The practice of “house flipping” (purchasing real estate in need of repair, fixing it up and quickly reselling it for profit) has long been a successful investment strategy—although it has had its ups and downs.  During the past 4 years or so house flipping has been in a down-swing due to the collapse of the housing bubble; but according to a couple of recent articles in the Wall Street Journal and The New York Times, house flipping as an investment strategy is making a comeback.

As a real estate lawyer and a real estate investor myself, I know that house flipping can be an extremely profitable investment strategy; but what interests me is to see what is left out of these articles about real estate investing—namely the importance of having an experienced and knowledgeable legal advisor on your side.

James R. Hagerty’s article in the WSJ mentions the fast pace and perilous nature of buying foreclosed homes at auction, “bidders often haven’t had a chance to inspect the property or determine whether it’s occupied by tenants, who may be hard to evict… Sometimes ‘you have half an hour to make a half-million-dollar decision.’” In addition, “bidders also don’t always know whether they’re buying a home subject to a lien from another lender, which can happen in cases where the borrower took out more than one home loan.” What the article doesn’t mention is that the more experience you have—this includes having an experienced mentor or advisor behind you—the less likely you are to take unnecessary risks.

Another aspect of house flipping that often goes unmentioned is the number of rules and regulations that can go along with it.  Marcelle S. Fischler does write in his article in the New York Times about the 90 day resale waiting period (recently waived) but he mentions it almost in passing. These kinds of things—along with unanticipated income and capital gains taxes—are just a few the things that can trip up a first time investor.

The state of New York has a number of local laws, as well as rules and regulations specific to your county of purchase.  All too often I see investors buying and selling foreclosures without the proper awareness of these local laws. National gurus such as the one mentioned in Fischler’s article make interesting news, but they won’t help you as an investor avoid transactions in violation of  local laws—such as the New York State Home Equity Theft Prevention Act. Working closely with a trusted local attorney will help you stay on the right side of the law.

Even if you are not a real estate investor, but someone merely looking for an affordable home for you and your family, you may have concerns about house flipping.  After all, there is a dark side to house flipping, and buyers need to protect themselves from those who would take advantage of them.  Again, here is where the advice of a knowledgeable real estate lawyer can be invaluable.

Whether you are an experienced investor, new to the game, or simply looking for the perfect home for your family, my goal is to make sure you come out on top.  Call my office with any questions about this or other real estate related topics.

Common superstition says that famous deaths come in threes, but the death of New York Yankees owner George Steinbrenner on July 13 makes four billionaire deaths in 2010. It’s hard to deny the significance of such events in a year when there is no estate tax.

According to the Associated Press Steinbrenner’s family is set to receive a tax break of “about $328 million” because of the estate tax repeal this year. This number, along with the millions of dollars saved (that would otherwise have gone to pay estate taxes) by the families of Dan L. Duncan, Walter Shorenstein, and Mary Janet Morse Cargill may inspire Congress to take action on the issue of the estate tax before the year is over. The Washington Post quotes Senator Bernard Sanders of R.I. as saying, “In the midst of this terrible recession, the idea of giving billionaires a massive tax break is obscene… Already we have four billionaire families who are not paying taxes — Steinbrenner’s being the last one. Many billions are being lost. We have to address that reality right now.”

Although there is still some talk of the possibility of the estate tax being reinstated retroactively, most lawmakers and attorneys agree that the further into 2010 we get the less likely this becomes. But missing out on the estate taxes of four billionaires has to hurt, and the members of Congress are not likely to drag their feet much longer. One way or another, we can soon expect to see the issue of the estate tax become a hot topic of debate in Washington. Our firm will keep you abreast of any changes to the law that could affect you, your loved ones, or your estate.

2010 has been anything but ordinary as far as the estate tax is concerned. First there was the unexpected repeal of the estate tax (unexpected not because the repeal was unplanned, but because nobody expected it to actually happen), then the idea that congress could reinstate the estate tax and make it effective retroactively, and now there are rumblings that certain Senators are considering a prepaid estate tax!

According to this article in the Christian Science Monitor, “News reports suggest that the Senate may soon consider restoring the estate tax with an option allowing people to prepay their tax before they die. Details are apparently still in flux as senators negotiate. We—and maybe they—don’t know yet what they’ll propose for the basic estate tax but it’s unlikely to be harsher than the 2009 version.”

If something like this gets passed, a visit to your estate planning attorney will be more important than ever, especially if you have the wealth to protect and the means to spend some money now to save a lot of money later.

Of course, this is all just speculation right now, but even the idea of prepaid estate taxes tells us just how much the government is counting on that revenue—one way or another. If you were under any illusions that the repeal of the estate tax might turn into a permanent thing this should be more than enough to convince you that the estate tax is here to stay.

Usually on this blog I write about how to protect your real estate; how to keep business property profitable and how to pass personal property on to the next generation.  But every once in a while the market plays tricks on us, and property you thought would be a good investment ends up weighing you down.  What do you do then?  How do you turn unproductive property from a liability into an asset?

During the recent downswing of the real estate market, many people found that holding on to unproductive property was becoming a financial hardship. Although the market seems to be on the rebound, not all property is rebounding as quickly—or as strongly—as we’d like.  And yet many people are reluctant to sell their property at a loss. The good news is that there are ways to get the most out of property that no longer serves your family or your business (although it may not be the ways that you think), these include:

• Giving the property as a charitable donation
• Transferring the property into a charitable “lead” trust
• Keeping the property in a retained life estate.

If you think you might like to look further into leveraging your property—for charitable purposes or otherwise—please contact us for more information. Our office can answer your questions about the tax advantages of making a charitable donation of property; or alternatively of keeping the property, but holding it in a separate protective entity such as an LLP or FLP.

When considering your estate, your real property is likely your greatest asset. Let our firm help you decide how to make the most of your real estate, whether you choose to leverage it now or keep it safe for the future.

As an attorney I may now be focused on real estate and estate planning, but in college I majored in environmental studies and was originally planning to go into environmental law, so the tragic oil leak in the gulf hits me on a very personal level.  Every day I see new articles, videos and news reports further chronicling the heartbreaking situation taking place just off our shores. These reports have at times both saddened and angered me, but most of all they have me wondering what can be done to help.

When you own real estate—whether it’s your home, a rental property, or a family vacation retreat—you know that a huge part of keeping up the value of the property is keeping the property clean, safe, attractive and maintained.  Our global real estate is no different.  The environment may not be something we can put in our last will and testament, but in a very real way it belongs to us, and we do pass it down to the next generation; we should protect it as vehemently as we would protect our other assets, because in many ways our environment is our greatest asset.

BP will have to take responsibility for this particular tragedy, but the truth is that the fault lies with all of us. If you are as concerned as I am about the recent oil spill, and would like to help, click here to take action.  To find out more about how do to your part—both simple and great—to preserve our environment every day, follow the links below.  And if you’re wondering how helping the environment may end up helping the value of your property, call our office!

Information to Help You Go Green Every Day:

National Resources Defense Council

WorldWatch Institute

MSN Real Estate: 10 Ways to Green Your Home

What is a QPRT?

Chances are you’ve never heard of a QPRT (Qualified Personal Residence Trust.)  QPRTs are not as familiar as the Revocable Living Trusts (RLT) used by estate planners, and they’re not as prominent as the Irrevocable Life Insurance Trusts (ILIT) recommended by many financial planners; but for the right family and situation, the Qualified Personal Residence Trust can be the perfect solution to your concerns about how to transfer ownership of your home. Think about these questions:

• Would you like to protect your personal residence or vacation home from creditors and lawsuits?
• Would you like to pass your property to your children with as little estate tax or gift tax as possible?
• Would you like to continue to live in your home, but know that it will pass smoothly and tax-free to your children when you no longer need it?

A QPRT is one tool that can help you accomplish all of these goals by taking the property out of your taxable estate and putting it “in trust” for a specified number of years before ownership is transferred to the beneficiaries. During the specified number of years the grantors retain the right to live in the home and continue to take responsibility for maintenance and upkeep; however, at the end of the term the value of the “gift” to the beneficiaries is not based on the current market value of the property, but on the much lower actuarial value of the property as determined by the IRS actuarial tables.

In this way, creating a Qualified Personal Residence Trust is a useful way to give property to your children without incurring high estate taxes or gift taxes—and it allows you to continue living in your residence until a time of your choosing.

Setting Up A QPRT

Before you set up a QPRT you’ll need to decide 3 things:

1. Who will serve as the initial trustee(s)?—This will usually be the property owners—the people who will continue to use the property until the end of the term.
2. How long will you want to continue to live in the home?—This should be a length of time that is useful to the grantors, but not so long that the grantors are likely to pass away before the end of the term.  If the grantor dies before the end of the term the entire value of the property will end up being included in the taxable estate.
3. Who will be the ultimate beneficiaries of the trust?—This is most often the grantor’s children. But have caution when choosing your beneficiaries, once the term is over the property belongs to the beneficiaries, who may or may not choose to allow the grantors to continue their residence in return for fair market rent.

Once you’ve answered the above questions you’ll want to talk to an experienced attorney who can help you safely set up your QPRT.

What are the benefits of a QPRT?

The main benefit of a Qualified Personal Residence Trust is that it allows you to give a gift of significant value to your heirs without incurring heavy estate or gift taxes.  A QPRT removes a valuable piece of property from your taxable estate while allowing you to continue to enjoy the benefit of living in it.  Mom and dad have the security of knowing they won’t be kicked out of their home, while their children rest easy knowing that the inheritance of the family property is a foregone conclusion.  Additionally, during the time that it is in trust, the property is safe from lawsuits or creditors because it is not yet officially owned by either the grantor or the beneficiaries.

Are there any drawbacks to creating a QPRT?

A QPRT will not be the right solution for everyone. First of all, a QPRT will not be of much benefit if your property is still mortgaged.  Secondly, if the grantor dies before the term of the trust is up the property goes right back into the taxable estate and any benefits will be lost.  Thirdly, due to the exacting nature of the IRS rules and regulations, the creation of a QPRT requires the help of a knowledgeable and experienced attorney or tax planner—this is not a trust to attempt on your own!

If there is one way to be sure money stays in the family and grows over time it is through real estate. Despite the year-to-year ups and downs of the real estate market, the value of real property continues to grow over the long term.

Real estate is often considered a comparatively easy way to maintain and grow wealth because it doesn’t require the kind of daily attention—or stress!—that a business demands. Depending on the type of property, real estate typically requires duties that are annual or month-to-month, such as maintaining the physical structures, paying property taxes, making insurance payments, getting updates from property managers, and the like.

What real estate investors might be slow to realize is that property ownership carries with it significant liability risks. Unless the precautionary measures are taken, one small misstep can result in the loss of all your real estate holdings. Imagine it, one person slips and falls in front of one of your properties, and suddenly ALL of your holdings are at risk.

Preventing this kind of mess is not as difficult as you might think—for example, putting each of your properties in its own separate legal entity is one technique that can be used to protect all of your properties (and yourself) from lawsuits. Our firm can help you with this and other asset protection techniques.

We know how important it is to keep your family and your finances safe, and we are dedicated to helping you achieve that security. Call our office and let us tell you how we can put our expertise to use for your benefit.

Do you own a home?  If so, do you know what is going to happen to that home when you die?

Perhaps you want your spouse to have the house when you die.  Or maybe you plan to leave it to your kids. The question is: how is that transfer of ownership going to take place?

If you own your home jointly with your spouse you are probably safe in assuming that title will automatically pass to that spouse when you die; no need for probate, no need to re-title, a joint tenancy transition is generally very smooth. Unfortunately, the real problems with joint tenancy appear when the surviving spouse passes away and your children or other heirs have to contend with the lengthy and expensive probate process. Not only this, but your estate will be subject to estate tax, your heirs may be forced to sell in a down market—or be prevented from selling in an up market—there are simply no guarantees without an effective estate plan.

The fact is—if you own a home, you need a trust.

Putting your home into a living trust essentially keeps it out of your probate estate.  A living trust is an entity that continues even after the grantor passes away, which means that the “owner” of the asset still exists, and probate is thereby avoided. When you pass away ownership is transferred smoothly and immediately to the beneficiaries of the trust. In this way, you can leave your home to your spouse and then to your children without having to go through the probate process.

Another benefit of living trusts is their flexibility.  Whether you want to transfer ownership to a spouse, hold the property for a certain number of years while your children mature, sell and divide the proceeds among your grandchildren, or leave it to a charitable organization, a trust can help you do it.

If you have rental or investment property you may want to consider an LLC or FLP in combination with a living trust as a way to own the property, avoid probate, and easily transfer ownership when you die. For more information about the best way to hold your property, contact my office today.



“No one wants to think about dying. But refusing to look at the documents that will determine where your money goes when you pass away will not make you live longer. It will just make sorting through everything more difficult for your heirs.”

So begins Paul Sullivan’s recent article in the New York Times, and we must admit, we couldn’t have said it better ourselves. Most people simply don’t want to deal with what they imagine will be a mountain of decisions and paperwork to create an estate plan, and they especially don’t want to think about their own death. It’s not that they truly believe avoiding it will help them live forever, it’s just that they know they aren’t going to die tomorrow or next week, so estate planning really isn’t a high priority… yet.

It’s time now for some straight talk. Any one of us—including you—could die tomorrow. Or next week. You could be in a car accident, your plane could crash, or you could simply be in the wrong place at the wrong time. If and when that occurs, what will happen to your spouse and children?

There are two answers to that question:

1. If you have no planning in place your assets will likely go through a lengthy and expensive probate process, losing some value in the process, eventually to be divided amongst your closest living relatives. If you are married your spouse may have to fight your parents about your wishes regarding burial and memorial. And if your spouse dies with you in that terrible car crash your children will be raised by whichever faintly qualified relative steps up to the plate—your parents? Your in-laws? Your 23 year old sister? And if nobody steps up…
2. If you DO have planning in place your assets will transfer quickly and smoothly to the beneficiaries you’ve named, in the amounts you have specified. If you have a spouse that person will be taken care of, while perhaps some of your estate is set aside for your children’s education, or to help them buy a home. Your children will receive their inheritance at a time of your choosing; when you feel they will be ready for the responsibility. Your parents and your spouse will know exactly how to arrange your burial and memorial, and will feel a sense of peace and closure knowing that they are following your wishes.

These are hard truths, and no one denies that they are difficult and uncomfortable to consider, but the heartache that can result from neglecting to think about these things is even more painful to imagine.