Resources For Investors

Section 1031(a) of the Internal Revenue Code (26 U.S.C. § 1031) states the recognition rules for realized gains (or losses) that arise as a result of an exchange of like-kind property held for productive use in trade or business or for investment. It states that none of the realized gain or loss will be recognized at the time of the exchange. It also states that the property to be exchanged must be identified within 45 days, and received within 180 days.

• Investors / Business visa
• The E2 is the primary investor visa and there is currently no quota or annual cap, so E2 visas are unlimited in the number available.
• An E2 visa basically allows you to buy entry into the USA without actually "immigrating."
• The E2 visa is typically issued for two or five year periods.
• The E2 can be renewed indefinitely as long as the investor is running the business and it generates "more than enough revenue" to support the investor's family.
• The E2 visa also covers the investor's spouse and children under age 21.

Who typically uses the E2 Investor Visa?

• People who want to purchase a franchise or small business in the USA
• People who want to retire in America.
• Real estate investors

The EB-5 visa for Immigrant Investors is a United States visa created by the Immigration Act of 1990. This visa provides a method of obtaining a green card for foreign nationals who invest money in the United States. To obtain the visa, individuals must invest $1,000,000 (at least $500,000 in a "Targeted Employment Area" - high unemployment or rural area), creating or preserving at least 10 jobs for U.S. workers excluding the investor and their immediate family.

Sale-and-leaseback, is a financial transaction, where one sells an asset and leases it back for the long-term; therefore, one continues to be able to use the asset but no longer owns it. The transaction is generally done for a variety of purposes, including financing, accounting, and taxing. After purchasing an asset, the owner enters a long-term agreement by which the property is leased back to the seller, at an agreed-to rate.

An installment sale is a sale of property where you realize a gain and receive at least one payment after the tax year of the sale. In each year you receive a payment, you must include in income both the interest part and the part that is your gain on the sale. You do not include in income the part that is the return of your basis in the property. Basis is the amount of your investment in the property.

Most people are only familiar with one type of real estate ownership; fee simple, also known as freehold. It is important to know the difference between fee simple and leasehold, especially if you’re buying real estate in a leasehold state such as Hawaii along with a few other states in the United States. The difference in these two types of land tenure is very different and affects the value of the real estate.

FEE SIMPLE: Fee simple is sometimes called fee simple absolute because it is the most complete form of ownership. A fee simple buyer is given title (ownership) of the property, which includes the land and any improvements to the land in perpetuity. Aside from a few exceptions, no one can legally take that real estate from an owner with fee simple title. The fee simple owner has the right to possess, use the land and dispose of the land as he wishes: sell it, give it away, trade it for other things, lease it to others, or pass it to others upon death.

LEASEHOLD: A leasehold interest is created when a fee simple land-owner (Lessor) enters into an agreement or contract called a ground lease with a person or entity (Lessee). A Lessee gives compensation to the Lessor for the rights of use and enjoyment of the land much as one buys fee simple rights; however, the leasehold interest differs from the fee simple interest in several important aspects. First, the buyer of leasehold real estate does not own the land; they only have a right to use the land for a pre-determined amount of time. Second, if leasehold real estate is transferred to a new owner, use of the land is limited to the remaining years covered by the original lease. At the end of the pre-determined period, the land reverts back to the Lessor, and is called reversion. Depending on the provisions of any surrender clause in the lease, the buildings and other improvements on the land may also revert to the lessor. Finally, the use, maintenance, and alteration of the leased premises are subject to any restrictions contained in the lease. During the lease term, typically there is a lease rent to be paid and there may be periodical increases throughout the term.

The asking prices for leasehold properties are typically less than an equivalent property that is fee simple.

Important Leasehold terms to know:

• Lease Term – The length of the lease period (usually 55 years or more)
• Lease Rent – The amount of rent paid to the Lessor for use of the land
• Fixed Period – The period in which the lease rent amount is fixed
• Renegotiation Date – Date after the fixed period that the lease rent is renegotiated
• Expiration Date – The date that the lease ends
• Reversion – The act of giving back the property to the Lessor
• Surrender – Terms of the reversion
• Leased Fee Interest – An amount a Lessor will accept to convey fee simple ownership

National Association of Realtors
www.realtor.org

FIABCI
www.fiabci.org

Urban Land Institute
www.uli.org

CCIM
www.ccim.com

National Association of Real Estate Investment Trusts
www.nareit.org

National Multi-Housing Counsel
www.nmhc.org

Smith Travel Research, Inc
www.str.com

International Counsel of Shopping Centers
www.icsc.org

Building Owners and Managers Association International
www.boma.org