Legislative Update: Tax Cuts and Jobs Act

Comparing the House and Senate Tax Cuts and Jobs Act

On November 2, 2017, the House Ways and Means Committee released their comprehensive tax reform proposal, Tax Cuts and Jobs Act (H.R. 1). On November 9, the Senate Finance Committee unveiled their own tax proposal. It is widely expected that both bills will be considerably amended as they go through the legislative process.

Although there will be a lot of discussion and changes to the tax proposals, here is what we know so far:
CCIM Institute’s Priority Issues

Provision
CurrentHouse Bill (H.R. 1)Senate Plan
1031 Like Kind ExchangesAllows investors to defer capital gains taxes on the exchange of like-kind properties.Eliminates the exchange for personal property but preserves the exchange for real estate.Eliminates the exchange for personal property but preserves the exchange for real estate.
Corporate Tax Rate35% corporate tax rateEffective 2018, a 20% flat corporate tax rate and 25% flat rate for personal service corporations.Effective 2019, a 20% flat corporate tax rate and eliminates the special rate for personal service corporations.
Section 179D Deduction for Energy Efficient Commercial BuildingsSet to remain expired as of December 31, 2016Not AddressedNot Addressed
Pass-through Businesses
Taxed same as income with the current top marginal rate 39.4%Effective 2018, 70% of income taxed as wages and 30% taxed as business income (25%) with the ratio adjusted based on capital investment.Effective 2018, 17.4% deduction for non-wage income, but only if taxable income is below $75,000 ($150,000).
Carried InterestAllows a share of an investment’s profits paid to the investment manager exceeding the amount that the manager contributes to the partnership.Retained but a 3-year hold period is required to qualify.Retained but a 3-year hold period is required to qualify.
State and Local Tax DeductionAllows deductions for sales, income and property taxProperty tax deduction is capped at $10,000. Repeals itemized deduction of state and local income and sales tax.Repeals itemized tax deduction for state and local taxes for individuals but allows a deduction for sales and property taxes incurred in business.
Mortgage Interest Deduction$1,000,000 cap$500,000 cap for new mortgages but disallows any deduction for interest on home equity loans.Retains the $1,000,000 cap but disallows any deduction for home equity loan interest.
Estate and Gift TaxesEstate Tax exemption is currently $5,490,000Effective 2018, increases the estate exemption amount to $11,200,000. Repeals the estate taxes for decedents dying after 2024. Lowers the federal gift tax from 40%-35% effective 2025.Effective 2018, increases the estate tax exemption amount to $11,200,000. Does not repeal the estate tax in the future.
Corporate Alternative Minimum TaxAlternative tax rate to calculate a corporation’s tax liability.Effective 2018, would repeal the corporate AMT. For 2019-2021, if a taxpayer has AMT credit carryforward, the taxpayer could claim a refund of 50% of remaining credits and could claim all remaining credits for 2022.Effective 2018, would repeal corporate AMT. Allows the AMT credit to offset the taxpayer’s regular tax liability for any tax year. For 2018-2020 the AMT credit would be refundable equal to 50% of the excess of the minimum tax credit for the tax year over the amount of the credit allowable for the year against regular tax liability and 100% beginning in 2021.
Historic Tax Credit20% credit to certified historic structures.Repeals the credit with a transition rule for expenditures incurred through a 24-month period beginning 180 days after January 1, 2018.Repeals the 10% credit for pre-1936 buildings and reducing the credit for qualified rehabilitation expenditures to certified historic structures to 10%.
Source:
 
Questions? Contact the Government Affairs Liaison at legislative-affairs@cciminstitute.com
 
JUST SOLD – 13-Unit Multifamily Property in Fallbrook

JUST SOLD – 13-Unit Multifamily Property in Fallbrook

We are pleased to announce Gabhart Investments has recently closed on a 13-unit multifamily property in Fallbrook, a property with a 2-star rating.

725 Alturas Lane was sold at 10% over asking price. Gabhart Investments was able to work with both the Buyer and Seller to produce a quick transaction that yielded the highest possible benefit for both parties. The Seller was able to net almost $500K over the original expectation.

This 13 unit apartment building is a value-add opportunity teeming with potential. It is composed of 12 2 bed/2 bath units, which are incredibly spacious, and 1 detached 2 bed/2 bath unit. The property had a lot of deferred maintenance and the new owner will be spending $20K to $30K per door putting in new kitchens, bathroom, flooring and taking care of a long list of deferred maintenance items. The property is 100% occupied at the time of sale and has a lot of room to increase rents which make this property a great investment opportunity. It is projected to have over 6.50 cap rate after renovations and increasing rents.

725 alturas side viewThe property is located in a quiet area just minutes away from shopping and restaurants. Fallbrook has a population of just over 50,000 but is continuing to grow due to its quaint location and proximity to the military base and surrounding areas.

Over the past four quarters, investors have been busy trading assets in North County, making it one of the more active submarkets in turnover in San Diego. The majority of trades involve 1 & 2 and 3 star stock, often with deferred maintenance.

 

 

Commercial Real Estate Internship Update #1 – Blake Imperl

Commercial Real Estate Internship Update #1 – Blake Imperl

How My Views on Commercial Real Estate Are Changing

By: Blake Imperl

As I am approaching the end of my first month as an intern at Gabhart Investments, I’d like to reflect on what I’ve learned, and what has changed thus far.

What I’ve Been Doing

Over the past few weeks, I have been spending a lot of time reading the material Curtis has provided me on Property Valuation & Investment Analysis. Although it is mainly an overview of the subject, it has proved to be some highly valuable content. This material essentially picked up where I left off in my Real Estate Investment Analysis class that I took last semester at San Diego State. I have been brushing up on subjects like tax benefits, 1031 exchanges, expenses, leverage, returns, evaluating cash flow, and much more. I still have a great deal of learning to do on these subjects, but it is exciting to see how what I’ve learned in the classroom correlates to real world applications. It is my intention to continue to read up on these subjects and ask as many questions as I can.

I’ve also been observing how Curtis and his team assemble marketing packages for commercial properties they are listing. I was doing things similar to this at my last internship at Realty National, so I’ve enjoyed seeing how this translates in the commercial arena

Commercial Real Estate Blog Posts

Another task I have taken on is the editing of Curtis’s blog posts. My first edit was a post on property walkthroughs. One tremendous benefit of doing this has been the information I’m learning is sticking much deeper than if I just glanced over it. It’s proved to be a great learning tool for me and I’ve even taken on the task of researching some of the topics I was curious about. Writing has always been a passion of mine, so getting the opportunity to revise and write some stuff has been great. I’m excited that I will get to continue to edit blog posts during my time here.

Property Walkthroughs

This past week I had a great learning opportunity with Curtis to do a walkthrough of a 13-unit apartment building in Fallbrook. I was able to learn about some of the things you should be looking for in a property, both on the interior and exterior. This was a neat real life application after reading Curtis’s article on property walkthroughs. This is certainly the kind of stuff you’d never learn in a class room.

13-Unit Apartment Building In Fallbrook

La Jolla Multi-Family Building

Another property we looked at was a 5 unit multi-family building in La Jolla. This was a very intriguing property because it had great bones, was less than a block to the beach and offered several routes for renovation. When walking the property, we looked at things like the condition of the floors, the bathrooms, kitchens, balconies, electrical, etc… It was far from move-in-ready, however, at the right price this could prove to be a great deal.

Curtis and Abe inspecting the condition of the upstairs balcony

the interior of the detached studio

Co-Star Lunch & Learns

In addition to the property walkthrough, I’ve also attended two Co-Star lunch and learns with Curtis and his assistant Dianne. The one that stood out to me was on the housing forecast over the next few years in San Diego County. I enjoyed this meeting because this is a real problem we will be tasked with fixing over the next decade. This past semester in my investment analysis class I did a great deal of research on this subject, so it was neat to hear the industry take on the issue.

Other Opportunities

Lastly, I have very much enjoyed the opportunity to pick Curtis’s brain. He’s always offering me valuable tips and knowledge about real estate and just life in general. Whether it be tips on client relations, listing properties, or even just financial management, I’ve been trying to act like a sponge of knowledge. He’s always honest about things and I respect that.

My views on real estate are growing stronger than ever and I’m excited all the learning opportunities that lie ahead. I am finding that the San Diego Commercial Real Estate Market contains more possibilities than I ever could have expected. Stay posted for my final update in August!

In a bit,

Blake Imperl

Intern, Gabhart Investments

Meet Our New Summer Intern At Gabhart Investments

Meet Our New Summer Intern At Gabhart Investments

 

Blake Imperl – 22 Year Old Aspiring Commercial Real Estate Professional

 

Background

I moved from Milwaukee to Scottsdale, Arizona when I was 5 years old. Spending my formidable years in the desert climate, I always had dreams of moving to the beach. As the son of a former real estate developer, I was exposed to real estate from a young age. My dad specialized in multi-family and student housing developments in and around the Milwaukee area. Upon graduating high school at 18, I moved to San Diego to study marine biology at San Diego State University. I quickly realized I wasn’t cut out for the science world and changed my focus to pre-business. It wasn’t until my sophomore year that I decided I wanted to be a management major with a real estate minor. I accredit this route to the all inspiring business professors I had at SDSU and to my involvement with The Real Estate Society. As a person who thrives on leadership and entrepreneurial opportunities, the knowledge and values I acquired during my time at SDSU will serve me for the rest of my career. Outside of real estate, I am an avid musician who plays in a local indie rock band called Stray Monroe. We’ve had the fortune of playing at some great venues around San Diego including The Casbah and Soda Bar and have also been played on 91X and 94.9FM. I also enjoy traveling, spending time with my girlfriend, and practicing Portuguese.

 

Why did you choose to intern with Gabhart Investments?

I chose to intern with Gabhart investments for several reasons. First, Curtis seems to have an amazing drive and motivation to succeed. From the first time we met, I could sense that he carries himself to a high level of professionalism with an immense entrepreneurial spirit. Though I had been exposed to commercial real estate before meeting with him, I never entertained the idea of making it into a possible career. He definitely opened up my eyes to all the opportunities that could be had in commercial. Second, Curtis is a very generous person who gives back to the real estate community. His involvement with past interns, students, and aspiring professionals, really spoke volumes to me. I sensed that if I gave it my all during this internship that I would get a lot back. Lastly, I really liked the opportunity to learn in a small team environment. I felt that I would get a great deal of hands-on experience and intangible knowledge.

How did you hear about the internship?

I heard about this internship through my former boss, Randy Zimnoch, who is the owner of Realty National. Realty National is an investor-friendly and full-service brokerage based out of Pacific Beach. They’ve developed a stellar team of over 30 agents since their inception in 2011. Randy was crucial in setting me on the career path that I am on now. Without his guidance, I think my focus in real estate would have been entirely different.

Why would you work for free?

Knowledge is invaluable. What I will be learning over the course of this internship far outweighs any minute compensation I could currently earn elsewhere. I realized early on in my college education that you can’t monetize the value of experience, because it’s that very experience which will make you more money down the line. In my initial meeting with Curtis, he asked me about my professional goals. One of the things I told him was that it was a personal goal to be a millionaire by the time I’m 30. He told me through hard work, smart decisions, determination, and a bit of luck that it could be possible. This isn’t to say I anticipate real estate being a get-rich-quick process; I fully understand you need to be in for the long-haul. Judging by how successful he has been thus far, I think it’s safe to say I’m learning from somehow who could teach me some things on how to make that possible.

What are you trying to accomplish?

It is my goal to walk out this internship a much stronger professional that I was before. I will achieve this by applying myself and acting like a sponge of knowledge. I want to understand the commercial arena better and pick up on some things that have made Curtis so successful. I’d like to also understand how I can hit the ground running upon graduation in December of this year. It is my hope that I can add many invaluable tools to my real estate belt that I will be able to utilize for years to come. Lastly, and most importantly, I want to add as much value as I can to Gabhart Investments.

Why is it you are interested in Real Estate?

I touched on this early, but I attribute my interest in real estate to my father and The Real Estate Society at SDSU. From a young age, I remember walking properties with my dad, doing napkin math, and talking real estate. Though I may not have realized it at the time, he was planting the seeds that would eventually grow into a profound interest. Once I got involved with The Real Estate Society in my sophomore year, I began to apply a lot of those concepts my dad and I initially discussed. I went to every guest speaker event, every case study, networked, took notes, and constantly worked on my professional development. I also served as Director of Marketing during my third year and this past year I was Vice President on the executive board. Lastly, I need to thank my many mentors who have helped me along the way; David Smith, Sean Bascom, Kris Kopensky, Mark Goldman, Mike Wolfe, Cody Zindroski, Jessica Barber, and many others. Their support and knowledge have proved to be invaluable.

 

I will be making monthly posts on my progress here at Gabhart Investments, how my views are changing in regards to real estate, and any other new updates. Stay posted!

In a bit,

Blake Imperl

Curtis Gabhart Earns Prestigious CCIM Designation

Curtis Gabhart Earns Prestigious CCIM Designation

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I am happy to share with you that I have been awarded the Certified Commercial Investment Member designation by CCIM Institute. The designation was awarded during a pinning ceremony on April 4 during CCIM Institute’s Midyear Governance Meetings at the Fairmont, in Chicago.

I was among 164 designees honored by CCIM Institute and their local chapter members. The new CCIMs have varying years of experience and work in all aspects of the commercial real estate profession. They hail from 36 states, the District of Columbia, Puerto Rico, as well as five new CCIM designees from Canada and one from Germany.

I started to pursue the CCIM designation program back in year 2005 and now I am one of the Board Members of CCIM San Diego Chapter.

To earn the CCIM designation, commercial real estate professionals must complete more than 160 hours of case-study driven education covering topics such as interest-based negotiation, financial analysis, market analysis, user decision analysis, investment analysis, and ethics in commercial investment real estate. Candidates must also compile a portfolio demonstrating the depth of their commercial real estate experience and pass a comprehensive examination.

Celebrating its 50th anniversary, CCIM Institute is a global community of 13,000 members, more than 50 chapters, and 30 countries that educates and connects the world’s leading experts in investment strategy, financial analysis, and market analysis.

The Designation

The CCIM designation remains the only credential at the leading edge of investment strategy, financial analysis, and market analysis.

CCIM stands for Certified Commercial Investment Member. The CCIM lapel pin denotes that the wearer has completed advanced coursework in financial and market analysis, and demonstrated extensive experience in the commercial real estate industry. CCIM designees are recognized as leading experts in commercial investment real estate.

Investment Expertise

Above all, the CCIM designation represents proven expertise in financial, market, and investment analysis, in addition to negotiation. Courses in these core competencies are taught by industry professionals, ensuring all material reflects the state of the industry. With this real-world education, CCIM designees are able to help their clients:

Minimize risk
Enhance credibility
Make informed decisions
Close more deals