Most real estate investors know the importance of purchasing insurance for their commercial property.  The common risks they protect against are liability for slip and fall incidents and damage caused by fire or other hazards.  However, there are other key factors to consider when shopping for and reviewing insurance policies for your commercial real estate investment.

A. Proper Valuation- Often investors end up paying more on premiums because their policies insure the property up to the resell value rather than replacement value.  The replacement value is the cost to repair or replace the property at the time of the loss by using like kind and quality materials.  It is not the market value of the property.  In determining the replacement value of your property, industry standards are used such as construction class, square footage, year built etc… Be sure to insure your property to its proper replacement value. Insurance companies will never give you more to repair or replace the property than the replacement value at the time of a loss, so it doesn’t make sense to insure to an inflated market value.

B. Flood Insurance- If your property is in New York City, insuring it against flood damage may not be at the forefront of your mind.  However, with the numerous water main breaks throughout the City in the past five years, insuring against flood damage is key to protecting your investment. Remember, a flood can be caused by sources other than coastal waters and rivers.  Water main breaks are more common than you might think, and the cost to repair or replace damaged floors, walls and carpets, as well as the cost of mold remediation, can be quite expensive. Flood coverage is not always automatically included. Be sure to ask your broker to include this important protection on your investment property.

C. Coverage Form- When reviewing your insurance policy make certain that the policy is written to insure your property on a “replacement cost basis.” Replacement Cost coverage means that your property will be replaced without a deduction for depreciation at the time of the loss.  Also, be sure that your policy is written on a “Special” form basis, thereby providing the broadest coverage available.

D.  Co-insurance-a term often misunderstood in the insurance world. It refers to a penalty you will incur if your property is NOT insured to the proper limits or within a reasonable valuation.  For example, if the proper replacement value of your building is $1,000,000, and you have a 100% Co insurance clause, you would need to insure to 100% of that value, or you might incur a penalty at the time of loss. The greater the underinsured limit you carry the greater the penalty will be assessed at the time of loss. Essentially, to the extent that you are underinsured, you become a “co insurer” of the property. Discuss eliminating coinsurance entirely on your policies.   Discuss these matters with a competent, licensed insurance broker to avoid confusion at the time of a loss.

E. Business Income & Extra Expense Coverage- although most investors do protect against the risk of loss of business income when the property suffers damage, it is important to consider loss of rent and extra expense coverage. Be sure to discuss adequate loss of rents coverage and know that, in the event of a loss, you will likely incur many unexpected “extra expenses.” Be sure to discuss proper loss of rents and extra expense coverage with your broker. At the time of a loss, this could be the difference between coping with a loss, and losing your investment.

No matter what your current insurance policy, it is beneficial to have it reviewed by an insurance professional to make sure you are not overpaying and you are protecting your investment.

[Data Source: Interview with Panel Expert: Brendan Leavy, a veteran in the commercial insurance industry].

Nowadays everyone is looking to buy bank notes /mortgage loans at significant discounts.  They aspire to walk away with control over a prime asset in New York City for 50% to 60% cents on the dollar.  However the reality is that in New York City 70% to 80% discount on a bank note IS a significant discount. What might be prevalent in other parts of the country does not reflect the circumstances, benefits and competition of the New York City commercial market.

The Status of Non-Performing Notes Market

New York City

In the course of the next four years, $1.4 trillion dollars in commercial real estate loans are expected to come due.  Moreover, contrary to popular perception, it is not the large banks (the Wells Fargo and Banks of Amercia) that are confronted with this looming crisis but the smaller- regional banks-like New York Community Bank.  These banks loaned exorbitant amounts of money, inclusive of their reserves, to over-leveraged purchases. Consequently the rates of defaults in these regional banks predictably will continue to skyrocket. As a startingly example, New York Community Bank has 94% of its debt in the commercial real estate market! (Multifamily Investor).

Nationwide

Although the commercial real estate market is improving with prices increasing up to 6%, the rate of defaults continues its upward climb. (Realtor. org) .  According to Fitch Ratings (an international ratings agency which provides bond ratings and research on banks ) loan defaults will continue to deteriorate for commercial mortgage-backed securities (CMBS).  It projects the default rate to reach 11% from the current 7% by year end 2010. Among the biggest concerns are the default rates in large loans.  In 2009, 56 loans in amounts exceeding $50 million dollars defaulted.  Additionally, in contrast to the past five years, the retail sector with 32.3% default rate beat out the multifamily sector which experienced a 22.1% default rate. The office sector had a 20.2% default rate and hotel sector suffered a 17.8% default rate. “Fitch predicts the 10-year cumulative default rates on 2007  Fitch-rated CMBS to reach a staggering 27 percent!” (DSnews.com)

The Realities of the Purchase Process

With assurances that the non-performing notes market will continue to expand both in volume and magnitude, an interested investor needs to consider the factors at play in oder to profit from the opportunities  this market has to offer.

The Research on the Property Securing the Bank Note

Unlike a traditional property purchase, in a bank note transaction there is no set-up or detailed financials to review while considering an offer. Rather the investor will only receive the address of the property from the bank. From that point on, it is the investor’s responsibility to undertake as much research as possible on the property securing the Note in order to make an informed decision to pursue its purchase. Moreover, communication with the current owner/titleholder of the property is frequently ill-advisable.  The owner is in the midst of defending a foreclosure lawsuit by the bank and thus her own wish is to sell the property at top price so that she can pay off the Note herself and walk away with the equity she was promised when she purchased the property in 2007!  Additionally, if the investor does in fact purchase the Note, he risks loosing negotiating leverage with the owner, if he tries to work out a pre-Note purchase surrender of title.

The Valuation Process to Formulate a Competitive But Advantageous Offer

This factor is a corollary of the previous one.  In order to be able to submit a competitive but advantageous offer, an investor will be required to price in all the risk factors involved in his journey to acquire title of the property.  Such risk factors include:  (1) the interior condition of the property; (2) the price to persuade the current property owner to surrender title; (3) the price to persuade a tenant to seek out other living accommodations and (4) the legal fees that might be involved in bringing a foreclosure suit against the current owner.

The Negotiation Process With the Bank’s Contact

Typically a bank note deal can only be offered by a broker with a relationship with the bank.  It is via this relationship that the broker is able to gain access to these Notes.  The relationship between this broker and the bank is the key to negotiating a successful bank Note transaction.  Since the banks are presumptively taking a loss on the sale of the Notes, they do not compensate the broker for his services.  Rather, in this scenario it is the investor who stands to gain most in the deal and thus the responsibility of paying the broker’s fee validly rests upon buyer.

The Negotiation with the Owner (Title-Holder)

Upon the successful purchase of the bank Note, the investor then needs to address acquiring legal title from the current owner.  The bank will inform the current owner in writing about the consummated sale and transfer of the Note to the investor.  At this point the investor needs to initiate negotiations with the owner to surrender title in lieu of fighting it out in a foreclosure proceeding.  Given the leverage that the investor has with possession of the Note; and disadvantages to the current owner of being flagged with a foreclosure judgment, negotiations may be heated but should prove successful.

The Negotiation with A Tenant

Similar to negotiating with a “distressed owner” in a bank note context, negotiating with a tenant may prove challenging.  Often owners that default on their loans have also defaulted on other financial obligations and may have refrained from maintaining the property as a result.  This situation might assist in negotiating with the tenant to seek out other accommodations.

Conclusion

As is the case with any great opportunity in life, the journey is filled with challenges. To offer you these bank note opportunities, we have partnered with brokers direct to regional banks within the NY Metro area.  More importantly, to navigate the challenges from identifying the opportunities to your acquisition of the property, we also provide the professional services to support your investment objectives and lead you to a successful transaction.  Should you be interested in learning more, please subscribe to our Newsletter.

Avant-Capital Partners has just announced a private money program that addresses the need for quick closings.  This program allows investors to close in 5-10 days with no 3rd party reports.  Avant-Capital relies on an internal valuation analysis to decide whether to approve a loan request.

Additional details:
- Refinance unencumbered real estate quickly to gain equity for opportunistic acquisitions
- Discounted note purchases and/or recapitalizations of under-water assets
- Quick closing to opportunistic acquisitions (no appraisal required)

Basic parameters of the lending program are:
Loan amounts from $250,000 to $5,000,000
Fixed interest rates from 12.00% to 15.00%
Loan fees from 3.00% to 6.00%
50% to 70% LTV
6 to 18 month terms, with extensions
Properties located in Northeast corridor and Texas. Other core markets will be considered.
Property types under consideration include multifamily, industrial, office & retail
No appraisal required
Closing timeframes range from five to fifteen days.

[See: Drawing to a Quick Close,  GlobeSt.com, March 22, 2010].

Two New York City banks became the 27th and 28th bank failures of 2010, according to the information provided by the Federal Deposit Insurance Corp. With 140 bank failures in 2009 and 30 to-date this year, the lending industry continues to struggle with mounting losses from bad loans. Many banks that are still open for business have put a halt on new commercial real estate lending, and are instead, focused on managing existing loans in their portfolio. Financing has become much more difficult for borrowers to obtain, but it is available, for those that know where to look and how to present their request.

While the availability of credit is no longer as widespread as it was just a few years ago, there are national and local banks that are still actively lending on commercial real estate. Other traditional sources of financing such as life companies, agencies, REIT’s, hedge funds, and private lenders have been active throughout the credit crunch and are still viable sources of capital. The loans offered by each one of these sources will vary to some degree. Interest rates, loan terms, amortization schedules, recourse, and leverage are all items that will vary from one lender to the next. What is consistent, however, is the information each lender will need to review a loan request.

The lenders that are currently active in today’s marketplace are finding themselves inundated with loan requests, and requests that are incomplete will find themselves pushed to the bottom of the heap. Understanding how to present your loan request and what information will be required can not only improve the speed in which you receive a response, but also whether that response is an approval or denial.

In general, all lenders will look at the following key factors:

(1) The Property:

• Cash flow of the property – historical, in-place, and budgeted
• The quality of the asset
• The characteristics of the market
• Business plan

(2) The Sponsor

• Financial strength
• Liquidity
• Contingent liabilities
• Experience

The Property

Since the Property will be the collateral securing the loan, it will be the key focus of the review. Items that will be required by the Lender include:

a. Current Rent Roll

b. Historical and Year-To-Date Operating Statements

c. Property Photos

d. Market Information, including occupancy and average rents

This information will enable the lender to determine whether or not the Property is currently stabilized and whether the in-place cash flow is sufficient to meet debt-service coverage requirements, as well as whether the Property meets their asset-quality requirements. Stabilized Class “A” properties located in strong markets will qualify for better rates more desirable loan terms than lower properties that exhibit risky attributes such as high vacancy, deferred maintenance and declining rents. With lenders being more cautious in today’s environment, occupancy and rent trends are often reviewed, and providing monthly income and expenses can illustrate whether a property exhibits stable, declining or improving performance.

Borrowers seeking financing for construction or construction completion loans will need to provide a lender with a greater amount of information, as these projects entail a greater level of complexity. Additional information required for construction loans typically include:

a. Project Budget

b. Business Plan

c. Sources and Uses of Funds

d. Project History e. Milestones and Projections

f. Absorption Analysis (for condominium projects)

The Sponsor

As the Project Sponsor, the lender is relying on you for the successful execution of the business plan and timely loan payments. They will need to verify that you have adequate financial strength and experience to support the Project. Items that will typically be required include:

a. Net Worth Statement

b. Schedule of Real Estate Owned

c. Schedule of Contingent Liabilities

d. Resumes highlighting experience with similar properties

Lenders will typically look for a Borrower’s net worth to be equal or greater than the loan amount requested. They will also want to see cash reserves available post-closing to mitigate the payment risk should the Property unexpectedly experience an interruption in cash flow. Typically, the down payment required for a property will range from 20% to 35% of the purchase price, and a wise general rule of thumb is to have cash reserves in the amount of 6 months principal and interest payments available after closing. For a property “in-transition” (one that requires substantial renovation, has higher than market vacancy, etc.) the down-payment and cash reserves requirements will be considerably higher to offset the greater risk.

A Sponsor’s resume is also a key factor that will be reviewed, as a track record of successfully developing and/or managing similar properties provides evidence that the required experience is there. The Schedule of Real Estate can add further strength to the Sponsor’s experience, as it shows the number and size of other assets currently owned. It can also be used to identify any contingent liabilities, as the presence of loan guarantees on non-performing properties or upcoming loan maturities can signify potential risk in the Sponsor’s finances. The preparation that is put into detailing this information and creating the financing package can exponentially increase the probability of obtaining a loan. Understanding what a lender will look for, as well as how a loan will be underwritten, can also help when evaluating potential investments. Valuable time (and often, money) is often lost when investors pursue projects for which they cannot obtain financing.

(Data Source: Panel Expert Adam Luysterborghs of Avant Capital Partners).

About Avant Capital Partners – Avant Capital Partners is a real estate investment bank and correspondent lender for several institutional investors and has offices in New York, Boston, Chicago, Dallas and Greenwich. The firm provides clients with a full spectrum of debt and equity capital solutions for commercial real estate, including portfolio advisory, restructuring and workouts. Avant represents a broad range of capital sources, including institutional investors such as life companies, pension funds, REITs, government agencies such as Freddie Mac, Fannie Mae and HUD, private money sources such as hedge funds and family offices, real estate capital markets and national and community banks. The principals and directors of our company have collectively completed over $5 billion in debt and equity financings over the last four years alone, and represent a broad range of experience as developers, owners, managers and financiers of commercial real estate. Avant has serviced clients ranging from individual commercial investors to widely-known institutional asset managers and can provide senior debt, mezzanine and bridge loan financing, equity and/or joint venture capital solutions for real estate acquisitions and recapitalizations ranging from $2 million to $100 million.

According to Real Capital Analytics, a research company that tracks commercial real estate trends, the default rate on commercial real estate loans increased to 3.8% from 1.6% a year ago. Moreover, separately assessed in its own category, the default rate on loans tied to multifamily properties escalated to 4.4% from 1.8% a year ago.

The New York based research company concludes that there are 8,942 commercial properties that are classified as “distressed” throughout the United States.

Further based upon their research, without additional policy intervention, default rates on office, retail, hotel and industrial properties are expected to rise to 5.1% from 3.8% in 2009 and will peak at 5.4% at the end of 2011. In the multifamily sector, the company anticipates the defaults to peak at 5.3% by the end of this year.

Notably, Research Capital Analytics opinions that smaller institutions with $100 million to $10 billion in assets will likely suffer the most defaults-given the fact that 33% of their assets are concentrated in the commercial real estate sector. Contrastingly, top-tier banks may hold 48.3% of the outstanding commercial real estate loans, but only have 12.5% of there assets in that sector and have a smaller percentage of loans defaulting.

According to Sam Chandan, Real Capital’s global chief economist, “the level of distress [in the commercial sector] continues to rise irrespective of improving economic treads.”

Perhaps surprisingly, these improving trends include a 4.1% gain in commercial property values in December 2009-the largest jump ever observed by Moody’s Investors Service in the 10 years it has been tracking the price movements of the commercial property sector.

[Data Source: DSNews.com, 2/24/2010]

Commentary:
If the commercial real estate market has bottomed, than where are the “real” purchasing opportunities?  Everywhere. Especially in those assets classified as “distressed” but also in those that have no such classification.  Today’s  CRE market is substantially different than it was  prior to September 2008.  Savvy, informed and cash-flushed investors will reap the benefits of acting prior to the competition increasing both in scope and numbers.  To learn about such opportunities in the New York City area, email us at: mohare@frandimapropertiesllc.com.

Most investors leave the review of their property purchase contract to their attorneys.  However, having an understanding about what to look for and what questions to ask can pay off immeasurably-not only in dollars and cents but in time and emotional well-being.   Typically your real estate lawyer receives a “term sheet” from the brokers, detailing in broad strokes the agreement reached between you and the seller of the property.

Match the Purchase Contract to the Term Sheet
The first thing every lawyer will do is to compare the terms of the contract with those of the term sheet provided by the brokers.  This exercise will reflect the “meeting of the minds” between you and the seller and whether in fact, the seller’s attorney drafted what you believed to be the agreement in the contract.  Although verbal agreements can change subsequent to further negotiations, once you sign the purchase contract, you are obligated under law to comply with its terms and conditions.

Generally, the more flexibility  your attorney can write into the purchase contract, the better. The following contingencies are typical to include on the buy-side:

*Financing-especially these days it is vital that a well-drafted contingency be written detailing the buyer’s exit strategy should the financing anticipated fall through.  Otherwise, you risk loosing the deposit you put
down for the property.  In the event the seller is not willing to accept a financing contingency, an alternative can be offering to “leave some money on the table” just not the total deposit placed on the property.  Typically anywhere from 2%-10% can be negotiated in exchange of keeping the contingency in the contract and accommodating the seller’s concern of tying up the property without guarantee of closing.

*Consider negotiating your loan commitment terms early and broadly so that you decrease the potential of surprises at closing.

*Title Search- is the next paramount contingency that needs to be carefully addressed.  If the term sheet is silent as to any title violations, it is critical to draft a contingency allowing you to exit the contract should you and the seller fail to successfully negotiate any uncovered title violations. At times identifying the lineage of prior owners of a property can be challenging and can further complicate conducting a title search which offers you as the buyer notice of any potential claims.  (See:  Title Issues In Negotiating A Deal).

*Consider negotiating to keep an amount in escrow in the event a title issue is uncovered and needs to be resolved or alternatively, negotiate a discount off the purchase price to address an unforeseen title issue.  Typically, a provision can be drafted with the seller agreeing to pay up to half (1/2) of one-percent of the purchase price and the buyer paying the difference to resolve the title issue.

*Building Code Violations-are also important to write in as contingencies in the purchase contract should these be discovered  during the title search.  These too will need to be successfully negotiated between you and the seller in order to consummate the purchase.

*Environmental Inspection-is another vital contingency to ensure is written broadly in the contract in order to allow you as the buyer to get out of the deal should you uncover circumstances that would thwart your objective for the property or prove to be costly to eradicate.

*Engineering and Structural Reports-similarly need to be written broadly into the contract as these have the potential of having the similar devastating consequences as the environmental inspection results.

*Zoning-your ability to use the property for the purpose you plan is the foundation of making a successful investment. Consider retaining an attorney with zoning expertise in addition to your real estate attorney to ensure the property is zoned is for the purpose you plan for.

Careful Attention to Purchase Contract Provisions
Once having matched the term sheet to the purchase contract, and taking note of major contingencies to closing on the deal, the following provisions need to be carefully reviewed to ensure your protection AT and AFTER closing:

* Representations & Warranties-to the extent the transaction is not an “as is” purchase deal, careful review and
inclusion of any unforeseen circumstances need to be covered.  Although most deals will be “as is” any representations that are made by the seller need to be checked and a exit strategy detailed should the representations prove invalid.

*Review of all the leases and status of the leases needs to take place.  Check for non-payment or conflict of interest circumstances in your review to ensure you will  not experience challenges with your tenants once you take control of the property

*Request the Rent, Security and Payroll, if applicable, schedules for your review.

*Request service and maintenance contracts for the property past and for any on-going work.

*Ensure there are no legal or tax proceedings either against the seller or being pursued by the seller on behalf of the property.

*Request a pay-off letter from the seller of the existing mortgage on the property so that you know exactly what is owed, how much you want and need to finance, and whether an assignment of the loan is possible.

*Ascertain whether you will obtain a “warranty deed” for the property.

*Consult a CPA and determine what is the best legal entity in which to “hold” your property for tax and management purposes.

*If you are purchasing the property with more than one partner, consider creating two separate entities to allow for flexibility in the future, should one or more partners decide to exit the partnership and want to pursue a tax advantaged exchange of the property-or section 1031 exchange.

*In New York City it is wise to calculate anywhere from 8%-10% of the purchase price to account for closing costs involved in acquiring a commercial property.

[Data Source: Interview with Panel Expert, Thomas E. Kass-Commercial Real Estate Attorney.]

A recent report by the Urban Land Institute cites four demographic trends which will impact housing in a significant way:

1. Aging Baby Boomers (55 to 64 year olds) given the losses in their net worth, many will be compelled to continue to work and to remain in their suburban homes until real estate values recover.  Those with the ability to move will choose mixed-age living environments to fit their lifestyles.

2. Younger Baby Boomers (46 to 54 year olds) who currently are entering their prime earning years will lack home equity and as result will not be able to purchase second homes, as the older baby boomers may have been able.  Consequently, the second-home market will experience a decline in demand as we move forward.

3. Generation Y (younger than 45 year olds)  with 86 million members, they are not as interested in home ownership as their predecessors, rather they will more likely be renters by necessity or by choice.  Demand for rental units is anticipated for years ahead.

4. Immigrants (legal and illegal) with 40 million members prefer “multi-generational households.”  Provided they can afford it, they will likely choose to live in larger homes in areas with strong communities.

Evaluating the demographics of the location in which to invest is critical to a successful real estate investment.

[Data Source: Realtor.org, January 29, 2010]

Seeking to reorient and stabilize, Citigroup is selling its Citi Propery Investors portfolio in order to focus on its retail and investment banking businesses.  Ironically, Joseph Azrack who helped build a $13 billion portfolio of commercial properties for the bank and which now has plummeted in value since his departure in 2008, is in the running to once again manage it.  Two firms are bidding to take over the portfolio, Apollo Global Management LP and an Australian company, Macquarie Group.  Subsequent to Mr. Azrack leaving Citigroup, he was hired by Apollo Global.  No final decision by Citigroup has been made to date.

The steep decline in commercial real estate values has lead investors  to question the management of these bank sponsored funds  At the height of the market, Morgan Stanley as well as Goldman Sachs Group Inc., raised multi-billion-dollar real state funds, which in tandem, generated millions of dollars in management fees.

Today, with the benefit of hindsight many investors are considering the strategy of investing in large-bank real estate funds.

[Data Source: WSJ, January 28, 2010]

According to Greg Genovese, president of securities at Thompson National Properties, the commercial real estate markets are nearing a bottom and “its a good opportunistic time to start investing in real estate.” He cautions investors to carefully assess where they are investing in, in what asset type as well as how much leverage they are going to use.  Jordan Sadler, REIT analyst at KeyBanc Capital Markets shared that there are opportunities to be made in REITs.  Both agreed that “there’s a bottoming process about to take place in fundamentals, and valuations are actually fair.”

[Data Source: CNBC Mobile, January 28, 2010]

There is little doubt  among CPAs that the Obama Administration will fulfill its campaign promise to raise income taxes for small businesses and upper middle income individuals (above the $250,000 annual income level).  Most real estate investors hold their properties as partnerships and limited liability companies which are pass-through entities, and thus are taxed at individual rates.  Moreover,  excessive deficits incurred by the federal, state and city governments provide ample predicate for increases in taxes across the board. New York State has already raised the individual tax rate to 9.25% effective in the fourth quarter of 2009.

Strategies to Consider:

A.  Cost Segregation- the IRS Code allows a taxpayer to depreciate a an improvement” to a real estate asset and take an immediate write-off  up to $250,000 dollars per year against profits.  For example: if a group of doctors decide to purchase a property to run their medical practice and they install a chairlift, the cost of the chairlift would be considered a non-permanent nor fixed improvement and thus qualify for the write-off.  This tax strategy is vital to every real estate investor to keep in mind when considering a property purchase, renovations to the property and the costs of the improvements.  Dependent on what these improvements are you might be able to deduct the costs and obtain a rebate from the federal government.

B.  Sound RecordKeeping-Although one might take this concept for granted, this year due to the awakened appetite of our government for revenues, an increase in audits is anticipated.  Therefore, allocation of expenses between direct and indirect expenses is crucial.  Examples of direct expenses are: rent, insurance, utilities, and telephone.  Indirect expenses  are less apparent such as travel, office supplies and professional fees.  Additionally, owner-operators especially need to pay attention to recording all your expenses, whether they are made in cash, credit card or debit card and to retain all receipts for backup.

C. Depreciation-Even if cost segregation would not be applicable, many necessities of running a real estate investment business can be depreciated at different terms.  Namely, depending on the improvements to the property, you might be able to depreciate the asset for a shorter term than a fixed-permanent asset which has the 39 years term for commercial real estate depreciation. This strategy similar to cost segregation would benefit you with a deduction against your profits or a loss to write down.

D. 1031 Exchange-When purchasing/acquiring a property by more than a single investor, partners should consider whether it would be worthwhile to incorporate more than one legal entity to hold the property.  Down the road, one or more of the partners may want to exit the partnership. Holding the property in more than one legal entity provides all partners with added flexibility should that eventuality occur in the future and would facilitate the division and distribution of the ownership shares between the exiting partners. This in turn would afford the partners who exit the ability to do a 1031 exchange and carry-over the capital gains by investing in another property within 180 days as prescribed by the IRS code.

E.  Finally, real estate investors should be aware that in 2010 there is a one-year moratorium on the estate tax exemption. This means that a trust or family limited partnership can leave an unlimited amount to heirs without concern that any amount of the bequest will be subject to the estate tax.  That being said, given the federal government’s need for revenues, investors should keep alert to any changes in the law that might revise the current stay on estate taxes, and make it retroactive and applicable.  In NYS the estate tax continues to limit the bequest exemption to $1 million dollars-any bequests in excess of $1 million dollars will be subject to the NYS estate tax.

Caution: With all 5 of the above tax strategies, it is imperative that you consult with a qualified and licensed CPA to determined whether and to what extent you and your properties can benefit.  Please feel free to contact our Panel Expert, Joseph Gil, should you have any questions about your 2010 taxes.

Interview with Panel Expert: Joseph Gil, CPA.