Cliff Hockley

Bluestone & Hockley Real Estate Services

As we begin 2012, all real estate investors need to pay very close attention to the ever changing tax landscape.  Particular attention needs to be paid to the significant tax increases slated to occur in 2013.   Investors considering whether or not to sell and pay their taxes, or sell and 1031 Exchange, must consider the year-over-year tax implications. Real estate investors will have a much greater tax burden in 2013 than in 2012.

 Tax Rate Changes for 2012 and 2013

Courtesy of Delap  CPA, Lake Oswego, Oregon

 Medicare Tax

Beginning January 1, 2013 a new Medicare tax of 3.8%  will be applied to investment income of those investors with a modified adjusted gross income of over $200,000 ($250,000 for couples filing jointly).  The tax applies to the lesser of the (1) total investment income for the year, and (2) the amount by which the individual’s total income exceeds the threshold.  For example a single individual taxpayer who has $150,000 of investment income and $125,000 of other income will pay the new Medicare tax on $75,000(the amount by which the individuals’ income exceeds the $200,000 threshold. Because the threshold amounts for the new Medicare tax are not indexed for inflation, more taxpayers will be subject to the new Medicare Tax over time. 

(courtesy of Jenee” Hilliard ,Attorney at Law , Miller Nash)

Estate Taxes

Courtesy Delap CPA, Lake Oswego, Oregon

More details for those investors that have employees on-site at their properties:

1. Minimum Wages have increased in Oregon and Washington:

As of 1 January 2012 the Minimum wage has increased to:

 ~ Oregon to $8.80 an Hour

~ Washington $9.04 an Hour

Note: Continued uncertainty regarding social security taxes:  Even though the President and Congress have  extended the social security tax reductions for 2 more months there is no guarantee that they will be continued through next year 2012.  Under the compromise late in 2010 that extended the tax cuts by President George W. Bush, employees in 2011 are paying Social Security at a reduced rate of 4.2 percent. President Obama would like to lower the 2012 Social Security tax rate for both employers and employees to 3.1 percent. But if Congress does not take action in two months, the Social Security tax rate in 2012 reverts to the usual 6.2 percent for both employers and employees.

(http://erinarvedlund.wordpress.com/2011/12/08/taxes-are-going-up-no-matter-what-party-you-support/ )

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Sale

LVL, LLC has purchased a 7 unit apartment building located at 3503-3527 NE Grand Ave in Portland, OR from Symphony Asset Pool VIII . Cliff Hockley of Sperry Van Ness | Bluestone & Hockley represented the buyer. Grayson Pounder of Hendricks & Partners represented the seller.

Sale

Fuel Options, LLC purchased a gas store/c-store at 52023  Columbia River Hwy in Scapoose, OR from Global Investments, Inc. Philip Higgins of Sperry Van Ness | Bluestone & Hockley represented the seller. Christopher Gaskins of Petroleum Realty Advisors represented the buyer.

Sale

KLOH LLC purchased a house at 8918 Taylor St in Portland, OR from AHMSI. Philip Higgins of Sperry Van Ness | Bluestone & Hockley represented the seller. Arika Wobly of Blu Dot Realty LLC represented the buyer.

Lease

Mental Health America of Oregon has leased  850 square feet of office space at 10150 SE Ankeny Rd in Portland, OR from Unlimited Financial Properties. Karen Soll of Sperry Van Ness | Bluestone & Hockley brokered the transaction.

Lease

Moby Duck has renewed their lease of  5,096 square feet of retail space at 10820 NE Coxley Dr in Portland, OR from the Cheng Family. Laura Pallin with Sperry Van Ness | Bluestone & Hockley brokered the transaction.

Lease

George Fox University has renewed their lease of 8,092 square feet of office space at 12570 SW 69th Ave in Tigard, OR from COA7. John Brandhorst of Sperry Van Ness | Bluestone & Hockley brokered the transaction.

Lease

Richards Packing has leased  14,500 square feet of industrial space at 2730 NE Riverside Way in Portland, OR from COA1 . John Brandhorst of Sperry Van Ness | Bluestone & Hockley represented the landlord. Cara Nolan of CB Richard Ellis, Inc. represented the tenant.

On February 15th, 2012 at 4:30pm Bluestone & Hockley University will be offering a course in exploring real estate investing in 2012. Even if you are a seasoned investor, this is an opportunity to take advantage of the current economic environment.

• Balancing Risk & Return
• Interest rates for different property classes
• Tax rate change between 2012 & 2013
• Investment choices & comparisons
• Avoiding trouble when purchasing troubled assets
• Understanding the language & formulas of real estate investing

Instructors:

Cliff Hockley

Bluestone & Hockley Real Estate Services

My wife, Julie, and I went on adventure in November of 2011. We traveled to Koothattukulam, Kerala, India to the Sreedhareeyam Ayurvedic Eye Hospital.

Just to set the stage, Koothattukulam is located 1.5 hours by car from the Cochin (India) airport in the middle of lush farmland in the rural part of Kerala, South India. The hospital itself is surrounded by rice paddies, rubber plantations, pineapple groves and all sorts of herbal plants.

We traveled this far because Julie has an irreversible eye condition, much like macular degeneration, which at some point will make her blind. We had been told that the potential existed to stop the deterioration of her vision. We came with very low expectations, but much to our surprise her vision improved during our visit.

Key ingredients to this eye treatment included, drinking special water, eating a strictly vegetarian diet (supplemented with hard boiled eggs) numerous massages and purges, of course no TV or computer and complete rest (not the American way). The food served was usually spicy Indian dishes so we ate as much as we could handle, then had nuts and biscuits to fill in.

The medical care was incredible. We were visited by doctors every day, and had excellent treatment from the nurses and the support staff. Everyone spoke rudimentary English but the main language spoken is Malayalam. On the other hand, there were numerous power failures every day and often had no water for a few hours. The walk to town was about 20 minutes though you could almost always find a rickshaw taxi (a motorcycle with room for two or three in the back), that would take you to town for 30 rupees (75 cents or so). The town of Koothattukulam has about 15,000 inhabitants. There are a couple of small hospitals, our hospital, a rubber refiner, a coconut oil refiner, catholic schools and about 100 small businesses. There were many jewelry stores, cell phone stores, a few grocery stores,vegetable stands, and a whole section of town was dedicated to furniture manufacturing. Each of the furniture factories had one to three employees who focus on one thing, for example one factory made beds, another made chairs, yet another made tables etc.

Most of the streets are unmarked, in terrible condition and with almost no sidewalks. Despite the poor condition of the roads people often ride three or four to a motorcycle. In the rural areas cars are still a luxury. The only way people stay safe on the roads is by driving slowly.

Americans need to realize that India is real competition for us. Cost of operations is much lower in India and Indians work much harder than we do. Even with the significant increase of the middle class (they get paid more), entry level Indians make about 4000 rupees a month, which translates into eighty dollars a month, often working over seventy hours a week (seven days a week, ten hours per day) with no paid vacations and no health insurance.

Even with the challenges created by corruption and a slow legal system, Indians speak English, work hard and are willing to compete in the international environment at a significantly lower cost than Americans. This means that American and international businesses will continue to send labor intensive jobs to India. In addition, Indian expatriate labor is powering the Middle East and the rest of the world. Remember, there are over one billion two hundred million Indians as compared to one billion three hundred million Chinese and three hundred and thirteen million Americans.

As Americans, we need to continue to be extraordinarily creative and competitive in order to keep jobs onshore, rather than have them outsourced. If we do not, our unemployment rate will continue to rise. As our unemployment increases, even with increases in population, our housing need will stay flat and our need for commercial buildings will remain low. This will have a serious impact on future real estate investments in the United States, as it is employed Americans that pay rent for apartments and employees that fill office towers, industrial and retail buildings.

It is our job to fund education and help our children be more successful when competing with other countries. As investors, we need to understand the global marketplace is just that, global and our cities compete with cities in other parts of the world.

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