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New immigration rules will force illegal workers to be fired.
Carolyn Lochhead, Chronicle Washington Bureau

Saturday, August 11, 2007

(08-11) 04:00 PDT Washington - — People clamoring for a crackdown on illegal immigration got their wish with the Bush administration’s announcement Friday of sweeping new enforcement measures that will force employers to fire the millions of illegal workers they now employ.

“We strike at that magnet” of jobs, said Homeland Security chief Michael Chertoff, announcing a new rule holding employers liable for workers whose Social Security numbers do not match government records. The new rule takes effect in 30 days.

No state stands to feel the effects more than California, which has more illegal immigrants - an estimated 2.5 million - than any other state. California farmers are expected to be among the hardest hit with their heavy reliance on Mexican field hands, the vast majority of whom are undocumented. But service businesses will be heavily affected too, from hotels and restaurants to cleaning services and nursing homes.

California Sen. Dianne Feinstein predicted a “catastrophe” in the state’s $32 billion agriculture industry as the new rules become effective with the fall harvest. But the proposal met no opposition from House Speaker Nancy Pelosi, D-San Francisco, who issued a statement saying, “Securing our border remains a top priority for the New Direction Congress.”

The rule that will require employers to fire employees unable to clear up problems with their Social Security numbers 90 days after they’ve been notified or face sanctions and a fine of at least $2,200 for a first offense. Up until now, employers have routinely ignored what are called no-match letters.

“In certain industries and in certain states, there will be a very significant impact on the functioning of businesses or entire sectors,” said Deborah Meyers, a senior policy analyst at the Migration Policy Institute, a nonpartisan think tank. “Some employers are going to find themselves having to fire significant portions of their workforces, and I think there will be employees - some who are authorized and some who are not - who will find themselves out of a job.”

The new rules of enforcement

What happened: New rules proposed Friday by the Bush administration will require employers to fire employees unable to clear up problems with their Social Security numbers 90 days after they’ve been notified of such discrepancies in what are called no-match letters.

What it means: Hiring undocumented workers has been illegal for two decades, but until now, employers were not held liable for fraudulent documents. Employers who fail to comply will face fines and sanctions.

What’s next: The new rules take effect in 30 days.

August 31, 2007 by Dan Pudwill

Have you seen it, it is all over the news stations, ABC/ NBC. They are trying to prepare people for the big disaster due to Earthquake.

They are telling people what they will need incase of a disaster caused by EQ. Such examples would be batteries for a flash light and radio, a charged cell phone, a good pair of shoes and enough water for three days. These things would satisfy your personal needs, but what if you are a business owner?

What if your office were destroyed or severely damaged in an EQ? How long would it take to get back up & running again? Where would you quickly find the phones, computers or office chairs and desks that you might need? Will you need to have generators for the lights or use them to power the computers? What about a mobile office setup? How about all the little things, snacks, coffee and refrigerator so you can keep going steadily through the day?

The sight would be an eye opening experience for an owner because most have not sat down and thought about what they need to get back to business as usual. There is so much to think about during/ after a disaster.

I would recommend informing business owners about the importance of having EQ coverage and make sure they have an endorsement called Business Income/ Extra Expense & EQ Sprinkler Coverage. In the event of an earthquake your building coverage or liability coverage will not pay for that type of loss. Earthquake insurance was designed to cover that loss specifically. EQ Insurance will rebuild or repair the structure and Business Income/ Extra Expense will get your business up and running in approximately 48 hrs. During the quake if the building had sprinklers and they went off and soaked your office or inventory, you would be covered by EQ Sprinkler Coverage endorsement. The business income part will replace the $ that the business had been making before. Earthquake insurance will also pay for loss of rents for habitational owners if their renters can no longer live in the units.
I would also inform the business owner that EQ is very hard to get, especially in Riverside & Los Angeles Counties. There are some companies still offering coverage up to 5 million. We happen to be one of them. Wheatman Insurance has Commercial “All Risk” Monoline Property Policies covering Earthquake and in some cases flood. The policies would be written through companies that have a rating of A++ by AM Best Company.

Our EQ program specifically targets Commercial Property Owners who are finding it hard to secure coverage.

Dan Pudwill/ Agent
Wheatman Insurance Services
A team of professionals. A singular focus. You.

6345 Balboa Boulevard
Building IV, Suite 285
Encino, CA 91316
(818) 921-1450
(818) 975-7559
dan@wheatman.com
www.wheatman.com

CA Lic# 0C36866

Is it possible to utilize a 1031 exchange on a vacation home?

This may come as a surprise to most sellers but the answer to the above question is probably “yes”.

Thanks to a new tax court decision (Barry E. Moore v. Commissioner, T.C. Memo 2007-134) you may now be able to defer paying capital gains by implementing a 1031 exchange on your vacation home. As long as you, the seller taxpayer, can verify that your primary objective was to use the relinquished property primarily for investment and only incidental personal use (generally less than 14 days a year or less than 10% of the time rented), you may be eligible for this new program.

It is crucial that you seek advice from your tax advisor to properly plan your exchange.

If you would like further information please feel free to ask your apartment building trader advisor!

Posted By
Stephanie Moskowitz
Stewart Title
525 N. Brand Blvd
Glendale, CA 91203
(818) 486-7745

With the current status of the capital markets in flux, many sellers of commercial properties are concerned about how this may affect the sale of their own properties, as well as the availability of solid replacement properties. Lenders are tightening their belts and imposing restrictions on new loans, making financing of commercial properties more difficult as well as more costly. In speaking with clients who have recently sold properties, or who have properties presently for sale, the overriding concern I hear expressed is, “how can I avoid blowing my exchange?” It has been reported that even before the current situation developed, exchange accommodators (also known as Qualified Intermediaries) who hold property sale proceeds in escrow for a potential 1031 exchange are forced to refund 30% of those funds when the buyers are unable to close on a replacement property.

At first glance it might appear that would-be sellers will have to hold on to their properties until restrictions on new loans are relaxed, and replacement properties are again readily available. Rather than taking the risk of having to pay capital gains taxes and depreciation recapture, some sellers may be reluctant to sell for fear of not being able to protect their exchange. Others who have sold their properties and have not yet identified a property for their exchange are even more frantic. “What if I am unable to close on my nominated property due to the inability to find financing?” This is a very real concern since paying state and federal capital gains taxes, as well as depreciation recapture, can add up to as much as 22-28% of the sale proceeds. On a $1,000,000 sale that means writing a check to the IRS for $280,000 – ouch.

At the risk of being an alarmist, it may not be an exaggeration to say that there exists a crisis in the commercial lending market such as we have not seen in recent years. One has only to pick up any financial publication or newspaper to read how the sub-prime residential lending debacle has essentially trickled upstream to negatively impact the commercial lending market, particularly the CMBS (commercial mortgage-backed securities) market.

All buyers and sellers of commercial properties are feeling the effect of this freeze-out by most lenders. Loans are harder to come by, require higher down payments, and have higher interest rates. Interest-only loans may be a thing of the past, at least until the markets calm down.

Considering the current status of the financing market, the safest, most reliable option for anyone considering a 1031 exchange may be to place the proceeds of a sale into a tenant-in-common property offered by a reputable sponsor. The larger, more established real-estate based TIC sponsors offer several advantages to exchangers:

• In most instances, when a property is offered for sale to TIC co-owners, the principal, or sponsor, has already acquired the property and locked the loan rate and terms. The loan may be interest only for all or a portion of the term, or it may be amortizing. In either case, the rate is set and not subject to market fluctuations.
• Most sponsors will have completed all of the due diligence on the property to the lender’s satisfaction prior to closing and offering the ownership portions for sale. Appraisals, environmental studies and physical inspections, among other research, have all been conducted and approved, and are made readily available to buyers.
• Certainty of execution is the strongest reason for investing one’s sale proceeds into a quality TIC property rather than a sole ownership property. A principal/sponsor such as SCI and others are not susceptible to having contracts fall out or failing to close on a property. Before the property is brought to the market, execution is assured.
• If the property being offered by a TIC sponsor is newer, high quality, investment grade real estate, in a thriving market, lenders are much more inclined to offer favorable financing rates and terms for these sales. These rates and terms are then passed on to the co-owners of the property.

How long the effects of the unstable lending market will be felt is any economist’s guess. This may be a mere bump in the road, or an uneven ride that lasts much longer. Either way, the tightening of restrictions on loans, and the rising interest rates, will cause investor returns to diminish over the short term. As anyone who has owned investment real estate will attest, however, short-term yields are only one factor to consider in making a purchase decision. What is much more critical to today’s investor is the assurance that his equity will go into a high quality property with upside appreciation potential, and not to Uncle Sam.

Posted By
Jane Hope, CCIM
Vice President - Sales and Marketing
Contact AptBldgTrader Investment Group for further information about Jane Hope and SCI!

Question:
My tenant is clogging up the toilet by throwing in paper towels and foreign objects. Last time my plumber discoverd a scissor in the plumbing pipe. I know which tenant is clogging the plumbing pipe. How can I prove it is her as the tenants all share the same sewage pipe?

Answer:
The court system works on that which you can prove. If you cannot determine which tenant is causing the blockage, then you cannot proceed.

Author
~Dennis Block: Source

Vacancy rates in the apartment rental market, “multifamily housing” are projected to remain steady throughout 2007, according to the latest Commercial Real Estate Outlook of the National Association of Realtors®. Average rent should increase a modest 2.1 percent in 2007, after a 4.1 percent rise last year. In many areas, buildings constructed as condos are now being turned into rental projects, but new supply is essentially matching leasing activity.

Thursday, 7/19/07
I just finished with a client who has some concerns that seem to be growing amongst the ‘Mom and Pop’ demographic. This couple who are in their mid-sixties has done a fantastic job in saving and investing, and have built up a respectable real estate portfolio mainly in CA. Their main source of income is being derived from a few apartment buildings but now they are reaching a point in their lives were they are looking for something different. Looking to enjoy their retirement more, they have found that their apartments which are supposed to provide them with passive income are becoming more of a burden than a blessing. They find that it is difficult to take any sort of significant vacation while still actively managing their properties. The uncertainty of the real estate market and the possibility of earthquakes make them worry about not being diversified enough by being overly concentrated in real estate. They also have concerns about the best way to leave their legacy to their kids and grand kids as they recognize that there may be some differences in opinions in how to manage the properties and whether to keep or sell some or all of them.

For this couple, I recommended that they keep their highly appreciating properties, but sell the income producing ones using a Real Estate Legacy Trust to both replace their rental income with truly passive income, avoid capital gains tax, and leave the assets to their heirs. To mitigate the risk of earthquakes and being overly concentrated in real estate, I recommended a re-optimization of the equity assets in their properties. What a lot of people don’t realize is that in addition to not being liquid, equity in real estate earns a 0% rate of return. I also recommended that they set up entities to hold their investment real estate to protect them from losing everything to frivolous law suits, and to modify their Living Trust (’A’ Trust) with provisions to the ‘B’ Trust to capitalize on the $2M of estate tax exclusion amount on the death of the first spouse. Finally, with the AB Trust and the Real Estate Legacy Trust to minimize the estate taxes, this couple was now over-insured in life insurance with term policies that were due to expire in a few years. I recommended that they sell any excess life insurance they didn’t need for about 15% of the face value to offset any new mortgage payments and increase cash flow for medical and potential long term care expenses. The couple didn’t foresee the need for additional cash flow after all that we had done, so they opted to roll those proceeds to another insurance policy held in an Wealth Replacement Trust for their heirs. Since the insurance companies all started using the new mortality tables in 2005, this couple was able to get a higher death benefit than what they had originally.

Posted By
Stan Sung, CFP®

Risk Management Advisors, Inc.
“Redefining the Way You Protect Your Wealth.”

110 Pine Ave, Suite 310
Long Beach, CA 90802
(562) 489-7028
(562) 435-7886 FAX
www.riskmgmtadvisors.com

CA Lic#: 0D71892

IRS CIRCULAR 230 DISCLOSURE: To insure compliance with requirements imposed by the IRS, we inform you that, to the extent this communication (or any attachment) addresses any tax matter, it was not written to be (and may not be) relied upon to (i) avoid tax-related penalties under the Internal Revenue Code, or (ii) promote, market or recommend to another party any transaction or matter addressed herein (or in any such attachment).