18A — January 12 - 25, 2018 — 2018 Forecast — M id A tlantic
Real Estate Journal
2018 F orecast By Glenn Ebersole A Strategic Approach To Your 2018 Business Planning: Ask Your Clients Questions H appy New Year! I hope you are excited about the year ahead. This 2018 business year? 2. What strategies do you expect to use to capitalize on successes achieved in 2017?
long before the start of the first month of the New Year. It takes plenty of work and planning to set your year up right. Hope- fully your strategic thinking and planning for your business in 2018 has been underway months before the start of this New Year. A strategic thinking business approach is critical for business success and hearing from and listening to what your clients are thinking are essential ac- tions to take in your planning. One proven method of gaining valuable insights for that stra- tegic business planning effort includes asking your clients some probing questions. The answers to those questions will help develop the best client- focused strategic solutions for your clients’ challenges and opportunities in 2018. ments in personal property, more commonly referred to as full or immediate expensing. This new provision is part of the tax law for five years and then begins to taper off. There are significant concerns these business and property owners will face a “tax cliff” and high- er taxes once the immediate expensing provision expires. Investment property owners can continue to deduct net interest expense, but invest- ment property owners must elect out of the new interest disallowance tax rules. The new interest limit is effective 2018 and applies to existing debt. The interest limit, and the real estate election, ap- plies at the entity level. The new tax law continues the current depreciation rules for real estate. However, prop- erty owners opting to use the real estate exception to the interest limit must depreciate real property under slightly longer recovery periods of 40 years for nonresidential prop- erty, 30 years for residential rental property, and 20 years for qualified interior improve- ments. Longer depreciation schedules can have a nega- tive impact on the return on investment (“ROI”). Property owners will need to take into account the longer deprecia- tion schedules if they elect to use the real estate exception to the interest limit. The tax law creates a new tax deduction of 20% for pass- through businesses. For tax- payers with incomes above
Asking questions of your clients will help you build rap- port with them; increase the clients’ comfort level; under- stand their needs; and discover their concerns, frustrations and fears. You can begin by asking questions that will let you learn and understand what is going right with your clients and then transition into areas where challenges and possible break- through opportunities may ex- ist. It is essential that you make sure the client understands that he or she has ownership in this process of questioning. What are some examples of probing questions you could ask your clients to facilitate great strategic business planning in 2018? Here are ten questions that I believe would be helpful to you in this effort. 1. What are your goals for the certain thresholds, the 20% deduction is limited to the greater of: 50% of the W-2 wages paid by the business or 25% of the W-2 wages paid by the business, plus 2.5% of the unadjusted basis, imme- diately after acquisition, of depreciable property (which includes structures, but not land). Estates and trusts are eligible for the pass-through benefit. The 20% pass-through deduction begins to phase-out beginning at $315,000 for mar- ried couples filing jointly. The new tax law restricts taxpayers from deducting loss- es incurred in an active trade or business from wage income or portfolio income. This will apply to existing investments and becomes effective 2018. State and local taxes paid in respect to carrying on a trade or business, or in an activity related to the production of income, continue to remain de- ductible. Accordingly, a rental property owner can deduct property taxes associated with a business asset, such as any type of rental property. This article is only intended to provide a brief overview of some of the tax law changes, which will affect any taxpayer who owns real estate and is not intended to provide an in-depth overview of all the new tax law provi- sions. Every taxpayer should review their specific situation with their own tax advisor. Asset Preservation is a lead- er in the §1031 exchange in- dustry and provides the most up-to-date information. Scott R. Saunders is sr. vice president of Asset Preservation, Inc. n
one thing about our business relationship, what would it be? 10. How can we be a more valuable asset and resource for your business? You will be pleasantly sur- prised at what your clients will divulge to you that they never told you before. And why is this so? I will tell you why - because you never took the time to ask them. My advice is “always know who you are doing busi- ness with.” If you do, you will be in a much more strategic position to deliver better client- focused solutions because you will understand your clients’ real needs and goals. Glenn Ebersole is a long- time columnist and strate- gic business development/ marketing executive and leader. n “We are one of the few, if not the only, direct private lend- ers with the knowledge many borrowers in the international community want or need, since many borrowers look for U.S. backing or experience,” Wolfer said. “Our expansion into those global markets has been, and continues to be, a key part of our growth.” n rents will stabilize. The econo- my continues to strengthen and investor activity and interest in the industrial sector will be robust. Some investors may see the office market as bottoming out and look for undervalued buildings. There is more con- fidence among investors that another recession is not on the horizon. Commercial real estate will further strengthen as an attractive asset class. David Zimmel is CEO of Zimmel Associates, the Edi- son, NJ, corporate real es- tate services firm. Zimmel is consistently ranked as a New Jersey Power Broker by CoStar. n Practice. For more than 30 years, he has provided industry-specific tax and advisory services, with a special emphasis on help- ing family-owners and in- vestors realize their full profit potential and maxi- mize tax benefits. He can be reached at sberger@saxllp. com. n the Caribbean, Canada, Central America and Europe.
year will be full of oppor- tunities and those bus i - nesses that h a v e p r e - pared to rec- ogn i z e and act on them and have de-
3. What do you believe is the number one challenge for your business in 2018? 4. What is the single biggest frustration you have in your business going into 2018? 5. What is the one major change you want to make hap- pen in your business in 2018? 6. What is the one thing you value most about our business relationship? 7. What can we do to sustain and enhance our business rela- tionship with you in 2018 and beyond? 8. How can we improve upon the services we provide to you in 2018 and beyond? 9. If you could change just difficult market to navigate, traditional and direct private lenders alike tend to shy away from lending onreal estate – par- ticularly when there are foreign governments involved who have their own regulatory policies. Not so for Kennedy Funding Financial, which has built an en- viable reputation in the industry by successfully closing millions of dollars of loans throughout continued from page FC-A areas such as Metro Park they are $30 to $35 a s/f. Rents in the Jersey City waterfront ap- proach $40 a s/f. The office park we are located in at Raritan Center, which is a highly desir- able central location, is competi- tively priced at $22 a s/f. Out of 122,000 s/f only 2,500 s/f is available. However, areas that are in a bit of trouble that have a lot of vacancies, for instance Parsippany, South Plainfield, Piscataway and Bridgewater, offer rents at about $16 a s/f. I see this remaining about the same in 2018. In summing upmy outlook for 2018, it is positive. Industrial continued from page 9A no concrete determination at this time. One thing is for certain, however, and that is the Real Estate industry is resilient and will undoubtedly adapt successfully to whatever changes lie ahead. Stuart Berger is a partner at Sax LLP and the founder of the firm’s Real Estate
veloped a strong strategic busi- ness plan will have a very suc- cessful 2018. Planning is one of the most important parts of running a business, no matter whether it is a large multina- tional corporation trying to plan an expansion or a small business launching an exciting new product. Too many businesses don’t re- alize that success in 2018 begins continued from page 12A of real property were made in the new tax law. However, the new tax law repeals 1031 exchanges for all other types of property that are not real property. This means 1031 ex- changes of personal property, collectibles, aircraft, franchise rights, rental cars, trucks, heavy equipment and ma- chinery, etc will no longer be permitted beginning in 2018. There were no changes made to the capital gain tax rates. An investment property owner selling an investment property can potentially owe up to four different taxes: (1) Depreca- tion recapture at a rate of 25% (2) federal capital gain taxed at either 20% or 15% depend- ing on taxable income (3) 3.8% net investment income tax (“NIIT”) when applicable and (4) the applicable state tax rate (as high as an additional 13.3% in California.) Some investors and private equity firms will not have to reclassify “carried interest” compensation from the lower- taxed capital gains tax rate to the higher ordinary income tax rates. However, to qualify for the lower capital gains tax rate on “carried interest,” investors will now have to hold these assets for three years instead of the former one-year holding period. Some property owners, such as farmers and ranchers and other business owners, will receive a new tax advantage with the ability to immediately write off the cost of new invest-
Kennedy Funding Financial reaches . . .
Impact of the new 2018 tax law on real estate owners . . .
Industrial investment progresses in . . .
continued from page 15A The CRE industry is resilient and . . .
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