Transcript Invest in Florida Real Estate

USA Headquarters
IBC GROUP
MiamiTower
100 S.E. 2nd Street, Suite 2222 A
Miami, FL, 33131
USA
Tel:
+1 (305) 358-4441
Fax:
+1 (305) 358-1144
[email protected]
Antenna in Russia
IBC GROUP
Lyteiny pr. 60
St.Petersburg, 191125
Russia
Tel:
+7 (911) 215-8027
Fax:
+7 (812) 272 5667
[email protected]
WWW.IBC-INTERNATONAL.COM
Antenna in Luxembourg
IBC GROUP
2-8 Ave. Charles de Gaulle
Luxembourg, L-1653
Tel:
+352 27-0012
Fax:
+352 27-0012-205
[email protected]
IBC’s Executive Summary
 26 years of experience in secure investments
 185 consultants in wide range of
jurisdictions, including tax havens
 Specializes in supporting clients to
successfully acquire, manage and
sell secure investments (real estate
and gold) while minimizing taxes.
FLORIDA
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Very low tax rates (Constitution prohibits personal income tax)
State government budget is almost balanced
Continuing vigorous population growth (2-3% per year)
Tourism:84,000,000 visitors annually
Healthy Business Climate: few regulations, little bureaucracy & “right to work”
law (few unions). Very pro-international climate, dynamic economy
Agriculture: 1st citrus state, 2nd cattle state
Banking and finance: 3rd largest US Center
Mining: $1.92 Bln/year industrial mineral production, fifth in the USA
Trade: 5 deep water ports & 40+ free trade zones
High profile and well-educated population; many Europeans, wealthier classes
Main real estate trend: immigration of wealthy investors
Now – highly discounted prices (substantial capital gain opportunities)
NEW YORK
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Very high tax rates in New York State and New York City
NYS & NYC budgets suffering severe deficits ($40 bln. & 25 bln.)
Population is steadily declining
Strained business climate (tough bureaucracy, many regulations &
strong unions)
Older industries declining (“rust belt”, textile & small manufacturers)
Still № 1 in banking and finances, but hemorrhaging
Tourism is growing industry but still lukewarm (approx. 60 mm)
International trade (still active but declining; only 20± trade zones)
Population composition problems (high poverty rates, large welfare
classes, emigration of wealthier classes)
Main real estate trends: lower growth and out migration
Lower potential for real estate gains
Growth & price statistics
US population growth 2000-2030
FL - NY Population
2000-2030:
FL +81%
NY + 2%
31
29
Millions
27
25
23
Florida
21
New
York
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Single
Home price
index
US Home Prices
(Seasonally
Adjusted
Jan. 1987 - Jun. 2010)
300
Selling Price
250
200
CA-San Francisco SFXR-SA
FL-Miami MIXR-SA
NY-New York NYXR-SA
150
Composite-10 CSXR-SA
100
50
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Date
Source: US Bureau of Economic Analysis, Standard & Poor's Case-Shiller Home Price Indices
2030
2027
2024
2021
2018
2015
2012
2009
2006
2003
15
2000
17
Example № 1: Russian purchase of
condominium in the USA
 Mr. Ivanov, a Russian citizen and tax resident.
 Mr. Ivanov purchases a condominium for $250,000 and
spends a further $50,000 to renovate the property.
 Mr. Ivanov rents out his condominium at the normal rate of
12% a year, equal to $36,000 gross income per year.
 Mr. Ivanov takes no property tax exemptions and
purchased the condominium unit with fee simple title in
his own name. He derives no other income from the US.
 What are the tax consequences in New York and Florida?
Comparison of Rental Taxes - New York City vs. Florida
New York, New York
Purchase Price +
Improvements
Miami, Florida
300,000
300,000
Gross rent income (est.) $3,000
per month
36,000
36,000
Renting commissions (8.334%)
(3,000)
(3,000)
Less – Maintenance
($1,000/mo)
(12,000)
(12,000)
Less – Depreciation (3.39%)
(10,170)
(10,170)
Net rent income subject to
taxes.
$10,830
$10,830
NY State Income Tax (4,5%)
$487
ZERO
NY City Income tax (2,9%)
$302
ZERO
$1,625
$1,625
Federal tax (15%)
- Housing in Miami is on average 66% cheaper than a comparable sq. ft sized property in NYC.
- Profits from rents in NYC are subject to federal , state that the and city income tax at local rates.
- For the same purchase price the Miami condo would be substantially larger.
- Depreciation is a notional amount for tax purposes .
Example № 2. Sale of United States
Condominium by Russian owner.
 Now assume that Mr. Ivanov, after holding his apartment,
for five years, finds a buyer. The real estate market has
recovered and he is able to sell the property (seller’s closing
costs included) for $500,000.
What are the comparative tax consequences to Mr. Ivanov in
New York City and Miami ?
Sale of Property – Approximate Tax Consequences
New York City vs. Miami, Florida
New York, New York
Miami, Florida
Basis on Purchase
250,000
250,000
Improvements
50,000
50,000
Depreciation Recapture
(50,850)
(50,850)
Total Adjusted Basis
249,150
249,150
Sale Price
500,000
500.000
Selling Commissions (6%)
(30,000)
(30,000)
Closing Costs (est. 1.5%)
(7,500)
(7,500)
Net gain on Sale
213,350
213,350
US federal tax on Gain (20%)
(42,670)
(42,670)
NY city income tax (3,648%)
(7,783)
ZERO
NY State income tax (6,85%)
(14,614)
ZERO
New York City Transfer Tax
(1.425% of sale price)
(7,125)
ZERO
New York State Transfer Tax
($4/1,000 sale price)
(2,000)
ZERO
TOTAL TAX ON SALE
66,409
42,670