What Is United to House LA?

“The hardest thing in the world is to understand the income tax” Albert Einstein

On April 1st, also known as April Fools Day, a new measure will take effect for those selling properties in the City of Los Angeles. Known as measure ULA, which stands for United to House LA, it will cause sellers to pay an additional tax. The required amount will be 4% on properties selling in excess of 5 million dollars (amounting to at least 200.000.) and 5.5% on amounts in excess of 10 million. (amounting to at least 555,000.) This goes along with all other costs of sale including, but not limited to, escrow, title, real estate commissions, seller concessions, and payoff of existing liens. It is a hefty amount and may put some sellers out of the market as well as ruin some 1032 exchanges, for those looking to move up.

WHO IS AFFECTED?
This affects all types of real estate. not just “mansions”.Commercial and multi-family properties will probably experience a lot of the pain here, because of more frequent turnover by investors, especially those who rehab properties and then resell them.

RESPONSES TO A UCLA study from September of last year shows that 4% of all sales in Los Angeles would be affected with 3% of single-family home sales feeling the extra fees. Predicted to raise 923 million for the City of Los Angeles, this may be a harbinger of things to come for other municipalities.

EXACERBATING THE PROBLEM
Many investors and other experts have said that this will drive developers away from a city saddled with rather stringent rent control already. Additionally, approximately 28,000 units have been converted to other uses or demolished in Los Angeles per the Ellis Act. This measure could cause developers to move the location of their next project to another more tax-friendly city.

WHAT CAN WE DO NOW?
While many people rushed to close escrow before this measure took effect, others are trying to split properties into multiple parcels with ownership by multiple different entities. Always consult with your CPA and your real estate attorney before you move forward with any plans to try to make your property compliant with the new regulation. Others are just keeping their buildings and waiting for times and laws to change.`. “The past doesn’t matter. Take today.” Becky Sauerbrunn

What we at PRS PROPERTIES CAN DO. We can discuss with you the current rents in your area and supply you with comparable rental prices for similar properties. Before you hire a manager, make sure the compensation is fair to you! We can also look at your building for changes that might allow you to get a higher value in order to create value without huge expenses for your building. We can help you to get the maximum value for your property, should you decide to sell, or the maximum return if you are planning to keep your building.

We always have many investors who are looking for “as-is” properties and are willing to purchase with low rents, a moratorium, or even with a problem tenant in place. We have put together numerous transactions over the years which involve properties that are not listed for sale. Many investors are in 1031 exchanges and need to identify a replacement property before their 45-day identification period runs out.

Should you decide to put your property on the market, we will put together an aggressive, targeted, and professional campaign to get your property sold fast. We have been doing this for over 40 years, and we will use all the tools available to bring you the most dollars at closing. If you are thinking of selling or are just curious about the value of your property, don’t hesitate to give us a call.

Remember – KNOWLEDGE IS POWER!