Real Estate California
Cap Rate
Cap Rate Explained
The capitalization rate, often referred to as the cap rate, is a fundamental metric used in real estate investing to evaluate the potential return on investment for a property. It's essentially the ratio between the net operating income (NOI) generated by a property and its current market value or purchase price. Here's how it's calculated:
The net operating income (NOI) is the income generated by the property after deducting all operating expenses, such as property taxes, insurance, maintenance costs, and property management fees, but before deducting mortgage payments and income taxes.
A higher cap rate indicates a higher potential return on investment, while a lower cap rate suggests a lower potential return. However, it's important to note that cap rates can vary significantly depending on factors such as location, property type, market conditions, and risk factors associated with the investment. Typically, properties with higher risk or lower growth potential tend to have higher cap rates, while properties in stable or high-growth areas may have lower cap rates. Investors often use cap rates as a tool to compare different investment opportunities and assess their relative profitability.
NOI = gross operating income – operating expenses. Three ways to maximize your NOI include minimizing operating expenses, increasing rental income, and charging fees for amenities and services.
NOI is a before-tax figure, appearing on a property's income and cash flow statement, that excludes principal and interest payments on loans, capital expenditures, depreciation, and amortization.
Mansion Tax
Real Property Transfer Tax and ULA (United to House LA)
Effective for transactions closing after June 30, 2024, the new thresholds for ULA will be $5,150,000 and $10,300,000. Transactions above $5,150,000 but under $10,300,000 will be assessed a 4% tax and transactions $10,300,000 and up will be assessed a 5.5% tax.
Does the City impose a real property transfer tax other than the special tax imposed under Measure ULA?
Indeed, the City enforces a real property transfer tax on all documents that transfer real property within its jurisdiction. The current tax, known as the "Base Tax," is calculated based on the consideration or value of the real property interest being transferred, at a rate of 0.45%. Additionally, Measure ULA introduces a special tax, termed the "ULA Tax," which is levied on top of the Base Tax.
What are the rate components of the Base Tax and the ULA Tax under the City’s real property transfer tax?
- The Base Tax rate of $2.25 per $500 or part thereof (“Base Rate”).
- The ULA Tax rates of, 1) 4% for properties conveyed over $5,000,000, but under $10,000,000, and 2) 5.5% for properties conveyed at $10,000,000 or more (“ULA Rates”).
Value of Property Conveyed
| Value of Property Conveyed | Base Rate* | ULA Rate | Applicable Tax Rate |
| > $100; ≤ $5,000,000 | $2.25 / $500 | 0% | 0.45%* |
| > $5,000,000; < $10,000,000 | $2.25 / $500 | 4% | 4.45%* |
| ≥ $10,000,000 | $2.25 / $500 | 5.5% | 5.95%* |
*Note: the City’s Base Rate is $2.25 for every $500 or fractional part thereof. A transfer in which the value of the property conveyed is not divisible by $500 will be rounded up to the nearest $500 for the calculation of the Base Tax. This does not apply to the ULA Rate calculations, which are percentage-based.
DISCLAIMER: This is not tax advice. Please refer to the link below for further information.
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LOS ANGELES / ORANGE COUNTY
Q1 2024 Los Angeles, Orange County, San Francisco average sale price per SqFt
Average price per SqFt comparason.
LA vs OC vs FS
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LOS ANGELES / ORANGE COUNTY
What are Proposition 60 and 90?
Proposition 60 and Proposition 90 are both California property tax relief measures that provide certain homeowners with the opportunity to transfer their property tax base to a replacement residence under specific conditions. Here's an explanation of each:
- Proposition 60:
- Proposition 60 allows homeowners who are 55 years of age or older to transfer the assessed value of their current primary residence to a replacement property within the same county, as long as certain conditions are met. This transfer helps homeowners avoid a potentially higher property tax assessment that would result from purchasing a new home with a higher market value.
- To qualify for Proposition 60, the replacement property must be of equal or lesser value compared to the original property, and the replacement must occur within two years of the sale of the original property.
- This proposition is especially beneficial for retirees or older homeowners who may want to downsize or move to a more suitable residence without facing a significant increase in property taxes.
- Proposition 90:
- Proposition 90 extends the benefits of Proposition 60 to homeowners who are moving to a different county within California. It allows eligible homeowners to transfer their property tax base to a replacement property in a different county, provided that the county where the replacement property is located has adopted an ordinance authorizing such transfers.
- Not all counties in California participate in Proposition 90, so homeowners should check with the county assessor's office in both the county they are leaving and the county they are moving to in order to determine eligibility and any specific requirements.
- Like Proposition 60, Proposition 90 also requires that the replacement property be of equal or lesser value compared to the original property and that the replacement occurs within two years of the sale of the original property.
Both Proposition 60 and Proposition 90 aim to provide property tax relief for eligible homeowners in California who are looking to move or downsize without facing a significant increase in property taxes. However, it's essential for homeowners to understand the specific criteria and limitations of each proposition and to consult with local authorities or legal professionals for guidance regarding their individual situations.
As of January 2022, the following counties in California have adopted ordinances to accept inter-county transfers under Proposition 60 and/or Proposition 90:
- Alameda County
- El Dorado County
- Los Angeles County
- Orange County
- Riverside County
- San Bernardino County
- San Diego County
- San Mateo County
- Santa Clara County
- Tuolumne County
- Ventura County
Please note that this list may not be exhaustive, and it's always a good idea to verify with the respective county assessor's office or consult official resources for the most up-to-date information regarding Proposition 60 and 90 inter-county transfers in California. Additionally, the specifics of these ordinances, such as eligibility criteria and limitations, may vary between counties.
PAYAM SHIRAZI, Broker
DRE: 01925601
Call: (949) 436-3936
LOS ANGELES / ORANGE COUNTY
Current Inventory Update – August 2023
40% reduction in residential listing inventory when comparing August 2023 to the same period in 2022
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PAYAM SHIRAZI, Broker
DRE: 01925601
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LOS ANGELES / ORANGE COUNTY
Orange County Market Update – July 2023
Median single-family home price up 6% from July 2022
Median Townhome/Condo price up 7% from July 2022
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Source: CRMLS, California Regional Multiple Listing Service, Inc.
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ORANGE COUNTY / LOS ANGELES
Liens vs. Encumbrances: How They Impact Property Sales!
Liens vs. Encumbrances: How They Impact Property Sales!
Liens are like financial encumbrances, representing debts recorded against your property. Examples include voluntary liens like mortgage liens and contractor-recorded mechanic's liens. On the other hand, encumbrances refer to any claim against a property in a broader sense.
When liens or encumbrances are filed against your property, it means that whoever buys your home will inherit these burdens. As a result, the likelihood of someone purchasing your property with existing liens or encumbrances is very low.
To facilitate the sale or refinancing of your property, it's crucial to pay off these liens or encumbrances beforehand. This step is typically required before most potential buyers or lenders consider moving forward.
Stay informed about the impact of liens and encumbrances on your property's sale and take proactive steps to resolve any outstanding debts. Your real estate agent can guide you through the process and help ensure a smooth transaction.
Contact me to know how this can affect the sale of your property!
PAYAM SHIRAZI, Broker
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Starting Prices for 3 BR Homes in Southern California California July 2023
Starting Prices for 3 BR Homes in Southern California
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Exploring the Attraction: Why Canadians Choose to Buy Property in Palm Springs
Palm Springs has become a popular destination for Canadians seeking to purchase property. This article examines the factors that attract Canadians to invest in Palm Springs, including its desirable climate, vibrant lifestyle, and various amenities.
Here are the facts
- Desirable Climate: Canadians are often drawn to Palm Springs due to its warm and sunny climate. The region boasts over 300 days of sunshine annually, providing an escape from Canada’s colder winters. The year-round pleasant weather allows Canadians to enjoy outdoor activities, golfing, and relaxation in a comfortable environment.
- Vacation and Retirement Destination: Palm Springs is renowned as a premier vacation and retirement destination. Canadians, especially those looking for a winter retreat or a place to enjoy their retirement years, are attracted to the laid-back and resort-like atmosphere of Palm Springs. The abundance of golf courses, spas, and leisure activities cater to a relaxed and enjoyable lifestyle.
- Proximity and Accessibility: Palm Springs’ proximity to major Canadian cities, particularly in Western Canada, makes it easily accessible for Canadians. Short flights from cities like Vancouver, Calgary, and Edmonton allow for convenient travel to and from Palm Springs. This proximity reduces travel time and provides Canadians with a convenient option for their vacation or second home.
- Real Estate Investment Potential: Palm Springs offers attractive real estate investment opportunities. The region has seen steady growth in property values over the years, making it appealing for Canadians seeking potential returns on their investment. Additionally, the Palm Springs rental market provides an opportunity for Canadians to generate income from their properties when not in use.
The combination of Palm Springs’ desirable climate, vibrant lifestyle, accessibility, and real estate investment potential make it an attractive choice for Canadians looking to buy property. Whether seeking a vacation getaway or a retirement destination, Palm Springs offers a desirable mix of leisure, relaxation, and potential financial benefits for Canadian buyers.
Call to access the latest listings of homes for sale in Palm Springs and schedule a private showing.
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