DEAR BOB: We are considering listing our 48-unit apartmentbuilding for sale. So far, we have spoken with two Realtors. We would like toknow what sales commission to expect to pay on a $3 million sale. The standardrate for houses in our area is 6 percent commission. One of the Realtors wantsa flat commission. The other has some sort of pyramid-style system involvingstarting out at 10 percent and going down to 3 percent after a certain amount,all combined together. What guidance can you give? –Ellen A.
DEAR ELLEN: You need an apartment sales specialist who onlysells commercial and apartment buildings. Stay away from sales agents whospecialize in single-family sales.
Purchase Bob Bruss reports online.
Real estate sales commissions are negotiable, especially on$3 million income property sales. According to Real Trends, the averagehome-sale commission is now 5.1 percent so your commission should be less thanthat.
Interview at least three or four apartment and commercialproperty sales specialists who sell apartments in your vicinity. Listen to eachagent’s listing presentation, including his/her quoted sales commission rates.
Let each agent “sell” himself or herself to you,not necessarily based on the sales commission rate alone. Check out theirreferences of recent sellers of large properties like yours before selectingthe best agent for your situation.
INFORMATION ON STUDENT HOUSING
DEAR BOB: My son is going away to college. We want to buy atwo-bedroom condo for him so he can rent out the second bedroom. Do you know ofa book or articles about this type of rental? The plan is to sell the condoafter he finishes college. Would we get the $250,000 tax exemption just likeselling a primary residence? –Edna D.
DEAR EDNA: If your son’s name is on the title, afterownership and occupancy of his primary residence for at least 24 of the 60months before the condo’s sale, he would be entitled to the Internal RevenueCode 121 exemption up to $250,000. However, you won’t qualify because the condowon’t be your principal residence.
Although I have not yet read it, there is a new book,”Profit by Investing in Student Housing: Cash in on the Campus HousingShortage,” by Michael H. Zaransky, which should answer your questions. Itis available in stock or by special order at local bookstores, public librariesand amazon.com.
IS DEPRECIATION RECAPTURE TAX 25 PERCENT OR 40 PERCENT?
DEAR BOB: I always read your excellent articles. But I thinkyou made a mistake a few weeks ago. You said a seller of a depreciablebuilding, such as an apartment building, must pay a 15 percent federal capitalgain tax, but there is a 25 percent “depreciation recapture tax.”That means the seller is actually paying 40 percent on the depreciation thathas been deducted so the investor is taxed twice. Or am I missing something?–Patricia H.
DEAR PATRICIA: There’s only one tax on depreciationrecapture. Suppose you have deducted $40,000 of depreciation on your apartmentbuilding before selling it. Also, suppose your total capital gain on that saleis $100,000.
Of that $100,000 total capital gain, you will have $40,000″recaptured,” which means taxed at the special 25 percent federaldepreciation recapture tax rate. The other $60,000 will be taxed at the maximum15 percent federal capital gains tax rate. In addition, there may be statecapital gains taxes also payable. For more details, please consult your taxadviser.
The new Robert Bruss special report, “Five Easy Ways toBuy Your Home and Investment Property for Nothing Down,” is available for$5 from Robert Bruss, 251 Park Road, Burlingame, CA 94010 or by credit card at1-800-736-1736 or instant Internet delivery at
(For more information on Bob Bruss publications, visit his
Real Estate Center).
Copyright 2006 Inman News