Comparative Market Analysis

California New Construction Warranty

New homes are desireable for a number of reasons from their design to the thought that they will come with less maintenance concerns. Luckily for a buyer, Builders in California are requred by law to provide for "limited" new construction warranties.

Some builders provide express new construction warranties to address buyers’ concerns.  However, in the event that the builder does not provide a warranty, California law provides for implied new construction warranties. These warranties are contained in California Civil Code 896, et seq., also known as the “Right to Repair Act,” and are described below.

One Year Warranties

•  “Fit and finish” of cabinets, mirrors, flooring, interior and exterior walls, countertops, paint finishes, and trim. California Civil Code section 900.
•  “Manufactured products”, i.e. any product that is completely manufactured offsite, including efrigerators, stoves, etc., as well as HVAC units and fixtures. California Civil Code section 896(g)(3).
•  Compliance with “interunit noise transmission standards set by the applicable government building codes, ordinances, or regulations in effect at the time of the original construction”, as applicable to attached structures. California Civil Code section 896(g)(6).
•  Irrigation, drainage, and landscaping systems. California Civil Code sections 896(g)(7) and 896(g)(12).

Two Year Warranties

•  “Untreated wood posts” that are installed in contact with soil such that they cause unreasonable decay. California Civil Code section 896(g)(8).
•  Dryer ducts. California Civil Code section 896(g)(14).

Four Year Warranties

•  Plumbing and sewer systems. California Civil Code section 896(e).
•  Electrical systems. California Civil Code section 896(f).
•  Exterior pathways, driveways, hardscape, sidewalls, sidewalks, and patios. California Civil Code section 896(g)(1).
•  Untreated steel fences and adjacent components that cause unreasonable corrosion. California Civil Code section 896(g)(9).

Five Year Warranties

•  Paint and stains causing deterioration of building surfaces. California Civil Code section 896(g)(10).

Ten Year Warranties

•  All other components not specifically referenced in other warranties, including foundation systems, retaining and site walls, support beams, etc. California Civil Code sections 896 and 941.

Dispute Resolution Procedures

As its name indicates, the Right to Repair Act not only provides for warranties, but also provides builders with the right to repair defects before being subjected to legal proceedings. Prior to filing an action against a builder, the claimant must submit a claim describing the defect and allowing the builder to inspect the defect. The builder then has the option to offer to repair the defect, mediate the dispute, or offer cash in lieu of the repair.

Importance of Understanding New Construction Warranties

The warranties provided by builders are exceedingly important because, unlike existing home purchases, the escrow process in connection with purchasing a new construction typically does not include a “physical inspection contingency” period. When buyers are purchasing an existing home, typically the buyer has an opportunity to conduct some due diligence as to the physical aspects of the property, and if the buyer is unsatisfied he or she can cancel the agreement without being in breach. Sellers of new construction, on the other hand, are often reluctant to include such a provision in their sales contracts. As a result, the new construction warranties provide important protections for buyers who might subsequently uncover issues for which the seller is responsible.

This article is not intended to be, nor should it be interpreted to be, legal advice. Please consult with an attorney concerning the specifics of your situation, and whether a new construction warranty might apply.

How To Buy Real Estate With Bitcoin

What is Bitcoin?

The world is buzzing with a new asset class called cryptocurrency. This started with the introduction of an open source system called Bitcoin which was launched in 2009 by an unknown group of engineers and a main developer known as "Satoshi." The digital network eliminates the requirement for third parties or intermediaries like governments and banks to create financial transactions. In short, it’s a decentralized store of value due to it's built in transferability, fungibility, scalability and scarcity.

The decentralized payment system is completely based on the internet, where every Bitcoin transaction history can be derived using the user’s anonymous wallet address. Bitcoin uses blockchain technology to decentralize and democratize the accounting ledger. This ledger is checked and modified using multiple nodes, also known as "miners," to validate each transaction (a role that the banks and payment processors traditionally filled.)

Any computing device could in theory be a payment processor on the network. This democratizes the network with tens of thousands of mining devices existing in many locations all throughout the world.

A Bitcoin wallet is extremely secure because it contains a unique public key and a non-public key, which provides proof of authorization and permits the owner to initiate and sign transactions digitally and instantly using any device.

The main downfall currently is the fact that the cryptocurrency's value is extremely volatile because the worth of Bitcoin is influenced by the law of supply and supply in a rapidly growing market. Although the volitility exsits, it's likely to decrease as wide spread adoption continues and the network grows larger.

There are several benefits of using a Bitcoin:

• Good potential for higher growth (10 year average of 200%+ growth in value per year)
• The transactions may be processed at any time with potentially lower fees compared to banks and credit cards
• The transactions are semi-private and secure
• Most importantly, it eliminates the necessity for third parties – banks/government intermediaries.
• Divisibility, one bitcoin can be sold by a single "Satoshi," which is the smallest Bitcoin unit you can find in the market. There are 100 million Satoshis in a Bitcoin (0.000000001 BTC). Think of them as bitcoins version of a penny.
• Scarcity, the maximum amount of Bitcoins that will ever be made is 21 million. Currently less than 19 million are in existance and a portion of those have been lost as well.

There are also a few drawbacks or threats in using bitcoin:

• The cryptocurrency’s worth is extremely volatile
• Cryptocurrency wallet storage face hacking concerns (depending on what type of wallet is used)
• Losing access to wallet assets with accidental loss of passkeys
• U.S. Law treats profits as capital gains

Mortgage loans using Bitcoin:

Bitcoin plays a significant role in the emerging decentralized financial markets, where it serves a lot of functions which include issuing loans against Bitcoin which can help bypass traditional capital gains taxes compared to just selling the coins.

If you are reaching to pay your current mortgage using bitcoins, then all you've got to do is exchange your bitcoins for dollars, then deposit them to your bank account and pay your lender as usual. 

However, emerging finance companies are now offering a blockchain-based loans which can be activated or approved in a matter of minutes, rather than watching for the traditional approval of loans where it takes days for the approval. Additionally, it eliminates the high processing fees that are been charged with traditional lenders. The main drawback currently is the amount of reserves required for most Bitcoin lenders, who generally will require 2.5x the amount of assets compared to the loaned amount. For example, if you take out a $100,000 loan you would be required to pledge $250,000 worth of bitcoin as collateral for the loan.

Blockchain enhances smart contracts, where it ensures that each loan seekers and lenders tend to comply with possible terms relating to providing proof of funds and planning for payment. These contracts eliminate the utilization of banks and lawyers by confirming and recording the transactions. Blockchain technology has many benefits to mortgage loans – lower value, high security, time-saving, clear delivery and approach, no third parties concerned, record keeping, simply accessible, etc. 

Capital Gains Implications:

The U.S. Internal Revenue Service (IRS), has said that Bitcoin should be treated as an asset or an intangible property and not a currency because it is not issued by a central bank. This treatment of Bitcoin as an asset or intangible property portrays the tax implications on Bitcoin. All kinds of transactions using Bitcoin must be reported, no matter how small in value it is.

A short-term capital gain tax rate is applied on any profits, when bitcoins are held for a shorter duration (less than a year) before selling or exchanging it. This is as same as the ordinary income tax rate. A long-term capital gain tax rate is applied, when bitcoins are held for a longer duration (more than a year) before selling or exchanging it.

Taxpayers in the U.S. are required to maintain a record of all purchases, investments, and selling done through bitcoins to get hold of products and services (that IRS considers as bartering)The transaction becomes a taxable one, if you use bitcoin regularly to purchase items online instead of using cash, as the Bitcoin is converted into an asset, it incurs taxes.

Purchasing Real Assets with Digital Currency:

If you currently have signficate amount of value in Bitcoins, you may be considering purchasing Real Estate assets to diversify your portfolio.

We recommend considering three different avenues to go about purchasing a Real Asset using cryptocurrecy.

• Offer the Cryptocurrency as direct payment of the asset
• Use a fiat loan on the cryptocurrecy
• Sell the cryptocurrency for fiat currency

The first method has a least amount of complications and tax obligations but requires a Seller that is willing to accept cryptocurrency and a escrow company familiar with using cryptocurrency to facilitate the transaction instead of fiat dollars. 

If you are unable to negotiate with a seller to directly accept only the cryptocurrency, a smarter way can be utilized to limit these tax liabilities and purchase real assets. This way would be to take out a loan using a site like BlockFi, Nexo, or SALT. Once you receive the loan in Dollars, backed by Bitcoin, you can then use those funds to make the purchase. 

If getting a loan isn't up your alley, your last option would be to sell the cryptocurrency and use the proceeds to make the purchase of the Real Asset. The downfall with this method is you would have to use the after-tax proceeds for the purchase.

Interested to learn more or purchase property using Bitcoin? Get in touch with one of our licensed agents. We're happy to help!

Maximizing Returns: Unlocking the Potential of Managed Room Rentals

In the dynamic landscape of real estate investment, savvy investors are exploring innovative strategies to maximize returns. At WE ARE REALTY Inc, we recognize the shifting trends in the market and are excited to introduce you to the world of managed room rentals. This strategy not only allows for efficient property management but also opens the door to higher rates of return compared to traditional leasing models. In this blog post, we'll explore the benefits of investing in managed room rentals, highlight the importance of property size and ratio, and showcase how our financial analysis tools empower clients to make informed decisions.

The Advantages of Managed Room Rentals:

1. Higher Returns: Managed room rentals offer the potential for significantly higher returns compared to traditional leasing. By renting out individual rooms, property owners can tap into multiple income streams, maximizing the property's earning potential.

2. Flexibility and Adaptability: The flexibility of managed room rentals allows property owners to adapt to market demands and capitalize on high-density areas. This adaptability is particularly beneficial in urban environments where renters are increasingly seeking cost-effective housing solutions.

3. Reduced Vacancy Risk: With managed room rentals, the risk of extended vacancies is minimized. Even if one room is vacant, the income from the remaining rented rooms helps offset the impact, providing a more resilient cash flow.

Property Size and Ratio Considerations:

While the potential for higher returns is appealing, it's crucial to note that not all properties are suited for managed room rentals. The right size and ratio are key factors in determining the success of this investment strategy. At WE ARE REALTY Inc, our team conducts a meticulous analysis of properties to ensure they meet the criteria for optimal room rental profitability. This involves assessing the property's layout, size, and the number of rooms that can be comfortably accommodated.

Utilizing Financial Analysis for Informed Decision-Making:

Investing in managed room rentals requires a strategic approach. Our commitment to providing comprehensive support includes utilizing sophisticated financial analysis tools. WE ARE REALTY Inc assists clients in comparing the financial benefits of traditional leasing versus managed room rentals. This analysis takes into account factors such as market demand, property expenses, and potential rental income, allowing investors to make informed decisions that align with their financial goals.

The Trend of Room Rentals in High-Density Areas:

As urbanization continues, the trend of room rentals in high-density areas is expected to persist. Renters are increasingly drawn to the cost savings and flexibility offered by managed room rentals, making this investment strategy highly attractive in markets where space comes at a premium. At WE ARE REALTY Inc, we stay ahead of market trends, ensuring our clients are well-positioned to capitalize on the evolving preferences of renters.

Conclusion:

Investing in real estate for managed room rentals presents an exciting opportunity for those looking to maximize returns in high-density areas. At WE ARE REALTY Inc, we combine expertise, innovative strategies, and advanced financial analysis tools to guide our clients through the complexities of this investment model. Contact us today to explore how managed room rentals can unlock the full potential of your real estate portfolio and propel you towards financial success in the ever-evolving real estate market.