Often time buyers and/or sellers enter into a contract for the purchase of real estate without fully considering the ramifications. Whether pushed by their own financial situation or other outside factors, a person hastily entering in to a contract without fully understanding their rights and obligations can lead to unforeseen consequences.Continue Reading Sanctity of Contract

Virgin Islands landlords receving $600 or more annually in rent from real estate will be required to file Form VI-1099 with the Virgin Islands Bureau of Internal Revenue (BIR) and with their tenants.  They will also have to send Form VI-1099’s to the BIR for all service providers such as plumbers, electricians, handymen, accountants, etc. for rental property services provided to the landlord for payments of $600 or more.  To ensure compliance, the BIR may levy penalties of $50 for each failed to file Form VI-1099 or with the tenant or service provider.  These penalties are capped at $100,000 or $250,000 depending on the delinquency.

Designed to close the tax gap, this new legislation was passed to ensure that income paid to contractors gets reported accurately and deductions for work and improvements or rental properties can be verified by the VI-1099 form. While this new reporting requirement will not impact rental properties held out as a trade or business (owning multiple properties and a full-time business) since they are already covered, it will affect smaller, “mom and pop” landlords, who typically are not armed with accountants to track contractors, verify deductions and report taxes. This will also create a new burden for small real estate operations.

Continue Reading VI Landlords Face New Tax Responsibilites

On September 29, the U.S. Congress voted to extend higher loan limits for government-backed mortgages in the U.S. Virgin Islands and other high cost areas, a move that should help keep borrowing costs low and support the housing sector.

At the height of the financial crisis in 2008, the government raised the ceiling on the size of loans Fannie Mae and Freddie Mac could buy. At the time, the private market for so-called jumbo loans had all but dried up.

The legislation approved by the House of Representatives and Senate, which President Barack Obama is expected to sign into law, would keep in place until September 30,  2011 the higher $729,750 ceiling for single-family home mortgages in high cost areas such as the U.S. Virgin Islands.Continue Reading Congress Extends Higher Loan Limits for VI Fed Backed Mortgages

Boards of directors of owners associations in the U.S. Virgin Islands and elsewhere play a critical role in managing timeshare resorts. This is especially true in mature resorts that are past the development stage and are being run by their owners. Boards frequently contract with management companies to handle the day to day operations of the resorts and may rely on their expertise — so long as all is going well.  But even with the best of management companies, board members bear a fiduciary obligation to the ownership and  must monitor and review the performance of the manager, resolve policy issues, and engage in the long range planning that is essential for a resort to remain healthy.

A primary challenge for any interval ownership regime is attracting qualified people to serve on boards of directors of owners’ associations. Because interval owners usually own only a week at a resort and don’t reside where the resort is located, their interest in participating in the management of the resort may not be a high priority. In fact, many owners just want to visit and have fun. To participate in board functions takes time and effort that few are willing to expend. That being said, there seems to be, in most cases, people who are willing to step forward, either because they like to be involved or have a sense of duty or, in the case of a troubled resort, to protect their interests.Continue Reading Timeshare Board Membership: A Key to a Successful Resort

Investors sometimes make investments in real estate that turn out badly.  There is an old saying in the Virgin Islands that "the man that makes a small amount of money in the Virgin Islands is one that started with a large amount of money!"  Many may blame their loss on the "real estate cycle" when actually there were mistakes that could have been avoided by better planning and analysis.

Based on over 35 years experience in real estate, I have identified several costly mistakes.  Here are a few:

Misjudged Demand. 

Developers have faced costly setbacks by assuming that customers existed without undertaking adequate market analysis.  For example, a mixed-use retail/office development designed to attact EDC businesses and upscale shoppers just when the Territory’s EDC Program had a setback from additional federal regulation and upscale shoppers took it on the chin in the current economy.Continue Reading Costly Mistakes In Real Estate