September is Life Insurance Awareness Month

Buying any amount of life insurance is based on several factors – your income, how many dependents you have, and your debts and other financial liabilities. Your own personal preferences and risk tolerance were also considered when you decided what type of policy to buy. All of these things can –and likely will –change over time. When is the last time you reviewed your current insurance to make sure it still makes sense for you and your family? Is it keeping up with your evolving financial situation so that you and your loved ones can live life confidently?

When to review your life insurance program

Like other aspects of your financial life, your life insurance should be reviewed periodically. If that hasn’t happened, here are some situations that should prompt you to do so –

  • You have married or divorced
  • You have a new child
  • You have changed jobs or careers
  • Your health has changed
  • You have purchased or sold a home
  • You have started or sold a business
  • Your children or others are no long dependent on your income for their needs
  • You are about to retire
  • Your net worth has changed
  • Your legacy goals have changed

Don’t Delay

Families grow, careers progress, needs change, your plans and goals shift. You need to make sure your life insurance keeps up.

Your Fortis Wealth team has the expertise and resources to help you – Call to schedule a life insurance review today.

September is Life Insurance Awareness Month, a nationwide campaign created in 2004 by Life Happens. Life Happens is an organization dedicated to educating consumers on financial products and topics.

Fortis Solutions, LLC is a licensed insurance agent under laws of the Commonwealth of Pennsylvania and is providing this information for educational purposes only. Fortis Solutions LLC may sell and service certain insurance products.

Investment Opportunities in Student Housing

Demographic and macro-economic trends favor this alternative to traditional investment.

By Randy Hubschmidt
Fortis Wealth, Managing Partner

Key Takeaways

  • Investment in student housing is approaching record levels.

  • Student housing generally weathers recessions—and rising interest rates–better than most other asset classes.

  • Gaining access to this asset class remains a challenge for individual investors. Think twice about being a do-it-yourselfer.

With college enrollments continuing to rise and the stock market expensive by historical standards, student housing has become an increasingly attractive alternative to some traditional investments. Student housing transaction volume totaled a record $9 billion in 2016, a 62-percent increase from 2015, according to a report by Axiometrics. After a brief pause in 2017—more a statistical anomaly than a market trend–three-quarters of investors surveyed by CBRE expect to increase their exposure to student housing in 2018.

The biggest challenge for investors of student housing is gaining access to this asset class. On the private side, we’re seeing a tremendous amount of investment in that asset class. It’s more difficult for clients and other investors to get access via the public markets.

Unique advantages of student housing investments

Unlike many other investments, including traditional real estate, student housing is generally recession-proof. That’s because young adults tend to go back to school when the economy is soft and job prospects are meager.

SSSource: National Center for Education Statistics

Another advantage is that students tend to sign one-year leases. It’s analogous to buying a one-year CD. The rates will reset annually, which can work to your advantage in a rising rate environment–or in this case–a rising rental market environment. Additionally, if the property is desirable, well maintained, has good amenities and is located close to campus, renewals of those one year leases tend to occur well in advance of their anniversary date. That’s because kids who know they will be attending that school the next year will once again want to renew their apartment lease long before the September start of the school year. Both occupancy rates and renewal rates tend to be VERY high when it comes to student housing.

What are the best ways to invest in student housing?

Sure, you could purchase an apartment building and turn it into student units. But, one of the difficulties with “turning” an existing apartment building in the student housing market is that you run the risk of alienating your current tenant base as you start to transition that asset from multi-family tenants to student tenants. These groups tend to have different schedules and different tolerances for noise. You could also have issues with local laws whereby privately-owned student housing may not meet the local municipal ordinances.

Risks associated with student housing investments

One of the biggest risks, as with any real estate investment, is competition in the marketplace. One needs to be aware of competing projects both existing and in the works. Similarly, the schools themselves could elect to build their own on-campus student housing. Real estate continues to be local in nature and myriad issues could affect the marketability and desirability of a project.

Long-term outlook for student housing as an investment sector

A college education continues to be in high demand, and there doesn’t appear to be any reason for this to subside. And so long as a college education is valued, the need for student housing will be there. Certainly, cost will be a factor. But, as college enrollment continues to increase, this asset class should continue to perform well. As previously stated not only does it tend to be somewhat recession proof, history has shown that enrollment actually increases as the economy stalls and jobs become more difficult to find. And as long as that demand continues there should continue to be demand for housing.

According to Axiometrics data, U.S. college enrollment growth has increased by 6.4 million students over the last 20 years and the 14 to 17 year-old demographic continues to grow compared to previous generations. All these factors continue to attract investors to an investment space that is still considered young by commercial real estate standards.

Conclusion

If you or someone close to you is concerned about your lack of diversification or wealth building strategies, please don’t hesitate to contact us.

Business Owners’ Potential Business Exit Worksheet

Click Here to Print

1. What motivated you to start your business?

 

2. How important is your business to your personal identity?

 

3. Is the business your primary source of income? If not, what is?

 

4. How much time do you spend working ‘in’ the business rather than ‘on’ the business?

 

5. Which of the following best describes you? (circle one)

  • Wealthy but I would prefer to continue to work
  • I need to continue to grow my business if I want to own an asset that will eventually make me wealthy
  • I’m already wealthy and ready to exit my business in the next 1-3 years
  • I wish I had sold the business already

 

6. What, in your opinion, is the #1 thing you can do to grow and protect the value of your business?

 

7. What aspects of your business keep you up at night?

 

8. There are many ways to exit a business, of the following six options, which are the two that you find the most likely and compelling? (Circle two)

  • Gifting or sale to member(s) of your family
  • A buyout made by your business partner(s) or your co-shareholders
  • A management buyout by one of your essential manager employees or a group of essential manager employees
  • A sale to a large group of your employees (ESOP etc.)
  • A private equity sale or recapitalization – selling your business, or a significant part of your business, to a buyer that would like to buy, improve and re-sell (or possibly hold) the business
  • Sale of the entire business to a practitioner in the same business or a related industry
  • Public offering of company stock (IPO)

 

9. What valuation method do you use to measure the value of your business (EBITDA multiple, Discounted Cash Flow, ‘Back of the Envelope’ etc. etc.)

 

10. How much money do you believe you need in order to maintain or improve your lifestyle after you are no longer taking a salary from your business?

 

11. Let’s talk about your team. Do you regularly (at least once per year) consult with the following 5 types of advisors? (Circle all that apply):

  • Accountant
  • Estate Attorney
  • Corporate Attorney
  • Financial Advisor
  • M&A Advisor (business broker, investment banker etc.)

 

12. Does your team of advisors coordinate their planning and advice for you? How often do they meet to review your comprehensive plan?

 

13. How often do you and your co-owners set aside half a day for a formal ‘shareholder’s meeting’ designed to jointly make business decisions and solve problems in the business?

 

14. How recently have you updated your shareholders (buy/sell) agreement? Does it include your most recent valuation? Is it adequately funded by insurance?

 

15. What are the best methods you’ve used to attract, retain, and reward your key employees?

 

16. Would your business be likely to suffer a financial loss if you or essential employee(s) were lost or incapacitated?

 

17. Do you or your company own any life insurance policies for business succession, buy/sell, disability, deferred compensation or retirement purposes?

 

18. Have you done any advanced estate planning for yourself and your family (giving away company stock, living trusts, life insurance, charitable planning)?

 

19. Have you updated your advanced estate plan to reflect recent changes in your business or recent tax-related legislation passed by Congress?

 

20. Would you be interested to have a second opinion on any of your planning work that we have asked you about on this worksheet?

IRS Releases 2018 Form W-4 and Updated Withholding Calculator

The IRS has released a new version of Form W-4, as well as a new withholding calculator to help taxpayers adjust their 2018 tax withholding.

The Tax Cuts and Jobs Act made major changes to the tax law and it is important to ensure that you are having the right amount of tax withheld from your paycheck in order to avoid facing an unexpected tax bill or penalty when filing your 2018 tax return.

We recommend that all employees check their 2018 withholding, especially those who:

  • Earn two incomes or are in two-income families
  • Work only part of the year
  • Have children who claim credits such as the Child Tax Credit
  • Itemized deductions in 2017
  • Have high incomes and more complex tax returns

 The IRS has created two methods to help taxpayers determine their appropriate withholding:

  1. A withholding worksheet, which is included with the 2018 Form W-4
  2. New withholding calculator https://apps.irs.gov/app/withholdingcalculator/index.jsp

We recommend using the calculator, as it is designed to help employees make changes based on their personal financial situation. To use the calculator, you will need your most recent pay stub and a completed copy of your 2017 income tax return.  If you have not yet filed your 2017 return, you can refer to 2016, but the results may not be as accurate.

-Your Fortis Tax Team
March 2, 2018

 

Fortis Perspectives – February 2018

FROM THE DESK OF OUR MANAGING PARTNER, RANDY HUBSCHMIDT

Today’s Multifamily Housing Sector

In Order to Sell Right, You First Have to Buy Right

 

Key Takeaways

  • Proper market analysis is essential for success when investing in multifamily housing.
  • Multifamily housing should remain strong as new tax laws make single family ownership less attractive and as downsizing Boomers migrate to urban markets vacated by Millennials.
  • There is still plenty of upside left for properties that can be upgraded quickly and cost effectively and can be re-positioned in the market.

Recent stock market volatility has caused many to wonder if the real estate market has also hit its near-term peak. Many investors have asked me if it’s time to take some chips off the table or diversify into other sectors of the real estate market.

Real estate is notorious for its boom and bust cycles. As is the case with other asset classes, as returns continue to increase, more capital is attracted. As more capital is attracted, investors become increasingly aware that returns are on the upswing and thus, still more capital flows in that direction. At some point the music stops and you don’t want to be the one left without a chair. Sound familiar?

How real estate differs from stocks

Unlike publicly traded stocks, it takes time to deploy capital into real estate. If you are talking about a development, entitlements take time, contractor bids are collected, building commences and finally “lease up” (attracting tenants) begins. This process can take several years. By the time lease-up begins, the market may have shifted and the projected rents may be unachievable. If the projections are rosy to begin with, or if the project is over-leveraged, then returns on this investment will suffer.

If we’re talking about a “reposition” or a “value-add” project, there should be existing cash flow that can be reinvested into the property to make the required capital improvements. If the property can be quickly upgraded and repositioned in the market, then its owners will be in a better position to take advantage of the market upswing before time runs out.

Unfortunately, real estate investors often enter the market too late in the cycle and end up buying at the top of the market. This may certainly be the case when it comes to some of the multi-family assets being purchased today.

How real estate is like the stock market

Real estate and equities are in the sense that it’s very hard to financially engineer your way out of a bad investment or to rely on the “next bigger sucker” to provide your exit. If buying real estate at 5 cap or buying a tech stock at 100 P/E, how much more room is there to go?  As the old saying goes, “In order to sell right, you first have to buy right.”

  • If you buy right, you can always hold the asset for the cash flow it generates and sell when the market turns back in your favor.
  • If you buy right, you can sell when you want to, not when you have to.

According to Multifamily Executive’s (MFE) 2018 Investment Forecast, competition for attractive assets becomes tighter as valuations increase, and as a dearth of yield persists in fixed income. Thus, operational expertise becomes even more important.

The MFE report also said to expect continued outperformance in the secondary and tertiary markets despite the increased competition for high quality assets. Primary markets continue to attract the most attention driving capitalization rates down. Thus, those assets may yield lower overall returns.

Challenges will be ‘the same, but different’

MFE’s report also had an interesting take on Millennials and their propensity to rent in urban markets: “Challenges will be ‘the same, but different.’” MFE and other market observers say statistics no longer support the belief that millennials will be lifelong renters—i.e. perpetual members of the sharing economy that not only don’t buy homes in the suburbs; they don’t even commit to purchasing cars in order to get around.

Not so. Millennials are clearly delaying marriage, children and household formation later than previous generations did. But, here’s the thing: Eventually they are getting married, starting families, buying cars and migrating to the suburbs. This trend would normally be adverse news for the multi-family housing sector, but there’s another powerful trend taking place–aging Boomers are doing the reverse. Boomers are downsizing, which means they are selling their suburban homes and moving into multifamily units in urban areas. I suspect this trend to continue for the foreseeable future.

As Bendix Anderson recently explained in National Real Estate Investor (NREI), The Apartment Sector Boom (Is) Set to Continue in 2018. Anderson’s report said the new tax law changes will create an increase in overall renters as the tax benefits of home ownership have been reduced for the time being. The NREI report also said that Developers will continue to focus on the primary markets, as well as on gentrifying surrounding areas and on building luxury apartments. According to the report, these developments charge rents at the top of their respective markets and face significant competition from other luxury apartment offerings. The report also said it will be increasingly difficult for those properties to raise rents.

At Fortis, we tend to agree with Anderson’s assertion that the strongest returns can be achieved in the secondary markets—markets that are located close enough to primary markets so they can “siphon off” prospective tenants who’ve been priced out of primary markets and where competition among buyers is reduced.

Conclusion

Real estate has, and always will be, an important component for a well-balanced long term portfolio. If you or someone close to you is concerned about your lack of diversification or wealth building strategies, please don’t hesitate to contact us.

Randy Hubschmidt
Managing Partner, Fortis Wealth

Fortis Advisors, LLC is a registered investment adviser with the Securities and Exchange Commission. You can read more about the Fortis team at www.fortiswealth.com. To the extent that content includes references to securities, those references do not constitute an offer or solicitation to buy, sell or hold such security as information is provided for educational purposes only. Articles should not be considered investment advice and the information contain within should not be relied upon in assessing whether or not to invest in any securities or asset classes mentioned. Articles have been prepared without regard to the individual financial circumstances and objectives of persons who receive it. Securities discussed may not be suitable for all investors. Please keep in mind that a company’s past financial performance, including the performance of its share price, does not guarantee future results. Material compiled by Fortis is based on publically available data at the time of compilation. Fortis makes no warranties or representation of any kind relating to the accuracy, completeness or timeliness of the data and shall not have liability for any damages of any kind relating to the use such data. Material for market review represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events, or a guarantee of future results. Indices that may be included herein are unmanaged indices and one cannot directly invest in an index. Index returns do not reflect the impact of any management fees, transaction costs or expenses. The index information included herein is for illustrative purposes only

Tax Identity Theft Awareness Week: January 29 – February 2, 2018

DAY 5 – How are the IRS and state revenue officials protecting taxpayer data today?

  • Password protocols have been enhanced for individual and tax professional software.
  • The IRS is requesting additional information from tax professionals who contact them to discuss client information. The additional information may include SSN, date of birth or home address.  According to the IRS, this personal information is necessary to verify the identities of the tax professional they are releasing taxpayer information to.
  • IRS has strengthened protections for IRS e-Services.
  • States and financial institutions have implemented their own program to help identity false refunds.
  • The IRS is enforcing a Form W-2 verification code that will help verify income information and employer for 2018 tax filing season.
  • The IRS has a public awareness campaign “Taxes. Security. Together.” to help taxpayers and tax professionals stay alert to cybercriminals and identity thieves. https://www.irs.gov/pub/irs-pdf/p4524.pdf

As cybercriminals and identity thieves’ progress, we need to stay on guard!

To keep yourself up to date with the latest scams and tips to protect your personal information visit www.irs.gov.  You will find plenty of information regarding the latest scams targeting taxpayers, telephone scams, email scams, etc.

 

Sources

https://www.irs.gov/ “Security Summit Partners Mark Progress in Identity Theft Battle; Prepare for 2018 Tax Season”

https://www.journalofaccountancy.com/ “IRS asking for taxpayer representatives’ personal information”

 

Tax Identity Theft Awareness Week: January 29 – February 2, 2018

DAY 4 – Reasons to Use Direct Deposit for your Tax Refund

Nowadays, using direct deposit is the fastest and safest way to receive a tax refund. Taxpayers who option out of e-file and choose to file a paper return can still use direct deposit as their refund method.

Direct deposit is beneficial because it eliminates the risk of a paper tax refund being stolen or lost.

FAST – SECURE – SAFE – DIRECT DEPOSIT

 

 

The IRS does have a direct deposit limit.  The limit is set to fight fraud, identity theft and criminals obtaining multiple refunds.  The limit of tax refunds being directly deposited into a single bank account or pre-paid debit card is three.  The fourth and subsequent refunds will be paper checks and mailed to the taxpayer or their tax professional with a notice.

You must deposit refunds into an account in your own name, spouse’s name or both.  Keep in mind, some banks require both spouses’ names on the account to directly deposit a tax refund.  It is best to check the direct deposit rules with the bank first.

With direct deposit, you have the option to split a refund into several accounts.  These accounts include checking, savings, health and some retirement accounts.  For more detailed information and instructions use IRS Form 8888 or notify your tax professional to complete the form on your behalf when filing your tax return.

Sources

https://www.irs.gov/ “Here’s Five Reasons to Use Direct Deposit for a Tax Refund”

https://www.irs.gov/ “Get Your Refund Faster: Tell IRS to Direct Deposit your Refund to One, Two or Three Accounts

Tax Identity Theft Awareness Week: January 29 – February 2, 2018

DAY 3 – How Do You Protect Yourself From Identity Theft?

TREAT YOUR PERSONAL INFORMATION LIKE CASH, don’t leave it laying around.  By taking a few simple steps, you can reduce your risk of identity theft.

  • Do not routinely carry your social security card or any type of document with your social security number.
  • Keep old tax returns and tax records secured/locked away. If electronic, keep encrypted.
  • Shred tax documents or any document with your personal information before throwing away in the trash (credit card bills, invoices, banking statements, medical documents, expired driver’s license, etc.).
  • Avoid IRS-Impersonators. The IRS will not call you with threats of jail or lawsuits.  The IRS will not request personal information online.

Forward IRS-related scam emails to phishing@irs.gov.

Report IRS-impersonators at www.tigta.gov

  • If you are publicly sharing your personal information on social media….stop! There is just some information that should not be shared with everybody.

The Do Not Share List

  1. Home address
  2. Places you lived
  3. Birth date (M/D/Y)
  4. Work place
  5. Vacation plans
  6. Any information about your children, a new car, a new home.

 

Sources

https://www.irs.gov/“Taxpayer Guide to Identity Theft”

Tax Identity Theft Awareness Week: January 29 – February 2, 2018

DAY 2 What To Do If You Become A Victim Of Tax Identity Theft

  • Respond immediately to any IRS notice. 

Call the IRS at 800-829-1040 to verify the notice received of tax identify theft or your tax professional will call on your behalf with Power of Attorney.

When the IRS confirms they sent the notice, an Identity Theft Affidavit (Form 14039) should be completed and submitted.

The IRS will then issue a PIN that verifies that you are the true owner of that identity.

It is extremely important to not misplace your PIN.  Obtaining a replacement PIN is a real challenge.

 For more information on IRS identity theft victim assistance visit irs.gov/IdtVictimAssistance

  • Alert your financial institutions right away.

They will need to monitor any fraudulent activity on your accounts.  You will need to review transactions and have any accounts closed that you did not authorize to open.

  • Notify at least one of the credit bureaus.

The credit bureau will place a fraud alert on your credit records. 

  • Contact the FTC (Federal Trade Commission) to file a complaint.

The FTC recommends you visit their website to find helpful resources and file the complaint online.    identitytheft.gov

 

Sources

https://www.irs.gov/ “Taxpayer Guide to Identity Theft”

Raquel, Arrechea “Understanding Tax Return Identity Theft.” New Jersey CPA Magazine