The Small Balance Intersection Update - July 13, 2024

Data Point Of The Day: Shelter prices, which account for about one-third of the CPI, only rose 0.2% in June as rents cooled. It was the category’s smallest monthly rise in three years.

Did You Know? States with the highest foreclosure rates included New Jersey, Illinois, and Florida. Among metro areas, Lakeland, FL, and Columbia, SC, had the highest rates.

Foreclosure Freeway

Foreclosure Activity in the First Half of 2024 Down from the Previous Year

The ATTOM Midyear 2024 U.S. Foreclosure Market Report reveals a 4.4% decrease in foreclosure filings compared to the previous year, affecting 177,431 properties. This suggests potential market stabilization, as foreclosure starts also dropped by 3.5%. States with the highest foreclosure rates included New Jersey, Illinois, and Florida. Among metro areas, Lakeland, FL, and Columbia, SC, had the highest rates. The average foreclosure timeline increased to 815 days in Q2 2024. In June 2024, new foreclosure starts decreased by 17% month-over-month. However, bank repossessions rose by 8.6% from the first half of 2023, indicating ongoing challenges. Illinois, New Jersey, and Maryland had the highest foreclosure rates. Despite fewer filings, extended timelines and increased repossessions reflect market complexities. Read the full report here.

Multifamily Growth Avenue

Multifamily is Well-Positioned for Short- and Long-Term Growth

The Arbor Realty Trust and Chandan Economics report underscores the promising short- and long-term growth prospects for the multifamily sector. Despite high interest rates, the sector is stabilizing, evidenced by an 8.7% rise in the Freddie Mac Apartment Investment Market Index (AIMI) in Q1 2024. Cap rates are also stabilizing, with small multifamily cap rates slightly decreasing to 5.7%. The multifamily Commercial Real Estate Mortgage Index (CREMI) improved, showing above-average conditions in 107 out of 390 markets. Rental housing demand continues to outpace supply, highlighting the need for new developments. The aging rental stock further emphasizes this necessity. Household formations are exceeding housing additions, indicating sustained growth potential. For more detailed insights, read the full report here.

LLC Exit Ahead

Strategies for a Smooth Transition Out of an LLC

Exiting an LLC can be a complex and challenging process, making it essential to understand the steps and legal considerations involved for a smooth transition. The first step is to review the operating agreement, which often outlines the specific procedures for withdrawal, including notice requirements and valuation methods. If the operating agreement is silent or ambiguous on these points, state statutes and case law will govern the exit process. Effective communication with other LLC members is crucial to avoid conflicts and ensure compliance with any required procedures. Accurately valuing the exiting member’s interest is vital, and this may necessitate the assistance of a professional appraiser to determine the fair market value. Legal counsel can guide the process to mitigate risks and ensure all legal requirements are met. Additionally, understanding potential tax implications and planning accordingly can prevent unexpected liabilities. For more detailed advice on navigating the exit process, you can read the full article here.

Tax Planning Road

Navigating the Connelly Decision: Essential Tax Strategies for Small Business Owners

The U.S. Supreme Court's decision in Connelly v. United States has complicated a common succession strategy for small businesses. This strategy involved companies buying life insurance on owners to fund stock repurchases upon their death, expecting the insurance payout to be tax-free. However, the court ruled against this, resulting in significant estate tax burdens, as seen with Crown C Supply. The owner's estate ended up owing nearly $900,000 more in taxes. The court decided that the requirement to repurchase shares wasn't a liability offset, adding the insurance payout to the company's value. This ruling disrupts many small business owners' plans who don't typically focus on complex tax and legal issues. Owners are advised to review and possibly revise their buy-sell agreements and consider alternative arrangements like cross-purchase agreements or using LLCs to hold life insurance. This decision underscores the need for careful tax planning and professional advice to avoid unexpected tax liabilities. For more detailed insights, read the full article on WSJ.

Confidence Avenue

Mastering Public Speaking: Steps to Become a Confident Speaker

Remember Jerry Seinfeld's joke about public speaking, where people fear it more than death? Public speaking anxiety is common, but it doesn’t have to be a life sentence. Understanding your audience and tailoring your message to their interests and needs is crucial. Regular practice, including rehearsals in front of a mirror and seeking feedback, can significantly boost confidence. Joining organizations like Toastmasters International provides structured opportunities to improve in a supportive environment. Thorough preparation, effective use of visual aids, and managing anxiety through techniques like deep breathing are essential. Engaging with your audience through eye contact and interaction enhances the impact of your speech. Utilizing resources such as Dale Carnegie Training and The Public Speaking Project can further develop your skills.

For more detailed insights, read the full article on LinkedIn.