Posted on June 25, 2009 @ 8:50 pm - Written by BawldGuy
Here’s something almost every client who’s been new to investing has had to learn. It’s so simple I think folks don’t see it, even though it tends to hide in plain sight. Since newly acquired depreciation is akin to having a new kid or four, why wait ’till April for the benefits? If you’re an employee and not an independent contractor, simply talk to those in charge of your paycheck, usually Human Resources. (I think)
Your CPA can tell ya how many exemptions to add. The increased exemptions act to swell your take home pay. It all comes out in the wash at tax time, the same as it would if you indeed had a set of quadruplets. 
Why on earth would ya wanna lend Uncle Sam YOUR money at 0% interest if an easy as pie errand like walkin’ down the hall at work transfers those dollar$ from his coffers to yours? Read the rest of this entry »
Posted on June 3, 2009 @ 8:06 pm - Written by BawldGuy
Let’s spend some time with the ever popular line item — Repairs & Maintenance. (R & M) This particular expense is the most flexible. It’s one figure when you’re a buyer lookin’ at the seller’s income/expense form. It’s another when it’s on the tax return. It’s yet another when a seller’s real estate agent is ‘projecting’ income and expenses. See what I mean? Flexible.
San Diego real estate investors know all about what it takes to keep property in shape. Many of them still haven’t ever owned an income property younger than they are. Is your hometown the same? Mostly older properties, some WAY older? When you look to buy older properties, it matters a great deal just how well the previous owner(s) viewed maintenance. Was it what I call the ‘Just in time’ method? You know, after the fifth tenant complaint something was repaired using a couple clothes hangers, duct tape, and prayer? Read the rest of this entry »
Posted on May 26, 2009 @ 7:24 pm - Written by BawldGuy
Here’s a very solid comment with an often asked question posed by Matthew. He was commenting on the post immediately preceding this one.
I know that what you are saying is true overall and the economics work out positively, but I do have one question. It seems that when many real estate agents recommend purchasing property as a tax shelter, they neglect to mention the interest that you are paying the bank over those 30 years. How does the interest paid (vs. buying all cash) figure into the equation? I am just thinking about the approximately $250,000 in interest that they’ll be paying if they get the 50% loans.
Originally, the primary goal of the investors in the example had been retirement income — laudable if before tax income was by definition synonymous with after tax income. Alas, for far too many that’s woefully untrue. I’d advised this retired couple to acquire two properties using 50% down payments. The result, without going through the details was a significant increase in after tax monthly cash flow. Read the rest of this entry »
Posted on May 21, 2009 @ 8:42 pm - Written by BawldGuy
Was talkin’ with a very bright agent today from the Tacoma area. We were talking about retired folks he knew, who owned several smallish income properties locally, all of which were either free and clear or close enough for horseshoes. My immediate response was, uh oh.
These investors took Grandpa Economics to it’s logical if ill-fated conclusion. This falls under ‘be careful what you wish for’, ‘cuz you might get it.
They’re now over 70, retired and living off the fruits of decades of investing. Their Plan was Purposefully executed — which is the crux of the problem. The strategy they employed had a huge hole in it. See, they now own all these debt free properties, most if not all of which are completely bereft of depreciation. As you are probably aware, depreciation has an alternate spelling — T-A-X S-H-E-L-T-E-R. Their home is free and clear too. They don’t have a shred of an inkling of a hint of any kinda shield against all that income — and since April 15th seems to come around pretty much every year or so, that can be a problem. Read the rest of this entry »
Posted on May 18, 2009 @ 7:36 pm - Written by BawldGuy
As if it was yesterday, I can still hear one of the grizzled veterans of real estate investment brokerage admonishing me for even pursuing alternatives to their holiest of holy beliefs — you buy and hold — forever. Some wouldn’t even allow discussion of tax deferred exchanging. You bought — you held — you refinanced if necessary, (of course it was always necessary) — rinse and repeat into eternity.
35 years of that strategy, ending in 2010 would yield very predictable results. If you’d kept your capital in San Diego as most locals do, you would’ve been the punch line for a good news/bad news joke — though it wouldn’t be funny ‘ha-ha’.
The good news is, they were on the happy end of some pretty impressive capital growth. Even with the recessions and other economic bumps in the road since 1975, they consistently made a boatload of money. One might say, without argument from me that it’s great news not just good. They refinanced and bought more property in 1978. Then again in 1986 and 1988. They then weathered the whole S & L thing, remaining inactive ’till about 1999 or so. They again pulled more capital from their various properties, investing in still more local income producing real estate. Read the rest of this entry »
Posted on May 12, 2009 @ 5:31 pm - Written by BawldGuy
Every boom to bust cycle creates a new if temporary class of real estate investor — often more than one. Sometimes the results of the boom generates the new class, sometimes the consequences of the bust. My favorite new kinda client these days is the one who owns a couple kinds of property — those acquired long ago with significant post crash equity — and those worth less than what they paid.
And there lies the gold, as in golden opportunity.
Let’s get rid of some phobias first, OK?
1. Chances are, I’m gonna tell ya to eschew the acquisition of local property for superior regions. If you’re in San Francisco, Palo Alto, Walnut Creek (Bay Area in general), get over it, and resign yourself to owning income property elsewhere. If you own properties in areas currently living through the sequel to The Grapes of Wrath — Michigan & Ohio come quickly to mind — same message. Get over it already. But then what? Get Outa Dodge for Heaven’s sake. Read the rest of this entry »