Posted on May 7, 2008 @ 9:27 pm - Written by BawldGuy
Caveat: There’s an old saying that says you shouldn’t buy real estate solely for the tax shelter. I’ve seen some exceptions to that rule. But just a handful, and they tended to prove the rule, not otherwise. Yer gonna get some tax shelter whether you want it or not. Of course, if you don’t want yours, we can talk. 
Let’s all get on the same page first. What is tax shelter in real estate terms? Simply put, depreciation is the loss of value of your building. Land isn’t depreciated because it doesn’t wear out. Even better, depreciation shows up on your tax return as a loss — one you didn’t feel, ‘cuz it’s also known as a ‘phantom loss’. Make sense? You didn’t really lose any money — it’s a paper loss only. Yet you get to claim you lost money.
How cool is that? You mean you never got the memo?
This loss saves you money through income taxes you now don’t have to pay. Those are real dollars, and the taxes you aren’t paying are real return. Said another way — these are dollars that but for the depreciation would be leaving your Levi’s and heading towards the IRS. A quick example would be an investor with a $90,000 income from their day job. Read the rest of this entry »
Posted on April 29, 2008 @ 10:10 pm - Written by BawldGuy
Setting up a Purposeful Plan is not a walk in the park — not for us and not for our clients. It takes serious work on both sides. Between podcasts, case studies, white papers, and what I do here on a daily basis, you can pretty much ascertain how much is involved. Being serious isn’t an option, it’s a necessity.
Today let’s explore a potential case study. I’m using numbers obtained by a very experienced and competent pro in the midwest.
We’ll not dwell on the minutia, but instead take a broad view of the before and after. Let’s use an investor’s income property in an area which is probably not gonna grow much, and where the future is fine, but not nearly as promising as solid growth regions we’re now recommending. I say it won’t grow much since it’s averaged less than 2½% a year for what seems like forever — especially to the long suffering investor.
Here’s what we’re working with: Small income property worth around $250,000 — loan balance of around $135,000 — sales costs of around $20,000 or so.
Let’s get started. Read the rest of this entry »
Posted on April 28, 2008 @ 10:48 pm - Written by BawldGuy
Though I touched on Grandpa Economics yesterday, there’s something begging to be added to the mix. This afternoon I had a very interesting conversation with a house agent from the midwest. He told me of an investor who’d retired at 39 after he’d paid of the last of his five local duplexes.
The agent commented he should have done the same thing, and expressed regret he hadn’t. I replied he wouldn’t be even considering that approach if he worked with us, which he is strongly considering. What? Huh? Why not?
Hint: Would you plan on putting yourself between a rock and a hard place on Purpose?
Simple — Read the rest of this entry »
Posted on April 26, 2008 @ 12:03 am - Written by BawldGuy
It’s never a good day when I find it necessary to tell someone I can’t take them on as a client. Sometimes it’s ‘cuz they find themselves in quicksand and need help — but they’re too far gone. Most of the time though, it’s ‘cuz they’re under capitalized. They either want me to help them invest with 0-5% down, which I won’t do period, end of sentence, or they’ll have zip, zero, nada cash reserves to establish their Sominex Account.
As I’ve said dozens of times here, no Sominex Account means we can’t work with you. Though it’s designed to help the client sleep when Murphy makes his inevitable visit(s), it’s also there so I can sleep, know what I mean, Verne? I don’t like those weird dreams when I’m stressed.
Still, to those for whom I can’t help for this reason, and who obviously have more courage than is safe, I offer the following. Read the rest of this entry »
Posted on April 23, 2008 @ 11:22 pm - Written by BawldGuy
Here’s a real time example of what a San Diego income property owner can do — if they’re willing to Get Outa Dodge.
Example — investors met with us today. We’ll be keeping them anonymous of course. They own a handful of San Diego homes, which they bought as investments. I recommended they execute tax deferred exchanges on two of them. The others simply weren’t ready yet. Between the two, there is roughly $300,000 tradable equity.
They also have, give or take, $130-140,000 in cash to sweeten the pot.
Here’s a picture of how cool their retirement could be, after taking advantage of this opportunity. What does your retirement look like to you?
In the next few months they’ll be easily able to acquire around $3-3.25 Million in solid growth region ‘path of growth’ income property. Their tax shelter alone will increase by around $80-100,000 a year.
That’s a crucial number, ‘cuz in say, 5 years from now when they pull the trigger on another exchange they’ll have Read the rest of this entry »