Posted on July 30, 2008 @ 12:10 am - Written by BawldGuy
This was many moons ago. The client was on in years and wanted to execute a tax deferred exchange to younger, higher cash flowing properties. Oh, and by the way, Jeff, can you exit about $75,000 in cash for me? When asked why, and getting the usual lecture from her about it being none of my $%^# business, I explained how her answer would most likely dictate how I’d design her transaction.
She always allowed me a smile after givin’ me the expected hard way to go. It was a dance we did, at her calling. Turns out, since she was gonna keep the newly acquired property for quite awhile, she wanted the cash way ahead of when she actually needed it. Though semi-retired her income was still six figures yearly, as she owned a long established cash cow cafe. (She hated it when I called it that.) Turns out in three years she was turning over the reins to the cafe, and forgoing the income. This worked out ‘cuz by then her portfolio was already cash flowing, uh, more than adequately. (She had quite the portfolio.) This was probably gonna be her last exchange, and it was mostly due to her wanting younger property with lower long term operating expenses.
My assignment was to get her $75,000 — and time it for three years from the close of this exchange. It would be for a long trip she was gonna take, and frankly, just ‘cuz she wanted a little more spending money for when she turned over the cafe to her son and daughter-in-law.
Not a problem. Read the rest of this entry »
Posted on July 28, 2008 @ 11:18 pm - Written by BawldGuy
Of late I’ve had maybe half a dozen conversations involving tax deferred exchanges. As one astute observer pointed out, there’s even some business models based on them. True enough, but I’ve seen so many folks get themselves in unintended places while worshiping the false god of 1031. I’m here to tell ya true — it ain’t the end all be all to the real estate investor. It’s merely another tool.
Ever met a carpenter whose tool belt had only a hammer? He has levels, saws, various measuring tools, and a bunch more. He uses the tool made for the job at hand. Why? He’s found through experience pounding nails with a level makes for a crazy day. That analogy is nearly exactly on point with the real estate investor’s tool belt. There are times when a partial exchange will do the trick.
Your Purposeful Plan takes into account how you will exit your investments when the time comes. Though most folks will make use of the tax deferral, it’s not anywhere near universal. This is especially the case for those with household ‘day job’ (In IRS-ese that’s ‘ordinary income’.) of $150,000 or more.
Let’s skip process for tonight, and go straight to results. Oh, now yer paying attention. Read the rest of this entry »
Posted on July 7, 2008 @ 11:59 pm - Written by BawldGuy
“The mass of men lead lives of quiet desperation.” Thoreau
Do you love what you do? Let’s be honest. Even for those who love the results of their labor, as do I, there are certain realities for which my anticipation isn’t amplified with a winning smile. Heck, even that was sugar coated. Let’s cut to the chase.
Part of life’s reality for million’s of Americans is what their retirement will look like — or more to the point, what it won’t look like. The older they are, the more likely desperation threatens to take hold.
I’m here to tell these folks there’s one immediate action they can take to begin to change their future positively.
They can stop pretending.
They pretend the qualified retirement plan at work is gonna be just fine. This, even though the average 50-something American male has less than $60,000 in their 401(k). If they’re 55, and retire at 65, (more pretending) what will that paltry sum have grown to? Let’s give them a huge benefit of the doubt and say they quadruple it in the decade before their retirement. The retiree having to retire based upon SS payments plus the income derived from less than $250,000 will have to turbo charge their talent for pretending.
Yer 30 or 40-something? Our clients average age range is 35-55. We have younger and older clients in decent numbers. You can correctly envy the younger, and say a prayer for the older. They have a steep hill to climb, and little time in which to plant their flag at the summit.
Back to pretending. Read the rest of this entry »
Posted on June 26, 2008 @ 10:10 pm - Written by BawldGuy
Guy I’ve been helpin’ on the side with investment advice lives in Iowa. Pretty smart guy, and frankly, if my opinion was asked, I’d say he had more ah, testosterone than is safe. But that’s another post altogether. Anywho, he’s not only smart, but a doer with a capital D. Tell him what to do and how to do it, and Boom! he’s emailin’ me with a question about what to tackle next.
BawldGuy Axiom: Those who set out to try are doomed to learn from those who set out to do. Doing is what results are all about. Trying is how we begin explanations for failure.
The latest bump in the road for ‘Jim’ is figuring out how to reliably value properties in which he has some interest. Though I’m still not positive about what he was looking at during his research, I can say it did bring up a common misconception.
Going to the local tax assessor and viewing property tax appraisals in order to value is maybe one of the fastest ways to find yourself in the black abyss of ‘What happened?’
In California for example, the only kinda sorta reliable assessor valuation is found the day after a new sale is recorded — if that sale was recorded at full value. Back in ‘78 we amended the state constitution as it relates to real estate taxes. (Proposition 13) Very much oversimplified, it limits taxes to 1% of the purchase price, which of course has been perverted somewhat over time to include various exceptions. In San Diego homes and small investment props generally land in the range of 1.25-1.6%. Also, and this is best part, annual tax raises cannot exceed 2%. Pretty cool, eh? Read the rest of this entry »
Posted on June 26, 2008 @ 1:05 am - Written by BawldGuy
We’ve found the right property(s) for you. You’ve successfully entered into escrow, and have navigated all the hurdles and potholes encountered on the way. It’s time to transfer ownership to you. Let’s look at what happens now.
Note: For those who haven’t read the series from the start, and would like to do so, here on some links for you. Here’s Part I, Part II, and Part III
I’m gonna simplify this as much as I can. It’s not my job to make things as difficult and/or complex as possible, right? Right.
How do we know when we’ve arrived at our off ramp? There are as many answers as there are brokers and investors. For me it’s when lender says to get ready for loan docs. Don’t get me wrong, Murphy still has arrows left in his quiver. They’re just harder for him to reach now. At least that’s my story, and I’m stickin’ to it.
BawldGuy Axiom: The escrow ain’t closed ’till someone tells you it’s closed and even then not ’till you’ve confirmed with the title company. You can be fairly sure when you’ve received the payment info from the lender. Probably. Read the rest of this entry »