Posted on July 30, 2008 @ 11:47 pm - Written by BawldGuy
Here’s how I explain to real estate investors in other states what it’s like to trade equity from California to much lower priced growth regions.
It’s kinda like buying that killer Norstrom’s dress for yer wife. You honestly thought it was perfect for her. But after she stopped laughing, and could speak English again, you were back in the car, headin’ for a refund. Now, imagine you hafta spend the entire refund at the Dollar Store. That is what the CA real estate investor faces when he exchanges his properties’ equities to another state.
Take a Bay Area, San Jose (Palo Alto), or San Diego income property owner. We’ll use a San Mateo duplex. Let’s say it can sell for $850,000 and with a loan balance of $400,000 the net proceeds would be roughly $385,000 or so. If they paid $600,000 back in the day, their annual tax shelter runs in the neighborhood of $18,000 +/-. (Should be more, but that’s another post.) Their current cash flow is either zip zero nada zilch, or enough to treat the family to a monthly dinner at Sizzler. Oh boy! We’re goin’ to Sizzler!
Here is the ‘before & after’ picture when their 1031 tax deferred exchange has been successfully completed. Read the rest of this entry »
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.
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 26, 2008 @ 11:02 pm - Written by BawldGuy
Places like San Diego, Orange County, Palo Alto, and San Francisco are excellent examples of markets having turned from warm and cuddly to cold and prickly. Where are the CA real estate investors headed these days? Lots of places. Several spots in Texas. Austin, Dallas, Ft. Worth, Allen, Weatherford, and many pockets between the MetroPlex and Austin. Kansas City is a very prudent spot on the map for your real estate investment capital and/or equities.
Also, and don’t tell a soul — am headed soon for the Carolinas. And yes, for the record, we’re still closing transactions for clients with 10% down. You have to share Divine DNA proven with blood test, but it happens. Add Purposeful Planning to the mix, and pretty soon you’ll be on yer way to a magnificently abundant retirement.
The first video is just for fun. A certain midwest agent snarked something about my yesteryear choices for music. Well here ya go, Pilgrim. Eat my dust.
The second video was offered up by a friend on twitter.com, where I’m known as, (surprise) @BawldGuy. She said I should put up something by Toby Keith, then got specific. I really liked her choice, ‘cuz it brings back memories. (Don’t ask, not tellin’.) If yer lookin’ for diverse music, these two are about as different as yer gonna get. You can thank Brad Coy for the Arcade Fire song. Jamie Geiger sent in Toby’s piece. Thanks again guys.
Posted on July 24, 2008 @ 10:12 pm - Written by BawldGuy
As regulars here will surely attest, I’m passionate about gettin’ equities held in California investment properties into superior markets. These markets will not only perform far better, but will also allow the ownership of significantly more property. More property, but with the same monthly bottom line, more or less.
Let that sink in. You can trade your CA equity. Then what happens? Well first you better put those units of yours on the market before the train leaves the station. Read the rest of this entry »
Add Purposeful Planning to the mix, and pretty soon you’ll be on yer way to a magnificently abundant retirement.