Posted on February 5, 2010 @ 4:00 am - Written by BawldGuy
Ever walked into a movie you’d really been lookin’ forward to, only to learn they’d totally mislead you with the trailers? We all have, and with an exception or two here and there, it rarely turns out to be a movie we like. Don’t ya hate it when the happens? For me, the worst time was when I went to what I thought was a comedy, which sadly turned out not only NOT a comedy, but a chick flick to boot. How it got past my ChickFlickRadar™ I’ll never know. 
This is one of those nuts ‘n bolts things every real estate investor should know. The IRS doesn’t usually buy the whole ‘dog ate my homework’ — ‘I had no idea’ type of excuse when it comes to unintentionally recognized capital gains. So, heads up. Read the rest of this entry »
Posted on January 4, 2010 @ 8:28 pm - Written by BawldGuy
BawldGuy Note: David Stejkowski is a well known Chicago real estate attorney with gobs of experience, hands on. Gobs, as in, closing $1 Billion in real estate transactions for clients. (He’ll correct me if I’m wrong.) The guy knows which way is north on the map. I’m so pleased to announce he’ll be a regular author from now on, posting roughly 2-4 times monthly as time permits. This, in the blogging community, is what we call a coup.
By David Stejkowski
If I only had a nickel for every time a friend, acquaintance or prospective client said to me, “What if I buy Blackacre subject to the existing mortgage and don’t tell the lender?” There’s no problem with that, right?
Wrong.
Why? It isn’t illegal, but it is a risky practice, and, being a risk-adverse lawyer and all that, one I cannot recommend.
I understand that there are good reasons for the buyer to do these deals. You can avoid underwriting the loan again, loan fees, costs, credit issues –- and you may want to preserve a dirt cheap deal. And for a seller I suppose it is a great albeit risky-laden way to get a deal done quickly. Read the rest of this entry »
Posted on December 23, 2009 @ 7:12 pm - Written by BawldGuy
Over the years, especially when the cycle has reached it’s predictable low point, the so-called experts come outa the woodwork, giving advice that frankly, makes my blood boil. I’m not anyone’s judge, nor will I do that on these pages. I will, however, point out an example of how bad advice can hurt innocent people who rely on the experience and expertise of those who simply don’t possess either.
Sound harsh?
One of the topics these folks talk about so recklessly is how real estate investors (Homebuyers too for that matter.) can buy properties ’subject to’ the existing financing. Sounds pretty innocuous doesn’t it? You’ll just march right in, put yer money down, close the escrow and start makin’ payments on the seller’s old loans. Sounds simple enough to me — not. Read the rest of this entry »
Posted on November 19, 2009 @ 4:30 pm - Written by BawldGuy
The most common reply I hear from folks calling me is, “I didn’t know that was possible.” Or something similar. It all goes back to the root of successful investing, which is doing things on Purpose — Purposeful Planning. One of the main factors in any Plan is how taxes/tax shelter blend into the big picture. Though you never wanna buy property solely for the tax benefits (VERY rare exceptions.), Incorporating them into your Plan with maximum impact is almost always a key factor in ultimate performance. (Think I sprained a finger typin’ that sentence. )
BawldGuy Axiom: In the long run the investor who doesn’t use all available strategies when creating and executing their Purposeful Plan pays a bigger price for inferior results.
The following are just a few of the questions to be answered when discussing taxes/tax shelter and real estate investing. First though, let’s agree on a layman’s definition of depreciation.
It’s what many call a ‘paper loss’ which allows for the aging and physical deterioration from usage, obsolescence, passage of time, or just simple wear and tear. There is no actual loss of money — which is why it’s commonly called a paper loss. Read the rest of this entry »
Posted on November 18, 2009 @ 3:03 pm - Written by BawldGuy
As a hired gun many moons ago I used to do after tax cash flow ‘autopsies’ on investments for attorneys representing either investors or other real estate agents/brokers. I’d produce historic rates of return, almost always expressed as IRR — Internal Rate of Return. I’ve explained IRR, in court, the following way.
It’s that rate of return, which when discounted back to Day 0 equals the original amount invested. (In ‘analyst speak’ that means Net Present Value (NPV) = 0.)
The court accepted the data I was given was correct in those cases, since most of it came from escrow closing statements, CPA’s, management company reports, bank statements and the like — they were relatively reliable numbers.
In one case I was grilled for over 20 minutes about holding periods. It was literally one of the dumbest 20 minutes the judge ever had to endure going by his facial expressions. For me though it was live entertainment. Read the rest of this entry »
Posted on September 23, 2009 @ 5:24 pm - Written by BawldGuy
The time in which we live is often referred to as the Information Age. It’s an apt description. This is the first in a short series on answers for which many real estate investors don’t have the questions. We’ll begin with a little known IRS rule, along with a pretty cool alternative use for depreciation.
First, understand the nature of depreciation — it’s a paper loss, not a real one. However, the benefits are as real as it gets. There’s a dark cloud to that silver lining though.
As long as your job income (Ordinary Income in IRS-Speak) is under $100,000 a year you’re fine as wine. You can apply up to $25,000 a year of available depreciation against your ordinary income. But as soon as your ordinary income exceeds $100,000 the code begins decreasing that $25,000/yr — until ya make $150,000 or more, than it’s disallowed altogether as a tax shelter against job income. Read the rest of this entry »
Posted on August 4, 2009 @ 9:02 pm - Written by BawldGuy
No time to get into serious detail, but there are folks comin’ out of the woodwork who are ripe for this strategy. Though the parameters I’ll lay out shortly are perfect for San Diego investment property owners, they’ll obviously make the strategy produce regardless of your geography. All the parameters aren’t necessary for the strategy to bring forth solid results.
Here’s the perfect scenario from my viewpoint. NOTE: Whether I’d advise a straight sale, or a tax deferred exchange is wholly dependent upon your specific set of circumstances. Just so ya know. Read the rest of this entry »
Posted on July 30, 2009 @ 8:36 pm - Written by BawldGuy
BawldGuy Axiom: It’s not the answers to the questions you ask that get you. It’s the answers to the questions you never knew to ask that can end up haunting you for years. Put another way — You can’t know what you don’t know. Duh
Today had a pretty happy ending. An agent called me out of the blue. I’ve never met them, but they’d been reading my stuff here and over at BloodhoundBlog.They had just one question, which led to a boatload more, as usual.
She said — “My client is selling one of their rental properties, a triplex, for a sizable loss — about $50,000 give or take. It’s in escrow and scheduled to close on or before August 5th — next Wednesday.”
Their numbers seemed to jive with the set of facts she then had given me. But hard earned experience has taught me to ask the seemingly unrelated questions, as those answers, if they raise red flags, often lead to a complete change of horses in the middle of the escrow stream. Read the rest of this entry »