The Capital Growth Oriented California Real Estate Investor — Oxymoronic
Posted @ 10:12 pm - Filed under 1031 Exchanges, Real Estate Investing, Retirement, San Diego Property Owners, Real Estate Markets, Investment Lessons, Leverage, Depreciation, Capital Growth, Palo Alto, Tax Shelter
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.
1. Most CA investors trading to other states increase total value owned by 2-5 times.
2. Tax shelter is increased sometimes by orders of magnitude.
I’ve seen 10-fold.
3. Most CA properties are young at 20 years old. They often trade to new stuff.
4. Tax savings almost always increase big time. If depreciation not allowed ‘cuz ya make too much at yer day job, still a killer factor. When it’s time to exchange, you’ll be able to take out tax free cash. Yeah, I meant ‘free’ not ’sheltered’.
5. Acquisition of several properties allows much increased flexibility down the road. This can be crucial when opportunities present themselves in the future. You now have more options.
I could go on, but believe I’ve made the point.
Consider This
Let’s say, conservatively speaking, you only double your holdings in an exchange. You also doubled your leverage. What does this mean in plain English? It means if CA all of a sudden started to experience 10% appreciation, the better leveraged properties in the other region would still grow your capital more quickly at just 5.1% appreciation. And seriously, do ya really plan on double digit appreciation in CA any time soon? Really?
To pound this point home, I’ll use another more normal example. CA real estate investor executes tax deferred exchange from San Diego or Palo Alto, using property with 50% loan to value. They use 20% down payments in the new properties. Rough numbers tell us CA appreciation would have to be 2½ times the new stuff just to keep up.
Do we need a Cray to figure the odds on that one happenin’? Didn’t think so.
If I’ve struck a chord with you, give me a buzz, or simply hit the Contact BawldGuy text. We’ll be talkin’ before ya know it. What follows will be a Purposeful Plan. It won’t have an oxymoronic bone in its body, I promise.
This entry was posted on Thursday, July 24th, 2008 at 10:12 pm and is filed under 1031 Exchanges, Real Estate Investing, Retirement, San Diego Property Owners, Real Estate Markets, Investment Lessons, Leverage, Depreciation, Capital Growth, Palo Alto, Tax Shelter. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
