Learn how to avoid missing out on the Best Real Estate Investment Properties

Learn how to avoid missing out on the Best Real Estate Investment Properties

In almost every real estate investing seminar I’ve ever attended, a lot of time has been invested in teaching real estate investors and potential real estate investor on how to find good deals. Because deal-finding is so crucial to one‚Äôs investing success and longevity in the real estate investing business, I recently decided to chat with a real estate investment friend and look back and see which methods have generated the most deals and the best deals for him.. In reviewing the 200 properties he has bought or flipped over the last 5 years, I was surprised to find that many of the “traditional” sources of great deals haven’t worked for him, while some less obvious methods have been great lead generators. I’d like to share with you the results of my study.

The Multiple Listing Service. The MLS is essentially a catalog of all the properties listed for sale by brokers. Needless to say, some of them are good deals for investors, and some aren’t.  Sometimes there is a great foreclosure in there, sometimes not. The trick is to ferret out which properties have motivated sellers without making offers on all of them. I’ve honed this skill through years of translating agent lingo like, “Handyman’s special” (looks bad, smells bad, has at least one major system that doesn’t function), “needs TLC” (ugly, but not smelly, and everything works).  What you’re going to find is a lot of cost, markup and competition has set the price.  As an investor, you really want to find ways around the ‘traditional real estate sales’ databases if at all possible.

Properties listed in the MLS are for sale.  To anyone, including the real estate investor. This may seem pretty profound, but some of the other methods touted as great ways to find deals involve locating owners, then finding out if they want to sell. Properties in the MLS also have the advantage that all of the information about the property is pretty much laid out for you – a major time saver. For the average real estate investor, time really is money.  And, with the sophisticated, computerized access available to your agent, it’s a matter of a few keystrokes to view all of the properties that are handyman’s specials, or bank-owned, or in estate, or priced under a certain dollar figure – whatever you‚Äôd like to concentrate on.  The disadvantage is that if you’re after foreclosures, you may not find the deals here.

Another reason that the MLS has worked so well  is that  generally the market for really ugly properties is where real estate investors may want to be, otherwise the deals for good real estate investing values just won’t be there. Coincidentally, these are the same properties that most agents prefer not to spend a lot of time with. In many cases, they’re downright cooperative – particularly when I’m offering all cash and a quick closing.

Direct mail to real estate agents?  At one point, we did a mail out to 1,200 agent names from the Board of Realtors and generated a 3-part mailing to send to every agent in town. For the real estate investor, this might seem like a respectable idea, however there are drawbacks.

The theme of this campaign was this: if you, Mr. Agent, have a property listed that fits a specific real estate investment criteria, I’ll make an offer and you get to keep the entire commission. Out rolled a brilliant campaign -all posted first class, incidentally – and in numbered the telephone calls. All 9 of them. That‚Äôs correct. The workweek after the 1st letters got out, we got 9 calls. We had already produced offers on 3 of the houses; 2 were out of our price range; and two were overpriced listings soon to expire.  Not a beneficial take for the average real estate investor seeking to realise a living with real estate investment .

The succeeding mailing gave even more answers – about 16 replys – all basically in the same classes. The final mail out, a postal card, encountered no notice at all. Basically, we consumed close to 00 on a campaign that gave nothing for our real estate investing concern.

I still guess that this idea has some merit, but if  performed again, we would make some substatial shifts. Initially, we’ll target only the 350 or so brokers who name the kinds of real estate investment properties we would purchase. Then, we would do a better job of composing the marketing collateral, underlining how the broker and his seller could gain from doing work with our real estate investment business. Finally, we would make the campaign a continuous one throughout the next twelve months, trying out dissimilar letters for reception and sending the best to the same real estate agents over and over. And lastly, to personalise the campaign by following up with a telephone call to the 30 or so preferred candidates. Target marketing our real esatate investing marketing attempts.

Ads in the Yellow Pages. For half dozen years, we have featured an ad in the “real estate” section of the Yellow Pages. Each calendar year, the ad has possessed some variation of the phrasing, “We purchase homes – all cash‚Äù. This advertising only yields 3-4 calls a calendar month, but for some grounds the caliber of the telephone calls is better than those that are produced by whatever other means we have ever practiced. The sellers incline to be incited, cooperative, and bear unlisted houses.  All of these items are precisely what the real estate investor is wanting in investment properties.

What is great is that you get to look at with these ads once a calendar year, then leave ‚Äòem. While they usually are pricy – 1000s per 12 month time period – the telephone company will regularly charge you every month for the price. In addition, as one of the very few ads in the telephone directory that promises to buy investment properties, You have not got alot of competition.  This works out, but getting connected with  people that own the houses in hand: banks, any mortgage company that possesses (and does not want) foreclosures, key real estate agents, any one that recognises the market and recognises you embody the real esate investor that understands the marketplace.  Both cases, you succeed.  Yellow pages, you pay for the leads, the word of mouth, time is payment for the great real estate investing leads.

Advertised FSBOs? Properties For Sale By Owner,
a.k.a. FSBOs, are a preferent means for a number of real estate investors. For us, on the other hand, have never bought a holding from an owner who promoted his property for sale rather than ringing me.  Sounds like a deal for the budding Real Esatate Investor who purchases homes for a living right?

We have found various issues with straining to purchase FSBOs. The 1st is that many are not actually for sale. Some FSBOs are just “trying out the market to ascertain what variety of offers he’ll acquire. Other FSBO sellers are very moved to sell, but do not list because they need to keep all of the money from the sale. They do not wish to pay a commission – but they do not desire to receive a lower price, either. And sometimes a seller opts to try to sell their holding by themselves because they owe too much to bear a 5%-7% commission, even if he sells it at full price.  For the real estate investor, obviously there is no economic value here.

If you are purchasing expensive properties creatively, these sellers are ripe for the variety of answer you propose. A majority of real estate investors schemes is to buy ugly real estate cheaply and for immediate payment, and you just do not witness this type of deal in advertized FSBOs.

fFiers to Targeted Neighborhoods: Last calendar year, we delivered 14,000 double-sided “We buy real estate” circulars published. We employed an individual to set this flyer in the threshold of every single, two, or multi family residence they saw in the prospective region.  Every three calendar weeks or so, 5,000 approximately of these flyers were delivered, and the reply from qualified sellers was first-class. For a price of less than 0, we gained 3 deals that clearred over ,000.  For a new region for the experienced real estate investor or just examining a dissimilar way to ‘farm’ the real estate investment outlooks in a given area, this is very good and popular way to find out if there are any sound real estate investment deals to capture.

Billboards in the same neighborhood? Here is a object lesson in messing up a beneficial thing: hot on the heels of our massively successful circular campaign, I settled to spring for 4 large billboards in the same vicinity. The trouble was that my marketing budget is only so large, and purchasing the billboards signified stopping the fliers. Still, I envisioned that the billboards would get more attention anyway, so I handed over the ,800 and acquired…

No response.. Nothing……

The Point? Keep with What does work.  This is the number one rule of obtaining good real estate investment properties.
Employing only one lead source at a time. In my experience, it is best to use at least a few dissimilar techniques of lining up deals at the same time: preferably 2 you’ve practiced before with some results, plus 1 that you are screening. Which takes us to:

Not understanding which of your deal-finding techniques are producing, and which are not. If you are going to expend money on fliers or ads or phone pole signs or whatever, it is very significant that you give attention to which methods are getting good leads, and which are not.. For any real estate investing occupation, and business in general, one needs to monitor and try out the outcomes of a marketing campaign. If you are not tracking your lead sources to expose which are producing leads and which you should give up, you’re wasting away time and money that could be set to use giving you deals.

For much more real estate investing information, help, write ups, services, foreclosure database, foreclosure listings, real estate investing courses and resources check out: http://www.RealEstateInvestingInformationSource.com

1031 Exchanges: How to Avoid Capital Gains on the Sale of an Investment Property

1031 Exchanges: How to Avoid Capital Gains on the Sale of an Investment Property

Do you have an investment property that you would like to sell, but defer the capital gains taxes? If so, then you need to consider a 1031 exchange:

A 1031 exchange, otherwise known as a “tax deferred exchange” is a strategy and method for selling one investment property and then proceeding with an acquisition of another property, all of which must happen within a specific time frame as set by the rules of the Internal Revenue Service. It is because you will be “exchanging” and not simply buying and selling a real estate investment property that allows the taxpayer(s) to qualify for a deferred gain treatment. Sales of real estate are taxable with the IRS and 1031 exchanges are not.

NOTICE: Due to the fact that exchanging a property represents an IRS-recognized approach to the deferral of capital gain taxes, it is very important for you to understand the rules involved. It is within the Section 1031 of the Internal Revenue Code that you can find the appropriate tax code necessary for a successful exchange.

Why consider a 1031 Exchange?

If you are a real estate investor, or have real estate investment properties, you should consider an exchange when you expect to acquire a replacement “like kind” property subsequent to the sale of your existing investment property. A simple sale of the property would necessitate the payment of a capital gain tax to our friends at the IRS, which can range from 20% to 40% depending on the federal and state tax rates. By selling your property using a 1031 exchange, you are leveraging your purchaing power by keeping all of your funds intact.

To qualify as a 1031 exchange, you must adhere to these two rules:

1) The total purchase price of the replacement “like kind” property must be equal to, or greater than the total net sales price of the relinquished, real estate, property.

2) All the equity received from the sale, of the relinquished real estate property, must be used to acquire the replacement, “like kind” property.

Should either of these rules (above) be violated, then then a qualified tax attorney will have to help you determine the tax liability accrued to the person executing the Exchange. In any case which the replacement property purchase price is less, there will be a tax responsibility incurred. To the extent that not all equity is moved from the relinquished to the replacement property, there will be tax. This is not to say that the (1031) exchange will not qualify for these reasons. Keep in mind, partial exchanges do in fact, qualify for a partial tax-deferral treatment. This simply means that the amount, of the difference (if any), will be taxed as “non-like-kind” real estate property.

THE 1031 Exchange Rule

A property transaction can only qualify for a deferred tax exchange if it follows the 1031 exchange rule laid down in the US tax code and the treasury regulations.

The foundation of 1031 exchange rule by the IRS is that the properties involved in the transaction must be “Like Kind” and Both properties must be held for a productive purpose in business or trade, as an investment.

The 1031 exchange rule also lays down a guideline for the proceeds of the sale. The proceeds from the sale must go through the hands of a Qualified Intermediary and not through your hands or the hands of one of your agents or else all the proceeds will become taxable. The entire cash or monetary proceeds from the original sale has to be reinvested towards acquiring the new real estate property. Any cash proceeds retained from the sale are taxable.

The second fundamental rule is that the 1031 exchange requires that the replacement property must be subject to an equal or greater level of debt than the property sold or as a result the buyer will be forced to pay the tax on the amount of decrease. If not he/she will have to put in additional cash to offset the low debt amount on the newly acquired property.

1031 Exchange Rules and Timelines:

There are 2 timelines that anybody going for a 1031 property exchange:

The Identification Period: This is the crucial period during which the party selling a property must identify other replacement properties that he proposes or wishes to buy. It is not uncommon to select more than one property. This period is scheduled as exactly 45 days from the day of selling the relinquished property. This 45 days timeline must be followed under any and all circumstances and is not extendable in any way, even if the 45th day falls on a Saturday, Sunday or legal US holiday.

The Exchange Period: This is the period within which a person who has sold the relinquished property must receive the replacement property. It is referred to as the Exchange Period under 1031 exchange (IRS) rule. This period ends at exactly 180 days after the date on which the person transfers the property relinquished or the due date for the person’s tax return for that taxable year in which the transfer of the relinquished property has occurred, whichever situation is earlier. Now according to the 1031 exchange (IRS) rule, the 180 day timeline has to be adhered to under all circumstances and is not extendable in any situation, even if the 180th day falls on a Saturday, Sunday or legal (US) holiday.

Christopher Benedict coined the brand, Ask The Big Guy in 2001. Something of a maverick on the ritzy Main Line, Christopher is developing a network of young, high-energy professionals who share his “Strength In Numbers” philosophy. Christopher Benedict specializes in working with investors, as well as continuing to provide real estate services for buyers and sellers on the Main Line and the greater Philadelphia region. Visit www.AskTheBigGuy.com to learn more.

For more information about exchanging your investment real estate, please contact Christopher Benedict at 610-779-5300.

Want to 1031 Exchange into a Property You Already Own?

Want to 1031 Exchange into a Property You Already Own?

Want to 1031 (EAT)  into a Property You Already Own?

There are times when an investor may want to sell one of his properties and invest its proceeds in another he owns. In the past the IRS forbade 1031 exchanges in such cases, however, today there are means around it. It is known as an “advanced built to suit” transaction and though it has never been explicitly supported by the IRS, it has been upheld by private letter rulings.

The difference between the advanced build to suit transaction and a typical tax deferred exchange (or one with a build to suit component) is the type of property designated as replacement property. In a build to suit tax exchange, the replacement property is owned by a third party, with Exchange Accommodation Titleholder (EAT) obtaining the replacement property’s title, which it holds while the property undergoes its improvements. In the advanced build to suit transaction, the taxpayer is attempting to transfer funds into property already owned by him. However, Rev. Proc. 2004-51 places restrictions on using replacement property owned by the taxpayer within 6 months of the exchange. Thus, the taxpayer is unable to accept either “assignment of the LLC or direct deeding of the Replacement Property after the improvements have been made directly.”

In order to complete this arrangement, the taxpayer must enter into a 1031 like-kind exchange agreement with a QI, after which he enters into QEAA and Construction Management Agreement with the EAT. He would then send cash or agree to a loan with the EAT, allowing the EAT to purchase replacement property and carryout the improvements. The EAT then acquires title to the replacement property and sets it up in a LLC. The EAT also has authority to appoint a Taxpayer General Contractor under the Construction Management Agreement, who acts as Fund Control, making disbursements as construction commences. After 180 days, the QI will direct the EAT to transfer the replacement property directly to the taxpayer, this is accomplished by handing over control of the LLC to the taxpayer.

If completed correctly, with the right guidance and supervision, this transaction allows investors to greatly improve their own properties and consolidate their holdings. This flexibility can be extremely beneficial during recessions or other economic downtimes, when ancillary properties become less valuable and the need to improve core ones increases. Thus, the advanced built to suit exchange gives investors another tool to use in the marketplace.


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Avoid Paying Capital Gains Tax with Exchange 1031

Avoid Paying Capital Gains Tax with Exchange 1031

As a common cliché would have put it, taxes are inevitable.  However, we break tradition in this article as we discuss a method to avoid paying taxes.

Exchange 1031 is a provision that allows the homeowner to keep the entire proceeds for the sale of a real estate property by exemption of payment of capital gains tax.

This privilege is governed by the provisions of the IRS Code under section 1031, thus the term Exchange 1031. This incentive aims to perk up business activities in the real estate sector by giving due consideration for homeowners who sell their real estate property with the primary purpose of using the sales proceeds to purchase another real estate property.

A graphical demonstration of how significant Exchange 1031 is on the entire buying process would be by looking at the impact of capital gains tax on subsequent buying of ‘like kind’ property.

Capital gains tax levied against the sales proceeds of a real estate property hover in the range of 20% to 30%.  This is translated to a diminished buying capacity of the same proportion for a replacement property.  In other words, you are left with a net amount corresponding to 70% to 80% of what it was during the sale of the real estate property.

There are pre-conditions that have to be met for the deferment of realized capital gains tax for the sale of a real estate property under Exchange 1031.  These include the following prerequisites:

The fair market value of the replacement ‘like kind’ real estate property should always be equal to, or more than the net sales proceeds of the sold real estate property. The entire equity from the sale of relinquished real estate property must be used to pay for the replacement ‘like kind’ real estate property.

The amount of liability for violation will be determined by the violation of any of these two conditions.  In the event that the replacement property is bought at a price less than the net equity of the sales proceeds of the relinquished real estate property, an accrued tax liability is incurred by the one who availed a tax deferral under Exchange 1031.

The amount of accrued tax liability is based on the extent of the amount of net equity not utilized for the payment of the replacement ‘like kind’ real estate property.

This only means that exclusion of tax incentives under Exchange 1031 is not absolute when applying the above cited prerequisites.  The application of the provisions allow for partial exchange as a result of failure of absolute compliance under the two prerequisites.  Exchange under this condition is subjected to partial deferment of capital gains tax liability.  Tax liability is applied on that portion of equity that is subject of tax deferral under Exchange 1031 used for ‘non-like kind’ real estate property. This tax incentive is an essential tool for homeowners and investors to retain in full the equity generated in the sale of a real estate property for as long as it is intended to be used for the purchase of another ‘like kind’ real estate property.

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Advantages of real estate investing

Advantages of real estate investing

Advantages of real estate investing

Investing in real estate is as advantageous and as attractive as investing in the stock market. I would say it has three times more prospects of making money than any other business. But, But, But… since, it is equally guided by the market forces; you cannot undermine the constant risks involved in the real estate. Let me begin discussing with you the advantages of real estate investments. I found the advantages as most suited and really practical.


Real Estate Investments are Less Risky

As compared to other investments, less of misadventure is involved in a real estate property. I will not get away from the fact that just like any investment you make; you have the risk of losing it. Real estate investments are traditionally considered a stable and rich gainer, provided if one takes it seriously and with full sagacity. The reasons for the real estate investments becoming less risky adventure primarily relate to various socio-economic factors, location, market behavior, the population density of an area; mortgage interest rate stability; good history of land appreciation, less of inflation and many more. As a rule of thumb, if you have a geographical area where there are plenty of resources available and low stable mortgage rates, you have good reason for investing in the real estate market of such a region. On the contrary, if you have the condo in a place, which is burgeoning under the high inflation, it is far-fetched to even think of investing in its real estate market.

No Need for Huge Starting Capital

A real estate property in Canada can be procured for an initial amount as low as ,000 to $ 15,000, and the remaining amount can be taken on holding the property as security. This is what you call High Ratio Financing.  If you don’t have the idea as to how it works, then let me explain you with the help of an example. Remember that saying… Examples are better than percepts!

Supposing, you buy a condo worth 0,000, then you have to just pay the initial capital amount say 10% of 0,000. The remaining amount (which is 90%) can be financed, against your condo. It means that in a High Ratio financing, the ratio between the debt (here in the example it is 90% Mortgage) and the equity (here in the example it is 10% down payment) is very high. It is also important to calculate high ratio mortgage insurance with the help of Canada Mortgage and Housing Corporation (CMHC). If needed, you can also purchase the condo on 100% mortgage price.  

Honing Investment Skills

A real estate investment, especially when you buy a condo for yourself, will be a pleasurable learning experience. It gives you the opportunity to learn and when I went ahead with my first real estate property, I was totally a dump man. Ask me now, and I can tell you everything, from A to Z. Necessity is the mother of all inventions. I had the necessity to buy the property and so I tried with it, and I was successful. I acquired all the knowledge and skills through experience of selling and purchasing the residential property. Thanks to my job. It gave me the experience to become an investor.

Not a time taking Adventure

Real estate investment will not take out all your energies, until you are prepared and foresighted to take the adventure in full swing. You can save hell lot of time, if you are vigilant enough to know the techniques of making a judicious investment in the right time and when there are good market conditions prevailing at that point of time.

You should be prepared to time yourself. Take some time out, and do market research. Initiate small adventures that involve negotiating real estate deals, buying a property, managing it and then selling it off. Calculate the time invested in your real estate negotiation. If the time was less than the optimum time, you have done it right. And if you end up investing more time, then you need to work it out again, and make some real correction for consummating next deals. You have various ways and methodologies, called the Real Estate Strategies that can make it happen for you in the right manner.

Leverage is the Right Way

The concept of leverage in real estate is not a new one. It implies investing a part of your money and borrowing the rest from other sources, like banks, investment companies, finance companies, or other people’s money (OPM). There have been many instances where people have become rich by practically applying OPM Leverage Principal. As I had discussed under the sub head – No Need for Huge Starting Capital, the high ratio financing scheme gives an opportunity of no risk to the lenders, as the property becomes the security. Moreover, in case the lender is interested in selling the property, the net proceeds resulting from the sale of the property should comfortably cover the mortgage amount.

Now consider a situation, where the lender leverages the property at too high ratio debt say 98% or even more, and all of the sudden the market shows a down turn, then both the investor as well as the lender. Hence, greater is the mortgage debt, more is the lender’s risk, and it is therefore necessary that lender pays higher interest rates. The only way out to ease the risk from lender’s head is to get the mortgage insured. Two companies authorized to insure your high-ratio mortgage debts are CMHC (www.cmhc-schl.gc.ca), and GE mortgage Insurance Canada (www.gemortgage.ca).

Let me explain you with the help of an example… supposing, you are buying a real estate property worth $ 200,000 at three mortgages, with the first one of  0,000, the second of  ,000 and the third one of  ,000. Possible percentage of interest rates charged can be 3%, 5% and 7%.  The last mortgage amount of  ,000 will be accounted, as riskiest; as it would relatively be the last mortgage that you will pay when you finally make a selling deal.

On the contrary, if the first mortgage representing almost 90% of your property price is insured against getting default or as high ratio mortgage, then in the above example, the basic interest rate would be 3%.

Let me explain you the leveraging concept by taking another example.

 Supposing, you are buying a real estate property worth 0,000, and made down payment of 10%, equitable to ,000, while financed the rest amount of ,80,000. Over the year’s time, the value of your property appreciates by 10%. In this case, what would be the total return that you’d incur on your down payment of ,000? It would be 200%. Yes 200%. Putting in simpler words, the down payment of  ,000 made by you has an appreciation of 10% over it, i.e. (10% increase of original home price of $ 200,000), 200% return on your down payment investment of ,000.

On the contrary if you invest all the money in buying the property of 0,000, and in wake of appreciation of 10% over the year (,0000 would then be accrued to as 20%.

Synonymous with leveraging is pyramiding, where you borrow on the appreciated value of your existing property. Pyramiding applies the principal of leverage that enables you to purchase even more properties. This appreciated value over the real estate property in some selected areas results in accumulation of rich financial virtues.
Real Estate Appreciation

An appreciation is an average increase in the property value over original capital investment, taking place over a period. There are some neglected real estate properties that have an appreciation below the average mark, whereas, some of the properties located in maintained geographical areas, showing high demand, have an above average appreciation. In such centrally located and high demand areas, the average appreciation can reach up to 25% in a year. I will discuss appreciation in the chapter on real estate cycles. For now, for general understanding, appreciation is what goes up.

You Make Your Equity

As you gradually pay your mortgage debts, you are creating your equity. In other words, you would be reaching to original house price on which you have no debt. Your equity is absolutely free of percentage increase in appreciation.  From the investor’s perspective, in real estate market, equity is the amount that is free of debt and it is the amount that an investor holds. When you sale your property, then the net money you get, after paying all the commissions and closing costs, becomes your equity. Lenders don’t want to take risk by allowing a loan on over 90% of equity. Therefore, in this manner, the lenders take the safety measures in wake of their loan being defaulted.

The Federal Bankruptcy act says that all the first mortgages of over 75% of the appraised or purchase value must be covered under high-ratio insurance schemes. However, there are certain conditions, wherein, CMHC offers the purchasers of real estate property qualifying the insurance, a mortgage of up to 100% of purchase price over your principal house value. In the wake of an event where borrowers want more money from the lenders, they would ideally settle for second and the third mortgages.

Low Inflation

Inflation is the rise in the prices of the products, commodities and services, or putting it another way, it is the decrease in your capacity to buy or hire the services. Supposing, a commodity was worth a decade back, will now cost $ 100 as the result of inflation. For people who have fixed salaries feel the real brunt of the dollar, as the inflation rises. In Canada, the inflation rate varies and it varies every year. There was a time when Canada had a double-digit, but it was controlled to single digit, after the regulation of policy.

If we analyze closely, the land appreciation value for the residential real estate is 4% to 5% higher than inflation rate. Therefore, when you invest in real estate, then you are paying mortgage debts in high dollar value. Now as you are getting more, salary to pay less amount than the amount that you had paid in the original mortgage.

Tax Exemptions

You get various tax exemptions on your principal and investment income property. The tax exemptions available in real estate property investment are more than available in any other investment.  In other investments, you lose terribly on the investments in your bank in the form of inflation and high taxes therein, but in real estate; you don’t actually have such hindrances.

Various tax exemptions available are:

•The interest receivable from your bank account, term deposit or guaranteed Investment Certificate (GIC) is completely taxable as income. A little math here will do the magic work for you. Supposing, if you get an interest of 8% on the deposit, and the on going inflation rate is 5%, the Real Return Rate will come out to be settled at 2%.
•You get completely tax-free capital gain on principal amount of your residential real estate property.
•You have the opportunity to ward off principal amount of your residential real estate property against the home expenses incurred by you.
•You can easily ward off the property depreciation against your income.
•You can cut the expenses incurred in real estate property investment through your income
•Tax rate reduced to approx. 50% of the capital gain.
•And many more

Net Positive and High Income is Generated

If taken in right direction and played seriously, a real estate investment can be your virtue making endeavor now and in times to come. You will not only be having additional assets building in your favor, but also with positive cash flow, your real estate property value will increase automatically.

High Return on Investments (ROIs)

Real estate investment gives you potentially high ROIs before and after the taxes levied on your income. In fact, investing in real estate gives you high ROIs after the taxes.

Demand for the Real Estate Increases

As a natural instance, when the population of a region increases, the total usable land decreases, and this provides the impetus for high real estate prices. There are many communities that can or cannot have growth and development regulations, thereby, resulting in limited land available for use. Therefore, the real estate prices of the area shoot up. Remember housing is the necessity of an individual and therefore it is much in demand than any other single commodity taken. Furthermore, there are people who purchase additional houses for their recreation, recluse or as a past time. This in turn increases the demand for land.

Ravinder Tulsiani – Entrepreneur, Author, Mentor, Advisor & Success Coach

Ravinder Tulsiani is a published author and writes numerous articles and books on finance, self-help and relationships.

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Real Estate Investors – Refinancing With a 1031 Tax Exchange

Real Estate Investors – Refinancing With a 1031 Tax Exchange

One of the most essential concepts in the 1031 exchange process is that a property investor must not receive any cash benefit from the proceeds of the sale of his or her relinquished property; any kind of cash benefit from the sale is considered to be boot, and this means, in fact, subject to capital gains taxes. In keeping with this concept, the act of refinancing for the purpose of removing equity from the 1031 property delves into a rather gray area with regard to acceptability under Section 1031.

In a court case involving an investor named Garcia, the court clearly asserted that any benefit received by an investor resultant from the refinancing of a property in anticipation of selling it in an exchange will be deemed to be boot. This decision set a precedent for the way in which these kinds of situations. As of now, a more common strategy is waiting until after the closing on the replacement property, and to refinance at some point afterward. This practice, however, raises the issue of how long it is appropriate to wait before performing this refinancing and removing equity from your replacement property.

The most conservative investors would advise you not to refinance until a considerable time post-closing (maybe as long as two years), in order to make absolutely sure that you’re in compliance with the intent of Section 1031. The popular mindset amongst more liberal minded contingency of investors, however, is to assume that the closing on the purchase of your replacement marks the definitive ending of to the 1031 process, and so an investor need not fret over the substantiation of the exchange from there onward. For a property investor who perceives the 1031 process from this vantage point, it is irrelevant how long one waits to refinance a 1031 replacement property, and many investors will elect to do so directly after the closing .

If you are expecting any kind of hard and fast rule as to when you ought to refinance your replacement property, you are doomed to disappointment, at least in regard to this article. The two schools of thought discussed here are only opinions, and represent extremes on a wide spectrum. Investors vary a good deal in the way in which they elect to approach these types of legal gray areas, and the most useful suggestion that I can {impart is simply to look to qualified tax adviser or legal expert in formulating your final choice, and to work closely with him or her to figure out the approach that will work best in the context of your particular situation.

Maximize Your Tax Savings By Using A Reverse 1031 Exchange When Buying Or Selling Like Kind 1031 Exchange Real Estate. Visit http://www.Top1031Exchange.com To Learn More.

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