Thursday, December 31, 2009

Happy New Year!

The Exeter Learning Institute team would like to wish you and your family a very Happy, Healthy, Safe and Prosperous New Year. Happy New Year everyone.

Wednesday, December 30, 2009

Dear President Obama: I Think You Have A Problem.

This is a great letter drafted by my good friend Alan Nevin with MarketPointe Realty, and I thought I would share it with you.  You can read the original letter posted on the Wealth & Legacy Series blog on The Center for Wealth & Legacy Studies.  Alan Nevin is one of the co-founders of The Center. 

Dear President Obama: I Think You Have A Problem! 

In about a year from now, you will have to start running for your second term. No doubt it would wound your ego to no end to be a one-term president and yet it would be very difficult for you to be elected to a second term if the economy continues to be in a moribund state.

I really don’t want the word “sickonomy” to be the byword of your administration.

Now, we have all read in the business section that our gross national product is rising; that productivity is just plain great; that the stock market is solid; oil prices are stable; our interest rates remain low; Walmart and McDonald’s are bursting with economic vitality; and that our leading lending institutions are healthy once more.

Unfortunately, all of these wonderful things happening to our economy are without the benefit of new jobs.

And frankly, Mr. President, without new jobs, you don’t have a shot at a second term.

It appears to me that your gnomes in the West Wing are spending all their time working on the auto industry, a category that at best is a minor player in the national economy, especially when you consider that at least a quarter of the sales are of vehicles made somewhere besides the United States, or substantially containing parts made outside the country.

Automobile manufacturing employment in the United States in 2008 totaled 877,000 jobs.

Now let’s talk about America’s really important industry: housing construction. Now there’s an industry that deserves your full and immediate attention and is barely a footnote in your economic stimulus agenda.

In a year in which construction is healthy, homebuilding employment is almost 10 million, more than 10 times that in the automobile manufacturing industry; and, in that 10 million I am not counting the multitude of jobs in industries that directly relate to construction or manufacturing the materials that go into the construction of a home.

Before the housing industry fell apart, there were more than 9000,000 firms in the construction-related businesses.

New housing constitutes more than 80 percent of construction employment in this nation and that industry is really hurting right now, and that’s a shame, because it it the one industry that can put you back in the White House in 2012.

Let me share a few facts with you:

First, the residential construction industry has twice the economic multiplier of virtually any other industry in America (according to the economic model developed by the U.S. Department of Commerce).

There’s a good reason for that, or I should say, four good reasons:

First, it is a highly leveraged industry, which means that a relatively small amount of equity will cause a whole house to be built. So a small investment generates large amounts of material purchases and new jobs.

Second, virtually all materials used making a home are created within the 50 states.

Third, it is a labor-intensive industry. Typically, 50 percent of the cost of a new home is the labor component and all that labor is local. A new home is a genuinely a “made in the U.S. A.” product.

And fourth, the purchase of a new home sets off an amazing round of purchase activity that is home-related. A multitude of jobs are created in the escrow, title, finance, landscaping and home improvement industries.

In addition, typically, every time someone buys a new home, there are four resale homes sold. And those sales, as well, create another multitude of jobs in the industries noted above.

The home remodeling business, when things are good, is far larger than the automobile manufacturing business.

Housing construction has plummeted from almost 2 million units in 2005 to fewer than 500,000 unties in 2009. Imagine that, Mr. President. America’s most potent economic job generator is down 75 percent and your administration is doing virtually nothing to change the situation.

And I won’t even bother to mention the impact of the home construction industry on the construction of and demand for retail, office and industrial space.

The big question is: “What can you do to generate a massive increase in new home construction?” I am going to tell you in my next article right here in The Daily Transcript.

Tuesday, December 29, 2009

Dear President Obama: I Think You Have A Problem!

I just read a fantastic letter addressed to President Obama.  It's entitled "Dear President Obama:  I Think You Have A Problem" by my friend, economist and demographer, Alan Nevin with Marketpointe Realty.  I highly recommned a quick read of the letter.

Monday, December 28, 2009

The Demise of the Private Annuity Trust or PAT

Private Annuity Trusts, or PATs for short, were sometimes used (prior to 2007) to defer capital gain taxes upon the sale of highly appreciated real estate or personal property.  The Private Annuity Trust allowed taxpayers to transfer property, whether it be real property or personal property, into a Private Annuity Trust by conveying or transferring it to the Trustee of the Private Annuity Trust.  The conveyance or transfer of the property had to be completed prior to the sale of the asset. 

Sale of Real or Personal Property

The Trustee of the Private Annuity Trust would then sell the real or personal property to the end buyer and deposit the sale proceeds into the PAT.  The taxpayer was the Beneficiary of the Trust, which was part of the reason for the demise of the PAT that will be discussed shortly. 

Capital Gain Deferred Into Future

Capital gains from the sale of the real or personal property were deferred into the future since the Beneficiary (Taxpayer) did not receive any of the funds from the sale of the asset.  The Beneficiary would only recognize a portion of his or her capital gain as they received principal payments from the Private Annuity Trusts. 

IRS Rules Against PAT

The IRS ruled against the Private Annuity Trust on October 17, 2006.  The IRS ruled that “Private Annuity Trusts or PATs have been relied upon inappropriately in a number of transactions that are designed to avoid U.S. income tax,” according to an IRS press release.

In Buckmaster vs. CM TC Memo 1997-236, there were four (4) elements used to determine whether or not a trust of any type was actually a "sham trust".  These four (4) elements were the Taxpayer’s relationship to the property or asset in question; the independence of the Trustee; whether or not an economic interest was transferred to other beneficiaries of the trust; and restrictions placed on the taxpayer by the trust.

Private Annuity Trusts can not meet this test, and therefore can no longer be used to defer the payment of a taxpayer's capital gain taxes after October 17, 2006.  Transactions which have been properly structured under the old rules prior to October 18, 2006 will be permitted to stand, but the Internal Revenue Service will not recognize future transactions structured as Private Annuity Trusts for income tax deferral purposes.

However, Private Annuity Trusts can still provide some important estate planning benefits when used appropriately, so consult with your estate planning professional for further details. 

Sunday, December 27, 2009

Is It Better To Sell My Relinquished Property in 2009 Or Postpone Until 2010

Taxpayers have only four more business days to get transactions structured and closed until 2010 hits us right between the eyes.  First of all, yikes, where did 2009 go?  Second of all, thank God we are moving into 2010, which promises to be a much better year than 2009.

Closing By Year-End

Now to the question of when to close on the sale of your relinquished property.  It has always boggled my mind during the 24 years that I have been in the 1031 Exchange industry that so many taxpayers want to close on their relinquished property before year-end when they are structuring a 1031 Tax Deferred Exchange. 

Why put so much pressure on yourselves?  Its a tax-deferred exchange, so its tax deferred and it shouldn't matter when you close on the sale of your property assuming that all other relevant factors are equal.  However, let's discuss some of the basic reasons why, and then get to the question. 

The Buyer

Certainly, the buyer may wish to close by December 31st in order to obtain any number of benefits, including tax benefits, of owning the property before year-end.  The tax benefits can often be tremendous, or losing tax benefits that may expire at year-end may be very expensive.  So, the buyer may have motives for doing so. 

There may be other reasons as well, such as deploying investment capital by year-end, shoring up the balance sheet ("window dressing") for year-end financial statements, etc. 

The Seller

Generally, the seller completing the 1031 Tax Exchange shouldn't care, but some of the same reasons my apply.  They may want to get the property off their balance sheets by year-end, may want to reduce the amount of outstanding debt before December 31st, etc., just to name a few of the more obvious reasons. 

When to Sell/Close

One or both parties may wish to close on the property for some of the reasons stated above, or other reasons, in which case, it certainly does make sense to sell and close on the property before December 31st. 

However, barring other benefits, detriments, or issues not mentioned here, there is no real benefit from a 1031 Exchange perspective to closing in 2009 or 2010, unless you are concerned that your 1031 Tax Exchange may fail (i.e. you are not able to acquire replacement property). 

A failed or incomplete 1031 Exchange is generally taxable in the year of sale or the year in which the taxpayer has the right to receive their 1031 Exchange proceeds from the Qualified Intermediary.  This is the one main issue that taxpayers should consider when selling relinquished property in order to answer the question when should they close because it may affect their income tax situation. 

As yourself the following questions:
  • Will closing in 2009 versus 2010, or vice versa, potentially place myself in a higher income tax bracket because of the 1031 Tax Deferred Exchange?
  • Will closing in 2009 trigger my 45 day and 180 day deadlines before I am ready to?
  • Would closing in 2010 buy me more time to look for and identify suitable replacement properties to be acquired through my 1031 Exchange? 
  • Will closing earlier or later help or hurt my borrowing position? 
  • Will closing in 2009 hold up the filing of my income tax return if I have not completed the acquisition of my replacement property?
There are probably many more question like this that should be addressed, so you should always consult with your legal and tax advisors before proceeding with your 1031 Tax Deferred Exchange. 

Saturday, December 26, 2009

Didn't Get What You Wanted For Christmas? 1031 Exchange It!

O.K.  So you didn't receive exactly what you wanted for Christmas.  It happens to many of us each and every year, and we head right to the stores in order to return and/or exchange the gifts for something that we do want or need.  Do you realize that today, the day after Christmas, is historically the biggest shopping day of the year in terms of returning and exchanging gifts. 

Personal Property 1031 Exchanges

This shopping day, or more accurately, day of returns and exchanges, reminded me that many taxpayers do not realize that you can 1031 Exchange personal property.  The 1031 Exchange strategy is not just limited to real estate; that's right, it also applies to personal property that has been held and/or used as rental/leased property, investment property or used in a trade or business. 

Exchange Into a More Productive Property

The concept of a 1031 Exchange of personal property is similar in concept to the day after Christmas.  The personal property owned, rented or leased out or used by the taxpayer in his or her trade or business has become obsolete and/or less productive.  Some examples of personal property that might be a good candidate for a 1031 Tax Deferred Exchanges are:
  • Aircraft or aviation equipment
  • Shipping vessels
  • Fleets of trucks or automobiles
  • Machinery or equipment
  • Franchises
  • Livestock
The taxpayer wants to return or exchange the asset for a better, more efficient, and more productive asset without incurring any income tax consequences by structuring a 1031 Tax Deferred Exchange.

Like-Kind Replacement Property

1031 Exchanges of personal property can be more complicated than an exchange of real estate due to the fact that the definition of like-kind property is applied by asset class or line-item by line-item, if you will. 

You will be fine as long as you are working with a Qualified Intermediary that possesses the necessary experience and expertise in the areas of LKE Program Exchanges (i.e. personal property like kind exchanges). 

Friday, December 25, 2009

Merry Christmas

Merry Christmas from The Exeter Learning Institute! We hope that you have a very Merry Christmas with you and your family.

Thursday, December 24, 2009

It's Not Too Late For Year-End Tax Planning With 1031 Exchanges

Those of you who are familiar with 1031 Tax Exchanges and perhaps have completed a number of them yourselves are probably wondering what this blog is all about.  You are probably asking yourselves "how can you possibly use a 1031 Tax Deferred Exchange for any kind of tax planning at year-end?"  The answer is actually quite simple. 

Failed 1031 Tax Deferred Exchange

1031 Tax Deferred Exchanges are all about tax planning.  The 1031 Exchange allows a real estate investor to sell rental or investment property and defer the payment of his or her taxes by structuring a 1031 Tax Exchange and buying like-kind replacement property. 

Year-End Tax Planning for Failed 1031 Exchanges

But, there are special year-end tax planning opportunities that come into play when you have a 1031 Exchange in progress and it fails.  In other words, you are not able to complete your 1031 Tax Deferred Exchange because you did not identify any replacement properties or you were not able to acquire any of the properties that you did identify.

Investor's Right to Receive 1031 Exchange Funds

The issue at hand when a 1031 Tax Deferred Exchange fails is when exactly is the sale of the relinquished property taxable since the 1031 Exchange failed?  The answer depends on many factors, including, and especially, when the investor actually has the right to receive or control or receive the benefits to his or her 1031 Exchange proceeds held by the Qualified Intermediary. 

Capital gains will be recognized in the year in which the investor has the right to receive his or her 1031 Exchange funds provided the 1031 Tax Deferred Exchange transaction and related 1031 Exchange documents and agreements were structured properly.  This means that the capital gain might be recognized in the following year rather than the year of sale under the right circumstances. 

Tuesday, December 22, 2009

Can I Pay Off Credit Card Debt at Closing if I'm Using a 1031 Exchange

This question has been raised more than usual recently because of the economic recession that we are all going through, and it makes complete sense. Taxpayers are trying to downsize their own financial position and "de-leverage" by paying down or paying off their debt, including the pay off of credit cards when they sell real estate.

Debt Paydown When Selling Investment Property

It is only natural to want to payoff the credit card debt when you are selling real estate, and to have it done through the closing process. However, it gets more complicated when you are selling investment property and structuring a 1031 Exchange and also want to pay off credit card debt, or any type of personal debt for that matter, through or at the real estate closing.

Personal Debt Payments Create Taxable Boot

The pay down or pay off of personal debt is considered a taxable event when you are selling investment property and structuring a 1031 Exchange. It is technically referred to as cash boot because you are pulling cash out of the transaction and not reinvesting the cash (equity) into your replacement property.

In other words, the payment of personal debt such as credit card debt is a non-permissible expense when paid through a 1031 Exchange transaction. The payment of personal debt therefore means that 1031 Exchange equity has been diverted and is now taxable boot.

Consider Refinancing Your Replacement Property After Acquisition

You might want to consider not paying off the debt at the closing, completing the acquisition of your replacement property and then refinance the acquired property after a few months have passed in order to pay off any personal debt. However, the lender may insist upon the immediate pay off of the debt as a condition to the lender's new loan, in which case you may not have a choice.

Monday, December 21, 2009

IRS Form 8824 for 1031 Exchange Reporting Now Available

The IRS Form used to report 1031 Exchanges, IRS Form 8824, is now available for download.

Sunday, December 20, 2009

Wise Real Estate Investors Always Know Their End Game

I was speaking with a real estate investor this morning and he was completely stumped when I asked him what his end-game was. A wise real estate investor always has an end-game in mind. You know, an exit strategy. You should always know how you are doing to get out before you get in.

Granted, the market may move against you and you may have to alter your end-game, but you should always start off with an exit strategy in mind. You can refine it as you go, especially as your needs change.

It might be to continually diversify your risk by trading up (1031 Exchanging) into more properties (quantity) with an emphasis on capital appreciation while in your younger (working) years and then repositioning your real estate portfolio so that it focuses more on income (cash flow) for your retirement years. This may include a consolidation approach so that you are trading into out of the many properties you have build up into fewer, more manageable properties.

In any event, give it a lot of thought, and know your end game.

Saturday, December 19, 2009

Economic Outlook from our Friends at Goldman Sachs & Co.


Near-term inventory and stimulus-led growth should remain brisk, especially after last week’s data on trade, inventories, and retail sales. In the longer term, headwinds persist in the form of labor weakness, stagnant incomes, higher savings, state and local fiscal drag, housing supply, unused industrial capacity, and limited credit demand/availability.


The “jobless recovery” pattern established following the last two recessions provides a reasonable template for corporate hiring decisions over the next few years. We expect the unemployment rate to peak at approximately 10¾% in early 2011.

We have raised our 4Q09 GDP estimate to a 4.0% annual rate. As we look ahead into 2010, recovery is apt to be anemic at 2.1%, but reaccelerate in late 2011 as rising asset prices, improved credit availability, and better hiring facilitate a pickup in real GDP.


Although highly expansionary fiscal and monetary policies have caused many to worry about inflation, we believe that the large gap between potential and actual output will tame prices for at least the next few years.

Fed Policy

We remain far from consensus in our view that the FOMC will maintain a 0-¼% federal funds range in 2010 and probably 2011. There are three key reasons for this view: 1) the state of labor, inflation, and fading stimulus suggests Fed policy still remains too tight…even at effectively 0%, 2) it is better to be late than early with policy tightening as it’s much easier to intercept inflation than to defeat deflation, and 3) the Fed’s exit strategy will likely start with a reduction in quantitative easing rather t easing, than a hike in the federal funds rate.

Research - Risks to Our View

We see two plausible risks to our forecast: 1) much stronger and sustained growth above 4.0% that would lower unemployment quickly, and 2) a big run-up in asset prices that could ignite a bubble response from the Federal Reserve.

Friday, December 18, 2009

Highlights from an Economic Luncheon

There are so many economic opinions circulating today that you have to wonder who to believe, who's right, and who's way, way off. I attended a luncheon this week hosted by the Strategic Trusted Advisors Roundtable, and the key note speaker was none other than Dr. Lynn Reaser.

Dr. Lynn Reaser

Dr. Lynn Reaser was formerly the chief economist of Bank of America's Investment Strategies Group, and she is currently the president of the National Association for Business Economics (NABE) and has just joined the Fermanian Business Center with Point Loma Nazarene University.

Economic Comments

I made some notes from Dr. Lynn Reaser's comments and thought I would share them with you in bullet point format:
  • We definitely out of the recession - our GDP numbers have been up since June 2009.
  • Third Quarter GDP was up about 3%
  • Fourth Quarter GDP concensus is 4%
  • Recovery will absolutely continue
  • Inflation will be tame in 2010 - no signs to indicate otherwise
  • Employment is already improving with increase in number of hours worked, etc.
  • However, full employment will not be back until 2012 or 2013
  • We should experience an increase in new jobs during the first quarter 2009
  • Interest rates should begin to increase in late spring or early summer

Her Recommendations

  1. Refinance and lock in the historically low interest rates if you have not already done so.
  2. Buy real estate now if you have not already done so.
  3. Take care of your employees if you are an employer to make sure that you keep them later when jobs are more abundant.
  4. Integrity is king today. We have seen too many sleezy things, many of which led to this downturn.

So, there you have it. We have certainly seen many signs that lead me to believe Dr. Reaser. I hope these comments help you get a handle on what you might want to consider doing.

NEW Webinar: Don't Leave Insurance Settlement Money on the Table: Hire a Public Insurance Adjuster

You have sustained a loss on your real estate or personal property. Perhaps it was due to a fire, hurricane, flood or maybe a mud slide. You don't know what to do next, and your concerned that your insurance company won't treat you fairly.

Retain a Public Insurance Adjuster
  • Learn How to Protect Yourself After Sustaining an Insured Loss.
  • Protect yourself from your own insurance company during settlement negotiations by hiring a public insurance adjuster to represent you and your interests.
  • Speed your financial recovery after an insured property loss.
  • Learn what to do in case of an insured real property or personal property claim to avoid being "taken" advantage of by your insurer.
  • Learn how not to leave settlement money on the table.
  • Learn how to maximize property insurance claim settlements.
  • Learn about coverage ideas in terms of how to properly insure property.

Who Should Attend?

Insured real estate or personal property owners and their advisors who want to learn how to get the highest and best insurance settlement possible after sustaining an insured loss.


William L. Exeter
President and Chief Executive Officer
Exeter 1031 Exchange Services, LLC

Expert Presenter

Richard Michelson
Licensed Public Insurance Adjuster
RISCO - Risk & Insurance Services Company

Date and Time

Tuesday, January 12, 2010
8:00 AM PST/11:00 AM EST Login
11:00 AM — 12:00 PM EST Webinar

Webinar Registration Required

Click here to register for this webinar and learn how to protect yourself with a Public Insurance Adjuster in the event of an insured loss to your real estate or personal property.

Thursday, December 17, 2009

Federal Regulation of 1031 Exchange Industry Maybe Here

U.S. Government Regulation over the 1031 Exchange industry may finally be here. New regulations designed to protect real estate investors that retain 1031 Exchange Qualified Intermedairies to administer their 1031 Exchange transactions have been included in the recently passed U.S. House of Representatives Bill that would create a Consumer Finance Protection Agency ("CFPA"). The Bill would establish the CFPA as the primary regulatory body over 1031 Exchange Qualified Intermediaries.

The Act's amendment calls for the Director of the Consumer Protection Agency to review Federal laws and regulations relating to the protection of real estate investors that retain the services of 1031 Exchange Qualified Intermediaries, and subsequently recommend changes and/or improvements to the U.S. Congress.

Wednesday, December 16, 2009

FOMC Leaves Fed Funds Rate Unchanged Today

The Federal Open Market Committee provided a more encouranging appraisal of the United States economy today. However, FOMC members still voted to keep the closely watched Federal Funds interest rate unchanged and there was no indication that the Federal Reserve Bank would raise rates anytime soon despite better-than-expected November 2009 employment numbers.

The Federal Reserve Bank said it will continue its plans to withdraw certain lending programs over the next few months — an indication that the Federal Reserve Bank may start to unwind more significant asset purchases shortly thereafter.

The Federal Reserve Bank and its policymaking colleagues at the FOMC said that "the deterioration in the labor market is abating." This was the Federal Reserve Bank's first formal declaration that an very difficult employment outlook is actually brightening. The national unemployment rate slipped to 10% in November 2009 from 10.2% in October 2009.

The Federal Reserve Bank also stated that, "Financial market conditions have become more supportive of economic growth," in an indication stringent credit markets are loosening a bit. Also, consumer spending seems to be "expanding at a moderate rate," the Federal Reserve Board said, describing income growth as "modest."

Both statements represent upgrades over prior month statements. And, there have been many encouraging signs recently that the economic recovery is building.

1031 Exchange of Foreign Property or Assets

London Property Exchanged for London Property
I just completed a 1031 exchange that involved the sale of a London Flat as the taxpayer's relinquished property and the purchase of another London Flat as the replacement property. The two properties are being treated and used as rental properties.

1031 Exchange of Foreign Property
You are probably wondering how this can be. You are not alone. There are many who do not realize that you can 1031 exchange foreign property for other foreign property.

Properties Must Be Qualified Use Properties
The key is that both properties must be "Qualified Use Properties" (i.e. held for investment, rental or use in a business) in order to qualify under Section 1031. The other issue is that there must be a United State income tax consequence in order for the 1031 Exchange to provide any benefit.

So, as long as the taxpayer is a U.S. taxpayer that will have a U.S. tax consequence upon the sale of the foreign property and the property is held as investment property, it can be exchanged for other foreign property.

Properties Must All Be Foreign Properties
You can not sell foreign property and exchange into domestic property (i.e. U.S. property) or sell domestic property and exchange into foreign property. The properties involved in a 1031 Exchange must either be all domestic properties (all U.S. properties) or all foreign properties (all non-domestic properties).

Tuesday, December 15, 2009

This IS and WILL be the BEST Market to Trade Up in Your Lifetime!

I just read a blog post on Active Rain (a social media website for real estate professionals) that I could not agree with more. It is all about trading up and buying now. It's about getting into the game before the prices start going back up.

The blog post was discussing residential property to be used as your primary residence, but the same can be said for investment property, too. I've posted about this topic before. This is and will be the most important buying opportunity that most of us will ever see during our lifetime. The real estate market, and most other markets for that matter are on sale, and available for those who jump on it.

Now, I'm not professing that the market is going to jump and bounce back so fast that you will make a quick buck. I think this will be a slow crawl out of the hole kind of a recovery, but I've seen the same mistakes during the 70's, 80's and 90's. Investors wait until it feels right and then realize that they have missed the market and then they decide to wait until it comes back down. The markets have dropped so much, now is the time.

What if it drops another 5% or 10% you ask? It might, but it has already dropped 30% to 50% in many markets. You can acquire now and lock in the 30% to 50% discount and then hold tight until the market does come back.

Most people who sell investment property and then buy replacement property through a 1031 Exchange either want to diversify or consolidate their holdings, but the new trend in today's market is to reposition your real estate portfolio. Take advantage of these prices to get the properties that you want.

Monday, December 14, 2009

Reverse 1031 Exchanges Are NOT Monsters

I just finished reading an entire message board thread that started with a post by a member of the board that wanted to structure a Reverse 1031 Exchange but was concerned that everyone seemed to call Reverse Exchanges "Monsters."

Reverse 1031 Exchanges NOT Monsters
Now, I've been administering Reverse 1031 Exchanges for many years now, and I can tell you that they are more complicated and absolutely do require more proactive planning compared to regular forward 1031 Exchanges if you want to be successful with your Reverse 1031 Exchange. And, Investors that merely jump into a Reverse Exchange without any planning and good understanding of what is involved is asking for a difficult and challenging Reverse 1031 Exchange. I do not deny any of that.

Powerful 1031 Exchange Strategy
However, when Reverse 1031 Exchanges are used properly and are planned for well in advance, they can be a very powerful strategy in reducing the amount of risk involved with locating, identifying and acquiring suitable replacement property in your 1031 Exchange. I prefer to use the Reverse 1031 Exchange when ever possible so that I can acquire first and not have to worry about whether or not I will be able to acquire my replacement property.

My advice
Just do you homework, ask lots of questions, retain the services of an experienced Reverse 1031 Exchange services provider, make sure that you have a clear picture of what will happen in your Reverse 1031 Exchange, and absolutely do not pick your Reverse 1031 Exchange service provider merely based on fees, or you will be sorry. You definitely get what you pay for in the Reverse 1031 Exchange field. Experience and expertise and priceless for a smooth Reverse 1031 Exchange transaction.

Wednesday, December 09, 2009

Holding Real Property in a Partnership or Multi-Member LLC

This is just a quick note about issues involved with property held in a general partnership, limited partnership, or multiple member limited liability company and the complex problems that can arise when the underlying partners want to dispose of the real estate and subsequently structure a 1031 Exchange.

It is important to note that the entity itself (i.e. the partnership) is the owner of the property, and therefore any 1031 Exchange structure should be completed at the entity level. The underlying partners do not own an interest in real estate. The partners own an interest in the partnership (partnership interest), which is personal property and not real property.

There are solutions for these scenarios, but it generally takes advanced, proactive planning in order to properly structure a solution. I would recommend that you speak with your legal and tax advisors today if you already own property in a partnership or other separate entity in order to discuss how to restructure your ownership position now before it becomese a problem at the time of actual disposition.

Friday, November 27, 2009

Happy Thanksgiving!

Everyone here at The Exeter Learning Institute wishes you and your family a very happy, healthy and prosperous Thanksgiving. We have much to be thankful for during these trying times, and now that the real estate market is beginning to show signs of life once again, we wanted to remind everyone how much we should truly be thankful for.
Happy Thanksgiving!

Wednesday, November 25, 2009

The Reality of the California Real Estate Market: Siftings From the Tea Leaves of a Demographic Guru Webinar

Go To Webinar Registrations Are Required
Click here to register for this webinar on the California real estate market.

Confused About What To Do Next in Real Estate?
The "Great Recession" has left many of us scratching our heads and wondering what's next? Where do we go from here? How should we reposition our real estate portfolio going forward now that we are emerging from recession? Should I hang tight, or make an investment move now?

We realize these are confusing times, which is why Exeter 1031 Exchange Services, LLC is hosting this webinar for you. Our goal is to provide you with up-to-date real estate market data and information so that you can make better informed investment decisions.

"The Nation of California: An Almost Flat Line in 2009"
This exciting webinar will provide an update on the California real estate market and an overview of certain demographic trends that will affect investment property in the California real estate market. It will help you answer the above questions, and help you decide how to position your own investment portfolio as we move forward beyond the recession.

Hosted by:
William L. Exeter
President and Chief Executive Officer
Exeter 1031 Exchange Services, LLC

Presented by:
Alan N. Nevin
Director of Economic Research
MarketPointe Realty Advisors

Date and Time
December 1, 2009
8:55 AM PDT Login
9:00 AM — 10:00 AM PDT Webinar

Go To Webinar Registrations Are Required
Click here to register for this webinar about demographic trends in California.

Tuesday, November 24, 2009

Fannie Mae Housing Forecast for 2010

Fannie Mae's housing forecast projected New and Existing Home Sales will be UP 11% next year, with prices flat but stable nationally.

2010: Existing Home Sales Up 10%; New Home Sales Up 24%
They see Existing Home Sales UP 10% (5.46 million), and New Home Sales UP a whopping 24% (498,000) for 2010. The report unequivocally states:
It appears that the economic recovery is here.

In fact, the 23.3% boost in the annualized rate of home sales in Q3 was the largest in over twenty years. The analysis also noted that new-home inventories have dropped steadily since May 2007 and are now at their lowest levels since 1982.

Wednesday, October 14, 2009

More Good Economic & Market News

ISM Non-Manufacturing Index Rose to Best Level Since August 2008
The ISM Non-Manufacturing index rose to a better-than-forecast 50.9 in September from 48.4 in the previous month. This is the first time since August of 2008 that the index moved above 50, which is the level that separates growth (greater than 50) from contraction (less than 50). Indexes of orders and business activity advanced the most. While the employment index edged up modestly, it continues to remain at a level indicating contraction (44.3).

Employment Claims Improve
Latest claims data swung back toward modest improvement with both claims figures at new lows since the cyclical peak earlier this year. Initial Jobless claims fell 33k to 521k while continuing claims fell 72k to 6.04mm. It is likely that the continued downward drift in continuing claims represents exhaustions of eligibility for regular benefits rather than actual rehiring. Additionally, given the volatility of the data, we look for continued declines rather than reading too much into one week.

Trade Deficit Narrows
The trade deficit narrowed in August by $1.2bn to -$30.7bn, contrary to expectations of a modest further widening. Exports inched up 0.2% following three months of increases averaging 2% per month. Imports swung to -0.6% in August following large increases in June and July, with imports of crude oil being the primary driver on both sides of this swing. In real terms, the deficit narrowed by $1bn. This reduces, but does not eliminate, the likelihood of a trade drag on Q3 GDP growth.

Wednesday, September 23, 2009

Preparation of Warranty Deed to Trustee for Florida Land Trust

Warranty Deeds to Trustees are used to transfer real estate into Florida Land Trusts and are by far the most important transaction related document used when establishing and funding a Florida Land Trust.

Granting Authority to the Florida Land Trust Trustee
The Warranty Deed to Trustee conveys and details the specific legal authority and powers given to the Trustee of your new Florida Land Trust by the Warranty Deed. The Trustee, who can be an individual or entity, still has all of the powers and authority given to it by the Warranty Deed to Trustee even if you never draft and execute a formal Florida Land Trust Agreement. However, we always recommend using a formal Florida Land Trust Agreement.

Drafting the Warranty Deed to Trustee
Warranty Deeds to Trustees must grant full authority and power to the Florida Land Trust Trustee. The individual who is drafting your Florida Land Trust Agreement must ensure that the requirements listed in Section 689.071 of the Florida Land Trust Statute be included in the Warranty Deed to Trustee language.

Land Trust Trustee Should be a Natural Person or Legal Entity
A Trustee should be a natural person (human being) or a legal entity (such as a corporation or limited liability company). The Florida Land Trust itself does not have legal capacity to execute documents and is not a natural person or legal entity, so the Warranty Deed must convey the real property to the Trustee of the Florida Land Trust, such as Exeter Fiduciary Services, LLC, as Trustee of Florida Land Trust No. 12345.

The Trustee has the legal capacity to act on behalf of the Florida Land Trust, so you should also take great care in the selection of your Trustee. There are many providers that charge nominal fees, but getting in touch with them and actually getting timely service can be a challenge. So, be sure to thoroughly review the options, services, expertise and experience in addition to the fees charged by prospective Florida Land Trust Trustees.

Personal Property Designation
Warranty Deeds should include language stating that the beneficiary's interest in the Florida Land Trust is a personal property interest (in other words not a real property interest). This is an important distinction between the Florida Land Trust and a regular living trust. I don't have enough time to go into greater detail here, but will do so in a future post.

The Warranty Deed to Trustee should also clearly state that the Trustee does not have any person liability, which should take care of any possible exceptions that might be found in the Florida Land Trust law.

Tuesday, September 22, 2009

More Signs that Economy is Rebounding

Continuing Improvement in Current Economic & Market News

Retail sales increased 2.7% (-5.9% yoy) in August. Ex-autos, sales were firmer than expected, rising 1.1% (-7.0% yoy). This reading introduces additional upside risks to Q3 GDP growth.

Gasoline prices pushed the PPI up sharply in August by 1.7% (-4.3% yoy), while Core PPI rose 0.2% (+2.3% yoy). The core index was a bit stickier than we forecasted, with prices of new cars and trucks contributing to the upside surprise.

CPI in August rose 0.45% (-1.5% yoy) while core CPI rose 0.07% (+1.4% yoy). The firmer-than-expected readings resulted from the treatment of the cash for clunkers rebates, which were not considered a discount as we had expected. Inflation pressures of other components remain muted,
consistent with tame and abating inflation.

Industrial production jumped 0.8% in August (-10.7% yoy) after a large upward revision for July. The strong back-to-back increases strengthen the likelihood that the NBER will mark the trough of the recession in June. Capacity utilization increased to 69.6% in August. Although still below post WWII standards, we believe the higher than expected increase speaks to the strength of the unfolding rebound.

Housing starts moved up 1.5% in August (-29.6% yoy), as a 25% gain in multifamily starts overwhelmed a 3% drop in single family starts. The setback in single family starts follows five
months of gains of nearly 40%.

Sunday, September 20, 2009

California's Largest Rental Housing Expo on 09/30/2009

The largest rental housing education and networking event is just around the corner. September 30, 2009 is the date for California's largest rental housing expo to be held at the Long Beach Convention Center from 9:00 AM to 5:00 PM in Exhibit Hall B.

The Apartment Association, California Southern Cities
The event is designed and managed by The Apartment Association, California Southern Cities, and looks to be another great day with loads of free information on owning, managing and dealing with apartment housing.

You can discover and learn about all sorts of topics by browsing trade show booths, attending educational programs that will cover topics such as:
  • Secrets to Creating Wealth
  • Credit Checking in Today's Market
  • Covering Your Legal Bases
  • Profitable Employment Practices
  • Social Networking 101
  • How to Rent to Today's Tenants (Panel)
  • Taking Advantage of a Depressed Real Estate Market
  • How to Cut Costs and Put More $$$ in Your Pocket
  • Solutions to the Water Problem for Owners (Panel)
  • Fair Housing Conversation
  • Resident Retention Techniques
  • and much, much more...
Free Admission With Tickets
Call for your FREE admission tickets. We only have 100 tickets to give away. Simply call (866) 393-8370 or email and ask for your free admission tickets to The Apartment Association.

Tuesday, September 15, 2009

More Good Economic & Market News

The Federal Reserve Beige Book showed continued stabilization in economic activity with most Federal Reserve district banks reporting that business contacts “remained cautiously positive”.

Notable points included:

1) Tepid consumer activity aside from vehicle sales increases related to the cash-for-clunkers program; and
2) slight improvement in residential real estate but soft commercial real estate demand; and
3) improvement in manufacturing activity, and 4) labor market weakness. Commentary on inflation suggested downside risks remain in the near-term.

The US trade balance widened substantially to negative $32.0bn in July 2009 from negative $27.3bn in June 2009 on a surge in import growth, offsetting what had been emerging upside risks in our Q3 GDP growth forecast. A wider deficit in vehicles accounted for $1bn of the overall move. Import growth was broad-based with capital goods, consumer goods, and industrial supplies rising.

Initial jobless claims fell to 550k, down from 576k the prior week. Continuing claims fell more sharply to 6.088 million, although this may be due to expiring benefits.

Reuters/University of Michigan's consumer sentiment index rose 4.5 points to 70.2 with gains split evenly between expectations and the assessment of current conditions. The report signals some recovery in consumer expectations, which have been under pressure due to job losses.

Wednesday, August 19, 2009

1033 Exchange Consulting Services

Increase in 1033 Exchanges
There has been a pretty significant increase in the number of 1033 Exchange transactions occuring over the last year or so, and I would not be surprised to see the number of 1033 Exchanges continue to increase over the next couple of years as well.

Spurred by Stimulus Spending
And, its not surprising. The number of government stimulus programs have increased dramatically and therefore have increased Federal, state and local government spending. This increase in spending by government agencies will naturally increase the number of properties taken via the eminent domain process in order to complete the public projects.

1033 Exchange Consulting Services
We are not attorneys, but have extensive experience and expertise in the area of 1033 Exchanges because of our almost three decades of related involvement with 1031 Exchanges. Call The Exeter Group, LLC for a free consultation to see if we can help you.

Tuesday, August 18, 2009

Reverse 1031 Exchange Webinars on August 24, 25, 31, 2009

Follow-up Inquiries Re: Reverse 1031 Exchanges
I received a number of follow-up emails after my recent post about Reverse 1031 Exchanges Gaining in Popularity in the Current Market asking for more information regarding Reverse 1031 Exchanges and how they can be used in today's rapidly evolving real estate market.

Website Content on Reverse 1031 Exchanges
We do not have any material that can be sent via email, but we do host content on Reverse 1031 Exchanges, which is available on our affiliated companies' website through Exeter Reverse 1031 Exchange Services, LLC.

Reverse 1031 Exchange Webinars
However, The Exeter Learning Institute does host weekly webinars, generally on Mondays, on a variety of tax deferred and tax exclusion subjects, as well as other topics such as Economic Forecasts, Demographic Investing, and more.

We do have three Reverse 1031 Exchange webinars scheduled during the next 30 days.

Monday, August 17, 2009

More Good Economic & Market News

Nonfarm productivity surged 6.4% in Q2 while prior quarters were revised down. The surge is typical at a time when the economy is turning from recession to recovery.

The trade balance widened $1bn in June to -$27.0bn, with both exports and imports rising in the month. However, in real terms the deficit narrowed slightly.

As expected, the FOMC left short rates unchanged, noting modest economic improvement. The committee continues to expect a sluggish recovery and subdued inflation.

Retail sales disappointed in July, in both headline (-0.1%) and ex autos (-0.6%). Away from autos, which likely benefitted from the cash for clunkers program, weakness was fairly widespread. Coupled with modest revisions to May and June figures, the drop in July adds to signs that GDP in Q2 could be
revised lower than the -1.0% on record.

July Consumer Prices remained muted, rising only 0.005% (-2.1% yoy). The cash for clunkers program had no visible impact on new car prices which rose another 0.5%. Firmer than expected apparel prices helped to push Core CPI up 0.09%.

Industrial production rose 0.5% in July (-13.1% yoy). However, the increase was heavily skewed towards auto output which drove the manufacturing sector higher 1.0%.

Capacity utilization improved to 68.5% from 68.1% in June.

Friday, August 14, 2009

Economic Outlook

The Economic Outlook
The following economic outlook comments come from our friends at Goldman Sachs & Co. There continues to be positive trends in many areas.

Better News Drives Up Near-term GDP
Improved news flow in homebuilding, home prices, manufacturing, and employment contribute to an upgrade in our second half 2009 GDP forecast from 1.0% to 3.0% annualized. This change is particularly warranted due to the economic jolt coming from the positive turn in the inventory cycle and fiscal stimulus.

Remaining Headwinds Keep Longer-term Views in Check
The factors driving the near-term rebound are inevitably transitory. Persistent headwinds remain, as 1) consumers continue deleveraging from damaged balance sheets, 2) weak employment weighs on household income, 3) state and local governments cut back, 4) commercial real estate price declines accelerate, and 5) credit availability remains impaired.

The July labor report was the clearest recent sign of economic stabilization as payroll losses posted their smallest decline (-247K) since the Lehman Brothers bankruptcy and the unemployment rate fell for the first time since April 2008 (9.5% to 9.4%). We have tempered our view slightly on labor, now expecting the unemployment rate to reach 10¼% in 2010, down from our previous forecast of 10½%.

Fed Policy
Monetary tightening seems highly unlikely in a world of vast labor and manufacturing slack, contained inflation, and subdued consumption. We think the FOMC will be reluctant to raise the funds target, even from zero, until they have some confidence that the unemployment rate has reached its cyclical peak or will do shortly.

Treasury Yields
The recent sell off seems to have gone too far in response to improving economic data. In our view, the 10-yr will migrate closer to 3% over the next few months.

Wednesday, August 12, 2009

Reverse 1031 Exchanges Gain in Popularity in Current Market

Significant Buying Opportunities
Incredible investment opportunties abound everywhere today. I'm sure that you have seen them, or at the very least heard of them. There are properties that are being sold everyday via a short-sale, via foreclosure (Trustee's Sale) or deed in lieu of foreclosure, or directly by the financial institutions that have already taken the property back via foreclosure (REO Property). The potential long-term return from these investment properties is absolutely astounding. The investment opportunties often already provide positive cash flow.

Cash Is King: But Must Move Fast
The catch is that those who have cash are in control. Cash is King. Investors that have all cash can make offers and move and close on the acquisition of the troubled property quickly. This creates challenges for those that would like to structure a 1031 exchange because you have to move quickly and will generally not have time to sell your existing relinquished property in time to structure a 1031 exchange transaction.

Demand for Reverse 1031 Exchanges
The need to move quickly in the acquisition of short sale properties, foreclosure properties or REO properties has resulted in an unexpected increase in Reverse 1031 Exchange transactions. Investors are identifying tremendous buying opportunities and moving on the acquisitions quickly by acquiring the replacement properties immediately through a Reverse 1031 Exchange.

The Reverse 1031 Exchange allows the investor to move much quicker by taking advantage of the current investment opportunities created by the present real estate market cycle. The investor can buy their replacement properties first and then worry about selling their existing relinquished property within the next 180 calendar days.

Tuesday, August 11, 2009

More Good Economic News: ISM Manufacturing Index Jumped in July

This is an economic update provided by our friends at Goldman Sachs & Co.

Economic & Market News
ISM Manufacturing jumped to 48.9 in July and nearly every component showed a meaningful rise. An increase in the inventories index suggests moderation in the deep rate of liquidation (a positive for GDP), but at 33.5 remains depressed.

Construction spending rose 0.3% in June (-10.2% yoy). The composition of the report was as we hoped - more residential (+0.7%), less private non-residential (-0.5%), and some evidence of public spending (+4.6%).

Personal income fell 1.3% in June (-3.4% yoy), driven by removal of one-time stimulus payments of $250 paid to retirees in May plus a drop in wages, salaries, and dividends. Personal spending rose 0.4% (-2.2% yoy) but edged lower in real terms. As income fell more than spending, the savings rate fell to 4.6% from 6.2%.

ISM Nonmanufacturing fell to 46.4 in July indicating ongoing contraction outside of manufacturing.

The labor market had one of its most positive readings in nearly a year. Nonfarm Payrolls fell 247k in July, the smallest decline since July 2008, and figures for prior months were revised up modestly. The 0.1% drop in the unemployment rate, to 9.4%, can be attributed primarily to large declines in labor force participation in June and July rather than meaningful improvement in the rate. Other positive signs include increases in the workweek and average hourly earnings.

Sunday, August 09, 2009

Charitable Remainder Trusts or CRTs

The Charitable Remainder Trust or CRT is one potential income tax planning strategy for clients to use in eliminating their capital gain taxes and depreciation recapture taxes upon the sale of property. In fact, many of my clients that have used the CRT have done so for financial reasons and not for charity. The charitable cause is merely the icing on the cake.

Real Estate or Personal Property
The property is generally real estate but could be any type of highly appreciated property – real or personal. The important point here is that the asset is a highly appreciated asset that has a significant capital gain to worry about.

CRTs Are Not For Everyone
It is a very complex strategy, so the following is merely a very simple overview to help taxpayers understand the benefits of the CRT. The CRT is not for everyone, so a suitability analysis is critical before proceeding.

CRTs Simplified
The CRT is a “charitable” trust established by the taxpayer. The taxpayer names one or more charities as the beneficiaries. The taxpayer contributes the highly appreciated asset into the CRT. The CRT then sells the asset. The capital gain and depreciation recapture taxes are not triggered upon sale because it is a charitable trust. The net cash proceeds are then reinvested in stocks, bonds, and mutual funds inside the CRT. The taxpayer can receive a certain amount of predetermined income from the CRT during their lifetime (many options here). The charity receives the balance of the trust when the taxpayer passes on.

The positives: eliminate taxes upon sale of property, receive immediate tax deduction for future charitable gift, receive cash flow during lifetime, and fund charity at death.
The negatives: complex strategy, loss of control over assets, can not be undone, heirs lose assets unless replaced with a life insurance trust.

Please remember that this is an oversimplified explanation. I would be happy to refer you to a CRT expert that can work with you to determine if the CRT is suitable for your needs.

Thursday, August 06, 2009

Self-Directed IRA Custodians Are Not Created Equal

This is a follow-up post to my blog post from yesterday regarding Self-Directed IRAs and selecting the most appropriate IRA Custodian for your Self-Directed IRA (SDIRA). There are very Self-Directed IRA Custodians on a national basis that are truly and completely Self-Directed IRA Custodians. 

Service Level is Critical 

One of the most important elements of being a really good Self-Directed IRA Custodian is the level of expertise, experience and service provided by the IRA Custodian in the asset classes that you are considering for investment. There are many IRA Custodian that know how to administer a Self-Directed IRA and know how to run a trust company operation, but there are few that have extensive expertise and experience in the real estate world

Choose Your Investment Class 

The first thing that you need to do is determine what you are interested in investing in.  Are you looking to invest in real estate?  Perhaps cryptocurrencies?  Perhaps something else.  You need to decide what is important to you and what your investment goals and objectives are.  Once you have determined what your target investment objectives are you will be ready to begin interviewing IRA Custodians to ensure that you select one with the necessary experience and expertise that you need. 

Privacy and Confidentiality of Real Estate Ownership

Some Asset Protection Strategies Too Complex
There are many ways to protect yourself, your property and your family from risk and liability in today's world. Some of the strategies are really basic while others are probably way too complex (except for those few individuals who really do need the complexity).

Evaluate and Understand YOUR RISKS
The key issue here is to really evaluate and understand what risks and liabilities you want and/or need to protect yourself from. We often over estimate potential risks and then respond by over reacting with complex real estate ownership structures.


Often, the best structure for holding title to real property is in the owner's name combined with good property and casualty as well as excellent liability insurance coverage. However, when you have above average exposure, additional steps might be needed and should be analyzed to determine if the additional work, costs and complexity is worth it.

Keep Your Real Estate Private

One such step is evaluating the Title Holding Trust or Land Trust. The Title Holding Trust keeps your name off the public record. Your property is owned and held by the Trustee of the Title Holding Trust. Your name does not appear anywhere in the public record.

The Title Holding Trust (Land Trust) provides you with the confidentiality and privacy for your real estate portfolio that you might just need in order to protect yourself. The confidentiality and privacy of ownership advantage is by far the most important benefit of the Title Holding Trust (Land Trust).

There are many reasons that confidentiality and privacy of ownership for real estate are important issues to consider, including:
  • Protection from risk and potential litigation
  • Identify theft
  • Stalking victims
  • Negotiating advantage when acquiring property
  • Many more...

The Title Holding Trust allows you to buy, hold, manage and sell real property in a very confidential and private manner. It just might be the easier solution that you have been looking for.

Thursday, July 30, 2009

When Are IRAs Truly Self-Directed IRAs

Talk continues regarding opening Self-Directed IRAs (SDIRAs) and managing or self-directing one's own Individual Retirement Accounts, including, but not limited to: 

  • Traditional IRA
  • Rollover IRA
  • Inherited IRA
  • Roth IRA
  • Roth Conversion IRA
  • Individual 401(k) Plan (or Solo-K) 

Self-Directed IRAs 

The term "Self-Directed IRA" is used somewhat loosely in the retirement industry today. The bottom line is that each and every IRA is "self-directed" because the investor chooses what financial institution to place it with, and if the investor does not like the product, investment or service, they can choose to move it via an IRA-to-IRA transfer to another IRA Custodian with no tax consequences as long as you follow the rules. 

IRA Custodians

The issue with Self-Directed IRAs is not whether you can "self-direct" your own IRA, but which self-directed IRA Custodian should you choose. You must first decide what type of investments you wish to invest in inside of your Self-Directed IRA before you begin searching for and evaluating possible self-directed IRA Custodians.  

Real Estate Related Investments

There are relatively few IRA Custodians that allow you to actually invest in promissory notes that are secured by deeds of trusts or mortgages, tax lien certificates, non-trade REITs, real estate, and much more, for example. You need to shop around, and once you have found the short list of Self-Directed IRA service providers you must carefully evaluate their service quality. This is what sets the various providers apart from one another.  Most self-directed IRA Custodians that allow "Alternative Investments" are trust companies.  

Real Estate Expertise and Experience 

Trust companies generally have expertise and/or experience in retirement account administration and trust company operations, but few truly have actual direct expertise and experience in buying, selling, exchanging, or owning investment real estate.  You need to make sure that the IRA Custodian you choose has expertise and experience in both retirement account administration and real estate transactions.  

Thursday, June 25, 2009

Buying an Installment Note as Like-Kind Replacement Property in a 1031 Exchange

Buying Troubled Installment Notes
Recently I heard a discussion about selling real estate and the desire to acquire a troubled installment note as part of a 1031 exchange. The person indicated that they wanted to buy troubled notes (installment notes) at discounted values from financial institutions. The notes were in the foreclosure process, and the person wanted to acquire the loans today so they could end up owning the actual real property at the completion of the foreclosure proceedings.

Buying Loans in a 1031 Exchange
He said he wants to dispose of real property that he already owns by structuring a 1031 tax deferred like kind exchange, and then wants to buy the installment notes (loans) from the financial institution as his like-kind replacement property to complete his 1031 exchange.

Two 1031 exchange Qualified Intermediaries that he had approached about doing just this said the proposed 1031 tax deferred exchange transaction doesn't work for tax deferred exchange treatment under Section 1031 of the Internal Revenue Code because the promissory notes (loans) were in fact personal property and not real property.

Significant Value Lies in Expertise and Experience
The responses received from the two Qualified Intermediaries appear to be correct when viewed at the surface. He is going to dispose of real property, so it stands that he must buy real property to qualify for 1031 exchange treatment.

There is a creative way to structure the proposed 1031 exchange transaction so that it does in fact qualify as a 1031 exchange transaction. The strategy is very easy. The 1031 exchange strategy combines the concepts of the Reverse 1031 Exchange parking structure and the Build-To-Suit 1031 Exchange improvement strategy.

Parking Structures in a Reverse Exchange
He can use a Reverse 1031 Exchange parking structure under Revenue Procedure 2000-37 where the installment note (loan) is bought and "parked" or held by an Exchange Accommodation Titleholder as the intended replacement property.

The installment note (loan) is currently personal property. It is clearly not real estate, yet.

Improvement Exchange Strategy
Real property is very often bought and held by an EAT. The real property is then improved by the EAT, generally through some form of construction. The real property is then conveyed to the party completing the 1031 exchange once the improvements have been made. This 1031 exchange strategy is referred to under many names, including: Improvement Exchange or a Build-To-Suit Exchange or even a Construction Exchange.

The Improvement Exchange strategy can be structured for his proposed 1031 exchange. The installment note (loan) would be bought and held by the EAT. The EAT would "improve" the property by following through with the foreclosure. The EAT would end up holding title to real estate upon the completion of the foreclosure. The real property can then be conveyed to him and his 1031 exchange would be completed.

You really can buy an Instalalment Note as part of your 1031 exchange provided the replacement property received in the 1031 exchange is an interest in real estate.

Wednesday, June 24, 2009

Federal Reserve Holds Policy Steady; Less Worried About Deflation

Tuesday, June 23, 2009

We Are Celebrating our 5th Anniversary Today

5th Anniversary of The Exeter Learning Institute Today
We launched The Exeter Learning Institute Blog back on June 23, 2004 in order to provide real estate investors with thoughtful and educational real estate information so that they could make better informed investment decisions. And, we have been blogging ever since.

The 1031 Exchange Institute
We have received so many positive comments from loyal followers over the years that we decided to launch another blog that was specific to 1031 exchange related matters, and was later expanded to include tax-deferred related matters.

The 1031 Exchange Institute was launched on November 14, 2006, which included information, blog posts, and our first discussion board. The 1031 Exchange Institute far exceeded our expectations in terms of visitors, discussions and posts.

We wanted something that was more interactive, though, so we decided to roll out a real estate focused Discussion Board with numerous real estate related Forums.

The Exeter Discussion Board
We launched The Exeter Discussion Board in August 2007. Discussion boards can be very tricky, and most never really take off. But, we were pleasantly surprised when The Exeter Discussion Board far exceeded our expectations. In fact, it just recently surpassed its 1,000th post and 300th registered user.

Thank you for following our blogs.

Monday, June 22, 2009

More Good Economic News: Housing Starts Increased Sharply

Economic & Market News from Goldman Sachs & Company
I'm reposted some of the economic comments published by Goldman Sachs & Company in their Weekly Market Monitor dated June 19, 2009. As you can see, there is some really great news contained in their comments.

Housing Starts Increase Sharply
Housing starts increased sharply in May, up 17.2% (-45.2% yoy). Multifamily starts were a major driver, rebounding 61.7% after a 50% decline in April. Permits also increased, up 4%. Here, single family permits were the driver, up 7.9%.

Producer Price Index
The producer price index rose 0.2% in May (-5.0% yoy). Core PPI edged down 0.1% (+3.0% yoy). The core weakness appears genuine given that it was fairly widespread and not centered in normally volatile components.

Industrial Production Fell in May
Industrial Production fell 1.1% in May (-13.4% yoy), due mainly to difficulties in the auto sector. However, weakness continued across major categories. Reflecting the ongoing drop in production, capacity utilization fell to 68.3%, another all-time low. These readings make sustained upward price
pressure in the goods sector unlikely.

Consumer Price Index Rises
The Consumer Price Index rose a meek 0.1% in May (-1.3% yoy). Often errant food and energy were subdued, at +0.2% and -0.2%, respectively. Core CPI registered higher 0.145% (+1.8% yoy). Most components registered price declines with only vehicle prices surprising to the upside. Overall, the report paints a picture of prices that are largely in check.

Continuing Jobless Claims Fall
Initial jobless claims remained essentially unchanged at 608,000 last week, while continuing claims fell sharply and unexpectedly by 148k to 6.7mm.