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.
Wednesday, August 19, 2009
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.
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.
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.
Unemployment
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.
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.
Unemployment
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.
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.
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.
Summary
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.
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.
Summary
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.
Keep It SIMPLE
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:
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.
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.
Keep It SIMPLE
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.
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