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Buying Foreclosed Properties: Important Pitfalls
Many people have started looking at foreclosed properties as a new, cheap real estate investment. Properties at foreclosure sales often sell at a substantial discount, so you can get a very good deal in many cases. There are several problems you...
Choosing A Reputable Real Estate Appraiser
When you are considering purchasing a property; either for investment or personal use you will need to hire a real estate appraiser. If you are financing the purchase through your credit union or another financial institution will most likely be...
Home Buyer And Home Design Terms And Definitions
When you start shopping for a new home, you may encounter some words and terms with which you are unfamiliar. The following glossary will help you to be a better informed shopper.
Adjustable Rate Mortgage (ARM) - A loan whose interest rate is...
Real Estate Websites - Head Librarian Or Realtor?
If your real estate website has an IDX link, do you provide the full property address to Web surfers? If so, you may be acting more like a librarian than a realtor! Do you really believe Web surfers, the potential clients, who have had in many cases...
Sell My House Without A Realtor
If you’re thinking, "I should sell my house without a realtor," the current real estate market and explosion of the Internet will make your job easier.
Sell My House Without A Realtor
If you are looking to sell a house without a realtor, you...
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Need More Income From Your Investment Property?
The goal of every real estate investor is to see their property appreciate in value and to have it generate a positive cash flow. The appreciation normally takes care of itself if the property is of good quality, in a good location, and is held over a long enough period of time. Just like the stock market, real estate has proven to go up way more than it goes down over time.
The positive cash flow component is not always a given though. Ask any seasoned investor, and unless the property is owned free and clear, there have probably been times when he's had to dip into his own pocket to pay for some aspect of his rental. Who hasn't seen a raise in homeowner's fees, property taxes, an outlay of cash for a new roof, plumbing, paint, carpet, appliances, or a length of time supporting it between tenants.
So, what if you're nearing retirement age and see the need for increased and steady income? You may even look forward to taking a permanent break from the "joys" of hands-on property management. We all deserve to reap the rewards of our labors, right?
Basically, to meet these goals, one can do one of two things.
1. Sell the property, pay all the capital gains taxes, recaptured depreciation, etc. and pocket what is left. To receive an income, one would have to either live off whatever interest/gains your proceeds produced, or begin depleting your funds to provide you with the amount of monthly income you deem necessary. Depending on your age and financial needs and whether or not you desire to leave as large a legacy as possible, this approach may or may not work for you.
2. Employ a strategy that will defer the payment of any tax or depreciation. Let all of your gains continue to
work for you throughout the course of your retirement and into the next generation. Yet, you will still get a significant and partially tax deductible monthly income.
What strategy is #2? If your property is over a million and you are not a young retiree, you might consider a Private Annuity Trust. You will get monthly income for the rest of your life, but you will be depleting your asset and only spreading out the repayment of capital gains tax over a longer period of time. That is a simplification of a complex agreement, but that is the gist.
A better option may be a 1031 exchange into a tenant in common (TIC), Basically, you exchange your property for a deeded partial interest in a grade A commercial property. You sign a contract with a property management company, and in turn receive a monthly income (typically 6-7% of your total equity). You never have to deplete your asset, and it can pass to your heirs at the stepped up basis.
The 1031/TIC exchange is a fairly new concept, sanctioned by the IRS in 2002. It is projected that the influx of property assets into this type of exchange will be close to 5 Billion dollars in 2005. That's a lot of equity. Why not let your equity continue to work for you instead of parting with a lot of profits that would take you years to replace.
About the Author: How much would you pay to save thousands in Capital Gains Tax? Paula will share the secrets in a free Teleconference . Sign up now at : http://www.savegainstax.com
Source: www.isnare.com
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