We are all looking for ways to increase our incomes, diversify our businesses, expand our operations, and add value-added services to retain existing clients, just so we can survive during this current real estate cycle that we find ourselves in.
Real estate agents and brokers who can reinvent, redesign, and regroup their real estate businesses will be successful in surviving this current real estate cycle. Those who can not do so may not survive to see the full recovery that already appears to be in progress.
Who Moved My Cheese?
This discussion reminds me of a great little book that I read years ago written by Dr. Spencer Johnson, M.D., entitled Who Moved My Cheese.
This great little book is a very quick and easy read. And, it makes a very important and critical point regarding survival. It demonstrates in a very clever way that you must be ready to move, to adapt, to change in order to survive.
Who Moved My Cheese will not provide any solutions to your specific business issues or needs, but it does delivery a very powerful message about being ready for change, being agile, being flexible, and actually moving (read "do something") to find your next piece of cheese ("opportunity") when your cheese is unexpectedly moved. Your survival in this current real estate market cycle depends on your ability to change by reinventing, redesigning and regrouping.
I would highly recommend reading it if you have not already done so. In fact, you might even consider buying and giving it out to your entire real estate team to help them understand what you are trying to accomplish.
Blue Ocean Strategy
Being ready for change and willing to adapt is one thing, but knowing what to do is an entirely different matter altogether. It reminds me of a quote by Albert Einstein. He defines "Insanity: doing the same thing over and over again and expecting different results." How many times do we keep doing the same thing the way we have always done it and we keep hoping for a different outcome?
Blue Ocean Strategy is about reinventing, redesigning and regrouping in such a way that you make your competition obsolete. In other words, the competition does not matter. They can't touch you.
Real estate professionals need to look for ways to build, expand and diversify their real estate businesses in such a way that you offer or provide products or services that your competition does not. Look for ways to think and work outside of the box.
The Exeter Group of Companies
It was no different at The Exeter Group of Companies. We were already looking for ways to diversify our real estate services operations when the economy took the inevitable plunge. The Exeter Group of Companies specializes in tax-deferred and tax exclusion transaction strategies.
Now, since the capital and credit markets froze during the early stages of the recession, and banks, real estate lenders, and mortgage brokers were no longer lending on real estate investments, 1031 Exchange transaction volume plunged by 70% to 90% in most geographic areas, including and especially in the California real estate market.
So, how do you stay within your tax-deferred and tax exclusion specialty and still provide a service needed in the current real estate market cycle? You identify and implement a Blue Ocean Strategy for your operation.
We realized that taxpayers were still selling assets (real estate, personal property, and businesses), and that taxpayers still had taxable capital gain issues to worry about. But, the 1031 Exchange was not necessarily a viable option because they could not obtain the necessary financing in order to acquire replacement property. However, taxpayers do not want to get hit with all of the taxes in the year of sale.
An Alternate Strategy: The Deferred Sales Trust
An alternative to the 1031 Exchange was needed to help taxpayers that did not want to or could not use the 1031 Exchange. It had to allow them to sell highly appreciated assets - whether it be real estate, personal property or businesses - and defer the payment of their taxable gain over a period of time selected by them.
So, we joined forces with the Estate Planning Team to offer the Deferred Sales Trust. Taxpayers can sell highly appreciated assets through the Deferred Sales Trust and defer the payment of their capital gain taxes over a period of time of their choice pursuant to Section 453 of the Internal Revenue Code - just like an installment sale contract.
Taxpayers can choose the 1031 Exchange when they can and do want to reinvest in replacement property and they can choose the Deferred Sales Trust when they can't or don't want to reinvest in replacement property but do want to at least defer the payment of their taxes.
Realtors Can Offer The Deferred Sales Trust As Their Blue Ocean Strategy
You can choose to offer the Deferred Sales Trust as your Blue Ocean Strategy, too. This will set you apart from your competition. You will bring more value to the table for your clients. Click here to learn more about expanding your real estate business with the Deferred Sales Trust while increasing your income at the same time.
September 18, 2009--San Diego, California--Exeter Fiduciary Services, LLC, The Estate Planning Team and Robert Binkele are pleased to announce that Franklin Templeton Bank & Trust now offers its Preferred Shareholder Credit Line to Estate Planning Team members' clients seeking to sell highly appreciated assets through a Deferred Sales TrustTM or DST. The credit line will be offered through Franklin Templeton Bank & Trust. With a Deferred Sales TrustTM, buyer and seller are linked to a third party trustee. Title conveys upon closing; funds are then deposited in a trust account.
Access to the Preferred Shareholder Credit Line enables sellers to borrow up to 65% of the value of the Deferred Sales TrustTM note providing the highly prized liquidity aging baby boomers desire. Sellers can use the credit line to purchase other real estate without having to follow 1031 Exchange guidelines.
The Reality of the California Real Estate Market: Siftings from the Tea Leaves of a Demographic Guru Webinar, Thursday, October 1, 2009
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 Thursday, October 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 on the California real estate market.
Click here to view other upcoming webinars in The Exeter EdgeTM Webinar Series.
Tax Deferred and Tax Exclusion Strategies for Real Estate Webinar 09/30/2009
Click here to view other upcoming webinars in The Exeter EdgeTM Webinar Series.
Go To Webinar Registrations Are Required
Click here to register for this tax deferred and tax exclusion strategies for real estate webinar.
As a real estate investor you've worked hard to build equity in your real estate. When it comes time to sell, preserve your wealth by deferring or excluding your capital gain and depreciation recapture taxes by implementing a tax deferral or tax exclusion strategy.
Build & Maintain Your Wealth by deferring and/or excluding payment of taxes on the sale of your real estate -
Need CASH FLOW NOW?
Wish to take advantage of tax programs developed specifically for investment property owners?
HAVE cash flow - want to invest in real estate and PROTECT your portfolio?
Selling real estate and looking for an exit strategy?
Worried about losing your equity to capital gain taxes?
Want to keep your cash working for you instead of Uncle Sam?
Want to trade into more real estate to increase your cash flow?
Learn about numerous tax deferred and/or tax exclusion strategies that you can use when selling your real estate...
This educational webinar will discuss the various tax-deferral and tax-exclusion strategies available to you when selling real estate, including:
Cost Segregation
EPAct
1031 Exchanges
1033 Exchanges
1034 Exchanges
121 Exclusions
721 Exchanges or upREITs
453 Installment Sales (Seller Carry Back Notes & Land Contracts)
Deferred Sales Trusts (DSTs)
And more...
The webinar will address the requirements, structures, processes, strategies, and compliance issues necessary to successfully utilize the various tax deferred and tax exclusion strategies outlined above.
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 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...
Call for your FREE admission tickets. We only have 100 tickets to give away. Simply call (866) 393-8370 or email info@exeterco.com and ask for your free admission tickets to The Apartment Association.
Selling rental property, investment property or commercial owner/user property via a short sale may still trigger capital gain taxes. The seller often focuses on the fact that they have no equity in the property and therefore assumes that they have no tax liability either. However, having equity or no equity has absolutely no bearing on whether they have a taxable capital gain in the real property.
Background Information
This is an issue that many rental or investment property owners have probably not given much thought about. They own rental or investment property that is underwater (i.e. the real estate is worth less than what they owe on the loan). They have absolutely no equity in the property, or actually have negative equity. The property owner decides to try to sell the property via a short sale in order to mitigate their losses and get out from under the loan servicing requirements. Their lender agrees to the short sale, and they complete the transaction.
Investors Have Pulled Equity Out Over Time
The problem is created by the fact that the investor has pulled his or her equity out of the property over the years as the property has increased in value. The increased equity is gain that has been pulled out of the property, but they have not paid any taxes on the gain yet.
Example
Let's use an example. Suppose that the investor acquired rental property for $100,000.00. It then grows in value each year. Each year the investor refinances the property and pulls out what ever additional equity is available. The value of the property reaches $1,000,000.00 in 2007 and the total amount of debt on the property after all of the refinancings is now $900,000.00.
Real Estate Market Values Collapse
Fast forward to 2009. The property value has dropped to $600,000.00. The outstanding debt amount is still $900,000.00. The investor has negative equity of $300,000.00. The market appears likely to go lower and some tenants have moved out so that the investors cash flow has dropped.
Selling Under A Short Sale
The investor decides to sell the property and get out from under the negative cash flow. They are able to sell for $600,000.00 and the lender agrees to a short sale. The investor lets out a "Whew!" and moves on with their life. They visit with their tax advisor in April to complete their tax return, and what a surprise they have waiting for them.
Capital Gain
They may not have equity in the property, but they do have a gain. Remember, they sold for $600,000.00, and even though the debt was $900,000.00 so that they have not equity they only paid $100,000.00 for the property. They actually have a $500,000.00 taxable capital gain on the short sale. It is so important that investors meet with their tax advisors BEFORE completing any sale, disposition, purchase or 1031 exchange of property to ensure they know exactly what the outcome will be.
The Zero Equity 1031 ExchangeTM
They have probably made their financial situation much worse in this case because they now owe quite a bit in capital gain taxes. They may not have had any other options, but knowing what to expect and evaluating potential options would have been a smart thing to do.
The Zero Equity 1031 ExchangeTM is one of those options. It will not work for everyone, and takes some creative thinking and planning to get it done, but it would allow the investor in this case to sell the problem asset, reinvest in replacement property (hopefully in a slightly better position) and defer the payment of capital gain taxes.
"Real Estate Ownership Should be Private and Protected"
Keeping the owners name out of the public record
Avoiding costly litigation by keeping assets hidden
Protecting real estate from liens and judgments
Negotiate to buy property anonymously
This is a basic level discussion regarding the benefits and advantages of acquiring, owning, holding and disposing of real estate or personal property under a Title Holding Trust or Land Trust. The discussion will include the requirements, structures, processes, strategies, and compliance issues necessary to successfully establish and maintain a Title Holding Trust or Land Trust, which is often referred to as a California Title Holding Trust, Florida Land Trust or Illinois Land Trust.
The Exeter EdgeTM Series- Seminars, Webinars and Workshops
Get the edge you deserve when it comes to understanding the power of wealth building tax deferral and tax exclusion strategies. Register today for a 1031 Exchange, Title Holding Trust (Land Trust) and Deferred Sales TrustTM seminar, webinar or workshop. Registration is required for all of our events. The Exeter Edge SeriesTM is complimentary and open to everyone unless otherwise specified. We would also be happy to present a custom 1031 exchange, Title Holding Trust (Land Trust) or Deferred Sales TrustTM workshop for your organization.
DateTimeProgramLevelLocation
Monday 07/27/2009
5:25 PM - 6:30 PM PDT
1031 Exchange Webinar Webinar will discuss the requirements, structures, processes, strategies, and compliance issues necessary to successfully complete a 1031 exchange transaction.
1031 Exchange Webinar Webinar will discuss the requirements, structures, processes, strategies, and compliance issues necessary to successfully complete a 1031 exchange transaction.
Learn how to buy, hold, manage and dispose of real estate in a private and confidential manner on Monday, July 13, 2009 in a free webinar on Title Holding Trusts (Land Trusts).
You may be thinking "why would I need a 1031 exchange if I'm going through a short sale. The answer is easy, and one that many investors going through a short sale have not even thought of.
Short Sale Scenario
Our story begins with an investor has been acquiring and accummulating rental property over the last five years. The investor refinances all of his or her rental properties every six to twelve months in order to pull the cash equity out of the property and acquire more investment property. They maintain the loan-to-value ratio as close (as high) to 100% as possible. The easy credit markets have allowed this to continue.
Now, the real estate markets are in a free fall. The investor's market value of his or her properties has dropped well below what he or she owes on the property. Renters begin to move out and rental income begins to drop. They are no longer able to service the debt because the cash flow has dropped too much.
They have no choice but to sell the property and complete a short-sale.
Capital Gains
Let's say the investor acquired the property for $100,000.00 (cost basis) and that the property increased in value to $500,000.00 (fair market value). The investor was able to refinance over a period of time and has outstanding debt of $450,000.00 (90% loan-to-value ratio). The property value has now dropped to $300,000.00. The investor owes $150,000 more than what the property is worth, so they decide to sell for $300,000.00 and complete a short-sale.
Here's the catch. The investor sells the property for $300,000.00, but they have a $100,000.00 cost basis, which translates into a $200,000.00 CAPITAL GAIN. They are still going to owe taxes on the $200,000 capital gain even though they have sold the property and have NO EQUITY. Investors often get equity and gain confused. This problem could be avoided if the investor had consulted with his or her tax advisor before proceeding.
ZERO EQUITY 1031 EXCHANGETM
One possible solution is to defer the payment of the investors depreciation recapture taxes and capital gain taxes by structuring and completing a Zero Equity 1031 ExchangeTM (the phrase was coined and trademarked by Exeter 1031 Exchange Services, LLC in April 2009). The Zero Equity 1031 ExchangeTM allows the investor to sell the troubled property, complete a short-sale AND structure a 1031 exchange in order to defer the payment of the capital gain taxes.
The structure is easy. It works like any other 1031 exchange except their is no equity or cash position for the 1031 exchange Qualified Intermediary to hold during the 1031 exchange process. The challenge for the investor is to find a way to buy and finance replacement property as part of the 1031 exchange. Click here to read the entire story on the Zero Equity 1031 Exchange.
Disclaimer: ActiveRain Corp. does not necessarily endorse the real estate agents, loan officers and brokers listed on this site. These real estate profiles, blogs and blog entries are provided here as a courtesy to our visitors to help them make an informed decision when buying or selling a house. ActiveRain Corp. takes no responsibility for the content in these profiles, that are written by the members of this community.
An alternative to the 1031 Exchange was needed to help taxpayers that did not want to or could not use the 1031 Exchange. It had to allow them to sell highly appreciated assets - whether it be real estate, personal property or businesses - and defer the payment of their taxable gain over a period of time selected by them. 
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