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May 2017 Blog Posts (20)

The Secrets of a 1031 Exchange "Drop & Swap"

Often times, real property held by a partnership or limited liability company is subject to a sale but there is disagreement among the partners as to how to handle the sale proceeds. Some investors want to conduct a 1031 exchange while others simply want to sell for cash. To satisfy these competing interests, the partnership or LLC initiates what is known as a “drop and swap” exchange.

In such a transaction, before the exchange the property ownership title is changed to reflect…

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Added by Dr. Robert G. Hetsler, Jr. on May 31, 2017 at 7:06am — No Comments

When Does the Two-Year Holding Rule Apply to 1031 Exchanges?

In a typical, arm’s length #1031 exchange, the parties to the process only come together because one is selling something the other one wants. They don’t likely know each other, and, in many cases, may never meet at all. For those transactions, the two-year holding rule never comes into play.

However, when related parties want to use section 1031 to exchange property, this nuanced rule is applicable. Both sides must be clear on this part of IRS code. When related parties exchange…

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Added by Dr. Robert G. Hetsler, Jr. on May 30, 2017 at 12:11pm — No Comments

How to Minimize Taxes When Selling the Family Ranch

When it comes to selling the family ranch or farmstead, sellers often end up paying upwards of 20% of the property’s value in taxes. However, if you want to keep more for yourself or your heirs and give less to Uncle Sam, there are several tax strategies you can employ to meet this goal.

One of the best ways to avoid capital gains taxes altogether is with a properly structured #1031 exchange. This allows you to sell one property and acquire another “like kind” property without…

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Added by Dr. Robert G. Hetsler, Jr. on May 29, 2017 at 12:20pm — No Comments

Why a Self-Storage TIC Might be Right for You

Investors go into rental property ownership for all the right reasons. Appreciation of the asset and a steady, monthly income flow are two big ones. And it works beautifully for most. At least for awhile.

But eventually the day comes when an investor, likely facing his or her golden years, still desires the cash flow and appreciation, but no longer wants the day-to-day responsibility of rental property ownership. After all, those 3:00 a.m. phone calls get tiresome, even for the most…

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Added by Dr. Robert G. Hetsler, Jr. on May 26, 2017 at 12:58pm — No Comments

Help! I Can't Find a Buyer for My 1031 Exchange

In the nearly 20 years I’ve been helping investors navigate the tricky waters of a #1031 exchange, I occasionally receive a frantic phone call that goes something like this. “Hey, I’ve found a great replacement property and closed on it, hoping to do a reverse exchange. But it’s almost 180 days later and I still haven’t found a buyer for my relinquished property. What should I do?”

Unfortunately, not every 1031 exchange goes as planned. In situations like the one above, the investor…

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Added by Dr. Robert G. Hetsler, Jr. on May 24, 2017 at 9:26am — No Comments

Note Investing News: 53% of Market Has Above Pre-Recession Foreclosure

Good news for note investing: over half of America’s housing markets are still flush with distressed property deals.

While every single foreclosure is still a tragedy, those searching for distressed property deals will find there is plenty of inventory out there, according to the latest data.

A new foreclosure report from Realtytrac and…

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Added by Fuquan Bilal on May 23, 2017 at 6:16pm — No Comments

The Right Way to Identify Property in a 1031 Exchange

One of the biggest obstacles in any #1031 exchange is finding suitable replacement property. Sometimes the ideal property will come along right away – sometimes even before the relinquished property is sold – but unfortunately this is not the case for most exchanges.

For investors who relinquish before finding a replacement property, there are several important requirements that must be followed with regard to identifying replacement property in order for the 1031 exchange to succeed…

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Added by Dr. Robert G. Hetsler, Jr. on May 23, 2017 at 9:34am — No Comments

Who is Minding the Cash in a 1031 Exchange?

In my work with #1031 exchanges (as both a qualified intermediary and a real estate professional), I often encounter investors who are delving into the world of 1031 exchanges for the first time. They understand the basic concept of trading investment property to avoid capital gains taxes, but are a little fuzzy on the steps of the process.

One of the biggest things any investor must know before beginning any 1031 exchange is how the IRS treats the cash from the sale of the…

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Added by Dr. Robert G. Hetsler, Jr. on May 22, 2017 at 1:19pm — No Comments

Speak the Language of 1031 Exchanges

For an investor new to the world of section #1031 of the IRS Tax Code, the terminology that comes along with these tax-saving exchanges can be confusing. To help you understand the phrases you will undoubtedly hear if you choose to complete a tax-deferred 1031 exchange, here’s a list of the key terms you will come across.

Boot: This is the fair market value of any non-qualified property you receive during the exchange. It can be cash, loans, property, reduction in…

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Added by Dr. Robert G. Hetsler, Jr. on May 18, 2017 at 11:09am — No Comments

The Many Hats of the Qualified Intermediary

One role that is essential for a #1031 exchange is that of the Qualified Intermediary. This is the person who keeps you on track and fulfills an indispensable role to guide you away from violating the strict rules of the tax code.

The QI should be doing three key things for you throughout the 1031 exchange process.

Holds exchange funds

Since the investor cannot have actual or constructive receipt of sale proceeds from the relinquished property (or even…

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Added by Dr. Robert G. Hetsler, Jr. on May 17, 2017 at 6:48am — No Comments

​6 Empowering Financial Books To Read In 2017

Want to boost your finances this year?

Check out these books on money and investing and upgrade your financial situation…

1. The Tire Kicker

The Tire Kicker is Fuquan Bilal’s empowering book on how to beat the mind game and breakthrough to taking action. It’s a book you need if you want to get to the next level, and one you’ll want to keep, re-read, and share.

2. Turning Distress into Success

An introduction to becoming a…

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Added by Fuquan Bilal on May 15, 2017 at 11:02am — No Comments

Investor Basics: What is a TIC?

Tenancy in Common (TIC) is a way for two or more individuals to have an undivided fractional ownership interest in a single property. With a #TIC, each owner has individual rights and obligations related to the property. These rights equal the proportionate share of the owner’s interest.

Having an ownership interest in a TIC gives an #investor the right to his or her proportionate share of net income, tax benefits and appreciation. The TIC owner is treated similarly to a fee simple…

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Added by Dr. Robert G. Hetsler, Jr. on May 15, 2017 at 8:38am — No Comments

Do Your Due Diligence Before Investing in a TIC

Every investor wants to be certain that they are putting their money into solid investments, especially when it comes to complex real estate transactions. Due diligence – the analysis of the circumstances surrounding an investment – and full disclosure of all material facts is an essential component of the investment process. Especially when it comes to Tenancies in Common (#TIC) and Delaware Statutory Trusts (DST).

Every responsible investor should make sure they complete this very…

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Added by Dr. Robert G. Hetsler, Jr. on May 13, 2017 at 11:09am — No Comments

Why You Should Consider A Self-Storage Tenancy In Common Investment

Whether you’re new to the world of real estate investing or a veteran of buying and selling these type of properties, there’s a niche market you’ve likely never considered. The idea of a self-storage facility tenancy in common investment is a relatively new concept to many investors.

Why? Because traditionally, the lucrative nature of self-storage facilities coupled with their low overhead and maintenance responsibilities, makes these properties the type that investors don’t wish to…

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Added by Dr. Robert G. Hetsler, Jr. on May 11, 2017 at 7:55am — No Comments

Can You Exchange Your Primary Residence Via Section 1031?

I am often approached by homeowners lucky enough to have built up extensive appreciation in their primary home. Trying to avoid excessive capital gains taxes, they often want to explore the option of utilizing section #1031. They are often disappointed when I point out that the IRS code explicitly prohibits private residences from eligibility in Section 1031.

Do you have any options to avoid hefty capital gains taxes?

One option is, of course, to use the 250,000/500,000…

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Added by Dr. Robert G. Hetsler, Jr. on May 9, 2017 at 1:19pm — No Comments

Is This The Last Chance For Homeowners To Modify Loans?

Is the window of opportunity for homeowners to save their homes finally closing for good?

The market is changing and taking the housing market along with it. And banks and mortgage lenders are changing their attitudes for dealing with nonperforming borrowers. Help for distressed homeowners has been plentiful for a number of years, but there may be few lifelines left after the next few weeks.

Foreclosures

There are still thousands of homeowners in default…

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Added by Fuquan Bilal on May 8, 2017 at 11:50am — No Comments

How Long Should You Hold Investment Property Before Relinquishing It in a 1031 Exchange?

For all the codification that exists within IRS regulations, one area where Uncle Sam doesn’t provide explicit guidance has to do with holding relinquished property under section #1031. In fact, the tax code doesn’t provide any specific time requirements for holding property before you exchange it.

That being said, flipping property is a huge red flag to the IRS and will likely result in the rejection of your claimed exchange. This will, of course, result in immediate tax due on your…

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Added by Dr. Robert G. Hetsler, Jr. on May 4, 2017 at 10:10am — No Comments

Timing of Submitting Offers to Purchase in a 1031 Exchange

In many situations, an investor looking to take advantage of section #1031 on the sale and replacement of some investment property face a dilemma. They list their relinquished property for sale, but it doesn’t sell before they find the perfect replacement property.

I am regularly asked what to do in such a scenario. There are actually two options. The investor can submit an offer to purchase and delay closing until after the relinquished property is sold. As long as the closing on the…

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Added by Dr. Robert G. Hetsler, Jr. on May 3, 2017 at 10:58am — No Comments

The Basics of Tenancies in Common

A Tenancy in Common (TIC) is a way for two or more individuals to have an undivided fractional ownership interest in a single piece of real property. With a #TIC, each owner has individual rights and obligations related to the property. These rights equal the proportionate share of the owner’s interest. Tenancy in Common is a popular way for individuals with shared interests outside of property ownership to continue that relationship with their joint property ownership. It is also ideal for…

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Added by Dr. Robert G. Hetsler, Jr. on May 2, 2017 at 8:00am — No Comments

Commercial Real Estate Financing Could Hit New High In 2017

Analysts expect commercial real estate lending to set a new record in 2017. That could be great news for all investors.

The Mortgage Bankers Association estimates commercial mortgage loan originations will hit $515B in 2017. That trumps the previous high of $508B set in 2008. Trepp predicts that…

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Added by Fuquan Bilal on May 1, 2017 at 6:47pm — No Comments

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