Opportunity Costs and the 1031 Exchange option

Opportunity Costs: The unexpected costs of property ownership!

You've done quite well with your property...perhaps now is the time to cash in your midsize property for a larger one. Holding on to a property can actually limit your ability to go after a bigger property.

The occupancy is high, the debt service is low, maintenance is stable...did you know there's an opportunity costs associated with owning an apartment property?

There’s a phenomenal tax incentive available in a 1031 Exchange, which allows you to take the gain from the sale of a property and roll it over, tax-deferred, into another property.

When you sell the property, the original deferred gain, plus any additional gain since the purchase of the replacement, is subject to tax. Unless, that is, you opt to roll-over that gain into another like-kind property.

One way to avoid premature receipt of cash or other proceeds is to use a qualified intermediary or other exchange facilitator to hold those proceeds until the exchange is complete. Be careful! You, nor anyone who has worked for you (attorney, broker, etc) in these capacities (for the past 3 years), can act as your facilitator!

“Whenever you sell business or investment property and you have a gain, you generally have to pay tax on the gain at the time of sale. IRC Section 1031 provides an exception and allows you to postpone paying tax on the gain if you reinvest the proceeds in similar property as part of a qualifying like-kind exchange. Gain deferred in a like-kind exchange under IRC Section 1031 is tax-deferred, but it is not tax-free." (Source: IRS.gov FS-2008-18, February 2008)

Investing in Real Estate Tip - Leverage

I believe that people have an innate desire to own something solid and substantial that they can actually touch.[.1] Real estate is great for this type of investor.[.2] It is one of a small group of investments where an investor has the potential to impact the profitability through good management, hard work and smart negotiating. As you look at all of the types of real estate available for investment, I believe that Multi-Tenant investment real estate deserves a special look. It has the unique ability of allowing you to leverage a group of tenants with a single transaction. A single apartment complex may contain from as few as 4 units to several hundred apartments. Each one can be purchased with a single contract and is treated as a single transaction.

Leverage, as a term used in real estate investment or in fact any investment, allows you to multiply the return on the money that you have invested to get even greater returns. "Give me a lever and a place to put it, and I can move the world". [.3] A great quote! This is truly the power of using leverage in real estate. You can invest a small amount of capital (say 20% of the total purchase price) and see huge effective returns on that capital on an annual basis. This is what we are talking about when we talk about leverage in a real estate transaction.[see my video below!]

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[.1] There is plenty of competition, be ahead of others by having a good relationship with your local bank and an experienced realtor.

[.2] There are no "no risk" investments, even if you can touch this. Make sure you've done your homework.
[.3]Archimedes of Syracuse

The New SheehyTeam Website Is Now UP!

Today is a special day as we launch our website, filled helpful helpful Multi-Tenant Investment Information as well as our "Scouting Report". The Property Scouting Report, is the middle tab at the top. This Report is a based on McLennan County tax information and some general property analysis based on that tax information.

We encourage you to browse and enjoy! And at anytime, contact us when you are ready to invest!

Upcoming Good News: Andy is putting the final touches an a new book that we'll be mailing to Multi-Tenant owners in McLennan County and will soon be posted on our website. So stay tuned!