March 2023

  This is the fifth video in the series. In the first four, we identified real estate investment opportunities, we discussed the challenge of capital gains and depreciation, we talked about using 1031 exchanges to defer that depreciation. But is there a way to just eliminate those capital gains? A qualified opportunity zone. What is it? It’s essentially a designated geographic area, usually a low-income community, and it’s designated within the rules of the Tax Cuts and Jobs Act of 2017. It is designed to incentivize investment in areas that are underserved financially, that need economic development. There’s a whole debate as to how effective this has been, but that’s not the purpose of this video. If you invest a high capital gain rollover into a qualified opportunity zone and you hold it for five years, 10% of those capital gains that you invested on top of the gains in…

  In the last three videos we’ve talked about real estate investing, capital gains, depreciation, recapture, and how to defer those using 1031 exchanges. As we know, 1031 exchanges defer capital gains on real estate transactions, but sometimes they’re tricky. Today we’re going to talk about some advanced strategies to maximize the benefit of 1031 exchange. So, you want to do a 1031 exchange. You’ve got the property. You’ve sold it. But for whatever reason, maybe it’s a very rich real estate market, maybe there’s just a lack of inventory, you can’t identify in 45 days, or you can’t close in 180. That may be a financing issue. What are you going to do? Well, all is not lost. There’s actually a strategy called a Delaware Statutory Trust, a DST. It’s a very complex trust, but it’s okay, you’re not inventing it. There are alt investors, there are private investors,…

  With all the news of bank failures, just how fragile is the banking system today and what, if anything, can you do about it? If you’re one of my clients, you already know that interest rates, when they rise, cause bond values to fall. Long bonds fall a lot. This is why for the last two to three years, we have been putting our clients in short-term bonds to protect them from the ravages of the bond market in a rising interest rate environment. Somehow, to my great fascination and to the consternation of regulators, the Silicon Valley Bank, Signature Bank, First Republic Bank*, and probably more to come broke that most fundamental rule, and when loaded up with cash post-COVID because everybody got disbursements, they got bailout money, they got PPA money, they wanted to put that money somewhere and they decided that treasuries weren’t yielding enough, “We’ll…

  I’ve previously talked about investment real estate as an investment asset class. Of course, the challenge already identified is that when you sell investment real estate, you now must recapture depreciation and you’ll be also taxed on capital gains. Are there strategies to defer gains or maybe even eliminate them on the sale of your property? The short answer is yes. There are three primary strategies available. One is the 1031 exchange, the second is a qualified opportunity zone, and the third is the installment sale. Now, in the last video we talked about the simplest one – your personal residence. If you own a personal residence for more than a certain amount of time and lived in it two out of five years, the sale of that property, if you’re an individual, you can roll over $250,000 of capital gain, if you’re married, $500,000 of capital gain into…

  If you’re a real estate investor, of course one of the big bugaboos is real estate taxation – how do you maximize the tax benefit of your real estate investment? To an extent, almost all of us are real estate investors, even if we’re not thinking about it. As a homeowner you’re enjoying a mortgage interest deduction, probably, and a property tax deduction. There are limits, a $10,000 cap here, a million dollar mortgage there. But in essence, even a homeowner is getting some kind of tax break. And should you sell that house between $250,000 and $500,000 in capital gain can get rolled into a future house. All good reasons if you’re staying put, to consider real estate for your residence because it’s also an equity building tool. However real estate investors, in addition to these breaks, can depreciate the property and enjoy other much more sophisticated benefits….

Real estate as an investment asset class. What are the merits, what are the pitfalls and how do you avoid them? From the beginning of the century through the end of 2021, the FTSE NAREIT All Equity REITs Index gained 9.6% versus 7.7% for the S&P 500. It has been one of the best investment asset classes out there. Now, that’s not been as true since interest rates started climbing, but when this interest rate cycle is over, we can expect improved performance from real estate. Now that’s important. What I gave you were statistics for the entire real estate environment, and it does vary by sector. Office properties may not be the best properties to be invested in in this post-covid environment. For those of you who are interested in investing in real estate, you have a choice between physical real estate and what are called REITs, real estate…