Thursday, November 16, 2006

CREE Meeting

My business partner, Bob Deis, gave a talk preceeding our weekly CREE (Columbus Real Estate Exchangors) meeting in east Columbus this morning on capital rate of return. We had a packed house, but I think there were other reasons (like breakfast being served?). This rates of return discussion is often not understood by residential agents who dabble in commercial brokerage. With home sales slipping it seems a lot of residential folks are trying to pick up commercial accounts. This is frustrating when you're in a deal and having to explain to the residential agent who is on the other side how it all works. Trust ain't like selling a house, and at the risk of offending some residential agents, they aren't doing their clients any favors when they do not understand all the ins and outs and positive tax implications of an investment transaction.

Anyway, CREE is an organization of commercial/investment agents and brokers who specialize in real estate "exchanges." These are IRS 1031 tax-deferred exchanges, that enable the seller to indefinitely defer paying taxes on capital gains. We have weekly meetings to tell each other about properties we have listed, or properties we are looking for for our clients who want to buy. We don't just "pitch" properties to each other to see if someone is interested. We brainstorm and problem-solve to help each other sell listings. You see, I might have the third or fourth leg of multi-leg transaction, and be able to help the selling agent with one property put together the puzzle for the benefit of all our clients. A question about capitalization rates from a few weeks ago led broker Furman Tinon to discuss the issue at last week's meeting. Which led to more questions on overall rates of return. Bob stepped up to discuss cash-on-cash returns, after-tax returns, etc., which is what he and I deal in virtually every day with our clients. Something for everyone this morning. Heard about homes in the country, development land in and out of Columbus, investment rentals, a large restaurant near Cincinnati that might be perfect for an outdoors store or conversion to offices, folks looking for apartment complexes, and more. To the good for one of my clients, I learned about four new-build rental homes for sale at the resort area of Indian Lake, 90 minutes northwest of Columbus. I've got a client who is coming out of the sale of a duplex in the Ohio State University area and this might work for him in an exchange as he and his partners exploit the tax advantages of moving to ever-larger investment properties.

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