There is a new book out that is creating quite a buzz in real estate circles. Titled, "Real Estate Advantages," the book penned by CPA Sharon Lechter and attorney Garrett Sutton appeals to every reader. Organized into two sections, the first is about tax benefits of owning real estate. The second section focuses on legal strategies, with particularly well-rounded discussions of the best way to hold title to investment property, and why.
After I finish the book in the next few days, I'll discuss some of its best sections. But to start, it appears to do a very good job of explaining all of the benefits of tax depreciation, which many investors still don't entirely understand. Specifically, the book explains how depreciation is a paper loss or tax deduction, which does not require any out-of-pocket cash payment. And, how it saves tax dollars.
More to come . . .
Wednesday, December 27, 2006
Thursday, December 21, 2006
Investment Property: The Hedge Against Inflation
Inflation is on the rise, and investment real estate is the hedge against it. At my weekly Columbus Real Estate Exchangors (CREE) meeting this morning, we noted that the federal government is reporting wholesale prices surging in November by the largest amount in more than 30 years. So what does inflation have to do with real estate? Its simple. The key is property appreciation.
Property appreciation is truly "wealth forced upon the property owner."
A property gains in value about 2-5 percent annually without the owner doing any work. (Of course, if you make improvements your appreciation can be greater). With that, owners can pull money out through a re-finance, tax free, for use in any way they see fit. Remember, when you pull money out of an investment property you own, it is a tax-free loan that you never have to pay back. Your renters (office tenants, multifamily renters, industrial tenants, etc.) pay it back for you.
So for example, if a $100,000 investment appreciates $10,000 over a couple of years, you can pull out about 75 percent of that amount, or $7,500. Pay for kids' braces, college loan, trip, down payment on another investment property . . . whatever. All this helps insulate investors from the effects of inflation.
Inflation is actually a good thing for investment property owners. Inflation forces wealth upon them. But as one of my colleagues noted at the meeting this morning, you can't exploit this "hedge" if you don't own anything.
Property appreciation is truly "wealth forced upon the property owner."
A property gains in value about 2-5 percent annually without the owner doing any work. (Of course, if you make improvements your appreciation can be greater). With that, owners can pull money out through a re-finance, tax free, for use in any way they see fit. Remember, when you pull money out of an investment property you own, it is a tax-free loan that you never have to pay back. Your renters (office tenants, multifamily renters, industrial tenants, etc.) pay it back for you.
So for example, if a $100,000 investment appreciates $10,000 over a couple of years, you can pull out about 75 percent of that amount, or $7,500. Pay for kids' braces, college loan, trip, down payment on another investment property . . . whatever. All this helps insulate investors from the effects of inflation.
Inflation is actually a good thing for investment property owners. Inflation forces wealth upon them. But as one of my colleagues noted at the meeting this morning, you can't exploit this "hedge" if you don't own anything.
Monday, December 18, 2006
See our Ad in 'Buy, Lease, Build'
We've got an ad in the latest issue of "Buy, Lease, Build" magazine (Ohio edition) promoting Prudential CRES and properties for all investor levels. Business opportunities, multi-family, c-stores/gas stations, offices and more. Check it out!
Even The Big Boys Admit "Broken" Properties Provide Most Opportunity
If the big boys are doing it, so can anyone with some common sense and a good management plan.
TMG Ventures chairman and CEO Michael Covarrubias recently characterized his firm's approach to development. Interviewed by Real Estate Media Group during the inaugural RealShare San Francisco gathering to chat about the things that set his Oregon-based investment firm from the others, Covarrubias kept repeating his organization's penchant for "taking looser assets and converting them to winners." That is key to TMG, which has acquired or built a respectable 18 million square feet of commercial space--totaling $3 billion--since Covarrubias took control. Here is what he said about finding properties that need better management and some fixes, and how they are the real money makers...
"There is so much money chasing real estate and it's looking for different ways to arbitrage. Our arbitrage is to find broken assets or assets that need significant fixing, let's say an office that needs a seismic upgrade. For us the niche is value-add. That's why we'll always be different."
Covarrubias also talked of how they plan to jump into multi-family investment and the opportunities it such properties present..... "We've done condo projects, but we just got a $100-million equity investment from CalPers with which we'll be able to do $400 million of residential projects. We'll keep looking for broken deals. But with the money from CalPers, we now have a housing strategy with a long vista. I'd love to find some broken residential deals."
Like I said, if the big boys are doing it, so can anyone with some common sense. And it does not take a $100 million investment to get cash-on-cash returns of eight, 10 or even 12 percent.
TMG Ventures chairman and CEO Michael Covarrubias recently characterized his firm's approach to development. Interviewed by Real Estate Media Group during the inaugural RealShare San Francisco gathering to chat about the things that set his Oregon-based investment firm from the others, Covarrubias kept repeating his organization's penchant for "taking looser assets and converting them to winners." That is key to TMG, which has acquired or built a respectable 18 million square feet of commercial space--totaling $3 billion--since Covarrubias took control. Here is what he said about finding properties that need better management and some fixes, and how they are the real money makers...
"There is so much money chasing real estate and it's looking for different ways to arbitrage. Our arbitrage is to find broken assets or assets that need significant fixing, let's say an office that needs a seismic upgrade. For us the niche is value-add. That's why we'll always be different."
Covarrubias also talked of how they plan to jump into multi-family investment and the opportunities it such properties present..... "We've done condo projects, but we just got a $100-million equity investment from CalPers with which we'll be able to do $400 million of residential projects. We'll keep looking for broken deals. But with the money from CalPers, we now have a housing strategy with a long vista. I'd love to find some broken residential deals."
Like I said, if the big boys are doing it, so can anyone with some common sense. And it does not take a $100 million investment to get cash-on-cash returns of eight, 10 or even 12 percent.
Venison in the Freezer
Success this past weekend in Knox County, Ohio. Tom N., Jamie, Tom P., Pete . . .we hit an 80% return this season. Thanks for your support, gentlemen!
Huge Tax Abatements To Spur Further Growth at Rickenbacker Port
The Columbus Regional Airport Authority and Franklin County are creating a community-reinvestment area for a 160-acre strip of land near Canal and Vause roads near Rickenbacker Airport. Developers will be eligible for abatements on all of the real property they build for up to 15 years. The end result will be better lease terms for tenants. Long term, 20,000 jobs are expected to be created in the next 20 years in the Rickenbacker area as warehouses and new manufacturing pops up. County officials say the new reinvestment area will be in addition to one that’s about to be extended for 20 years. It includes nearby land in Franklin County owned by the port authority. Together, the these so-called CRAs cover about a quarter of Rickenbacker Global Logistics Park, an industrial area near the airport being developed by the airport authority, Duke Realty Inc. and Capitol Square Ltd. The new CRA covers about 160 acres near Canal Road that contains mostly single-family homes. The authority expects to close in early January on these properties, which it will add to the logistics park portfolio. Robin Holderman, vice president of real estate for the airport authority, said that the average cost per acre was $57,000. According to the Columbus Dispaptch, the Ohio Department of Development must approve the CRA, which the county expects soon. A key benefit is direct access for tenants to the Norfolk Southern rail line that borders the western edge of the Canal-Vause property. There was some opposition. Hamilton Local School District officials had to agree to it, and two incentives made it work. The authority agreed to buy Hamilton South Elementary School at Shook Road and Rt. 317 for $1.1 million. The school is expected to close in August. Also, the authority is expanding a current pre-annexation agreement that covers land it owns at the rail campus to include the Canal-Vause tract. It will reimburse the school district for property-tax benefits it loses when the houses are acquired. That’s necessary because the airport authority is a nonprofit organization and is exempt from paying property tax. Land prices in the area have been driven up by the development, and expected expansion of free trade zones. Many warehouses built in the past 24 months are still empty, but may be full in the coming months with these new moves.
Thursday, December 14, 2006
REMINDER: New Ohio Law Requiring Registration by All Rental Property Owners
Just a quick reminder that a new law that went into effect Sept. 28, 2006, in Ohio requires all rental property owners to register their contact information with the County Auditor in which the property is located. It's passage was supported by the Ohio Association of REALTORS®, the Columbus Apartment Association (CAA), and the Ohio Apartment Association (OAA).
The main objective of the Ohio House Bill 294, titled "Expedited Tax Foreclosure of Abandoned Land," was to permit certain foreclosure cases to be filed with the county board of revision now, instead of going through the judicial process. It further authorized the county treasurer or a certificate holder to compile a list of abandoned parcels of land suitable for disposition under the act's expedited foreclosure procedures. Often this is a result of delinquent real estate taxes.
The rationale of the legislation is to speed up the foreclosure process of abandoned and blighted rental properties in Ohio's larger cities and counties. In addition, the bill establishes an appeal procedure for challenging determinations of eligibility for the 10% "rollback" exemption from real property taxes. Though all properties are recorded with the auditor's office, there was a perception that bad situations can be averted if the name of a contact person, rather than just the owner, is available, especially for cases where the property has been neglected or the owner has failed to pay taxes in a timely manner.
For a copy of the proper form, contact your Ohio County Auditor. Here is a link to the overview letter sent by the Franklin County, Ohio Auditor's Office. The form is identical for all of Ohio's 88 counties. Go to: http://209.190.122.34/proprent/
The main objective of the Ohio House Bill 294, titled "Expedited Tax Foreclosure of Abandoned Land," was to permit certain foreclosure cases to be filed with the county board of revision now, instead of going through the judicial process. It further authorized the county treasurer or a certificate holder to compile a list of abandoned parcels of land suitable for disposition under the act's expedited foreclosure procedures. Often this is a result of delinquent real estate taxes.
The rationale of the legislation is to speed up the foreclosure process of abandoned and blighted rental properties in Ohio's larger cities and counties. In addition, the bill establishes an appeal procedure for challenging determinations of eligibility for the 10% "rollback" exemption from real property taxes. Though all properties are recorded with the auditor's office, there was a perception that bad situations can be averted if the name of a contact person, rather than just the owner, is available, especially for cases where the property has been neglected or the owner has failed to pay taxes in a timely manner.
For a copy of the proper form, contact your Ohio County Auditor. Here is a link to the overview letter sent by the Franklin County, Ohio Auditor's Office. The form is identical for all of Ohio's 88 counties. Go to: http://209.190.122.34/proprent/
Subscribe to:
Posts (Atom)