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Archive for May, 2013

VIDEO: How to Take the Uncertainty Out of the Transition

Wednesday, May 29th, 2013

Brightwater Living is an independent senior living retirement community in the heart of Myrtle Beach. I met with Barbara Gans from Brightwater because there are so many questions on how the transition of moving from a home to a facility like Brightwater transpires.

According to Barbara, interested parties should look at as many independent living communities as possible. When you visit, there are many questions you should ask. We’ll look at three key ones. How do you like the community? Can you afford it and can you afford not to move to in? What about the “what ifs?”; what’s available if you need specialized care? Here’s a summary of the advice Barbara shared.

Question 1:  How does the community make you feel?

The best way you can figure this out is by experiencing the environment. You can do a tour, stay in a guest suite, participate in activities and enjoy meals there to see if you want to truly explore it. The best things you should look for you can’t taste and see. It all comes down to how the environment makes you feel. 

Question 2:  How much does it cost and can you afford it? 

Get all the facts and figures. To do so, ask lots of questions. Who owns the property? How long have they been in business? How are they licensed by the state? Ask for occupancy agreement templates to share with financial advisors, attorneys and family members. What are the home prices? What is the financial model? For example, there are many, such as life care, equity, and deed-based models so it’s very important to get all that clarified. Does the family have any liability when you leave the community? Make sure your salesperson is transparent. And, finally, ask for the complete cost analysis upfront. When you take into account all the services, you may be pleasantly surprised because it may be less than it is to maintain your own home.

Question 3:  What about the what-ifs?

What if you need a higher level of care? Be sure to ask about assisted living, memory care, skilled nursing, long-term care and physical therapy. What do these areas cost? Can you use long-term care insurance and how does Medicare factor in? Tour these areas, even if you don’t need those areas now. At Brightwater we offer a full continuum of care.  

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VIDEO: How to Use a 1031 Exchange to Save a Bundle When Buying Investments

Sunday, May 19th, 2013

If you’re a real estate investor or thinking of becoming one, then you can definitely take advantage of this law, and I recommend you do so.

Basically, the “1031” allows you to sell one property and buy another without incurring capital gains taxes.
You simply have to re-invest all your profits into the next property (or properties) within a specific timeline (described later).

However, the property must be “qualifying property.” This is property held for investment purposes or used in a taxpayer’s trade or business.

Investment property includes real estate, improved or unimproved, held for investment or income producing purposes.

Be aware that real estate must be replaced with like-kind real estate. This means that “like-kind replacement property” can be any improved or unimproved real estate held for income, investment or business use.

Here are some examples:
·    Improved real estate can be replaced with unimproved real estate and vice versa.
·    A 100% interest can be exchanged for an undivided percentage interest with multiple owners and vice-versa.
·    One property can be exchanged for two or more properties.
·    Two or more properties can be exchanged for one replacement property.
·    A duplex can be exchanged for a fourplex.
·    Investment property can be exchanged for business property and vice versa.

Be Aware: Your personal residence can’t be exchanged for income property, and income or investment property cannot be exchanged for a personal residence in you’ll reside!

What Are the Types of 1031 Tax Deferred Exchanges?

There are three types of 1031 tax deferred exchanges that can take place:

– Straight exchanges—two parties trade properties of equal or approximate value. This is the simplest exchange.

– Multi-party exchanges—this involves three or more parties buying, selling, or exchanging properties. Don’t attempt these exchanges without the aid of a tax professional; they tend to be very complex.

– Delayed exchanges—this exchange allows the sale of the relinquished property and the buying of the replacement property to occur at different times as long as stringent rules are followed. This is the exchange most often used.

What’s the Advantage of the 1031 in Terms of Taxes?

As the law’s title indicates, the capital gains tax is deferred, but not eliminated.

However deferral is a great way to leverage small real estate holdings into larger ones!

Since you can postpone gains, you’re able to use a tax-deferred exchange strategy to transfer equity to a larger property, all without paying taxes!

Another advantage is that there’s no limit on exchanges. This means you can make as many exchanges as you want!

So, over the course of your lifetime, you can keep growing income and appreciation by adding new properties without having to pay the capital gains tax!

If you specialize in buying and renovating properties and want to keep reinvesting your profits into larger properties, then this strategy is especially attractive.

Note: If you don’t keep reinvesting, you risk being classified as a real estate dealer by the IRS and will not be able to participate in exchanges.

What Are the Basic 1031 Qualification Rules?

There are some basic rules that must be followed in order to qualify for a 1031 exchange. These include the following:

·    The properties to be exchanged must be located in the United States. Note: You can exchange foreign property for foreign property and domestic for domestic. However, you can’t mix these exchanges together.
·    You must trade only like-kind real estate.
·    An exchange must be made that’s equal to or greater in both value and equity. Any cash or debt relief received above this amount is considered “boot” and is taxable.
·    The like-kind property must be identified within 45 days of the closing on the initial property.
·    All proceeds from the initial sale must be turned over to a “qualified intermediary” (also called a QI, facilitator, exchanger, etc.) who is the person or company playing the role of middleman.
·    Any of the proceeds not under the control of the middleman are subject to taxation.

The middleman holds the funds from the initial property in escrow until such time as the closing on the second property occurs.

The middleman also assists the owner with the preparation of paperwork and other services to ensure the transaction progresses in a smooth manner.

The closing on the second property must take place within 180 days following the close on the first property.

Wow, as you can tell, this is pretty complex subject and can’t completely covered here! But if you’re an investor or plan to be one, I hope I whetted your appetite for this subject. To learn more, contact me at insert link.

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