"Remember the difference between a boss and a leader; a boss says "Go!" - a leader says "Let's go!""E. M. Kelly
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Do You Need an Offshore Bank Account
When you think of offshore bank accounts do you see shady characters carrying around bags full of money? Today's modern bank legislation does not allow banks to accept cash deposits or transfers of US$ 10.000 and up without presenting proof of the source ...
Real Estate Auction Action - Buying A Home At Auction
Due in part to the popularity of the U. S. Department of Housing and Urban Development (HUD)'s home auction program, more potential homebuyers than ever are buying homes at auction. Homes for auction aren't limited to just HUD, however. Many government ...
Understanding And Improving Your Credit Rating
No man's credit is as good as his money." E.W. Howe, Americanjournalist, novelist 1853-1937The American economy is based on credit. If you don't have atleast an average credit rating, you will find that gettingapproved for any type of loan, or credit ...
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The goal of every real estate investor is to see their property appreciate in value and to have it generate a positive cash flow. The appreciation normally takes care of itself if the property is of good quality, in a good location, and is held over a long enough period of time. Just like the stock market, real estate has proven to go up way more than it goes down over time.
The positive cash flow component is not always a given though. Ask any seasoned investor, and unless the property is owned free and clear, there have probably been times when he's had to dip into his own pocket to pay for some aspect of his rental. Who hasn't seen a raise in homeowner's fees, property taxes, an outlay of cash for a new roof, plumbing, paint, carpet, appliances, or a length of time supporting it between tenants.
So, what if you're nearing retirement age and see the need for increased and steady income? You may even look forward to taking a permanent break from the "joys" of hands-on property management. We all deserve to reap the rewards of our labors, right?
Basically, to meet these goals, one can do one of two things.
1. Sell the property, pay all the capital gains taxes, recaptured depreciation, etc. and pocket what is left. To receive an income, one would have to either live off whatever interest/gains your proceeds produced, or begin depleting your funds to provide you with the amount of monthly income you deem necessary. Depending on your age and financial needs and whether or not you desire to leave as large a legacy as possible, this approach may or may not work for you.
2. Employ a strategy that will defer the payment of any tax or depreciation. Let all of your gains continue to work for you throughout the course of your retirement and into the next generation. Yet, you will still get a significant and partially tax deductible monthly income.
What strategy is #2? If your property is over a million and you are not a young retiree, you might consider a Private Annuity Trust. You will get monthly income for the rest of your life, but you will be depleting your asset and only spreading out the repayment of capital gains tax over a longer period of time. That is a simplification of a complex agreement, but that is the gist.
A better option may be a 1031 exchange into a tenant in common (TIC), Basically, you exchange your property for a deeded partial interest in a grade A commercial property. You sign a contract with a property management company, and in turn receive a monthly income (typically 6-7% of your total equity). You never have to deplete your asset, and it can pass to your heirs at the stepped up basis.
The 1031/TIC exchange is a fairly new concept, sanctioned by the IRS in 2002. It is projected that the influx of property assets into this type of exchange will be close to 5 Billion dollars in 2005. That's a lot of equity. Why not let your equity continue to work for you instead of parting with a lot of profits that would take you years to replace.
About the author:
How much would you pay to save thousands in Capital Gains Tax? Paula will share the secrets in a free Teleconference . Sign up now at http://www.savegainstax.com
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Italy PM Monti defends tax authorities as protests mountReutersROME (Reuters) - Italian Prime Minister Mario Monti faced protests and catcalls on Saturday as he defended tax authorities against attacks fuelled by his government's unpopular austerity measures. Monti's speech to a passing-out parade of new officers ... |
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