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I hope all of you had calm, meaningful, holidays! Now we’re into the New Year! I don’t know what it will bring, in terms a real estate. I put my blogs into hibernation between Thanksgiving and the New Year and now I’m rarin’ to go!
I closed 2 listings and 1 sale in December, and have some Buyer clients in contract now. This is the busiest real estate holiday time I’ve seen in maybe decades! Those transactions are in the column to the right of this post.
Here’s a recap of what went on during the hibernation! Note that all these transactions are current as of 1-4-18 and that all categories (detached, condo, townhome, multifamily, commercial) are included.
Alameda Real Estate today
Not many tours happened during my hibernation, and nothing on tour this week.
While I’ve taken some time off, I’ve been going through my files. I wrote this back in March of 1989. I was pleasantly surprised! Please be aware…that the new tax laws have yet to be vetted, and this scenario may not work…but it does get one to think about alternatives!
IN THE MARKETPLACE (Apartment Owners New Magazine – Mar 1989)
Has your building spoken to you lately? Sure, it may be yelling at your to perform some maintenance, but have you heard the dollars sitting in it, screaming to be used? “Dead equity” is the untapped, unused portion of equity that could be realizing a better return for you, the owner.
Often we ignore dead equity because: 1. we don’t know how much there is 2. we don’t know how to get to it or 3. we don’t know how to use it. To discover dead equity takes time and expertise.
Here’s a sample of utilizing dead equity to great advantage. Mr. and Mrs. S had originally purchased a home in the town of Alameda for a principal residence. After several years, they elected to pull money out by refinancing it in order to buy a triplex and rented out the house. Now the house needed extensive work. They called on me to analyze their options. After discussions focusing what their financial goals and timelines were, a market analysis was done, including property inspections to understand the true condition of the house. If the work was done on the property it would demand a sizable cash outlay, months of vacancy, and questions about the exact return of the improvements. Due to appreciation, the amount of equity in the property even in its deteriorated condition gave the S’s some opportunities. Although they had never participated in an exchange or sold a rental before, the house was put up for sale, subject to the buyers’ participation in an IRC 1031 exchange, and subject to tenants rights.
A problem for the S’s was the high costs of units in their town. Leverage was important, but so was a positive cash flow, and appreciation. It was decided to trade into units within one hours’ drive of Alameda. The home was marketed to investor-contractors and owners with building skills. After negotiations, a price was agreed upon, the transaction closed with the proceeds placed into a trust account, while another triplex was purchased via a tax-deferred exchange.
The S’s had gone from owning one house with a negative cash flow to three units in good condition, with good tenants, and good location, and good signs of appreciation. Ultimately they increased their holdings from four units to six. They were able to take advantage of real estate tax losses allowed them by the IRS based on their incomes, increase their depreciation expense, reverse a negative cash flow into a good monthly positive flow.
In a market such as this, listen to your building! It may be telling you about more than just squeaky pipes! And apply this to all of your real estate holdings!
Okay! That’s a wrap! Call/em me if you have questions about our market!
During my holiday break, I attended an overview class about IRC 1031 Exchanges. And I have passed the CCIM (Certified Commercial Investment Member – the best of the best take these classes), many years ago: 5 classes (each 1 week) in various locations. I don’t have the designation because I didn’t have the body of work to support it (and still don’t)! And you definitely need legal and accounting advice before you step into such transactions.
Carry on! marilyn