We learned that the best way to acquire property is from inheritance. Much better than receiving it as a gift. When you inherit it, your cost basis is the current market value. If you receive the property as a gift you’re cost basis is the gift givers basis. Cost basis is used when calculating the capital gains tax due when you sell.
Another good method to acquire real property is by exchanging one property for another. With that, capital gains tax is deferred. Although the language is “like property for like property” it is a very vague term. You can sell vacant land and buy a single family home; you can sell a 10 unit building and purchase several single family homes. You can sell a single family home and purchase several condominiums. You cannot live in any of the properties for at least year. Please keep in mind that capital gains tax is deferred but not waived. But there is no limit on how many times you can perform a 1031 Tax Free Exchange.
We were told that Capital Gains tax will be increasing effective January 2013. If you are considering selling and not doing an exchange do it this year and save yourself a 4%.
Remember it is not what you earn it is what you keep and that leads us to the next speaker.
Michael McNair explained to us we have alternatives to the stock market investments for our Retirement Plans. It is called a Self-Directed IRA. With a self-directed Ira one can invest in Real Property, precious metals, deeds of trust and more. Most people using a self-directed IRA to purchase real estate pay all cash. By holding real estate in your IRA, the positive cash flow and appreciation when realized is tax free. That is important today as we learned that for the first time in maybe 20 years one can invest in Bay Area Real Estate and expect a positive cash flow with a 25% down payment. Not only are home prices at incredibly low prices, rents are incredibly high. That combination along with record low interest rates has created “The Perfect Storm”. Great cash flow and great potential appreciation for your Retirement years.
The Prudential agents told us some of the best returns to adding value is still curb appeal and that is to sell or rent. Entry doors, double paned windows and a deck addition added some of the best value. For other value added improvements please visit http://www.remodeling.hw.net/2010/costvsvalue/division/pacific/city/san-francisco--ca.aspx.
The Prudential team also said to limit your management time, screen your potential tenants well. Getting the right tenant can make you a lot of money and maintain your sanity.
Be Sure to attend our upcoming Speaker Series:
Thursday May 24: Estate Planning: How to Protect Your Real Estate Investments
Marc Weissman, ESQ., Weissman & WeissmansJoseph Galligan, CPA, Galligan, Thompson, & Flocas
Trust vs. Will s Transferring to Children
Move and Keep Your Property Tax Proposition 58, 60, & 90
Tax Consequences & Benefits
Thursday June 28: A Seller’s Market??? Home Selling 101: Preparing your Home Sale
Pricing to Achieve Maximum Values Costs Involved In Selling (What is my bottom line?)
Sell or Rents Moving Up? Moving Down? Cashing Out? How To Keep Your Tax Basis
Cost-Effective Upgrades (To Remodel or Not to Remodel)s Inspections and Appraisals
Marketing Your Property (Open House, Home Warranties, Internet, Staging)
Marketing Your Prop
For to register go to speakerseries@prucal.com
“It is Better To Own Real Estate and Wait than Wait To Own Real Estate”
www.LeeSellsMore.com
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