TOM CRONE'S Quick Information on Investment / Income Property Action November, 2006

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Happy Holidays!

After the first of the year, I would like to informally assemble as many recipients of this newsletter as possible in one room for an hour. I believe it is difficult to self-motivate and act on making investment decisions of any significance in uncharted waters. Getting together to talk about possibilities, perhaps even about collaborations, is what many successful real estate entrepreneurs do on a regular basis.

No suits, no ties, no PowerPoint presentations, no brochures, nothing to sign and no obligations - just a pow-wow of potentially like-minded folks. We might end up with more questions than answers. We might discover some people with common interests. We might decide with some finality one way or the other about considering this type of investment, period. In any event, we will have taken action.

"Achievement seems to be connected with action. Successful men and women keep moving. They make mistakes, but they don't quit."
Conrad Hilton

And, since it is the beginning of the year and a time for enterprise, one more quote I've liked from an author we've all enjoyed…

"Twenty years from now you will be more disappointed by the things you didn't do than by the ones you did do. So throw off the bowlines. Sail away from the safe harbor. Catch the trade winds in your sails. Explore. Dream. Discover."
Mark Twain

Make a mental reservation right now. Think, “Yes, I’d invest a couple of hours going to, being at, and coming back from this gathering.” If you do, then ask yourself if you’d rather do it as a lunch meeting or an after work (5:30-ish) one. Then, look into January and see if there are times you could make it.

NOW, take 30 seconds and CLICK THE REPLY BUTTON. Put "Meeting" in the subject line. Say YES or NO. If YES, what's best? If NO, and you have time conflicts, say so. Otherwise NO works. Not everyone is a group kind of person.

It would be nice to know how big a room we will need. So, I would appreciate a response. Thanks.

Now, onward…

Way back in March I suggested I would be adding an educational viewpoint to the newsletter. Educational and opportunity-oriented would make a nice combination, so I thought we'd consider the following:

Of course, this only works if you have a self-directed IRA, or can create one. If you are in this category, consider, "With the many advantages that non-traditional IRA investments enable - including greater control over investment options, tax favorable income and perhaps most importantly, the potential to count on higher returns with less risk than with stocks and bonds - they can be a highly valuable vehicle for investors of all levels."[Leveraging Your IRA to Capitalize on the Real Estate Market by Daniel Cordoba, CEA, Broker Agent News, Oct. 06]

It is possible to use the self-directed IRA like a checkbook, so people who want to buy, re-hab and re-sell see advantages to it. Many are forming IRA LLCs to garner tax benefits as good as or better than 1031 exchanges, especially since the 1031 requirements off finding and purchasing a like property in some specific time do not apply.

"The appreciation and cash flow that can result from purchasing investment real estate with an IRA provides industry professionals with a number of favorable tax benefits. Also, unlike with 1031 exchanges, there are no specific investment timelines or requirements to purchase "like kind" investments when buying real estate with an IRA. When the property is sold, the IRA prevents any capital gain exposure, since taxation of an IRA does not occur until distribution.

A Roth IRA provides even greater tax savings benefits, since it is tax-deferred while growing, and tax-free upon distribution (unlike with a traditional IRA, which is taxed at the time of distribution). In addition, a Roth IRA has no minimum distribution, so it is up to the investor, when (after 59 1/2), and how much he or she takes as a distribution. The Roth IRA may also be passed on to heirs without taxation." [ibid.]

Doing this requires expert advice from someone well versed and specialized in the use of IRAs and related tax matters. Your usual accountant or tax advisor may not be the person to do this.

Much more needs to be said about this, and you can go to this web site: My Real Estate IRA

I believe the "buyer's market" that seems to be emerging means the following:

1. Houses will be purchasable for less (supply and demand).
2. Skittish first time homebuyers will unwisely hold back on making purchases.
3. These same Nervous Nellies will give consideration to good Lease With Option to Buy programs, well-crafted Buy-Down programs (know what that is?), and might be your best renters if they don't want to purchase. (As renters, after a few years they could just become first-option buyers.)
4. Financing is going to stay competitive, even for investment properties.

It really appears this newly emerging market is an investment opportunity. History has shown us there are opportunities in every kind of market.

Tom Crone
The opinions expressed in this newsletter are solely those of Tom Crone and others being quoted and do not necessarily reflect the opinions of Coldwell Banker Burnet or its affiliates.