Two Cash Flow Enhancement Strategies

There are two excellent Cash Flow Enhancement Strategies that I recommend to owners of business or investment properties.  Please do yourself a favor and consider them both:

Strategy #1 - When you sell the property

If there were a way to re-invest all (or some) of the sale proceeds and owe no taxes (or less taxes) - more money when you sell, then you’d probably want to know about it.  There is, of course – with the “1031 like-kind tax deferred^† exchange” you can let the government’s money grow with your own (it’s like gambling with the house’s money).  I manage a 1031 exchange company (an IRS Qualified Intermediary) and even wrote an E-Book on the subject.  And I suggest you check out: Intro to 1031, 1031 E-Book and Start a 1031.

†And please let me show you how to defer the tax indefinitely.

Strategy #2.  While you own the property

If there were a way to take your depreciation write-offs sooner rather than later (while your tax dollars are more valuable) without penalty - more cash-flow sooner, you’d probably want to know about that too.  There is - you could get extra tax savings of as much as 10% of your building's cost during your first five years of ownership (that's $100,000 for a Million dollar building - real extra cash if you pay taxes) when you "reclassify" your building's depreciable "components" into their useful life “categories” (with 5-year, 7-year, 15-year, and 27.5, 31.5 and/or 39-year “lives”).  It's called "cost segregation" and IRS Audit Guidelines seek a "quality cost segregation study and report” prepared by experts knowledgeable in both construction engineering and tax law property classifications.  I represent a company that has successfully produced thousands of IRS approved engineered cost segregation studies nationally (for a fraction of what you and your accountant probably expect it would cost).  Take a look at some incredible but realistic cost segregation examples: Bank, Hotel, Medical Facility, Office Building, Restaurant, Retail Store, Self Storage, Auto Dealership and Apartment Complex.

There's a modest cost for a study (like paying a dime to get a dollar) but it will cost you nothing for an estimate of the extra savings you can get for your building if you will just get me a copy of your depreciation schedule (it need not identify you and will be held in strict confidence) - see for free how much money you are leaving on the table and learn the cost to get it (there is no obligation and I can probably get it to you in a day).  Then you can take that estimate to your CPA and decide how to proceed.

Your accountant may remind you that with this Strategy #2 you would have to pay tax on the recapture when you sell the property but you can avoid that by Strategy #1 - a 1031 exchange...

Would you like to get extra cash flow from tax savings of from 7% to 10% of the cost of your commercial building during your first five years of ownership?  That's an additional $70,000 to $100,000 for a $1M building in today's money when you need it most!  Cost segregation is your answer.

Every commercial property owner can save tax dollars by using these cash flow strategies.

They say that about 75% of individuals who pay mortgage interest on their homes fail to take the IRS allowed deduction.  My experience is that most investors first learn about 1031 exchanges after it is too late and that very few are aware of the advantages of cost segregation depreciation, although IRS guidelines recommend it.  That is both unfortunate and avoidable!  Please don’t include yourself in those statistics.  Let me show you better strategies.

Bob Calongne, Broker / Attorney
Director, KW Commercial division
Keller Williams Capital Properties
Washington, DC
Bob@CommercialREConnection.com
http://CommercialREConnection.com

Which type of real estate would be a great investment now?

Let's see, interest rates have never been lower...EVER.  The experts predict that residential rentals will increase in epic proportion to drive up rental rates.  And sale prices for multifamily investment property (the very places where all those renters will live) is climbing from the cellar.

So, do you get the picture?

Perhaps the commercial real estate market may still be "soft" for office space, industrial, retail and even land but all indications are that now is the time to buy multifamily investment property because its value should skyrocket...just like commercial property did in the late 1980's.  Did you miss that opportunity then?

Well it's probably a good idea that you "catch the wave" this time.

So give us a call - your commercial real estate connection.


Bob Calongne, Broker / Attorney
Director, KW Commercial division
Keller Williams Capital Properties
Washington, DC
Bob@CommercialREConnection.com
http://CommercialREConnection.com

Why should you invest in real estate?

Perhaps you've been bombarded by media promotions urging you to invest in certain financial products and services but it's interesting that they rarely suggest that you invest in real estate.  Maybe that's not so surprising since "better investments" will automatically attract the capital with less promotional effort.  "Programming" aside, you would probably want to weigh your options and consider some real estate investment factors that can give you more bang for your bucks.

Appreciation on resale:  The real estate market is rebounding, prices are rising and "days on market" are declining.  The real property future is promising while most other investments are still a "crap shot".

Income potential:  Rents are firming up as the rental population booms.  Dividends?  Hmmm.

Tax benefits:  Sure there are some tax-free bonds to be had.  But depreciation on investment property means tax deductions without any cash outlay resulting in more cash for you.  And with a 1031 exchange you could avoid all the tax on your investment gains.

Improvements can be made to add value to the investment:  Try applying a bucket of paint to your Americatrade account.

Long-term financing:  You could buy stock on the margin but you won't get a 30-year loan with a 25% down payment.  Do the math - real estate means better leverage.

Use the investment:  Live in or run your business from your real estate investment.  You could even spend a couple of weeks in your investment rental home at the beach - run over there for the weekend to change the light bulbs.

Permanence:  I guess there's a chance your building could fall into a huge sink hole but you are not likely to misplace your rental property.

So take another look before you buy that stock.  Today's real estate market literally abounds in opportunity.

Bob Calongne, Broker / Attorney
Director, KW Commercial division
Keller Williams Capital Properties
Washington, DC
Bob@CommercialREConnection.com
http://CommercialREConnection.com

When will you invest in real estate?

When interest rates are low?  They have never been lower in history and certainly cannot drop to zero.

When the economy turns around?  Last year economists were concerned of the second phase of a "double-dip" recession but now virtually none of them expect that, even if the economy of Greece crashes.  One even said the Greek economy was like a beautiful woman with an ugly boyfriend - if he were to abandon her, there were many willing to take his place.  He opined that Germany was poised to take over the Greek market.

When the banks are lending?  The Federal Reserve recently reported a huge surplus in the money supply...

...so the banks that feigned making loans last year are now really doing so.

When the government cuts the deficit?  During a debate Rick Perry forgot one of the three federal departments he would eliminate.  I have news for you - if you eliminated all of them it would not make a dent in the deficit.  All the money that was printed was necessary to prevent a depression and to stimulate the economic growth that continues to steadily improve.  Inflation is certain to occur but the Fed announced that it would hold the low interest rates despite the inflation.

So is it likely that the value of your investments will crash?  Just the opposite - the fear of the falling knife has been averted.

Are you waiting for the upcoming presidential election?  Well, you tell me - like it or not, is the outcome of the election even really in doubt?

Please let me know of anyone interested in buying selling or leasing real estate for investment purposes and any real estate professionals interested in a rewarding career with the nation's largest commercial real estate marketing organization.

Bob Calongne, Broker / Attorney
Director, KW Commercial division
Keller Williams Capital Properties
Washington, DC
Bob@CommercialREConnection.com
http://CommercialREConnection.com