REAL ESTATE JOURNAL
SUMMER 2024
2. How to Profit from Legislative Challenges in Real Estate Investing / Learn to Adapt and Thrive in Any Market Condition by Being Creative and Resourceful 3. NREIA Legislative Update 5. One Connection Away 6. Five 1031 Exchange Rules to Know
14. Recapturing Debt with Infinite Banking for Real Estate Investors 15. Property Protection Starts with the Crime-Free Addendum
Member Spotlight
Gary and Candy Parr
andy & Gary Parr are members of the Great Lakes REIA (GLREIA) in Cleveland, Ohio. Their primary focus is in the Cleveland/Akron area, where they have been lifetime residents. They have three grown children and will soon be grandparents. Their entire family is involved in the family real estate business. Their oldest, Ashley, went to Ursuline College and Cleveland State where her focus was Art & Business. Ashley is co-founder of a real estate brokerage in Florida (House Match). She specializes in inside sales and new agent training. She is also experienced in interior design and helps with designing & decorating the investment properties. Their middle son, Josh, went to the University of Akron and received his Bachelor’s and MBA degrees. While in school he purchased his first foreContinued on Page 10
Vol. 9 Issue 3
Revisiting the Fundamentals
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8. Maximize Profits by Scaling Your
By Jeffery S. Watson
I
was privileged to sit in a room at a REIA meeting with three legends in the residential real estate investing space. Each of these men has educated thousands of individuals on smart, savvy, safe, and effective ways to be residential real estate investors. Their presence made an important point: In an economy and real estate market that is going through a significant transformation, it’s important to go back to the fundamentals. Here are some basic things that are important for any real estate investor to remember.
1. You become like those with whom you frequently associate. Look at the people with whom you most frequently interact. Are they going where you’re going? Are they further ahead, or are they holding you back? To answer those questions, you must be clear in your own mind (and hopefully, you’ve put it in writing) as to where you are going.
What are your goals? What principles are shaping your career and business endeavors? If you aren’t clear on the answers to these questions, this is where you need to begin. This is where you escape the shiny-object phenomenon for clear, identifiable goals regarding what you want to do. Instead of saying, “I want
to be a real estate investor,” be specific and say, “I want to be a real estate investor who uses the BRRR method with a reasonable LTV,” or “I want to be a buyand-hold investor,” or “I want to be a fixand-flip investor taking ugly houses and making them assets in my community.” Once you have figured out the answers Continued on Page 12
Inherited Real Estate By David Gorenberg, JD, CES
W
e often get questions about what happens when Grandpa dies and his heirs inherit his investment real estate, including whether the heirs should sell the real estate as part of a 1031 exchange and whether there are other tax implications. This article will address many of these questions. Suppose Grandpa has investment real estate that he purchased for $200,000, with an adjusted basis of $100,000, and a current fair market value of $500,000. Certainly, Grandpa could sell this property as part of a 1031 exchange and continue to defer the capital gains taxes on his investment. If he were to sell it outright, without the benefit of a 1031 exchange, he would incur a depreciation recapture tax of 25%
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on the $100,000 of depreciation that he has taken, and a capital gains tax hit of 20% on the $300,000 of gain, costing him $85,000 in federal taxes. Depending on where Grandpa lives, there could also be state taxes to consider (as high as 13.3% in California). But if Grandpa were to die today, with the $500,000 fair market value, his heirs would inherit the property with a “step-up in basis.” The step-up in basis is a provision in the current federal tax law that allows heirs to inherit the property at the fair market value as of the date of death. In this case, the current basis of $100,000 is adjusted – or “stepped-up” – from the previous valuation to the $500,000 valuation as of Grandpa’s death. Thus, Grandpa has avoided the capital gains and depreciation recapture taxes. Continued on Page 8
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