The 1031 Exchange BlogThe 1031 Exchange Bloghttp://www.1031exchangeinstitute.org/1031-exchange-blog/2012-02-13T06:17:04ZSquarespaceIncome Tax Incentives on Renewable Energy Investmentshttp://www.1031exchangeinstitute.org/1031-exchange-blog/income-tax-incentives-on-renewable-energy-investments.htmlStaff2012-02-02T20:33:05Z2012-02-02T20:33:05ZThere are significant income tax incentives or benefits that were created for taxpayers/investors in the American Recovery and Reinvestment Act ("ARRA").  ARRA was also extended by the 2010 Tax Act to December 31, 2011 and is widely expected to be extended again for 2012.  

Some of the income tax incentives available include:

  • 100% Bonus Depreciation, if placed in service prior to December 31, 2011; 
  • MACRS Depreciation; 
  • Production Tax Credits ("PTC"); 
  • Electricity sold to third parties; 
  • Investment Tax Credit ("ITC") equal to 30% of the cost basis (amount paid for the asset) which is available only if the owner foregoes the PTC;
  • Direct Treasury Department grants under Section 1603, equal to the 30% investment tax credit.

Bonus Depreciation

Bonus Depreciation is a first year income tax deduction that is equal to 100% of the tax cost basis in the completed project.  There is no one-half year or mid-quarter year convention applicable and the Bonus Depreciation is not reduced for a short income tax year. 

Bonus Depreciation applies to completed projects placed in service betwen September 9, 2010 and December 31, 2011.  It is widely anticipated that ARRA will be extended again through December 31, 2012, so check with your tax advisor to determine if ARRA has in fact been extended.  

The investor/owner of the project or the partners of pass-through entities can take advantage of the Bonus Depreciation deductions.  Lessors can claim Bonus Depreciation if their sale/leaseback transaction occurs within three months of the original date that the completed project was placed in service.

MACRS Depreciation

Property that is generally not eligible for Bonus Depreciation can take advantage of a five-year MACRS income tax deduction for domestic renewable energy properties.  MACRS depreciation uses the double declining balance ("DDB") depreciation method with a half-year convention.  Investors may forego both Bonus Depreciation and MACRS depreciation and elect the alternative depreciation system if they so choose.  This would mean 12-year straight line depreciation for most Renewable Energy Investments.

Production Tax Credit ("PTC") 

The Production Tax Credit or "PTC" is a credit based on the sale of energy to third parties.  The credit is paid for electricity produced by qualified facilities and sold to unrelated parties during the first five or ten years of the production facility's operation, depending on the resource. 

The credit starts at 1.51 cents per kilowatt, adjusted for inflation.  It is generally only available to the investor who is also the owner and operator of the production facility.  Leasing is allowed only for open loop biomass and certain closed loop biomass expansions. 

Qualifying energy resources include the following:  (1) wind; (2) close loop biomass; (3) open loop biomass; (4) geothermal; (5) solar; (6) landfill gas; (7) municipal solid waste; (8) qualified hydropower; (9) marine and hydro kinetic. 

The required placed in service date is 2012 for wind and 2013 for most other property. 

Investment Tax Credit ("ITC") 

The Investment Tax Credit or "ITC" is a credit equal to 30% of the investment available to the tax owner who is the original user.  The lessor is treated as the original user if the sale/leaseback occurs within three months of the original use.  ITC may be passed through to the lessee.  The credit is 30% of the cost of qualifying property which must be tangible personal property or other tangible property used as an integral part of a facility but does not include buildings or structural components.  The basis of the property is reduced by 50% of the credit or 15%.  The credit carries back when year end carries forward 20 years.  The project must be domestic and may not be used by governmental, 501(c) entities or foreign persons.  Generally, the property must be placed in service before January 1, 2013 for wind projects or January 1, 2014 for other projects.

Direct Grants

The Department of the Treasury provides a 30% grant in lieu of a 30% investment tax credit available for property placed in service before 2013 for wind, or 2014 for other renewables.  Construction must commence no later than December 31, 2011, unless extended again.  Grant applications must be received before October 1, 2011.  The depreciable cost basis is reduced by 50% of the grant or 15%.  The grant is not included in taxable income. 

Both the ITC and grants are subject to recapture. If the facility ceases to operate, or is sold or exchanged within five (5) years of the date that the facility was placed in service.  100% is subject to recapture if the disposition occurs in the first year of the facility's operation, 80% in the second year, 60% in the third year, 40% in the fourth year and 20% in the fifth year.  Recapture is treated by a reduction in the partner’s interest in the profits derived from the facility if it falls below two-thirds of what that interest was when the facility was placed in service.  

]]>1031 Exchanges Remain California FTB Audit Targethttp://www.1031exchangeinstitute.org/1031-exchange-blog/1031-exchanges-remain-california-ftb-audit-target.htmlStaff2012-01-27T20:08:15Z2012-01-27T20:08:15Z
Section 1031 Tax Deferred Exchanges (commonly referred to as 1031 Exchanges, Tax Deferred Exchanges or Like Kind Exchanges) continue to be one of the California Franchise Tax Board's ("California FTB") top audit concerns as announced by the California FTB in its January 2012 issue of Tax News.

The California FTB provided further guidance regarding the top audit findings involving 1031 Exchange transactions, which included:
  • Capital gains not being properly recognized and taxed in the State of California when the non-California replacement property acquired as part of the 1031 Exchange is ultimately sold; 
  • Taxpayer fails to report other property (boot) received in the 1031 Exchange;
  • Taxpayer does not meet identification or other technical requirements of the 1031 Exchange;
  • Relinquished and/or replacement property are not held for investment or for productive use in a trade or business (i.e., property is used for personal purposes or is held primarily for sale); and
  • The taxpayer who transfers relinquished property is a different taxpayer than the party who acquires replacement property (see article on Is Your LLC Really a Single Member LLC?).  

Non-California Replacement Property Acquired in 1031 Exchange  

The majority of the audit issues mentioned above are certainly not surprising.  1031 Exchanges are complex tax-deferred transactions and can be very confusing to deal with.  However, investors should take careful note of the first audit concern mentioned.  
California has always taken the position that investors owe capital gain taxes to California when they sell non-California property that was acquired as part of a prior 1031 Exchange starting with the sale of California property.  In other words, you can not sell California real estate and acquire non-California real estate through a tax-deferred exchange in order to avoid California capital gain taxes.  
]]>1031 Exchange Activity Updatehttp://www.1031exchangeinstitute.org/1031-exchange-blog/1031-exchange-activity-update.htmlStaff2011-12-30T15:31:22Z2011-12-30T15:31:22ZFirst, I want to wish each and everyone of you a very happy, healthy and prosperous New Year.  I don't know about you, but I am so very ready to say goodbye to 2011 and welcome 2012 with open arms.  It has certainly been a challenging few years. 

Having said that, I thought that I would end the year with a quick update on how we see the 1031 Exchange market place.  So, I will leave you and 2011 with some observations in terms of 1031 Exchange activity and trends:

  • 1031 Exchange transaction activity (volume) for 2011 was up by more than 250% compared to the transaction activity for 2010.
  • 1031 Exchange transaction cash balances (equity) for 2011 was up by more than 400% compared to the transaction cash balances for 2010.
  • The 1031 Exchange transaction pipeline going into 2012 continues to show increased momentum, and we anticipate a 400% increase in 1031 Exchange transaction activity in 2012 over 2011. 

]]>Six quick tips for Obamahttp://www.1031exchangeinstitute.org/1031-exchange-blog/six-quick-tips-for-obama.htmlStaff2011-09-13T15:41:46Z2011-09-13T15:41:46ZDear Mr. Obama,

I was a little disappointed when I never received a reply from the letter (Dear President Obama: I Think You Have A Problem) I wrote you last year, but I think I’ll try again. It is fairly obvious that the economy has stalled out and that nobody is doing anything creative to get us back into a more positive position.

Although you no doubt have been barraged with brilliant suggestions from your highly educated team of gurus, I have a few more that could help put back to work the 14 million Americans who are out of work and many more who are underemployed. After all, that is a lot of folks who could be paying taxes and buying goods. Some of those goods may even be made in the U.S.

Let me offer six suggestions for your consideration:

  • We need several hundred thousand more affordable rental units in this nation. As the Feds pay less than 2.0 percent for its money, it would make sense to fund 500,000 new affordable rental units all around the nation. Typically, each new unit would directly create 1.5-2.0 person years of work. With the construction industry multiplier of more than 2.0, a half million new affordable rental units would create more than 1.5 million jobs over the next two years. The good news is that there are more than 500,000 units designed and ready to go. No downtime. And millions of American households stand by to rent those units.
  • Add $1 per gallon to vehicular gas taxes. After all, we have the lowest gas taxes of any place in the industrialized world. Allocate it by state on pro rata basis. Mandate that all the funds be used for infrastructure replacement and repair. That’s $150 billion a year (we use 9 million gallons a day). That’s a lot of new jobs in desperately needed highway and infrastructure construction. Construction of football stadiums would be off-limits for these funds.
  • Offer a continuing long-term tax credit program for home insulation and water heat/HVAC replacement. The majority of homes in this nation are more than 50 years of age, especially in the Midwest and Northeast, and a high proportion cannot afford to update their homes, especially seniors. For seniors, you might want to consider cash grants repayable upon resale of their homes. Insulation and new water heaters and heating/air conditioning systems will save millions of gallons of fuel each year, making us less dependent on Arab nations. And the program will create jobs.
  • Offer to pay 50 percent of the first year’s salary for any additional employment offered by small business. There are 6 million small businesses in the U.S. — 1.2 million of them in California alone. That’s better than paying unemployment stipends. And small business suffered 60 percent of the employment losses in this recession.
  • Offer each member of the military one extra year of service and utilize this incredible talent base in the civilian sector as part of the infrastructure repair and replacement team and in the school and library systems. They can hold these jobs while attending college that you are already paying for. Hopefully, there will be hundreds of thousands coming home from Afghanistan and Iraq in the next two years.
  • And finally, with all the new jobs created, there will be demand for millions of new owner-occupied housing units in many U.S. metropolitan areas. Each new home generates two person years of work. Each year our nation adds more than 1 million households, and other than those states that are losing population, the vacancy rate in for-sale housing is negligible. We will need new housing in states like California, Florida and Texas. And every time somebody buys a new house, the trickle-down effect produces sales of four resale homes. That inevitably generates billions of dollars in remodeling, appliance and interior furnishings, and landscaping.

Overall, your administration will be judged, almost in entirety, on its ability to put the U.S. back to work. And the next election is not too far away.

Alan Nevin is a Principal with The London Group.

Re-Blogged from SanDiegoSource by The Daily Transcript. 

]]>We Must Build For a Better Economyhttp://www.1031exchangeinstitute.org/1031-exchange-blog/we-must-build-for-a-better-economy.htmlStaff2011-08-20T01:29:28Z2011-08-20T01:29:28ZThis is a reprint of an article by my friend Gary London who is president and chief executive officer of The London Group Realty Advisors:

by Gary H. London

In my postapocalyptic musing about recovery from our economic collapse, I have envisioned that the source of our resuscitation might be the much-vaunted technology sector, what with its growing importance as well as the competitive advantage it offers the U.S.

Knowing the construction and housing sector — which has brought us out of past modern recessions — to be particularly moribund, I was searching for a new catalyst to recovery. I no longer believe that technology can play a big enough role in economic recovery. The various technology sectors do not yet play a large enough role such that they could handle the task.

The regional manufacturing sector, which is now in full retreat with job levels down 25 percent since 2000, won’t be riding to the rescue either.

I again believe that the true economic recovery will be evidenced by growth in the construction sector. When we are building again, we will know that we have recovered.

Recently, the Wall Street Journal published an article by Robert Bridges, “A Home Is A Lousy Investment,” in which he asks the question, “Why is there such rapt attention to the revival of the homebuilding industry and residential property markets?”

He does a side-by-side comparison of the investment in a home versus investing a similar amount over 30 years in the stock market and concludes that the stock market wins, big time.

Tearing Down the House

Bridges also provocatively asks the question: “Why then would anyone want to purchase a home? Why wouldn’t we just rent?” He calculates that home ownership in California from 1980 through 2010, when compared with a 30-year investment in the stock market, produces substantially inferior results.

Professor Bridges misses a concept fundamental to a reasonable comparison analysis: leverage. The concept of leverage is practically biblical in home buying, or, for that matter, in any real estate investment. You make a down payment, say 10 percent or 20 percent. When you do that, you must measure the return based on your actual leveraged expenditure. So while you have purchased an asset (your home) that appreciates at 3.6 percent annually, your net equity appreciates at a higher rate because it only represents 10 percent or 20 percent of the asset value.

We compared these two asset classes employing a different methodology, which I will dub a “same time frame” analysis. This approach compares the two asset classes — housing versus the stock market — over the same time frame but not at the same time.

This is because all asset classes have bottoms, middles and tops. Both markets have periods of relative low price points which ultimately bubble up. It makes more sense to test each asset class within their own bubble and bust periods.

Employing that test, our calculations are that the Dow Jones & Co. industrial average increased by 254 percent from 1990 through ’98. Where as the Standard & Poor’s Case-Shiller Price Index for San Diego rose 138 percent from 2000 through ’06. To give a down cycle example, the Dow Jones was down 11 percent from the beginning of 1999 through the end of 2002, and the Case-Shiller Price Index for San Diego was down 33 percent from the beginning of ’07 through the end of 2010.

While I cannot dispute that the overall results show the Dow performed better on average, these numbers still compare a full price investment in the Dow to a full price investment in a house. If you put a more typical 10 percent or 20 perecent down on the home, and then still realized the appreciation, the home investment would outperform the Dow average by an additional 15 percent per year in the up-cycle. However, the decline after the peak was much greater in real estate (a 33 percent drop) compared to the Dow (down 11 percent).

The point is that it is a wash. You can prosper or fail investing in both.

I recommend investing in both. Use your stock portfolio as your nest egg and ultimately as a source of retirement income or benefaction. And over a 30-year investment horizon, you will continuously rebalance your investment portfolio among the various asset classes, particularly to take advantage of buying low and selling high. And you would also try to time your housing “move ups” to take advantage of the sector’s lows and highs.

Enjoy your home. Go barbecue in the backyard. Sell it to “move up” or ultimately to retire at mostly tax-free capital gains.

A Foundation for Growth

And always keep in mind the compelling role the construction sector plays in both the local and state economies.

The economic “multiplier” of construction, is a huge two — for every construction worker employed, two jobs are also created — this is higher than the tech and manufacturing sectors, which are one-multipliers.

While perhaps transitory, these constructions jobs are not “temporary.” True, when a project is built and completed, the construction job is finished. But in a healthy economy, the construction worker simply moves to the next job. How is that any more temporary than most any other job? We all move to the next task.

The very inefficiency of the construction sector broadens its economic reach. As America has evolved its employment base, we have lost manufacturing jobs to other countries with lower labor costs. However, in the American construction sector, with the exception of some materials, most materials and most of the labor is American.

While San Diego building permits have hovered at the historic lows of below 6,000 units per year during the past 3 1/2 years, clearly the sector bears a huge load in taking down this economy. No other sector comes close, either locally or nationally in importance.

That’s why I believe that the housing sector, in particular, and the construction sector in general has to recover for the economy to truly recover.

This is actually a bad omen because the sector simply cannot recover quickly. In fact, for the foreseeable future, there is very little demand for any construction until the market clears. This means the present high vacancies in the commercial market have to come down. We must face up to the very real assault on “brick and mortar” retail by technology. The distressed residential assets have to emerge from the shadows and be dumped on the market.

The apartment sector will build at a healthy clip early. But for the remainder of the housing sector, it will be some years before new construction can be justified, except for occasional spot opportunities.

Yet, be very careful before you dis the construction sector. Few activities have such direct, intense and immediate positive economic impact as new construction. In California, construction employs more people than Apple, Google, Facebook and the some others — combined.

Housing creates construction jobs. The government wants us to own a home. Communities benefit from the care and maintenance homeowners put into their homes and their neighborhoods. And in supply-constrained regions such as San Diego, the investment gain through homeownership has exceeded the average by most reasonable calculations.

This is not what political scientists like to call a “zero-sum game.” The housing market is a key measurement of the overall economic prosperity of the region. Stripping the construction sector from the economic equation is like taking a big slice of pizza out of the overall pie.

You cannot deliver the pizza with a slice missing. To fuel a recovery, we need that "slice."

]]>Beware of The California Claw-Backhttp://www.1031exchangeinstitute.org/1031-exchange-blog/beware-of-the-california-claw-back.htmlStaff2011-08-18T19:20:34Z2011-08-18T19:20:34ZAt first glance, you might think the California Claw-Back is some kind of wild animal native to the State of California.  It is wild, and it is native to California, but it's not an animal.  It does rear its ugly head and bite investors when they have 1031 Exchanged into and/or out of California real estate.

Section 1031 is a Federal Tax Code

The 1031 Exchange is a great tax-deferral strategy for owners of investment property who wish to defer the payment of their capital gains and depreciation recapture taxes.  It allows investors to indefinitely defer their tax liability if they continue to 1031 Exchange throughout their lifetime.  However, it is important to note that Section 1031 is a Federal Tax Code, and not all states administer or recognize the 1031 Exchange strategy precisely the same as the Federal government does.

Most States Conform to Federal Tax Code

The majority of states with in the U.S. conform to the Federal income tax treatment of Section 1031 of the Internal Revenue Code ("1031 Exchanges") in that all capital gains and depreciation recapture taxes are deferred until ultimate sale or disposition of the property.

Common sense would lead you to believe this would mean investors are only subject to capital gain and depreciation recapture taxes in the state where the investment property is actually sold (i.e. the investor stops structuring 1031 Exchanges).  For example, if the investor 1031 Exchanges out of California property and into Florida property, where Florida has no state income taxes, one would assume that when the Florida property was sold there would be no state income taxes dues.

The California Claw-Back

However, the State of California is a notable exception to this, and takes the position that any increase in fair market value of investment property in California is subject to California income taxes.  They take this position regardless of whether or not that property was exchanged for another property located in another state before its ultimate sale. This means that California investment property owners cannot escape State of California income taxes, even if they 1031 Exchange out of California real estate and into replacement property located in another state.

The State of California employs what is referred to as a "claw-back" provision, entitling California to tax any gain on property that occurs in California, regardless of where the property is eventually sold.  So, the sale of the Florida property mentioned above would be taxable in California to the extent that any of the gain was realized in the State of California.

Case Study

Say Mr. Jones bought a California investment real estate for $200,000.  After appreciating to $300,000, Mr. Jones 1031 Exchanges the investment real estate for one in the State of Arizona.  While in Arizona, the investment property continues to appreciate in value to $500,000.  Feeling that he has had enough of investment real estate headaches, he sells the real estate for $500,000, equating to a total capital gain of $300,000.  Mr. Jones would not only be liable for capital gain taxes on the $300,000 in capital gains in the State of Arizona, but would also owe capital gain taxes on $100,000 of capital gains taxes that appreciated in California.

So, beware of the California Claw-Back.

]]>With Winds of Optimism at Their Back, Investors Chase Qualityhttp://www.1031exchangeinstitute.org/1031-exchange-blog/with-winds-of-optimism-at-their-back-investors-chase-quality.htmlStaff2011-08-17T20:55:38Z2011-08-17T20:55:38ZThis is a reprint of an article by my friend Gary London who is president and chief executive officer of The London Group Realty Advisors:

There is a decided — and quite unexpected — glow in the real estate capital markets, according to a consensus of the major debt and equity funders operating in the United States. At a conclave in New York City recently, I witnessed near unanimity on the outlook of real estate investment.

There is a lot of capital available for investment in real estate, more than can actually be invested.

The market is up, although, it is limited in asset type, class and geography.

Investors are “chasing quality.” Finding the right spot for the capital is tricky. The “flight to quality theme” is consistent among all money sources at the moment. They want to be in the best buildings mainly in certain markets.

The geographical targets for this money are the primary metropolitan regions of New York, Los Angeles, Chicago, Washington, D.C., San Francisco Bay Area and Boston.

Some more observations: The current “darling” target product is multifamily residential (apartments); most of the attendees expect inflation to remain low for the next three years, and then rise; capitalization rates remain stable; the levels of distressed sales are now trending down throughout the nation; there is virtually no chance of a double-dip recession.

The analyses I heard in New York addressed other subjects.

Equity Markets

Pricing for most assets is hitting about 25 percent below the historic average. This is low, but not necessarily “distressed.” Companies such as Blackstone, the largest private equity fund in America with $30 billion of equity under management, representing $100 billion in assets, are currently buying high quality assets that have debt issues.

Clearly Blackstone is taking advantage of real estate assets which it believes are mispriced today. Its strategy is to aggregate assets in specific investment pools, hold for approximately five years, and then sell to institutional buyers.

However, the low fruit has been picked off — the best assets in the best markets have mostly been transacted. Capital markets are smart. When the spread is wide enough, the investors will broaden their investments to the middle of the country.

Money Sources

There is diversity in the sources of capital available to commercial real estate. Foreign investors (mostly from Europe and Asia) make up about 10 percent of investment sources. Approximately 24 percent of the deals are being made by private equity funds. But it is the REITs that are the biggest investors. Through the securities market, they continue to have the best access to capital.

One example is Jones Lang LaSalle, the “unlisted” REIT has $72 billion in assets. It raises money mostly from small investors. The REIT’s strategy is to invest in “hard” real estate whose fate is not correlated to the stock market. This is what is called “blind pool” capital (money that is invested without necessarily knowing what assets it will be directed toward). Those investors are investing in current yields of 5 percent to 7 percent. Adding in dividends, investors can expect total returns of 11 percent.

My view is that this isn’t bad at all considering that these seem to be purchased assets at less than 50 percent leverage, or loan-to-value ratios.

The big change in this industry is that the internal fees, or fee loads, are way down, a result of the excesses before the recession.

Waiting Game

For all of the dynamics and optimism on the equity side, lenders have elected not to participate. They apparently want to invest. But since there is a general belief that interest rates will go up 100 to 300 basis points over the next three years, many are simply sitting on the sidelines and holding out their money for better rates.

The concept of allowing bad loans to wither or “extend and pretend” is still present with lenders. A lot of loans still need to mature, although in general, loan levels have been shrinking through restructuring and repayment of notes.

U.S. banks are still hobbled by their “heritage” issues. Most are still only lending to people and entities that really don’t need the money. What money they are putting out seems to be concentrated in multifamily.

Since Lehman Brothers fell in 2008, there has been over $300 billion in loan defaults. Right now only about 42 percent of these notes have been “worked out.” The good news is that lenders are making progress in resolving these troubles, but everyday still brings reports of new defaults.

Regional banks are still under pressure. These banks are concentrated in the weakest secondary and tertiary metropolitan markets. Most are in no position to put out money now.

The great issue that is still looming for banks is a coming maturity of mortgages. Over the next few years, many notes are coming due. Conditions have improved: maybe half the loans are bad. It used to be 90 percent.

Shovel Unready

The focus for the short term in the capital world is to invest in existing product. Funds are mostly not available for development. There is a consensus that while investment-grade markets are not critically overbuilt, many have inventory of both housing and commercial space that needs to fill and stabilize. Other markets need to tighten up and see revenue increases before development is an option. This may be as long as three to five years.

Much of the money focus has been on the “big six” primary markets in the U.S. Cap rates had moved way down in 2010 in six major markets, especially in New York City and Washington, D.C., where most of the deals are. There is a far greater sense of risk in the secondary markets, including San Diego.

The dichotomy is that much of the rest of America has yet to rebound. And except for a broader investment foray into multifamily, the capital markets have mostly restricted their activities there. The feeling is that assets are currently not stabilized in markets, so it is hard to attract capital.

The key difference between now and the recession of the early 1990s is that then the government’s Resolution Trust Corporation was formed to assemble and liquidate assets to “clear” the markets. There has not been a similar clearing mechanism to package and rid the market of bad assets. There is a consensus that it is going to be an additional three to five years before the economy is fully dynamic again.

There is a “structural change” at work in the American economy. Demand for real estate product is changing. Even with this change, the capital providers generally believe that existing space will find demand.

They are no longer purchasing properties to flip. Real estate investment has become a long-term strategy. Hold for stabilization. Achieve reasonable — if now lower — returns. Improve the properties, both physically and financially.

And wait for the economy to really improve.

 

Very best regards,

THE LONDON GROUP

 

Gary H. London &
Nathan Moeder

]]>Economic Comments From The London Grouphttp://www.1031exchangeinstitute.org/1031-exchange-blog/economic-comments-from-the-london-group.htmlStaff2011-08-17T03:40:23Z2011-08-17T03:40:23ZHere is the copy of an opening letter by my friend Gary London contained in The London Group's Monthly Newsletter, which I think captures the current state of the economic recovery:

In this issue we have posted three papers dealing with investments and the economy. It is mid-August and the world is in catatonic shock: even if you are not "in" the stock market or are politically disconnected - and nobody fits in both of those categories - you can't help but be at least psychologically burdened with the economic state of the globe.

It makes one wonder about what we have written about in these papers: that there is capital to be invested and it is searching for opportunities, that while returns in real estate versus the stock market are hard to measure most fare well in either over the long term, and that there is generally hope for economic prosperity.

Is any of this still true from our current vantage point what with the debt ceiling circus in D.C., followed by the S&P downgrade, followed by market turmoil?

It is. In times like these it is important to have perspective. What we are realizing is that no politician has a death wish for this economy. Regardless of his or her ideology or party affiliation neither are they capable of instantly lifting us from this economic malaise.

The structural economic transition that we are witnessing is a soap opera with episodes still to be aired. It is affecting all asset classes and all regional markets because it is rocking our economic belief system.

Our advice is to be steadfast in your long term view of the market and the economy. This is slowing working itself out. People want to be prosperous. Slowly but surely the waste is being drained out of the economy, the markets are clearing and demand for goods and services will emerge.

Very best regards,

THE LONDON GROUP

 

Gary H. London &
Nathan Moeder

]]>1031 Exchange Basic Webinar - Listen On Demand Nowhttp://www.1031exchangeinstitute.org/1031-exchange-blog/1031-exchange-basic-webinar-listen-on-demand-now.htmlStaff2011-07-21T20:03:43Z2011-07-21T20:03:43ZWilliam L. Exeter, President and Chief Executive Officer of Exeter 1031 Exchange Services, LLC has over 30 years of experience in the fiduciary services industry and is a renowned real estate tax strategist.

Mr. Exeter joins Silver Stream Advisors’ President Gregg Wood and his team of real estate experts to bring you a brief education on buying real estate using 1031 Exchange strategies.  Mr. Exeter will provide you a greater understanding of what 1031 Exchanges are all about and how to invest using 1031 Exchanges, while Mr. Wood will discuss how Silver Stream Advisors’ trademarked Real Estate Money Machine™ investment model will grow your retirement and take advantage of the incredible investment opportunity in real estate.

Both Mr. Exeter and Mr. Wood are committed to providing investors the highest levels of experience, expertise and security of funds in the industry.

Join us for this on demand webinar. 

>>>>Watch Now<<<< 

This webinar will teach you:

  • What a 1031 exchange is
  • How to sell & reinvest using a 1031 exchange
  • 1031 exchange strategies and requirements
  • How to regain control of your retirement using Silver
    Stream Advisors investment opportunities
  • Tax strategies of the wealthy

For those prepared with the right tools, there has never been a better time to invest in real estate. Learn the secrets of the rich to control their financial future. We look forward to seeing you there. 

>>>>Watch Now<<<< 

]]>Supply and Demand Favors Multi-Family Residential Rentalshttp://www.1031exchangeinstitute.org/1031-exchange-blog/supply-and-demand-favors-multi-family-residential-rentals.htmlStaff2011-07-12T21:59:19Z2011-07-12T21:59:19ZThe focus of supply and demand in the real estate market appears to be in multi-family residential housing.  We see it on the investment side, through the general reports of the market; and in our 1031 Exchange Qualified Intermediary operations.

Over the past couple of years REIT's have become opportunistic investors in a down market. However, our discussions with investors, their advisors and our competitors, as well as financing sources suggest there is a pattern of interest specifically in multi-family residential investment market.

It has become obvious that real estate investors know we are at the bottom of this market cycle because they are buying.  Their focus on multi-family residential rental properties is consistent with demographic trends and analysis, catalyzed by the giant (82 million strong) generation "Y" population, who rent first as they join the workforce.  Presently there are more people who will rent versus own, because they should rent.

Homes are much less expensive than what they used to be, but rental income has been rising significantly.  Investors of all sizes are aware of the fast improving rental income associated with hoards of new renters entering the rental real estate market. 

The economic outlook, however, remains rather bland. There is sufficient capital available, but most of it can't or won't be deployed until the economy is significantly further along in its recovery than it is today.  And, banks won't lend until Fed Funds Interest Rates begin to rise (why take the risk when they can borrow at .18% and reinvest through the U.S. Treasury earning a couple of points spread with no risk?). 

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