This Mobile Home Park at the Lake of the Ozarks boasts great income and a location and reputation that makes it easy to keep full.  The property sits on 20 acres, and is surrounded by trees.   Just a few miles from Bagnell Dam in Lake Ozark, this is close to area employment and future growth.  Call John Garrett Lake Real Estate Pros for more information at 573-480-6420.

EAGLE MOBILE PARK

My new real estate company is called Lake Real Estate Pros.   Maybe I took the Warren Buffet quote that everyone loves nowdays that says ““… be fearful when others are greedy and to be greedy only when others are fearful” a bit too seriously.   After 10 year at RE/MAX Lake of the Ozarks, it was time to make this move.   Lake Real Estate Pros is located across from JB Hooks on Bagnell Dam Blvd.   The address is 2221 Bagnell Dam Blvd Ste 400, Lake Ozark MO 655049.  John Garrett can be reached at 573-480-6420.

UPDATED STORY: Wall Street Journal story

LandAmerica files for bankruptcy protection, to sell 3 units to Fidelity National Financial
Bad news, you need to be careful when completing a 1031 exchange, and be very diligent about where your money is being kept! Call John for more info on which intermediaries to use and to make sure your assets are insured and protected at all times!

NEW YORK (AP) — Title insurer LandAmerica Financial Group Inc. said Wednesday it will file for bankruptcy protection, while competitor Fidelity National Financial Inc. said it will acquire three of LandAmerica’s subsidiaries.

The bankruptcy filing of LandAmerica’s holding company and subsidiary LandAmerica 1031 Exchange Services Inc. and sale of the subsidiaries comes just days after Jacksonville, Fla.-based Fidelity National canceled an agreement to purchase all of Richmond, Va.-based LandAmerica. That deal called for Fidelity National to acquire LandAmerica in an all-stock acquisition for about $128.4 million.

A subsidiary of Fidelity National, Chicago Title Insurance Co., will acquire Commonwealth Land Title Insurance Co. for $158.6 million. Fidelity National Title Insurance Co., another of Fidelity National’s units will acquire Lawyers Title Insurance Corp. and United Capital Title Insurance Co. for $139.4 million.

The units Fidelity National is purchasing remain solvent and continue to operate.

The acquisitions are expected to close as early as late December.

Nothing illustrates the power of this tool better than an example, even a highly simplied one like I am using here.  Call 573-302-2320 if you have any questions.

A 1031 Exchange allows your clients to sell his or her investment property and defer the capital gains tax into a new investment property of equal or greater value.

The true power of exchanging is found in being able to meet investment objectives without losing equity to taxes.  This allows clients to leverage their purchases to build greater wealth many times the amount of their initial investment. 

Investor Jack Smith owns a building that he purchased 10 years ago for $500,000.  His basis, the amount he paid for the building, was $100,000.   This is what his transaction looks like with no 1031 exchange: 

Sales Price of Property	$500,000
Cost Basis	($100,000)
Capital Gains	$400,000
Taxes Due
Federal 15%	$60,000
State	$20,000
Equals	$80,000
Proceeds	$420,000

Here’s the same sale using a 1031 exchange.  This is a highly simplified example, it doesn’t even consider the considerable savings of depreciation recapture and avoiding the Alternative Minimum Tax (Click here to read more about these).

Sales Price of Property	$500,000
Cost Basis	($100,000)
Capital Gains	$400,000
Taxes Due
Federal 15%	0
State	0
Equals	0
Proceeds	$500,000

Information for 1031 Exchange Clients

Title holding issues in 1031 exchanges, (Realty Times, Mar. 3, 2006).

What type of properties qualify for a 1031 exchange?, (Realty Times, Sept. 5, 2005).

Unlocking new revenue streams in real estate: Three winning strategies to maximize your 1031 exchange, (Georgia REALTOR®, June 2005).

Make a clean exchange: Avoid common mistakes with 1031 exchanges, (Texas REALTOR® , Mar. 2005).

Multi-asset mastery: These tax-deferred exchanges require pre-planning and careful attention, (Commercial Investment Real Estate, Nov./Dec. 2004).

Exchange eligibility: Do your properties meet IRS requirements for 1031 transactions?, (Commercial Investment Real Estate, July/Aug. 2004).

1031 details: Manage transactions precisely to maximize tax benefits, (Commercial Investment Real Estate, Mar./Apr. 2004).

Leasehold interests offer alternative 1031 exchange options, (Commercial Investment Real Estate, Nov./Dec. 2003).

1031 exchanges do more than save taxes; These transactions can be used strategically to upgrade portfolios or even to liquidate partnerships, (National Real Estate Investor, Jan. 2003).

Smooth moves: Successful exchanges follow these 12 rules of the road, (Commercial Investment Real Estate, Mar./Apr. 2001).

1031 Basics

1031 Exchange FAQs, (Federation of Exchange Accomodators).

Show me the money: Using exchanges, (Realty Times, July 19, 2005).

Five misconceptions of 1031 exchanges, (National Real Estate Investor, May 2005).

1031 Exchange Manual, (1031 Corporation, 2004).

Review the fundamentals of Section 1031 like-kind exchanges, (Commercial Investment Real Estate, Jan./Feb. 2003).

If you have any questions about 1031 exchanges or buying or selling Lake of the Ozarks real estate, you can always contact John Garrett at 573-302-2320 or e-mail me for a fast response.

“Just Pay the Capital Gains – it’s Only 15%”

What terrible and misleading advice! I have CPAs, attorneys, and other ‘friends’ recommending to my clients to just pay the 15%. True, the Federal Capital Gains rate went to 15% on 05/05/03, however the rate isn’t as cut and dried as it appears. The gain on APPRECIATION dropped to 15%, but the gain on DEPRECIATION is at 25%.

In addition, most states will apply a tax typically ranging from 5% to 11%. As your income rises and your profits on the sale are added to your adjusted gross income, the Federal Alternative Minimum Tax is likely to factor in as well.

Your ‘15%’ is much more likely to be closer to 40% by the time the entire tax burden is factored in.

This example will illustrate more clearly:

Purchase Price of Investment	$75,000
Sale Price of Investment	$150,000
Adjusted Basis	$50,000
Capital Gain	$100,000
Tax on Appreciation 15%	$15,000
Tax on Depreciation 25%	$25,000
Tax Burden 40%	$40,000

This doesn’t even factor in State Tax, but it does illustrate that the burden is more than 15%. What if you didn’t take depreciation during the life of the investment? Too bad, you should have! The IRS will still make you pay the recapture regardless if you took it or not.

Here’s the official IRS publication in PDF form for Depreciation.

If you have any questions about 1031 exchanges or buying or selling Lake of the Ozarks real estate, you can always contact John Garrett at 573-302-2320 or e-mail me for a fast response.

Can I use a 1031 exchange to sell my vacant land to buy a Lake home or condo?

The answer is yes.   If you are selling investment property to buy a Lake of the Ozarks home or condo as a rental, then you can complete this exchange with relative confidence it will be seen as a “Like-Kind” exchange by our friends at the IRS.  With appreciation rates from ten to thirty percent a year, low property tax and strong projected demand, why not get into this market?

The replacement property must be equal or greater in price than the selling price of the relinquished property. Otherwise you will have to pay tax — called “boot” — on the difference between the two properties.  Also, you must identify a replacement property within 45 days and close on that property within 180 days to make this transaction valid.  A few other options exist where you could actually use the property with some personal use while it is a rental, giving you both a vacation home and a solid real estate investment. There is even a way creatively combining Internal Revenue Code (IRC) Sections 1031 and 121 to convert this property to your primary residence, live in the property for at least two years, and then take the principal residence exclusion and make the capital gains tax disappear forever!

There are many other considerations, and some pitfalls along the way, so you need to work with an agent that is experienced with these types of transactions to make sure you don’t do anything to jeopardize your exchange.  For more information on 1031 exchanges for vacation homes, check out my site at www.1031taxsaver.com/Exchanging_20_Second_20_Homes.html

Use the powerful combination of buying real estate with your IRA in conjunction with a 1031 Exchange?

Using an IRA for real estate requires a special Self-Directed IRA. Your Self-Directed IRA at say Charles Schwab probably does NOT permit you to hold real estate or any asset other than securities. This can be solved by moving your IRA to a custodian that allows for real estate in the plan document. With the right Self-Directed IRA  and proper structuring, you partner with your IRA to buy leveraged real estate. When it comes time to sell, you can 1031 exchange your portion of the gain while the IRA gets its portion of the gains tax exempt.  You can buy raw land, rental properties, commercial real estate, and even a piece of a larger multi-million dollar property called a tenant-in-common TIC investment.   The advantages of real estate in a retirement plan are its potential high rate of return, added diversification and its lower risk over the long run.

Perhaps the biggest drawback to investing in real estate for a retirement account is the loss of the depreciation deduction. It’s useless inside a retirement account.  Again, using 1031 exchange, when it comes time to sell, you can 1031 exchange your portion of the gain while the IRA gets its portion of the gains tax exempt.

If you have any questions about IRAs in real estate or buying or selling Lake of the Ozarks real estate, you can always contact John Garrett at 573-302-2320 or e-mail me for a fast response.

One main difference in the tax treatment of your vacation condo is that on the surface, you cannot use a 1031 Starker Exchange to defer the capital gains if you used this property strictly as a vacation condo for your own personal use.  One solution to this is to convert the condo to a rental property.

Conversion of a vacation condo to a rental property is a nontaxable event.  Once a property owner starts renting the condominium, the treatment of the property for income tax reporting changes as well.  Depreciation, expenses, rents received, will all be reported on your tax return.  It is then eligible for a like kind exchange of property.  Like kind meaning anything that is not your primary residence, so it could be exchanged for raw land, investment property, even an interest in a TIC Tenants-in-Common investment.

There are so set in stone rules as to how long you must rent the condo before it is considered converted to a rental by the IRS.  One year is often cited as probably long enough, but this is a decision for you and your tax advisor to consider.  Once the property is converted to rental, is the owner prevented from ever using the property for personal use?  The answer is no, they are not prevented from using the property, but they are limited.  The easy and quick answer is that owners can use the property for 14 days without altering its designation as a personal use property, or 10% of the number of days during the year for which the unit is rented at a fair rental.  The days you spend working on the property, or performing maintenance on the property do not count as personal use days.

The other solution might be to convert the condo to your primary residence, and this involves occupying the property for a minimum of two years.  At this point, you can use the $500,000 exemption for married individuals to avoid capital gains tax.

If you have any questions about 1031 exchanges or buying or selling Lake of the Ozarks real estate, you can always contact John Garrett at 573-302-2320 or e-mail me for a fast response.

Every Dollar Saved in Taxes Will Allow an Investor to Purchase 4 to 5 times as Much Real Estate

Tax deferment increases leverage. Consider that 10% appreciation is converted to a 50% profit with a 20% down payment. Let me illustrate:

An investor sells a fully depreciated property and the capital gain is $200,000. This amount is subject to taxation. Assuming a 35% tax bracket, the Tax would be

$200,000 x 35% = $70,000

If the investor sold the property outright rather than exchanging it, they’d have $130,000 to re-invest. If the investor exchanged the property pays no capital gains and has $200,000 to re-invest.

Both investors purchase a new property using 20% down payment. The sale investor can purchase a building worth $650,000 while the exchange investor can purchase a building worth $1,000,000. That amounts to a $350,000 loan from Uncle Sam to invest in real estate! This is one transaction. If 1031 exchanges are utilized again on the new property, the leverage will again be increased.

The Lake of the Ozarks has an abundant supply of properties that qualify for tax free exchanges. You can sell your rental or investment property, even raw land, and buy a vacation home or even a retirement home at the Lake of the Ozarks legally. It is even possible to sell this as your personal residence and eliminate the capital gains altogether! You must follow certain guidelines, but it can be done. The key is to make sure you have an agent that knows what is going on, and is experienced with these matters.