Thursday, April 30, 2009

1031 Thy Name is Diversity

By Winston Orzechowski

It is common to think of a 1031 transaction as one involving land for land or buildings for buildings. However, this is a tragic oversimplification.1031 transactions deal with “like-kind” property and in most people’s minds “like-kind” means both pieces of property are alike, such as trading land for land. But do not follow this train of thought when dealing with real estate; in the eyes of the IRS “like-kind” refers to all “qualified real estate”, opening the doors to a wide array of transactions.

For example:

In one case a person wished to exchange18 oil wells valued at 1.375 million for an apartment or office building. If they were to simply sell the oil wells and buy their building of choice, they would face a substantial capital gains tax; however, through the use of a 1031 they are now making this exchange tax free. That is because oil wells are considered qualified real estate and are eligible for a 1031 involving all other qualified real estate. Other qualified real estate types include: Coal mines, mineral rights, timber, and vineyards.

This all means that investors have an immense selection of properties to both acquire and exchange using a 1031.

Note: The example above pertains to real estate. A 1031 can also be used for property other than real estate such as medical equipment or airplanes, in which case the property would have to be alike i.e.: airplanes for airplanes, medical equipment for medical equipment.

Wednesday, April 22, 2009

I Want a WAG!

By David Sobelman

NYSE: WAG! Walgreens has always been the stereotypical net lease investment. Bringing together single-tenancy, strong credit, triple net lease, and a "Main and Main" location, investors have sought out Walgreens as long term/stable investments. This current market cycle has only accentuated the desire for a WAG in one's portfolio. It wasn't that long ago that when you explained the potential return one would receive from this bond-like investment, roughly 6.5 - 7.5%, people would shun the notion of accepting that yield for such a long and finite period. However, compared to today's Money Market and CD rates, that CAP Rate doesn’t look all that bad. In fact, it may be higher than what people are currently receiving in similar "stable" investments.

There are dozens of Walgreens for sale today. But when you have several to choose from, the real estate of the site becomes ever more important. Gone are the days that you could purchase a WAG in Leoti, KS and believe that it is the exact same investment as one in Sarasota, FL. Lenders will look at the assets completely differently, even though the same lease, same credit and same building (most likely) will be present.

So pick your investments wisely as even WAG investors are becoming more discriminating.

Thursday, April 16, 2009

By Nicole Hipp

If I were to make a bobblehead of myself it would resemble a many-headed monster….to wear all the hats that I don each day as I morph in and out of my many roles. It’s career week in my 6 year old daughter’s classroom this week and on Tuesday evening she asked me “Who is Daddy? I mean not his name but what’s another thing we call him?” Ok, so I had to bite my tongue and resist all the clever answers immediately spinning in my head and said “Net Lease Broker”…which for some people, in this economy, could have a whole different meaning! And then she asked about me and I said “Bookkeeper”. And to avoid the next question I immediately offered a piece of distracting trivia to make my job sound a lot more exciting (in case she was compelled to share it with her class). “Did you know that bookkeeper is the only word in the English language with THREE sets of double letters all in a row?” (Recent news to myself as well!) She stared at me blankly perplexed much like she did when I tried to teach her “The Hustle”. So I tried to better explain that I count all the money and write checks to pay bills. She must’ve understood because as soon as Daddy stepped in the door, she proudly announced, Mommy is a book writer! Which is not a complete mistruth as I do have one of those in the works. And then the next day when I picked her up from school she shares “I told my class you are a book reader.” To a 6 year old this is quite the profession. Something they aspire to, so I accept it. After all, being a book reader to our kids really is a great thing. For many families, the economic downturn has been an upturn for the quality of family time. The creative juices that flow when you are trying to save money can be fun. Children now have a greater opportunity to learn some values – not just of money. And instead of constantly finding yourself on the run or eating out, families are eating in and entertaining themselves with each other AT HOME. The rat race got way out of control. And now consumer spending is down. It hurts in some ways. But when we are not out “consuming”, where are we? Hopefully at home with our families….book reading.

Monday, April 13, 2009

Teaching New Dogs Old Tricks and Old Dogs New Tricks

By: Patrick Nutt

While it may not come as a surprise to everyone, the real estate market and broader economy is in a bit of a downturn. Many have focused their attention on the negative signs and headlines cast through every channel of media, but I’ve taken a much more micro-economic view; as in the economy located within the confines of my personal checking account. I quickly realized that there wouldn’t be any deposits into my “local economy” from TARP or the federal stimulus plan, so the best way out of this recession is to put my head down and work hard, with the belief that it will all pay off one day. A quick survey of my inbox indicates that many brokers have left the industry, whether by force or by choice, which instantly creates an opportunity to grab market-share and build a pipeline to benefit from the eventual recovery.

There are countless articles, webinars, seminars, teleconference marketing symposiums, and any other fancy titles for listening to people tell you how to do something better these days, most of which focus on tips of the industry pros for surviving the current down cycle through using technology, and being creative. I recently listened to a teleconference call discussing marketing and branding ideas for commercial brokers, and one example was discussed where a broker made bobble-head dolls of himself to pass out to his clients and prospects. This may be an extreme example, but it just goes to show you that necessity is the mother of innovation, and right now, generating business and maintaining relationships is a necessity.

Every possible form of electronic communication and networking seems to be on the forefront of discussion, covering everything from Myspace and Facebook to using Twitter and blogging. The popularity of these items and technological gap between industry veterans and the younger members in the brokerage community has caused many “old dogs” to try and learn a new trick or two. At the end of the day though, no “Tweet”, text, or email will be able to replace the old fashioned phone call, face-to-face meeting, or even a written letter. I have been fortunate enough as one of the younger members of this industry to learn from veterans that still preach the basics and have seen it pay off. Now’s not the time to skip the basics and forget the fundamentals, so when you’re trying to teach an old dog a new trick, don’t forget the learning can flow both ways, and it’s never too late for a “new dog” to learn some old tricks.

Friday, April 3, 2009

What is Your Generation?

by Anonymous

Every generation wonders what the future holds for them, and every generation also has its own set of challenges to overcome. And guess what? People always manage to survive. They work the problem. The human spirit is a wonderful thing! And a lot of good changes happen when times are tough; it’s just part of a cycle. Those before us struggled and worked hard to make the world a better place for themselves and for their children. So here we are; now it’s our turn to figure it out! It’s our turn to be the grownups.

Life is a roller coaster ride. Each generation gets a new ride. And each generation is confronted with and ultimately defined by its own set of circumstances. No doubt, some generations are luckier than others. Some are faced with wars, some peace, good financial times, bad financial times, excesses, sacrifices. Luck of the draw… Some get to ride years with healthy economies, real estate booms, low interest rates, and even surprises such as Internet booms. Others get to ride through weak economies, Stock Market crashes, real estate busts, high interest rates. I guess if you live long enough, you’ll get to see it all!

Just have to ride it out. Maybe let out a big laughing scream with your hands in the air as your roller coaster hits the zero gravity drop! Make good decisions, stay healthy and be grateful spring is here! Be thankful for all the good, and muddle through, just like all the generations before us did!