Whatever your answers, you also need to know that you can achieve your WIGs with focus and with leverage. I challenge you to time block an hour or two a week solely to create action items that will ensure your success. Identify where you need help and who can provide it. “Work smarter, not harder” is as cliché a saying as there is, but it contains more than a nugget of truth. Using the expertise of others is easier and more effective than doing the heavy lifting on your own.
KREIA is a great place to attend, network and build leverage. It is an abundance minded organization dedicated to helping you move whatever obstacle is preventing you from achieving your dreams. I encourage you to show up, give what you have to offer and take what you need. You will grow in ways you never dreamt possible.
• What will you regret not having accomplished if you don’t focus on it now?
• If not, what do you need to do over the next 4 months to move the needle?
Take a few moments to answer the following questions. Be serious! I’ll wait…
• If so, what is the next thing that needs to be done?
• What do you need to learn so that 2023 becomes your best year yet?
• What were the one or two Wildly Important Goals (WIGs) that you set for 2022?
• Have you achieved them?
Copyright MMXXII Kentuckiana Real Estate Investors Association • P.O. Box 91225 • Louisville, KY• 40291 www.KREIA.com DISCLAIMER: KREIA does NOT pre qualify, evaluate, endorse, guarantee or warranty any particular deal, service, company, or person. The Kentuckiana Real Estate Investors Association recommends you perform your own due diligence & seek appropriate legal, accounting, or other professional advice before making any investment. KREIA is a Member of National Real Estate Investors Association. Vol 8 22 August 2022 Monthly Newsletter for KREIA Members Erik Hitzelberger President’s Letter 1 Main Meeting: Exponential growth with 1031 tax deferred exchanges 3 Welcome, New Members! 4 Mike Butler: TREES! Love ’em or hate ’em? 6 Eric Shadowens: How Michael Jordan can teach you the benefits of a Like Kind 1031 Exchange 8 Nina Musgrave: Metro’s LDC reform on Middle Housing 10 Alexis Fentress: Check out KREIA’s new clothing line! 16 KREIA Photos 20 L.O.T.S. Recap: Mary Conrad flips a Beechmont house inside her IRA 21 Government Affairs Links 38 Calendar of Events 40 Providing Education, Resources & Networking Since 1978 Kentucky’s premier investment club for landlords, rehabbers and wholesalers Meeting the 4th Thursday of every month (except November & December) KREIA.COM • facebook.com/groups/kreiaky • twitter.com/reiaky Dear KREIA Members and Friends, Nothing quite marks the impending change of seasons like the reemer gence of school buses. The presence of these yellow vessels and the “first day” photos that fill social media signify a bittersweet end to the more carefree days of summer. As we settle back into routines, this is a great time to re evaluate objectives for the year.
Continued on Page 10
Put your message in front of the most active rehabbers, landlords and wholesalers in the state! KREIA offers five membership levels for businesses. Go to KREIA.com and join at one of these annual advertising levels to get your ad in every issue of KREIA’s newsletter and be invited to make ad pitches at meetings:
BergeronRob
Business Card Membership Includes your business card sized ad. Admis sion at monthly meetings is $20.
individual member is $125 per year, with a door fee of $20 at our monthly meetings (which covers the buffet meal and rent on the hall). Click JOIN
2 Copyright MMXXII Kentuckiana Real Estate Investors Association • P.O. Box 91225 • Louisville, KY• 40291 www.KREIA.com DISCLAIMER: KREIA does NOT pre qualify, evaluate, endorse, guarantee or warranty any particular deal, service, company, or person. The Kentuckiana Real Estate Investors Association recommends you perform your own due diligence & seek appropriate legal, accounting, or other professional advice before making any investment. KREIA is a Member of National Real Estate Investors Association. JordanSecretaryPohn Treasurer Mike Grinnan CPA Treasurer Elect Wally Kallbreier George ForeeMcFarlandRue HamptonScurlock ParliamenMichelleRawntarian MillerFrank WilloughbyLaurenMediaManager Your KREIA Leaders Board of Directors Get involved with KREIA. You can help with the monthly meetings, L.O.T.S. program, this newsletter, Saturday workshops, Government Affairs roundups, marketing, the KREIA website & more. Work alongside active investors! Ask for someone to direct you at the check in desk at the main meetings. KREIA's newsletter is published monthly and serves to educate you and to remind you of upcoming monthly meetings. About KREIA: The Kentuckiana Real Estate Investors Association is a nonprofit organization focused on education, networking and resources for today’s investor. Whether you are just starting out in real estate investing or are working on your hundredth deal, KREIA can help you learn more, earn more, and have more fun doing it. Group discounts are available. Contact us at support@KREIA.com if you: Want to advertise on KREIA.com • Need help • Have a question
Advertise With KREIA
meetings. Or
HitzelbergerErik DennisErhard McKnightKarenMaysJohn
and click the
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Premium Levels: These four advertising levels include your ½ page ad in each issue.
ChristopherPresidentMcCartyChrisPastVicePresidentJaquith
Platinum Membership Includes extra promotion. There can be only one advertiser at this level. Our current Platinum Sponsor, FlippinLoan.com, holds exclusive renewal rights until 2023. Questions? Catch up with KREIA Sponsor/ Advertiser Chair Dennis at the email support@KREIA.com. KREIA KREIA is easy: Go to KREIA.com "JOIN" on the as an at KREIA.com
President
Join
BolotteDuna
Bronze Membership Includes free admission to monthly meetings for one person. Silver Membership Includes free admission to monthly meetings for two people. Gold Membership Includes free admission to monthly meetings for two people and gives you a skirted table in the vendors area.
to find out about all the benefits of membership for both individ uals and businesses. Too many to list here! $499 . . . . . . . . . . . . . . $699 . . . . . . . . . . . . . . . $999 . . . . . . . . Reserved . . . . . . . . $199
option
Erhard
Joining
HooperIan FentressAlexis
menu. Tell all your investing friends. The cost to join
DISCLAIMER: KREIA does NOT pre qualify, evaluate, endorse, guarantee or particular service, The Kentuckiana Real Estate Investors Association recommends you perform your own due diligence & seek appropriate legal, accounting, or other professional advice before making any investment. KREIA is a Member of National Real Estate Investors Association.
Eric Shadowens
If you’ve been to an “in person” KREIA main meeting lately, you’ve probably picked up one or more color coded lanyards that identify what kind of investor you are. Please remember to bring your lanyards with you to our main meetings!
Joe HamptonHarry Borders Renee Buster
5:30 p.m. Early Meeting with John Walton 6 p.m. Member Orientation with Jordan Pohn 6:15 p.m. The buffet line opens! Also, at the mic, there will be announcements, property pitches and sponsor pitches 7 p.m. Panel of 1031 Exchange experts take the mic
Want to learn more? Attend KREIA’s August 25th main meeting at Woodhaven Country Club: Wind your way through the buffet line and be in your seat by 7 p.m.! You’ll hear from a panel of 1031 Exchange experts. Attorney Harry Borders helps shepherd his clients through the process of the 1031 Exchange. KREIA Past President Joe Hampton (1989 1991) is a Realtor who makes 1031 Exchanges his specialty and besides having done a ton of them himself, he facilitates them for other investors. CPA Eric Shadowens knows the numbers and how the tax implications play out when doing a 1031 Exchange. All three panelists will tell you what they know at the meeting and answer your questions.
For people who want to watch from home, we will be livestreaming the meeting over Zoom: You can ask your questions in the chat, and we will relay them to the panel.
5:30 p.m. Early Meeting: John Walton
company, or person.
What’s your plan when you sell one of your rental properties? Is it to come up with cash to buy another rental property? If so ... stop. Stop now! When you sell a property, you have to pay taxes on the gain. Wouldn’t you rather NOT have to pay thousands of dollars in taxes? Wouldn’t you rather apply the full value of your present rental property to the one you’re planning to acquire?
Don’t Pay Up – Trade Up! With 1031 Exchanges
5 p.m. Doors open at Woodhaven
Remember Your Lanyard!
warranty any
deal,
Aug. 25’s panel of experts shows you how to hit the gas on growing your portfolio
And acting as moderator will be paralegal Renee Buster, who is Harry Borders’ boots on the ground, and knows quite a bit about 1031 Exchanges herself.. Have your questions ready, and be sure to speak up at the main meeting. But please wait for the microphonewanderingtomakeits way over to you before asking your question then we all can hear.
There are many rules to follow in doing a 1031 Exchange, and a time window in which to get it accomplished, but it’s a tool many investors use to accelerate building their portfolios.
You can do that with what’s called a 1031 Exchange, which is a way of “trading up” in properties while deferring taxes.
What’s going on in the supply chain these days? Is COVID still disrupting the production and distri bution of rehab supplies? Let’s ask John Walton of Express Cabinet Store when he speaks at KREIA. Illustration by Nina Musgrave August 25th’s Meeting Agenda
3Copyright MMXXII Kentuckiana Real Estate Investors Association • P.O. Box 91225 • Louisville, KY• 40291 www.KREIA.com
Color Key: Blue = Buy and Hold Investor; Orange = Flipper; Yellow = Real Estate Agent; Red = Wholesaler; Green = New Member; Purple = KREIA Sponsor; Black = Board Member.
► Turn to Page 8 for an accountant’s overview of 1031 Exchanges. Eric Shadowens has written an in depth article laying out steps and rules: good info to know before attending the meeting.
4Copyright MMXXII Kentuckiana Real Estate Investors Association • P.O. Box 91225 • Louisville, KY• 40291 www.KREIA.com DISCLAIMER: KREIA does NOT pre qualify, evaluate, endorse, guarantee or warranty any particular deal, service, company, or person. The Kentuckiana Real Estate Investors Association recommends you perform your own due diligence & seek appropriate legal, accounting, or other professional advice before making any investment. KREIA is a Member of National Real Estate Investors Association. Welcome, New KREIA Members! Andrew Beeli Cassidy Case Drew Cookenmaster James Crenshaw Glenn SamuelMacraeMinter Carson NicholasMosserParrott Roger Spalding Meaghan Thompson Jimmy Welch Luther Williams KREIA’s New Member Orientation Jordan Pohn will give a short presentation of the bene fits of joining KREIA at every regular monthly main meet ing. We offer many educational and cost saving oppor tunities! Join him in the small conference room at 6 p.m. Online Presentation: You can view a recent session with Jordan and Stacey Duvall by visiting the Intro to KREIA page at kreia.com (About/Intro to KREIA on the menu). On the Member Benefits page (Join/Member Benefits), you’ll learn how to secure your discounts and bonuses.
5Copyright MMXXII Kentuckiana Real Estate Investors Association • P.O. Box 91225 • Louisville, KY• 40291 www.KREIA.com DISCLAIMER: KREIA does NOT pre qualify, evaluate, endorse, guarantee or warranty any particular deal, service, company, or person. The Kentuckiana Real Estate Investors Association recommends you perform your own due diligence & seek appropriate legal, accounting, or other professional advice before making any investment. KREIA is a Member of National Real Estate Investors Association.
5. Especially if the house has been vacant for a while, try to turn on the water and test all of the drains. Many times, even on homes not vacant, the sewer lines are clogged with tree roots. Better to discover this before you make your offer versus discovering it later. Also, try to determine where the sewer line runs from the house to the main line. Are there any bushes/trees along the line? If so, they gotta go!
or Hate ’em?
6. Fence Rows – take a careful look before you make your offer. Are they covered completely by a jungle? Odds are, you have seen some old fences with trees growing IN the fence. Don’t try to tell yourself “I can deal with that later” to save money now, because that’s exactly what I did when I got started. Guess what? “Later” never happened until the next tenant turnover.
Continued on Page 26
Love ’
6Copyright MMXXII Kentuckiana Real Estate Investors Association • P.O. Box 91225 • Louisville, KY• 40291 www.KREIA.com
Now when it comes to your home, you can have your dream home in a tree house in a forest chock full of trees because it is what you want. Totally different reason. My wife is a big tree hugger, and we do have some big discussions involving trees at our home. Back to your investment properties. Doesn’t it seem like almost every property you look at to buy, especially those fixer uppers, have a full blown Vietnam jungle or trees, trees, and more trees on the property? Trees, maintained properly, can make a home’s back yard or front yard feel like a cozy and peaceful park. First, let’s start with the end in mind. And to keep it simple, let’s use a cookie cutter, three bedroom brick ranch with a concrete driveway and a block garage. To make this home qualify as “Rent Ready,” it must pass our 159 point Rent Ready Checklist. Here’s the end result involving trees on your property:
DISCLAIMER: KREIA does NOT pre qualify, evaluate, endorse, guarantee or warranty any particular deal, service, company, or person. The Kentuckiana Real Estate Investors Association recommends you perform your own due diligence & seek appropriate legal, accounting, or other professional advice before making any investment. KREIA is a Member of National Real Estate Investors Association.
1. You MUST remove all dead trees and dead tree branches. This is a Housing Code enforcement violation, and you will get a fine if you ignore it. The worst part is that once House for rent I found on the Internet today. The interior is immaculate. House with trees trimmed 10 feet or more. Doesn’t it look prettier & safer? you have received notice of the dead tree/branch from anyone, including neighbors, if the dead tree/branch falls and damages property or injures someone, your insurance company can refuse to cover the damages because of your “negligence.” Yeah, the insurance company would have to discover you had “notice,” but let’s try to remove this skeleton from your closet.
By Mike Butler You might get your feathers ruffled on this one, but trees can be a critical factor to consider before you make your offer on an investment property of any kind. Why? Because they can play a major role in your repair/rehab costs. We’re talking about your
2. Imagine yourself standing on the roof holding an 8foot 2x4 from Home Depot. Walk around the entire roof waving this board. You want to trim back any and all tree limbs away from this roof so your 2x4 does NOT touch any leaves or branches. This also includes any trees growing this close to your house. Repeat for the garage as well. This is important because you want to buy yourself several YEARS of not having this worry.
3. After you get off the roof safely, take your same 2x4 and walk around the yard waving your board, trying to touch tree limbs and branches. Once again, remove all tree limbs and branches so you cannot touch any of them with your 2x4. Do this for the entire property, both front and rear yard.
TREES! em financial investment, not emotional, political, or planetary attitudes.
4. Lastly, look for trees (or bushes that have turned into trees) that are close to the home, garage, sidewalks, patios, and driveway. Trees and bushes can cause major damage to your foundations and floors, and they can buckle sidewalks and driveways. Remove them now to prevent further damage. You MUST factor these costs into your repair costs BEFORE you make your offer.
7Copyright MMXXII Kentuckiana Real Estate Investors Association • P.O. Box 91225 • Louisville, KY• 40291 www.KREIA.com DISCLAIMER: KREIA does NOT pre qualify, evaluate, endorse, guarantee or warranty any particular deal, service, company, or person. The Kentuckiana Real Estate Investors Association recommends you perform your own due diligence & seek appropriate legal, accounting, or other professional advice before making any investment. KREIA is a Member of National Real Estate Investors Association. ATTORNEYS AT LAW 920 Dupont Road, Louisville, KY 40207 bordersandborders.com • (502) 894-9200 Representing real estate investors, mortgage companies, banks, builders and buyers since the early 1970s with… ✓ Residential & Commercial Closings ✓ Title Searches ✓ 1031 Exchanges ✓ Business Formation ✓ Wills & Probate ✓ Title Insurance ✓ Contract Prep & Review ✓ Powers of Attorney ✓ Investor Guidance Practicing in Kentucky THIS IS AN ADVERTISEMENT
Deferral of Gain There are a few options to defer your gain. You may have heard of deferring your gain by investing through a Qualified Oppor tunity Fund. This is a newer option that was introduced in late 2017, but it’s not an option I’m discussing today. The 1031 is the option I’d like to point out.
8Copyright MMXXI Kentuckiana Real Estate Investors Association • P.O. Box 91225 • Louisville, KY• 40291 www.KREIA.com DISCLAIMER: KREIA does NOT pre qualify, evaluate, endorse, guarantee or warranty any particular deal, service, company, or person. The Kentuckiana Real Estate Investors Association recommends you perform your own due diligence & seek appropriate legal, accounting, or other professional advice before making any investment. KREIA is a Member of National Real Estate Investors Association. would be a state tax such as 5% here in Kentucky aslocalpotentiallyandataxsuchJefferson County, which is 2.2%.
Like-Kind 1031
• Purchase your identified property within 180 calendar days of the relinquished property closing
To accomplish a 1031, the proceeds from the sale of your property would need to be transferred at closing to a Qualified Intermediary (QI). A QI is a 3rd party who is independent of you. The QI holds the sale proceeds received Continued on Page 30 and leave with a few packs of cards. The anticipation of opening the packs to see whose cards were inside was always exciting. I would feel lucky to see a Pete Rose, Johnny Bench or even an Eric Davis card. And the moment I would pull a rookie card of Barry Larkin, Kirby Puckett or Ken Griffey Jr. would be like I won the lottery.
I would take the time to carefully go through each pack, separating the good cards from the common cards, then display my most favorite on the top of my dresser in my bedroom. On nights I would get to spend with friends from school, we would all bring our cards to flip through and inquire about trades. I once recall a school friend who offered up a Michael Jordan rookie basketball card (value today is more than $100k) for a combination of my Eric Davis, Kirby Puckett and Barry Larkin rookie cards (combined value today is less than $1k). The nerve of that fellow trying to sneak in a dumb basketball card for my prized baseball cards. Yeah, I was never the best judge of future value on cards. It didn’t seem as a “like kind” exchange in my mind at the time. This story helps me transition into the purpose of this article and what it means to you as a real estate investor. A Like Kind Exchange (1031) of real property is like my baseball card trading days. It’s even more important because of the money you can save by performing the exchange.
123rf.com stock photo
• Consider mortgage debt relief
In a perfect world you may decide to sell your property and are able to find another investor who will sell you their property while purchasing yours. Generally, that is a simultaneous exchange. As the last few years have taught us, we do not live in a perfect world. Therefore, a common occurrence is that you sell your property but need to find a replacement property from someone other than the purchaser of your property.
Qualified Intermediary
• Use a qualified intermediary to assist with the exchange
Generally, all your realized gain from your sale of a business or investment property can be deferred using a 1031 by meeting a few requirements:
How Michael Jordan can teach you the benefits
• Identify your replacement property within 45 calendar days after the close of your relinquished property
• Put in equal or more money or buy an equal or larger valued property
By Eric Shadowens One of my best memories growing up was collecting baseball cards. It was always a great feeling to save up a few quarters and get the chance to run into the local Convenient Food Mart (Hey, Vern!) and plunk down the money
Imagine how these past few years have gone with COVID and the uncertainty of tenants’ income. In addition, consider how home values continue to skyrocket. There is a potential for a huge movement in houses in the coming months. You have a few homes in your portfolio you are looking to move but are unsure of doing so because you will recognize a large gain due to the appreciation explosion resulting from high demand and low inventory. You purchased a home just 2 years ago through a whole saler and at a decent discounted price. You made a few improvements, but after looking at comparable sales today you believe you could realize a $50,000 gain if you sold it. Selling that home could cost you thousands in taxes as you may be responsible for depreciation recapture up to 25%, capital gain up to 20% as well as potentially being required to pay 3.8% of net investment income tax. In addition, there of a Exchange
Gain on Sale of Property
Copyright MMXXII Kentuckiana Real Estate Investors Association • P.O. Box 91225 • Louisville, KY• 40291 www.KREIA.com DISCLAIMER: KREIA does NOT pre qualify, evaluate, endorse, guarantee or warranty any particular deal, service, company, or person. The Kentuckiana Real Estate Investors Association recommends you perform your own due diligence & seek appropriate legal, accounting, or other professional advice before making any investment. KREIA is a Member of National Real Estate Investors Association. 9
By Nina Musgrave, KREIA Volunteer If you’ve ever thought, “This looks like a deal! I could build a duplex here! Wait… Why can’t I build a duplex here? Or a quad? Or anything besides a SFR, for that matter? Why is the zoning like this?” I invite you to attend one or more of the following upcoming hands on workshops with Metro Planning & Design:
August 30, 2022, at 6 p.m. Crescent Hill Community Meeting Room 2762 Frankfort Avenue, 40206
Continued from Page 1
Time will be made at the beginning of each workshop for new participants to learn about the LDC reform, meet staff, and ask questions. Many of the workshops are designed independently of each other; meaning that you do not need to attend them in any specific order, and you do not need to attend one to understand another.
Metro’s LDC Reform on Middle Housing
Metro started evolving our Land Development Code in 2020. They have had meetings, community hearings, hired professional studies and analysis, and reviewed peer cities. This type of reform hasn’t happened before, and it is part of our Plan 2040. As investors, it is a unique opportunity to be a part of the change to improve our community. Hope to see you at one of the meetings!
To your investing success and to an abundant life!
September 7, 2022, at 6 p.m. Newburg Library Community Meeting Room 800 Exeter Avenue, 40218
September 13, 2022, at 6 p.m. Iroquois Library Community Meeting Room 601 W. Woodlawn Avenue, 40215 What happens at these workshops? Per the Planning & Design website: A collection of workshops and discussions have been designed to inform recommendations to amend the Land Development Code. The activities and discussions of each workshop intend to provoke collaboration and encourage debate.
Get involved and voice your opinion – attend an upcoming workshop
The workshops in August and September are focused on Middle Housing. What is Middle Housing? Middle Housing is basically every type of housing in between SFR and large apartment/condo complexes. The Land Development Code in Jefferson County is restrictive and hasn’t allowed for housing like cottage courts, courtyard buildings, small/medium multiplexes, and live/work parcels due to strict density, dwelling units and lot size requirements. The first zoning ordinance was adopted in 1931 and began to separate where middle housing could be built. SFRs became the norm because they were all that was permitted to be built, per zoning regulations.
10Copyright MMXXI Kentuckiana Real Estate Investors Association • P.O. Box 91225 • Louisville, KY• 40291 www.KREIA.com DISCLAIMER: KREIA does NOT pre qualify, evaluate, endorse, guarantee or warranty any particular deal, service, company, or person. The Kentuckiana Real Estate Investors Association recommends you perform your own due diligence & seek appropriate legal, accounting, or other professional advice before making any investment. KREIA is a Member of National Real Estate Investors Association.
Erik Hitzelberger: President’s Letter
When it comes to achieving our financial goals, the tax code offers several levers. We simply need to find the ones applicable to our situation and apply pressure. This month’s guests are going to teach us how to do just that with respect to 1031 Exchanges. Joe Hampton, Harry Borders and Eric Shadowens are experts at helping investors minimize and/or defer tax liabilities. The strategies they will share 1) allow us to keep more money and 2) give us more capital to use while we are growing our businesses. This is a must attend event if you already own investment properties and are trying to grow faster or are considering an exit strategy. Even if you don’t own property today, you should attend just to learn what you can do as you build your portfolio. We will continue to meet online and via Zoom. Either way, I hope to see you there!
Continuing over the years, zoning became more inflexible and unequal. Many neighborhoods have suffered because of discriminatory zoning ordinances. (For more information on how Metro is confronting racism in planning and zoning, check out this special project at bit.ly/k2208zoning)
August 24, 2022, at 6 p.m. Shawnee Library Community Meeting Room 3912 W. Broadway, 40211
11 PRO-TECH FLOORING Floor Refinishing Specialist Hardwood Floors Installed Floor Repairs • Poly Recoating Dry Foam Carpet Cleaning Insured Member Office Mobile Fax 966 9300 500 8775 961 5730 David Williams, Contractor FREE ESTIMATES Do You Want Your Business Card to Appear in KREIA’s Newsletter? Become a Business Card Member for only $199/year and see your ad in a year’s worth of issues! You can upgrade to a business membership at any time.
12Copyright MMXXII Kentuckiana Real Estate Investors Association • P.O. Box 91225 • Louisville, KY• 40291 www.KREIA.com DISCLAIMER: KREIA does NOT pre qualify, evaluate, endorse, guarantee or warranty any particular deal, service, company, or person. The Kentuckiana Real Estate Investors Association recommends you perform your own due diligence & seek appropriate legal, accounting, or other professional advice before making any investment. KREIA is a Member of National Real Estate Investors Association.
13Copyright MMXXII Kentuckiana Real Estate Investors Association • P.O. Box 91225 • Louisville, KY• 40291 www.KREIA.com DISCLAIMER: KREIA does NOT pre qualify, evaluate, endorse, guarantee or warranty any particular deal, service, company, or person. The Kentuckiana Real Estate Investors Association recommends you perform your own due diligence & seek appropriate legal, accounting, or other professional advice before making any investment. KREIA is a Member of National Real Estate Investors Association.
14Copyright MMXXII Kentuckiana Real Estate Investors Association • P.O. Box 91225 • Louisville, KY• 40291 www.KREIA.com DISCLAIMER: KREIA does NOT pre qualify, evaluate, endorse, guarantee or warranty any particular deal, service, company, or person. The Kentuckiana Real Estate Investors Association recommends you perform your own due diligence & seek appropriate legal, accounting, or other professional advice before making any investment. KREIA is a Member of National Real Estate Investors Association.
Copyright MMXXII Kentuckiana Real Estate Investors Association • P.O. Box 91225 • Louisville, KY• 40291 www.KREIA.com DISCLAIMER: KREIA does NOT pre qualify, evaluate, endorse, guarantee or warranty any particular deal, service, company, or person. The Kentuckiana Real Estate Investors Association recommends you perform your own due diligence & seek appropriate legal, accounting, or other professional advice before making any investment. KREIA is a Member of National Real Estate Investors Association. 15 5236 Dixie Hwy
Photos courtesy of Alexis Fentress
Check Out KREIA’s New Clothing Line!
An added bonus, 100% of the proceeds from the sales will go directly to Home of the Innocents. As most of you know, this has been our philanthropy for many years, and we are so excited to implement another way to make a positive impact on children’s lives here in our hometown. Happy shopping, and keep buying real estate!
This journey began when I really wanted to rock some KREIA apparel. I met with Nina because we have been a team for almost 3 years now (Nina helps with KREIA’s event graphics), and that’s when I found out that she, too, had worked in the apparel industry. Her parents have owned and operated a screen print business for many years, and I knew then that we were the right people for this endeavor. Before real estate, I graduated from the University of Kentucky with a bachelor’s degree in Fashion. Just before graduation I decided it was time to make my childhood dream a reality: I created a Christian clothing line. I loved creating new designs and putting together photo shoots. I learned a very valuable lesson from my apparel business that I’ve carried with me into real estate, and that’s what has helped me become successful to this day: you can’t build an empire by yourself.
16Copyright MMXXI Kentuckiana Real Estate Investors Association • P.O. Box 91225 • Louisville, KY• 40291 www.KREIA.com DISCLAIMER: KREIA does NOT pre qualify, evaluate, endorse, guarantee or warranty any particular deal, service, company, or person. The Kentuckiana Real Estate Investors Association recommends you perform your own due diligence & seek appropriate legal, accounting, or other professional advice before making any investment. KREIA is a Member of National Real Estate Investors Association. hope you will love it as much as we do. We decided to stick with our association colors (blue and red) and keep the designs simple, for now. We have future plans and welcome any feedback or suggestions on what you may like to see in theFunstorefront.fact:Eric George and Nina decided on the colors red and blue to incorporate both U of L and UK fans. You’ll find the link to the storefront on the home page of the website at KREIA.com on the right hand side. (If you’re on a phone, keep scrolling.) For now there are men’s and women t shirt options and a hoodie. Just place your order and your item will be shipped directly to your doorstep.
I eventually became burnt out because I thought I could do everything on my own and was too fearful of hiring someone else because they “just weren’t going to love my business the way I do.” Anyway, I guess you could say that I always knew I was going to be an entrepreneur. As we continue to grow KREIA’s merchandise line, we By Alexis Fentress I am so proud to announce the launch of KREIA’s first ever merchandise line! Nina Musgrave and I have been collaborating on this project for almost a year, and we are so happy to have a finished product to offer.
17Copyright MMXXII Kentuckiana Real Estate Investors Association • P.O. Box 91225 • Louisville, KY• 40291 www.KREIA.com DISCLAIMER: KREIA does NOT pre qualify, evaluate, endorse, guarantee or warranty any particular deal, service, company, or person. The Kentuckiana Real Estate Investors Association recommends you perform your own due diligence & seek appropriate legal, accounting, or other professional advice before making any investment. KREIA is a Member of National Real Estate Investors Association.
18Copyright MMXXII Kentuckiana Real Estate Investors Association • P.O. Box 91225 • Louisville, KY• 40291 www.KREIA.com DISCLAIMER: KREIA does NOT pre qualify, evaluate, endorse, guarantee or warranty any particular deal, service, company, or person. The Kentuckiana Real Estate Investors Association recommends you perform your own due diligence & seek appropriate legal, accounting, or other professional advice before making any investment. KREIA is a Member of National Real Estate Investors Association.
19Copyright MMXXII Kentuckiana Real Estate Investors Association • P.O. Box 91225 • Louisville, KY• 40291 www.KREIA.com DISCLAIMER: KREIA does NOT pre qualify, evaluate, endorse, guarantee or warranty any particular deal, service, company, or person. The Kentuckiana Real Estate Investors Association recommends you perform your own due diligence & seek appropriate legal, accounting, or other professional advice before making any investment. KREIA is a Member of National Real Estate Investors Association.
At left and above: At July’s main meeting, Mark Dolfini, aka “The Landlord Coach,” talked about how we can become time wealthy investors. He used systems to reduce his work week from more than 60 hours to under 10! If you want more instruction on how to pull off a feat like that yourself, be sure to sign up for his Aug. 27 & 28 workshop! (Photos courtesy of AJ Buster)
Above, left to right: It was full participation day at August 10th’s Lunch & Learn. Jordan Pohn headlined the lunch event, talking about hard money and the economy. Duna Bolotte hosted and introduced Jordan to the KREIA crowd. Ed Gibson asked follow up questions.
What: ‘Workshop Creating Time Wealthy Advantage’ When: August 27 & 28 How Much: $147 for members, $247 for non members Why: Because you need to get your time back!
Visit KREIA’s Public Facebook Page and Private Group to catch up with investor friends and their photos! KREIA Photos 20
KREIA Past President Dennis Erhard jumped in with more questions and a few answers. Julia King, of King Financial Repair, shared details of her recent hard money loan for a rehab project. And Tony Gregory, commercial lender with Towne & Country Bank, answered questions about ARMs and the ‘R’ that goes with ‘Refinance’ in the BRRRR strategy. (Photo courtesy of Lauren Willoughby)
Mary Conrad hires a general contractor and flips inside her IRA
THE Purchase:NUMBERS
seek appropriate legal, accounting, or other professional advice before making any investment.
A tired landlord was selling the Bullitt house, so Mary had asked if he had anything else available and he did. This house off Taylor Boulevard, the very last house of a 50 house package he was selling off. Tip #1: Ask sellers if they have other properties to sell especially if they’re landlords. If the owner is tired of tenants, the answer could be a relieved yes.
21Copyright MMXX Kentuckiana Real Estate Investors Association • P.O. Box 91225 • Louisville, KY• 40291 www.KREIA.com
does
The potential was obvious to everyone who attended. The work done by Mary’s GC was gorgeous. The cabinets (a bargain she found used) looked amazing, as did the floors. And the bathroom tub features subway tile all the way to the ceiling. Mary was excited to show off a remote commode flushing button attached to the side of the vanity which was a bargain her GC found. I think that’s a first for L.O.T.S.! And a cool bit of bathroom tech.
Gross or not, this 2 bed, 1 bath house had an asking price of $108,000. Mary made an offer of $75,000, but an inspection showed so much wrong that she decided not to go forward. But her agent persuaded her to stick with it. “Tell you what,” Mary recalled saying to the agent,
$52,000 Rehab + All Expenses: $36,285 Sale Price: $138,000 Net Income to Roth IRA: $49,715 Find videothefrom this L.O.T.S. event available soon on our Videos page. Take a tour of the house with Karen McKnight!
Mary said this house was also on the MLS, but the Realtor (a relative of the seller)
pre qualify, evaluate, endorse, guarantee or warranty any particular deal, service, company, or person. The
Investors Association.
Rehab House: A Closer Look
Why did she flip it instead of turning it into a rental? “The only reason I’m not keeping it is because it’s in my Roth IRA, and I would have to hire a property manager to manage it.”
DISCLAIMER: KREIA NOT Kentuckiana Real Estate Investors Association & KREIA is a Member of National Real Estate
She added that if she had decided to keep it as a rental, she would have added an ADU and sectioned off the large garage and rented that out separately. “This house has so much potential.”
Some KREIA members said they wished they’d spotted the house first. Then Mary pointed out that she did offer it up as a wholesale deal during a main meeting property pitch, but there were no takers.
By Lauren Willoughby Mary Conrad’s recent rehab in Beech wood, the focus of our August 10th L.O.T.S. event, came about because she found a house in Bullitt County on the MLS. In her presentation describing her journey from the Bullitt house to this one, Mary dropped some golden tips.
L.O.T.S. host Mary Conrad
Tip #4: Be sure to take notes when houses are offered up at property pitches! didn’t go above and beyond in marketing it. There were no signs in either yard, and Mary concluded from the listings, which contained no interior photos, that the agent may not have even stepped inside either house, “because they were so gross.”
recommends you perform your own due diligence
Why do we call it “L.O.T.S.”? Because we Learn On The Site! “$52,000 or I walk away…. And they accepted $52k.” At this, the KREIA crowd applauded So, Tip #2: Don’t be afraid to make a low ball offer. Mary ended up buying both houses. She used her traditional IRA to purchase the Bullitt house. For this one, she used her Roth IRA.Tip #3: There are still deals on the MLS, despite naysayers.
Beechmont
The house at 4114 Henry Ave., off Taylor Blvd., sits on an oversize lot that offers room for an Accessory Dwelling Unit. (Photos by Lauren Willoughby)
22Copyright MMXXII Kentuckiana Real Estate Investors Association • P.O. Box 91225 • Louisville, KY• 40291 www.KREIA.com DISCLAIMER: KREIA does NOT pre qualify, evaluate, endorse, guarantee or warranty any particular deal, service, company, or person. The Kentuckiana Real Estate Investors Association recommends you perform your own due diligence & seek appropriate legal, accounting, or other professional advice before making any investment. KREIA is a Member of National Real Estate Investors Association.
23Copyright MMXXII Kentuckiana Real Estate Investors Association • P.O. Box 91225 • Louisville, KY• 40291 www.KREIA.com DISCLAIMER: KREIA does NOT pre qualify, evaluate, endorse, guarantee or warranty any particular deal, service, company, or person. The Kentuckiana Real Estate Investors Association recommends you perform your own due diligence & seek appropriate legal, accounting, or other professional advice before making any investment. KREIA is a Member of National Real Estate Investors Association.
24Copyright MMXXII Kentuckiana Real Estate Investors Association • P.O. Box 91225 • Louisville, KY• 40291 www.KREIA.com DISCLAIMER: KREIA does NOT pre qualify, evaluate, endorse, guarantee or warranty any particular deal, service, company, or person. The Kentuckiana Real Estate Investors Association recommends you perform your own due diligence & seek appropriate legal, accounting, or other professional advice before making any investment. KREIA is a Member of National Real Estate Investors Association.
25Copyright MMXXII Kentuckiana Real Estate Investors Association • P.O. Box 91225 • Louisville, KY• 40291 www.KREIA.com DISCLAIMER: KREIA does NOT pre qualify, evaluate, endorse, guarantee or warranty any particular deal, service, company, or person. The Kentuckiana Real Estate Investors Association recommends you perform your own due diligence & seek appropriate legal, accounting, or other professional advice before making any investment. KREIA is a Member of National Real Estate Investors Association. Do You Want Your Business Card to Appear Here? Join KREIA as a Business Card Advertiser for only $199/year and see your ad in a year's worth of KREIA newsletter issues!
• Call the insurance agent listed on the proof of insurance they send you to verify they are properly insured and document this call or email. Many investors have found out the hard way that dates of the policy have been changed.
Insurance companies do this because when a board comes flying into your window during a storm, there’s no way to identify where the board came from. If you have your neighbor’s tree hanging over your property line, you can whack all the limbs and branches back to your invisible property line, and your neighbor can do the same to your trees hanging over into their property.
✓ Tree limbs and branches hanging over your roof might look okay today, but when it rains and they get wet or coated with ice, they rub, scrape, and damage your roof’s shingles, causing major damage and voiding the warranty, if any, you have on your roof.
✓ Personal Safety is paramount in today’s world. It just feels safer when you can see the entire yard from inside the home and from the street. Fewer places for bad people to hide in the yard.
✓ Along this same area, these tree limbs and branches cause your gutters and downspouts to get clogged up. When this happens, it can get very ugly, very fast. Clogged gutters can cause water to run inside the home. The water can run down inside the walls and even onto your ceilings, causing them to cave in from the water damage.
✓ It just looks better, and your neighbors will be happier and thank you.
To Your Continued $uccess, P.S. Sign Up for Your FREE Investor Training Every Tuesday at 12 noon: MikeButler.com/PowerLunch
Mike Butler is a KREIA Past President, a recipient of the Ed Melton Award, a property manager, a high volume landlord, a principal in Tenant Finder Service, a retired Louisville undercover police detective, and the author of the best selling real estate book “Landlording on Autopilot,” now available in its 2nd edition.
Also, catch Mike’s real estate investing podcast: www.5hrRealEstateWeek.com
• When doing your move out inspection with this resident present, take the same 4 corner photos capturing photos of the fence rows. Many times you will find your resident has not maintained the fence rows, and they have allowed vegetation, bushes and more to grow into them. Now you have “evidence” showing before and after to charge your resident for cleaning the fence rows properly.
✓ While we are on gutters and downspouts, make sure the downspout drains away from the house and does not pool back against the foundation. Dumping all that water next to the foundation has caused many basement leaks and foundation damage.
Investor Do’s and Don’ts When It Comes to Trees. Tree Services the removal, cutting and trimming of trees is a very hazardous occupation requiring very expensive worker compensation policy premiums. This is NOT a time to get
• Ask for references, but not from homeowners. Instead, ask about other investors and/or real estate companies they have done work for. Hopefully they will rattle off a name of a person you know, and you can give that person a call on how they did.
There Are Many Benefits For You And Your Resident:
• Get proof of insurance from the tree service company
✓ Having all limbs and branches at least 12 feet above the ground makes for super simple, easy and fast lawn care.
COMMON SENSE is paramount. When weather tragedies strike, such as high winds, tornadoes, ice storms and more, tree service companies are overwhelmed with work, and they charge retail or higher prices. If possible, try to do a short term band aid approach to make the area safe and not dangerous. Call the tree service during “slow time,” and they will almost always give you a cheaper price.
Property Lines and Insurance: just in case you did not know this, as far as insurance goes, there is an imaginary invisible wall/fence that extends up into the skies above your property lines. You are responsible for everything inside your invisible property line fence regardless of the source. The same applies to your neighbors.
Larry, Darryl and his other brother Darryl to do the work. Yes, this does cost more, but you get peace of mind with quality work that is insured.
26Copyright MMXXII Kentuckiana Real Estate Investors Association • P.O. Box 91225 • Louisville, KY• 40291 www.KREIA.com DISCLAIMER: KREIA does NOT pre qualify, evaluate, endorse, guarantee or warranty any particular deal, service, company, or person. The Kentuckiana Real Estate Investors Association recommends you perform your own due diligence & seek appropriate legal, accounting, or other professional advice before making any investment. KREIA is a Member of National Real Estate Investors Association. Mike Butler: TREES! Love ’em or Hate ’em? Continued from Page 6 • Here’s what you should do and why: Factor in the cost to make the fence rows clean, neat, and free of any vegetation before you make your offer.
• Your Move In photos must include shots of the house showing the clean fence rows. The simplest way to do this is to take “4 Corners of the Property” photos. These photos are part of your move in photos and will be used when you have your next tenant turnover.
27Copyright MMXXII Kentuckiana Real Estate Investors Association • P.O. Box 91225 • Louisville, KY• 40291 www.KREIA.com DISCLAIMER: KREIA does NOT pre qualify, evaluate, endorse, guarantee or warranty any particular deal, service, company, or person. The Kentuckiana Real Estate Investors Association recommends you perform your own due diligence & seek appropriate legal, accounting, or other professional advice before making any investment. KREIA is a Member of National Real Estate Investors Association.
28Copyright MMXXII Kentuckiana Real Estate Investors Association • P.O. Box 91225 • Louisville, KY• 40291 www.KREIA.com DISCLAIMER: KREIA does NOT pre qualify, evaluate, endorse, guarantee or warranty any particular deal, service, company, or person. The Kentuckiana Real Estate Investors Association recommends you perform your own due diligence & seek appropriate legal, accounting, or other professional advice before making any investment. KREIA is a Member of National Real Estate Investors Association.
29Copyright MMXXII Kentuckiana Real Estate Investors Association • P.O. Box 91225 • Louisville, KY• 40291 www.KREIA.com DISCLAIMER: KREIA does NOT pre qualify, evaluate, endorse, guarantee or warranty any particular deal, service, company, or person. The Kentuckiana Real Estate Investors Association recommends you perform your own due diligence & seek appropriate legal, accounting, or other professional advice before making any investment. KREIA is a Member of National Real Estate Investors Association.
In addition to the 45 day window, you also have a 180 day window from the date you close your relinquished property to purchase and close on your replacement property. The housing market is booming right now with homes being sold in some cases less than 2 days. It can be a tricky situation trying to plan the 1031. You’ll need to move quickly on your identification and closing proc ess to make sure you don’t exceed the time frame allowable for tax deferral. Make sure you stay in constant contact with your tax advisor, QI, realtor, loan officer, closing attorney and all others involved in helping you achieve the 1031.
Imagine you come across a good deal on a home you’d like to add to your portfolio and have been wanting to get rid
Continued on Page 34 in escrow and transfers the money at the closing of the replacement property once purchased. Basically, the QI keeps you, the exchanger, from handling the money from the sale of your property to keep you eligible to defer tax on theTheregain. have been cases where QIs have been less than trustworthy, so it’s important you complete your due diligence on selecting a QI prior to having them hold your proceeds during the exchange process.
professional advice before making any investment.
HEY! What About Flipped Homes?
How do you know if your property is inventory or investment? There is a facts and circumstance test known as the Winthrop Factors. It is commonly used to help establish your original and current intent for the use of the property, how long you have held the property, as well as how often you transfer properties, which are among some of the factors used to determine where your property falls between inventory and investment.
pre qualify, evaluate, endorse, guarantee or warranty any
Since a simultaneous exchange is not common, there is a window of time allowed for you to select your replacement property. For example, you’ve just completed the closing of your property and haven’t yet found a replacement property. No worries. You have 45 days from the closing date of your relinquished property to just identify a replacement property.Youhave a few options in identifying property because we all know buying the first property identified may not happen. Therefore, you can identify up to 3 properties in the 45 day window. A second option would be to choose 4+ properties, but the aggregate fair market value of the identified proper ties may not exceed 200% of the sale price of your relin quished property. Finally, your third option would be to iden tify however many properties you’d like, but you must ulti mately purchase 95% of the market value of all properties identified.
does
deal, service, company, or person. The
Typically, when you sell one of your investments, you likely had it mortgaged, and the sale will help to pay off the mortgage. That’s perfectly fine when accomplishing a 1031, but something you’ll want to consider so that you don’t find yourself in a taxable situation.
Replace With Equal or Larger Valued Property
Debt relief reduces what you owed on the investment property and is considered taxable income if not properly replaced. Debt relief is replaced by mortgaging your replacement property at equal or greater value of the original debt. It can also be replaced by bringing your own cash to the closing of the replacement property along with the proceeds received from the relinquished property.
Mortgage Debt Relief
Also, you’ll want to avoid financing more than necessary on the replacement property, creating additional cash to pull out. This could create a taxable situation. Refinancing after holding the replacement property for at least a year (2 years is better) after the 1031 is finalized is the option to avoid recognizing gain.
recommends you
If you are a flipper, I realize you may be getting super excited reading through this article, but please keep in mind your properties would generally not be eligible for a 1031 as your properties are considered inventory and not investment property. Gain on sales of inventory property would be subject to ordinary income tax typically while investment property is generally a capital gain.
Eric Shadowens: Like Kind 1031 Exchanges Continued from Page 8
Reverse Exchange
There is some flexibility to the 1031. You may find the timeframe to identify and close on the replacement property extremely difficult. The Reverse Exchange will allow you to first find a replacement property and then identify the properties you want to relinquish.
180 Days to Close on Replacement Property
The whole idea of a 1031 is you want to avoid paying any taxes on the sale of one of your investment properties. Generally, you’ll avoid taxes when the purchase price of your replacement property matches or exceeds the selling price of your relinquished property.
30Copyright MMXXI Kentuckiana Real Estate Investors Association • P.O. Box 91225 • Louisville, KY• 40291 www.KREIA.com
DISCLAIMER: KREIA NOT particular Kentuckiana Real Estate Investors Association perform your own due diligence & seek appropriate legal, accounting, or other KREIA is a Member of National Real Estate Investors Association. of one of your current investment homes that is not performing as well, but the value has significantly increased. You could accomplish a 1031 by purchasing the replacement property first and then selling the relinquished property within the same timeframes as a normal 1031. Please keep in mind there are additional hurdles I’m not mentioning in this article you’ll want to understand before diving into the Reverse Exchange.
45 Days to Identify Property
31Copyright MMXXII Kentuckiana Real Estate Investors Association • P.O. Box 91225 • Louisville, KY• 40291 www.KREIA.com DISCLAIMER: KREIA does NOT pre qualify, evaluate, endorse, guarantee or warranty any particular deal, service, company, or person. The Kentuckiana Real Estate Investors Association recommends you perform your own due diligence & seek appropriate legal, accounting, or other professional advice before making any investment. KREIA is a Member of National Real Estate Investors Association.
32Copyright MMXXII Kentuckiana Real Estate Investors Association • P.O. Box 91225 • Louisville, KY• 40291 www.KREIA.com DISCLAIMER: KREIA does NOT pre qualify, evaluate, endorse, guarantee or warranty any particular deal, service, company, or person. The Kentuckiana Real Estate Investors Association recommends you perform your own due diligence & seek appropriate legal, accounting, or other professional advice before making any investment. KREIA is a Member of National Real Estate Investors Association.
33Copyright MMXXII Kentuckiana Real Estate Investors Association • P.O. Box 91225 • Louisville, KY• 40291 www.KREIA.com DISCLAIMER: KREIA does NOT pre qualify, evaluate, endorse, guarantee or warranty any particular deal, service, company, or person. The Kentuckiana Real Estate Investors Association recommends you perform your own due diligence & seek appropriate legal, accounting, or other professional advice before making any investment. KREIA is a Member of National Real Estate Investors Association.
34Copyright MMXXII Kentuckiana Real Estate Investors Association • P.O. Box 91225 • Louisville, KY• 40291 www.KREIA.com DISCLAIMER: KREIA does NOT pre qualify, evaluate, endorse, guarantee or warranty any particular deal, service, company, or person. The Kentuckiana Real Estate Investors Association recommends you perform your own due diligence & seek appropriate legal, accounting, or other professional advice before making any investment. KREIA is a Member of National Real Estate Investors Association. Follow us, like us, join us @reiaky Eric Shadowens: Like-Kind 1031 Exchanges Continued from Page 30
Kick the Can Down the Road
Do you remember the fuss about President Trump’s tax returns and his unwillingness to release them to the public? A portion of his returns were leaked a few years back and revealed he had paid little or no income tax for several years. You may recall he is heavily invested in real estate. He likely has taken advantage of real estate rules such as using real estate losses to offset his ordinary income as well as 1031s to defer taxes.
A typical strategy used in real estate investing is to kick the can down the road. That means you would begin investing in real estate. At some point you’d like to buy up in value or maybe reduce your portfolio. You could do so by taking advantage of a 1031. You continue to do that while continuing to defer potential taxes. Then you die. Sounds morbid, but this is a great opportunity because you likely have set up an estate where, once you pass, someone is named as a beneficiary to your Currentlyestate.those beneficiaries inheriting assets receive a step up in basis. If you were to die today and your beneficiary received your rental portfolio, they’d inherit it at today’s fair market value. Therefore, if you have one home you purchased for $25,000 that now has a fair market value of $100,000, your beneficiary’s basis in the home becomes $100,000. They could sell it immediately and pay no income tax on the sale because there is no gain. It might be worth mentioning the difference between inheriting and gifting. I’ve come across a situation with a client who transferred their parent’s rental properties prior to their parents passing. The parents “gifted” the rental properties to my client as a way of potentially avoiding any issues with Medicaid. When an asset is gifted to an individual, they receive the gift and take over the adjusted basis of the asset. Therefore, if you were to gift the home purchased for $25,000 to someone, they wouldn’t get the home with a basis at fair market value. They would take over your adjusted basis, which would be less than $25,000
Continued on Page 38
This is important because if you do normally flip homes it doesn’t mean all the homes you have are considered flipped homes. You may be in a situation where you originally set out to flip a home but determined you would hold onto it for maybe a year and look to rent. You then decide you’d like to sell it but are looking at a large gain because of the increase in home values. Always consider having a conversation with your tax advisor to make sure you’re not missing out on taking advantage of a 1031.
35Copyright MMXXII Kentuckiana Real Estate Investors Association • P.O. Box 91225 • Louisville, KY• 40291 www.KREIA.com DISCLAIMER: KREIA does NOT pre qualify, evaluate, endorse, guarantee or warranty any particular deal, service, company, or person. The Kentuckiana Real Estate Investors Association recommends you perform your own due diligence & seek appropriate legal, accounting, or other professional advice before making any investment. KREIA is a Member of National Real Estate Investors Association.
36Copyright MMXXI Kentuckiana Real Estate Investors Association • P.O. Box 91225 • Louisville, KY• 40291 www.KREIA.com DISCLAIMER: KREIA does NOT pre qualify, evaluate, endorse, guarantee or warranty any particular deal, service, company, or person. The Kentuckiana Real Estate Investors Association recommends you perform your own due diligence & seek appropriate legal, accounting, or other professional advice before making any investment. KREIA is a Member of National Real Estate Investors Association.
37Copyright MMXXII Kentuckiana Real Estate Investors Association • P.O. Box 91225 • Louisville, KY• 40291 www.KREIA.com DISCLAIMER: KREIA does NOT pre qualify, evaluate, endorse, guarantee or warranty any particular deal, service, company, or person. The Kentuckiana Real Estate Investors Association recommends you perform your own due diligence & seek appropriate legal, accounting, or other professional advice before making any investment. KREIA is a Member of National Real Estate Investors Association.
In the meantime, if you come across any Michael Jordan rookie cards, let me know. I’ve got a couple of baseball cards that I need to get rid of.
Twitter:
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I have covered a lot in this article regarding the 1031. There is a lot that I have not covered. Therefore, it is important for you to understand that this is a perfect conversation you want to have with a tax advisor well before you act on selling one of your properties.
• GOVERNMENT AFFAIRS LINKS State Government Roundup Kentucky Realtors Legislative Updates. Read weekly updates on bills in play in Frankfort at the Kentucky Realtors’ site: bit.ly/KYR_LEGU Local Government Roundup Louisville Metro Government: Get a summary of local affairs (and state) by the Greater Louisville Association of Realtors (GLAR): bit.ly/LRGAU KREIA’s Government Affairs Board Chair: Rue McFarland
A single family residence doesn’t necessarily have to be traded for another SFR. You can trade for land or an apartment building. You couldn’t trade your personal residence but might be able to trade your vacation home. Also keep in mind that it is important to keep the integrity of the replacement property as an investment. I have fielded questions where a client wanted to do the 1031 while taking cash out at the closing of the replacement property. The IRS may disallow this type of transaction because they would argue the intent of the replacement property loses the characteristic of being an investment property due to the cash out. You would want to hold the replacement property for at least a year to establish it as an investment property before looking to pull cash out. Otherwise, the cash taken out at closing or soon after closing could be considered taxable income.
Pres. Biden’s Proposal to End Like-Kind Exchanges
You may have heard the chatter recently about the possibility of the 1031 being ended. As part of President Biden’s campaign, he mentioned he’d like to see a closure of the 1031 tax loophole because it creates an unfair advantage to rich Americans. As recently as June of last year the topic came up after being found in the Greenbook, which is a published report of the President’s fiscal agenda. In the report you will find the plan, currently, is to put a cap on 1031 tax deferrals for realized gains exceeding $500,000 ($1,000,000 for married filing joint returns). No law has been passed by Congress to make any changes to the current 1031 section of the Internal Revenue Code. The change to the 1031 was briefly considered in legislation in 2021, but eventually was removed from any legislation being considered. A review of the 2022 Greenbook reveals Biden is still seeking to limit the 1031, but no current legislation has been released that includes mention of the 1031.
38Copyright MMXXII Kentuckiana Real Estate Investors Association • P.O. Box 91225 • Louisville, KY• 40291 www.KREIA.com DISCLAIMER: KREIA does NOT pre qualify, evaluate, endorse, guarantee or warranty any particular deal, service, company, or person. The Kentuckiana Real Estate Investors Association recommends you perform your own due diligence & seek appropriate legal, accounting, or other professional advice before making any investment. KREIA is a Member of National Real Estate Investors Association. Eric Shadowens: Like-Kind 1031 Exchanges Continued from Page 34 assuming you have rented it for a few years. The basis would be adjusted down by the amount of depreciation you have taken over the years. This is a good example for those of you who have not considered estate planning. If you have a significant amount of assets, you may want to consult with an estate attorney to get a better idea of how to transfer your assets and take advantage of favorable tax laws to help maximize the assets you leave your beneficiaries.
Anybody have a Michael Jordan rookie card to trade?
So, I Want to Trade One of My Properties for a Tesla Hold on for a second. You recall how I mentioned earlier that trading dumb basketball cards for prized baseball cards was a bad idea? Well, forget about my judgment of value, but please keep in mind a 1031 only works for certain kinds of trades.Beginning in 2018, you can no longer trade personal property using a 1031 exchange. In addition, trading real property is subject to certain conditions as well. First, a 1031 exchange must involve property held for productive use in a trade or business or for investment.
A 1031 exchange can have a lot of complexities that you’ll want to fully understand before you proceed further. You may be fully sold on the 1031 but find out through a consultation with your tax advisor that a 1031 is not a good option. I’ve seen where a taxpayer has performed a 1031 without consulting their advisor and wound up failing to defer tax because they didn’t fully understand the requirements of the 1031.
LinkedIn:
Eric Shadowens is a Certified Public Accountant and Senior Tax Manager with DMLO CPAs (Deming Malone Livesay + Ostroff, dmlo.com). You can reach him by calling (502) 326 2319 or emailing him at eshadowens@dmlo.com. You can also connect with him on social media: Facebook: facebook.com/eric.shadowens @ericshad76cpa BiggerPocketslinkedin.com/in/ericshadowens:Biggerpockets.com/users/EricShadCPA
39Copyright MMXXII Kentuckiana Real Estate Investors Association • P.O. Box 91225 • Louisville, KY• 40291 www.KREIA.com DISCLAIMER: KREIA does NOT pre qualify, evaluate, endorse, guarantee or warranty any particular deal, service, company, or person. The Kentuckiana Real Estate Investors Association recommends you perform your own due diligence & seek appropriate legal, accounting, or other professional advice before making any investment. KREIA is a Member of National Real Estate Investors Association.
We’re Back at Woodhaven, Baby! PRE-Register Now at KREIA.com THE Local Resource for Landlords, Rehabbers & Wholesalers Meeting the 4th Thursday of every month (except November & December) at Woodhaven Country Club, 7200 Woodhaven Road, Louisville, KY 40291 KREIA.COM • twitter.com/reiaky • instagram.com/reiaky • youtube.com/reiaky facebook.com/reiaky (public) • facebook.com/groups/kreiaky (private) UPCOMING EVENTS U.S.FirstPresortedClassMailPostagePaidLouisville,KyPermitNo.1402PO Box ReturnLouisville,91225KY40291ServiceRequested Defer Taxes and Speed Your Way Into a Rental Portfolio What's your plan when you sell a rental property? Is it to come up with cash to buy another rental? If so, hold those plans and attend this month’s main meeting, featur ing Harry Borders, Joe Hampton and Eric Shadowens, with moderator Renee Buster. It’s time to talk 1031 Exchanges. August 25th, 5:30 p.m. 9 p.m. ► 5:30 p.m. Early Meeting: John Walton of Express Cabinet Store answers your questions. ❖ Aug. 24th – 7 p.m. – 8:30 p.m. Diversify Your Income With Short Term Rentals. Tommi and Frank Miller lead an online class. ❖ Aug. 27th & 28th . Workshop: Creating a Time Wealthy Advan tage, with Mark Dolfini. The “Landlord Coach” returns to lead a deeper dive on systems and getting your time back. ❖ Aug. 27th – 9 a.m. 2 p.m. Online Masterclass: Asset Protection Plans. RMG call with attorney Kathie Russell. ❖ Aug. 30th Noon - 1 p.m. L.O.T.S. event. Tour Angela and Duna Bolotte’s flip house in the Parkland neighborhood. ❖ Sept. 7th Noon - 1:30 p.m. Lunch & Learn. Duna Bolotte hosts KREIA Past President Dennis Erhard, whose topic is “Problem Solving & Solutions in Real Estate.” Members only. ❖ Sept. 8th – 5 p.m. 7 p.m. KREIA Happy Hour. Networking at Woodhaven. Everyone is invited. Bring a friend! ❖ Sept. 13th – Noon 1 p.m. Tool Tip Tuesday With Tamara West. Investor/broker demonstrates investor resources. ❖ Sept. 15th – 5:30 p.m. – 8 p.m. KREIA Game Night. Join us at Martin’s Bar B Que for a competitive, educational game of CASHFLOW 101. Main Meeting Preview
September 22nd: House flipping expert panel October 27th: Economic Update
