Mckenna’s Recent Posts
Real estate investors often use leverage to help increase the performance of their returns. While this works well when property values are appreciating and operations are running smoothly, it can backfire when things aren’t going as well. This problem is exacerbated when an investor decides to over-leverage.
Holding property in a shared arrangement with others may take several forms. Each has particular advantages and potential risks. Two of the more common structures are joint tenancy and tenants-in-common (TIC). Let’s look at the similarities and differences between the two and examine when each is appropriate.
As has been pointed out time and time again, the 1031 Exchange is in place to help investors defer taxes on capital gains by allowing them to swap one type of real estate held for trade or investment for another (with assistance from a Qualified Intermediary). And most like-kind exchange discussions tend to center around commercial real estate, or residential property used to generate rental income.
Paying taxes is unavoidable in making money, whether you earn income through wages or investments. However, investors can seek to manage their tax liabilities through various means, including deferral. One valuable tool is understanding the different taxes, how they apply to your investment holdings, and how the tax amount is determined.
What Is the Difference between Realized and Unrealized Gains? A realized gain is an investor's amount of gain when selling an asset. The amount is determined by subtracting the adjusted basis from the net sales price. For example, suppose the investor bought a property for $200,000 and spent $50,000 to improve it, then sold it for $350,000. If there were $30,000 in closing costs, the net sales price is $320,000 while the adjusted basis is $250,000, leaving a realized gain of $70,000. In contrast, an unrealized gain can be considered a paper gain. For example, suppose the investor buys a property for $400,000, and while they own it, the value rises to $750,000. The investor has a theoretical gain of $350,000, but the gain remains unrealized unless they sell the asset.
If you can feel it and relocate it, then it meets the definition of tangible personal property. Tangible personal property is a term most often used for tax purposes. It describes a wide range of items used in the course of conducting business or for operating a rental property. Items that are considered tangible personal property can be depreciated over five or seven years using the straight-line depreciation method. However, these items also can be depreciated using the accelerated method if you desire.
If you’re planning for retirement, you’ve probably figured out your Social Security benefits and any distributions you might receive from pension accounts, IRAs, or 401(k) investments. You might be in the process of determining how much income you’ll need once you’re no longer drawing a consistent salary or wages. This is where the retirement income replacement ratio comes in.
Many important factors must be considered before making informed investment decisions. These include extensive knowledge of a wide range of markets, varying investment opportunities and strategies, as well as patience, conviction, foresight, risk tolerance, and a host of other components that make up the greater whole.
When deciding to invest funds into a risky (and hopefully high return) endeavor, one of the first decisions is how much money should be invested. It’s another way of asking how much money I want to lose if the venture goes south.
Every so often, the media will announce that Americans are living longer than ever before. It’s true that recent headlines report shorter life spans because of COVID-19. But over the very long term (i.e., a 50-100 year big picture), people are living longer, thanks to improvements in medicines, medical technologies, and lifestyle choices.