Aging Property Owners with Passive Income Needs for Retirement At Safe Harbor Asset Management, we frequently receive inquiries from investors considered real estate-rich and cash-poor, who have locked up most of their wealth in assets like real estate that are difficult to convert into cash. Read More:
Learn how you can use 1031 exchanges and DSTs to your advantage by Downloading my FREE Brochure. Read About: What a 1031 exchange is and an overview of the basic steps Essential rules and timeline to follow in a 1031 exchange The expected net proceeds of selling a property vs using a 1031 exchange The vast range of “like-kind” properties available for investment The many benefits of a Delaware Statutory Trust (DST) Follow the Link for Brochure Download:
After a tsunami of a year facilitating 1031 Exchange transactions, we found there are many misconceptions among investors about 1031 Exchanges. Here are five of the most common areas of investor confusion. Reverse Exchanges Are Quick & Simple: Identifying replacement property in a hot market was a challenge for 1031 Exchangers this past year, causing many sellers to pursue a strategy of purchasing a replacement property before selling their relinquished property. Known as the Reverse Exchange, in this scenario, the investor first buys a new property of equal or greater value than the relinquished property and then has 180 days to sell their relinquished property. With a Reverse Exchange, you cannot own your replacement property and relinquished property at the same time, requiring an affiliated entity (a Qualified Intermediary) to hold the title of the relinquished property or the new replacement property. While Reverse Exchanges can benefit sellers in hot markets, they take longer to arrange, include more steps, and have, additional costs and fees compared to the more common Delayed Exchange. Vacation Homes/Secondary Homes Qualify for an Exchange: Residential property can only be considered “like-kind” if held for investment purposes. The rules are very specific. You can sell your vacation/secondary home through a 1031 Exchange if you rented it for more than 14 days per year and your personal use was no more than 14 days per year (and less than 10% of the total nights rented over the two years leading up to the sale). When renting a vacation home you purchased as part of a 1031 Exchange, you must charge rates at fair market value. You cannot rent to a “family member” for $1.00 per night! 1031 Exchanges are a “tax Loophole”: Since 1921, 1031 Exchanges have been a vital part of U.S. tax policy. Exchanges have been available in their current form since 1986. Like-kind exchanges encourage capital investment for the highest and best use of real estate, thus improving communities and increasing the local and state tax base. Section 1031 like-kind exchanges give businesses and entrepreneurs more incentive and ability to make real estate and capital investments. Far from being a tax loophole, the 1031 Exchange, which has enjoyed political support from Republican and Democrat legislators for decades, is a powerful economic tool that allows investors to grow and transfer their wealth to future generations in the most tax-efficient manner. Partners in an LLC Can Simply Separate in the Middle of an Exchange: The “Drop & Swap” alternative is an exit strategy for the sale of real property held in an LLC where two or more partners in the LLC have differing ideas about what to do with the proceeds in another property and continue deferring taxes to “drop” the partnership interests in the LLC and “swap” for Tenant-in-Common (TIC) interests. But the Drop and Swap strategy is not simple, and careful planning is required. It is recommended to prepare the property being sold for separate exits before signing a listing agreement with a real estate brokerage. Considering Replacement Property Options Can Wait Until Closing of the Relinquished Property: You’ve heard the adage, “timing is everything,” and that certainly holds true regarding the timeline requirements of a 1031 Exchange. Many first-time exchangers, aware of the 45-day replacement property identification rule, often wait too long to explore their options, only to discover their deadline passes before selecting a property. And their exchange fails. That’s why it’s critical that you work closely with your 1031 Exchange investment professional and Qualified Intermediary to ensure you take the necessary actions at each stage so that your exchange is successful. Get clear on conducting a proper 1031 Exchange, feel-free to contact me. Disclosure: The commentary in this blog post reflects the personal opinions, viewpoints and analyses of the Safe Harbor Asset Management, Inc.’s employees providing such comments, and should not be regarded as a description of advisory services provided by Safe Harbor Asset Management, Inc.’s or performance returns of any Safe Harbor Asset Management Inc.’s Investments client. The views reflected in the commentary are subject to change at any time without notice. Nothing in this blog constitutes investment advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Safe Harbor Asset Management, Inc. manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Investments in securities involve the risk of loss. Past performance is no guarantee of future results.
A client recently sold his business and was looking for options to address a large capital gain as a result of the sale. We presented a number of solutions with support from his other advisors. One of the options we are implementing includes an investment in a Qualified Opportunity Zone (QOZ). Opportunity Zones were born out of the Tax Cuts and Jobs Act of 2017. When structured properly, investing in a QOZ allows you to defer capital gains through 2026. In addition, if the holding period within the QOZ is 10+ years, any gain from the underlying investment is exempt from further taxation. For more details on Qualified Opportunity Zones, please read the attached alert from the Advanced Planning Group at UBS. QOZ-Advanced-Planning
Delighted to share an interview I recently conducted on the Commercial Real Estate Shark Eye Podcast. Where I take a deep dive into: My personal story, building my business in the early days on Long Island to developing my relationships in Manhattan. Market trends I’ve witnessed and what I foresee The impact of Global events Tax mitigation strategies I’ve used to preserve client assets The best practices to accumulate wealth How I advise/educate real estate, legal, tax, and business professionals The impact of Section 1031 Exchange on the economy
The commercial real estate market has never been this hot. Consider a sale leaseback instead of hoping that the business buyer wants to own a building too. I can’t count the number of times I have been called in with 24-72 hours left to close to “clean up” the real estate aspects of a transaction. Why wait till then. Business owners looking to exit in the next 12-48 months should take advantage of these amazing market conditions.
Free webinar to learn about expensing and depreciation strategies to counter upcoming tax increases. Presentation will include the following. Bonus Depreciation Cost Segregation Little know safe harbors Expensed repairs vs capitalized improvement property And much more. Here is the link to listen to the recording of our recent webinar on Expensing & Depreciation Strategies.
New employment opportunities, a booming housing market, and a change of environment or slower pace of life. These are just a few reasons why people are planning to move. COVID-19 gave all of us time for reflection and, for some, opportunities outside of their current domicile. In today’s blog, we’ll look at simple ways you can evaluate a change in residence before you pull the trigger…including taxes. Click
My Profession is: Tenant Representative / Office Leasing Broker / Commercial Real Estate Broker My Business is: CREATING SOLUTIONS When it comes time to find an office space for the first time, renew a lease, renegotiate a lease, or relocate; clients use me and my services to maximize their savings, increase their concessions and improve the value of their leases. My involvement creates a competitive environment, which puts pressure on a Landlord to improve the concessions package and lower the rent. This happens because the Tenant, now has a real estate professional on their side leveraging the transaction to the benefit of the Tenant. My involvement will save a Tenant TIME, MONEY and STRESS.
What is your goal for your business? As fractional CFOs, when we first meet with our clients, this is among the first questions we ask. Your goals will inform much of our work supporting your company – whether we focus on preparing you for a near-future exit or growing and building the value of your business over time. This is what makes our fractional CFOs – many of whom are also CEPAs – a vital (and often missing) piece of the exit planning puzzle. Many business owners enlist exit planning experts as they approach the exit process, bringing in an army of resources to make the most out of what has already been built. A fractional CFO, however, becomes embedded in your business over time and, in the process, comes to serve as a value growth advisor – a financial expert who can help you
There is a common misconception that what an employee does outside the workplace, particularly on social media, is not the employer’s responsibility.
ROBS – or use funds from their existing personal 401(k) or other retirement accounts as capital for buying a business. In addition to creating cash flow and minimizing the use of debt, ROBS are an attractive source of funds unlocking value from an individual’s retirement savings to fund a business, what are the tax advantages that make considering a ROBS strategy worthwhile? First, there is the aspect of tax deferral. Financing through ROBS avoids the early withdrawal penalty normally incurred when funds are withdrawn from retirement savings prior to retirement. When you use the capital from your 401(k) to fund a new income taxes or penalties, more money is available to go into the business, thus maximizing your available capital. In addition to increasing capital efficiency, you avoid loan obligations because ROBS is not a debt product. It’s simply accessing the equity you already have built up in your retirement plan, so there’s no monthly repayments or interest like you would incur with a loan. Accessing Business Capital Through ROBS Here are some points to remember about how the flow of money works when using a ROBS strategy: The new business entity to be funded must specifically be established as a C-Corp. After a new 401(k) or profit-sharing plan is the business advisory space and how to implement a ROBS strategy. For a consultation on your business plans and objectives, please contact us at 770.740.0797 or email info2@SJGorowitz.com.
As a small business owner, your instinct might tell you to seize every opportunity that knocks on your door. Let’s face it: saying yes can be a thrilling ride into new ventures. Sometimes, you need to remind yourself of your organizational Sweet Spot. Does your team have the bandwidth, the people power, and the infrastructure to take it on? Sometimes, saying no is not just the better option; it’s a powerhouse move that aligns your business with your growth goal. Here’s the lowdown on when, how, and why flexing your “no” muscle is your smartest play. The Unmanageable Yes When you’re overcommitted and under-resourced, every additional yes is like adding more weight to an already overstretched team. If saying yes means sacrificing the quality of your work, spreading your resources thin, or burning out your team, then it’s time for a firm, resolute “no.” Remember, quality over quantity isn’t just a great saying – it’s the golden rule for sustainable growth. The Misaligned Opportunity Some opportunities seem golden on the surface, but they won’t help you achieve your business mission, vision, or values. Listen up: Your business is your compass; every decision should steer you to your true north. If it doesn’t fit, say no. It’s not just about avoiding the wrong turn; it’s about staying true to your course and your team’s potential. The Power of Prioritization Here’s a reality check—you can’t do it all. When you say no to less important things, you say yes to more focus, energy, and time for what truly matters. Embrace the art of prioritization because knowing what to decline is as vital as knowing what to pursue. Make your yes count! Cultivating Respect Saying no isn’t just about protecting your time and energy; it’s about setting boundaries. Assertiveness isn’t rude; it’s a sign of respect – for yourself, your team, and your business’s vision. When you respect your limits, others will follow suit. It signals to the world that your time, team, and resources are valuable. Conclusion Saying no is a tough decision. It’s not a negative judgment; it’s a selective choice. Think of the word no as a complete sentence and a powerful tool to guide your business to where it truly belongs. So, the next time you’re faced with a request that doesn’t feel right, plant your feet, take a deep breath, and remember that saying no is not just okay—it’s essential for your business’s health and ongoing success. Do you need to get in your Owner Sweet Spot?
GAAP traps often occur when a business owner sells a company to a third party. The transaction is commonly memorialized by a Purchase Agreement. That agreement contains certain representations (or “reps”) and warranties. Some of these are common sense and should pose no problem to someone who has operated a good business. The Accounts Receivable represent money that is actually owed to the company. Taxes have been filed on a timely basis. The seller doesn’t know of any pending litigation. The owner has the right and authority to enter into a sale agreement. There is one, however, that is frequently required by attorneys who don’t understand privately held business, and agreed to by owners and their attorneys who don’t understand what they are guaranteeing. They are Generally Accepted Accounting Principles, or GAAP. What is GAAP? To start, the term “Generally Accepted” is misleading. It could easily be interpreted as “what everyone typically does.” Nothing could be further from the truth. GAAP is determined by two organizations, the Financial Accounting Standards Board (FASB) and the Securities and Exchange Commission (SEC). Per I
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