Real Estate Exchange.comHomeMy REE.comFormulasSignInAbout Us
Add Properties
Property Search
Update Email
User Comments
Creative Ideas
Resource Links
Spam & Scam
All Articles

Site Overview
 Automated Tour
 Ree.com Tips
 Text Site Tour

Email Me About
The most motivated
& best opportunities

(your email address)


REE.com - where the real estate investor market is always hot. With real estate credit virtually non-existent, facilitating a direct 1031 exchange between property owners is a great alternative. REE.com is the oldest, most trusted, and fastest-growing online exchange website for the trading or property swap of commercial real estate properties.


Site Tour/Demo
  My Desktop
  Submit Proposal
  Worksheet
  Balance Equity

 Acquiring a New Basis

Print Me!
 
 EXCHANGE AND BUY BACK
(Very similar to the R.E.O. except done with individuals)
When -   When a person wants to establish a value on the property that they are exchanging in to another individual or when they want the option to repurchase that property.
Situation -   Jones has a four-plex that he feels is well worth the money. The rents, however, are not at their peak and therefore most people look at the property with the idea that it is not worth what he is asking.
How -   Jones exchanges the four-plex at a value of $120,000. He then agrees to buy back the property at that figure within 1 year’s time. That time may be extended to as long as 5 years where he would have the option to repurchase the property at a price of $130.1000.
Results -   If Jones buys the property back he then has established that the property value would be correct. Also he is establishing a new basis when he does buy the property back. If he just has an option to buy the property back within 5 years, Jones might find that the property values increase considerably and he could buy the property at a “bargain” price.

 LAND PLUS CASH FOR INCOME
When -   When a party owns land with no income and is unable to exchange it for income property.
Situation -   Jones owns a $50, 000 lot free and clear on which there is no income Jones would like to have some income from his equity. Jones finds Smith who carries a $60,000 equity in a tri-plex.
How -   Jones offers the lot plus $10,000 to Smith for his equity. Smith did not want a lot but the cash gives him the added incentive to make the transaction.
Results -   Jones ends up with a cash flow tri-plex and Smith ends up with the cash plus the lot which he will build on later.

 GENERATING CASH ON PAPER WHILE DEFERRING THE TAX
When -   Jones has $100,000 in several mortgage notes he has carried back on real estate sales. All tax on these notes has been deferred. He will not enjoy the benefit of the $100,000 for several years and Jones understands the “time value of money”.
How -   Jones creates a $90,000 note, secured by these $100,000 in notes. The notes are retained by Jones but pledged as security for this $90,000 note. Payment on the $90,000 is $950.00 a month including 10% interest. This $90,000 note plus $5,000 cash is exchanged for a free and clear home or condo. (it can be done). Once acquired, Jones borrows 80% on the home ($79,000). He now retains $74,000 less costs, which is non taxable because his basis on the house is $95,000. He now sells the house for $95,000, $10,000 cash down and carries back a $6,000 2nd. He has now generated $84,000 in cash and a $6,000 2nd from his $90,000 in notes (about 93.3%).
Variation -   If the house won’t sell for $95,000 and he drops to $89,000 and does not take back a 2nd, he will be able to show a $6,000 tax loss after generating 93.3% on the paper.

 R.E.O. (REAL ESTATE OWNED BY A LENDING INSTITUTION)
When -   You have large equity or free and clear property you can’t borrow against but need cash!
Situation -   Jones owns a$100,000 F/C 5 acres at edge of town. He would like to keep it but needs immediate cash in the meantime.
How -   Jones approaches a local savings & loan and offers to exchange the land for two $50,000 F/C condos the lender took back through foreclosure. He then offers to buy back the land provided they (or someone else) will lend him 80% on the condos. He agrees to buy back the land for 30% down and “sweetheart” terms.” $30,000 cash down, 8% interest only, payment quarterly for 33 years, then 10% interest only, all due in 5 years.
Results -   Jones generates $50,000 cash, has $20,000 equity in the depreciable asset and $30,000 equity in his own land with a new higher basis.

 DISCOUNTED SALE-OPTION TO BUY BACK
When -   If you need money badly and are unable to borrow against the property or sell at market value.
Situation -   Jones finds himself in the need of $20,000. He has nice little commercial piece of land at the edge of town with an appraisal of $50,000. He can’t borrow against the property.
How -   Jones offers the property for sale for $25,000 all cash provided that he has the option to buy the property back within one year for $30,000 all cash.
Results -   Jones generates the cash almost immediately. It will cost Jones $5,000 for his interest, however, he will be able to buy the property back within one year for $5,000 more than he received. Smith, the buyer, will receive $5,000 for the use of his money for one year. In the event Jones does not buy back the property, Smith has a tremendous bargain.

 SELL OR EXCHANGE?
When -   When a client moves away from a property on which they would take either a sale or exchange for property where they plan on living.
Situation -   Jones moves from Michigan to California. He has had his small farm on the market for sale for two years but has not been able to find a buyer. He finally makes the move anyway and wishes to either sell the farm and take the cash or move his equity to California.
How -   He lists the property with a real estate exchange specialist who then contacts a broker in Michigan to see if he would be interested in working on the property under a sale situation. He makes arrangements with the broker in Michigan that if he sells the property he would receive 80% of the commission and the exchange broker would receive 20%. In the meantime if the exchange broker would make the exchange, he would receive 80% of the commission and the selling broker would receive 20% for his time and trouble.
Results -   The transaction is made either through a sale or an exchange and the owner, Jones, has the best of both worlds. (The author has worked in this way and has found it to be very satisfactory for all parties concerned.)

Disclaimer
Copyright 1998-2017 REE.com All rights reserved.