1031 Exchanges - Bawldguy Talking

By: Bawldguy  09-12-2011
Keywords: Real Estate, high school, cash flow

This will be short and sweet for a couple reasons. First, tonight’s post is over at BiggerPockets Blog. If you’re not acquainted with it I give my full and energetic endorsement to it. I’ve been writing there for a couple years, or at least in a few weeks. It’s the best membership site for real estate investors in the country.

BawldGuy Heads Up: Tomorrow (Wednesday) I’ll be out of touch with the world completely. Gettin’ some dental work done, and they wanna knock me out to do it. Works for me.

I’ll be available for calls beginning at noon Thursday. ‘Course by then I’ll be Jonesin’ for a fix. You can help me with that by callin’ me at 619 889-7100. Or you can, if you prefer, send me a note using the Contact BawldGuy button up top. Have a good one.


Long time readers know what I think about worshipping at the altar of cash flow — it can wound, even maim what coulda been a magnificently abundant retirement. I’ve written often on the subject. It’s my thinkin’ that the one I wrote a couple years ago was possibly my best effort.

It talks about a couple guys who came into my office quite some time ago. Real folks, in the flesh, with real agendas and money to back ‘em. A father and his son — from different schools. I learned much about human nature from those two.


BawldGuy Here: I first published this piece about six months ago. I was thinkin’ it was time to put it up top again. Hope it sheds some light for ya.

There are multiple schools of thought related to investing in real estate for retirement. Two dominate.

One says you buy property, holding it forever. When you’ve saved sufficient capital to buy additional property, you do — then hold IT for evermore too. The idea is you allow rental income to pay off debt as quickly as possible, arriving at the point of a debt free cash flow machine. Do this a buncha times and you’ve built the foundation for a nice retirement income stream.

Or so the doctrine goes.


Several times a month a reader, or maybe a client referral will gimme a call and a great fix by asking if I could, “just tweak our plan a bit to make it perfect.” So many times they’re under the mistaken belief that owing to (Stellar pun, Jeff.) the fact they own a $300,000 income property debt free, their retirement plan is only subject to minor adjustments. Sometimes that’s the case, though in my experience rarely. The answer to my follow-up question dictates my advice.

How long till you retire?


As mentioned in yesterday’s post, while in Starbucks I met a local high school teacher, Rick, who was hunched over a buncha papers he was grading. We got to talkin’ and as one thing will led to another, real estate investing came up. (Yeah, I’m shocked too.) Turns out he owns a small local La Mesa, CA apartment building. I know exactly where it is — solid location. It’s well kept. He was raised in the biz by his dad, doing cleanup, repair and maintenance — against his will. Amen brother, we lived the same lives.

Breaking News: My old San Diego TC — Transaction Coordinator — just walked into Starbucks. Hadn’t seen Debbie in years. I’ve had TC’s since her, but none better, not even close. She was the real deal. So fun to run into her today.

OK, back to schlepping for Dad against our wills.

His units are now cash flowing about $5,000 monthly with $800,000 in debt. He says it’ll cash flow roughly twice that when the loan is paid off. He’s retiring in about 10 years. Oh, and for the record, the location of his units is such that I’d gladly have Mom live there alone. Just so ya know.

Ever heard the saying, “. . . like shootin’ fish in a barrel?”


A couple weeks ago I met a potential client, in San Diego for a work related conference. He’s a 30-something professional, married to the same. They have their first child, not even two months old yet. (Remember those days?) They’re both smart as whips, hard workers, way above average wage earners, and already building an incredible future. Also, just nice folk, both of ‘em.


It offered two bedroom units on each side, both of which sported fireplaces. It was very well maintained. The rents at the time of sale were $765 a side. Heck, it’s even at the end of a nice, quiet cul-de-sac. With forced air heat and central air, neither harsh Ohio summers or winters were gonna get the best of any tenant. Also, they’d given it the ‘once over’ before selling. Redone driveway, modernized windows, and the like.


The objective Purposeful Plan factors

    What yields the highest retirement income?
    What are the differences in after tax benefits?
    How will the size of any future capital gain be affected?
    Given retirement is 15-20 years away, will operating expenses be an issue?
    What’s the difference in the time it’ll take to pay off all debt by retirement?

The topic — refinancing vs completing a tax deferred exchange.


There are multiple schools of thought related to investing in real estate for retirement. Two dominate.

One says you buy property, holding it forever. When you’ve saved sufficient capital to buy additional property, you do — then hold IT for evermore too. The idea is you allow rental income to pay off debt as quickly as possible, arriving at the point of a debt free cash flow machine. Do this a buncha times and you’ve built the foundation for a nice retirement income stream.

Or so the doctrine goes.


The information in this article was current at 06 Dec 2011

Keywords: cash flow, Dental Work, high school, investing in real estate, Real Estate, real estate investing, Real Estate Investors, retirement income

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