REMOTECONTROLRETIREMENTRICHES

AUGUST 2019

RECESSIONCOMING?HOWWOULD IT

AFFECTOURSINGLE FAMILY

RENTALS?

TITLE ISSUES IN A

1031EXCHANGE

LIFE 201: ADIEL’S NEW PUBLICTELEVISION SPECIAL

JOE MERANTEVPofBusinessDevelopment

National Credit Care

JOSH COOPERCPA at

An AccountancyCorporation

JUSTIN FARIANCISP® Senior RetailSales Representative

Saturday, September 7, 2019ICG REAL ESTATE 1-DAY EXPO

WITH ADIEL GOREL

Real Estate Investments andAdiel Gorel Presents

EXPERTGUEST

SPEAKERS

FOR MORE INFOORTO REGISTER,GOTOWWW.ICGRE.COM/EVENTS

We are excited about our 1-DayExpo upcoming on Saturday9/7/2019. That is just aroundthe corner. As always, we willhave several top notch expertsto teach us subjects of interest.This time it will be on taxes,credit, and self-directed IRAs.

As always, there will be a lot ofQ&A, and plenty ofopportunities to learn fromothers’ questions.

The market teams from thevarious markets from across theUS will present updates abouteach of their markets. They willbe available to interact with you

all day. Of course they all makesure to bring great propertysheets with them so we can seewhat is available. Propertymanagers will be present aswell. I will teach a beginner’ssection, the lenders will be thereto discuss regular loans, loansfor bigger investors, and loansfor foreigners.

If you can attend, we arelooking forward to seeing you.Contact us to register atinfo@icgre.com. If you can’tmake it, we will be available todiscuss the highlightsafterwards.

1-DAY EXPOOn The Upcoming ICG

I have included an article on a possible recession inour July newsletter. However since then, everynewspaper and media outlet screams “recession” so Iam addressing it in this newsletter as well, from adifferent angle.

The “Topic of the day” in almost every media outlethas been predictions of an impending recession,domestically and worldwide.

One of the metrics mentioned is the “Inverted YieldCurve”, where short-maturity bonds have a higheryield than long-maturity bonds. We are currentlyexperiencing it.

In the past, this metric preceded a recession seven outof nine times (since the 1960’s). Thus it is not a“surefire” predictor, but a pretty good one.

Even the presence of an inverted yield curve has todo with investors’ perception regarding short termrisk vs. long term risk.

Perception plays a major part in both recessions andbooms.

The media tends to amplify the people’s perceptionsince it has to generate attractive headlines. Rightnow headlines discussing recession are very attractive.

It should also be mentioned that, leading to anelection, the occupants of the White House strive tomaintain a good economy, whereas their opponentswould actually benefit (politically) from an economicdownturn. These forces are likely in play right now,as, again, the media’s voice affects perception andcan actually dictate the way things end upturning. This is not new, and has alwaysbeen the case before elections.

The occupants of the White Househave a bit of an edge in the sensethat they wield more power increating positive scenarios.However the power of the

media should not be underestimated.

So where does it leave us? Well, there could be arecession (most economists seem to think that if oneoccurs, it will come in the next year and a half or so).

If a recession does occur, the likelihood of it beinganything closer to the recession that started in 2008 isvery slim. Many safeguards were put in place in theaftermath of that big recession, including far stringerlending criteria (Dodd Frank as one example).

So if a recession happens, it may be quite a bit lesssevere than the last one.

I have been through a few recessions and the 2008one was the strongest I have seen by far.

How does this affect us as buyers of single familyhomes to hold as rentals for the long term, using 30-year fixed rate loans?

During every recession I have been a part of, theeffect on rentals has been as follows: If tenants livingin a house had been saving up and planning onbuying their own home, those plans usually are puton hold during a recession. The reason usually is thatpeople are concerned they might lose their job, orthat their small business may falter. Thus duringtimes of recessions, they remain as tenants. Thisphenomenon, occurring on a large scale, createsbetter rentals, lower vacancies and overall a stablerental situation for the landlord.

During booms, the effect is usually the reverse,optimism causes people to buy their own

home in greater numbers, creating aworse rental situation. However

during booms the home mightappreciate faster.

We buy single family homesusing 30-year fixed rateloans. Interest rates todayare some of the lowest in

RECESSION COMING?HOWWOULD ITAFFECTOUR SINGLE FAMILYRENTALS?

Continued…inside back cover

Weiming Peng is a 1031Tax Deferred ExchangeSpecialist

T I T L E I S S U E S I N A

1031 EXCHANGEBy Weiming Peng

Section 1031 of the InternalRevenue Code allowsinvestors to defer taxes onthe capital gains realizedupon the sale of aninvestment property. Wheninvestors think of 1031exchanges, they think ofselling investment real estateand buying other investmentreal estate. For others, itmay be the number. Howmuch can I potentially sellmy property for, and howmuch do I need to spend inorder to defer 100% of mytax liability. Althoughinvestors should definitelybe attentive to these points,many fail to realize one ofthe biggest underlying issueswith doing a 1031exchange: how title shouldbe transferred to thereplacement property.

For any 1031 exchange, thetax payer who sells therelinquished property musttake title to the replacementproperty. If tax payer #1sells an investment propertyas the sole owner on title,then tax payer #1 maypurchase under his/hername, under a singlemember (or two if they are

married) LLC that is set upas a pass through entity, or arevocable trust.

Issues arise when there aremultiple owners of a singleproperty. Investors may havechosen to take title to theirrelinquished property as

tenants in common (TIC),under a single LLC(multiple members in theLLC), or a revocable trustwith trustees that are notmarried to each other. Thisis not an issue if themembers choose toexchange together, but thecomplications becomeevident when they may wishto go their separate ways.

There is really no good wayto split an asset and do a1031 exchange. This is

because of a technicality. Ifa multi member LLC hasowned and rented out aproperty for many years,then the owner of theproperty is the LLC. TheLLC is eligible to do a 1031exchange when it sells theinvestment property. Shouldthe members of the LLCdecide to part ways, theywill need to dissolve theLLC and take title in theirnames or respective passthrough entities. When eachmember has taken title intheir names individually,they have not owned theproperty long enough tohave established it as aninvestment property. TheLLC qualifies for anexchange, but they do notbecause of the short holdperiod. In order to mitigatethis problem, we wouldadvise the client to establisha longer hold period, ideallya year or longer, beforeselling the relinquishedproperty. If they do not orcannot establish a holdperiod of at least a yearbefore executing a 1031exchange, this will a dropand swap: dropping out ofan entity and taking title

shortly prior to doing a 1031exchange and swapping into areplacement property. A dropand swap is an aggressivemove for a 1031 exchange, andif audited, have a much higherchance of being disqualifiedfor an exchange by theCalifornia Franchise TaxBoard.

Title issues may not just occuron the relinquished property,but also on the replacementproperty. Many investorschoose to include businesspartners when purchasingreplacement properties andthereby adding them onto title.This may add an additionallayer of complexity to the

exchange. Please contact yourQualified Intermediary andconsult with them on how tobetter proceed with transactionto make it a successfulexchange.

There is reallyno good way tosplit an assetand do a 1031

exchange.

This section has been provided byJan Wynns and Tonya Debnam.

The Research Triangle Region(Raleigh-Durham-Chapel Hill andsurrounding towns) offers rareopportunities for real estate investorsto experience appreciation andstability in an area of extraordinarygrowth. The three main drivers ofthis area’s economic success areTechnology, Medicine andEducation.

We have found a “sweet spot” in theRaleigh MSA housing market. TheClayton market is only 18 miles fromthe heart of Raleigh and is acommunity that is experiencingstrong economic growth, the homesare still modestly priced and there is

a strong demand for housing.

It is also an exciting time for growthin Clayton. The Novo Nordiskpharmaceutical plant completes theirtwo billion dollar expansion in 2020doubling the size of their facility andwork force. Earlier this year, Grifolspharmaceuticals announced a$210M expansion that will becomplete 2022 bringing even morejobs. Between the Grifols and NovoNordisk facilities, there are over3,000 (and growing) pharmaceutical-related jobs in a town of 21,500people!!

We have recently sent six newproperties to ICG, that are ready forreview in the area all priced from$199,900 to $239,900. We have a

great contractor whose homes arewell built, modestly priced and ingreat locations. We expect them to bequite popular with our investors dueto the prices, locations, and values.

The Triangle was ranked the 2nd“Most Highly Educated” area in thecountry according to Forbes,October 2017 and the surroundingareas continue to be ranked as oneof the “Best Places to Live” byMoney Magazine, 2018.

It’s no wonder that the Raleighmetro region is projected to be thefastest-growing in the U.S. over thecoming decade.

Invest where you would want to live.Invest in the Research TriangleRegion.

As many of you know, when I talk toyou one-on-one, I share not onlyinvestment experience, but alsowellness experience. True wealth ishaving great results not just in ourinvestments, but also in our health, theway we eat, supplementation, braincare, and physical and emotional well-being.

The idea for Life 201 came to lifeabout 15 years ago. In our big Expos, Iinvite various experts to teach us fromthe stage about investment issues. Ienvisioned creating events that willaddress investments as well as wellness.

I have just recorded a new PublicTelevision Special. It’s called Life 201(like moving on from college 101courses, to the more advanced 201courses, the idea is to move to a moreadvanced life).

I have invited seven other experts:doctors, scientist, experts in movement, nutrition, getting rid of toxins,

creating a healthy brain, and investingwell. I added my advice on singlefamily home investments. Thematerials from all eight experts werepresented by me on the PublicTelevision stage.

The show will start to air in Decemberof 2019. Right now we are working oncreating a 300-page book titled “Life201”, where each expert iscontributing a chapter. We are alsocreating an entire pledge (donation)package for Public Television, the bookbeing part of it. There will also be

booklets with all 8 experts’ material foreasy summaries for people to take onthe road when traveling. We will alsohave video segments from each expert.

It will be a very compelling and usefulpackage available for the PublicTelevision donors. We hope it raisessubstantial donations to support PublicTelevision.

In the San Francisco Bay Area it willbe shown on KQED, but it will also beshown in other cities nationwide. Theexact name of the show is “Life 201with Adiel Gorel”. I hope you enjoy it. Retirement Riches Testimonials

RALEIGH-DURHAMwhy it’s time tobuy

history, and the Fed is talking aboutfurther lowering rates.

Thus during a recession, even astrong one, all an owner of a rentalsingle family home has to do is thehardest action for a human being:nothing!

Doing nothing is even harder in theface of a media onslaught talkingabout how things are down during arecession.

A lesson learned from past recessionsis: Owners of single family homes ,,which were bought brand-new, andfinanced with a fixed 30-year loans,just have to stay put. Just letting theloans get eroded slowly by the cost ofliving, while principal paydownoccurs (also slowly), is a slow and sureway to build equity and wealth forthe future. Couple that with a morestable rental market duringdownturns, and the message is yetagain: just hold. Be patient! Donothing!

Invariably recessions are followed byan upturn . A recovery.

It took me a few cycles to fullyinternalize these lessons. I hope youcan benefit from my experience.

Today we have very low loan rates.Jobs are very strong, in fact theunemployment rate is currently oneof the lowest in history. Consumerspending has been strong even in thepast month.

Thus even if a recession ends uphappening, it is likely to be a mildone. Nothing to do if it happens. Justhold.

In addition, we are buying in marketswhere the prices are just a builder’smargin over the building and lotcosts. In such markets, recessionstend to have a moderate effect onprices, as opposed to markets whereprices far exceed the costs of buildingand land (like Los Angeles, San

Francisco , New York etc.).

Even during the massive recessionthat began in 2008, not all marketshave gone down. Some states (backthen it was states like Texas andOklahoma), barely budged. Otherstates have felt both the boom of2004-2006 and the bust whichstarted in 2008 quite strongly(Nevada, Arizona, Florida,California, and other states).

Even if the possibility of a recessionis real, buying brand new homes ingood areas in affordable marketsremains an excellent long term

investment which is likely todramatically change your future.Especially if the recession is mild.The rental markets are strongeralready due to a seeming preferenceon the part of millennials to berenters (percentage wise), as opposedto previous generations.

In short: no change in strategy iscalled for, regardless of whattranspires next.

RECESSION COMING?

LIFE 201: ADIEL’S NEW PUBLICTELEVISION SPECIAL

Dawn S.

I watched your Public Televisionshow in the Chicago area. This showcould be life changing. They shouldshow it everywhere. Thank you formaking nit, and for being available tospeak and consult with me.

Ron R.

I read your book in 2004 and bought2 homes right away. I eventuallybought 10 more homes in 2 markets.I feel I have already set my future up.

Sira P.

Looking forward to your Octoberevent in Columbia. My closing forthe first property at Oklahoma isscheduled for a few weeks from now.Looking forward to it.

Continued…

Even if arecession endsup happening,it is likely to bea mild one.

Q: Should I buy a propertywhere I aim to retire?

A: Not necessarily. Your idea ofwhen and where you wish toretire, or what kind of propertyyou’d seek, may change over theyears. I believe it’s preferable tobuy the best investment homesnow. Later, when retirement isimminent, you can use theequity and wealth yourinvestment homes have created,to fund a desirable retirement atthe location which attractive toyou at that time.

Q: I live in San Francisco, Itmakes me more comfortableinvesting in a place inCalifornia which is not toofar from me, likeSacramento. Isn’t that better?

A: No it is not. The logic usedhere is also useful for exampleslike this in the Los Angeles, NewYork, and other expensive cities.

Yes, San Francisco is veryexpensive. Yes, Sacramentoappears affordable relative toSan Francisco. HoweverSacramento, as of August 2019,is completely out of whack. Theprices are way too high relativeto the rents. It would be muchbetter to buy in a good market inthe Sunbelt States, where thenumbers work, like the marketswe talk about these days. Theprice will be much lower, and therent will be good relative to theprice. You can buy a brand newhome in a good area, which willbe WAY too expensive inSacramento. In addition,California is not a landlordfriendly state, while the Sun BeltStates we buy in are.

Q: My wife likes Tampa.Should we buy property inTampa?

A: Much of Tampa itself isalready too expensive relative tolocal rents, to make sense.

However not far from Tampa(still in the larger metro area),are developments where thenumbers still work. The sameapplies to Orlando. In fact,Tampa and Orlando aregrowing towards each other. Wecan connect you to our localteams for more detail, andperhaps a visit.

ADIEL’Scorner