by recentricrealty | Apr 10, 2015 | Capital Markets, Uncategorized
Have you ever been to a really great party, and as you are walking out the door, everyone encourages you to stay? The night is young, the music is great, the food is incredible, the people are all beautiful. Well, I have been to this party before, and it doesn’t end well. It was called the Great Recession, which occurred technically from the end of 2007 to mid-2009, and has had lasting effects even today. Eerily, this party of 2015-2016 has the same feeling and everyone wants you to stay. Well, I’ll be leaving soon, and here’s why:
1) Back then, as now, the feds loosened their fiscal policies which sparked a stock market boom. Looking back over the entire history of the US fed funds rate, we have never seen such loose monetary policy in the history of the United States. This has translated into the the fourth longest bull market run in the history of the stock market.
2) Back then, as now, low interest rates and loosening of credit requirements encouraged US households to borrow money for home purchases they can not afford. Last fall, mortgage financing giants Fannie Mae and Freddie Mac, together with their federal regulator, have drawn up rules aimed at loosening constricted lending standards making mortgages easier to get for those with less than stellar credit.
3) Global threats the United States are on the rise, and according to James Clapper , Director of National Intelligence, “cyber” tops the list again this year. Clapper attributes the 2014 attack on the Las Vegas Sands Corporation to Iran and announced that “the Russian cyber threat is more severe than we’ve previously assessed.” Counterintelligence, terrorism and weapons of mass destruction (notably nuclear) round out the next 3 spots. For a rude awakening on the state of global affairs, take a look at this report. Worldwide Threat Assessment
In summary, if you have been to this party before and want to take advantage of future opportunities, consider keeping a larger portion of your overall portfolio in cold hard cash. Keep it apart from an emergency fund meant to cover expenses should you need it. Here is a quote from Benjamin Roth, a lawyer from Youngstown, Ohio who lived during the Great Depression, and kept a diary of the rise up and the run down in markets and human mentality. “In 1928 people were excited about big profits on the stock market: they read literature about investments, lived high and talked about the ‘new era,’” Mr. Roth wrote in February 1933. “Today their outlook is gloomy, they think the depression will never end, the stock market is an abomination, real estate is no good, everybody is cynical.…The slump is now looked upon as of indefinite duration.”
As an investor, you want to choose your options carefully. There are many alternatives to the stock market for you to invest. Resort Realty Capital is currently searching for value-add and opportunistic real estate acquisitions in 12 Rocky Mountain markets through our broker partners. If you would like to learn more, please contact us.
by recentricrealty | Oct 22, 2012 | Capital Markets, Uncategorized
By the time January 1, 2013 rolls around, it may be too late to take advantage of the current tax rates from the Bush era. To refresh your memory, the Bush tax cuts were enacted in 2001 and 2003 and scheduled to expire in 2011. President Obama signed legislation in 2010 that temporarily extended the Bush tax cuts through 2012. It is unlikely that the Bush tax cuts will be extended again until the election is over, and even then it’s anyone’s guess as to what will happen. So call your accountant and get your parachute ready, it’s time to start planning for the so called fiscal cliff. Here are a few of the impending changes:
1) Individual Income Tax Rates: Ordinary income tax rates will increase for most individuals in 2013. Also, qualified dividend income will be taxed at ordinary income as opposed to the current long term capital gains rate. Also, there will be a marriage penalty for many taxpayers by pushing them into the 28% tax bracket.
| Tax Brackets (2012 Dollar Amounts) |
Marginal Rate |
| Unmarried Filers |
Married Joint Filers |
|
|
| Over |
But Not Over |
Over |
But Not Over |
2012 |
2013 |
| $0 |
$8,700 |
$0 |
$17,400 |
10% |
15% |
| 8,700 |
35,350 |
17,400 |
70,700* |
15% |
15% |
| 35,350 |
85,650 |
70,700* |
142,700 |
25% |
28% |
| 85,650 |
178,650 |
142,700 |
217,450 |
28% |
31% |
| 178,650 |
388,350 |
217,450 |
388,350 |
33% |
36% |
| 388,350 |
… |
388,350 |
… |
35% |
39.6% |
2) Long Term Capital Gains Rate: The maximum rate on long term capital gains is scheduled to increase from 15% to 20%. Additionally, tax payers in the 10 and 15% ordinary income tax bracket currently pay no long term capital gains tax. They will be subject to a 10% long term capital gains tax in 2013.
| Maximum Rates |
2012 |
2013 |
2013 (including Medicare contribution tax) |
| Long-Term Capital Gain |
15% |
20% |
23.8% |
| Qualified 5-Year Capital Gain |
15% |
18% |
21.8% |
Possible Strategy: Consider disposing of assets such as stocks, real estate and businesses which have a long term gain to avoid the possible tax increase.
3) Dividend Income Rates: Bush created a special category of dividend income called “qualified dividend income” which allows dividend income received from domestic corporations and some foreign corporations to be taxed at the long term capital gains tax rate. In 2013, this QDI will be taxed at the ordinary income tax rate.
| Maximum Rates |
2012 |
2013 |
2013 (including Medicare contribution tax) |
| Qualified Dividend Income |
15% |
39.6% |
43.4% |
| Ordinary Dividend Income |
35% |
39.6% |
43.4% |
Possible strategy: Owners of closely held corporations should consider taking a higher than usual dividend payment in the current 2012 tax year to avoid the higher rate next year.
4) Medicare 3.8% Contribution Tax: A new 3.8% tax on ordinary income is going into effect in 2013 as a way of paying for Obamacare and will take place regardless of the extension of the Bush Tax Cuts. This tax comes into play if your AGI or adjusted gross income exceeds $200,000 for unmarried individuals, and $250,000 for married couples. Please consult your accountant on this issue, as it is quite complicated.
Possible strategy: Investors in pass-through entities such as partnerships, LLCs, and S corporations should also review the tax distribution language in the relevant entity agreement to ensure that future tax distributions will account for this new tax.
The above represents just a small portion of the changes that are going into effect for 2013. I hope it helps you to start thinking about your tax planning strategy moving forward. It helps to make sure your parachute is in proper working order before you are forced to jump off the fiscal cliff!
As an investor, you want to choose your options carefully. There are many alternatives to the stock market for you to invest. Resort Realty Capital is currently searching for value-add and opportunistic acquisitions in 12 Rocky Mountain markets through our broker partners. If you would like to learn more, please contact us.
by recentricrealty | Jul 31, 2012 | Capital Markets, Uncategorized
If you are one of Facebook’s 835,525,280 users world-wide, it is likely that the recent Facebook IPO or initial public offering did not affect your Facebook experience in the slightest. You kept posting pictures, liking pages, and staying in touch with friends and family. But for those who invested in Facebook’s IPO, the effects of their investment were not so positive, i.e. they invested in Facebook foolery. The capital markets flat out rejected Facebook’s public offering leaving investors losing almost 40% on their investment within a few short months.
Facebook’s IPO was one of the most hotly and sought after IPOs in the world’s history. With over 800 million subscribers, you would think with this many “eyeballs” (as they say in internet terms), Facebook would overcome any negative stock sentiment and not experience a resulting -39.08% decline since it first started trading on May 18th, 2012. But, a couple of things went wrong: 1) Nasdaq failed their client by not executing the IPO properly, and 2) Morgan Stanley overpriced their client’s IPO. The end result is that as of July 30, 2012, Facebook is trading at 36 times revenue, a stock rich for even the height of the dot.com bubble in 2001.
I find this rejection by the capital markets an interesting paradigm on how the stock market is completely out of the average investor’s control. There is a saying that Wall Street is a river of money. A few get to swim in it, a few more get to stand by the river side and splash water around, and the rest of the world can only see it from miles away.
As an investor, you want to choose your options carefully. There are many alternatives to the stock market for you to invest. Resort Realty Capital is currently searching for value-add and opportunistic acquisitions in Breckenridge and 10 other Rocky Mountain markets through our broker partners. If you would like to learn more, please contact us.
by recentricrealty | Jun 12, 2012 | Capital Markets, Uncategorized
If you have not heard, the JOBS act was signed into law in April by President Obama. JOBS stands for “Jumpstart Our Business Startups.” Part of this legislation includes a provision for crowdfunding which is intended to allow small startup companies to raise much needed seed money to grow without having to obtain that capital from accredited investors. This is exciting news for the small investor who can soon get in on ground floor opportunities that would otherwise be off limits due to the red tape required for such offerings.
While the Securities and Exchange Commission is highly skeptical about the possibility of fraud, they are still mandated to finalize the exact rules in early 2013. Crowdfunding, in theory, would work with you as the investor buying shares of stock from a company that is listed on an SEC approved investment portal. Such portals exist today (http://www.crowdsourcing.org/directory), however, they are restricted to selling to only accredited investors. The JOBS act now opens true equity funding to the masses. So, how do you profit in these deals and mitigate your risks at the same time? Three rules to follow are: 1) invest in who you know, 2) invest in what you can touch, and 3) be realistic about risks/returns.
1) Invest in who you know: Invest only in companies to which you are referred by a trusted source. Having been a part of an internet startup back in 1999, the investors who participated in our stock offering were introduced to us by my business partner’s brother, who was also our investment banker. All parties involved trusted each other. One suggestion is to utilize Linked-In to cross check the founders’ names to see if you can make a connection back to yourself.
2) Invest in what you can touch: If you can drive to a location, whether it’s a production facility, a commercial real estate shopping center, a large tract of land, or an office with real people, and put your hands on your potential investment, the chances are greater your investment will be around longer than just a company with a website.
3) Be realistic about risks vs. returns: If you are reading a prospectus online which purports to provide a 25% return on your money in the first year, and every year after, be prepared to lose all of your money. If it sounds too good to be true, it could be another Madoff scheme. It is up to you to determine how much risk you are willing to take, so be prepared to analyze the upside along with the downside along with understanding the business model and how returns are generated.
In 2011 an estimated 452 crowdfunding platforms worldwide (but mostly in Europe and North America) raised nearly $1.5 billion, according to a May report from Crowdsourcing.org. That study estimates volume will hit $2.8 billion in 2012. This number is projected to grow exponentially once the SEC finalizes the rules. Remember, it is up to you to do your homework, as the Dr. Jekyll side of crowdfunding is very real.
Resort Realty Capital is currently searching for value-add and opportunistic acquisitions in Aspen and 10 other Rocky Mountain markets through our broker partners. If you would like to learn more, please contact us.
Darren Nakos, CCIM
Resort Realty Capital
111 Main Street
Frisco, CO 80443-0630
(720)-663-1430
THIS IS NOT A SOLICITATION FOR INVESTMENT – THIS INQUIRY IS TO FIND OUT IF YOU ARE INTERESTED IN RECEIVING ADDITIONAL INFORMATION. NEITHER RESORT REALTY CAPITAL, LLC, IT’S AFFILIATES AND REPRESENTATIVES MAKE ANY REPRESENTATION REGARDING THE RISKS OF INVESTING IN COMMERCIAL REAL ESTATE. YOU SHOULD CONTACT YOUR OWN PROFESSIONALS TO MAKE THE DETERMINATION AND ASSESS THE RISK OF INVESTING. AS WITH ANY INVESTMENTS, THERE ARE INHERENT RISKS AND NO GUARANTIES OF RETURNS. PLEASE CONSULT WITH YOUR OWN PROFESSIONALS IN DETERMINING THE RISKS ASSOCIATED WITH INVESTING IN COMMERCIAL REAL ESTATE.
by recentricrealty | Feb 8, 2012 | Capital Markets, Uncategorized
All signs are pointing towards Mitt Romney becoming the GOP elect candidate for the upcoming 2012 presidential election against incumbent Barack Obama. It’s no surprise that Mr. Romney’s wealth status and success at Bain Capital has been highly scrutinized. Whether you agree with his political views or not, there is no doubt that Mitt knows how to make money in a capitalistic society such as ours. What you may not know is Mitt has been living an alternative financial lifestyle. No, its not what you might be thinking as far as alternative lifestyles go. Mr. Romney uses his traditional IRA to buy alternative investments or non-traditional assets such as real estate and private equity.
Pensco Trust Co., a self-directed IRA custodian based in San Francisco used the information about Mr. Romney’s IRA to remind investors about how non-standard, high-return assets can help IRAs swell in size. In a news release, Pensco Trust noted that multi-million dollar IRAs aren’t uncommon and that it holds several IRAs each with more than $100 million.
So, why do people buy non-traditional assets with their IRA? Because regular IRAs are limited to investments in stocks, bonds and mutual funds. Self-directed IRAs, on the other hand, are specialized accounts that allow their holders to invest in anything except for life insurance, collectibles and investments that would personally benefit them or close family members, as restricted by the IRS.
As millions of baby boomers approach retirement, pensions are unsustainable and Social Security’s future is uncertain at best. That leaves many people depending heavily on their retirement accounts to fund their retirements. “As people live longer, you know, retire at 65, live to 85, that’s 20 years they’ve got to provide for themselves,” Tom W. Anderson, CEO and founder of PENSCO Trust Company, a self-directed IRA custodian, said. “No longer can you just park your money in a retirement account and expect to get by.”
Here are three more reasons to look into self-directed IRA’s:
1) Diversification: One example is that real estate within self-directed IRAs can be purchased in cash. If the real estate is a rental property, the rental income generated is pure profit back into the IRA which allows the purchaser to have consistent cash flow off the retirement investment.
2) Leverage: Account holders are allowed to use leverage, meaning a bank will lend money to the IRA using the real estate as security and not require a personal guarantee. This can be a great wealth-building tool.
3) Invest in your core competency: If you understand private equity, you can invest in business from start-ups to publicly held companies. If you understand real estate, you can access limited partnerships, or purchase real estate outright. The options are many, however self-directed IRAs require extensive due diligence and knowledge, because the account holders themselves make each investment decision, unlike traditional IRAs.
I personally am looking forward to the upcoming election. Candidates whose views empower people to make their own financial decisions about their own futures will provide our country with a sense of pride and accomplishment and will lead to a stronger economy.
Resort Realty Capital is currently searching for value-add and opportunistic acquisitions in Aspen and 10 other Rocky Mountain markets through our broker partners. If you would like to learn more, please contact us.
Darren Nakos, CCIM
Resort Realty Capital
111 Main Street
Frisco, CO 80443-0630
(720)-663-1430
THIS IS NOT A SOLICITATION FOR INVESTMENT – THIS INQUIRY IS TO FIND OUT IF YOU ARE INTERESTED IN RECEIVING ADDITIONAL INFORMATION. NEITHER RESORT REALTY CAPITAL, LLC, IT’S AFFILIATES AND REPRESENTATIVES MAKE ANY REPRESENTATION REGARDING THE RISKS OF INVESTING IN COMMERCIAL REAL ESTATE. YOU SHOULD CONTACT YOUR OWN PROFESSIONALS TO MAKE THE DETERMINATION AND ASSESS THE RISK OF INVESTING. AS WITH ANY INVESTMENTS, THERE ARE INHERENT RISKS AND NO GUARANTIES OF RETURNS. PLEASE CONSULT WITH YOUR OWN PROFESSIONALS IN DETERMINING THE RISKS ASSOCIATED WITH INVESTING IN COMMERCIAL REAL ESTATE.
by recentricrealty | Oct 5, 2011 | Capital Markets, Uncategorized
We recently held our first presentation of Life’s Financial Navigator at the Denver Athletic Club in an attempt to answer such a question. Our speaker, Jerry Paul, a former INVESCO fund manager, was able to impart his knowledge on the state of the US economy and the headwinds that we are still facing. The focus of the presentation was on two main topics, debt and savings.
From a debt perspective, the bank, consumer and government debt will take time to reduce. While consumer defaults may reduce leverage, bank balance sheet recovery will take longer as a result. The Federal Reserve is likely to maintain a low-rate policy into 2013 and maybe longer. As we have seen, this may not directly correlate into a lower interest rate for such instruments as credit cards and commercial real estate loans. However, such instruments as home mortgages have benefitted.
On the savings side, household net worth has fallen from $64.2 trillion in 2007 to $58.1 trillion at the end of Q1 2011. Jerry’s recommendation was that consumers need to build their balance sheets by 1) increase savings rate to 6% from 0% pre-recession levels, 2) reduce their debt service via lower debt balances or lower interest rates, and 3) extending their working careers.
So, how do you answer that ever elusive question, of “Where do I put my money?” Much depends on your risk tolerance and timeline of when you will need it, but here are a few ideas:
1) Go Global on Equities: Find sources of growth using a global view, such as Asia and emerging middle class markets. Focus on multi-national companies with a strong dividend strategy.
2) Go Pro on Fixed Income: Call Jerry Paul CFA directly at 303-956-7821. This is not an area to go it alone! There are considerations such as credit spread risk, duration risk, illiquidity, and closed end fund arbitrage. I would leave this up to an expert, however there is always a bull market somewhere.
3) Go Local on Real Estate: Utilize your retirement funds to invest in real estate through a self-directed IRA in part or entirely. There are some incredible buying opportunities in this market. Make sure you are partnered with an expert in their region and product type. These down markets are where fortunes are made.
As crystal balls go, there is no such thing. However listening to experts in their respective fields is a recipe for success. Don’t go it alone, as you can’t be an expert in everything.
Resort Realty Capital is currently evaluating several opportunities to profit from these market conditions. If you would like to learn more, please contact us.
Darren Nakos, CCIM
Resort Realty Capital
111 Main Street
Frisco, CO 80443-0630
(720)-663-1430
THIS IS NOT A SOLICITATION FOR INVESTMENT – THIS INQUIRY IS TO FIND OUT IF YOU ARE INTERESTED IN RECEIVING ADDITIONAL INFORMATION. NEITHER RESORT REALTY CAPITAL, LLC, IT’S AFFILIATES AND REPRESENTATIVES MAKE ANY REPRESENTATION REGARDING THE RISKS OF INVESTING IN COMMERCIAL REAL ESTATE. YOU SHOULD CONTACT YOUR OWN PROFESSIONALS TO MAKE THE DETERMINATION AND ASSESS THE RISK OF INVESTING. AS WITH ANY INVESTMENTS, THERE ARE INHERENT RISKS AND NO GUARANTIES OF RETURNS. PLEASE CONSULT WITH YOUR OWN PROFESSIONALS IN DETERMINING THE RISKS ASSOCIATED WITH INVESTING IN COMMERCIAL REAL ESTATE.
