Get Better Cash Flow With a 1031 Exchange

If you want to increase your monthly cash flow, it’s time to take advantage

of the 1031 Tax Exchange.

Did you know you can get up to 20% more monthly cash flow without spending a penny?
It’s true, and it’s as simple as implementing the 1031 Tax Exchange.

You’ve probably heard of the 1031 Tax Exchange in the past, but now’s the time to truly take to
heart what this strategy can do for you.

Through the 1031 Delayed Tax Exchange, you have 45 days after closing escrow to secure a
replacement property. You’ll also need to close escrow on the replacement property within 180 days
after closing on your home sale.

1031 Tax Exchanges allow you to avoid Capital Gains Tax upon the sale of your property assuming
you meet certain requirements. If you don’t pursue this strategy, there are three tax-related
concerns you’ll need to consider:

1. The State Tax. Depending on how much you make from your home sale, the amount you owe in
State property taxes may increase if you don’t use a 1031 Tax Exchange. To learn more about
what your taxes would look like without a 1031 Exchange, check out this calculator.

2. The Capital Gains Tax. When your sale is subjected to Capital Gains Tax, this means you could
lose a significant percentage of what you earn from your sale.
To learn more, check out this Capital Gains calculator.

3. The depreciation recapture rate. This is the federal tax rate that will be levied on the year that you file the tax return on a property sale without a 1031 exchange. The depreciation recapture amount is based on the cumulative depreciation that you have taken each year that you have owned the property and the rate is at 25%  on the total depreciation that you have expended on your tax returns.  For residential income property including apartment buildings over 5 units, the depreciation is taken over 27.5 years on the improvement value, not on the land.  For commercial properties such as retail, office, and industrial buildings, the depreciation is taken over 39 years. Check out this step-by-step guide to learn how to calculate a recapture rate for a given property.

If you have any other questions or would like more information, feel free to give me a call or send

me an email. I look forward to hearing from you soon.

How Should You Use the Equity in Your Home?

If you have a lot of equity in your home, keep reading. I’ve got some great tips for how you can use it to create even more wealth.

If you have equity in your home and you’re looking for different ways to use it, I’ve got a few
recommendations for you today.

First, you can get a line of credit. Depending on the institution you’re working with, you could
use that line to take out money via arbitrage. You could also invest in stocks, such as the S&P
500 Index, which returns about 9.7% per year historically.

One of the best ways to use your current equity to create more wealth is by investing in
real estate. Nowadays, you can get a great return cash on cash and with appreciation. Since 1980, we’ve
seen roughly 6% appreciation every year. A $500,000 home appreciating conservatively at 5% will gain you
$25,000 a year in value. That return is pretty spectacular on paper.

Finally, for those preparing for retirement, you can use your equity to get a reverse
mortgage. This will allow you to make one large down payment and not have to make a
mortgage payment. You will have to cover yearly property taxes and insurance, but there will be
no monthly payment.

As you can see, there are a ton of different ways to use your equity. If you have any questions for
me about this topic or about anything else related to real estate, don’t hesitate to give me a call
or send me an email. I look forward to hearing from you soon.

A Past Market Comparison & Update for 2019

We saw some considerable changes from the final six months of 2018’s real estate market compared
to that same time the year before. What were they?

First, I’m happy to report that average home appreciation rose from $623,000 in 2017 to
$658,000 last year. However, the total number of homes sold dropped off by 11.1%—total sales
reached 10,383 in 2017 and 9,229 the following year.

In 2017, home appreciation rose little by little between July and December without ever experiencing
a true surge. From November to December of that year, appreciation topped out at 0.5%.

Contrastingly, from July to December of 2018, prices seesawed up and down, and home
appreciation dropped by 3.3% to close out the year.  

So what’s to come for our market in 2019?   

Well, I expect appreciation to continue to be a little bumpy, with home prices rising to
somewhere between 4.5% and 5%. And I can say with certainty that no market crash is in sight.
Not only that, the market continues to flourish—unemployment is currently at an all-time low.

I’d love to hear your feedback, so don’t hesitate to text or call me at 626-643-7090 or email me at ReoAgent@ShawnLuong.com. I look forward to speaking with you!

3 Advantages to Having a Checkbook Control Self-Directed IRA, LLC

Today I’ll be shedding more light on checkbook self-directed IRAs, LLC after receiving some questions from a few of you.

Unlike more traditional self-directed IRAs, where your funds are held by a custodian who acts as
an authority on each transaction, the owner of a checkbook self-directed IRA, LLC possesses full
control, which is commonly referred to as “checkbook control.”

There are three benefits that set checkbook self-directed IRAs, LCC apart:

1. You’ll be able to keep more from a fix and flip. If you’re looking to use funds from your IRA
to fix and flip a piece of real estate, you’ll preserve 100% of your gains because you won’t have
that 40% taken right off the top due to the income tax you’d ordinarily incur from an ordinary fix and
flip.  

2. You can skip the excessively long process of a 1030 exchange. If you’re a rental property
owner and you want to upgrade to a new property, you would typically be stuck going through a
1030 exchange, which can be a slow-moving process. But with a checkbook self-directed IRA, LLC,
you’ll eliminate those long waiting periods because you’ll have full autonomy to write checks for
the necessary services and expedite the buying process.

3. You’ll have fewer fees to worry about. Rather than having to pay the litany of fees, such
as asset-based fees, that come with normal self-directed IRAs, you’ll simply pay an annualized
custodian fee that tends to be much more reasonable.  

If you’d like more information or would like to be pointed in the direction of a custodian to hold your
IRA, I’d love the opportunity to help you. Give me a call or email me today!

How to Take Advantage of Your Self-Directed Individual Retirement Account

I recently had the chance to meet with some old colleagues and friends of mine. During our
get-together, I was asked what I do with my individual retirement account (IRA) money.
I shared with them what I do.

I took my IRA money out and, combined with my wife’s IRA, we now have a self-directed

IRA. We've turned this into a checkbook controlled self-directed IRA LLC, and with our IRAs,
we are the owners and managers of the LLC. We’ve been using this fund since 2007 and
invested in a rental while most of the money goes toward flipping homes.

By using our own IRA money for the last 10 years, we’ve been able to grow our nest egg

by 300%. We just filed our tax returns and we can see the assets between 2007 and
2017, which showed about a 30% increase each year. My friends were definitely excited
after hearing what we were able to turn our IRAs into.

If you’re looking to leverage your IRA into a good income, I’d love to speak with you and go over your options. We can talk about getting a return by investing some of your retirement money. I look forward to hearing from you.

This Thanksgiving, I’m Thankful for You

With Thanksgiving just around the corner, now is the perfect time of year to pause and reflect and be
thankful. And one of the things I’m most thankful for in life is you—my valued friends and clients. I
appreciate the incredible support you’ve shown me this year, and look forward to continue serving as
your real estate resource in the new year ahead and beyond. I hope that you’re able to spend this holiday
season surrounded with those you love, and that you have a very happy Thanksgiving. To hear my full
message of thanks, watch this short video.

How to Prepare For Proposition 10 Rent-Control Changes

In our latest message, I’ll be discussing the potential changes of Proposition 10 and why you should consider increasing rent.

With votes being cast next month, Proposition 10 could potentially change the way rent control works
in Southern California. As the balloting comes closer, I’m being asked more and more about what
should be done in preparation for these changes.

The simplest solution? Raise rent periodically to reflect economic and market trends.

Employees receive wage increases for cost of living and inflation, and utility companies
increase price based on growing infrastructure costs. It’s no different in real estate—costs rise
over time.

Let me provide some examples:

The median price for a West Covina home in 2014 was $435,000 with an average price per square
foot of $278. In September 2018, the median price had risen to $568,000 with an average price per
square foot of $361.

To get a return of 5%, account for 6.5% to cover your costs of tax, insurance, and maintenance. In
2014, rent was around $1.50 per square foot per month, and for 2018 it’s up to $1.95 per square foot
per month.

In a recent survey, the median rent for a 3-bedroom house is $2,325 with a square footage of 1,400
square feet (about $1.65 per square foot per month). You can see the price increase from $1.50 in
2014 to $1.65 now.

If you’re a new buyer and are wishing you were at the $1.95 point, don’t worry! Over the past 35
years, home value has seen a roughly 6% appreciation. For the average owner who puts down 20%
on a new home, that appreciation of 6% amplified over 5 years is a substantial 30% return. On top of
this, a $60 monthly rental increase becomes $720 annually, adding even more value to your
investment.

If you’re looking for guidance in raising your rental prices, have questions, or need information,
contact me by email or phone and I’ll be more than happy to help. I look forward to hearing from you.

Seniors: Do You Know About Reverse Mortgages?

Hear two different true stories that demonstrate how reverse mortgages can help senior buyers purchase a home without adding monthly payments to their budget.

Today I’d like to talk about two scenarios, both of which are true case studies. In each scenario, a reverse mortgage helped the senior buyer to do away with their monthly mortgage payment.

The first refers to a home in Orange County for $950,000. The mortgage is still about $550,000. After the selling cost and the commission, the net amount is about $330,000. How would you buy a home for that amount in this current California market?

Since you’re planning to retire, you don’t want to worry about a higher mortgage. A solution to the problem is a reverse mortgage. This allows you to use the equity in your home to be converted into cash or a payment towards your mortgage, which means no monthly payment.

Since you’re planning to retire, you don’t want to worry about a higher mortgage.

The second scenario is about a single woman whose home is worth $550,000. She wants to move close to her children, and the home she’s interested in is $600,000. The solution here is similar: She can put $300,000 down and use the other $300,000 in a reverse mortgage so that she doesn’t have a monthly payment. She’s only obligated to pay the property tax and the annual homeowner insurance fee.


I have been able to put people into an investment vehicle like a Delaware Statutory Trust (DST) or in a TIC (tenant in common). For triple-net properties and A-Class, accredited types of investments, they can put it in and the return is between 5.25% - 6.25% depending on the offering from the sponsor.


Returning to the woman in the second scenario, with the $200,000 she has after the down payment of $300,000, she can get roughly an additional $11,000 to $12,000 a year in income that is fully sheltered.

Outside of this topic, I want to give a client named Quentin a shout-out. He told me about an area right here in Southern California with an affordable retirement community called Paumer Valley. You can find a 3-bedroom, 3-bath, 2,000 square foot home for $350,000. It’s a great community.

I’d love to hear from you. If you want to hear more about reverse mortgages for example, I’d be more than happy to bring in an expert to discuss your specific case. Just give me a call or send an email. Stay safe and stay happy!

One Simple Strategy for Southern California Buyers

Buying a SoCal Home? Search all Homes for Sale
Selling a SoCal Home? Check out our FREE Home Value Report

As the prime selling season of the year approaches, it’s important to prepare your home if you plan to list soon.

On my website, I offer a service called Rate Alert. I’ve subscribed to it for many years. I use it primarily to help clients figure out the best time to lock in a loan. Oftentimes, people that use this tool find out now is the best time for them. It provides an estimate your loan officer or broker would provide for you. You can sign up for both daily and weekly alerts.

This is an especially helpful tool if you’re thinking about buying or selling a home in Southern California. If you have any questions about this feature or anything else real estate related, feel free to give me a call or send me an email today! Let’s talk.

How Should You Prepare to Buy in SoCal?

Buying a SoCal Home? Search all Homes for Sale

Selling a SoCal Home? Check out our FREE Home Value Report

Welcome back to my blog. Today I want to talk to you about getting ready to buy because a lot of people in Southern California are on the same page. So here are a few things we wanted to remind you about today:

First, if you have had any recent expenses over the $1,000 mark, make sure you document it. When you go to get pre-approved for a loan, your lender will want all of this information. 

Secondly, if you take a look on your most recent tax return, under the 2106 form, you'll see that it's a form for employee-reimbursed expenses. If you have any big work expenses, like a mileage per diem, ask your tax preparer to do an amended tax return, because they will take this money into account when you qualify for a loan. 

The third thing you need to do is get online and get yourself a free credit report. Head to quizzle.com, credit.com, and creditkarma.com to get each of your three credit scores for free. 

If you have any questions for us, feel free to give us a call or send us an email. We are always here to help you get a leg up on the competition when it comes to buying and selling real estate here in Southern California.

Utilize my Free Resources to Boost Your Credit Score

There are many great San Gabriel Valley area homes for sale. Click here to perform a full home search, or if you're thinking of selling your home, click here for a FREE Home Price Evaluation so you know what buyers will pay for your home in today's market. You may also call me at (626) 643-7090 for a FREE home buying or selling consultation to answer any of your real estate questions.

Understanding Credit in the Spring & Summer Buying Season

As we enter a busy season here in Los Angeles and the San Bernardino Valley, I wanted to touch on a topic that is going to be important for you if you're planning on buying a home. 

What I am speaking about is your credit score. There are different types of credit scores, but the most important one is your FICO score. This is the score that lenders use to rate you and provide you with loans. 

One DVD I can recommend for you is The Credit DVD: How to Build a Perfect Credit Score. Another good video to watch if you are seeking a higher credit score is The Credit DVD: How to Rebuild Your Score After a Foreclosure, Short Sale or Bankruptcy. 

You can also go to www.AnnualCreditReport.com and get a free credit report. Another good resource is www.MyFico.com. This website is free of charge and simulates what your real credit score might look like. Another website, www.CreditKarma.com, will do this too, as well as notify you on a monthy basis whether your credit score has gone up or down. 

If you would like a copy of either Credit DVD, please contact me and I would be very happy to mail you a copy.

Otherwise, if you're looking to buy or sell your home in LA or San Bernardino Valley, please contact me by phone or email and I would be glad to provide assistance to you.

Thanks for tuning in!