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.

What’s the Best Way to Determine How Much Your Home Is Worth?

I’m offering you a free home evaluation that is much more accurate than a Zestimate.

Thank you all for your great feedback on my last blog post regarding the state of the market, where
I compared what we saw in 2018 to 2017.

As we have all learned, the market has pretty much reached its peak. Many of you have
done well in terms of your net worth by accumulating equity on your properties, though a few of
you have called me to say that while your equity looks nice on paper, it hasn’t given you any sort
of return yet.

Well, with that in mind, I have something to offer you:

I’m offering you a free home evaluation that’s accurate within 1.5% to 2% of the sales price
of the home. You might ask why you should go with my home evaluation instead of, say, the one
provided by the popular website Zillow’s valuation tool, the Zestimate.

The truth is that Zillow’s own site says that only 91.6% of the homes listed in the Long Beach area
sell within 20% of the sales price—that’s not a very high accuracy. Zillow may be a good tool
for a ballpark estimate, but you can’t rely on their Zestimates for an accurate estimate of your
home’s actual value. Remember that Zillow’s own CEO sold his home for 40% less than what
his Zestimate called for.

If you would like to know your home’s exact value, please reach out to me. I’m more than happy
to provide you with a complete report on your home so that you can review your current financial
information and prepare for the next step toward your real estate goals.

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!

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.

What I Learned About Our Market at a Recent Conference

I attended the largest default servicing conference in the country. Here are three things that I learned

I recently spent three days in Dallas attending the largest default servicing conference in the country.
Here are three specific takeaways from this conference that I want to share with you:

1. Fannie Mae has reported a very healthy gain. They have returned $193 billion to the treasury of
the $119 billion that they took out as a loan. At the height of the great recession in 2010, they had
a 170,000 home inventory. Right now, they only have an inventory of 22,000 homes.

2. Future trends. As you might recall, from 2012 to 2014 we saw the initial rate cast down to 2.5% for

five years. Now, those have been recast back up to 5% or 6%. Will homeowners be able to afford this?
We should know about a year from now, however, this won’t affect the market much aside from an
increase in distressed properties.

3. Demographics. This has a very important impact on our marketing and the economy. There are 75

a million millennials out there aged 19 to 34 and peer research has shown that over 50% of them are
still living with their parents. This explains why the home building industry hasn’t recovered like it has
in the past after past recessions.

Currently, the housing market is healthy overall, but there are definitely things to keep an eye out for

in the future. If you have any questions for me about the market or any of these takeaways that I’ve
discussed, don’t hesitate to give me a call or send me an email. I look forward to hearing from you
soon.

How Has the Southern California Market changed in a Year?

The latest statistics are in for the Southern California market.

Here’s what we’ve been keeping an eye on.

Today I’ve got the latest numbers from our Southern California real estate market and I want to bring
that data to you. Our market is defined from Monterrey Park and Pasadena to the west, Rancho
Cucamonga to Eastvale on the east, and along the 60 and 210 freeways.

In summary, our real estate market is very healthy. Here are a few reasons why. For starters, our
unit sales have decreased by 4.75% in 2018 from what we saw from January to July in 2017. In
addition to that, the average price has increased by 6.43% from last year.

Last year in July, the average home sold for $633,000. Today, the average home is selling for
$665,000. That’s an 8.1% price increase in the summer market alone. This is partially a result
of increased demand. The average days on market has played a big role as well. We saw it drop
from 26 days last year to 18 days this year.

Another thing I wanted to bring up is our inventory levels. Our inventory is a measure of how long it
would take to sell all the homes on the market if no new homes were listed. This year, our inventory
has dropped from 2.87 months to 2.8 months.

That’s my real estate report in a nutshell. If you have any questions for me or want to know more
about the numbers for rental properties or the numbers in your specific area, I’d be happy to assist
you. I look forward to hearing from you soon.