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20 The Gem La Quinta Chamber of Commerce September 2006 lqchamber.comMore Return on Equity For Your Investment DollarGuest Columnist ArticleBy Judy MathesFew would deny that real estate is a solid investment. It providesan attractive combination of stability, reliable cash flow,preservation of principal and capital appreciation. However, manyinvestment property owners nearing retirement find themselves in aquandary. They are equity rich, but cash poor, with increases in thevalue of their property far outpacing income growth. They also areoften tied down by the day-to-day issues of property managementand, particularly in California, shackled to the constraints of rent(and eviction) control. In fact, Californian metropolitan areas arehome to some of the lowest cash return on equity in the state’s realestate marketplace, which is somewhat counter-intuitive givenCalifornia’s ever-booming property market.The obvious answer is to sell the property and unleash thedormant equity, but that can be problematic. These investors facethe reality of prohibitive capital gains taxes and recaptureddepreciation, as well as the task of identifying an alternateinvestment venue; or locating, acquiring and financing suitablereplacement property in the time period allowed, taking advantageof tax deferral under IRS code section 1031.An ideal solution for many investment property owners may be toreinvest the proceeds from the sale of their property and utilize asubsequent 1031 exchange into a tenancy-in-common (TIC)ownership type, also known as co-ownership of real estate (CORE)interest in a suitable replacement property.1031 exchanges, also known as Starker exchanges or tax-deferredexchanges, permit owners to sell investment property and defer taxpayments by reinvesting the proceeds into another investmentproperty (or properties). In order to completely defer the payment oftax, among other things, the replacement property must be of equalor greater value and all the equity from the sold property must bereinvested in the new property. The marriage of 1031 exchange andTIC/CORE allows investors not only to defer their capital gains taxesbut also to upgrade their investment real estate.TIC/CORE is a way of sharing ownership of property among two ormore persons whereby each tenant holds an undivided interest inthe property. Tenants-in-common may own interests of differingsizes. TIC/CORE investors are on the title and considered separateowners of the real estate. They share pro rata in the income, taxbenefits and appreciation of the property. Their TIC/CORE interestcan be purchased, sold, gifted, bequeathed by will or inherited; andit is subject to property taxes, gift tax, and estate and inheritancetaxes in the same manner as any property held in sole ownership.With a TIC/CORE property, each of up to thirty-five investors have theopportunity to own an undivided fractional ownership interest in aninvestment-grade property, such as an office building, shoppingmall, apartment complex or industrial property, costing anywherefrom $10 million to $150-plus million.The benefits of investing in TIC/CORE properties are substantial.Such properties employ professional asset and propertymanagement, relieving the investor of day-to-day tenant headaches.More important, investors often receive greater cash flow andoverall returns than they had in their previous sole ownershipproperty. (Annualized cash flow and overall investment return varyfrom property to property.) Also compelling is that TIC/COREexchange investors can diversify among several property types, andgeographic locations through fractionalized ownership, while stillenjoying 1031 exchange benefits on each amount. Thus, investorscan potentially reduce risk in their overall real estate portfolio.Investors seeking to exchange for a TIC/CORE property are bestadvised to work with a financial advisor experienced in 1031exchanges. Such advisors work closely with top real estateproviders, who give the investor access to the best propertiesavailable. In addition, many TIC/CORE opportunities have prearranged,non-recourse financing in place, which is perfect forinvestors working within the 1031 exchange time frame. Numeroushours of upfront investigation, evaluation, due diligence and life cycleplanning transpires before a property is offered to an investor group.Investors faced with only a 45-day window to identify a suitablereplacement property to complete a 1031 exchange can select asuitable project with confidence.Given the tax deferral, institutional-grade quality of the property,professional property management and pre-arranged, non-recoursefinancing aspects, a 1031 exchange replacement property structuredas tenancy-in-common ownership can be a very wise and profitablesolution. It allows the investor to maintain everything they like aboutreal estate (monthly income, preservation of principal, capitalappreciation, etc.), while eliminating most of the hassles of propertyownership.Judy Mathes is a Replacement Property Specialist® with 1031Exchange Options. For more information, please seehttp://www.1031exchangeoptions.com. Judy can be reached toll freeat 800-675-2424, locally at 760-391-2369, or online athttp://www.1031exchangeoptions.com.This article is neither an offer to sell nor an offer to buy real estateor securities. There are material risks associated with the ownership ofreal estate. You must be an accredited investor. Securities offeredthrough Sigma Financial Corporation, Member NASD/SIPC.The Home Loan Consultant with More Mortgage OptionsRoger L. PerrisHome Loan Consultantand Business DeveloperServing the La Quinta andCalifornia Desert AreaFREE 24 HOURRECORDED INFORMATIONCALL 1.800.958.8098Ext.656 - Tax Deductions Buying a Home672 - Buy for LESS than Your Buying in RENT!673 - How to Buy a Home even with Damaged Credit678 - Eight Tips When Obtaining A Loan1736 - Why do Home Loan Rates Change?WIN ONE MONTH’SMORTGAGE PAYMENT(up to $5000)!Enter Every Month atwww.HomeLoanConsultant.NETThe Keyto your futureHome...Having the rightFinancial Plan!
lqchamber.com September 2006 La Quinta Chamber of CommerceIt’s What It Does, Not What It IsThe Gem 21Guest Columnist ArticleBy Joe FredericksonYou can’t help but enjoy the fantasy of television commercials for newvehicles. Obviously exceeding posted speed limits, traveling on deserted yetpaved roads or barely-navigable wilderness trails, these visual depictionsrarely reflect reality. Indeed, they as a group may have become an art form.Yet they play one of the most important roles in modern automotivemarketing. But why?Instead of providing a product demonstration (these are the tires, this isthe front seat, that is the GPS screen), these spots are designed to convinceyou what the vehicle will do for you. In other words, it’s not what it is. It’swhat it does.I’ve long believed that marketers of all products or services – andproprietors of businesses of all sizes – can be well served by keeping thatnotion foremost in their marketing and advertising planning.In Advertising 101 we learned to present benefits loudly and clearly,followed by product components that should differentiate our offerings fromthe competition. A look back to the early days of American advertising showsthat not much has changed. Pick up a newspaper, a magazine, a phone bookor even visit a page on the Web and you’ll see pretty much the same formatthat has driven informational advertising to modern times.But to this day I continue to believe that more sales, more awareness andmore brand-building can happen if messages strike to the heart of theconsumer in terms of what the shopping experience or the value receiveddoes for them.What do I mean by does?The example of vehicle advertising above is one example. Who wouldn’twant to experience the thrill of the open road at, say 90 MPH, or take on therigors of the deep backwoods or wilderness in full-leather comfort? Whowouldn’t want the admiration of others for choosing such a handsome modeof transportation? Who wouldn’t want heads to turn to see you arrive in frontof the upscale restaurant in that magnificent machine?Well, that’s what it does. That kind of advertising places another memory inyour cluster of memories that might well be remembered and recalled whenyou’re ready for your next motor vehicle.So when it’s time for you to craft new marketing messages, keep in mind thechance before you to tell consumers how the use of their product or service……will save money compared to your competitors…will help them lead better, healthier lives…will make them smarter, wiser and well-rounded…will help keep them in front of their competition…will help them better cope in a world of information overload…will help save and free up time for leisure activity…will lead them to a more enjoyable overall lifestyleAnd one important reminder: large businesses began as small businessesand smaller ones do not necessarily have the resources for wide-scaleintegrated marketing plans. But the bedrock idea of communicating thebeneficial effects of products or services can begin with even the smallestpiece of affordable advertising. For now, though, keep my comments in mindas you read, see or hear contemporary advertising and marketing messages.I believe you will agree that successful marketers translate their offerings fromwhat it is to what it does when aimed at the consumer.Joe Frederickson is Marketing and Public Information Manager at UCR PalmDesert. He was formerly Vice President/Marketing and Public Affairs for ThePress-Enterprise Co. and Publisher of The Business Press. He is a pastchairman of the Greater Riverside Chambers of Commerce.Jerry NantellVice President, Loan Officer,La QuintaIn banking for 30 yearsAt PDNB, it’s personal.That’s right – it’s about you. At Palm Desert National Bank, every product and service weoffer is designed to be simple and convenient for you, our customer. As a local bank, andwith a branch right here in La Quinta, it’s quicker and easier to get answers – whetheryou have questions on our wide range of deposit products or on our loans – fromconsumer to small business, construction or commercial. Whatever your needs, wemake it easy for you.After all, we’ve been helping Valley residents and businesses achieve their goals forover 24 years.760.340.1145 www.pdnb.comBanking made easy.PALM DESERT 73745 EL PASEO RANCHO MIRAGE 70390 HWY. 111 LA QUINTA 47000 WASHINGTON
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