§1031 Exchange Intermediary

Short notice, but I wanted to announce the Spring Educational Seminar and Trade Show of the Iowa Landlord Association. It will take place on Thursday, April 30, at the downtown Holiday Inn. There will be a succession of speakers on relevant topics to landlords. During breaks, please stop in at the vendor trade show and be sure to stop at the Iowa Equity Exchange booth to say hello. We will be there with our display and information to help Iowa investors with their Section 1031 exchanges.

You can find out more about the Iowa Landlord Association at http://www.iowalandlord.org/public/home.asp, including contact information for the group to register for the seminar.

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Please consider IOWA EQUITY EXCHANGE as your trusted source for answers to your questions about Section 1031 like-kind tax-deferred exchanges. Contact us at your convenience for prompt, accurate information. Please think of us for your next exchange.

Ken Tharp

800-805-1031 toll free

Providing Qualified Intermediary services for Section 1031 tax deferred exchanges all over the United States. Headquartered in Iowa, our services are available in Missouri, Kansas, Nebraska, Colorado, North Dakota, South Dakota, Minnesota, Wisconsin, Illinois, and all other states.

INTEGRITY. PRECISION. SECURITY.

Copyright © 2009 By Ken Tharp, All Rights Reserved. * Iowa Landlord Association Spring Educational Seminar & Trade Show * Contact Ken Tharp for information on Section 1031 tax-deferred exchanges anywhere in the United States.

Announcing the first annual convention of the Two Rivers Real Estate Investors Association, to be held on May 9, 2009, at the Des Moines Holiday Inn Airport Conference Center. Two nationally-recognized speakers will be making presentations to the group: Larry Goins, of South Carolina, and Pete Youngs, of Georgia. Larry's talk on wholesaling is titled "The Ultimate Buying/Selling Machine." Pete will present a detailed description of rehabbing for profits. Details and registration information is available at http://www.tworiversreia.org/Convention_Registration.html

This event promises to be a fantastic opportunity to network with fellow investors and hear a couple of the top national speakers on investing. I know I'm looking forward to it! Don't miss it if you are going to be in town or near town! There will be a vendor's trade show in conjunction with the event and Iowa Equity Exchange will be present as usual. We will be there with our display and information to help Iowa investors with their Section 1031 exchanges. Please stop by and say hello.

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Please consider IOWA EQUITY EXCHANGE as your trusted source for answers to your questions about Section 1031 like-kind tax-deferred exchanges. Contact us at your convenience for prompt, accurate information. Please think of us for your next exchange.

Ken Tharp

800-805-1031 toll free

Providing Qualified Intermediary services for Section 1031 tax deferred exchanges all over the United States. Headquartered in Iowa, our services are available in Missouri, Kansas, Nebraska, Colorado, North Dakota, South Dakota, Minnesota, Wisconsin, Illinois, and all other states.

INTEGRITY. PRECISION. SECURITY.

Copyright © 2009 By Ken Tharp, All Rights Reserved. * Two Rivers REIA First Annual Convention - May 9th, 2009 * Contact Ken Tharp for information on Section 1031 tax-deferred exchanges anywhere in the United States.

This will be a first... I'm going to give you an inside look at what it is we are trying to do here at Iowa Equity Exchange. First of all, props to Jeffrey Gitomer for a column on this topic that prompted me to devote detailed thought to these things. Let's start out with a definition.

When you think of someone who is "serious," does that conjure up the image of a staid, stoic individual, boring and stiff? In business, that's just not the case. The actions that are taken by a business build its image. If your business shows a desire to serve that is accompanied by the ability to serve, the public (your customers/clients) may perceive you as serious. Isn't that what you want, to be taken seriously by your customers and clients?

As a businessman, I certainly want my business to be taken seriously by its clients. Here's a list of some of the things I want our clients to know about us:

• I want them to know that we are serious about helping them. Most of our clients have a lot of questions both before they enter into an exchange and during their exchange. We are available for them to talk to by calling our office number pretty much anytime during normal waking hours, seven days a week. On the chance that we do not answer their call in person, it's rare that the call does not get returned within an hour.
• I want our clients to know that we are serious about knowing what we're doing. Handling Section 1031 exchanges is all we do. This is our full-time business, and we take the actions necessary to stay on top of changes that affect exchanges. We are one of a very small percentage of qualified intermediary companies that belong to the Federation of Exchange Accommodators, the national association for the exchange industry.
• I want our clients to know that we are serious about being an online leader. We invest in our future by maintaining an online presence.  regularly updating our website. We post blog articles periodically. We maintain and update our LinkedIn profile, including linking this blog to our profile and uploading presentations to our profile. You can follow us on twitter (@kentharp), and we're on facebook. 
• I want our clients to know that we are serious about being friendly and creating a pleasant atmosphere. Being friendly doesn't cost any more than not being friendly, and it sure makes life more pleasant.
• I want our clients to know that we are serious that now is the time. Our heads are not in the sand; we recognize that times have changed. Regardless of conditions, though, we will strive to maximize the opportunities that exist now, not wait for things to change.
• I want our clients to know that we are serious about striving for perfection in everything we do. We're not there yet and we may never get there, but we'll keep trying. Our clients also discover that we recover from any imperfections in extremely short order.
• I want our clients to know that we are serious about doing the right thing. Our clients' best interests are always the inspiration for our actions. Sometimes this means telling our clients that an exchange may not be the best course of action for them, meaning we lose potential business. If it's best for the client, it will serve us best in the long run.

How does all of this relate to selling? It is my belief that a business cannot really attempt to sell its services until its clients are comfortable that the business is serous about itself. The only real way to show your clients that you are serious about your business is to serve them properly. After you provide quality service to your client and establish that you can be taken seriously, making the sale is almost a foregone conclusion. 

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Please consider IOWA EQUITY EXCHANGE as your trusted source for answers to your questions about Section 1031 like-kind tax-deferred exchanges. Contact us at your convenience for prompt, accurate information. Please think of us for your next exchange.

Ken Tharp

800-805-1031 toll free

Providing Qualified Intermediary services for Section 1031 tax deferred exchanges all over the United States. Headquartered in Iowa, our services are available in Missouri, Kansas, Nebraska, Colorado, North Dakota, South Dakota, Minnesota, Wisconsin, Illinois, and all other states.

INTEGRITY. PRECISION. SECURITY.

Copyright © 2009 By Ken Tharp, All Rights Reserved. * Selling, Serving and Being Serious * Contact Ken Tharp for information on Section 1031 tax-deferred exchanges anywhere in the United States.

Here's another spreadsheet for your entertainment and enlightenment. If you've been following this blog for awhile, you may remember an earlier spreadsheet that compared buying and holding a property for ten years to buying the same property, holding it for five years, exchanging into another property, and holding the new property for another five years.

This new spreadsheet takes a little different approach. Its purpose is to compare the value of exchanging to simply selling and reinvesting without the benefit of an exchange.

Remember, there are four sources for income/profit from a real estate investment:

1. Cash flow before taxes
2. Tax benefits
3. Principal reduction
4. Appreciation

This spreadsheet ONLY addresses #4, Appreciation.

In the first section of the spreadsheet, you can enter the assumptions that you want to use. Here's a screen shot of that section, populated with some assumptions I made:

You can see that this sample investor is starting with $25,000 as a down payment. He's going to finance 90% of the purchase price of this new property.

When the property is sold, the assumption is that the sale expenses will be 7% of the total sale price, and that depreciation recapture, federal capital gain taxes and state capital gain taxes will total 30% on the gain recognized.

We go on to assume that properties will appreciate at 3% per year over the time frame of the comparison, and that each property will be held for five years.

All of these numbers are variable; you can use whatever you think is fair. The assumptions apply to each purchase and sale throughout the time frame of the comparison.

The next section of the spreadsheet calculates the net profits and available capital to move into the next property. It looks like this:

Comments: The Net Profits after the first period (which is five years, based upon the assumptions entered above) without the benefit of a 1031 exchange are $13,672. Adding the profits to the original $25,000 gives the Available Capital of $38,672 to use on the next property. In comparison, the exchanger would have $19,531 in profits and $44,531 as a down payment on the next property. Profits after the second period start to diverge between the exchanger and the non-exchanger even more: $21,149 for the non-exchanger, $34,790 for the exchanger. ($59,820 in Available Capital for the non-exchanger versus $79,321 for the exchanger.)

You can start to see the impact that deferral of taxes has on one's investment potential. Looking at the next section of the spreadsheet will drive the point home:

Comments: It is not uncommon to see the Net Profits double after only three periods based on reasonable assumptions. They don't quite double using my assumptions, but I'd still rather be moving into the fourth property with almost $62,000 in profits versus only $32,714. You can follow through the fourth period and see the Power of the Section 1031 Tax-Deferred Exchange!

If you are interested in obtaining your own copy of this spreadsheet, it is downloadable here: Power spreadsheet. Or, if you would prefer, we would be happy to email this spreadsheet to you. Simply send an email to us and put "Power spreadsheet" in the subject. We will promptly send you the spreadsheet. We hope it's helpful to you and that you'll have some fun with it. Remember that it is just an exercise and does not predict the future.

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Please consider IOWA EQUITY EXCHANGE as your source for answers to your questions about Section 1031 like-kind tax-deferred exchanges. Contact us at your convenience for prompt, accurate information. Please think of us for your next exchange

Ken Tharp

800-805-1031 toll free

Providing Qualified Intermediary services for Section 1031 tax deferred exchanges all over the United States. Headquartered in Iowa, our services are available in Missouri, Kansas, Nebraska, Colorado, North Dakota, South Dakota, Minnesota, Wisconsin, Illinois, and all other states.

INTEGRITY. PRECISION. SECURITY.

Copyright © 2009 By Ken Tharp, All Rights Reserved. * The Power of the Section 1031 Tax-Deferred Exchange - Free Spreadsheet * Contact Ken Tharp for information on Section 1031 tax-deferred exchanges anywhere in the United States.

I hate negative news. But facts is facts. When it comes to the sale of apartment properties in the Des Moines market, there's not a lot of positive news right now. If you only want positive news, skip to the last paragraph and I'll give you the best spin I can come up with.

According to Rick Krause, Senior Associate with CBRE Richard Ellis/Hubbell Commercial, sales transactions involving apartment buildings in Polk County were down 48% in 2008 compared to 2007. Dollar volume was down an even higher percentage: 62%. This information comes from Rick's self-published monthly newsletter, the Central Iowa Income Property Newsletter, which he has produced for over six years. It is a short, informative newsletter that reaches over 90% of apartment owners in nine central Iowa counties. (Email Rick if you would like to be added to his mailing list.)

Transactions considered include garden-style apartments, apartment conversions, and apartments with elevators. The raw numbers show that there were a total of 72 transactions in 2008 versus 139 in 2007. The overall sales volume for these properties in 2007 was $81 million; in 2008 it dropped to $31 million.

Comparing 2008 numbers to two years ago is even more bleak. Total transactions went from 146 in 2006 to the 72 mentioned above in 2008 (down 51%), while dollar volume plummeted from $145 million in 2006 to 2008's total of $31 million mentioned above (down 79%!).

Breaking things down another way, high dollar transactions were down, too. In 2008, the sale price of only five transactions exceeded $1 million, compared to 18 in 2007 and 19 in 2008. Averaging the transactions for the three years shows the following:

• 2008 average transaction = $431,000
• 2007 average transaction = $583,000
• 2006 average transaction = $986,000

The positive spin to all of this negativity is that things can't get much worse. Rick believes that commercial real estate transactions will increase in 2009. Reality is setting in for many investors who are considering the sale of their properties. Reality has already set in for some who, for one reason or another, must sell in the near future. Those who have the ability to purchase in this market stand to benefit from these newly-realistic sellers.

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Please consider IOWA EQUITY EXCHANGE as your source for answers to your questions about Section 1031 like-kind tax-deferred exchanges. Contact us at your convenience for prompt, accurate information. Please think of us for your next exchange

Ken Tharp

800-805-1031 toll free

Providing Qualified Intermediary services for Section 1031 tax deferred exchanges all over the United States. Headquartered in Iowa, our services are available in Missouri, Kansas, Nebraska, Colorado, North Dakota, South Dakota, Minnesota, Wisconsin, Illinois, and all other states.

INTEGRITY. PRECISION. SECURITY.

Copyright © 2009 By Ken Tharp, All Rights Reserved. * Apartment Sales Report - Des Moines, Iowa * Contact Ken Tharp for information on Section 1031 tax-deferred exchanges anywhere in the United States.

In an article in the Des Moines Sunday Register, author Dan Piller investigates the value of farmland in Iowa based upon the results of a number of recent farm auctions. The conclusion? Farmland values are not rising at the rate they have over the past few years. Probably not a huge revelation to those of us who keep track of things, nor a huge surprise to those of you who don't. The current macro-economic conditions in this country and the world affect farm prices just as they touch virtually every other aspect of our lives.

However, the good news is that while prices may not be increasing at the breakneck speed they once did, they are not necessarily falling, either. The article quotes prominent Iowa State University economist and all-around farmland guru Michael Duffy as follows: "What we're probably seeing now is a plateauing, rather than a fallback in land prices. When people say prices are down, it probably is reliatve to what they expected two or three months ago" Another prominent farmland figure, Randy Hertz of Hertz Farm Management, puts it this way: "We're not seeing a pullback in land prices by any means, but the growth in land prices may have slowed." 

While land owners feel the uncertainty that nearly all Americans feel right now, most are not concerned about a collapse such as the one that occurred in the 1980's. Land values rose at a hyper rate back then, too, but those purchases were oftenmade with bank loans. In a similar fashion to what is now occurring in the mortgage meltdown, farmers got upside-down on their farms when values dropped and were unable to generate the cash to make the payments. In today's farm economy, land owners are either purchasing new land with cash or with limited leverage, offering them a much greater probability of weathering future storms.

I welcome your comments on land values. Please let me know what you are thinking or wondering.

Please consider IOWA EQUITY EXCHANGE as your source for answers to your questions about Section 1031 like-kind tax-deferred exchanges. Contact us at your convenience for prompt, accurate information. Please think of us for your next exchange.

Ken Tharp

Ken Tharp, President

800-805-1031 toll free

Providing Qualified Intermediary services for Section 1031 tax deferred exchanges all over the United States. Headquartered in Iowa, our services are available in Missouri, Kansas, Nebraska, Colorado, North Dakota, South Dakota, Minnesota, Wisconsin, Illinois, and all other states.

INTEGRITY. PRECISION. SECURITY.

Copyright © 2008 By Ken Tharp, All Rights Reserved. * Farmland prices leveling off? * Contact Ken Tharp for information on Section 1031 tax-deferred exchanges anywhere in the United States.

As Thanksgiving approaches, it's an interesting time in our country and the world. (Have you heard the saying, "May you live in interesting times?" I had always thought of that saying as a blessing, but it appears that it may have first started as a curse, at least if you can believe the Wikipedia entry: Wiki it.) At any rate, counting our blessings is never more common than at this time of the year. And even in this turbulent time, with our stock market imploding and taxpayer money flying around like confetti, it's still important to take stock of ourselves and give thanks. We still live in what I and the vast majority of its citizens consider to be the finest country in the world. We're not without our faults, but by and large we do things right.

Individuals in this country have the greatest opportunity for success that exists anywhere in the world. Regardless of what you think of his politics, it is a remarkable, almost unbelievable story that Barack Obama will be our next President. Where else in the world could someone with his background be democratically elected to the highest office in his country? (Please don't read that last sentence as anything but a compliment; I'm one of those who will not agree with most of his policies, but I recognize that he has accomplished a tremendous feat by being elected.)

Before I get too political, and at the risk of getting a little too syrupy, let me just say what I intended to say in this blog: we are a blessed people, and even in this downturn we must stand aside and recognize that. No one knows how bad things will get or if we're near or past the low point, but regardless of when things turn around we all have many things about which to be thankful. Please remember that and remember especially to hold your family close and tell them that you love them.

Happy Thanksgiving, everyone

Ken Tharp, President

Providing Qualified Intermediary services for Section 1031 tax deferred exchanges all over the United States. Headquartered in Iowa, our services are available in Missouri, Kansas, Nebraska, Colorado, North Dakota, South Dakota, Minnesota, Wisconsin, Illinois, and all other states.

INTEGRITY. PRECISION. SECURITY.

Copyright © 2008 By Ken Tharp, All Rights Reserved. * Thanksgiving Time * Contact Ken Tharp for information on Section 1031 tax-deferred exchanges anywhere in the United States.

A Private Letter Ruling issued by the IRS relating to a taxpayer's intention to acquire development rights as his replacement property in a 1031 exchange is an interesting situation. In this case, the taxpayer sold a property as his relinquished property in the exchange and gave up his fee interest in that property. As his replacement property, he desired to purchase unused development rights to use on property he already owned in order to do more with the property than was allowed prior to the purchase of those rights. (See Private Letter Ruling 200805012.)

"Development rights" are one of the "bundle of rights" that one typically possesses with the ownership of real property. The "bundle of rights" include such rights as the right to possess, use, modify, develop, lease, or sell the land. Many of us are aware of mineral rights, which constitute one of the items in the bundle. If mineral rights are separated from the remaining items in the bundle, the owner is prohibited from doing such things as drilling for oil or mining the land. The right to develop is another of the rights within the bundle. If a property owner sells the development rights to his property, the remaining rights remain as before. Development rights can be sold to the owner of another parcel who wishes to develop his property and is unable to do so without those rights.

There are a couple of prerequisites to qualify. First, development rights must be considered real property by the state. And second, those rights must be perpetual, or at least if they are not explicitly granted in perpetuity, there must be no expiration date for the development rights so that they are effectively perpetual.

Please consider IOWA EQUITY EXCHANGE as your source for answers to your questions about Section 1031 like-kind tax-deferred exchanges. Contact us at your convenience for prompt, accurate information. Please think of us for your next exchange.

Ken Tharp

Providing Qualified Intermediary services for Section 1031 tax deferred exchanges all over the United States. Headquartered in Iowa, our services are available in Missouri, Kansas, Nebraska, Colorado, North Dakota, South Dakota, Minnesota, Wisconsin, Illinois, and all other states.

INTEGRITY. PRECISION. SECURITY.

Copyright © 2008 By Ken Tharp, All Rights Reserved. * Development Rights are Like-Kind to Real Property * Contact Ken Tharp for information on Section 1031 tax-deferred exchanges anywhere in the United States.

A recent survey of farmland real estate brokers shows that the price of Iowa’s best farmland rose by an average of 6.6 percent from March 2008 through August 2008, cooling slightly versus the previous six month period. This survey was conducted by the Iowa Farm and Land Chapter 2 Realtors Land Institute, as it has been done every March and September since 1978. The RLI is composed of real estate brokers who specialize in farm and land sales, farm management, and appraisals. The results were cited in an article in the Sunday Des Moines Register on September 17, 2008.

Troy Louwagie, the survey chairman as well as a real estate coordinator at Hertz Farm Management in Mount Vernon, had this to say about the results of the survey: “You’re seeing less demand for land for housing and commercial developments in the cities and a return to the more normal profile of 80 percent of buyers being existing farmers.” This compares to the same period last year during which approximately 60 percent of buyers being existing farmers.

For those who follow commodity markets, it is obvious that commodity prices have been a big contributing factor to the rising land values. While a plunge in commodity prices could precipitate a corresponding plunge in land values, Randy Hertz of Hertz Farm Management says, “Fortunately, farms today are in a much stronger balance-sheet position than they were 25 years ago” when land values declined by 70 percent. And at this point, there is nothing to indicate that a plunge in commodity prices is imminent or even anywhere on the horizon.

For the survey, the state is divided into nine districts. Only one of those districts had per-acre averages for high-qualify cropland of less than $5,000 in this survey, compared to four districts with an average lower than $5,000 in the survey over the same period a year ago. The averages in two of the districts exceeded $6,000 per acre.

Please consider IOWA EQUITY EXCHANGE as your source for answers to your questions about Section 1031 like-kind tax-deferred exchanges. Contact us at your convenience for prompt, accurate information. Please think of us for your next exchange.

Ken Tharp

Providing Qualified Intermediary services for Section 1031 tax deferred exchanges all over the United States. Headquartered in Iowa, our services are available in Missouri, Kansas, Nebraska, Colorado, North Dakota, South Dakota, Minnesota, Wisconsin, Illinois, and all other states.

INTEGRITY. PRECISION. SECURITY.

Copyright © 2008 By Ken Tharp, All Rights Reserved. * Iowa Land Price Survey Shows 6.6% Rise in Six Months * Contact Ken Tharp for information on Section 1031 tax-deferred exchanges anywhere in the United States.

About a month ago, the US Department of Agriculture published its annual report on the value of agricultural land in the United States. As you might expect, values were up nearly everywhere, but especially in the Midwest.

High prices on commodities such as corn, soybeans and wheat drove prices higher in the Northern Plains region, which encompasses states such as Kansas, the Dakotas, and Nebraska. Average farmland values increased 15.5 percent in that region, the highest increase on a percentage basis in the country.

On a per-acre basis, the most expensive farmland in the US was in Massachusetts - $12,200 per acre on average. Whew! Rhode Island and Connecticut were close behind. On the opposite end of the spectrum, an acre of farmland in New Mexico can be yours for an average of only $630.

According to the report, wheat increased 77 percent during 2007 on the Chicago Board of Trade. Soybeans soared 78 percent and corn rose 17 percent. These jumps are the primary reason for the increased values in farmland.

All of this took place and continues to take place in the face of stagnant or declining values in the broader real estate market. It is an interesting time, to say the least.

Please feel free to ask us any questions on this topic as well as any other exchange-related topics.

Ken Tharp

Providing Qualified Intermediary services for Section 1031 tax deferred exchanges all over the United States. Headquartered in Iowa, our services are available in Missouri, Kansas, Nebraska, Colorado, North Dakota, South Dakota, Minnesota, Wisconsin, Illinois, and all other states.

INTEGRITY. PRECISION. SECURITY.

Copyright © 2008 By Ken Tharp, All Rights Reserved. * Quick Update on National Farmland Prices *