William and Donna came to us with a variety of holdings in investment real estate. They wanted help to decide which properties were worth retaining and which should be sold. They were also very concerned with the tax liability that will ensue when a property is sold.
Our Solution:
We prepared a detailed analysis for each property with projections of cash flow and expenses 10 years into the future. Our analysis identified the projected rates of return (and opportunity cost for the client’s equity) for each of their properties. Based on the analysis we helped them decide which properties were no longer providing adequate return and thus should be sold. We also created an estimate of tax liability for the possible sales. We decided that the use of a tax-free real estate exchange may benefit them greatly because they wanted to consolidate some of the small properties with low rates of return into something much bigger. We also helped the client decide what the offering price should be (based on potential future rates of return) for properties they were considering purchasing, guiding them throughout the process.
The benefits to the client:
The projected future rate of return on their real estate portfolio was greatly increased, enhancing the growth in their net worth.
They were able to consolidate several small properties into one larger one with much better prospect for growth in cash flow.
Their life was simplified since they had fewer properties to worry about.
We were able to eliminate most income taxes through the tax free exchange of properties.
We did free up some funds they could now invest in financial assets greatly improving their liquidity and diversification.