Abe Lincoln reportedly stated “A person who represents himself has a fool for a client”

Nelsonian Theory would agree with that concept.                                                                                                                                    However, it is wise to be well informed on critical technical subjects so that you can detect potential flaws and lapses in understanding of those who act on your behalf.

That being said… here is the Internal Revenue Code – Section 1031

It identifies and specifies the federal tax rules that govern the tax deferred exchange.

I recently read this article in USA Today (10/15/09) that gave the top indicators of economic heath.
These are the indicators according to HSBC Consumer Survey of 1,000 households.

• 42% stated: People around me get jobs again
• 39% stated: Unemployment rate declines
• 22% stated: Home sales improve
• 16% stated: Retail sales increase
• 15% stated: Fewer empty store fronts.

Nelsonian Theory would state:

• Watch new job growth – there must be jobs to generate income that will allow and support consumer spending.
• Consumer spending leads to the spending cycle that generates consumer confidence and a return to the free flow of money. Nothing works unless people have money and borrowing capacity.
• Watch for the stable return of the commercial mortgage market – The “continual bad news” being emitted by the commercial lending sources is by itself squelching the desire to borrow on a long term basis. If there is a fear of availability of financing, there will be an absolute slow down in construction.
• Frankly, that can be an advantage, if you personally would purchase existing construction. The increase in user demand (tenants) will force a reduction in vacancy factor in the existing supply (apartment units to be rented to the folks that need safe and clean shelter).
• It is a great time to corner good quality property – The competition is sitting on their hands, and sellers will consider reasonable offers.

 Bob Nelson, CCIM

(541) 485-8100  bob@1031gur.com

Pacwest Real Estate Investments, LLC

The credit crisis, which is fallout from the subprime housing debacle, essentially shut down mortgage lending and other loans critical for real estate sales and refinancing in 2009. Commercial banks are watching delinquencies increase and vacancies continue to rise, and are tightening their credit requirements.

Most lenders use a measurement called Debt Coverage Ratio (DCR) to determine how much money they will lend on a property. Debt coverage ratio measures the property’s ability to generate enough cash to cover the monthly debt payments. In the past lenders requirements were around 1:1 but now are being increased to closer to 1:3 to 1:35 coverage. This means if the income from the property is not sufficient enough to cover the DCR; the borrower will have to put down a larger down payment upfront when purchasing the property.

Mark Cusick, a Commercial Loan Officer with Commercial Lending Group, is seeing lender’s require the following items from individuals:

1. Net worth equal to or greater than the loan amount requested
2. Cash after closing equal to or greater than one year of principal and interest payments
3. Borrower’s personal cash flow must carry their own debt load. Lenders want to know that the borrower will not need to supplement their personal cash flow from the properties cash flow
4. Strong ownership and management experience will help offset potential weakness in Items 1-3

Now more than ever a knowledgeable Real Estate Broker can make the difference in your real estate transaction. You need a trusted advisor on your side guiding you along the way!

Market Trends for October 2009

While Pacwest specializes in commercial real estate, we feel that it’s important to keep our clients informed of the activity in the residential arena. At October’s rate of sales, the current 1,939 active residential listings would last approximately 6 months. A truly healthy market likes to see that balance closer to 2-3 months of inventory.

In the month of October, closed sales were up 5.7% but pending sales were down 6.7%. We are still seeing a glut of pending sales that are waiting for bank approval due to short sale situations.

Check out the attached report, especially page 2. Notice the Average Sales Price % Change field. This is a comparison of the rolling average sales price for the last 12 months with the 12 month before. As you can see the figures are all over the board depending on what area of Lane County you are interested in.

If you would like more information on real estate trends in Lane County, don’t hesitate to call us at (541) 686-8246.

Many of our commercial real estate clients are adding a couple single family homes to their portfolios. Now might be a great time to pick up one or two single family properties that have gone to foreclosure and are now bank owned. Single family properties are easier to liquidate in a hurry if you need cash and they are typically easier to refinance if you wanted to access the equity in the property to take advantage of another opportunity. There are currently a 123 real estate owned properties in Lane County. Call us today at (541) 485-8100 if you would like a complete list.

Foreclosure Market Trends – Oregon – Oct. 2009

As everyone knows, the commercial real estate capital markets have been in turmoil since June of 2007, when the single family subprime lending debacle first appeared on the scene. Since that time, the lending market has slowly, but ever so consistently continued to deteriorate.

I am frequently asked “When will the lenders start lending again?”. While there is no silver bullet listed below are several things that need to happen.

1. The overall economy needs to improve
2. Commercial real estate fundamentals need to stabilize
3. Foreclosures need to occur so banks can cleanse their balance sheets of non-performing assets
4. Weaker banks need to fail
5. Lenders need to extend, amend and pretend
6. Inflations needs to happen
7. A new version of the Commercial Mortgage Backed Securities (CMBS) needs to be created

All of the solutions will take time to favorably impact the market. Even if all seven factors were to begin moving in the right direction today, it would take months before the lending environment would fully feel this positive influence.

To find out more details or discuss these points feel free to give me a call me Bob Nelson at (541) 485-8100. I have a complete report that I can share with you.

This article is reproduced with the permission of Doug Marshall of Marshall Commercial Funding.

This is a residential market trends report for Lane County, Oregon provided by RMLS. Notice on page 2 the 12 month change in value for each neighborhood in this marketing area. Under the heading “Appreciation” you can note the most recent 12 month trend in values for properties in each neighborhood. While this a bit unsophisticated, it does provide a meaningful direction and amount of change for residential properties in that neighborhood. Use it at your own risk.

Residential Market Trends for Lane County – Sept. 2009

The following “Investment Trends Quarterly Reports” are unquestionably the best and most current information concerning investment and value trends in the commercial real estate industry.

The CCIM Institute makes this information available for CCIM’s and CCIM Candidates only for their exclusive professional use. By permission of the CCIM Institute the following ITQ Reports are available for your viewing.

ITQ Report 3rd Quater 2009 – Portland Oregon

ITQ Report 3rd Quarter 2009 – Seattle Washington

ITQ Report 3rd Quarter 2009 – Western Region  

Doug Moy is a consulting specialist in estate/gift taxation and planning that I have relied upon for key estate tax planning issues over the years. Doug’s contact information is contined at the end of each report.
With Doug’s permission, I am including his most recent Estate Wise Planning Newsletters.

Vol. V, No. 9. September 2009 “Estate Tax Return” and other topics
Vol. V, No. 5. May 2009  “State Estate Tax Misunderstandings”  “Lifetime Estate Management Plan” and other topics
Vol. V, No. 8. August 2009 “State Real Estate Transfers”, “Life Insurance Policies Sold At a  Profit: and other topics

David Moore of Equity Advantage  and IRA Advantage  has created a brief and concise article dealing with the “mortgage over basis” or debt over basis issue, and how it can be solved by using the IRC Section 1031 Tax Deferred Exchange.

With David’s permission, I have included that article below.

Debt Over Basis article by David Moore