Making the Right Moves At the Right Times — Remain Objective…Please?

There’s no explaining human behavior when it comes to common sense vs. either comfort zone or convenience. I’ve seen folks hold on to absolute pieces of dog dung out of nothing more than an inexplicable stubborn insistence on being able to manage the property themselves. One client, back in late 2001 actually refused to do a tax deferred exchange, because, and I swear I’m not making this up — they (the husband) didn’t want to own property too close to their aunt and uncle.

You just can’t make up anything that, uh…never mind.

The wife rolled her eyes, turned to me and said, “Don’t ask” — and that was that.

I’m not speechless very often, but I was that day. What’s even more incredible is they’d referred their next door neighbors a few years earlier. To make a long story mercifully short, the neighbors took the three properties I wanted these folks to trade into.

Go back to the year this happened — 2001.

You guessed it. Their neighbors did as advised. The trio of duplexes took a total of $80,000 or so to close. They traded them in the early spring of 2003 — the net proceeds check deposited into the accommodator account was over $250,000!

BBQ

Seems there was this BBQ, and my clients shared their story, including the exceptionally happy financial ending, with their gracious hosts.

Crud.

The hosts were not amused. When reminded of the stated reason for passing on these three properties, those present agreed, the wife just about exploded all over her husband. By all accounts, it wasn’t pretty.

I never did find out the deal about the aunt and uncle. It still bugs me.

Meanwhile, back at the ranch…

The folks who bought the three cool properties, then traded up, tax deferred. We turned their $250,000+ into over $2 Million of properties in the exchange. rainbowThat was around April of ’03. Things happened a lot faster in those days.

Memories of almost daily Rainbows back then. :)

In the last quarter of ’04 they again executed a tax deferred exchange. This time taking their net proceeds outa state. By then, I’d been taking my clients’ equities out of San Diego — at least the ones who’d listen. Almost all agreed it was the thing to do — it had become fairly obvious at that point.

Anyway, they traded well over $600,000 in net proceeds in that one. Life was good.

Cartoonish appreciation was even better. :)

Their neighbors? The original clients who referred them to me in the first place? The ones who passed on the original three properties? (They were so cool.)

They’re divorced. They had me sell their properties. They took the profits and paid taxes. I did everything but get down on my knees a beg them not to.

Nope — sell them, or we’ll find someone who will. They were both leaving San Diego. Though in the process of divorcing, they remained together until the properties, and their home were all sold.

When the escrows all closed, they invited me over to their last neighborhood BBQ — which unfortunately I was unable to attend.

Seems I had scheduled time to visit with my aunt and uncle that weekend.

This entry was posted in 1031 Exchanges, Real Estate Investing on by .

About BawldGuy

I'm second generation real estate, first licensed in fall of 1969. Having been mentored by several iconic brokers, I'm also CCIM trained, having completed all 200 hours back in 1980. Have successfully executed well over 200 tax deferred exchanges, many of which have been multi-state in nature. Strong points are analysis and the creation and real world application of Purposeful Plans employing several strategies synergistically. The idea is to arrive at retirement with the most after tax income possible, backed by the largest net worth.

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14 thoughts on “Making the Right Moves At the Right Times — Remain Objective…Please?

  1. Robert Coté

    Philistine!* The art of the grill is the BBQ. Would you call a great painting simply canvas? You grill a suspect. You BBQ a delicacy.

    Regards the serious matters; You have the variables absolutely correct. It is the rare instance when cashing out and taking the tax hit comes even close to the 1031 scenario. It happens but it is the exception.

    Not to sound ghoulish but the other side of a divorce deal like you mentioned can be opportunity. Sometimes people just want to make a clean break and walk away. If we can offer those kinds of terms and also cooperate with funny closing provisions (wife can remove grandma’s chandelier) then these sellers can get what they want and we can get what we want.

    * 1. A member of an Aegean people who settled ancient Philistia around the 12th century B.C.
    2. A smug, ignorant, especially middle-class person who is regarded as being indifferent or antagonistic to artistic and cultural values.
    3. One who lacks knowledge in a specific area.

    N.B. The philistine comment applies only to your ignorance of the fine craftsmanship in a crisp but not charred babyback slab.

    Reply
  2. Jeff Brown

    Man, if anyone needs evidence of how seriously BBQ aficionados are about the subject, here you go. :)

    Ah, the crisp but not charred babyback rib. And me with a spinach turkey salad for lunch. Uhg.

    The 1031 vs. sale? Yeah, I talked ’till my face turned blue.

    “Just sell it, and give the —– her half!”

    Her instructions weren’t as, ah, politically correct. ;)

    Reply
  3. Robert Coté

    Jeff, you may be tops in cross state equity transfers and cumulative investment advice but look, just put down the tongs, step away from the open flame and nobody gets hurt.

    There’s actually an investment idea here someplace. Two, maybe three things. When acquiring SFRs for investment/rental “upgrades” are an important consideration. Hot tub? A plus? No way. The nice newly married couple with visions of starry love may be pushing out a few kids who will be toddlers within a few years. Tell that to your insurance agent. Conversely, a little pre-sale hardscape, say a built-in stainless grille… ummm… BBQ, excuse me, could result in an instant threefold return.

    And Jeff, iffen youse gonna be ah TRUE Austinite you better know your differences twixt a pit and rack. Land sakes son, thems worth fightin’ over.

    Reply
  4. Jeff Brown

    Steppin’ away slowly…

    You’ve turned me into a student.

    I have the perfect teacher in mind, too. I’ll be seeing him next month, and he lives in what he calls, the BBQ capital of the world — KC.

    Reply
  5. Robert Coté

    Keep in mind dear sir that KC is a BBQ legend in its own mind. I have friends from Rockport, MA to Philly to Pensacola, FL who will sing praises of the great KC flame but notice; Notice that they are all to the east of said Mecca of the flame. The same thing happened 30 years ago with wine. California wines? Yuck! Now the torch BBQ has passed. Fresno to San Diego, Bakersfield to Kingman. That is where the good stuff is being served. Those KC snobs don’t even know what a second slice tri-tip is. That means they don’t know BBQ just like all those Eurosnobs thought pink wines were good fer nutin but Malibu/Del Coronado debauches.

    Am I talking just grilled meat? No, I am talking real estate allegory.

    A moment please. I will stop being colorful. Kansas City is IMHO a bad place to invest. The “crossroads” mystique is a century too late. It has failed to achieve critical mass in any of the potential 21st century advantages. And now, please, really please don’t shoot the messenger; it is too ethnic and/or lower class. Understand. I don’t even tolerate such attitudes personally. I go against them when I can. Problem is I am not the market. The market is racist/stupid (repeating myself) but it won’t return higher values just because you think it should. KC is also old urbanform with respect to governance and weather and layout and its relationship with its suburbs. With few exceptions those patterns have been poor long term investments.

    But I ramble… I understand if you need to remove this post because of the sad race issues I’ve raised.

    Reply
  6. Chris Lengquist

    As soon as I stop laughing (in fact, I think I peed myself) I will respond to what is obviously a man who has been let out of an insane asylum!

    First, grilled food is grilled. It’s not BBQ’d. Of for God’s sake, this is grade school stuff here in KC. And I’m not even going to comment on the insanity of great BBQ being located in CA. That’s simply not even possible. The universe will collapse first.

    Second, KC is racist? I just spent a week in LA. I’ve lived in DC. I’ve visited the new cities in the south. KC IS whitebread. But racist it’s not. Sure we have our idiots. Show me a town that doesn’t.

    Third, to say that KC can’t experience growth is not practical, either. I agree 100% we will never reach the “critical mass” you speak of because we have too much available land. That’s a fact that won’t change because we are surrounded by it. Inexpensive land that allows affordable housing to those that work for a living. Housing that you don’t have to have a mid-six figure income to acquire. Housing that can be rented at a profit for as little as 10% down. (And that property will appreciate at 5% a year while the coasts with their critical mass sit and suck their thumbs after losing 33% of last year’s value.)

    Also, if you’ll check your numbers you will find Johnson County Kansas one of the wealthiest counties in the country, per capita, one of the most educated, per capita and one of the highest disposable incomes in the country, per capita.

    Now, there’s nothing to do but eat and drink with that money. But that’s why we have an airport. :)

    Reply
  7. Chris Lengquist

    By the way, I spoke with the owner of the Kansas City BBQ (located in San Diego) while I was in LA. He’s also a Kansas fan who came to watch Kansas drum on USC.

    Even he admits his BBQ isn’t to his standards because you can’t get hickory or mesquite wood there. BBQ is a food cooked over the course of many hours, sometimes days. It’s slow cooked in pits. Not on some grill operated by a fat guy with a beer in his hand.

    Reply
  8. BawldGuy Post author

    Guys guys guys — Everybody take a step back. :)

    First and foremost — Robert — I’d appreciate it if you’d stay away from issues of race on my blog. I, and my readers don’t care for it, and as you said yourself, won’t put up with it. Enough said.

    BBQ?

    Geez Louise Myrtle! Are you tellin’ me all those times I put the ‘special, 100 year old’ recipe BBQ sauce on my raw burgers, then put them on my $199 patio BBQ, they weren’t BBQed burgers?

    There’s been a tear in the continuum of my universe. :)

    As far as the KC real estate market goes — after looking at it for several months, I’m ready to jump in. I think it’s a solid opportunity. I think the demographics there, are in many ways, superior to those getting all the ink these days.

    OK — NO MORE BBQ TALK. :)

    Reply
  9. Robert Coté

    Thanks. I apologized in advance and apologize again. It is one of those cases where the pedestrian steps into the crosswalk knowing all the laws and what is right are on their side and still gets almost run over. There are irrational and worse attitudes out there and right or no it can be dangerous to ignore them.

    Everyplace is unique. Buffalo is not Detroit is not Kansas City. Heck, Kansas City is not Kansas City. Two states, something like a dozen counties and any number of suburbs. We agree on a number of places. I just am not convinced about KC. Salutatorian versus Valedictorian? I concede that possibility.

    Reply
  10. Greg

    I would have loved to see the wife chewing the hubby out over the lost opportunity!

    Didn’t know BBQ/grilling was so serious. Let’s talk about something less controversial like, I don’t know, religion or politics?

    Reply

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