Socratic Questioning Part 3 — Video

Gotta love Socratic questioning. Does it make sense to take a loss on an investment property? What circumstances, if any, would make that approach prudent? See? Socratic questioning.


Transcript:   Hi this is Jeff Brown the “BawldGuy”. Today, we’re going to continue the lessons I got from my mentors using Socratic questioning. One of the questions I want to ask you today and the one I’m going to answer is what if I told you that taking a loss on a currently held property, in order to move it to a superior region, is better for you now and better for you in the long run? Here’s what I mean. Today, we have many markets beginning to show signs of recovering. Now, whether they are actually recovering for the long term is anybody’s guess and that’s not the point today. But if you see the conditions of the market changing such that you can now put your property there for sale and actually get a sale, even if it’s for a loss but it ends up getting you a check from escrow with sufficient equity to make a move, you might want to consider doing it even at a loss. First of all, because you’re selling it a loss you want only capital gains. You don’t have to go through the hassle of a tax deferred exchange. This is good on many levels, but the main thing is as we discuss many times before, not using a tax deferred exchange allows you to end up on the property you buy next or properties with higher depreciation dollars per year and less capital gains when you sell it down the road. Now, one of the things that happens when you sell from a previously losing property is you also get out of the reason those properties were losers. It was because you’re in a region that just didn’t perform well. Now, you’re going to take that equity. You’re not going to put good money after bad in that bad region. You’re going to move to a good one, the one that passed the microanalysis test; the ones that make you smile every time you look at it. Now, you’re going to start making up for lost time and you’re going to do it without a tax deferred exchange or any of the baggage it entails. So that’s why a lot of times taking a loss in a region where you own property makes sense now while the getting is good. Get out of dodge. Get to a better place. This is Jeff Brown, the BawldGuy. Thanks for watching today and I’ll see you next time.

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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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