Ways not to screw up a 1031

Hey BNB peeps! Let’s talk more about saving money when selling an investment property in order to buy another one.

You don’t want to end up like the poor rabbit in the painting.

More about 1031s

Here is a little detail you want to keep in mind when calculating how much capital gains you could get stuck with in selling your property, after all, the reason you are doing a 1031 is to avoid paying taxes on capital gains (CGs).

If you determine that you are not going to have any taxable gains, you do not need to do a 1031.

Simple formula to remember to estimate the amount of gain that will be subject to CGs: Sale price minus Commissions and escrow costs minus Depreciation value of the home.

Key thing: You do not deduct your mortgage from the capital gain calculation.

Another Key thing: The value of your sale does not include your Depreciation.

For example: If you sell a home for $1,000,000 ($1M) and your commission and escrow are $50,000 and your depreciation is $400,000, your Capital Gains would be… $550,000.

BUT, the value of your sale would be …. $950,000

This calcalation is important to get straight in your effort to think through your 1031.

You do not want to underestimate your sale price of your “relinquished property” when you are trying to conduct a 1031 Exchange.

 

Again, a 1031 Exchange is designed to help people who are selling an investment property to buy another investment property while protecting them from paying taxes on their capital gains.

Now about calculating the value of the relinquished property, there is a qualification for a proper 1031: You must buy into a property that is at least EQUAL OR GREATER VALUE.

 

So take the previous example: If you are going to purchase a “replacement property” for $750,000, you will need to either buy another property within 180 days or buy another qualified investment property so that your total reinvestment meets or exceeds $950,000 to have a valid 1031 transaction.

In other words, if you only plan to spend $750,000 to purchase a replacement and you think you are done – PLEASE think again. This one transaction will not qualify the 1031.

Better yet, go and talk to a 1031 Exchange Officer for a reputable 1031 firm and ask him or her these important questions ( DISCLAIMER: I am not a professional or certified 1031 dude, but I want you to make sure you’ve got all your facts together).

Worst comes to worst, you can park the remainder of your unused  1031 funds into a special 1031 “fund” that will be the equivalent to buying a replacement property if you cannot find the right property to purchase and use all of your proceeds, but it would be helpful if you have all the numbers figured out before you begin the process, especially if you are only intending to target one investment property.

A last note for today: If you decide to do a 1031, be prepared for some escrow delays as doing the necessary paperwork or setting up LLCs  is extra work, requiring special contracts, registering LLCs, and often requires some additional government oversight (more paperwork).

 

Please like, share, comment, follow my blog or contact me if you have any questions, or if you’ve got some nice tips.

CKY

 

Copyright © 2018-2019 Challen YeeAll Rights Reserved.

To Party or not to Party

Have you ever wondered if it was worth lending your house to someone who wanted to have a one-day  “celebration”?

Especially if you do not have built in book-end days before your next potential booking, meaning that you only have a few hours to clean between different bookings, here are 8 reasons why you should NOT book to guests wanting to use your house for their party space:

  1. People just do not care as much about being clean when they don’t have to live there. Especially all the extra guests who don’t plan on staying over night who are not signing an agreement to any house rules. I’m not saying that people are necessarily bad, they just do not have as much at stake to keep things clean.
  2. A party will fill your garbage cans quickly with smelly rotting food mixed with alcohol to smell just like a back alley sewer in San Francisco.
  3. Large amounts of alcohol result in inebriated people who spill liquids, make floors sticky and harder to clean, along with your arm chair, sofa and tables.
  4. Inebriated adults cannot supervise young children.
  5. The responsible adults are policing the inebriated adults, and are not watching their children, or they are watching their children and are not watching the inebriate adults. Hell, they could be inebriated, cause, hosts just want to have fun.
  6. You can attract unwanted attention by creating a parking lot in front of your place.
  7. Especially if you have a no-shoes-in-the-house rule, which one-day guest/host is going to police their one day visitors to take their shoes off as they go in and out of your house wth a tray of food and drinks?
  8. Remember, outdoor shoes carry floor destroying micro and macro matter and have stepped through many public bathrooms. Enough said.

The end result is, even if you charge extra for cleaning, you will have to spend more time cleaning and risk damages that you have to go through the process of proving, not to mention the anxiety wondering if any of this is true.

Please like, share, comment, follow my blog or contact me if you have any questions, or if you’ve got some nice tips.

CKY

 

Copyright © 2018-2019 Challen YeeAll Rights Reserved.

Towels

OUR LOVELY TOWELS

We provide these wonderful towels bought from Macy’s. We carefully selected them from scores of choices from a variety of retail outlets and the colors and quality match our interior decor. We check, wash, and dry each towel before carefully folding them to store for our next guests.

One of our rules is we ask our guests not to use them to clean the floors with or leave them on the ground.

This leads me to ask my audience, how do you treat your towels at home compared to how you treat the average  hotel towel?

How much would you use your towels at home to soak up liquids, fluids or matter that is anything other than wiping your cleaned-rinsed-off-body dry?

For the most part, I believe our guests are very good at handling our towels. We provide a special towel just for the floor for wet feet. We provide a common hanging hand towel for our guests who have some guests over. We provide a hand towel and as you can see, a face towel, personal hand towel and body towel.

On top of that we provide a clothes basket to put stuff for wash and a washer dryer with hypoallergenic detergent powder.

 

Come on. Let’s see…

Let me know what you would use a hotel towel for that you would never use your wedding gift towels or your last bargain from COSTCO or BED, BATH and BEYOND? You know what I’m talking about… those white towels ones that can be bleached with chlorine to kingdom come after they are used for janitorial work or the latest physiology experiment.

Now that you’ve got that out of your system, please don’t stay at a BNB and exercise any of those little bad habits. We are like a hotel in good ways, but you’re still guest in someone’s home.

 

 

Please like, share, comment, follow my blog or contact me if you have any questions, or if you’ve got some nice tips.

CKY

 

Copyright © 2018-2019 Challen YeeAll Rights Reserved.

CHECKOUT CHECKLISTS

Hey Friends of BNB!

Here’s something that I’ve been oddly resistant to but it seems more frequent our guests are requesting that I provide them a check list of things to do before checking out.

I guess after about 18 months, I have to wonder how all our guests survived without a checkout list and so I have to wonder.

I would imagine it can be pretty stressful if you don’t know to what standard the host will hold the guests to in terms of the condition of the house. And if you don’t, in some cases, though rarely, people will feel like it’s permissible to leave some greater mess that what we  would expect.

I believe we start each new booking with such a clean house, people naturally (most of the time) obligated to do a decent job of keeping things in order.

So, okay, here’s a draft of some of the things I thought of for our place, maybe it’s help both hosts and guests alike. Your place may be different and may have more or less expectations.

 

GENERAL GUIDE FOR PREPARING THE HOUSE BEFORE CHECKOUT

  • Put garbage in a trash can, but not necessarily in the bins outside (we often use used trash liners in the process of our cleanup). If it’s full, you can take it outside to the bins.
  • Wash Dishes, or rinse off chunks (and empty out into compost bin under sink) and wash in dishwasher using the supplied soap tablet.
  • Cleanup any spills anywhere at anytime.
  • Do not leave towels on floor, leave on the towel racks or the supplied dirty close baskets okay.
  • Do not need to take sheets/linen off beds.
  • Leave any used blankets on the beds (normally stowed in a package in the closets), do not put back in their plastic storage cases.
  • Not necessary to restock food you have eaten.
  • Turn off and unplug coffee makers and hot water pot, blender, and other countertop applicance.
  • Clean top of stove (mainly wipe up spills) but not with anything abrasive.
  • Do not flush garbage down any sink or toilet (toilet is used for only what is normally expected).
  • Do not leave unwrapped food out, especially candy, best to dump out garbage in compost bin outside and best wrapped in a compost bag to reduce chance of attracting pests. Similarly, Seal up used diapers, especially the #2 kind, and put into garbage bin outside.
  • Turn off water faucets, shower, bath
  • Shut garage door, make sure garage door opener is in its wall-mounted location.
  • Turn off heater, air conditioner, microwave, stove top, oven.
  • Turn off lights and shut windows.
  • Shut and lock doors on the way out

 

THANK YOU FOR STAYING AT SWEET, BRIGHT, FRESH

 

Please like, share, comment, follow my blog or contact me if you have any questions, or if you’ve got some nice tips.

CKY

 

Copyright © 2018-2019 Challen YeeAll Rights Reserved.

 

Tips on Saving Time in Escrow (REVERSE 1031)

Hey BNB Peeps!

Here’s some thoughts about how you can save time in Escrow involving a Reverse 1031.

Most people may not be aware of how a 1031 affects an Escrow, so you can be sure that even less people know the effect of a REVERSE 1031.

A REVERSE 1031 requires the creation of an LLC for the Exchange Accommodate TITLEHOLDER , also known as the EAT, where the title of the replacement property is held.

In the regular 1031, CASH is held in a special account, but since I have not done a regular 1031 yet, I will not say whether it is an LLC or NOT. In a Reverse 1031, the TITLE is held in a special account. An EAT is specifically for a REVERSE 1031.

TALK TO YOUR 1031 ADVISOR about this LLC  detail and how it may affect the purchase agreement.

THEREFORE, you real estate lawyers and escrow officers, the Purchase Agreement must have an amendment to accommodate the LLC of the buyer. If you know this ahead of time you can get the real estate attorney to prepare the amendment to the purchase agreement ASAP, before he or she decides to take a week off without his lap top and cell phone.

Sometimes it takes so long to nail down a purchase agreement, it just helps to know this detail beforehand to smooth things out when you think everything is supposed to be on autopilot.

BTW, Buyers have the option of keeping the LLC after the escrow is closed, so buyers need to carefully consider the actual name of the LLC that is created.

My second thought about saving time in escrow, is working with a LAW GROUP or at least a legal professionals who have a backup in case they need to go on vacation or get sick, run off to Jamaica, or anything else that can interfere with getting work done when needed.

Is it ever possible that lawyers can work together in a way that is collaborative and to save time?  Ugh.

Even if your Escrow officer and you 1031 Exchange Officer are from a Title/Escrow company and its affiliate, do not assume that days will be saved based on what I just tried to explain to you.

ANYWAY, the next time you find yourself in a 1031 situation, I hope his little information will help.

 

 

Please like, share, comment, follow my blog or contact me if you have any questions, or if you’ve got some nice tips.

CKY

 

Copyright © 2018-2019 Challen YeeAll Rights Reserved.

 

 

Need for two new Fruit Trees

The tree on the left and the third tree had to come down, they stopped moving water. This photo was from the fall of 2017.

Apparently, apricot trees are pretty sensitive. 

After landscaping the back yard in the summer of 2017, the two apricot trees in the backyard died.

The one large tree actually blossoms in the spring of 2018 but then suddenly went dry.

We tried to do some deep watering but that didn’t matter.

I had to chop down one the larger of the two trees last summer and just recently had to chop down the smaller of the two, realizing that it was not responding to the season and had in fact followed suit with the other, just decided to stop moving water from its roots.

With two spots open for fruit trees, what kind of fruit trees do you like?

We definitely would like to get at least one more apricot.

 

(No promises just yet, as to how consistently I can blog here, but giving it a shot when I have time and ideas).

 

 

Please like, share, comment, follow my blog or contact me if you have any questions, or if you’ve got some nice tips.

CKY

 

Copyright © 2018-2019 Challen YeeAll Rights Reserved.

 

 

What is a REVERSE 1031?

In your efforts to secure a property for your BNB you may run into a situation where you are selling an investment property to obtain a replacement investment property.

For those of you who do not  understand what a 1031 Exchange is, here is a brief summary.

You can defer capital gains on selling an investment property if you set up a 1031 carefully (adhering to all 1031 rules) pipe it to another investment property of equal value or greater.

It can be any kind of real estate to any kind of real estate, anything from undeveloped land, to commercial property, as long as both are qualified Investment properties.

Normally, you sell an investment property, use the proceeds from that sale to fund the purchase of your new replacement investment property.

WHAT IF, you need to purchase the replacement property (i.e. with cash) before you can sell the relinquished property to fund the new acquisition? You are totally screwed, right?

What I discovered, someone in their infinite  wisdom created a 1031 instrument called a “REVERSE” 1031.

This way, the title to the replacement property is held in a special Exchange Accommodated Titleholder (EAT) until such time you can close the sale of your relinquished property thereby accomplishing the desired deferring of capital gains.

 

Please speak to a qualified 1031 Exchange Intermediary or Agent to get the full details as there are different costs involved and other requirements that I have not covered in this blog article.

Good Luck.

 

Please like, share, comment, follow my blog or contact me if you have any questions, or if you’ve got some nice tips.

CKY

 

Copyright © 2018-2019 Challen YeeAll Rights Reserved.

 

 

Pay Mortgage on or after the 1st.

Hey all, Just a short accounting tip for your BNB and to let you know that we are still alive and running our BNB.

In the meantime, here’s an easy accounting tip.

If you are making mortgage payments for your property, it helps cleanup your accounting if you do not make your payments before the 1st of the month that your payment is due for.

In other words, if you need to make a mortgage payment for April, make the payment April 1st or sometime after that and before the date that you will get charged a late payment. If you want to make January’s payment, do it in January.

For example,  even though you might get anxious and send out some kind of bizarre positive thoughts into the netherworld of computerized mortgage transactions, maybe trying to earn some kind of imaginary digital karma, better not to make the payment on March 29 since your accounting software may want to apply all charges to the month you actually make the payment – this  gets more complicated if you have any compounded charges on your mortgage like your landlords or flood insurance… and it looks goofy on your annual summary.

Essentially, this is helpful is when you do your tax accounting for the year everything just makes more sense. Your payments correspond to the appropriate month and if you’re talking about January’s payment, the correct year.

 

Please like, share, comment, follow my blog or contact me if you have any questions, or if you’ve got some nice tips.

CKY

 

Copyright © 2018-2019 Challen YeeAll Rights Reserved.

 

Is your BNB like another child?

Writer’s note: I wrote this article several weeks ago but it seems like a good time to post it. I may not post another article for a while as events can blur life at times. We thank our guests for bringing their bright light to shine.

Talk to anyone who is starting their own business and they will likely, albeit sometimes grudgingly, admit their business is like adopting another baby because its survival depends on you. Now you realize you have something you need to protect that no one else cares about, except for your booked guests who are counting on you to guarantee their plans for accommodations. Oh, and your mother most likely, because mothers almost always like to se their child be successful at something.

There is certainly a wide gamut of attitudes towards people who are running an BNB, everything from being non-aware, don’t give a hoot, to those neighbors who are afraid of their street becoming the next “DELTA HOUSE” (e.g. the fraternity in the movie comedy classic Animal House).

BNB? What are you talking about? Aren’t you just renting out some rooms, and money just starts falling off the trees … It seems so easy, right?

Every neighbors worst nightmare, a BNB taking the form of Animal House with toga parties every night. (Image credit: Coral Gables Art Cinema).Image may be subject to copyright.

No, my friends, unlike our corporate jobs, if you don’t do anything and you decide to not attend to run things, your little baby will die. That’s the responsibility a host takes when they set out on the adventure of renting out their place to guests.

AirBNB, like other companies like LYFT and many other service oriented companies that help serve as the interface between consumers and proprietors, greatly eases the difficulties related to money handling and advertising while making it easier to take the first steps of running your own business, including paying taxes.

Unlike LYFT, however, taking reservations, if you’re doing it right, is a 24/7 deal. I remember running my parent’s family business of parts sales and repair of electric cars and you, yep, you can get customer calls on Sunday complaining about their broken down electric truck, especially from one of our many family-owned flower nurseries back in the day when Silicon Valley was more agricultural than technical, but you usually do not get messages and inquiries at 4 am (Pacific Standard Time), like you might get from a guest sending an inquiry from Germany or Israel like you would running a BNB.

Despite the high tech assistance, however, it does not relieve the providers of the need to perform with as much excellence as possible, no matter which business model you choose, whether it’s accommodations, driving, or any other service and this new wave of internet-based businesses seem to be highly linked to customer reviews. Every job is subject to scrutiny and a broadcast to the public.

When was the last time your corporate job was reviewed and posted on the internet for everyone to see?

So if you have critics in your life, let them critics criticize, that’s what they do, it’s in their DNA.

Whether you are running a hot dog stand or a hard driving CEO of a tech start up, just do what you are willing to put forth the energy and resources to do and stick to it if that’s what you are willing to put up with to achieve your goals. No one is going to take responsibility for your child other than you.

Please like, share, comment, follow my blog or contact me if you have any questions

CKY

 

Copyright © 2019 Challen YeeAll Rights Reserved.

 

 

 

 

9 Tips for Facing an Unoccupied Month

Have you ever looked at your BNB schedule and see that after your current guest, you have no one booked for the next 30 days. It does give you a sinking feeling, especially if you’re relying on the income to survive.

 

Does your reservation calendar look like an empty beach? (photo of Drake’s Bay, CA north of San Francisco – by Challen)

 

There’s a number of things you can either try or consider since running a BNB you can’t really go out and start rounding up guests passing by with a lasso.

 

Here’s 9 tips, not in any particular order:

  • (1) Update your website or listing with new photos, better photos, or a catchy write up or title. So many listing around her promote Stanford, and if the listing actually resides in or near Stanford, that’s a good boost.

 

  • (2) Try lowering your prices under the next relevant search level. For example, lower them under the next $50 mark (i.e $250, $300, $350, $400, $450, etc). Searchers may be setting upper price limits to narrow down their choices.

 

  • (3)Take some faith in how guests tend to book your listing. Maybe you’ve had a lot of guests book within a week instead of two months ahead (like we’d all like to see that).

 

  • (4) Try “Instant Booking” (Airbnb). What this allows is for greater exposure to your listing as your will show up for both “Instant” and non-instant, instead of just non-instant listings.

 

  • (5) Try removing the extra guest costs if you are using them just to make the cost calculation easier.

 

  • (6) Update you listing to become more friendly to a guest. For example, use a keypad or other self-service mode of entry. This way a business man or woman doesn’t need to call you at 2 am to get a key or wonder if the key is actually in the hideaway place that you wrote.

 

  • (7) Offer something special (like food or other service), make the stay more attractive.

 

  • (8) Keep the darn place clean inside and in good order outside. It doesn’t matter of the guest is staying at a mansion or Motel 6,they want a clean place to stay. No one likes to stay in a beater. Take very positive steps and make amends in the listing and comments to make your listing a non-beater if yov’ve been reviewed as being on the dirty, trashy, or nasty side.

 

  • (9) Treat each guest and inquiry with respect and respond as soon as possible (if not immediately). Remember, you are in the hospitality business, not just a landlord or property manager. In fact, you may be the only ambassador of your town or neighborhood that the guest from another country may ever know.

 

Please like, share, comment, follow my blog or contact me if you have any questions, or if you’ve got some nice tips.

CKY

 

Copyright © 2019 Challen YeeAll Rights Reserved.