Fractional Deed Co-Ownership in Texas
The property market is taking a bit of a hit due to the sub-prime crash. The overvalued West & East Coast markets were already easing off a bit so that didn’t help things much.
But, what about Texas? From the latest results from Houston Association of Realtors it seems like not much is going to derail the “Texas Train”.
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| * Months inventory estimates the number of months it will take to deplete current active inventory based on the prior 12 months sales activity. This figure is representative of the single-family homes market. |
Above results come from Houston Association of Realtors (HAR), click here for full report.
If you’re in California or Florida, you’ve made some wonderful gains over the last 3 or 4 years but now you want to sell to lock in some of those gains. But… wait, what about the capital gains tax?!! that could eat at those gains unless you make the right moves.
What sort of moves should I make?
Well, there are two things to consider…
First, re-invest the proceeds into more investment property utilizing a 1031 exchange. Essentially, a 1031 exchange allows the investor to re-invest the proceeds of a sale into another “like-kind” asset within a certain time-frame and allowing the deferment of any capital gains tax.
Great… well, yes, I’ve thought of that. So…?
Okay… but here’s the interesting twist. You might have noticed that the Texas market isn’t operating the same way that the rest of the country is… we’re still moving up while everybody else is moving down! Texas is one of the fastest growing states in the nation from 2000 to 2005 in terms of population, adding over 2 million people*.
So, why not re-invest your 1031 money in Texas? This is my second point. I live in The Woodlands, TX and since arriving here in October 2001 the place is growing rapidly and expanding in all directions… residential, retail, commercial. And with immigration and huge interest from Mexico the market has great fundamentals.
Okay, but it’s too far away for me… I don’t want that kind of hassle.
Well, maybe you do or maybe you know someone that’s going to help you out or maybe you have a good property manager but let’s cover that in another story. Today I want to tell you about a great opportunity. It’s called “Fractional Deed Co-Ownership”.
How does it work?
Well, I’m working with a large firm that buys institutional quality multi-family investments anywhere from $15 million to $20 million dollars and up. These properties might be luxury apartments, student apartment communities or high quality retail centers. A few nice features:
- You “co-invest” so you’re able to buy bigger & buy better!
- There are a number of excellent Texas based investments to choose from
- The property is managed for you so you don’t have to worry about leaking taps, blocked toilets, etc
- High quality of management
- Ability to choose multiple investments
- Quick closes for 1031 exchanges
- Any dollar amount above $250 000 can be easily catered for to the dollar
The minimum investment is $250 000.00. But, you can invest in any amount above the minimum. So, if you wanted to invest $303 735.00 in some Luxury Apartments in San Antonio, TX and another $421 303.00 in a high quality retail center in Austin, TX you are able to do so, as long as the minimum investment is $250k.
Stringent acquisition criteria are used when buying these properties and the management is top class. So, risk is reduced but not eliminated! There is always the possibility that an investment will not return the original capital. But, so far, out of 150 deals, there has apparently not been a loss yet.
Of course, with reduced risk comes reduced returns… more in the norm of 6.3% CAP rate and around 6% cash-on-cash return depending on the particular property you’ve invested in but you should sleep a lot better and have a lot more spare time on your hands knowing you don’t have to spend your week-ends dealing with tenants!
If you’re interested in finding out more, please give me a call @ 832-483 8655 or email me lance@theoscargroup.com.
