All posts for the month December, 2016

Writing down your real estate investment criteria means writing down your needs and wants in a real estate deal. It means outlining what you are looking for in a real estate opportunity. Having written criteria can help you grow as an investor and can make it easier for you to land the best real estate deals.

If you to join the ranks of real estate investors, you might want to have formal written investment criteria set out for yourself. Putting your investment criteria in writing allows you to see at once whether possible investment opportunities do or do not fit your future plans. This allows you to quickly sort through potential opportunities to pinpoint the right ones.

Writing down your investment criteria also hones your focus and ensures that you have an easier time finding the best possible deals. Having written criteria also allows you to share your criteria with other real estate investors, so that you can learn from them. If you haven’t yet outlined exactly what your criteria are for selecting an investment property, now’s the time to put pen to paper. If you need more on that, contact Jody Kriss at and give him a poke.

When developing your written criteria, consider when you do not want to make an investment. What is the bottom line? Do you not want to make an investment at any time if you don’t understand it? Do you want to never make investments that you cannot pay for if everything goes wrong? Do you never want to make an investment where you cannot handle the worst-case scenario? Determine your comfort boundaries and the level of risk you are willing to accept or not accept, and put this in writing.

Next, when developing your written investment criteria, consider what your ideal investment would be like. What do you do to make sure that your investments are the best possible deals for you? Do you do a certain amount of research using specific sources? If so, write this down. Outline on paper the best real estate deal you ever put together. What were the steps you to that in to be an outstanding investor in that situation? What if you applied the same steps to every real estate deal you made? Would you generate more success from other opportunities? If so, outline exactly what you do when you are at your investment best, and add this to your written criteria. According to Jody Kriss, this will help ensure that every deal will at least have the opportunity of becoming as successful as your best deal ever.

Write down your money criteria. Where are you willing to go for financing? How much capital are you willing to put at risk? How comfortable do you feel taking risks with your money? What levels of risk are you willing to take? How are you going to secure your deals? Knowing how you will handle money is very important to you as an investor.

Finally, and maybe most importantly, outline the standards by which you wish to live as an investor. What are the ethical boundaries you’re not willing to cross? What you want to stand for as an investor and what sort of person do you want to be as an investor? This may seem abstract and very much up in the air, but it will help you outline exactly the sort of investment opportunities you want to capitalize on. The best real estate investors have a code of conduct, so you should, too.


Summary of the tax rules for an investor to sell real estate and replace with like kind property under Section 1031 of the Internal Revenue Code.

When a real estate investor sells real estate, a capital gains tax is recognized, along with a tax on deprecation recapture. The regular capital gains tax, deprecation recapture, and any applicable state tax can often result in a tax liability in the 20% to 25% range for the sale of real estate. (If the real estate has been held for less than 12 months, all of the gain will be taxed at much higher short term capital gains rates.)

A Section 1031 exchange, named for the applicable section of the Internal Revenue Code (also known as a Starker Exchange, Tax Free Exchange, or Like-Kind exchange), allows an investor to defer all tax on the sale of real estate if the real estate is replaced with other real estate pursuant to a detailed set of rules.

The replacement property must be identified within 45 days of the sale of the relinquished property.
(1) The replacement property must be purchased within 180 days of the sale of the relinquished property.

(2) The replacement property must have a purchase price at least as great as the relinquished property, otherwise some tax will be recognized.

(3) All of the cash proceeds from the sale of the relinquished property, less any debt repayment and expenses of the sale, must be reinvested in the replacement property.

(4) All of the cash proceeds from the sale of the relinquished property must be held by a Qualified Intermediary, which is a person or institution with whom the investor has not recently conducted other business. The investor must not have any access to the cash while it is being held.

(5) The titleholder of the relinquished property must be the same as the purchaser of the replacement property.

(6) The sale or purchase of a partnership interest does not qualify for a Section 1031 exchange, except under a few limited set of circumstances.

(7) The relinquished property cannot have been classified as inventory, such as condominiums built by the investor, or lots in a subdivision that was subdivided by the investor.

If these rules are followed, real estate investors can sell current real estate holdings and replace them with other properties. A Section 1031 transaction is an excellent way for a retiring real estate investor to convert actively managed properties into passive properties, such as triple net leased properties.