Finding Hidden Cash for Your Real Estate

Repositioning real estate is a great strategy for those looking to gain increased equity and generate additional wealth. Repositioning a building allows the investor to create forced appreciation by making improvements to certain characteristics of a particular building such as purpose, tenants,  use,  and aesthetics to name a few.  As an example, a well-orchestrated and executed re-positioning strategy is imperative to make older buildings competitive with new Class-A buildings as well as stand out from a crowd of vacant structures.   This in turn increases both the value as well as the cash flow of a particular property. Ultimately, repositioning strategies that are well implemented allows the investor to proactively super-charge their return on investment rather than to merely hold on to a property and wait for market appreciation to happen.

Believe it or not, similar to real estate repositioning, there is a term I like to call “financial repositioning”. Just as in real estate, financial repositioning is the ability to re-purpose your finances and redirect your money in ways that can supercharge your wealth and cash flow. This process involves identifying where your money is currently being utilized, putting to use any “lazy money” that you have lying around, and ways to find hidden cash that you didn’t know you had. The goal here is to make sure that all your money is working for you efficiently so that you can reach financial freedom sooner. Rather than waiting for someone to give you the money to invest, look at financial repositioning of your own resources and put them to work for you.

Now, there are over a dozen strategies when it comes to financial repositioning. Unfortunately, there is not enough room for me in this post to share all of them with you. I will, however, share with you the specific details of a financial repositioning strategy session that we put together with Stacey M., a real estate investor from Atlanta, and how we helped her to find over $121,000 of cash to use in her deals. To start off Stacey’s financial repositioning strategy, we first reviewed all of her personal, business, retirement, and investment information. Why? Well, in order to ensure we provide her with the greatest value, we needed to know what we are working with. After a review of all her personal, business, and investment finances, here is a summary of the areas where we identified additional money of her own that Stacey can reposition:

1. Stacey was working with a tax preparer who did not specialize with real estate investors. Because of that, Stacey lost out on over $22,000 in tax refunds on her taxes. This was due to her tax preparer not correctly taking the real estate professional status and incorrectly calculating depreciation benefits of her properties. The correction of these errors provided Stacey with ~$22,000 of additional cash that was repositioned from the IRS into Stacey’s pocket.

2. In looking at Stacey’s personal finances, we determined that Stacey had over $150k of equity in her home that was sitting idle. Rather than taking all of it out to invest, Stacey decided to conservatively tap into $50,000 of it and use it towards real estate.

3. Stacey had some stocks accounts with a brokerage house that has been declining significantly in value ever since the end of 2009. We helped Stacey to determine the best time to sell these stock investments to minimize her loss and also to obtain an additional $9,000 in liquid cash to use for her real estate investments.

4. Stacey had money still tied up in her retirement account with her former employer of $16,000. She never thought to move her money out of the employer plan and this money have been sitting with the old employer for over three years losing value in the market. We helped Stacey to set-up a self-directed retirement account so that she can reposition all that lazy money into real estate and start working for her.

5. Over the past three years, Stacey has been putting away the maximum contributions each year towards her 401(k) plan at work. Although this is a good strategy to minimize her taxes each year, Stacey now has ~$50,000 of her funds tied up with her employer’s 401(k) account that she has been unable to access. We put a strategy in place where she can redirect part of those funds immediately tax free and penalty free which resulted in an additional $24,000 of liquid cash that she can now reposition into real estate.

 
Just as in real estate, financial repositioning is the ability to re-purpose your finances and redirect your money in ways that can supercharge your wealth and cash flow. With financial repositioning, the goal is to make sure that all your money is working for you efficiently so that you can reach your goal sooner. So ask yourself: Do you have hidden money that you can put to work for you? Do you have lazy assets that can help you to generate higher returns? Do you have a strategy in place to ensure you do not overpay your taxes to the IRS? If you are unsure, contact your tax advisor immediately to help you put a plan in place to identify hidden cash and reposition your finances. After all, look at all that extra money we found for Stacey in repositioning her finances? Wouldn’t it be nice if you had the same?

Speak with your tax advisor to find out how YOU can find hidden cash for your

real estate!

Copyright © 2013 by Amanda Y. Han, CPA
KEYSTONE CPA, INC.   Maximizing Profits & Increasing Wealth
www.keystonecpa.com

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