Eastside Community Improvement

The Eastside Co. Real Estate team has always felt it was important to support our community. When we first started practicing real estate we didn’t have the financial resources to donate to charities and schools so we instead donated our time to 826LA’s tutoring program.  If you haven’t heard about it I encourage you to stop by their incredibly fun storefront at 1714 Sunset Blvd.  Look for the Echo Park Time Travel Mart sign and/or the robot in the window.

A lot has changed since those early start up days.  Since 2004 my team and I have been trusted to help represent hundreds of people in our Eastside community to buy and sell residential real estate.  This consistent and growing support from our clients has allowed us to provide for our families and we are now fortunate to be in a position to financially give back.  

So far we've identified a couple ways we will start giving back: financial donations to schools and charities and community improvement projects.  For each home we sell, we will donate to the local public elementary.  The greater the home price the larger the donation we can afford. This is a win for students and as the schools improve this will benefit the neighboring home owners.  For referrals from friends, family and clients we will donate to the charity of choice of the person providing the referral.  Thus far we've donated to environmental funds, cancer research, churches of different denominations and youth programs. The community improvement projects can vary from parkway clean-up and the planting of native plant species to the commission of murals and street art created by local artists.  We can’t draw, paint or sculpt but we admire those that devote their life to pursuing the arts and feel proud to support them.  Along with helping local artists it is our hope to interest the younger members of our community to get involved with our projects to learn and take pride in their community.  Being a new parent myself I would think anything artistic that can distract from screen time can't hurt.

Our first community improvement project is the blighted parkway on the eastern side Silver Lake Blvd between Rockford and Cove.  The parkway is unkempt, overgrown with weeds, trash, cigarette butts, dead trees and dog waste.  We thought, “would it be crazy to think that if this stretch of land was planted with attractive drought tolerant foliage then people would maybe litter less and pick up their dog waste.  We started by sending letters to the neighbors who lived closest to the parkway to learn if anyone had any objection to the planting we were planning.  To our surprise not only was there no objection there were kind words of support and plant donations.  We’ve even been invited into a couple homes to discuss our plans and have made friends in the process.   

As we started the clean up we noticed a stretch of retaining wall on the same parkway that was covered in graffiti and local gang tagging.  The wall had a significant crack in it and needed to be repaired or replaced so until then we thought a mural would help prevent future tagging and would give walkers and joggers something to enjoy as they went by.  For many years we had appreciated the friendly and joyful mural work of local artist Sky Poet and thought she may be a good fit for the project.  We direct messaged her through Instagram to see if she’d be interested in being commissioning to create something for the retaining wall. She not only was interested she was enthusiastic about our mission and the motivation behind the mural. Sky came up with a design and we invited parents and kids from the neighborhood who came out and helped paint it.  

We look forward to identifying other areas in which we can make a positive impact and encourage suggestions.  Suggestions can be sent to info@theeastside.co   

Facts Tell, Stories Sell

We love telling a home's story. And when it's told well the results are always above average.

Often times we see homes for sale that are poorly represented in that the marketing doesn't reflect the home's unique features or potential.

We have been able to consistently break home price sales records because we take great pride in understanding each home in order to craft and tell the story. A well presented story will attract an audience of interested Brokers and Buyers which sets the stage for the next act of offers and escrow.  The better the story, the better the audience the better the sales price and escrow process.

A general outline of what to expect from TheEastside.co in terms of marketing: 

  1. Understand the property in question.  What is valuable to highlight and how we help the Seller add value.
  2. Preparation.  Engage our team of designers, stagers and craftsmen to prepare property for highest sale price.
  3. Collect Property Assets.  Photography, video, 3D interactive guided tours all organized to be shot at times of day which best show property with professional architectural photographers.
  4. Price correctly.  Price according to the existing market conditions to generate real interest.
  5. Expose Property Assets to the broker and buying audience.  *We share this information in person only.
  6. Cultivate offers. We do not "shop offers" to inflate the price but instead maintain a strict professional relationship with all agents/buyers and provide them with necessary information only for how high to bid.
  7. Negotiate from a point of strength from acceptance through closing.

* A detailed and custom marketing program is thought out and created for each property. For over 12 years we have tested, reviewed and improved our marketing plan ensuring a system that promotes value,  accountability and achieves results.  Clients receive a detailed plan of action calendar ahead of time so they fully understand the steps being taken.  

Below are some of the steps we undertake to tell each story carefully.

  1. Calendar detailing the plan of action and process is reviewed and approved by client.
  2.  Professional Architectural photography
  3. 3D Interactive guided tours (Matterport)
  4. Professionally produced video 
  5. Aerial drone photography
  6. Twilight photography
  7. Staging (partial or full)
  8. Exposure to exclusive Eastside Agent network
  9. Targeted social media ad campaign (Facebook, Instagram, LinkedIn, Twitter)
  10. Introduction to online local blogs (CurbedLA, The Eastsider)
  11. Premier placement on Trulia and Zillow
  12. Exposure through the real estate brokerage on the Eastside with the highest sales volume.
  13. Exposure through 180 top search sites internationally through KWLS
  14. Daily updates of marketing and showing activity
  15. Lightning press releases
  16. A network of 20,000 offices, 65,000 associates internationally in over 30 countries
  17. Email blast to Los Angeles Agents
  18. Catered broker's open house
  19. Seller favorite 5
  20. +++ more

We look forward to meeting and being of service.                                      

Imraan Ali                    

What is The Eastside Collection?

In a nutshell, what is the Eastside Collection?

The Eastside Collection is a team that represents buyers and sellers who seek a highly customized and personalized level of real estate services in the Eastside of LA.

What is The Eastside Collection's internal purpose? 

To honor the sanctity of the real estate experience. We don’t do “deals”. We are not “top producers”. These terms and ideals are offensive to us and demean people. A Realtor is the one lifeline people have in a transaction and trust in that Realtor is critical. The only way to manifest that trust is to truly honor the role we must play.

Define the roles between the team’s principals? 

Imraan is the public face. His knowledge and expertise is our product. Aki is his partner and brand guardian. She oversees marketing and communication, insuring that everything we do is consistent with our standards.  Amir and Tanya are our buyer specialist team. Their focus is vigilantly monitoring the market to find and facilitate a smooth transition for our Buyers into their new home.

How are decisions are made that serve those standards?

Every decision must support who we are, what we believe and how we’re perceived. If anything presented to us distracts from these tenets, we walk. This applies to who we work with, what we are asked to do, where we market, what vendors we work with, etc. 

What created such a demand for our services?

We believe it’s a byproduct of what we’ve projected - professionalism at its highest degree, composure and brutal honesty at every turn that serves to protect our clients at all cost. People prefer this far more passionately than their need to just hire a Realtor. 

What exercises did we undergo to shape these beliefs in the public’s mind? 

As entrepreneurs and service providers we  study what we do, we evaluate our successes and failures and continually evolve as a result. Empathy is a critical component of branding which requires us to continually place ourselves in our clients’ shoes and ask ourselves what we would want if we were them. We know people yearn for great service. By providing that in every way possible, we created this sense of us without ever saying it.  

What is The Eastside Collection's external brand promise?

We promise our clients a customized service across all aspects of our work designed specifically for their needs. Every client is guaranteed to be treated individually rather than fall into a template process for service that works for everyone. This is something people want and it supports our purpose. 

If you could state one thing that the Eastside Collection owns what would that be?

Excellence. From copy to design, service, representation, from grand efforts to the simplest detail, everything must resonate excellence. To illustrate, our photography of each property is strategically thought out prior to the photographer's arrival.  Time of day is taken into account for shadows and reflections, shot locations are check listed so we don't miss any important angles, we pre-shoot so we can adjust staging and we organize photos so they walk the viewer through the property so they clearly understand and appreciate what the home has to offer.

These are simple details most agents don’t consider, but for us they are everything. Our attention to details like this don’t stop there. They apply to every single touch point of the Eastside Collection brand. Excellence isn’t an ideal we try to sell the world. It defines how we must operate at every level. 

The Eastside Collection operates within a brokerage brand, Compass. What factors guided your decision to co-brand with your broker? 

Our brokerage, Compass is comprised of the most respected staff, management and agent peers. The office team are our partners, our mentors, our sounding board and a daily reminder to stay focused and true to ourselves. The brilliant minds, clear vision, deep commitment to the agents and trustworthiness never wain. Association with these qualities adds to the The Eastside Collection brand. That matters. It’s hard to project excellence if your broker is an unmotivated real estate automaton or whose mission and values differ from yours. 

Behind the signs

The Eastside Collection possesses a clear purpose. A defined promise. Values that guide their actions.

 

The 7 Basic Rules to 1031 Exchanges for Investors

Thanks to Section 1031 of the Internal Revenue Code, the payment of income or capital gain tax on the sale of property can be rolled over to a new property. There are an unlimited number of times an individual can successfully rollover gain and postpone tax. You may ultimately make this tax disappear in one of two ways:

  1. Rollover gain and ultimately move into one of your investment properties and declare it your primary residence. Provided you are married and have held the property for five years, reside in the property for a minimum of two years, and then you can exempt $500,000 in taxes upon the ultimate sale.

  2. Capital gains taxes are eliminated upon the death of the property owner. Heirs receive a step up in basis on the date of death.

There are only seven simple points to have a clear understanding of the rules pertaining to 1031 exchanges. With the limited exception of subtle nuances, educated agents can share with customers all they need to know about 1031 exchanges. While the technical terms used to describe properties in an exchange (rollover) are “relinquished properties” and “replacement properties” convey the terms as “old property” and “new property”.

1ST REQUIREMENT: LIKE-KIND PROPERTY

The first requirement for a 1031 exchange (rollover) is that the old property to be sold and the new property to be bought are like kind. Like-kind relates to the use of properties. As a result, the old property as well as the new property, must be held for investment or utilized in a trade or business. Vacant land will always qualify for 1031 treatment whether it is leased or not. Commercial property may be used to purchase a rental home or a lot may be sold to buy a condo.

Section 1031 expressly states that property strictly held for resale does not qualify for an exchange. This means that investors and developers who strictly “flip” properties do not qualify for exchange treatment because their intent is resale rather than holding for an investment. There are numerous court cases seeking to determine the dividing line between held for resale and investment. Intent appears to be the single most significant factor in determining the difference.

Additional factors to consider:

  • Primary residences can never be utilized in an exchange.

  • A taxpayer may sell a property to a related party which requires a two year holding period, a taxpayer may never purchase the replacement (new) property from a related party.

  • Properties to an exchange must be within the United States border.

Example #1: Shaquille owns a tire business, but only leases the building which houses his business. Shaquille wants to retire, sell his business and buy a beachfront condominium with the proceeds. Can he do a 1031 exchange?
No. Because Shaquille does not own the real estate he cannot do a 1031 by selling his business (which is not real estate) and buy real estate to replace it.

Example #2: Howard, a doctor, owns a medical building that he leases to other doctors. Can he exchange the building for a vacant waterfront lot on which to build a home?
Yes. Investment property can always be exchanged for vacant land held for investment purposes.

2ND REQUIREMENT: 45 DAY IDENTIFICATION PERIOD

The Internal Revenue Code requires that the new property be identified within 45 days of the closing of the sale of the old property.

The 45 days commence the day after closing and are calendar days. If the 45th day falls on a holiday, that day is the deadline for the identification of the new properties. No extensions are allowed under any circumstances. If you have not entered into a contract by midnight of the 45th a list of properties must be furnished and must be specific. It must show the property address, the legal description or other means of specific identification.

Up to three potential new properties can be identified without regard to cost. If you wish to identify more than three potential replacements, the IRS limits the total value of all of the properties that you are identifying to be less than double the value of the property that you sold. This is known as the 200% rule. Accordingly, more than three properties may be identified as replacements however, if the taxpayer exceeds the 200% limit the whole exchange may be disallowed. As a result, the logical rule for investors is to keep the list to three or fewer properties. It is the responsibility of the qualified intermediary to accept the list on behalf of the IRS and document the date it was received however, no formal filing is required to be made with the IRS.

Example #1: Sarah sells her old property for $400,000. on February 1st. She may identify up to three new properties of any value within forty-five days of closing.

Example #2: Ludwig wants to identify four new replacement lots each selling for $250,000. Will this work?
No. This is not acceptable as the four properties total $1,000,000 and therefore exceed 200% of the property being sold.

3RD REQUIREMENT:: THE 180 DAY PURCHASE PERIOD

This rule is simple and straight forward. Section 1031 requires that the purchase and closing of one or more of the new properties occur by the 180th day of the closing of the old property. The property being purchased must be one or more of the properties listed on the 45 day identification list. A new property may not be introduced after 45 days. These time frames run concurrently, therefore when the 45 days are up the taxpayer only has 135 days remaining to close. Again there are no extensions due to title defects or otherwise. Closed means title is required to pass before the 180th day.

Example #1: Bonita identified a condominium under construction within 45 days of her sale. The developer now informs Bonita it will not be completed and ready to close with title passing within the 180 day period. Susan, through no fault of her own is prohibited to close within 180 days, accordingly, her exchange will fail.

4TH REQUIREMENT: USE OF A QUALIFIED INTERMEDIARY

Sellers cannot touch the money in between the sale of their old property and the purchase of their new property. By law the taxpayer must use an independent third party commonly known as an exchange partner and/or intermediary to handle the change. The party who serves in this role cannot be someone with whom the taxpayer has had a family relationship or alternatively a business relationship during the preceding two years. The function of the exchange partner/intermediary is to prepare the documents required by the IRS at the time of the sale of the old property and at the time of the purchase of the new property. The intermediary must hold the proceeds of the sale in a separate account until the purchase of the new property is completed. The taxpayer is entitled to the interest of these funds and must treat the interest as ordinary income during the period of escrow.

If 1031 documents are prepared incorrectly, the IRS will disallow the exchange. No state or the federal government, regulates qualified intermediaries. The majority of companies performing this function are not bonded as there are no licensing requirements. Through the Florida BAR client relief fund, each attorney in the state of Florida is, in reality, bonded up to $1,000,000 per transaction.

Example #1: Lia copies 1031 forms she received and sets up a special account at her bank for the sale proceeds to go into following closing. She never touches the funds and had her bank wire all of the proceeds to the title company for her new purchase property. Will this suffice?
No. By failing to have a qualified intermediary, Lia exercised dominion and control over the funds and therefore the exchange will be disqualified.

5TH REQUIREMENT: TITLE MUST BE MIRROR IMAGE

Section 1031 requires that the taxpayer listed on the old property be the same taxpayer listed on the new property. If you and your husband/wife/other are married and sell the old property than you and your husband/wife/other must also be on the title to the new property. If a trust or corporation is in title to the old property that same trust or corporation must be on title to the new property.

If only you are on the old property, but your husband/wife/other is required to be on title to the new property to help qualify for the loan, one solution to avoid this problem prior to the sale would be for you to Quit Claim your interest to yourself and your husband/wife/other. 

Example #1: Nobie owns a warehouse building in her own name but wants to buy a condominium in the name of a new limited liability company she wants to set up. Can she do this?
No. The new property must be acquired in his own name to successfully complete the exchange.

Example #2: Jamie is married to Jason and owned a condominium prior to her marriage that is titled in her sole name. Can she take title to the new lot purchase in both her name and Jason's name?
No. Jamie must first complete his exchange in his own name. Afterwards he may Quit Claim his interest to herself and Jason as husband and wife after the exchange is complete.

6TH REQUIREMENT: REINVEST EQUAL OR GREATER AMOUNT

In order to defer 100% of the tax on the gain of the sale of old property, the new property must be of equal or greater value. There are actually two requirements within this rule. First, the new property has to be of greater or equal value of the one which is sold. Secondly, all of the cash profits must be reinvested. In reality you may deduct closing expenses and commissions from the sale of the property being sold. If the property is being sold for $500,000 and the actual net amount after closing expenses is $450,000 all that is required to be spent for the replacement property is a total of $450,000. Closing expenses associated with the purchase may be added into the purchase, as well as capital improvements completed within 180 days together with furnishings. In fact, a taxpayer may make an unlimited number of capital improvements as well as spend up to 15% of the acquisition cost on personal property.

A party who elects to do an exchange and take cash out may do so, however, any cash received will be taxed at the corresponding rate of ordinary income if held for less than one year or 15% if held for more than one year.

Example #1: Kumar owns a property he paid $250,000 for and is now selling for $400,000. He has a $150,000.00 mortgage against the property and wants to buy a smaller condo for $250,000 with the cash. Does this qualify for tax deferral treatment?
No. Kumar is buying down from $400,000 to $250,000. Accordingly, tax is owed on the amount of the buy down, which is $150,000.

Example #2: Kumar decides to buy a replacement property for $500,000.00 and obtains a $400,000 loan using $100,000 of the $150,000. cash that the qualified intermediary is holding. Is his exchange fully deferred?
No. Despite buying up, Kumar did not use all of the cash and will be taxed on $50,000.00.

7TH REQUIREMENT: REVERSE EXCHANGES – TITLE TO BOTH PROPERTIES CANNOT BE IN SAME NAME AT SAME TIME

All previous requirements are applicable…..and then some. A reverse may come in handy when a seller does not yet have a buyer for the property that he wishes to sell and is afraid of losing the new property he wishes to acquire. In the fall of 2000, the IRS issued a revenue procedure that established the concept of an "exchange accommodation title holder" (another name for a qualified intermediary). Simply put, a taxpayer may not have both the old as well as the new property titled in their name at the same time and still qualify for a reverse exchange.

The IRS has set up guidelines which allow the taxpayer to acquire the new property before the old property is sold provided title is taken in the name of the exchange accommodation title holder (typically a limited liability company which is created). Under this scenario an entity, other than the taxpayer, will hold legal title in what is commonly referred to as a qualified parking arrangement until such time as the old property is sold. The old property must be sold and closed within 180 days of first acquiring title to the new property. As soon as the old property is sold the proceeds are then directed to the exchange accommodation title holder at which time the property may be deeded out of the parking arrangement directly to the taxpayer. This procedure is actually quite simple provided cash is utilized to fund the new purchase. The vast majority of lenders simply will not lend funds to a third party entity and only to the taxpayer.

If financing the new property cannot be avoided then title must be conveyed out of the taxpayers name to a straw person prior to acquiring the new property. This will avoid having title to the old property and title to the new property being in the taxpayer’s name at the same time which is a prohibited transaction. Although this is an acceptable procedure to the IRS the conveyance to the straw person must be reported as an arm’s length transaction the straw person will then convey title to the ultimate purchase. 

 

SUMMARY

In conclusion, there are countless scenarios involving 1031 exchanges with each and every one being unique with its own set of facts and circumstances. If you understand the seven technical requirements set forth above, you clearly understand 95% of all aspects of Section 1031 of the Internal Revenue Code. If you have questions, or have facts or circumstances which you are uncertain of, I would greatly encourage you to consult a CPA or an attorney who has experience and is knowledgeable with 1031 tax deferred exchanges.

To most Sellers, their home is their baby. No one wants to hear that their baby is ugly.

 

One of the things we learned the hard way during our real estate software start up was that when you believe something is going to work, you'll deliberately or even subconsciously ignore any feedback to the contrary, and you’ll focus only on the feedback that backs up what you already think. Most start up founders need to have such delusional conviction about their companies just to raise money and survive, it's easy to fall prey to this and it's a problem for property Sellers also.

It's called Confirmation Bias and it can also be a Seller's No.1 enemy when it comes to hiring an agent as well as preparing and pricing their property for sale.

Confirmation bias manifests in a few ways:

  • Only talking to people we think will agree with us.

  • Writing off people who don’t agree with us as idiots or haters.

  • Asking questions designed to support our hypothesis.

Let’s say you are interviewing agents and you ask one of them what they like about your home, and they respond by basically repeating the checklist you have in your mind for why your home is special. This is very exciting. So much so, that you probably won’t ask the contrary question: “What’s one thing that would cause a buyer not to purchase a home like this?” Asking that question is dangerous because the agent might say something you can’t fix or can’t afford to fix right now. 

Quick example of two Sellers we know.  Seller A chose us for our marketing plan but chose not to hear our points about house preparation or pricing to attract attention.  The house had many desirable selling points that were not given an opportunity to shine. Instead the house was overly "personalized" and the light and volume of the home was hidden behind furniture and window treatments. Finally after 5 months Seller A received an offer from a buyer that we had immediate concerns about. That buyer ended up negotiating unrealistically, ignored deadlines and refused to close the transaction.*

Alternatively Seller B aggressively asked us questions about what needed to be done to make his home more appealing and valuable. We created a shared Evernote file with pictures, repair options, notes and links to products that would help him get his house market ready. He agreed to staging and though he had very limited funds he did what he could afford and the rest of the work he did himself. The result was that the house got picked up by a widely read online publication, received 28 offers and sold for 24% higher than list price.  The difference? Seller B kept asking us, "What are the things that would cause a buyer not to purchase this house?" Looking back on it now, maybe his confirmation bias was that he knew his house needed love and we echoed that belief. Either way he prepared himself to hear some hard truths about his home and it literally paid off.

It requires a ton of humility from Sellers to remember they’re subject to confirmation bias.

You really have to choose to hear it. You have to very proactively and consciously shift out of this mode. You have to come back to neutral when going into conversations with prospective agents about your home and it's pricing.  If you only hear positive feedback with nothing constructive to improve your home, chances are you're being played. Sometimes it's a good thing to hear how ugly your baby is.  

For the record, we think the baby in the picture above is an awesome dude. It's the shirt that doesn't work.

* The Seller eventually moved out and let TheEastside.co paint and price the home accordingly. The property is expected to be on the market by April 15, 2016.