I
know there is fraud here somewhere, but why? I was talking
to one of my
investors the other day and he said he was talking to an investor buddy
of his
that is going to try something that he heard about on a radio show, but
my
question is and was… WHY?
You see, the idea was that these investors where doing 1031 exchanges on properties and what they would do is show on the HUDs that they were buying properties for say $200,000 but in reality they were paying $250,000 in cash and the last $50,000 was under the table.
Now, I could understand if this was a multi-million dollar 1031 exchange, but we are talking such a small amount, how can they actually be gaining anything out of the deal? The taxes would be minimal at that amount and I think the only thing it is actually doing in my opinion is losing the buyer money!
Here is why I think it is losing the buyer money. They report on their taxes they paid $200,000 for this property and have it start to depreciate over the years, but they would get more if they had paid $250,000, so why only report you paid $200,000? It just doesn’t make sense.
If someone can figure out who these people are defrauding besides themselves, I would love to hear it. I’m guessing it is one of these late night shows that talks and shows numbers and there really isn’t anything to it, but it gets investors to buy real estate.
Todd Clark - Broker / Sales Coach
Palazzo Realty Group
Phone: (503)524-9494
Fax: (503)622-8739
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©2009 Todd Clark - I know there is fraud here somewhere, but why?Good service is nice, but when you get great service you don’t forget it!
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I also don't see the point, do they know something the rest of us don't?
Those late night shows suck many people in, I'm always left wondering "Is it really that easy?"
It is funny I was thinking about these types of situations today. It is always unethical and it is fraud and there are big consequences. It happens when we are afraid and get too greedy that we try too hard to make something happen to our advantage.
The $200K number could make it possible for them to exchange for a property that otherwise wouldn't qualify for exchange. However by paying $50K under the table, they are defrauding the government of additional buyer property taxes, as well as reducing amounts paid to anyone involved in the transaction. I guess you had to hear the radio program. Maybe they are really the BUYERS and just trying to find new suckers to play with!
People (all of us!) can get sucked into schemes easily-- that's why they will always need honest professionals like us to help them cut through the emotion and see the truth.
Sooner or later someone is going to be upset about something and will threaten the others about the fraud.
Stay away!
Michelle - Can you give me an example where purchasing a lesser valued property would benefit one in such a situation of a 1031 exchange? Would an investor want to pay the taxes on the difference from the sale to the purchase? If so, why exchange? Maybe it is too early for my brain to get moving ... In any case Todd, I'd want them to explain to me WHY - they may be following someone else's advice and really have no clue what they are doing or even if they are commiting fraud.
I listened to this guy tell me four times how this would work and I have to tell you it never made sense. I even scanned the late night infomercials last night hoping to see this on there. I think it is just someone out there convincing people to sell to make money when in reality they aren't making any money they just think they are.
People that commit fraud don't think like the average person. It seems like they have outsmarted themselves.
Hi Todd, not being on the HUD is the first clue for me. Even when I take my commission as a second I put it on the HUD even though some say it isn't nessacary. The question is do you still do the deal.
Charles, if there is anything left off the HUD, I'm not going to be involved! NO WAY, NOT WORTH IT!
Not being on the HUD is a big deal. HUD looks into anything that isn't kosher. It's not right.
Todd - I cant help you either. Haven't seen this infomercial or even heard of it. Im sure no matter what the end results, the infomercial made it sound REALLY rewarding.
Todd --- thinking about this ---paying $200,000 on the HUD gives them more room for capital gain -- I don't get it either.
Mama Liz