The Baytown Sun (Baytown, Tex.), Vol. 63, No. 158, Ed. 1 Sunday, May 5, 1985 Page: 22 of 39
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2-C'
THE BAY TOWN SI N
•Sunday, May .,5, 1985
RELPs hot-selling
financial products
Business can’t be zoned out
By CHANGING TIMES
The Klplinger Magazine-
One of the hottest-selling fi-
nancial products in recent years
has been real estate limited
partnerships (RELPs). In-
vestors have poured billioris into
various kinds of RELPs for pro-
fit from property sales, income
from rents, or big tax write-offs
- the main, attraction for upper-
bracket taxpayers.
• Syndicators are heavily pro-
moting income-oriented part-
fbr~ IRAS'
and Keogh plans.
Should. you be. .interested..in
RELPs. and ho,w can you make a
good'choice? .
In >a limited partnership. ' a
general partner packages and
manages the venture, whether
buildiftg or buying commercial
property-or other assets, such as
land or short-term mortgages.
The limited partner's liability
for losses is limited to the
amount invested.
The minimum investment
ranges from about $2,000 to
$5,000 for public offerings and
$20,000 to $150,000 or more for
some of the private deals.
The partners can claim tax
deductions for depreciation, pro-
perty taxes, interest sn loans
and various other. partnership
expenses.
' After about“five to- I2.‘years.
the tax benefits diminish. The
syndicator sells or refinances
t^e'property, and distributes the
profits or periodic income to the
limited partners. - •
appreciation pros-
uncertain
pects.
—Personally check out private
offerings generally more ex-
pensive and profitable than
public offerings — offered by
reputable people in your com-
munity.
—Consider solid economic po-
tential first and tax benefits se-
cond. - *- - -
■—Ask for apd examine per-
formance histories. The bottom
line usually shows distributions
and tax benefit® per $1.0$ "'In-
vested'.
Read the footnotes and beware
of unclear "information!’' For ex-
ample. the net proceeds from an
average rate of return of 21 per-
cent a year for IQ years are ex-
actly the same as the net from 12
percent with annual compoun-
ding. .
—Consult an accountant, fi-
nancial adviser, tax lawyer or
real estate specialist. The fee is
peanuts if a lot of money is at
stake.
■ —Insist the general partner
provide realistic demographic
data from an independent source
supporting rental income projec-
tions. Look for independent
verifications of statements .
made by a broker or real estate ^
dealer. '
Be especially skeptical of high
yatnings forecasts. The
Securities and Exchange Com-
mission pr^jbits any projec-
tions for blind pools, where pro-
perties aren't acquired until
after investors buy in.
—Ask for projections for saile
' ’ of the property given .several
, — r ~ ' ■ ■' ' ' & f
I
By BRUCE WILLIAMS
DEAR BRUCE — My husband
and I have a small mobile-homte
park here in Florida.
When I shy -small, I mean
small. We have only 10 spaces on
1 acre.
When we purchased the mo-
bile-home park, it was in the
county, but now we’ve been an-
nexed by the city. The city re-
cently passed an ordinance stat-
ing that only eight mobile homes
chn be parked on l acre, and we
have been told that we must con-
form to the new ordinance.
I’ve been to planning-commis-
sion meetings, zoning-commis-
sion meetings and council meet-
ings, but so. far the city officials
say we have to go along.
What are we going to do with
our two tenants that we have to
get rid of? How do we handle
this?- - W.M., FT. PIERCE,
FLA.----------------—
DEAR W.M. - First, there’s
no way that any city can zone
you out of business. You are
what is called, in the language of
zoning, a non-conforming use.
That means that you were
there legally prior to the enact-
ment of the zoning ordinance.
(I’m assuming that 10 to an acte„
was proper when you took over
the property.)
City officials can prohibit you,
without a’variance, from ex-
panding, improving or altering
your mobile home park, but they
cannot force you to reduce ttfc
spaces from 10 to eight.
Yi.
DISPLAYING THE proclamation naming April 28 through May 4
Private Property Week in Baytown are, Freda Chandler, president
of the Bay Area Board of Realtors; and Ron Embry, city coun-
cilman. Private Property Wedk is celebrated by realtors nationwide.
(Sun staff photo by Carrie Pryor)
Sun Classified - 422-8323-
Let us help you find that special home!
A home that stands out among the rest
Freda Chandler Realty
427-7389
Glenda Wright
Kathryn Stephenson-
1209 Decker Dr.
Elizabeth Higgins
GIT
our of
UHC...
caution
The economic outlook for real
• estate is uncertain at best. While
a hew burst of inflation could
• make weir-selected real estate a
. good hedge, few forecasters ex-
pect that. Overbuilding, high
return using an 8 percent sale
rate and a .15 percent reinvest-
ment rate, advises H. Lynn
Hopewell, avails Church, Va.,
financial consultant..
vacancy rates or a recession, *>V —Don’t invest if the syndica-
regarded-by some economists as tor has bought the property at a
possible in’85, could hurt. ■ markup from a party with which
The 1984 tax law changes erod- he or she may have a business
ed some of the benefits, and the relationship.
Treasures reform proposals —Avoid deals ip which front-
could. in time, curtail or. strip end fees exceed 30 percent of the
away most of them. * " ■ money raised or in which limited
Overall. RELPs haven’t per- partners would receive less than
formed better than, or as well 75 percent of any .profits'. The
as, safer investments, such as limited partners should be paid
money-market funds or insured off before the syndicator. \
savings certificates'. -'—Has a reputable law firm
Charles C. Wetferer, editor of evaluated the tax aspects?
and it's safer.-too. Your monev ij thereAvait-
ing for you, instead of you waiting for it.
Sign up wherever you have your
checkings savings account.
Come on. get out of line...
newspaper and the Department
Treasury s FinancialManagement Service ^|j
“Real Estate Syndications Re-
porter,” examined 34 public
partnerships formed gnd com-
pleted by five major syndicators
between 1971 and 1983. After fac-
■toring% appreciation, fees and.
expenses, inflation! tax savings
and cash distribution over an
average holding period of 5.7
yeitrs,!Wetterer found that in-
vestors netted only 11-12 per-
cent;
Consider that, insured bank
certificates,currently have been
yielding about 9 percent to more
than 11 pert'ent.' U.S. Treasury
bonds and various government
agency securities have recently
been returning 10 percent or
tfcore - -
John E Sestina. a Columbus,
Ohio, financial consultant Who
heads the National AsseciStion
of Personal Financial Advisers
(its members sell advice only),
told- Changing Times that of the
last l.dDO RELPs his firm in-
vestigated. only seven were con-
sidered worthy of recom-
mendation to clients.
Many RELPs fail to pass ■
muster with independent'
analysts for the following' rea;
sons:.inexperience of the gener-
al partner, shaky finances,
heavy borrowings, excessive
fees, payment of unrealistic ■•
prices, 'unimpressive acquisi-
tions, overvaluing of assets and
Expect about 3-20‘percents
return from a tax^advantaged
RELP after taxes, if you're in
the 50 percent bracket. Income-
oriented RELPs pay less. Com-
pare the projections with yields
from safer/^simpler in-
vestments.
—Find ’out whether the in-
vestment, if
could expose you to an additional
tax liability. If a RELP borrows
to buy property, part of the in-
come could be classified as
. unrelated business income, and
amounts above $1,000 g year'
flowing into your account could
be taxable.
—RELPs are logg-term in-
vestments. Expect to maintain a
retirement account for the dura-
tion of the partnership, possibly
10 years orlonger.
If you bail out early, one
drawback is the lack of. an-or-
ganized resale market for part-
nership'interests. \
The Liquidity Fund In-
vestment Corp. (1900 Powell St./
Suite 235, Emeryville, C.A 94608-
1831) and a few other or-
ganisations -do buy units in se-
lected partnerships, but at deep
discounts from the value of the
underlying assets. For units.less
than five years old. Liquidity
pays from 20-35 percent under
their.appraised valub.
Reduce
if overweight.
WE'RE RGHTlNk FOR
VOURIIFE
American Heart ||
Association
- '1
BETTER HURRY!
ONLY 6 DAYS LEFT!
^^rsffvorfot Sale
In Mission Viejo & La Reforma
Financing Lite The Eood OldDays!
Two types of financing:
Cash Sale-datsFinanced Outside 1515 Corporation)
Empire of America FSB offers lot financing
20% Discount
Owner Financed-(LotsFinanced by 1515 Corporation)
5% Down
w / 10 Year Term
, 5 % Interest 1st Year
7 % Interest 2nd Year
• \' 9 % Interest 3rd Year .
'
Thereafter 300 basis points over the 1 year Treasury Constant Maturities * *
. as published in the Federal Reserve Statistical Release H, 15(5,19)
*
STOP BY
': r
‘ ’ *(•. k'A-I
Realtor
Betty Herndon-Associate
"Where Service Excels"
2007 E. James
422-8949 MLS
For Plat & Price Lists
^ (Located on corner of Alexander & Ward Road)
v
PlHMHI
' '
~
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Brown, Leon. The Baytown Sun (Baytown, Tex.), Vol. 63, No. 158, Ed. 1 Sunday, May 5, 1985, newspaper, May 5, 1985; Baytown, Texas. (https://texashistory.unt.edu/ark:/67531/metapth1075188/m1/22/: accessed July 18, 2024), University of North Texas Libraries, The Portal to Texas History, https://texashistory.unt.edu.; crediting Sterling Municipal Library.