Last week was graduation week, and man what a week it's been! It started on Saturday the 30th when me and three other friends drove to Billings to see an ICF fight. For those that don't know, IFC is the league below UFC (Ultimate Fighting Championship). I had an awesome time - always do when I goto Billings even though I hate that town.

Of course, once Monday hit, it was like clockwork. It seems like I knew at least one person each day this last week that were done with classes. Of course, graduating and being done with class means one thing... party. By Friday the 6th I had been out until the early morning hours every night. I was hoping to roll over to my homie Ian's for a relaxing night and pool and take a break before a huge graduation party on Saturday. Of course, I thought wrong... Brad and Marv were in town.

After sleeping only four hours, I was woken up because we had to get moving if we were going to have a massive party for Nerdig, John and Ian. So, at 8am Brad, Jer, Marv and me started getting shit ready. We got the tent setup and got about 100lbs of pig going on the grill (yah, trailer grill =). By 10am or so, Joe had dropped off two kegs, one Fat Tire and one Coors Light. People started showing up around 1:30 to 2pm or so, and by about 4pm there was no question there was a party!

By 10pm we decided that two kegs just weren't enough, and had the third one we reserved delivered around 10:30. By 12:30am I was trying to get people doing keg stands... too bad I forgot we were drinking Fat Tire, so needless to say it was brutal. By Sunday afternoon, I was pretty spent. It was such a nice day too, around 70, should have been on the river. Instead, I rested up and started the detox process. Yah, so if you don't see me out this next week this is why... I'm done for a week or so. After this last week, I got to give the liver a break I think.

Anyways, congrats goes out to all my homies that graduated this last semester! There are too many to name and I think I killed a lot of brain cells last week, which isn't helping right now either. As Marvel said yesterday, "All the information you cram into your brain over 4 years you kill in one night."

I recently have been reading a lot about using real estate to generate income. One of the biggest issues with this is if you sell the property you have to pay capitol gains. You can defer them using a 1031 exchange. Basically, a 1031 exchange allows you to "swap" one property for another of equal or greater value without taking the capitol gains tax hit.

This can be a useful tool for cycling properties. But, what happens when you don't want to have an income generating property any longer? Or, you want to use the money to purchase a home. Most are trapped into paying the capitol gains then. However, there is a way to use a 1031 to NEVER pay capitol gains, unfortunately it only works for residential not commercial (at least to the best of my knowledge).

Basically, you buy a house (again, of equal or lesser value) and use rent it out to generate income. When you do that, it qualifies as a business property. You must rent it out for at least two years before you can use it in a 1031 exchange. Now, this is where Section 121 comes into play. Basically, under Section 121 you must own the house for at least 5 years, at which point you can exclude captial gains tax up to $250,000 for someone who is single. If you are married, you can joint file and increase this to $500,000.

So, for an example, let's say I already own a commercial building, which I've owned for at least two years (to qualify for the 1031), and I bought it for $500,000. I sell that for $700,000 and utilize the 1031 to buy a house for $750,000 on a ski resort. I rent the place out for two years, then I move in and live there for three. If I filed my Section 121 as a joint filing, I can then sell the place for any amount less then 1 million dollars and pay no capital gains tax. Pretty kick ass huh?

How fucked up is this? A listing agent shows you a house, you make an offer, seller counters, etc. Then the listing agent buys the house for themselves. Not to forget that they have seen the inspection report. That bundled with the knowledge of my plan and intentions on buying the house gives him what I see as an unfair advantage. The worst part about it, it's perfectly legal. A listing agent can try and sell you a home, but decide to "steal" it from you for themselves.

With the real estate market rapidly growing and appreciation in effect (up to 99% increases in some areas since 1999), this seems more realistic. Of course though, if you do shady business and your karma isn't solid you will end up losing in the end. I know that if I was on the short end of this stick, I would make it a point to ruin the selling agents reputation. I wouldn't waste time slandering them, but I would inform others of the dealings I had with that agent and recommend stearing clear.

Either way, it's a interesting concept, and somthing the intelligent buyer should be aware of. Check out the full article at the WSJ Real Estate site:

RealEstateJournal | House Talk

My Mom sent me this quote the other day that got me thinking...

"Cherish your visions and your dreams as they are the children of your soul; the blue prints of your ultimate achievements."

Napoleon Hill
1883-1970,
Author of Think and Grow Rich

This is so true, it's amazing. I've really begun to understand the power of having dreams. While it might sound gay, I think it's important to create a "dream scapbook". When there is something I want to do in my life, such as more traveling for instance, I gather pictures of the place I want to travel to. I put those images in my scapbook, which helps me visualize myself being there. This process solidifies the dream and is the starting point for turning it into a reality. Traveling is just one example, I recommend doing this for things such as a career, a house, a car, etc.

Putting them in a book that you can look through whenever, helps you keep them in focus. It's a reminder of what you want and can help you do a comparison of where you are based on where you want to be. The hard part is of course getting from one point to the other, but I'll leave that up to you. =P

The other day I was reading an article about how there might be some changes to bankruptcy laws in the near future. While I have never claimed bankruptcy nor do I intend to, I still think some of the proposed changes are interesting. Basically, they are trying to lessen the protection consumers would receive against creditors. I think some of these changes might be needed, but I hope the changes don't give creditors too much power. I mean, how many people have you met that have filed for bankruptcy? Then think about how many of them still have nice homes and sweet rides. Anyways, it will be interesting to see how this ends up, it could definitely affect some peoples choices.