Sunday, March 28, 2010

A Ski-Lover’s Paradise

Keeping my posting short today. Playing catch-up after skiing at Brundage Mountain, Idaho. What a place. We skied six days, five hours a day. Figuring four runs per hour, that comes out to 120 runs! Brundage is just a few miles from McCall, a small town with plenty of great places to eat and stay. I wrote more about it in my January 14 posting. So if you’re a skier and looking to go where there are no lift lines and a variety of runs for a very reasonable price, Brundage is worth checking out. Best wishes, George

Sunday, March 14, 2010

How to be a Landlord Without All the Headaches

I’ve owned and managed residential rental real estate for over 20 years. Nothing on the sale of Donald Trump … just moderately-priced single family homes, condos, duplexes … even a few mobile homes. 

And from the prospective of a seasoned landlord, there is one sector that I’ve always liked: Self-storage. 

These are the places that rent space to people whose garages are overflowing with junk that they can’t bear to part with it. 

Self-storage facilities have become more upscale looking over the years, with well-lit parking lots and attractive facades. So you probably thought they were just another office building when you drove past them. 

They can be real cash cows without a lot of upkeep. Imagine, every month checks coming in like clockwork. And no clogged toilets, no broken water heaters and no pet-stained carpets to worry about. 

Tenants are on a month-to-month lease. If they’re a few days late on the rent, you can stick a padlock on the door. After a few more days, you go in, sweep the place out, and throw all the stuff in the dumpster or sell it. Try doing that with a residential property, and you’ll be the one standing in front of a judge! 

But you might not be interested in the hands-on experience of taking care of real estate, even something as simple as self-storage. Plus you might not have the bucks available to get in on one, yet you’d like to put some real estate in your portfolio. 

Then you may want to take a look at a real estate investment trust (REIT). A REIT is not subject to federal income tax to the extent that it distributes at least 90% of its taxable income to its shareholders. 

And one that I’ve owned for quite a long time is Public Storage (PSA). With over 2,100 locations totaling more than 135 million rentable space, it’s one of the largest landlords in the world. 

They also have interests in renting out commercial and industrial facilities. 

I’m not saying that Public Storage is the best stock in this sector. It just happens to be what I own. There are other companies in the same business, such as U-Store-It (YSI) and Sovran Self Storage (SSS). 

PSA is trading for about $88 now up from $51 a year ago, which gives it a 65% return. Plus it’s paying a 3% dividend. 

It avoided the tech bust at the beginning of this decade, and fared better than the general market during the recent crash. 

So if you’re looking to add some real estate to your portfolio without getting your hands dirty, check out Pubic Storage. 

Best wishes, 


Sunday, March 7, 2010

Annuities, Beneficiaries, and Taxes

A reader recently had a question about taxes on tax-deferred annuities. Here’s what she asked: “I bought a tax-deferred annuity from my bank back in 2003. The broker there said I would never have to pay income tax on it as long as I didn’t remove any of the money. Recently I asked him if my beneficiary, my niece, would have to pay income tax on it when I die. He said no, she wouldn’t have to worry about income or estate taxes. Was he right? My neighbor said the broker doesn’t know what he’s talking about. Please help me understand this. Thank you, Beth.” And here is my answer: “Beth, I’ll assume the annuity is not owned inside your IRA and you are the owner. As far as your niece goes, she’ll have to pay income tax on the gain within the annuity but not the amount you had invested. For example, if you had invested $50,000 and the annuity is worth $75,000 on your date of death, your niece will have to declare the $25,000 in profit as ordinary taxable income. Unfortunately, there is no capital gains break for annuities. “Not knowing the size of your estate, I can’t tell you whether your niece will have to worry about estate taxes. I can tell you, though, that the annuity will be included in your estate. So it sounds like your neighbor is more up on things than your broker!” What can you learn from this: Get a second opinion before making investment decisions. Best wishes, George
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