Don't be misled by the title of "The Insider's Guide to
Real Estate Investing Loopholes" by Diane Kennedy, CPA, and Dolf de Roos.
The book is mostly about income-tax loopholes for real estate investors.
That's fine. But the authors have created a very basic
realty investment book with a catchy title. If you are brand new to realty
investing, you will benefit from exposure to extremely simplistic explanations
of tax deductions for investors.
Purchase Bob Bruss reports online.
However, the book never refers to the sources for the often
sweeping statements. Co-author Diane Kennedy should know better than to explain
tax implications without referring to her sources, such as a tax law or court
decision. Vague generalities are insufficient.
For example, in the chapter about how to hold title to
investment properties, the statements are very vague without sources to support
the generalities. However, this chapter contains an excellent two-page chart
comparing C and S corporations, limited partnerships, and limited liability
companies (LLC) for holding title.
Occasionally, the authors lapse into brilliance. For
example, in the section about how to hold title, they advise: "However, if
you use a combination of a trust and an LLC, you can have the best of both
worlds. Instead of having the trust owned by its beneficiaries, have the trust
owned by an LLC that is in turn owned by the beneficiaries. Now, if there is a
lawsuit, either against the trust or against a beneficiary, the LLC asset
protection rules come into play."
Kennedy and de Roos often provide very practical advice such
as, "In fact, perhaps the worst thing you can do is to make extra
principal payments on your loan. The extra payments don't help you if you miss
a payment; the bank just gets more equity if they foreclose. Additionally,
you've relinquished the financial boon of leverage."
If you expect authoritative tax information on how to avoid
paying tax on your realty investment property sale, don't waste your money on
this superficial book. This "baby book" provides only minimal
information for serious real estate investors.
The final chapter, titled "Global Investing,"
provides the worst information of all the chapters. The authors recommend real
estate investing in foreign counties, completely neglecting to explain the tax
aspects and the currency conversion risks.
Chapter topics include "Choose the Tax Laws You
Want"; "Tax Traps to Avoid"; "Turing a Loss into an
Asset"; "Smart Business Structures That Reduce Risk and Tax";
"Titling Property: Tenancies, Trusts, and Transfers"; "Clever
Use of Debt"; "Sell Your Property without Immediately Paying
Tax"; "Exit Strategies"; "Be Paid to Live in Your
Home"; "Vacation Property"; and "Creative Ways to Put Money
into Your Pocket."
If you are a beginner real estate investor looking for
extremely simple information about the tax benefits of realty investments, you
can benefit from learning the book's basic tax rules. However, if you already
understand the basic realty tax rules, you will be very disappointed with this
"baby book." On my scale of one to 10, this very basic book rates
only a five.
"The Insider's Guide to Real Estate Investing
Loopholes," by Diane Kennedy and Dolf de Roos (John Wiley and Sons,
Hoboken, N.J.), 2005, $16.95, 214 pages; Available in stock or by special order
at local bookstores, public libraries, and www.amazon.com.
(For more information on Bob Bruss publications, visit his
Real Estate Center).
What's your opinion? Send your Letter to the Editor to