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Monday, April 23, 2007

Second Set of Red Line Planning Sessions

On March 5th and 12th, the Edgewater Development Corporation, with the assistance of the UIC City Design Center and State Representative Harry Osterman, hosted the first round of the Edgewater Red Line Corridor Revitalization Charrettes. Both Charrettes were incredibly successful with a high level of community attendance and participation.

The charrettes took the form of casino games, with three different themes. The first game quantified participants' desires for potential red line station improvements. Players were allotted a certain amount of money and had to negotiate with one another and the "dealer" to create a vision for the stations. The second game focused on the urban design of the corridors surrounding the red line stations. Players worked together to build their ideal physical design for the area, including green roofs, parking structures, and new buildings. The third game allowed players to work together to create a preferred mix of retail options such as coffee shops, bookstores, hardware stores, etc.

At the second round of charrettes, the community will review and refine the findings from the first charrettes. This will result in a final report that EDC and our elected officials will use to advocate for the renovation of the stations and to guide our retail attraction and development review efforts.

We welcome and encourage all community members to participate in the second round of charrettes. There is no need to have participated in the first charrettes.

Berwyn & Bryn Mawr Stations:

Monday, April 30th, 7 to 9 pm, St. Andrews Church, 5649 N Sheridan Rd

Thorndale & Granville Stations:

Monday, May 7th, 7 to 9 pm, Loyola University's Simpson Living & Learning Center, 6333 N Winthrop

Saturday, April 7, 2007

The Four Key Criteria for Evaluating an Investment Property

The Four Key Criteria for Evaluating an Investment Property
by Thomas Hall GRI ABR QSC, Broker Associate

So often when I speak to potential clients seeking investment property, I ask them to explain to me their process for evaluating income-producing property. A significant majority of these investors tell me they look solely at the capitalization rate of the property – the percentage of net income over the purchase price of a potential investment.

Cap rate is definitely a strong metric in measuring the value of an investment candidate, but it should not be the sole metric for measuring the strength of an investment. Evaluating an income producing investment property should not be one-dimensional.

Critical to evaluating any investment property’s fit in your overall investment strategy, it is important to understanding the four key criteria used to better understand the big picture. Solely relying on one financial metric does not provide an accurate picture of the viability of a particular investment property. Think of the four criteria as legs on a chair – the fewer the legs, the less stable the chair. By not evaluating one or more of the four criteria, you may not be making the most informed decision.

Ideally, the savvy investor evaluates all of the key criteria that make income producing investments attractive and evaluates the big picture – they determine how all of the above fit into their investment strategy.

When evaluating an income producing property, be sure to review the following criteria:

1. Cash flow
2. Principle Reduction
3. Tax Advantages
4. Appreciation


Cash Flow

Simply put cash flow measures the inflow of cash generated by an income producing property, i.e. rents less the outflow of cash, i.e. expenses generated by a property over a period of time. Ideally, cash flow is measured before taxes and depreciation.

Prior to identifying an investment property, it is important to understand what are your financial objectives. To some investors, cash is king – therefore their primary objective is to purchase property that provides a positive cash flow.

While positive cash flow sounds attractive, some investors may be looking to shield income, therefore, a positive cash flow may not be their primary objective – their search may be to seek income producing property with a cash neutral or even slightly negative cash flow for the attractive tax advantages.


Principal Reduction

One of the best advantages of holding income-producing property is that your tenant(s) are paying down a portion of the principal balance of your mortgage over time. In some cases, however, if your potential property has strong prospects of significant appreciation, it may make sense to explore financing with an interest only product – allowing the prospects of appreciation to offset the principal reduction paid by your tenants.

Tax Advantages

Depreciation is a non-cash expense, however, it has a significant impact on an income producing property’s cash flow. Because all assets lose value over time due to wear and tear and general obsolescence, depreciation accounts for the loss of value by lowering a property’s net income, hence lowering an investor’s tax liability as well.

As a current or future owner of investment and income producing investment property, here is some food for thought.

When you begin the process of completing your Schedule E, are you and/or your accountant depreciating just the value of your building, or do you bifurcate the value of the land, land improvements and personal property in your building(s)? If you are simply depreciating the value of your building, you may be losing enormous tax advantages.

IRS tax laws allow owners of residential income producing investment properties to depreciate the value of your building, land improvements (i.e. value of curbs, sidewalks, parking lots etc.) as well as the value of the personal property in the building (i.e. carpet, window treatments, lighting fixtures, appliances etc.). The cost recovery for personal property percentage in year one alone is 20% and can be depreciated over 5 years. The cost recovery percentage for land improvement is 5% in year one and can be depreciated over 15 years. You may even be able to file an amended tax return and perhaps get money back. Your potential refund can be reinvested in additional real estate. Consult a financial professional or call me, I can point you in the right direction.

Some addition thoughts as we close out the year: Do you and/or your accountant calculate the return on your equity in the property(s) you own on a year-to-year basis? If not, you may want to calculate your return in order to best understand whether or not your investment is providing the best return possible. As you begin to lose the tax advantages over time, your money may be better used in purchasing additional investment properties with better returns. You may not even need to sell your current investment. Perhaps borrowing against your equity may be a better solution. Either way, it’s important to understand how your money is working for you.

In order to best demonstrate the attractive tax advantages of income producing property, please see the following example:

Depreciation Illustration:

You purchase a building for $600,000 of which the land value is $100,000.

Your net income for the year is $24,800.

For purposes of a simplified illustration, the cost of debt service is not included in the calculations.

Building: Recovery Period for Residential Property = 27.5 years
Recovery Percentage for Residential Property for Year 1 = 3.48%

Land Improvements: Recovery Period for Land Improvements = 15 years
Recovery Percentage for Land Improvements for Year 1 = 5.00%

Personal Property: Recovery Period for Personal Property = 5 years
Recovery Percentage for Personal Property for Year 1 = 20.00%

Without bifurcation:

Purchase Price: $600,000
Building Value: $500,000
Land Value: $100,000

Total Depreciation = $500,000 x 0.0348 = $17,400

Net Income: $24,800
Depreciation: $17,400

Cash flow before tax = $24,700 - $17,400 = $7,400

With bifurcation:

Purchase Price: $600,000

Building Value: $400,000

Land Value: $100,000

Land Improvement: $50,000

Personal Property: $50,000

Total Depreciation:

= ($400,000 x 0.0348) $13,920 + ($50,000 x .05)$2,500 +($50,000 x 0.2)$10,000 = $26,420

Net Income: $24,800

Depreciation: $26,420

Cash flow before tax = $24,800 - $26,400 = -$1,620














Friday, April 6, 2007

Tax Tips for Income Producing Properties

As April 17, 2007 fast approaches, time is running out on preparing and filing your taxes for the 2006 tax year. As an owner of investment and income producing investment property, I wanted to follow up with you to provide some food for thought.

As you begin the process of completing your Schedule E, are you and/or your accountant depreciating just the value of your building, or do you bifurcate the value of the land, land improvements and personal property in your building(s)? If you are simply depreciating the value of your building, you may be losing enormous tax advantages.

IRS tax laws allow owners of residential income producing investment properties to depreciate the value of your building, land improvements (i.e. value of curbs, sidewalks, parking lots etc.) as well as the value of the personal property in the building (i.e. carpet, window treatments, lighting fixtures, appliances etc.). The cost recovery for personal property percentage in year one alone is 20% and can be depreciated over 5 years. The cost recovery percentage for land improvement is 5% in year one and can be depreciated over 15 years. You may even be able to file an amended tax return and perhaps get money back. Your potential refund can be reinvested in additional real estate. Consult a financial professional or call me, I can point you in the right direction.

Some addition thoughts as we close out the year: Do you and/or your accountant calculate the return on your equity in the property(s) you own on a year-to-year basis? If not, you may want to calculate your return in order to best understand whether or not your investment is providing the best return possible. As you begin to lose the tax advantages over time, your money may be better used in purchasing additional investment properties with better returns. You may not even need to sell your current investment. Perhaps borrowing against your equity may be a better solution. Either way, it’s important to understand how your money is working for you.

I want to reiterate to you my interest in developing a working relationship with you. Please contact me if you are interested in discussing the possibility of selling your property or purchasing additional property. To reach me directly, call 773 791-2154 or thall@rubloff.com.

Monday, March 26, 2007

Update on 7% Property Tax Cap for Cook County

The Civic Federation came out with an extensive study on the 7%. Their conclusion is - median increase across the city - 44% tax hike on residential properties...if the 7% is not renewed.

They gave examples in some areas like Englewood - TAX INCREASES OF 162%...we are not talking assessment increases - we are talking actual tax increases.

IAR and CAR oppose this renewal. The Civic Federation wants the 7% renewed with only the $20,000 "cap"...with tax increases on the average of anywhere from $2,000 to $5,000 (increases added onto a bill)
TRAC is saying, along with the Assessor and the Mayor - $20,000 is not enough. We want to see the cap increased to $60,000 which the Civic Federation said would result in a 2% DECREASE in residential property taxes. Sounds good to us!

This is just an FYI...no call to action yet...

Reminder - Forum on Community Service and Safety Initiatives, Saturday, March 31

Reminder ♦ Forum on Community Services and Safety Initiatives

Saturday, March 31


Where: Nicholas Senn High School When: Saturday, March 31, 2007
5900 N. Glenwood Avenue 10:00 a.m. until 2:00 p.m.
West Parking Lot entrance

Representatives from the Aldermen's Offices will explain their role in service for the community, and representatives from various city and county agencies will also be on hand with materials describing their work and services offered to the community.

Please join us for the three session themes during the forum:

1. Safety tips for children and seniors, street safety, self defense tips and recognizing gang activity and signs;
2. Various ways members of the community can actively participate in improving neighborhood safety through the CAPS and Court Advocacy Programs, and tips on when and how to use 311 and 911 services;
3. Demonstration of privately funded surveillance cameras, an important aspect of the ECC Safety Initiative.

In addition, ECC will present special recognition awards to the 20th & 24th District Police for their continued dedicated service in Edgewater.



The forum is sponsored by Edgewater Community Council and the 48th/ 40th Ward Aldermanic Offices.

www.edgewatercommunitycouncil.org

Edgewater Community Council, Inc. ¨ 6044 N. Broadway ¨ Chicago, Illinois 60660 ¨ 773-334-5609

Edgewater Community Council (ECC) is a 501(c) (3) not-for-profit and voluntary membership organization formed in 1960 to improve the quality of life in the diverse Edgewater community. The Edgewater community is located between Foster Avenue (5200N) and Devon Avenue (6400N), and between Lake Michigan and Ravenswood Avenue (1800W).
* * *

Edgewater Community Council

Reminder - Forum on Community Service and Safety Initiatives, Saturday, March 31

Reminder ♦ Forum on Community Services and Safety Initiatives

Saturday, March 31


Where: Nicholas Senn High School When: Saturday, March 31, 2007
5900 N. Glenwood Avenue 10:00 a.m. until 2:00 p.m.
West Parking Lot entrance

Representatives from the Aldermen's Offices will explain their role in service for the community, and representatives from various city and county agencies will also be on hand with materials describing their work and services offered to the community.

Please join us for the three session themes during the forum:

1. Safety tips for children and seniors, street safety, self defense tips and recognizing gang activity and signs;
2. Various ways members of the community can actively participate in improving neighborhood safety through the CAPS and Court Advocacy Programs, and tips on when and how to use 311 and 911 services;
3. Demonstration of privately funded surveillance cameras, an important aspect of the ECC Safety Initiative.

In addition, ECC will present special recognition awards to the 20th & 24th District Police for their continued dedicated service in Edgewater.



The forum is sponsored by Edgewater Community Council and the 48th/ 40th Ward Aldermanic Offices.

www.edgewatercommunitycouncil.org

Edgewater Community Council, Inc. ¨ 6044 N. Broadway ¨ Chicago, Illinois 60660 ¨ 773-334-5609

Edgewater Community Council (ECC) is a 501(c) (3) not-for-profit and voluntary membership organization formed in 1960 to improve the quality of life in the diverse Edgewater community. The Edgewater community is located between Foster Avenue (5200N) and Devon Avenue (6400N), and between Lake Michigan and Ravenswood Avenue (1800W).
* * *

Edgewater Community Council

Thursday, March 22, 2007

Disruptions in CTA Service - April 2

Are You Ready?

- A P R I L 2 -

Massive Disruptions in CTA Service!

The CTA has scheduled MAJOR construction at the Fullerton and Belmont stations beginning April 2 that will adversely impact the Red Line.

As a result, the CTA will reduce the number of trains by 25% during construction and has warned -

· Commuters northbound from the Loop may expect trip time to double.

· Trip time into the Loop may increase up to 50%.

· Construction is scheduled to last for three years.

The CTA has planned NO viable alternatives for commuters-except to add a few extra buses. At the same time, current "slow zones" will continue in full effect.

This will have a MAJOR impact on Edgewater residents and businesses:

· Significantly increased commute time for residents;
· Extremely overcrowded trains, train platforms, buses and bus stops;
· Dangerously increased traffic moving through Edgewater.

As a result, ECC is making a major effort to:
1. Put pressure on the CTA to delay the beginning of the construction and to work with affected communities to come up with a real plan.
2. Gather ideas and generate community discussion on what can be done to help alleviate the impact on Edgewater.
3. Coordinate with other affected organizations inside and outside of Edgewater.

Time is very short-We all need to speak up!
ECC is implementing a postcard/letter campaign to Mayor Daley asking him to exert his influence on the CTA to delay the 3-year project until an acceptable plan is developed with the affected communities along the Red Line.


Please. Send the attached letter to Mayor Daley.



Edgewater Community Council, Inc. ¨6044 N. Broadway ¨ Chicago, IL 60660 ¨ 773-334-5609

Edgewater Community Council (ECC) is a 501(c) (3) not-for-profit and voluntary membership organization formed in 1960 to improve the quality of life in the diverse Edgewater community. The Edgewater community is located between Foster Avenue (5200N) and Devon Avenue (6400N), and between Lake Michigan and Ravenswood Avenue (1800W).

Letter Link* * *

Edgewater Community Council

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