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Strategies & Market Trends : ahhaha's ahs -- Ignore unavailable to you. Want to Upgrade?

To: Ilaine who wrote (1450)	3/10/2001 12:02:27 AM
From: GraceZ	Read Replies (2) \| Respond to of 24758

If you cash out the equity, you can invest in your business without borrowing money, and use the money to make money. If I take equity out of the building my studio is housed in and use it to purchase equipment I might get a better return than letting it sit in a house, but I am still borrowing money, it's just that one loan is secured by a house and the other is unsecured so the rate is usually better on the one secured by the house. For business purposes both are deductible but a deduction on schedule C means a whole lot more to me than on schedule A. So you have to be careful using home equity for a business loan. OTOH I have stopped several friends from paying off mortgages on rental properties from their savings. I told them they were paying down the mortgage only to get their own money back as rent, for which they then have to pay income tax on a second time. Let the rent equal or be less then the mortgage payment, expenses and depreciation. Then there is no taxable income from the property or a write off and it builds up equity tax deferred. The only real reason you want income producing real estate in the first place is because you can use OPM to buy it. People in service professions, like me, are limited by our personal output. Oh man, grass is always greener. I meet my insurance guy and he's got a leased office in one of those suites where everyone shares a receptionist office manager. The phones, fax machines, conference area are all maintained under his lease which is low. He doesn't need a big space because he goes to see his clients in their space. All he needs is a decent car, suit and a cell phone. No overhead, it's what people like me dream about having. I have the worst of both worlds. I'm a manufacturer, but it's really a service business. Now that I want to cut back how much I work at the business, my overhead is killing me and my overhead is nothing compared to my competitors. Most of the shops I compete with have 300,000 to a half million in loans to service with a 20 man payroll to meet whether they have work or not. The switch to digital drove several area businesses under. Photographic equipment has changed very little in 20 years you can still use a processor that is 20 years old. Then all of a sudden these guys are having to buy digital printers that are obsolete before they can finish paying for them at the same time that the price you can charge for digital services is dropping like a stone. Anyone that got in early was royally screwed. Some of this equipment ages so fast it goes from cutting edge to boat anchor in about three years. I know what you are saying about being limited by your personal output. This is what my photographer clients have to contend with. You spend your whole life building a business and you can't even sell it, because you are the business. There are of course exceptions where people have created a partnership, brought in younger partners and transfered the business to them eventually. What I have to face is having spent my whole career building a business that turns out to be manufacturing buggy whips. I've been preparing myself mentally for this for years, but it doesn't make it any easier.