When initiating your partnership, it is important to remember to keep the task and relationship activities balanced. Spending the time up front will result in exponential benefits in the end. In the first trimester of development, you want to spend about two-thirds of your time on relationship development and about one-third on task design. This is also true once you have identified your partner and are initiating an activity. It is important to build the relationship with the partnering team implementing the initial activity. The challenge at this step is to build a strong relationship between the partners while creating a plan for a successful task.

Many times, when it comes to deciding between Property “A” and Property “B,” emotions will take over and attempt to dictate what you should buy. Many novice investors indignantly declare, “I refuse to purchase any building that I wouldn’t live in.” If you recognize yourself making that statement, you should realize that you’re on the verge of leaving lots of great opportunities behind for someone else to discover.

But don’t fret, you are not alone. In fact, it’s easy to see why emotions rule the day—you’re fearful of losing what little money you have been able to save. In fact, many will argue that the fear of losing their nest egg is as much (if not more of) a motivator as is the promise of gain from investing it. To illustrate, let’s say you were invited to a get-together at 9 PM to learn about a business opportunity that could very well make you $1,000 on a $5,000 investment. After a bit of thought, you might decide to spend that time watching the news or Seinfeld reruns on TV instead. But let’s turn the tables: What would happen if you got a call and were told you would lose that $1,000 if you didn’t go to the 9 PM meeting? Precisely.

There is no shame in a bit of apprehension. In fact, playing the devil’s advocate will usually help you make prudent decisions along the way. But beware unfounded fear about losing money by buying the “wrong” building could very well keep you from obtaining just the perfect fit for your long- term plan. Thankfully, unlike investing in commodities such as stocks and bonds via the advice of a so-called expert, there are concrete things you can do in this game that will minimize the risk of ever overpaying for a building, namely, learning how to value property accurately for yourself.

Expert help is nice, but when it comes to protecting your own nest egg, the peace of mind that will come from conducting your own analysis will be nothing short of invaluable.

Owners who have properties that are managed particularly well prefer this technique. What’s more, if you’ve managed your property correctly, the increased rents should more than cover any increased mortgage payments. If you are in a market where you can pull out most of your equity to move into another property and still keep the original property, you could be well on your way to creating a comfortable retirement scenario for yourself.

To sum up a long and complicated chapter, this information is designed to give you a basic understanding of real estate taxation and some tax-deferral methods. The goal is to make you aware of the complexity of this area so you will seek the advice of your tax expert before you make any move. When it comes to taxes, even minor mistakes could be costly. To that end, we recommend the following.

First, before you ever list a property for sale, make sure you schedule a general review meeting with your tax consultant. Review your goals, discuss all the alternatives, and get a general idea of your position. Second, when listing a property for sale make clear to your agent and in the listing contract that any transaction must be reviewed and approved by your tax consultant. And, finally, when negotiating a potential sale or exchange, include a contingency that gives you a right to have the final purchase agreement reviewed and approved by your tax consultant. This will give you an out if your tax expert advises you against the transaction.

Until you actually receive the profit from the sale of  your property, you don’t owe the IRS a penny. Instead,  with an installment sale you would be carrying the note  (and your profit from the sale) long term and receiving  interest-only payments from the buyer. The idea is to keep  earning a high interest on the taxes due for many years.

By doing this you would delay paying the capital gains  until the contract is complete.  The rules for qualifying for an installment sale were significantly  modified by the Installment Sales Revision Act of 1980. In the  past there were rules regarding the amount of down payment and  the number of years needed to qualify. These no longer exist. The  advantage of an installment sale now is that you are required to pay  capital gains tax only on the amount of the profit you receive in one  year. You pay the balance of the tax due as you collect the profit in  subsequent years.

The same is true for investment compatibility. There are hundreds of asset classes. Step 1 discusses the emotional implications of all the major and many minor investment classes. Fortunately, if you find yourself incompatible with the stock market, the chances of finding better investment satisfaction elsewhere are high. In the case of Michael and Susan, once they work on their investment maturity, they will find many asset classes that suit them better than stocks.

With a tax code that many accountants and financial planners struggle to master, there are hundreds of thousands of individuals who are caught off guard and unprepared by large tax bills. If you find yourself in this situation, it’s crucial to begin communicating with the IRS about eliminating this debt as soon as possible.

The legal system and states have become increasingly aggressive in pursuing people who fail to pay what they owe. Because of this increased aggressiveness, failure to pay child support or alimony can lead to garnishment of your wages and a debt that follows you even if you declare bankruptcy of move out of the country!

Like legal and medical debts, proactive negotiations can often reduce or even eliminate amounts you owe to other parties. Hence, if you find yourself in this situation, you need to put it at the top of your prioritized list.

The underwriting of accidental risk became an important business in 1771, when 79 underwriters pooled their activities and created the original Members of Lloyd’s. They would appear to have intuitively understood the value of diversifying their risks.

Benjamin Franklin set up the first American insurance company in 1752, writing fire insurance. Since then, a massive global insurance industry has developed to handle a host of relatively small risks whose occurrence is statistically predictable: Health and dental insurance, life insurance, fire and flood insurance, and automobile collision and liability insurance are examples.

These instruments are familiar because they work their way into most household budgets.

Though useful at the gaming table, probability theory was still not very useful for real world events. The theory of statistics was needed for that, and the first statistician might have been a Londoner, John Graunt, who studied the age distribution and the causes of death from bills of mortality in London parishes.

The primitive database (i.e., the church records) from which Graunt derived his study was itself an innovation and was less than 60 years old at the time of Graunt’s study, published in 1662. Databases would go on to become a powerful source of wealth and value, but that is another story. The astronomer and mathematician Edmund Halley extended Graunt’s work into an analysis of life expectancies, creating in 1693 a scientific basis for the valuation of annuities. Still, it would take nearly another century for a modern life insurance business based on actuarial data to evolve.

From a mathematical viewpoint, the remaining big step was the discovery of the bell-shape curve. Abraham De Moivre in the 1730s, using the binomial theorem,8 developed the concepts of the normal distribution and the standard deviation, the latter being a measure of the dispersion of the distribution about the mean. In Chapter 5, we relied on his formula, coded as NORMSDIST in the Excel spreadsheet program, to calculate Black-Scholes option values! And how did we calculate volatility? We used De Moivre’s formula for the standard deviation.

When you have invested in a country, you will often be treated like royalty and offered even more investments that may not already be publicly available. And when you have invested sufficiently in some countries, you will get invitations to advise them, joint-venture with them, or sit on their corporate boards.

What a sharp contrast to other professions! A few people have admonished me for suggesting investors look beyond their own borders, claiming that real estate is so complex, and that the laws regarding real estate are so involved, that it is difficult to keep up with the regulations in your own turf, let alone in a foreign country. Consequently, they claim, investing overseas is risky and foolish, and I am just grandstanding or showing off by talking about investing internationally.

Well, let’s consider a few alternative attitudes. First, few people living in the United States realize this, but the value of the U.S. dollar, when measured against a trade-weighted basket of currencies, has fallen in the seven years since the year 2000 by a massive 58 percent (as tourists traveling to Europe are finding out through the increased cost of a vacation there). In other words, if you had shipped $1 million overseas with the intent of investing it in real estate, but you never quite got around to making the investment, and today you repatriated the funds back to the United States, you would have more than $2 million. I have investors who took my advice and invested in New Zealand at a time when a United States dollar bought NZ$2.40. Today, that same NZ$2.40 buys over US$1.90. In other words, the value of their investment has nearly doubled without even taking into account how the investment in New Zealand has fared.