Posts in category: payday loan

This unconventional approach can bring immediate cash to investors or rescue them from a hefty tax bill, according to Jonathan Hipp of Avison Young.

Conventional real estate investment strategy is built on a straightforward formula. You invest in a property, possibly make some capital improvements, and reap the ongoing returns until your hold strategy dictates a disposition.

There are, however, other nonconventional strategies. One that isn’t touted too often, that can provide an alternative for some investors-especially 1031 investors-is a zero cash flow investment. We should say upfront that this is essentially a tax play, and it is not for everyone. Rather, it is a producer of immediate cash for investors in specific situations, or it is a saving grace for some who may be facing a tax bill they couldn’t otherwise afford.

First, let’s take a look at how a zero cash flow investment works. At its core, it is exactly what the name states. While the property you would invest in will produce revenue, that revenue is tied to the acquisition loan. The debt service has been engineered to equal the property’s rent payments over the life of the lease.

Let’s take the case of pharmacy giant CVS. Among the truckload of stores they open every year, there are some that they build on their own account. As a retailer, and not wanting to have capital tied up in real estate, CVS can bundle these properties for sale and lease back, with the loan and lease terms-typically 25 years-baked into a single package. The loans are also structured in such a way as to provide for something called paydown re-advance, which we’ll explain in a moment.

Now let’s apply this to a sample scenario. An investor, we’ll call her Betty, has owned an apartment property, currently valued at $5 million, for a long time.

Disputing the EITF’s Arguments

ASU 2016-15 states that some Emerging Issues Task Force (EITF) members had noted the lack of symmetry in not recording the receipt as a cash inflow from an operating activity. The analogy with the receipt from the sale of a typical investment breaks down even further, however, on the grounds that the cash used for the typical investment in another company would first have been recorded as a cash inflow, the cash spent on the investment would then have been recorded as a CFFI cash outflow, and then finally, the cash received from the sale of the investment in another company would be recorded as a CFFI cash inflow.

Generally, cash received from the sale of these assets necessitates the spending of that cash on replacing the sold factors of production, or it causes the entity to borrow cash to replace them

The cash received from a beneficial interest in securitized trade receivables is not analogous to either of these typical CFFI activities.

The truth of the matter is that ASU 2016-15’s treatment of cash received from a beneficial interest is not analogous to how cash flows are treated with typical investments. For example, assume that a bakery bakes bread, sells it at a profit, uses the cash received to buy an investment in another company, and then sells that investment. The entity would record a CFFO inflow from selling the bread at a profit, a CFFI outflow for the purchase of the investment, and then a CFFI inflow from the selling of that investment. The point is that the CFFO from the selling of the paydayloansohio.net/cities/dover/ bread comes first. Under the treatment required by ASU 2016-15, the transferor is never able to record the cash received from the beneficial interest in its trade receivables as a CFFO. This is not analogous to the required GAAP treatment for generating cash via an operating activity, spending it on an investment in another company, and then selling that investment.

The APR is not fixed, because it will vary depending on the amount, the loan type, or the credit requirements the borrower is accomplishing. The well-known peer-to-peer loans aren’t standardized bank loans. Instead of borrowing money from a bank and waiting for their everlasting approval period, you will receive your money directly from another individual.