The objective of the Matrix
The Matrix provides an exciting system for anyone that has something of value to move what he or she has to someone else that has something of value, that they would like to have at the moment. The form of this is an Exchange.
What is involved in an exchange (EQUITY)?
Equity is what we are exchanging
We will use property as an example: You have a 6-unit apartment building that has a value of 5,000.00. The equity is 0,000.00; you are looking to move that equity into something much larger.
There is a property owner that has a small shopping center with a value of ,300,00 and the equity is 0,000.00. The owner would be willing to take your property (equity 0,000.00) in exchange for his property that has equity of 0,000.00 and would take a down payment and hold a mortgage on the remainder.
This is agreeable to you, now you both have to do your due diligence.
What will this require?
. An appraisal
. A title search
. Inspections (roof, termite, electrical, mechanical, building, etc.)
. Demographics
. Attorneys
. Contractors to repair any deficiencies
. Real Estate companies (management)
. ECT.
The providers of these services will be signed up according to areas
How to market your property using the Matrix?
The Matrix consists of a center square surrounded by14 squares, you place your property in the center square, all exchangors interested in a property like yours will be notified. Those exchangors will have the opportunity to place their property in one of the outer fourteen squares. The exchangor will at that time send you a preliminary exchange proposal.
[**Insert Screen Shot of the Preliminary Exchange Proposal with Balanced T-Bar]
He possibilities are unlimited, you will review these proposals (you should receive 14 proposals) and respectively answer each offer. Remember these proposals have no legal standing they are written to start a dialogue between exchangors. You may find after reviewing and answering these proposals that you may see a three way or more exchange. This all depends on the creativity of the exchangors involved All of the exchangors that have offered their property in the Matrix will also have the opportunity to review all the other offers presented in the Matrix and send a proposal to those exchangors. Every member of Wagie will have the opportunity to review all Matrix's and you may receive a offer from exchangors that are not on your Matrix.
The T-Bar and Balancing Equities
Balancing Equities is the most important part of exchanging property this is fundamental and vital to receiving desired results. We have found the T-Bar is one of the most important techniques for balancing the equities.
The T-Bar is a graphic illustration of who is giving what to whom, it is a simple line drawing that will enable you to see what the equities are in the proposed transaction.
There are Five Basic Parts to the T-Bar:
1. The OV or owners value (this value may not be an appraisal)
2. The Loans section, which tells us the total amount of loans and encumbrances.
3. The Equity section, this is the number you get after you subtract the loans from the owners value in the T-Bar. Remember Equity is what we are dealing with, it is the buying power of the transaction.
4. The Difference section is the difference that must be added to the balance in order to balance with the other side of the T-Bar, to achieve an equal amount. Difference is always other than real property, it can be in the form of cash, personal property or mortgages. Difference is not considered like kind in a 1031 exchange.
5. The Balance needs to balance on both sides of the T-Bar.
