Nil Erdal,Broker Associate DRE# 00968997

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Dear Home & Property Owner,

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A new year upon us and perhaps it is an appropriate time to review our investment portfolios, whether they include stocks, bonds, or real estate properties. Naturally, how we balance our portfolio depends on our short term as well as long term goals, and how our current portfolio choices are performing toward these goals.

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On the heels of a third consecutive down year in stock market, we find ourselves in yet another uncertain time -- with one eye toward opportunity and the other toward safety. Even tough there are slight signs of economic recovery, the present market seems particularly uncertain, with the looming possibilities of war, terrorism and international turmoil. How should investors navigate these risks and rewards of today's uncertain markets? The common strategy is to diversify and distribute our portfolio toward investments that would help reach our goals while minimizing the risk of losing our assets. Our long term goals and risk tolerance will dictate the portion of our assets that we need to invest into relatively aggressive and defensive investments.

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For example, investments in residential real estate present an optimum reward and risk characteristics for many investors. Historically real estate investments have been less volatile compared stocks and provided lower risk to investors. Additionally, investment in real estate not only provided lower risk, but also provided better returns and capital appreciation compared to stocks during the past three years. Moreover, real estate investments provide additional inherent advantages - tax shelter, income generation, inflation protection, and tax deferred exchange.

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The 1031 tax deferred exchange gives you the ability to sell and buy properties without incurring a capital gain tax, state tax, and depreciation recapture tax, thereby allowing the earning power of the deferred taxes to work for you. The 1031 tax deferred exchanges provide investors with the opportunity to improve their investment position in many ways - increased asset growth rate, increased leverage, improved cash flow, increased depreciation deduction, diversification both geographically and by the type of investment property. The1031 exchange does not offer pre-tax contribution benefit; however it provides many other advantages - no time or age limits on cashing out your properties, no penalties, great potential for tax free income, and no limit on invested dollar amount.

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In particular, this is a good time consider buying a property due to number of reasons. Most importantly, the interest rates are still historically low and continue to create many opportunities for refinancing, remodeling, or for buying new properties. Additionally, as we start the economic recovery, any increase in household income and consumer confidence will likely to add more buyers into the market, increasing the demand on housing.

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The California housing market has been characterized by unprecedented sales activity and impressive price appreciation in 2002, and will remain strong into 2003 as it benefits from a recovering economy. The median home price in California will increase 10.0 percent this year according to California Association of Realtors. Price appreciation will be fueled in part by the continuing shortage of housing across much of the state. California typically adds 220,000 to 250,000 new households each year, yet only builds about 150,000 new housing units annually.

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Whether you would like to buy a new investment property or you would like to upgrade your current investment property, please call me to schedule an appointment to discuss your specific investment objectives at no cost or obligation. I'll be happy to prepare the followings for you;

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• A Market Analysis Report for your primary residence
• A Market Profile for your investment property
• A sample 1031 tax deferred exchange benefits summary for your investment property

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I have over 16 years of residential real estate experience, and I am specialized in the Silicon Valley and Santa Clara County area. I can guide you through the residential and investment property buying and selling process for a safe and sound investment.

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I am looking forward to helping you reaching toward your investment goals.

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Best Regards,

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Nil Erdal

Broker Associate, GRI

International President's Elite

Coldwell Banker Residential

(408) 973-9805

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Note: This document is provided as a general resource for the benefit of owners of investment property. Investors considering an IRS 1031 tax deferred exchange should seek counsel of their accountant and attorney to obtain professional tax and legal advice.

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