The Real Estate Investor’s Resource

Turning Intentions into Action

Banks Walking Away from Foreclosures

Due to values being down and the cost of taking property back, banks are walking away from foreclosures. 

This is a very interesting article from The New York Times….

http://www.nytimes.com/2009/03/30/us/30walkaway.html?_r=1

April 15, 2009 Posted by | foreclosure, Real Estate, Real Estate Investing | Leave a comment

Self-Directed IRAs

This is a recent newsletter article from my friend, Gus Nassif, at Insurian Services.   Self -Directed IRAs are a great tool for real estate investors.   

 

Self-Directed IRAs (SDIRA) allow you to diversify beyond the so called “traditional assets,” such as CDs, annuities, stocks, bonds, options and
funds, and in such “non-traditional assets,” as real estate (land, residential & commercial), a business, notes, boats, planes and everything
else deemed “asset eligible” by the IRS. Diversifying in the assets you like, best understand, and in the ones best positioned for growth is
what the Self-Directed IRA is all about; self-control! Without a self-directed IRA, you’re restricted to traditional asset diversification only,
and that’s due to IRS plan guidelines, as well as, asset choice limitations by the custodian of the IRA you choose.

In summary, if you haven’t already diversified in a self-directed IRA, now may very well be the time to evaluate doing so!

Now, one thing to remember is that a Self-Directed IRA is a term and not exactly an investment platform. It still needs to be associated with
the IRA or solo 401k it has selected, and therefore must adhere to that platform’s IRS’ guidelines, as for example, maximum contribution. Once
set up, it’ll allow you to diversify in both “traditional” and “non-traditional” assets. The IRAs in question come in many different flavors, from
the individual type plans as a traditional IRA (and Solo 401k), a Roth IRA, a SEP IRA, an Annuity, to the Rollover IRA. Additionally, there are the
Coverdell Education Savings Account and the Health Savings Account (HSA) which technically can be converted to a retirement plan if gone
unused on education. 

On the otherhand, a group 401k like plan can be restricted by the plan sponsor and plan’s custodian as well, allowing diversification in only
pre-selected, and sometimes limited, mutual funds or group variable annuity sub-accounts. A group SIMPLE IRA, unlike group 401k, may give participants more flexibility. A group plan participant who is no longer employed, may transfer the full balance to a “rollover IRA” and diversify
the money in a self-directed IRA. However, if the participant is still employed, then only a portion of the balance can be transferred, and only
if the employer’s “plan document” did include the “Non-Hardship In-Service Withdrawal” provision.

Let’s use a real estate based self-directed IRA as an example to illustrate its mechanics:

1.) A custodian or administrator is selected to help set up the self-directed IRA. Custodians assist with all paperwork and transactions
     within the Self-Directed IRA. Custodians are fee-based.

2.) A cash flow positive real estate investment property is located; that’s only if you’re financing the purchase.

3.) Selecting a lender, only if you need financing, and applying for what is known as a “Non-Recourse Loan” comes next. This is a loan
     that does not hold you personally liable in case of default. Again, it’s the IRA that owns the property and not you the account holder.
     The lender has only recourse to the property held by the IRA. The lender loans the IRA a portion of the value of the property, usually
     a maximum of 70% of the purchase price, with the remaining 30% coming through the IRA itself in the form of a down payment.
     Ratios are lender-dependent.

4.) The property is purchased, then placed within the self-directed IRA and held in its name. Again, the IRA and not you owns the property!
      It’s an “arms’ length” transaction, in that you can’t personally profit from it, but your IRA does until you’re 59 and 1/2 or older, where
      you can begin taking distributions taxed as ordinary income, or for that matter, no taxation if the money was held in a Roth.

5.) You may be able to set up an IRA in an LLC for reasons of both asset protection and self-management. The latter would give you, the
     IRA account holder, “checkbook control” in becoming the IRA LLC Manager. In this capacity, you simply write a check for all of the
     transactions. Additionally, this type of control allows you to diversify in other assets as well, besides real estate. In this type of
     scenario, you no longer have to direct the custodian to handle those transactions for you, doing so yourself. Now, do keep in mind,
     that whenever an IRA uses any type of financing, as is the case here with the non-recourse loan, an “Unrelated Business Income Tax
     (UBIT)” on the investment would have to be paid. There are both legal and tax aspects to this type of transaction requiring you to
     consult with both an attorney and a CPA respectively.

Gus Nassif
770.232.0677
grnassif@insurian.com

 

 

April 14, 2009 Posted by | IRA, Real Estate Investing, real estate investors, Self-Directed IRAs, Uncategorized | Leave a comment

Tax Time Tips

 Corporate tax returns are due March 16th.

 To file a 6 month extension on your corporate tax returns find the form here http://www.irs.gov/pub/irs-pdf/f7004.pdf

Individual tax returns are due April 15th.

 To file a 6 month extension on your individual tax returns find the form here http://www.irs.gov/pub/irs-pdf/f4868.pdf

Free Turbo Tax Business 2008

Intuit is offering a free download of TurboTax Business 2008 for Federal Filing. http://dealnews.com/Turbo-Tax-Business-2008-for-PC-download-for-free/273262.html

Don’t Overpay Uncle Sam!

 If you need a great resource to prepare your taxes and more, contact my friend and colleague, Woody Montgomery -800.958.6554 www.finishrichnow.com.

4 for 1— Tax Preparation with a Plan. Don’t just pay — profit!

• Tax preparation — efficient and easy with our tax organizers.

• Advisory service designed to find the most deductions.

• Tax Returns Stored in “My Secure Vault” with 24/7 access.

 • 1 Hour written wealth review to coordinate your profit plan.

Go to

http://www.finishrichnow.com/finishrichnow.aspx?MyMenu=home&MyPage=freeform16.asp&SessionID=70802104

for details.

Register for my free ezine at www.transformit.net for more great resources and tips to increase your productivity and profitability!

February 28, 2009 Posted by | Uncategorized | , , | Leave a comment

How to Deal with Your Escrow Shortage & Increase Your Cash Flow

Property taxes and insurance are increasing every year.  If your mortgage requires an escrow account to cover taxes and insurance, this will increase the payment.  Often it results not only in an increase in mortgage payments but an additional payment due for a shortage in the current mortgage escrow account.   This quickly decreases cash flow; however, there is a way to get some relief! 

Typically, mortgage companies will allow two options when there is an escrow shortage.  One option is to pay the escrow shortage in full with one payment.  The other option is an increase in the mortgage payment spreading the escrow shortage over a twelve month period.  The mortgage statement will come with a notice to either pay the shortage payment in full or start paying your new (increased) payment amount. 

 It is not unusual for real estate investors to receive several of these increases each year on multiple properties.  Even if you only own one property, your primary residence, the additional monthly expense is no fun.   However, for real estate investors owning multiple properties, these payment increases can really hurt cash flow.  Even if the increase is only $20 – $40 per property, it adds up fast when you multiply the increase by 5 or 10 properties or more.  

Most mortgage companies are willing to spread the escrow shortage over a longer period than twelve months – if you request it.   Some mortgage companies will spread the escrow shortage over a 36 month period, which can really lighten the burden and increase your cash flow if you have multiple properties.  All you have to do is send in a written request asking them to spread your escrow shortage over a longer period of time.  It is helpful to explain that the increase in payments is creating a hardship.  After all, it is always hard when your cash flow goes down, right?  You may want to call the escrow department ahead of time and ask how long they are willing to spread out the escrow shortage; and then make your request for the length of time you want the payments spread out based on the information they give you. 

February 26, 2009 Posted by | mortgages, real estate investors | , , , | Leave a comment

Successful Real Estate Closings

Real estate attorney, Traci Ellis, and I held a teleclass today to discuss overcoming barriers to closing.  

Here are some tips for successful closings:

Buyers

Be sure to get Owner’s Title Insurance. Lender’s require that you buy Lender’s Title insurance but you must request Owner’s Title Insurance.  It costs very little and can protect your from nightmare situations should issues arise regarding title.

Don’t apply for credit before you close your loan.  Applying for additional credit after you apply for your loan but before closing can stop your loan from going through.  Lenders check your credit (again) prior to closing.

Do your walk through prior to the day of closing. If things aren’t just right, you’ll still have some time to  work with the seller to fix them before closing.

Sellers

Be sure that your buyer is prequalified for a loan and can close.

Make sure that your title is clean and clear for closing (i.e. -no judgements, liens or issues)

Get an earnest money check.  If you have an agent, be sure they have the check.

Bring keys, warranties, garage door openers, etc. to closing.

Buyers & Sellers

Manage the closing closely to ensure success.

Submit all requested documentation immediately.

Expect changes.  A lot of things happen with closings.  Don’t be surprised if there are changes and/or things that require your attention through the process and on the day of closing.

Request a copy of the settlement statement from the closing attorneys office before you go to the closing.  Review it and immediately call the closing attorney if anything is incorrect so that it can be resolved  prior to closing. 

Selling a Property?  www.tipstosellyourhousenow.com

Buying a Property?  www.dealsorduds.com

When you’re ready to close www.traciellis.com

 

June 19, 2008 Posted by | Uncategorized | , | Leave a comment

Bubbles, Booms and, Busts

I must be getting old-this is the third time in my adult life that I’ve experienced a down economy.   I remember when I graduated from college, things were not good and jobs were hard to find.  Back at that time, my question was, “Is it really that bad or is that just what “old” people always say?”

Back in 2000 when the dot com bust erupted, the economy was tough once again.  I was in real estate but also in the IT field.   I created a seminar for the IT world on how to succeed in a tough economy. 

Now, here we are again in a tough economy.   What do I do?  Create an Ebook, How to Sell Your House NOW! Even in a Tight Market.  Then it hits me and I think, “Wait a minute, I’m getting old!  This is the third time I’ve seen this tough economy thing happen.”

Did I forget to mention that I’ve also experienced some “hay days”?   Oh, yeah.  See, somewhere prior to a bust, there has been an extremely good time for making lots of money.   For me, those times and opportunities have been in real estate, telecommunications, and IT. 

Do we forget that things go in cycles and that when things are down, there will be an upside.  It’s all a part of the cycle.   Let’s look on the bright side.  The issues of today’s economy provides opportunities.  As real estate investors, we have the opportunity to buy at great discounts and at low interest rates.  We can help people turn their lives around by saving them from foreclosure.  Then one day, it will change yet again; and we’ll be enjoying the upside of the economy and the cycle.  We’ll just have to make that mental shift to seek and find what works in that market. 

The struggle most people have is how to respond when there is a downturn.  It’s human nature to become set in our ways.  Just when things seemed like they were working right, along comes a change and being the human creatures that we are, we resist.   What we resist persists!  When there’s a bust, stop resisting.  Let go of “what was” and look for for the “needs” in the current market.   Open your mind to what else is available.   You never know what you will find -you might find your true passion, a new way of doing business, a new business all together -who knows what you will find.  It may even be better than your original plan.    Seek and ye will find -even in a downturn.  It is often simply a matter of changing your mindset. 

WSBTV has a great article from Business Week on their site.  The article tells us why booms and busts are good for the economy in the long run.

http://www.wsbtv.com/money/16584252/detail.html

 

June 14, 2008 Posted by | Uncategorized | , , , , | Leave a comment

Largest increases in metro Atlanta home prices

WSBTV reported on Friday that housing values rose sharply in a number of areas in Atlanta between 2006 and 2007.  The Atlanta Journal -Constitution’s website offers a report providing the data on the areas with the largest increases. http://projects.ajchomefinder.com/atlanta-home-sales-report/ziplisting/-diff_price/

Of course, there were also areas with sharp declines in value. The areas with the largest decline in value were those hard hit by foreclosures.

June 14, 2008 Posted by | Uncategorized | , , , | 3 Comments

Real Estate Investment Opportunities in 2008

Today on Real Estate Reality Radio, I had guest, Mike Jechorek, investor and agent, who discussed investor opportunities in today’s market.  For more information listen here…  http://www.blogtalkradio.com/RealEstateRealityRadio/2008/04/03/RE-Investment-Opportunities-in-2008 .

Today’s real estate market is offering better deals than we’ve seen in a long, long time.  Banks are offering properties at 70-75% of the market value. You make your money when you buy; and the time to buy is when prices are low -now!

The reality is that there is a lot of inventory on the market right now.  That makes it a buyers market, creating greater and more deals.  Take advantage of the deals out there while they are available. 

Don’t be fooled by what you hear! There are still funds available -even for investors. Granted the requirements are more stringent than they were before with traditional lenders, but loans are still available.  If you are unable to obtain a loan, seek partners and don’t miss out on these great deals that are available in the market today.

The important part about doing deals in any market is to do your due diligence. Factor in all the costs and ensure that you make an offer that will result in a strong profit for you out of every deal.   For more information on how to analyze deals step by step, order my Deals or Duds? Home Study course at www.dealsorduds.com.   In celebration of my 40th birthday, there’s a very special discount for Real Estate Reality Radio listeners -listen to today’s show for the discount code!

April 3, 2008 Posted by | Uncategorized | Leave a comment

Estate Planning for Real Estate Investors

Traci Ellis, my wonderful real estate attorney friend in Atlanta,  was the guest of my teleclass today on Estate Planning for real estate investors.  Among other things, Traci shared , “Although our mortality may not be our favorite subject, it is an important subject to address because what we leave behind is our legacy.”   By doing a little estate planning now, it can save those you love so much grief in the future.  Without that planning, the state ends up choosing how your assets are handled.  You are not working this hard for the state, are you?

At a minimum, we should all have the following:

1) Will  2)Power of Attorney 3)Living Will or Advanced Directive

If you have children, choose a guardian to raise your children should something happen to you. 

The important information regarding your estate and your wishes should be documented.  A family member or other person you choose should have a copy of the documentation and your attorney may also hold a copy.  There are also online services now to upload these types of documents so that they can be retrieved from anywhere.

Don’t miss our next teleclass with Traci when we discuss the use of Trusts for real estate investors.  Visit www.tranformit.net/eventscalendar to register.

Also, Traci offers an information packed blog of her own -visit it at www.traciellis.com.

March 27, 2008 Posted by | Real Estate Investing, real estate investor associations, Uncategorized | , , , | Leave a comment

Yes, Investor Funds Are Still Out There!!!

Don’t believe everything you hear.  I’ve heard all kinds of stories from people and the media over the past few weeks about how there is no more money for funding deals; and it’ s just simply not true.   One ezine that came out this week stated that there are no more stated income loans.   Fortunately, on today’s Real Estate Reality Radio Show, Michael Gross of Dividend America Mortgage set the record straight on the lending market for real estate investors.

As for stated income loans, they are still available.  It’s just that you’ll need a 680 credit score or better and you’ll need to verify assets.  What has gone away in regards to stated income loans is the old stated income/stated assets.  It’s now stated income/verified assets.

Construction lenders are a great way to get into deals.  Using this strategy potentially allows you to refinance with a conventional lender and walk away from the deal with some cash in your pocket from the construction loan. 

What are conventional lenders looking for in a borrower these days? 

Safety:  They want to see equity in the property rather than investors trying to pull all of the money out of the property. Michael says leave 30% equity in the property.  If you don’t find a deal with that kind of equity -keep looking ! It’s a numbers game; and there are plenty of deals out there.   If you need to learn how to analyze deals and what to offer to make your deals work, check out www.dealsorduds.com -I developed this home study course to help you do just that.

Long Term Holds:  Lenders want to lend on deals that you are planning to hold.  Producing a signed lease goes a long way. It’s even better to have an appraisal that shows the property as rented or leased.  This strategy works well if you started with the construction loan, fixed the property up and then put a tenant in the property prior to closing on your long term convential loan. 

If you’re sitting back saying, I don’t have good credit, there’s still hope!  The fact that money is available to those with good credit just means that you need to get a partner.  You can partner on deals and apply for loans as a co-borrower with someone who already has good credit.   Finding partners is not that hard -people are all around you that have money and/or credit -start looking for them! 

We talked today about all this and more on the show, you can listen to the show  for more information. 

March 20, 2008 Posted by | Uncategorized | , , , , , | Leave a comment

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