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

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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

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

Property Taxes too High? Here’s how to appeal…

Property Taxes Too High?

Property Tax Assessment Appeals to the Rescue

Are you watching your property taxes go up while your property value goes down?  Somehow it seems that even though property values are dropping, the taxes on property are still going up.  If this is the case for you, then exercise your right to the appeals process; it’s a fairly simple process.

First, you want to compare the tax assessed value of your property to the fair market real estate value.  Carefully check your property tax bill for the tax assessed value.  Then find the fair market value for your property by looking at recent comparable sales.  Real estate agents and websites such as www.homegain.com are good for performing a real estate fair market value analysis.

Let’s say that your property is 3 bedrooms and 2 bathrooms and is assessed at $155,000.00.  You want to look for recent sales in your area of other 3 bedroom/2 bath properties.   An example of the comparables sales in your area might be:

3/2   $138K

3/2   $140K

3/2   $157K

3/2   $165K

How would you make sense of these numbers?  If you just took the average of the numbers it would equal $150K.  

So, what do you do now?  Further define the differences in your property and the other comparable sales.  One way to do this is to use data from a real estate agent and website like www.homegain.com.   Another way is to simply drive by the address of each comparable property (this shouldn’t take much time since they are right in your neighborhood).   When you view the comparable properties, look to see how similar or different they are from your property.   You might find that the properties selling for the higher end prices of $157K and $165K are brick, while your home and those sold at $138K and $140K have siding.  Or you might find that the more expensive properties are larger than yours or have other differences that would make them worth more.  Whatever the situation, it is a good idea to take a picture while you are there to show the differences.

If you’ve found some substantial differences, it’s time to submit your real estate tax appeal.  There is a deadline for the appeals process so pay attention to the deadline dates on your tax bill.  Simply write a letter including your parcel identification number explaining why you are appealing the tax assessed value.  Include your comparable sales documentation, pictures and other documentation. 

You will receive one of two responses to your appeal letter.   Your tax assessed value may be adjusted based on your appeal letter.   However, you won’t always win the real estate tax appeal process that easily; your response letter may be a notice that you are required to go before the board of equalization to further dispute the tax assessed value.  At this point, you have to decide if it is worth your time based on the potential savings.

Don’t forget that the tax assessed value not only affects your bottom line, but if you get ready to sell your house, the buyer will have to consider the tax bill as part of their expense.  The tax amount on the property will impact their monthly mortgage payment, which impacts the amount they can pay for a house.  The simple fact that you have appealed your tax value and that it is in line with the fair market real estate value for your property can save you money now and be a help when you are ready sell. 

To learn more about real estate fair market value analysis, visit http://dealsorduds.com .

March 19, 2008 Posted by | Real Estate, Real Estate Investing, real estate investors | , | Leave a comment

Tips for Selling Your House in a Tight Real Estate Market

Erica Whitney, real estate investor and agent joined me today on Real Estate Reality Radio to talk about today’s real estate market. 

Erica’s best tip for selling your house in a tight real estate market: Give them the Wow Factor.  The “Wow Factor” includes making the house look top notch & pricing it right. 

To make the home look top notch, clean it up, give it a fresh coat of paint, clean or replace carpets and add some new light fixtures if necessary.   Stage the home with furnishings and accessories to make it look inviting.  Give the buyer a reason to think, “Wow -right features, right price!”

Price the home at or below the most recent comparable sales.  Erica shared some interesting information on pricing.  She said, “If you’ve had 10-12 showings and no offers -You’re 5-10% over priced.”  “If you have no showings you’re 10% over priced.”

Other topics discussed:  where to invest, cash flow, tenant management, the new GA Purchase and Sale contract, short sales, and more!  Here’s what one listener had to say about the show, ”

“I very much enjoyed listening to your broadcast. You helped me better understand the options around management of properties after the purchase is complete.” 

Thanks, 

Giulio

Listen to the show.   Listen to Real Estate Reality Radio on internet talk radio

February 22, 2008 Posted by | atlanta real estate market, Real Estate, Real Estate Investing, Uncategorized | , , , | Leave a comment

Loans -Risk Based Pricing/Loan Level Price Adjustments

Allow me to introduce you to the latest in the mortgage business for 2008 – Risk Based Pricing or Loan Level Price Adjustments. Basically, the concept is that additional points are being added to loans based on how risky the borrower is. These are not the discount points used to buy down the interest rate, these are additional points making the loan cost more. The lower the credit score of the borrower, the more points and cost.

Yesterday I was chatting with a lender at First Horizon about a potential “refi” on an investment property. Here’s the scoop or an example on what the points are looking like now based on the offerings from First Horizon:

Full Doc
680 & Above – no points
679-660 – 1 point
659-640 – 1.5 points
639-620 -1.75 points
under 620 – 2.5 points

Stated Income Loans -Must have a minimum of 680 score
720 Score – .5 point added for stated income
680-720 – 1 point added for stated income

This is a far cry from the old days when as long as the borrower had over a 620 credit score, loan costs were basically the same.

Thankfully, real estate investing provides creative ways to invest even without having great credit. However, when you are ready to refinance those deals that didn’t require credit to purchase them, credit becomes very important. If your credit is not the best and even if you are successfully investing without credit, begin working towards improving your credit score. There’s tons of great information at www.myfico.com.

January 12, 2008 Posted by | credit, mortgages, Real Estate Investing, refinancing | Leave a comment

Transform a Neighborhood

I’ve had this little idea for a while about a way that investors can unite to make a positive difference in lives, neighborhoods, communities and more and make money while doing so. The idea is called “Transform a Neighborhood”.

It started with my thinking, “Wouldn’t it be nice if someone spearheaded a project of getting investors together to go into a neighborhood that needs improvement where properties can be purchased inexpensively and a big positive impact can be made together?” I have thought that thought many times. Then one day it hit me that maybe I am the person to spearhead the initiative. Now with all of the mortgage fraud and foreclosures–especially in certain neighborhoods, I really see a need and an opportunity here.

It seems to me that investors are often “lone rangers”; and, I often wonder what would be possible if we were united. I see this as a project where investors would collectively mastermind the idea, recruit resources and collaboration from the city, county, police force, drug task force, corporate sponsors such as banks, and so forth. However, each investor would individually purchase their own property or properties within the neighborhood that is being transformed.
Thus far, I’ve created a file folder titled, “Transform a Neighborhood”, where I jot down notes and throw them in there, stuck a little sticky note on my dream board with “Transform a Neighborhood” written on it, and had a long conversation with one of my coaches about it. Now, I figure it’s time to take the next step, put it out there for exploration and ideas from other investors, like you, to see what’s possible when we unite. Emily Dickinson said, “I dwell in possibility.” Well, I do, too; and dwelling in possibility creates all sorts of amazing things! If you are interested in the possibilities surrounding this idea, you can get involved by posting your comments and or emailing me at nspivey@transformit.net .

September 13, 2007 Posted by | housing, Real Estate Investing, Transform a Neighborhood | Leave a comment

The Impact of Fraud & Foreclosures on Real Estate Investors

Fraud and foreclosures have a huge impact on investors. On one hand, foreclosures as a result of mortgage fraud and the sub prime fall out create huge opportunities for investors to buy at deep discounts. This is low hanging ripe fruit. On the other hand, the reality is that there are numerous negative ripple effects from fraud and foreclosures, which is causing the tightening of standards on investors and making it harder to do business. This is the rotten fruit; and it really stinks!

Certain zip codes have really been hit hard with fraud and foreclosures creating issues for neighborhoods and for real estate investors. The neighborhoods are sitting with vacant and boarded up houses. Normally, this would be great for some investors, who love to buy these types of properties; but the problem is that due to all of the fraud and issues around values of these properties, lenders do not want to lend in certain zip codes. Ethical quick turn investors and wholesalers sit with an inventory of properties in these areas with no means of their clients obtaining funding for them to move the inventory unless they take a loss. Neighborhoods with high vacancy rates and boarded up houses usually have issues with criminal activities such as break ins, theft, drugs and prostitution. How does this change when there are no funds available for these certain zip codes to begin repairing the problem?

Another big and growing issue is identity theft, which has an impact on landlords. With all of the identity theft, the big credit reporting agencies are now requiring tenant screening companies to perform a much more thorough inspection on any company or landlord who applies for tenant and credit screening services. The tenant screening company must now check your credit before providing services and perform an inspection of your office to ensure that you have the proper security measures around applicant’s credit information kept in your office. By the way this inspection is done at your expense.

Fraud and foreclosures displace tenants, causing agencies such as the Atlanta Housing Authority (formerly Section 8) to require more paperwork and thorough investigation of landlords. In addition to all the former requirements, now requirements include an authorization to release information regarding the mortgage on a property (to verify that the mortgage is good standing), proof of incorporation if you are incorporated and/or using a management company that is incorporated, and authorization to check your credit as a property owner. Although this is a reasonable effort to protect tenants, it seems a little invasive for landlords.

Legislation is another issue for investors. Unscrupulous investors using creative investing techniques in unethical ways are taking advantage of people. These people end up in court and the next thing you know, states are trying to outlaw the creative investing techniques all because they have been used in an unethical manner. This is unfortunate especially considering the fact that these same techniques are great when used properly.

For real estate investors, the ripple effects of fraud and foreclosure are long and wide. Although there are negative effects, there is also a very positive side and an opportunity. The key is in being prepared. Prepare your investing business for the rotten and the ripe fruit, the costs and the benefits of today’s real estate investing market. “Luck is what happens when preparation meets opportunity.” ~ Elmer Letterman

September 13, 2007 Posted by | foreclosure, fraud, Real Estate Investing | Leave a comment

How Does Real Estate Investing Work?

How Does Real Estate Investing Work?

Real estate investing works best with a strategy. In determining how you would like for real estate investing to work for you, it is important to first determine the results that you desire from real estate investing. Are you looking to build wealth or to create quick cash or both? Depending upon your desired results, you can choose a short term strategy, a long term strategy or a combination of the two.

How does real estate investing work to make quick cash?
Quick cash can be created with a short term real estate investing strategy, which includes quick turning or flipping property. Quick turning property (buying and selling right away) can provide big and quick cash if you buy right. Typically, the property is put under contract at a low price and then marketed at a higher price to include a profit. The property may be sold with or without improvements depending upon your strategy. Quick turn deals can easily generate from $2K to $30K plus depending upon the deal and whether it is a wholesale or retail quick turn.

Wholesale Quick Turn
Wholesale quick turns involve finding a deal below market value and quickly selling the deal at a wholesale price. By selling wholesale (below retail), you are giving your buyer, typically another investor, the opportunity to make a profit. If you negotiate the right deal upfront and turn the deal quickly, you can make good money this way.

Wholesaling is often a method of no, or little, money down deals. This is a way that real estate investors get around the need for financial backing for flipping houses. Let’s say that you find a motivated seller, who is willing to sell you their house at $100K. You put the property under contract with the seller for $100K and then find another buyer who wants the deal and is willing to pay $110K. You would then assign your contract with the seller to your buyer for a fee of $10K. Your buyer actually closes and purchases the property from the seller; and at closing you are paid a $10K assignment fee. An option is another method used to wholesale. You can put an option on a property and then sell your option to another investor for a profit. In fact, with assignments and options, you never even have to purchase the property to make money.

Retail Quick Turn
Retail quick turns involve finding a property well below market value and getting it market ready for retail sale. With retail quick turns, your target buyer is a home owner rather than an investor. You may purchase a property that needs a little work, a lot of work, or possibly needs no work at all because you purchased it from a motivated seller at a discount. Once the property is ready, you market and sell it at a retail price.

How does real estate investing work to build wealth?
Wealth is created through longer term real estate investing strategies, which involves buying and holding property. In this scenario, the investor buys a property and then rents it to a tenant or leases it to a tenant with the option to buy.

Renting
Renting involves finding a property, getting it in rent ready condition and marketing it for rent. The rental real estate investing strategy offers a number of profit opportunities. Cash flow is created when the monthly rental income exceeds the mortgage and other expenses. Long term wealth is created through appreciation of the property, the tenants paying down the mortgage, and tax advantages.

Imagine having 10 houses paid in full and rented for $1,000 a month for a monthly cash flow of $10,000. If the houses were only worth $100K each, you would have $1 million in assets plus a $10K per month cash flow before expenses. This financial position can be fairly easily accomplished in your own timeframe. Some people buy one or two houses per year and others buy a number of houses right away.

Lease Option
Lease options are created by offering a property for lease (usually for twelve months or more) with the option to buy. There are a number of profit centers with lease options to include income from the upfront option fee, monthly cash flow from the lease, profit from the sale when the option is exercised and tax advantages.

In conclusion, the answer to the question, “How does real estate investing work?” really depends on how you want real estate investing to work for you. Whether your goal is to build wealth, leave the 9-5, an early retirement, financial freedom, or quick cash, you can obtain it through real estate investing. There are numerous benefits to investing in real estate such as buying at a discount and creating instant equity, equity created through tenants paying down a mortgage, appreciation, cash flow, leverage and tax benefits. Determine your strategy –long term, short term or a combination of the two and make real estate investing work for you.

Nancy Spivey, known as The Real Estate Investor’s Resource, is an active investor, speaker and coach. Through her training and coaching programs, she helps new and experienced investors create profitability, productivity and prosperity. Nancy serves on the board of directors for the Georgia Real Estate Investors Association, the largest investor association in the U.S.

For a free copy of the eBook, The Science of Getting Rich and a list of Nancy’s Private Rolodex Resources, go to http://www.transformit.net/ezine.html and sign up for her free ezine, which is loaded with free tips, resources and tools that will help you create profit, productivity and prosperity in real estate investing!

© 2007 Nancy Spivey

August 14, 2007 Posted by | financial backing for flipping houses, how does real estate investing work, Real Estate Investing | Leave a comment

IRS & Real Estate Investors – Passive Loss

The IRS is cracking down on real estate professionals.
It’s questioning loss deductions. Real estate pros are exempt
from the passive-loss rules if they spend over half their working hours
AND at least 750 hours per year materially involved in real estate.
IRS agents are checking returns of people claiming to be real estate pros,
such as builders, landlords, managers and brokers. It wants to make sure
that the time tests are met. Thousands of tax returns have been pulled.
For more information, go to….
http://www.kiplinger.com/members/taxlinks/070309/IRS-rental-losses.pdf

Shared by ….

Roger T. Herring

Managing Member

Investor’s Accounting, LLC

678-287-8503

March 27, 2007 Posted by | Real Estate Investing, real estate investors | Leave a comment