Tag: bail out (35 articles found)

Is it time to sell that rental?

by  Vena Jones-Cox  on  Tuesday, July 25, 2017
According to a news article by WOSU Radio (and the experience of most of our community), property values in Central Ohio are at a record high. Does that mean it's time to sell?

As with all great real estate questions, the answer is, "It depends".

If you have rentals you'd rather not own, selling soon might get you the highest price on a property you don't want anyway. If you're good at finding distressed and low priced deals, it might be an opportunity to do a 1031 exchange into a rental you'll like better in the long run.

But if you bought your rental for long-term income and wealth building, believing that the market might be topping out (we don't believe that, but we don't have a crystal ball, either) is no reason to sell. The increased value is adding to your wealth in a non-taxable manner, and even if prices drop drastically, your income probably won't.

Getting rid of properties that have turned out to be too far, too management-intensive, or too unprofitable is always a good thing, and although we might not be at the top of the market just yet, now is a good time to divest yourself of those losers. But keep the keepers: jumping in and out of the market is NOT a good way to build wealth in real estate!
   Be the First to give this Blog Post a 5 Star Rating

Flipper and Other Mutations

by  Randy King  on  Friday, July 21, 2017
If you're a sci-fi geek and you just stumbled on this tome, I'm sorry to disappoint.  I'm not talking about people walking around with a third arm protruding from their chest or additional eyes on the back of their head, although in some instances, I would personally welcome such appendages.  If you've ever worked on a residential construction/rehab project or have children, you know exactly what I mean.

Instead, let’s look at how the media has mutated the public discourse on the perception of Real Estate Investing and Real Estate Investors.  I don’t just mean TV and print media here – there’s plenty of accountability to be passed around to social media and so-called “real estate gurus” as well.

There was a point in time not too many years ago when the term “Real Estate Investing” referred to the purchase of properties for rental, creating income.  The person who did this was a Real Estate Investor. 
President Dwight Eisenhower kicked off the whole real estate investing thing in this country with the 1960 enactment of the Federal Real Estate Investment Trust Act (REIT).  But Real Estate Investing as we know it today got its launch in 1980 with PBS Television’s This Old House from WGBH in Boston.

By the ratings explosion, it was clear that the creator, Russell Morash (who also introduced Julia Child to the world), had stepped into a surprising phenomenon.  People loved this stuff.  They loved doing it, but they really loved watching it on TV.
Fast-forward to today and cable networks such as HGTV, TLC, and DIY and countless web sites owe their existence to this phenomenon.  Here’s just a couple of ways that they have contributed to the mutation:

For those of a certain age, “Flipper” referred to a lovable bottlenose dolphin whose antics and social message aired weekly on NBC.  Today, a “Flipper” is anyone who rehabs houses.  But, technically, a “house flip” is a wholesale deal – where you control a property with an accepted offer, then “flip” it to someone else to fix up.

How the term rehabbing became flipping is T.V. shenanigans.  The term is really “doing a fix-and-flip”, which is where a rehabber purchases a property taking title to it, repairs and renovates it, then sells it on the retail market to someone who’s going to live there.

But the word “flip” is catchy in T.V. show titles and commercials, so flipper, flip, and flipping became shorthand.  Flipper is turning over and over and over in her watery grave, no doubt.

The term “Investor” conjures up notions of using one’s own money to do a deal, but that is rarely the case.  No, today an investor is someone that invests, time, money, or other resources into a real estate project.  Most of the time, that’s time, resources and OPM - Other People’s Money.

And because of the proliferation of so-called “real estate gurus” that fly into town, sell people the dream and completely focus on making money at any cost, investors are frequently portrayed as “low-balling scum” – the kind that offer a ridiculously low price and strong-arm little old ladies into selling.  Sigh.

And it’s no coincidence that the groups flying into town are the ones buying time on the networks to air their flipping shows.  Oh - you thought that the network was just featuring them?  Nope, those shows are paid for with money that’s being taken from people who want to be just like them.

So, the message, grasshopper, is to do your due diligence, learn exactly what this industry is all about, get the terms right, and learn how to contribute to the betterment of the community with your very visible work.  Stop in at the Madison REIA and they’ll show you how.  Tell ‘em Flipper sent you.
   Currentely rated 4.9 by 4 People

Multiple Offers Strategies

by  Mike Jacka  on  Monday, June 12, 2017

When it comes to making offers, most investors only know how to make one offer at a time.  They usually make an all cash offer, also known as the MAO (Maximum Allowable Offer) or they get a loan from a bank, hard money lender or a private investor.  This strategy has worked fine for investors and if you are only making offers on bank REOs on through the MLS, then a cash/MAO offer is really all you will be able to make.

The average number offers to get one accepted with this approach is 20-40 offers to get one accepted in today’s market for most of the country.  Some more experienced investors have been able to reduce that number down to about 5-10 offers to one acceptance by being very selective on what properties to make offers on.  In other words, they know from experience that certain properties from certain banks or listing agents simply will not accept their offers so they don’t even make the offers. 

The secret to success in the real estate business is making offers.  The problem is that most investors use the same offer process when dealing with sellers directly and they are missing some huge opportunities if they just knew how to create alternative offers that don’t require cashing out the seller.

Ask yourself these two questions: Read More...

   Currentely rated 4.3 by 7 People

Test

by  Nicolas Zepeda  on  Thursday, June 01, 2017
Test
   Be the First to give this Blog Post a 5 Star Rating

Test

by  Nicolas Zepeda  on  Thursday, June 01, 2017
Test
   Be the First to give this Blog Post a 5 Star Rating

Test

by  Nicolas Zepeda  on  Thursday, June 01, 2017
Test
   Be the First to give this Blog Post a 5 Star Rating

test

by  Brad Millon  on  Monday, May 29, 2017

test

   Be the First to give this Blog Post a 5 Star Rating

Real estate investing provides many tax benefits, and depreciation is one of the biggest. It’s also one of the more misunderstood.

Depreciation lets you deduct a portion of the cost of the investment each year for the length of its IRS-designated life span.  The depreciation computation is figured based on the value of the improvements, not on the land underneath the improvements.  This necessitates that you be able to determine the value of the land and the value of the improvements.  This determination is generally included in the multitude of closing documents you received when buying the property or found on the county real estate tax website.  It is essential that you keep your closing documents.  There are additional costs that can be expensed and loan costs that must be amortized involved in the closing itself.

A recent client case provides a good example for this deduction and how it can be forgotten.

Joe, an old Army buddy into my office asking for help with his taxes.  He had done his taxes up to this point as he had a pretty simple tax situation but about two years ago he moved and turned his old primary home into a rental property.  The first year of owning his home he had done his taxes and he had read some articles about depreciation and expenses that had gotten him thinking that maybe he had done something wrong on his taxes so the following year when his taxes were due he came to me make sure everything was correct. 

I reviewed his prior year tax return and immediately knew I was going to have to file an amendment to correct some glaring mistakes.  The first thing I looked at was his Schedule E.  He had about $10,000 of rental income and no expenses.  He had a 1099 showing interest and taxes for the property.  He had mistakenly included all the interest and taxes from the 1099 as an itemized expense and had not prorated the amounts between schedule A and E.  That was pretty simple.  When I computed his mistake, he had taken the standard deduction so the decreased itemized amount did not negatively affect him but I when I added up the interest and taxes attributable to the rental portion of of the property it reduced his income down to about $7,000.

Next I took a look at his depreciation.  Which was pretty quick because he hadn’t taken any.  IRS tax rules state that any depreciation recapture is computed on the amount that was take or the amount that should have been taken.  So, since the IRS requires the computation of depreciation recapture whether or not you actually took it, it makes sense to take the deduction when you can.  Figuring depreciation requires the computation of a basis of the property.  Generally, for someone buying a property as an investment property, their basis would be the purchase price of the improvements, not the land, minus buying costs plus amounts spent on capital improvements.  In the case of converting a primary property to a rental property this computation is a little more complicated.  It is the lesser of the adjusted basis or the fair market value at the time of conversion. 

In my friend’s case he had paid $250,000 for his home.  $50,000 of which was for land costs.  He also paid about $3,000 in closing costs and had made no capital improvements to the property.  This gave him a basis in the property of $197,000.  On the date he left the property and turned it into a rental it was estimated to be worth about $350,000 of which $300,000 was attributable to land value.  That $300,000 is divided by 330 to get a monthly depreciation amount of $909.  330 is the length of time in months the IRS says to depreciate residential real estate over.  The property had been turned into a rental for the last 5 months of the year.  This lead to a total cost of $4,545 that could be apportioned to depreciation, bringing his income from the rental property down to $2,455.

Then I talked with him some more.  He had paid rental property management fees of about $1,000, a homeowner’s fee is $600 and had other miscellaneous expense related to his property totaling $400.  All these expenses totaled about $2,000, leaving about $455 of income from the rental property.

I sat down and showed him all this.  Of course he asked me so what is the difference?  And so I laid it out for him.  Before I corrected his taxes he had a taxable income of of about $110,000 after his taxable income was about $100,000.  He was in the 28% tax bracket, by reducing his taxable income by the $10,000 we had reduced his prior year tax bill by about $2,800.  We filed an amended 1040X and got his money back.

Carefully accounting for costs when it comes to rental property and other deductions that you may be eligible for is key.  Knowing how those costs and deductions are computed and how to deduct them is essential in ensuring you make the most of your rental property.

Scott Vance is a fee-only planner and Enrolled Agent at Taxvanta serving the Raleigh, N.C. area. He recently retired from the Army. His background allows him to uniquely understand issues faced by military personnel, but he works with all clients. He is currently a candidate for CFP® certification and seeks to provide objective, commission free advice to clients. Vance was born and raised in Pennsylvania. He is married to Amy. They have a son, Brandon. They enjoy skiing and kayaking. He can be reached by email at scott@taxvanta.com

Article Disclaimer: This article was written by a valued blog contributor but Triangle Real Estate Investors Association does not give legal, tax, economic, or investment advice. TREIA disclaims all liability for the action or inaction taken or not taken as a result of communications from or to its members, officers, directors, employees and contractors. Each person should consult their own counsel, accountant and other advisors as to legal, tax, economic, investment, and related matters concerning Real Estate and other investments.  

   Currentely rated 5.0 by 1 People

What is Wholesaling?

by  Mike Jacka  on  Thursday, May 11, 2017

There is a lot of confusion out there with newbies and some seasoned investors as to what exactly Wholesaling means.  The easiest way to describe this is to look at the Minnesota State Statue: 82 REAL ESTATE SALES REGULATIONS Sub 55 Definitions. Condensed Version: You cannot sell a property for another for a fee without a real estate license.  So the question is, as a wholesaler, what are you selling?  If you have a property under contract, you can sell your rights to the contract, not the property.  This is done via an assignment agreement which allows the assignee to step into your place as the buyer.  That is the basics of wholesaling. 

Some states actively go after real estate investors for incorrectly wholesaling.  These investors get themselves into trouble because they can’t explain legally what they are doing and therefore say the wrong things, like I am trying to find a buyer for the seller.  That shows intent, and as the previous FBI Director James Comey famously explained, it comes down to intent.

The problem is that your true intentions may not reflect your stated intentions because you don’t understand the legality of what you are doing.  If you just change what you are saying, to reflect your true intentions, then you will avoid a lot of aggravation and harassment from the state. Read More...

   Currentely rated 4.7 by 4 People

Is there Another Crash Coming?

by  Mike Jacka  on  Tuesday, April 11, 2017

The simple answer is yes of course there is.  There have always been buildups, crashes and recoveries.  That is just the way things work.  The real questions are when is the next big crash coming, what you do about it and how do you prepare for it.

I know people are freaking out right now, but staying informed and objective at this point will help keep your sanity. 

As I am writing this, an email thread from my Lifeonaire Titanium group started circling about just this exact same topic.  Some of them are taking advantage of the current market conditions because they have a great marketing machine running that is supplying them with good deals and because of the lack of inventory, they are making higher profits than they would have in a normal market.  Others are starting to panic and preparing for dooms day.

Here is my quick response to them:

Everything we are seeing right now is equivalent to 2003-2005 before the big crash in 2008.  While there are similarities to that time frame, there are also huge differences.  As Steve stated, there are no NINJA loans right now.  But they may be coming back.  Lack of inventory was not the driving force back in 2003-2005.  NINJA loans and other no qualifying loans were the main driving force. 

My short version is this:
If you look at the historical price index from case shiller which is adjusted from inflation, we are not seeing the same price increases as we did the last time.  Below is a screen shot of my local market that I just did for our meeting last week.  As you will see, we are at a 3% appreciation over the last 27 years.  Historically right were we should be.  The big thing to keep an eye on right now is how the lack of inventory affects the markets.

I’m not saying everything is ok, but I am saying don’t panic, just yet.   Read More...

   Currentely rated 5.0 by 2 People
© Copyright 2017 Mike Jacka | Powered by: www.RealEstatePromo.com | Contact Us | Admin: Sign In