Tag: wholesaling (15 articles found)

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:

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by  Nicolas Zepeda  on  Thursday, June 01, 2017
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by  Nicolas Zepeda  on  Thursday, June 01, 2017
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by  Nicolas Zepeda  on  Thursday, June 01, 2017
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by  Brad Millon  on  Monday, May 29, 2017


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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.  

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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...

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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...

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What’s Holding You Back?

by  Mike Jacka  on  Tuesday, February 25, 2014

We live in uncertain times.  After the mortgage meltdown and the almost collapse of the financial industry, the real estate market has been going through several ups and downs.  The median sales price in my area went from its peak of $238,000 in June 2006 to a low of $138,500 in February 2012, back up to $210,000 in June of 2013 and we are on our way back down, currently sitting at $179,850 for January 2014.

There have been some wild swings in the past few years and the people that understand that and have kept a close eye on the trends, and have not been afraid of the market have made a lot of money the past few years.  However, I have seen most people sitting on the fence and haven’t done anything.  I can understand the feeling of uncertainty and being afraid to make a mistake, but let’s face it, if you’re afraid to make a mistake, you will never make it big.

You’re probably thinking right now “That’s easy for you to say Mike; you’ve been at this for a long time and have more experience than I do”.  While for many of you, that may be true, however, for your info, I have probably made more mistakes than most of you ever will, and I am still making mistakes.  But that is not holding me back.

That is one of the most common traits I see from those who are successful, even in this wild and uncertain market.  They are not afraid to make a mistake, and often do, but they don’t let that hold them back.

Everyone wants to minimize their risk of making a mistake and losing money or damaging their credit, myself included.  However, I see way to many people with paralysis of analysis and never do anything.  So what’s holding you back?  Read More...

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Can You Survive Dodd-Frank?

by  Mike Jacka  on  Monday, January 20, 2014

Over the past, the most common question I have heard is “what are you going to do about the Dodd-Frank Act”?  And my common responses have been, “not worry about it” or “understand it and work around it”.  So what is your response, and will you survive not that the dastardly bill that is now in full affect?

Many people are worried that this new law that has been in effect since January 10, 2014 will put them out of business.  There are many new regulations pertaining to lending and one segment in particular that affects investors the most, especially in the coming years with our current economic situation and that is seller financing.  People are worried that these new regulations will have a dramatic impact on our business, and I have heard several people predict that parts or all of the Dodd-Frank law will be repealed.

I don’t put a lot of faith in congress repealing anything these days.  Look at Affordable Health Care for instance; does it look like that will be repealed?  No, so why would you expect the Dodd-Frank Act to be any different?  The Dodd-Frank Act was a response to the sub-prime mortgage meltdown crisis to put the blame on a segment of the economy that was politically acceptable and to repeal it now would be an admission to that fact.  In an attempt not to offend certain political ideologies here, I will not get into the cause of the sub-prime mortgage meltdown crisis, or the political reasons for appealing the Dodd-Frank Act, but I will explain what it means to us as investors.

Here is the simple break down, as I understand it. Read More...

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