Opportunities to make big, quick profits in residential real estate tend to come and go in cycles. When a local market is hot, families may find it possible to buy a house at an attractive price, fix it up, and watch its value rise in just a few years.

When the same local market is at the low end of the appreciation cycle, reaping a profit on the family home can take a good deal more time but the reward can be just as satisfying if price and location and carefully considered.

Even in uncertain economic times like these, history shows that real estate is one of the soundest investments a family can make. During the Great Depression of the 1930s when the stock market plummeted as much as 89 percent, housing prices dropped only 39 percent. According to most of the research on housing trends, prices continually stay at the same level as, and most often appreciate faster than, the rate of inflation. Housing prices actually rose an average of 10 percent during the recessions of the mid-1970’s and early 1980s.

CENTURY 21 statisticians report that the rate of home appreciation since 1990 has been around five percent nationally, with inflation hovering around four percent. Homeowners, obviously, are still staying ahead in the real estate game on average.

And, with mortgage interest rates the lowest they’ve been in two decades, real estate today is a more attractive investment than it’s been in years.

First-time buyers are the big winners in this environment. Drawing up a budget can help you and your family decide on what you can afford. Once you’ve determined a price and picked your desired community, shop around to find the best house you can buy for your money. This strategy can help you realize greater appreciation two or three years down the road.

This is also a good time to purchase a second or vacation home. A bargain cabin in the woods today might bring an excellent return when housing prices move upward. Affordable second-home prices also allow you to purchase a vacation home that can serve as a stepping-stone to a larger retreat in the future.

But appreciation isn’t the only advantage to buying a home. The federal government thinks home ownership is so important to the future of our country that it allows mortgage interest to remain the last substantial tax shelter for families. Owners can also take deductions on their property taxes. And, the profit on the sale of your home remains tax free as long s you buy a house for a greater or equal price.

So before you decide that this is not a good time to invest in residential property, re-examine the financial benefits of owning your own home and put them to work for you.

About The Author

W. Troy Swezey is the author of "REAL ESTATE REMAINS A STRONG INVESTMENT.” As a Realtor at Century 21 Paul & Associates, he has helped many individuals with their real estate needs. Visit his web site to download his free e-book, "Real Estate Secrets Exposed." http://www.TroyIsMyRealtor.com” target=”_new or mail to: TroyC21 @ usa .net

Real Estate Remains A Strong Investment

Recently I closed on the sale of two homes. They were located about a mile apart and had comparable market values. However, beyond these two similarities, the two deals were very different from each other. Let me discuss in more detail the similarities and differences of the two deals.

My business partner and I purchased both properties from families who were in preforeclosure. The leads for each property came from letters that I had mailed to families who had recently received Notices of Default. The one family responded to me within 24 hours of receiving my first letter. I met with them within two hours of receiving their phone call and signed a contract with them on the spot to purchase their home. The other family responded to me after receiving the fourth letter from me. After a couple of broken appointments and two meetings we signed a contract to buy their home. With each home we did a "kitchen table" type closing within a couple of days of signing the contract. Both homes were purchased "subject to" the existing financing remaining in place. The earnest money given for each home was one dollar.

First Deal

We began marketing the first house by advertising it in the newspaper at market value and putting signs in the neighborhood and nearby intersections. We had a verbal agreement with the seller that they would clear all of their belonging out of the house within two weeks. The house was very messy and dirty. When the sellers failed to make any progress clearing the house we went ahead with the marketing and reduced the asking price. Within two weeks we had only received a few phone calls from mostly non-interested prospects.

At this point we reduced the asking price further and changed our signs to notify the public that owner financing was available. At that point we started to get a larger number of phone calls from truly interested prospects. Our owner financed terms and the lower than market value asking price separated us from the hundreds of realtor represented homes that needed bank financing.

With the second home, purchased a month later than the first, we immediately marketed it with owner financing. When we purchased the home we stipulated in the contract that the seller had to vacate the property in two weeks or be charged a fee for failure to do so. The seller was agreeable and cooperative and moved quickly to remove their belongings from the house. The seller of the first house was still dragging their feet and the house was still a mess.

Shortly after changing the marketing of the first house, we received an offer from a highly interested buyer. This house was truly ideal for this family and we wanted to help them get into it. They offered to buy it with bank financing and we agreed to sell it to them. There was still enough time before the foreclosure auction to close the sale with bank financing.

I cautioned the buyer that he should seek a loan other than an FHA loan since we had not held title to the property long enough for FHA to approve a new loan. In case you didn’t know, FHA recently changed a rule that now requires a property to be on title at least 90 days before they will approve a new loan. So guess what the buyer did?

Right. His mortgage broker and his real estate agent steered him toward an FHA loan program. Luckily, the buyer qualified for a good FNMA program as well. So I stipulated in the contract that the buyer had to gain approval for the FHA program within 5 days or else drop the FHA program and proceed with the FNMA program. Both the broker and the agent needed education on this point, which I provided in writing, and four days later the broker notified me that the buyer would not be approved by FHA and that they were proceeding with the FNMA program.

The next obstacle we faced was the home inspection. The inspection resulted in asking for several hundred dollars worth of repairs that we agreed to do. The repairs took two weeks to complete. While repairs were ongoing we ordered a property appraisal. The appraisers in our area are backlogged eight weeks but we knew an appraiser who would perform an appraisal within a week for 150% of his normal fee. Of course we didn’t have the luxury of being able to wait eight weeks so we bought the expensive appraisal.

The next obstacle was to order a preliminary title search, which showed a clear title luckily. The previous owner did not have an as-built survey so we had to order an expensive set of survey documents from the county.

Now that the obstacles to closing were nearly erased and we were close to a hard closing date, we still had a problem with the previous seller. They had only moved a few things out of the house and the house was still well cluttered. They were getting around to moving out eventually but not fast enough to be out of the house before closing the sale. Their lack of cooperation and their inability to follow through with their verbal promises made it clear why they had neglected their home and let it go into foreclosure.

Since the utilities were turned off and the seller was no longer living in the home I had the legal right to declare their belongings as abandoned property and I notified them that I would move the items out for them. My partner and I spent a day boxing and bagging up the seller’s personal items, and grudgingly they picked the boxes and bags up the day before closing. Whew!

Second Deal

Now, on the other hand, events with the second property proceeded much more smoothly. We bought the home, found a buyer for it within eight days, and closed on the sale eight days later.

We decided to sell the second home on a land contract or wrap mortgage with the existing financing remaining in place. We also decided to stipulate that the home had to be refinanced within two years or it would be foreclosed back to us. We did this to protect the previous seller’s interest in the underlying financing. They didn’t want it hanging out there for a long period of time.

Our "owner finance" signage attracted several buyers quickly. We required a large enough down payment to "cure" the loan, that is, to pay off the existing arrearage and attorney fees. We found an eager buyer who had sufficient cash on hand and a good income, but without enough time in the area to have a high credit rating. He understood the concept of the wrap mortgage and the underlying financing and we negotiated a contract with him at Starbucks. He negotiated a lower sale price by offering a larger down payment. Basically we were able to immediately receive all of the "back end" profit that would have been paid to us in two year’s time when he refinanced. We received this up front in exchange for a lower sales price. It was a fair exchange for both parties.

He agreed to buy the home "as is" and to do some repairs himself. No home inspection was needed; no appraisal was needed; no repairs had to be made; no real estate agent needed to be paid; and no survey had to be ordered. The buyer paid all of the closing costs which were far less than he would have paid if he had used a real estate agent and a mortgage broker.We used a closing agent who is very familiar with transactions of this type, which she calls "unacknowledged wrap sales." Our closing agent has become a friend and has spoken at our local Real Estate Investment Club.

In summary, each of the two deals netted about the same profit, but it is obvious which deal one would prefer to do if given a choice. If I were Robert Kiyosaki I might call one deal my rich dad’s deal and the other my poor dad’s deal. We learned enough to make deals of the first type go more smoothly in the future but I’ll take deals of the second type every day of the week.

I hope all of your real estate investing deals proceed smoothly and quickly.

*****************************
Garry Gamber is a public school teacher and entrepreneur. He writes articles about real estate, health and nutrition, and internet dating services. He is the owner of http://www.anchorage-homes.com/ and http://www.thedatingadvisor.com/.

How I Became a Real Estate Investor

Our complex IRS code requires that your, as a real estate investor,accurately calculate your “basis” in investment property when reportinga gain or loss on a tax return.

Your monetary gain or loss when you sell investment property is determined by comparing the sale price to the adjusted basis in the property.

Your original basis is determined by the way the propertywas acquired — whether through purchase, in trade, or received as a gift or inheritance.

We will briefly cover how you determine basis in an investment property you have purchased.

The original basis is determined by adjustments in the totalcost of the purchase.

The adjustments include depreciation, or additions, such as capital improvements… perhaps you added a room.

If the total purchase price of the property (including allclosing costs) was $100,000… your basis was $100,000.

Later you added a room at a cost of $20,000… your new basis is $120,000. Still later you replaced the roof ata cost of $8,000… your new basis is $128,000.

Adjusted basis is the new basis after additions or deductions to the original basis have been made.

The basis of purchased property is the purchase price plus other expenses such as installation of upgrades, option premiums paid, and other expenses of buying the property.

The basis of land includes the purchase price plus legal and recording fees, abstract fees, survey costs, and payments for non-depreciable permanent improvements.

When property is improved the basis is the total cost of the construction. This cost is not taken as an expense in the year of construction. The cost becomes the basis of the property.

Depreciation is calculated on the property’s basis.

When sell your investment property an Adjusted Basis is used in calculating capital gain or loss.

Adjusted basis reflects increases or decreases in the value of the property during the period you owned it. Increases in basis come from improvements that add to the property’s value.

Decreases in basis come from depreciation, casualty loss, and other reductions in the value of the property.

Adjusted basis is not a result of inflation and change in the market value of your property. They would only effectmarket value.

Increases in basis come from improvements to your property that have a useful life of more than one year. Generally the cost of improvements which add to the basis include supplies andmaterials purchased for major repairs or additions, legal fees, recording fees, and similar charges.

Calculating adjusted basis can get very complicated. It is bestleft to an accountant with real estate experience.

The IRS offers a detailed treatment of basis here:www.irs.gov/pub/irs-pdf/p551.pdf

About The Author -

Mark Walters is an investor and author. His publications canbe found at http://www.CashFlowInstitute.com

Real Estate Investing – Basis Explained

Real estate values rise and fall in cycles. Currentlyhome prices are nearing a top in many areas.

Skyrocketing housing prices in California are prompting nearly a quarter of the residents to seriously consider moving to areas with more affordable housing.

California had the nation’s third fastest rate of home price appreciation last year, behind Nevada and Hawaii.

Prices climbed more than 18 percent compared to the previous year, 84%in the past five years and a whopping 338 percent since 1980.

Less than one in five… 19%… of the state’s households can afford the median priced single-family detached home, which was $465,540 in September.

Guess what? Lots of these Californians are selling their homes for big dollars and moving to other states where they can buy a similar home for a fraction of the price.

Arizona and Nevada are prime target areas.

In those states the number of sales of homes to San Francisco Bay Area residents has risen by as much as (gulp!)6,000% percent. That huge demand forces prices up!

Here in the Phoenix area we are smack dab in the middleof a home buying frenzy. In the last three months we have put four of our rental homes on the market. Each of them sold in ONE DAY! Offers above asking price are common.

Real estate agents are tearing their hair out because theycan’t find homes for their buyers. Our listings with aflat rate discount broker prompted dozens of calls from desperate Realtors.

The other side of the coin is that it’s very hard tofind good renters. Anyone with the slightest record offinancial responsibility is buying a home.

If you are a cycle investor you buy near the bottom and sell near the top.

Is this the top in some areas? I can’t say, but when homes areselling a few hours after being listed it would seem toindicate that we can see the top from here.

If you are in a hot area it is the perfecttime to buy and flip.

Start walking neighborhoods in the early evening and weekends. Knock on every door asking, “Are you the folks with a home for sale? Do you know of anyone who would beinterested in a fast sale?”

You will find properties! Some you may be able to sell within5 or 6 days. Racking up a profit of five grand a week is notimpossible… if you are willing to put in the work.

With buy and flip you don’t have to worry whether or nota top is near. Using options just about eliminates anypossible risk. And a fast flip can be generated using the”How to Make Money In Real Estate Without Owning Property” system.

There’s money to be made… if you are nimble.

About The Author – Mark Walters is a real estate investor in Arizona. He uses options in his investing program as explained here http://digbig.com/4cefc

Grab Quick Profits As Real Estate Prices Soar

We all are thinking about it and some of us are actually taking action and getting their hands on real estate investment properties. The longer the NY Stock Exchanges doesn’t produce desirable returns the more people are starting with real estate investments.

For most of us the obvious choice of properties are single family homes. Although you can invest in real estate without owning a home, most people follow the experience they made while purchasing their own home. This is familiar ground and the learning curve for doing a real estate deal of this type is pretty slim.

Of course there’s a drawback with this approach. The competition is fierce and there are markets where investors are artificially driving up the cost of the properties while completely discouraging first time home buyers. If this is the case, the burst of the real estate bubble is just a matter of time.

How do you avoid these situations and still successfully invest in real estate? How do you get ahead of the competition and be prepared for bad times in real estate investments as well? The only answer I have is commercial real estate.

Why commercial real estate you might ask? Commercial real estate is a solid investment in good and bad times of the local real estate market. The commercial real estate I’m referring to are multi unit apartment buildings.

Yes you will become a landlord and No you don’t have to do the work by yourself. You are the owner and not the manager of the apartment building. The cost of owning and managing the building is part of your expenses and will be covered by the rent income.

Apartment buildings are considered commercial real estate if there are 5 or more units. To make the numbers work you should consider to either own multiple small apartment buildings or you should opt for bigger buildings. This will keep the expense to income ratio at a positive cash flow. Owning rental properties is all about positive cash flow.

With investing in single family homes it is easy to achieve positive cash flow. Even if your rent income doesn’t cover your expenses 100%, the appreciation of the house will contribute to the positive cash flow. With commercial real estate the rules are different.

While single family homes are appraised by the value of recent sales of similar homes in your neighborhood, commercial real estate doesn’t care about the value appreciation of other buildings. The value of the property is solely based on the rent income. To increase the value of a commercial real estate you need to find a way to increase the rent income. The formula on how this is calculated would be too much for this short article. I listed a few very helpful books where you can find all the details.

What’s another advantage to invest in commercial real estate? Commercial real estate financing is completely different than financing a single family home. While financing a single family home you are at the mercy of lenders who want to make sure that you are in the position to pay for the house with your personal income. Commercial real estate financing is based in the properties ability to produce positive cash flow and to cover the financing cost.

After reading all these information about commercial real estate you want to go out there and dive into the deals. Not so fast. First, you need to learn as much about real estate as possible. In commercial real estate you’re dealing with professionals. If you come across too much as a newbie you will waste these guys’s time and your commercial real estate career ended before it actually started. Second, no commercial real estate lender will lend you any money if you can’t show at least a little bit of real estate investment experience.

What’s the solution to this? Go out there and do one or two single family home deals yourself. It doesn’t matter if you make huge profits to start off with. Most newbie investors are loosing money on their first deal anyway. If you can manage to show positive cash flow with your single family home deals you are ahead of the pack.

My advice, buy a small single family home in a decent neighborhood and rent it immediately. This will keep your out of the pocket expenses at a minimum and you will have rent income to cover for your monthly expenses. Bonus, you gain experience as an investor and as a landlord.

Here’s another observation I made during my real estate investment career. Most people like to analyze, learn, discuss and analyze some more. They never actually got to do a real estate deal. They love to talk about real estate investments, but never did it themselves.

My approach to real estate investment was simple.

- I bought some books about real estate investment.

- I read every single one of them.

- I put together a simple plan on how I want to get started.

- I started looking for properties.

- I bought my first investment property 30 days after I started reading my first book.

- I made positive cash flow with all of my properties so far.

What is my point? You have to go out there and practice what you’ve learned. The only valid credential in the real estate business is practical experience. Having a couple of deals under your belt, you can go out there and start looking at commercial real estate and even impress seasoned investors with your knowledge. Because you made this experience by yourself and you know what you’re talking about.

Book reference for commercial real estate investments:

Gary W. Eldred, PhD: "Make Money with Small Income Properties"

Jack Cummings: "Real Estate Financing and Investment Manual"

You will find these books and many more on my real estate investment website at http://www.suncoastrenttoown.com/author_directory.htm

Sincerely,
Peter Dobler

Peter Dobler is a 20+ year veteran in the IT business. He is an active Real Estate Investor and a successful Internet business owner.Learn more about real estate investments at http://www.suncoastrenttoown.com or send a blank email to suncoastrenttoown @ getresponse .com

Beat the Crowd when Investing in Real Estate

If you’ve read my article "Purchasing Property With No Money Down. . ." today’s article may seem a bit conflicting. Bear with me, though, and you’ll see that it is not. In Purchasing Property With No Money Down. . ., I explain how buying up property at inflated values at a break-neck pace is no way to be successful in real estate. I explain how this is a form of investment real estate finance that is possible but not advisable. In this piece, I’d like to express that buying property with no money out of your pocket can actually happen and can be a great technique, if it’s done properly.

Let’s suppose you find a house that you’re interested in purchasing as investment real estate. The owner, who also uses the real estate as investment property wants to get out quickly. This is a perfect opportunity for you to get the house with no money down. Note, look for ads that say seller financing or motivated seller to find these types of deals.

In lieu of conventional bank financing, you may offer the seller his exact sales price, if he agrees to finance the sale for you. Before going this route, ask him if he’s willing to take a considerable amount less than his asking price; if he’s motivated, he’ll likely say yes, assuming he’s going to get a bank check. Now, you come in with much more money, but you ask him to finance the loan.

Here’s where salesmanship is critical. Offer him a deal that he can’t pass. If he’s selling for $100,000 but was willing to take $88,000, you’ll give him his entire asking price of $100,000 with very special terms. Although you amortize the loan over 30 years, you promise him that you’ll pay him off in three years or less. Meanwhile, you’ll pay him interest only payments on the note at 8 or 9 percent. Explain to him how he’ll make all of this money on top of the $100,000, because you’re not paying down the note with your monthly installments. Because you’re giving him such a great deal, you will not pay him anything as a down payment.

Now, you may be thinking this doesn’t look like a good deal for you. Here’s how you make it a terrific deal. The second you close the deal with the seller, you stick a for sale sign in the yard, announcing that the "Owner will finance." Now, you sell the house for $110,000. You take a $5,000 down payment, and you take interest-only payments on $105,000 at 8 or 9 percent interest. You are making more than you have to pay the seller, plus you have the $5,000 in your pocket. This is truly a sweet, No Money Down investment real estate deal.

NOTE: if the seller insists on a down payment, you offer him the $5,000 you plan to collect from your buyer. Be sure to get him to allow you to defer the down payment for three months. This gives you time to sell, collect the 5k and pass it along to him. This isn’t as sweet as pocketing the $5,000 yourself, but it’s still a no money down deal.

Mark Barnes is the author of the new novel, The League, a shocking, sports-related conspiracy. Learn more about his suspense thriller at http://www.sportsnovels.com He is also an investment real estate and home loan finance expert. Get his free mortgage finance course at http://www.winningthemortgagegame.com

Investment Real Estate Secret: Buy a House Today, With No Money Down

The Primary Residence taxation, the Residential Replacement Rollover, Sec. 1034 exception is gone. Previous capital losses still apply, if the property is held as investment property and sold at a loss and that loss can be carried over for up to 7 years. For those over age 55 the primary residence or residential sale exclusion of taxation is gone. Tax deferred exchanges remain a viable way of deferring taxation on investment real estate.

It is required to analyze and pre plan prior to transaction. That analysis must be done by an updated tax deferred exchange professional such as those we have on retainer. Not only do you need a tax attorney, but a real estate attorney, and an expert attorney working with them – that is a specialist in only tax consequences; especially those of tax deferred real estate transactions. There must be proper forms and written documents before the transaction is done. This requires planning and a review of limitations as well as a formal and professional critique of assumptions and decisions.

Most Realtors, Attorneys and CPAs do not have sufficient expertise to guide you in a legitimate and defensible tax deferred exchange. The key here is defensible, as the IRS will usually audit the tax deferred transaction and if it’s done correctly so that it is easily defensible you will sail right through the audit for little or no money. Your personal tax profile and that of your other business and family identities must be factored in the decisions. It may be necessary to legally refigure, adjust, and compartmentalize your purchase or sale – and document that appropriately, BEFORE you begin to put any part of the transaction in writing. Planning is legally done BEFORE and if it is done after the transaction you can be liable for fraud. The IRS does not take kindly to fraud especially regarding real estate.

For instance you must know your straight line depreciation factor; for investment property that is currently 39 years. For instance: Any depreciation taken during the ownership of the property will be picked up in a recapture tax upon the sale of the property.

Federal and State taxations must be combined properly, according to numerous factors that must be researched by your team of advisors. Since the total taxation on the gain is approximately 35% of the gain plus the recapture tax – your fees to professionals can be well worth it to you if they better your tax situation. The tax deferred technique can defer till later or eliminate your tax payment and consequence. Of course the only real and usual way to eliminate the tax is to die. There are ways to defer the tax however until that death. Tax deferred strategies are sometimes called alternative strategies or alternative tax deferment strategies.

Note: if you are speaking with anyone and they speak of TAX FREE EXCHANGE or TAX FREE SALE of your property, they are not well informed and thus you should be wary of any other advice they give you. There is, effectively, no such thing as a tax free sale or tax free exchange of real estate.

Exchanging is an effective tax planning tool. Large potential tax liability can therefore be deferred. And, there are savvy investors who have deferred taxation on millions of dollars of properties for decades and thus given themselves many millions of dollars of additional investment money with which to leverage their wealth.

Like kind exchange can now be defined as: any kind of real estate in exchange for any other kind of real estate.

We hear of qualifying property or properties – yes there can be more than two properties involved, in some cases there can be several and you don’t have to ever see or even know about the other properties involved. You will need good advice however, professional advice. This exchange of any kind of real estate for any other kind of real estate was not always true. This tax deferment alternative is not for everyone. Some owners should not defer.

We must realize, as well, that there is ALWAYS a risk of audit. The larger the dollars involved and the more suspect (according to the IRS) that the participants in the transaction are, the more likely an IRS audit of the procedure is. If there are several million dollars in tax deferment involved, and especially if one or more of the participants are considered audit targets by the IRS for any reason, you may become involved in an expensive tax audit. The cost of the audit, even if you are successful in defending your decisions, can be far greater than the tax deferments. And if the deferment is disallowed there WILL be penalties, fines, interest and even more substantial legal and accounting fees – plus an amended return in some cases which may trigger more consequences and even more audits. I hope I’ve made myself quite plain here – get good advice from legal and accounting specialists on these exchanges.

There is a time line, for several of the acts and consequences in exchanges according to the IRS. In addition to timing there are other qualifying or disqualifying situations and these situations include the use of the properties, before, during and after the transaction by those involved or their families, friends, associates, etc… In addition to the normal criteria for the exchanges, if Realtors, investors, attorneys, or those who buy and sell real estate frequently are involved in exchanges; the IRS makes special, more restrictive rules that will result in more scrutiny by the IRS. In fact the IRS can make up reasons why they think a person needs more scrutiny; that can include political affiliations, relationships to politicians, your social position, your affiliation with judges, and conspicuously wealthy or well known people and even your religious affiliations and charitable giving recipients. In fact, there can be a tax deferred exchange that will work for one side of the exchange and not for the other person or entity involved.

In addition the tax court looks at intent for use, investment, or purchase and sale — not only the use; past, present and future; of the properties involved but what they think may be or could be the uses and consequences based on all sorts of criteria and even hunches they may have. They also have extensive rules on what like-kind exchanges are. The exchange must also be interdependent. There may not be any receipt or control of cash or other liquid assets from the sale by any of the exchangers. This can be inclusive of debt relief as well. Any of these things will be taxed. In fact, a refinancing of any property involved within two years or less will disallow the tax deferment as well. There are also several time limits and timing criteria involved which must be allowed for and honored.

There are some specific terms; relinquished property and replacement property are the most important terms; after the most important definitive phrase of all: Like Kind Property Exchange. Large potential tax liability can be deferred; that is: NO tax is due upon receipt of the proceeds; from your investment in qualifying real estate, whether buying or selling, can be maximized by deferring the tax liability, the consequences, and using the deferred expenses. That is; you are saving and have the use of the tax money you don’t have to pay now, and you can invest that money in the next property, giving you a multiplied ability to invest and reap further benefits of appreciation and income. Therefore, you will have the additional money, and therefore additional down payment, to invest in an even larger property or pay cash for a more expensive property. This can change your life; your life as an investor, your business life, at least.

The exchange does not have to be simultaneous. You must in general; identify the property within 45 days and settle within 180 days.

There are also delayed exchanges, non simultaneous exchanges, which are sometimes called Starker Exchanges. There can be a buyer assisted, delayed, Starker exchange. This buyer assisted, delayed exchange, is done with the help of the buyer – by letting the buyer possess or even live in the property for a while. This is almost always a bad idea, a very bad idea. There is also such a thing as a reverse-Starker exchange. In a Reverse Starker Exchange the replacement property is acquired before the relinquished property is sold. These are rare, unusual, possible and legal – but not to be considered lightly without adequate counsel involved in your every planning facet.

For the protection of all involved; the contracts, all exchange documents and paperwork should be prepared by specialists in tax deferred transactions. The Realtor should never, ever, prepare the exchange documents!

There are some additional factors and rules. You can name up to three possible properties in that first 45 day period. There is also a rule called the 200% aggregate rule where you can name several
properties up to but not more than 200% of the value of the relinquished property. Property held by a person who deals in property does not qualify. Personal residential use property does not qualify. Partnership interest in property does not qualify. Refinanced property will not likely qualify if it has been refinanced in the last two years. The property must ordinarily be held for investment and generally acquired and held for appreciation and for production of income such as rental income.

Let’s now look at the sale of personal residences. The gain on a personal residence has no tax due on the first $250,000 of gain for one person or $500,000 tax relief for a couple. A principle residence is one that a person resides in for 183 days per year or more and no other. Factors which determine a person’s principle residence are four; each showing the same residential address of that being claimed: A Driver’s License; Magazine, Newspaper, and Internet Subscriptions, Utility Bills such as Cable TV, Telephone, etc. that are mailed to and show the address as residence, credit card bills, checking and savings accounts, voter registration card, personal telephone listing in the white pages.

There are many pages of rules, regulations, code, determinations, tax code, rental and vacancy rules, abandonment according to prescription, determinations of intent, various capricious factors known only to particular IRS agents, time lines, divorce issues, temporary use, rental, vacancy, or abandonment issues, documented or discoverable intentions on the part of participants in the transactions, multiple dispositions in short periods of time, work related occupancy and vacancy requirements, personal business use of property, income streams, family uses, health related and documented residential move or vacancy requirements, court cases and other recorded facts, all manner of special requirements and issues, land installment contract provisions, miscellaneous extenuating and defensible contingencies – which will affect the bona fide legality and defensibility of a tax deferred transaction. There are many points upon which your planning should be based. There are some emergency planning techniques as well.

You can even take some improvement expenses and take a fix up expense for work done to sell the house. You MUST have: Written affirmation of necessary expenses that are needed to sell the property. Be able to prove the work was done within 90 days of the executed contract of sale. There is also, now, a maximum of 20% taxation on the taxable portion of the net gain on the home. Generally tax laws are applied separately to each individual owner or co-owner of the property and each must meet requirements separately and individually.

Take care. Be prepared. Educate yourself and ensure that your advisors are as well. Be legally and financially, well represented and very professionally and personally wary.

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End Note: The above article was written in the form of notes during a class I attended on exchanges that was delivered by SEVERAL full time professionals in the business of ONLY these types of exchanges. These notes are to be considered guidance in the form of alarming you to the point of getting proper counsel only. You may know the exchanges of Real Estate as Starker Exchanges, 1031 or 10-31 exchanges or even as “tax free” exchanges. They are NOT tax free, they are tax deferred! Be careful.

Do not use the information in this article to make your final tax or selling or buying decisions. This information here is to give you enough data to begin thinking about deferred tax – exchange of real estate.

Do not make any decisions or write any documents based on this information. Get specialized legal advice from experts in this exact business; not from unspecialized attorneys or accountants – and especially NOT from general Realtors such as myself.

Ask to see the credentials of anyone who seeks to advise you, they will have them or not, exact and specific credentials, in writing, of their professional ability to serve you. If not, chose another professional to help you. In fact feel free to contact me and I’ll get you in touch with those senior professionals who are full time in this exact profession.

There are law changes frequently on these forms of transactions and as I write this 10-31-2001 there are several laws being discussed and perhaps voted on today that will change many of the factors involved here – hopefully for the best – in order to help bolster our economy even more and support the real estate business in which I work.

By< Jody Hudson (I'm NOT a tax expert - this is taken from my notes, taken at a 10-31 seminar for Realtors) Copyright 2001- 2004

Thank you: Jody Hudson http://www.JodyHudson.com

Jody Hudson has been a Realtor for 35 years in America and Delaware

The source page for this article is: http://www.kate-jody.com/essays/taxdeferredexchanges.html

Tax Deferred Exchanges of Investment and Business Real Estate

When it comes to buying investment real estate, there are many schools of thought on how to get the most out of your money. Some say lease optioning your houses is the best and safest way to go. In fact, I believe this to be true in many cases. For getting the most out of each investment dollar, though, and seeing a quick return, I believe that it is best to find property that you can rehab and resell.

Many people have tried this strategy and failed. Let me tell you why this is. Anyone can make money buying investment real estate, fixing it up and reselling it, as long as he or she understands how to buy and how to sell. This is the key. The people who fail in the rehab strategy of investment real estate fail because they know everything about rehabbing but nothing about buying and selling.

The real money is made by carefully evaluating the entire transaction. This includes looking at what the investment property will bring on the back end, or on the sale. Now, when you find a prospective investment property to buy and rehab, be sure to look at your profit after all of our money is spent.

I would never consider a deal that I couldn’t make at least 40 percent above my purchase price and all I’ve put into it. So, if I pay $40,000, put in $10,000, I want to sell my investment property for at least $60,000. If I can do this in one month, I’m happy, as long as I’m not splitting my profit with too many parties. Even if I have a partner or two, a quick $10,000 in one month is fine, as long as I have another deal going at the same time.

Now, if you want to move your properties quickly, and a month is not a reasonable time, you might consider combining two strategies – buying investment real estate for the purpose of rehabbing and quickly lease optioning the property. From there, you can move on to your next purchase.

Mark Barnes is an investment real estate and real estate finance expert. Get his free mortgage finance course at www.winningthemortgagegame.com. Mark is also the author of the new novel, The League, a shocking, sports-related conspiracy. Learn more about his suspense thriller at www.sportsnovels.com. He is also

Mark Barnes is an investment real estate and real estate finance expert. Get his free mortgage finance course at http://www.winningthemortgagegame.com Mark is also the author of the new novel, The League, a shocking, sports-related conspiracy. Learn more about his suspense thriller at http://www.sportsnovels.com

Investment Real Estate Made Easy ? Make the Most from Each Investment Dollar

Just like most things real estate investing can be broken down into easy to learn step.

Step One – Learn the basics:

Ownership of real estate is evidenced by a valid deed. When you buy property the seller signs a deed that transfers his ownership interest to you. Most states use a Warranty Deed. With that deed the seller warrants that title to the property is as he has described. You would buy title insurance in case some defect in title was discovered after the transfer of ownership. Recording the deed is notice to the world that you are the new owner.

You must know how to correctly fill out such basic documents as purchase offers, deeds, options, leases and rental agreements. Many of those documents have been recorded in your county and you can see many expert examples by viewing your County Recorders files.

If you have borrowed money to buy the property the lender will record a mortgage or trust deed immediately after the Warranty deed has been recorded. This mortgage is a lien on the property and gives the lender power to foreclose if you violate terms of the loan, like stop making payments.

Step Two – Understand how to buy real estate:

Most sellers want to sell their property for full price and all cash. Investors generally want to buy at a discount and delay paying for as long as possible. To do that you must understand the many techniques an investor can use to satisfy the needs of the seller.

You only make good deals if the seller is urgently motivated to sell. Perhaps he has lost a job, been transferred, has a drug problem, is facing divorce, bought more house than he could afford… or a variety of other reasons why he/she must get out from under those mortgage payments.

You can control real estate with leases, options, subject to techniques and a host of other “creative ideas”. To be successful you must understand which technique to use in which situation. You just talk to the seller until you learn what he/she will accept.

Step Three – You must uncover a steady stream of motivated sellers:

They are always plenty of people who must sell their homes and sell them in a hurry. The trick is to find them. Since most people will so “no” to any offer but all cash, you need to be constantly on the search those motivated home owners.

My experience is that most new investors don’t fail at investing… they fail at marketing. Marketing is how you sell you skill as an investor and find enough motivated sellers to keep the cash rolling in.

You can use billboards, flyers, telephone calls, door to door canvassing, bandit signs, newspaper ads, Web sites, direct mail… or any combination. If you don’t use good marketing every week of the year your chances of becoming a successful investors are minimal.

Good marketing is the secret. You can be expert at every creative buying technique in the book. If you can’t locate motivated sellers every week you just won’t be able to buy houses.

Time and again we’ve seen people with just basic knowledge of one or two buying techniques become very successful, because they are unrelenting in their search for motivated sellers. Perseverance and stamina can work wonders.

My choice is to mail postcards, because they are inexpensive to prepare and send. You can read more about my postcard system at http://digbig.com/4cjxp

Step four – Always have an exit strategy before you buy:

Before buying an investment property you must carefully evaluate the potential for profit. One of the keys to your evaluation will be to determine what you will do with the property if you buy it.

Included in the many way to profit are:

1. Place it in your “buy & hold” inventory if it will produce profitable rental income.

2. Place it in your “buy & hold” inventory if it will produce break-even cash flow and you expect it to increase in value by 8% to 15% or more per year.

3. You can assign the purchase contract to another investor for a one time cash payment.

4. You can buy the property and immediately sell it to a retail buyer and cash-out.

5. You can exchange it for a more desirable property.

6. Refinance cash out and use the money for the down payment on another property.

7. Etc…

Finally

Now you can visualize the four basic steps in real estate investing. You’ll never know all there is to know about every step. Just get started and add to your knowledge as you go along. Remember, all it takes to be successful is perseverance and stamina!

Mark Walters is a third generation investor who shares his experience at his Web site: http://www.CashFlowInstitute.com

Real Estate Investing By The Numbers

In recent years buy to let has been a popular way of investing in residential property. Stock markets are out of favour with many investors who have seen the values of their portfolios, endowment policies and pension funds shrink, whereas property has generally continued to rise in value. Interest rates are at historically low levels and mortgage finance is readily available on competitive terms from major banks and building societies. This brings property investment within the means of more investors than ever before. In these notes we will take the example of a foreign domiciled person, a non-resident of the United Kingdom, buying a property in London with the benefit of loan finance, but the general principles can apply to many other markets.

Buying to let pre-supposes that there is a tenant willing to rent the premises and provide the cash flow, which will service the borrowing and is only one of the factors, which need to be taken into account before entering into a commitment. These can be summarised under three main headings.

The Property

It has been said that the three most important matters to take into account when buying property are location, location and location and this maxim holds just as true for investment property,

? It should be situate in an area where tenants are looking to rent

? It should be attractive to tenants and be, for example, an apartment, penthouse or a period or modern house. Listed buildings or converted churches may have their appeal but it is to a narrower market

? It should be in, or brought into, good condition.

? It should be in an area where property is in demand, making a resale easier in the future.

The Finance

For the right property mortgages are available both onshore and offshore, at competitive rates, from many of the major lending institutions and the terms can be negotiated. It is possible to obtain a loan on a repayment or interest only basis and for an agreed period. Whilst higher percentages are sometimes available we suggest not borrowing more than say 70% of valuation to avoid a cash flow crisis if interest rates rise and to allow for periods when the property is vacant. The lender will also be looking for a monthly rent of the order of 130% of the monthly repayment.

Taxation

In the United Kingdom the investor will need to take into account the three main direct taxes,

? Income tax, which is payable on rents. Loan interest and the costs of repairs and maintenance are deductible

? Capital gains tax, which is not payable by a non- resident on the sale of a property held only as an investment and not as part of a trade or business.

? Inheritance tax, which is charged at 40% on the amount by which the aggregate value of chargeable assets exceeds a threshold, currently