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121	Cultivate Your Real Estate "FARM" Cultivate Your Real Estate "FARM"\ David Krebsbach
122	PARTNERS - Worth Their Weight In GOLD! PARTNERS - Worth Their Weight In GOLD! David Krebsbach
123	Why I Love "Uncle Sam" Why I Love "Uncle Sam" David Krebsbach
124	Curious Cat article: Real Estate Curious Cat article: Real Estate
125	Dealing with Real Estate Agents by William Bronchick, Esq. Dealing with Real Estate Agents by William Bronchick, Esq. The real estate agents have a valuable source of potential deals for the real estate investor - the Multiple Listing Service. Unfortunately, real estate agents have a monopoly on this information, so they may be a necessary part of an investor’s game plan. Dealing with real estate agents can be difficult as an investor. Agents prefer home buyers with cash to put down, good credit and conventional buying power. Their interest is getting a commission with as little hassle as possible. Most agents have never done a creative real estate transaction with an investor, so they are not often receptive to unusual offers. Most agents equate a “nothing down” offer with a buyer who is not serious. Offer a Reasonable Earnest Money. You cannot present an offer with a $50 earnest money and expect an agent to take you seriously. You can expect to pay at least $500 as earnest money to get their attention. If you are presenting a solid cash offer, you should put up more money. If you are concerned with losing your earnest money, consider using a promissory note. Offer a Short Closing Date. Another way to get an agent to take you seriously is to offer a fast closing. Nothing makes an agent salivate more than the thought of a commission check in ten days. If the agent has another offer presented to him, he will usually advise his client to take the offer with a larger earnest money and faster close than an offer which is higher in price. Insist on Presenting Creative Offers in Person. If you present a creative offer to an agent, it will not be represented to the owner in the same enthusiastic fashion. As stated above, agents do not like creative offers - they like conventional offers from solid buyers. If you want the owner to hear all of the great benefits of your offer, insist on presenting the offer in person. Appeal to the Agent’s Greed Factor. Let’s face it . . . real estate agents are in the game to make money, just like anyone else in any other business. If you can offer the agent an incentive to make money out of the transaction, you will get his cooperation. If you present an offer which does not permit enough cash to come out of the deal to pay the agent, why would he cooperate with you? If you present a lease/option offer on a listed property, how will the agent receive a commission? You need to find a way for the agent to get paid, even if you pay him out of your own pocket. Do Your Own Comps. Sometimes you will get the opposite of an uncooperative agent - an overzealous agent. Be suspicious of an agent who tells you what a deal you are getting on a property. If it is such a good deal, why didn’t he buy it? Don’t take his word as to the value. Ask for a printout of comparable sales (not listed properties). Be aware that information contained in the MLS computer was entered by the listing broker and may be exaggerated. If a comparable sale shows the same square footage as the house you are looking at, take a drive by and see if it is accurate. Do your own assessment of value. Fax Preliminary Offers First. Don’t waste your time filling out a contract offer until you have preliminary approval. Most agents are not this formal and will take any offer in writing to the seller. Simply summarize your offer in writing and fax it to the listing agent. Once you have an oral approval, then take the time to fill out a contract and an earnest money check. NEVER put up earnest money until the offer is accepted! Don't be Bullied by Uncooperative Agents. If you cannot finesse an agent, don’t be afraid to stand up to him. Some agents are unethical and will refuse to present your offer. Many times the agent will lie and tell you that your offer was rejected when, in fact, it was never presented. If this is the case, do not be afraid to go over his head to the listing broker. If the listing broker is uncooperative, deal directly with the seller (unless, of course, you are also an agent).
126	Dealing with the "Dealer" Issue by William Bronchick, Esq. Dealing with the "Dealer" Issue by William Bronchick, Esq. The capital gains, exchange rules and installment sales rules apply for properties held for "productive use." I.R.C. §1234. If you are actively buying and selling real estate on a regular basis, you may be considered a "dealer" in real estate properties. A dealer is one who buys with the intent of reselling rather than for investment. There is no magic formula for determining who is an investor and who is a dealer, but the IRS will balance a number of factors, (See, e.g., Winthrop, Ada Belle v. Tomlinson, 417 F.2d 905) such as: The purpose for which the property was purchased How long the property was held The amount of sales by the taxpayer in that year Amount of income from sales compared to taxpayer's other income How many deals the taxpayer did in that year The amount of gain realized from the sale "Flipper" Properties May Be Subject to Self Employment Tax If the IRS pegs you as a dealer, your properties are not "investments" but rather "inventory." If you are flipping properties, this means the profit will be reportable as a business on Schedule C of your federal income tax return. Thus, the gains from the sale of real estate will be subject to self-employment tax, which is currently 15.3% of the first $72,600. You will have to pay the back taxes due, plus interest. Remember that the back-end profit from a sandwich lease/option is "dealer" income, since you are essentially buying from the owner and flipping to your subtenant. Consider a corporation for flipping properties to avoid the self-employment tax issue. Installment Sales An installment sale is defined under the Internal Revenue Code as a disposition of property wherein the seller receives one or more payments after the close the tax year in which the sale occurred. I.R.C. §453. Installment sales are reported on IRS form 6252. A seller may elect to report the gain from a wraparound transaction on the installment method. This is desirable because much of the profit made on a wrap is on paper, not in cash. By using the installment method, the seller can spread out the tax on his profits over several years. In this fashion, the gain is taxed pro-rata as it is received. Real estate dealers cannot use the installment sales method. If you bought and resold a number of properties on a wraparound, the installment sales will be disallowed and the entire "paper" profit is reported as ordinary income in the year of sale. This re-characterization could be a large "hit" for the taxpayer. For example, suppose the taxpayer bought and sold ten properties on the following basis: Purchase: $90,000 purchase price, $20,000 down, $70,000 loan @ 8% Resale: $110,000 resale price, $10,000 down, $100,000 wrap note @ 11%. Thus, in each case the seller receives $10,000 in cash and $10,000 in "paper" profit. He also collects monthly net cash flow of about $440 per month. He pays taxes on the $10,000 cash and reports the balance as an installment sale. He also pays tax on the interest received each year. If the profit on the ten deals is re-characterized as ordinary income, the taxpayer now has $100,000 additional income subject to tax in the year of sale! If you are doing a large number of installment sales, consider "opting out" of the installment method. The installment method of reporting is not mandatory; you can choose to instead report the entire profit in the year of sale. When opting-out of the installment method, the profit is not based on the sales price, but rather the market value of the note received. Using the above example, the market value of a $110,000 note secured by a $100,000 property is probably worth about $92,000 depending on the credit of the buyer. Thus, the net value on the note is $92,000 - $90,000=$2,000. You would report a $12,000 profit (the $10,000 in cash + net note profit) in the year of sale, plus interest as you receive it annually on the payments.
127	Dealing with the Lender "Seasoning" Issue By William Bronchick, J.D. Dealing with the Lender "Seasoning" Issue By William Bronchick, J.D.
128	Death and Taxes Death and Taxes Source: Benny L. Kass - July 21, 2003 Q. I am a 83 years old and a widower. I lost my wonderful wife two years ago, and no longer need the large home which we occupied for more than 30 years...
129	Debt-Forced Decisions Tough To Make Debt-Forced Decisions Tough To Make Source: M. Anthony Carr - February 21, 2003 Q: We have lived in our townhouse now for six years. My husband lost his job three years ago and he hasn’t found one that would replace his old salary...
130	Details of a Listing Contract Details of a Listing Contract Source: - 2002 Price and Terms of Sale. Real Estate Commission. Multiple Listing Service. Agency and Salesperson Responsibilities. The Lockbox. Resolving Disputes with Your Agent...
131	Details, Details, Details…! Details, Details, Details…! Barney Zick
132	The Right Time, Place & Price for Your Offer The Right Time, Place & Price for Your Offer Barney Zick
133	Different Types of Lenders Different Types of Lenders Source: RealEstateABC.com - 2002 Mortgage Bankers, Mortgage Brokers, Wholesale Lenders, Portfolio Lenders, Direct Lenders, Correspondent, Banks, Savings & Loans, Credit Unions...
134	Direct Mailing Principles For Real Estate Direct Mailing Principles For Real Estate Scott Rister
135	Get All Fired Up For Motivated Sellers! Get All Fired Up For Motivated Sellers! Scott Rister
136	Make Thousands With One Sentence! Make Thousands With One Sentence! Scott Rister
137	Prescreen the Seller! Prescreen the Seller! Scott Rister
138	Pushing The Envelope! Pushing The Envelope! Scott Rister
139	Disclosure Requirements For Sellers Disclosure Requirements For Sellers Source: Stuart Lieberman - May 1, 2003 Real Estate is a very local kind of business. Local laws and customs dictate how things are done. I am going to discuss seller disclosure issues, but only in a general sense...
140	Dispelling the Myths that May be Keeping You From Owning a Home Dispelling the Myths that May be Keeping You From Owning a Home Source: Michele Dawson - November 18, 2002 Are you short that 20 percent down payment? Have you been in a job less than five years? Is that out-of-control college credit card frenzy years ago keeping you from even thinking about applying for a home loan?..
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