Real Estate Investing: Find Out How To Succeed In The Online Real Estate Market

When it comes to real estate investing, one avenue sometimes overlooked is the online real estate market which can provide a simpler and easier way to buy and sell properties.  Online real estate marketing, for starters, revolves around online listings and advertising properties through various outlets on the internet to help obtain exposure.  Online real estate is often a much more convenient method of doing business, and it is often much quicker than traditional methods of real estate investing  To top it off, online real estate means you typically won’t be dealing with real estate brokers meaning you can save on not having to pay commissions.

Below are some tips to help you get started.

reiWhat is the value of your property?

Before you begin, whether you are working your way into traditional real estate investing or you are tackling the online real estate market, you need to evaluate and understand the value of your property.  There are several methods to find the value of your property, but the two easiest would be to find a listing of your property online or request a real estate agent to perform the evaluation for you.

How do you market your property?

Once you have a solid idea of the value of your property, your next step should be deciding on methods of advertising.  One particular method employed by many agents is to utilize video.  With so many video hosting platforms out there (YouTube, Vimeo, etc.), getting a video online for potential investors or purchasers is easier than ever.  These videos should offer information on the property as well as a guided tour.  This allows people to view the property from the comfort of their own home or office.

Another option is to blog your property listings.  If you are savvier when it comes to writing, you can write an article about the property and provide some photos to go along with it.

There are many other ways to market your property online.  You can test out classified sites (craigslist) or even post your listing on standard real estate sites (Zillow).

Regardless of your choice, having your listing online opens your property up to a wider audience.  The more places your listing is posted, the more potential buyers will find it.  As such, you should be prepared to receive more calls and inquiries.

Are there risks?

There is little doubt that you can make a lot of money through online real estate investing; however, you should also make sure that you are completely comfortable with everything involved in the deal.  Spending time online will make your investing, purchasing, and selling easier and quicker, but without attention to the details, you could cost yourself a lot of money and time.

Of course, these risks are no different than if you are dealing with traditional marketing methods, but it is important to state the obvious to ensure that you are covering yourself no matter the means you choose.

You should be careful in regards to each and every aspect of the deal when it comes to online real estate.  You need to be fluent and comfortable with financing, property “rehab”, and when and if you need to consider hiring a property manager.  Of course, there are options available for you online that can handle these aspects for you or allow you to discuss with others what they are doing and their own best practices.

It also does not hurt to expand your knowledge whenever possible.  Subscribing to blogs or newsletters from the big real estate sites will keep you in the know about trends, tips, and topics to keep you on your toes and help mitigate any risks you may encounter.

In summary…

While online real estate investing can help you buy, sell, and rent more properties quicker, there are certainly some possible risks.  Make sure you take your time and complete the deal properly.  You’ll feed better and see better results.

Good luck!

Buying Investment Real Estate Incognito

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An oft promoted “secret” of buying investment real estate with the intent of “flipping” the property is, as usual, no secret at all. It is however well worth reviewing here so you don’t end up in a relationship that you don’t want. Many real estate investment aficionados promote the concept of buying real estate under the name of an organized legal entity instead of their own name. One purpose behind this structure is to facilitate easy re-selling of the property. This goal is reportedly accomplished by selling the ownership entity (LLC, Corporation, or Trust) and thus transferring the property it owns as well without the traditional process of title searches, title insurance, filings, etc. It sounds good, but is it really? I understand well the desire to make life easy for a buyer. However, there are elements involved in a typical “entity sale” that may make it problematic at best.

The first issue is the probable sale of the entity. Unless this is done correctly, the seller may in fact be selling a security. Securities law is what governs people who sell securities. Stocks, bonds, and shares in a LLC are all generally considered securities. In a case like we are discussing, the seller must comply with securities law. The penalties for breach of these laws are far more punitive than for breaking most real estate laws. In addition to the securities ramifications, there are liability issues.

For all available real estate ownership benefits to be enjoyed by (passed through to) the owners they must have personal liability for the debt. This means that the new owners will of necessity need to sign on any underlying debt, assuming that the current lenders will allow it, which is no way a given. In addition, it will be difficult for the sellers to get a release from the lenders. It is important to note that this type of a sale may well still trigger a “due-on-sale” clause in the mortgage. This would allow the lender to call 100% of the loan balance due and payable. Read these clauses carefully.

There is also the issue of entity operating liabilities. Simply put, if you buy an operating entity, you will inherit all of its operating liabilities. If the entity owes a debt when you buy it, you owe the debt. That is true even if the debt doesn’t pertain directly to the property you want to own. This may be the case for loans like lines of credit, credit cards and open accounts with vendors. In most cases it is difficult to learn of all the debts owed by an entity, and therefore, if you buy an operating company, be careful to identify and document all the debts you assume and have the sellers indemnify you against any others.

As with many things in real estate, this concept is presented as a safe, secure and easily used tactic to facilitate the business. In the real world, it typically is not. But, it is used with some degree of frequency. The reason you don’t hear more about it is that the parties involved usually never get to the point of litigating any of the issues. In most cases things just go along according to Hoyle. If money is made then everybody is happy. If money is lost then most people take the hit and get on with life. The fact that you may never be caught however does not make it all right to use this concept with impunity.

As with all elements in real estate, you have an obligation to yourself and to those you do business with to be honest, open and upfront. You need to understand everything possible about a transaction and make your decisions wisely. If you’re thinking about buying or selling an entity, and thereby a property, be careful. The more you know the better. This tool is not as safe as some would have you believe, for either the buyer or seller. If we can help, we’d be glad to. Good luck.

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Original article by Roger Beattie

4 Tips To Invest In Real Estate & Keep Your Day Job

 4-tips-to-invest-in-real-estateInterested in the real estate world, but too afraid to leave your current position? You may not have to.

It’s a myth that one must work in the industry on a full-time basis in order to be a great real estate investor. The truth is that you have plenty of opportunities available to you, even if you already have a job that you are comfortable with.

Earning extra income is one of the top reasons that people choose to get into real estate investing. With the right skills and work ethic, you can make these two careers work in harmony. Though it’s not for everyone, here are some tips to making an investment career work with your day job.

Start Slow & Gain Experience

One of the many advantages to sticking with your current employer is getting to “try out” real estate investing before going all-in. Your steady income will allow you to take more risks early on, or may help you qualify for different kinds of credit that will help you along the way. Who knows? You may be able to have more fun investing if you start small and work your way up. Learn to experiment and take risks early, and watch how your career develops.

Manage Your Time Wisely

As you juggle real estate investing alongside your career, you’ll need to become an expert in time management. Any smart investor will have a system for everything that comes their way. From the time you wake up each morning, to your processes for lead generation and marketing, take on the mindset of a business person when you do your real estate work, just like you do with your job.

Take Saving Seriously

In order to create the kind of income that you desire, you’ll have to ensure you have liquidity, or plenty of funds to move around. Having a regular source of income will put you at an advantage by allowing you to amass savings, whether you’re planning to leave your job or just plan to invest a little on the side. Develop a frugal lifestyle plan for yourself, and save your way to a lucrative side career in real estate investing.

Plan Your Exit

On this blog, we talk a lot about planning your exit strategy, whether it’s from a specific deal, or in this case, from your full-time job. Whether you plan to retire early, or fully transition from your current job to a real estate investing career, you have some thinking to do. How aggressive will your investment strategy be, and how long will it take to reach your goals? Even if you’ve just begun, it’s never too early to plan for the day you’ll hang it all up. Revise as needed!

Remember that real estate investing may be a higher-risk career path than what you’re used to, but there are options for all ability levels. Try investing in some REITs or flipping some easy properties to gauge your interest and skill in this field. Always remember to study up prior to launching any new investment plan, and you’ll be an informed and successful investor in no time.

 

Original Article by Marko Rubel

Holding Investment Real Estate – LLC, Trust, Or Both?

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The Issue: How to Hold Property in California?

Countless individuals invest in real estate every day. Some dream of becoming the next real estate mogul, while others simply wish to supplement their salary with additional income. Whatever your motivations, owning investment properties can produce big rewards, but also big problems. This is why it is important to hold title to your property in the most beneficial way. The internet is saturated with various posts and articles touting the most effective techniques to manage your property. It can often be a daunting task weeding through the mass of information in an attempt to discern what advice is reliable and what advice can get you into trouble. Our goal here is to provide a succinct and clear summary of the safest and most important strategies for holding investment property in California. We hope the result will be a valuable starting point in considering the best ways to both protect you as the owner/landlord from liability and also guarantee the best treatment of your assets.

The Risks of Owning Real Estate

As stated above, while property can be a valuable investment, there are also significant risks. One of the biggest risks is lawsuits. From common slip and falls, to environmental contamination, landlords and owners are easily exposed to legal judgments. Landlords have also been successfully sued by victims of crimes — such as robberies, rape, and even murder — that occur on their property on the theory that the landlord provided inadequate security.

Options for Holding Real Estate

Faced with the risk of lawsuits, it is crucial that you do not own investment real property in your own name. (The only real property you should hold in your own name is your primary residence.) Thankfully, there are several ways in which an individual can hold property other than in his/her own name. These include as a corporation, limited partnership, limited liability company (“LLC”), trust, and many others. While there are many options, when it comes to real estate investment, LLCs are the preferred entity by most investors, attorneys and accountants.

For many reasons, few investors hold investment real estate in C corporations. A corporation protects the shareholders from personal liability, but the double taxation of dividends and the inability to have “paper losses” from depreciation flow through to owners make a C corporation inappropriate for real estate investments.

In the past, partnerships and limited partnerships were the entities of choice for real estate investors. Limited partners were protected from personal liability while also being able to take passed through tax losses (subject to IRS rules–you’ll need an accountant or attorney to sort out the issues of at-risk limitations and so on) from the property. However, the biggest downfall with limited partnerships was that someone had to be the general partner and expose himself to unlimited personal liability.

Many small real estate investors also hold property in a trust. While a living trust is important for protecting the owner’s privacy and provides valuable estate planning treatment, the trust provides nothing in the area of protection from liability. However, although a trust provides no liability protection, it should not be overlooked, as it can easily be paired with an LLC.

1. Benefits of a LLC

LLCs appear to be the best of all worlds for holding investment real estate. Unlike limited partnerships, LLCs do not require a general partner who is exposed to liability. Instead, all LLC owners — called members — have complete limited liability protection. LLCs are also superior to C corporations because LLCs avoid the double taxation of corporations, yet retain complete limited liability for all members. Furthermore, LLC’s are rather cheap and easy to form.

A. One LLC or Multiple LLCs?

For owners of multiple properties, the question arises whether to hold all properties under one LLC, or to create a new LLC for each additional property. For several reasons, it is generally advisable to have one LLC for each property.

First, having a separate LLC own each separate property prevents “spillover” liability from one property to another. Suppose you have two properties worth $500,000 and they’re held in the same LLC. If a tenant is injured at property 1, and wins a $750,000 judgment, he will be able to put a lien on both properties for the entire $750,000 even though property 2 had nothing to do with the plaintiff’s injury.

On the other hand, if each property had its own LLC, then the creditor could only put a lien on the property where the plaintiff was injured (assuming that they cannot pierce the corporate veil).

Additionally, many banks and lenders require separate LLCs for each property. They want the property they’re lending against to be “bankruptcy remote”. This means that the lender doesn’t want a problem at a separate property to jeopardize their security interest in the property that they’re lending on.

2. Benefits of a Trust

As stated above, an LLC may be used concurrently with a trust to provide the best protection and estate treatment for your property. There are many types of trusts, but the revocable living trust is probably the most common and useful for holding title to real estate. The major benefit from holding property in a trust is that the property avoids probate after your death. As many are aware, probate is a court-supervised process for transferring assets to the beneficiaries listed in one’s will. The advantages of avoiding probate are numerous. Distribution of property held in a living trust can be much faster than probate, assets in a living trust can be more easily accessible to the beneficiaries of the trust, and the cost of distributing assets held in a living trust is often less than going through probate. [Note: One should also be aware of other ways to avoid probate. For instance, property held in joint tenancy with a right of survivorship automatically avoids probate whether or not the property is in the living trust. Consult an estate planning attorney for more advice regarding probate matters.]

3. Use Both an LLC and a Trust

Because an LLC and a trust both provide significant benefits to the owner of real property, a smart investor should consider using both a LLC and a trust to adequately protect himself and his property. Utilizing both a trust and a LLC creates the best combination of liability protection and favorable estate planning. To accomplish this, the owner should hold the investment property in a single member LLC, with the living trust as the sole member of the LLC. Here, the trust is the owner of the company and holds all of the interests of the LLC. This form of ownership gives you an added layer of protection from the LLC as well as the additional estate planning benefits of a trust.

A. Costs

For the most part, the costs of forming and maintaining an LLC and trust are rather minimal. For an average LLC, the costs are simply nominal filing fees and an $800 per/yr fee to the state of CA. While simple incorporations may be done on your own, it is strongly advised that you seek the advice of a knowledgeable attorney so that no mistakes are made. The same may be said for forming a trust. A little money now is worth the price of avoiding big problems in the future.

B. The CA LLC Fee

While the costs of forming a LLC are generally small, there are additional fees that may be imposed on LLCs in California depending on gross profits. The California Revenue and Taxation Code Section 17942(a) includes an additional fee on LLCs if total gross income (i.e. rent) exceeds $250,000. “Total gross income” refers to gross revenues (not profits). Under this Tax Code Section, the amount of the fee is determined as follows:

1. $0 for LLCs with total gross income of less than $250,000;

2. $900 for LLCs with total gross income of at least $250,000 but less than $500,000;

3. $2,500 for LLCs with total gross income of at least $500,000 but less than $1,000,000;

4. $6,000 for LLCs with total gross income of at least $1,000,000 but less than $5,000,000; and

5. $11,790 for LLCs with total gross income of $5,000,000 or more.

Although the fee is relatively small, one must consider that the fee is assessed against gross revenues, not profits. This means that the fee is due whether or not your property is profitable. For a property with high revenues but narrow profit margins, the fee would reflect a higher portion of the property’s profitability than it would on a property that is highly profitable. For example, a company that owns an office building with revenues from rent totaling $1 million, but a mortgage of $995,000, would actually operate at a loss after the $6,000 fee was imposed. Furthermore, the fee would be particularly irksome for those companies that foresee incurring losses in their early stages of development.

4. Limited Partnership: a Possible Strategy if Gross Receipts Exceed $250,000

For the vast majority of investors, the CA LLC fee should not dissuade you from forming an LLC. If, however, the impact is severely detrimental, there are several potential solutions that may be explored. A competent attorney or accountant may be able to work with you to avoid this fee. One method may be to form a Limited Partnership. The partnership should be set up with an LLC as the General Partner (assuming liability) and the owner(s) of the property as the limited partner(s). By forming a limited partnership with an LLC acting as the general partner, the landlord can likely avoid the higher fee imposed on an LLC while still protecting his/her personal liability. While this may be a possible solution, it is strongly recommended that you consult with an attorney or accountant regarding the best course of action.

While there are risks associated with real estate, with intelligent decision-making and thoughtful preparation, real property can be a valuable investment. The first step though, is to make sure that you have adequately protected yourself and your property. We hope that this article helps property owners begin to discover the various ways in which one may hold investment property, as well as the protections and benefits provided by such ownership.

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Original article by P. J. Javaheri

5 Steps of Short Term Vacation Rental Investing

5stepsshorttermYou’re about to discover a new twist, thanks to technology, on the age-old concept of short term vacation renting of a house or of a condo. Not just so that you can have a vacation home, like I described in a previous training, “How to Make Your Vacation Home Dreams a Reality”. Instead, in this training, I’m going to take this concept to a whole new level and focus on short term vacation rental from an investing standpoint.

 

Five Steps to Short-Term Vacation Rental Investing

Things like Airbnb, VRBO, HomeAway, and now to a lesser extent, TripAdvisor, this is an amazing way to make more money with a rental than the traditional way. I have a video called, “Three Ways to Turn a House into a Cash Flowing Machine”, where I introduced this concept of being able to produce more profits with the same house by converting it into a short-term rental in a vacation rental.

To be clear, you don’t necessarily have to be in some far off Caribbean island or some ski resort to make this concept work, it can work in a lot of places because in a way it’s competing against hotels and motels. More and more travelers are travelling as a family and they want to have more space and more room when they go on vacation, and thanks to technology we can now put this altogether and put it into your hands as opposed to just some select local property managers.

Vacation rental investing is for real. I personally do it so I have a tremendous amount of experience, and so in sharing this with you I know what I’m talking about and it can make you a lot more money than the traditional rental. Here are the five steps.

1. Do Your Research

There’s a couple of things in particular I want you to research. The first is the legality. This is somewhat new in a way, the idea that someone can put their house up for short-term rent. A lot of these houses are in little residential neighborhoods and they’re zoned as a single family home. What happens is some of these communities don’t even have laws in place for this kind of stuff. What they do is change the law if there is none, or they put one in place that says you can’t rent it for less than 30 days.

I need you to do your research on the legality because that could be a big deal killer. You get this going, you have all these bookings set up, some as far as a year in advance and then boom, the government says you can’t do it. Make sure you do your research on that.

The next thing is you need to see if it’s going to make any money, so you need to look into what other vacation rentals in the area are going for. They’re already on HomeAway.com and AirBnb, so go look at some competitors, see what their nightly rates are and then look at the calendar and see how booked up they are. You might even want to call a local property manager.

Gross Revenue

Another thing I’m going to talk about here in a minute is a booking agent, and their organization can look into some of their statistics as well. Look at what it’s bringing in, and the main number you want to get to more than anything else is the gross. What is the gross revenue? I’m not taking about when they collect an extra 12.5% for taxes or a cleaning fee, I’m talking about the actual rental money that could go to you as the owner, what is the gross amount?

If the gross amount is  about 45,000, well then how much are my utilities going to be because that’s extra, and your normal rental would not have to pay for utilities. You’ve got your gas maybe, your electrical, and  your water, you might have your sewer and your trash, then you’re also potentially going to have cable, and internet. Some people try to cut corners and not offer cable TV. Just real quick on that. The cable organizations around the world have figured this out, and so what they do is make the idea of just buying the internet, maybe like $75 a month, but if you go ahead and get the cable and what not, it’s $85. Often times, cable TV is not that much more expensive than internet, but travelers want internet as well.

Other expenses include things like lawn care or if you have a pool you of course have pool care. You’re going to need to look at what the revenue you’re going to generate.  I’m not including taxes or insurance because you’d have that no matter what, but what kind of revenue are you going to generate. Is it significantly more than if you did a normal rental?

2. Sweet Spot Property

That’s the property that’s going to give you the most beds at the least amount of cost but also has the amenities. If you’re in the Smokey Mountains it’s going to need a view. Ideally it’s not incredibly difficult to get your car up the mountain, and maybe it has a flat and is a log cabin not just some stick built home. If you’re near the water you want to be close to the beach, but you don’t necessarily have to be waterfront. Waterfront properties typically cost more but they don’t generate nearly as much revenue to compensate for the cost of purchase. You want to be close enough to where it’s not a long bike ride or a really long car ride to get to the ocean.

Try to figure out what those amenities are by going back to study what your competition is and what they putting in their ads. Really study what they’re offering to figure out and pick up on ideas on what those amenities need to be.

Sleep number is another one. Maybe you’ve only got three bedrooms but it’s got an extra bonus room that you can put some bunk beds in. The number of people that a rental sleeps is a huge determining factor on how much more money you can get. The sweet spot property has the amenities, the beds, and then it has to have the ability to just to have a ” Wow Factor”.

Wow Factor

You can fabricate some of this by the way in which you furnish the property and renovate it, but the “Wow Factor” is the reason people go there they just love it. Again, I’m going to go back to the Smokey Mountains, it’s got a great view. Let’s say you’re just in a major city you’re not in some super destination, it may be accessible to the subway, or have something  there that people are really, really going to like. If it’s a complete dump you’re going to absolutely have to renovate it.

3. Renovate and Furnish

Now, you may not have to renovate very much, but usually there are certain things you may need to accomplish to make it far more traveler friendly. You can win big by how you furnish your vacation home. You’ve got leather couches and great things on the wall, you make it feel homey, you do all the little things. You have all the pots and the pans, and everything you need so that as a traveler you feel like you’re at home. You can make up for some lack of amenities that a property doesn’t have, maybe it isn’t all that close to the water as much as it should be, but if you can make it wonderful.

If when people walk in they’re just like, “Wow, this place is great.” . All those little things, they’re not that expensive but they make a huge difference. This is by far the biggest separator from going to a normal, traditional investing arrangement versus short-term rentals or vacation rentals. You’re going to have to pay to get it furnished, and this can be $10,000, $15,000, $20,000. This is definitely more difficult for those that are cash challenged because you can’t usually borrow money on furnishing unless you get a credit card and those interest rates are too high, you have to have the cash to do it.

You have to look at the math that we started with on step one. If it’s going to make enough money then the furnishings are negligible. In fact, many of the deals that I do I can make up for the furnishings, in half a year I get them all paid off. Make it wonderful, make it a home and it will have a huge impact on your star ratings which makes a big deal over time, but also it makes a huge impact on the ability to get these people to come back. Ideally, you start building a brand where people want to stay in your properties because they’re just wonderful and have all of the little things that most people don’t have.

This is where so many of the people that have been in the short-term rental business for a little bit of time, get cheap on the furnishings. Don’t do that, this is where you can win or win big.  I have amazing furniture and people love it even if the property doesn’t have all the other details it should have. I can make up for it and then some in furnishings, because they’re going to stay in the property anyways.

4. Booking Agents

With a short-term rental especially on platforms like HomeAway, Airbnb, VRBO, TripAdvisor, they require you to respond in 24 hours or less. That’s not freedom. I mean at least with the traditional rental you just have to pick up your rent each month and maybe pick up a phone or call or two, or you hire a property manager to do it. A booking agent is kind of like a property manager only they’re more suited for this particular industry. They’re the ones that are handling those inquiries that are coming in usually on a daily basis.

Perhaps the biggest one out there is evolvevacationrental.com. What’s so wonderful about a group like this is not just that they’re going to pick up the phones, they’re also going to manage your listings. If you don’t know how to set up an Airbnb or a VRBO or a HomeAway listing account very well then you’re going to be in trouble because that’s where all the bookings come from so you got to make that look good. These people have already figured that out and they’ll manage it for you.

Dynamic Pricing

This is the other big thing that they’re going to do, this one is huge, dynamic pricing. There are tools out there now that the hotel industry has been using for eons where they will dynamically price the unit based on time of year, based on if it’s a peak week or not because there’s some event coming to town, also based on what the hotels are changing, what the other competition is like out there. It’s amazing. They have it already built in to what they’re doing.

If you want to build your own Airbnb accounts and whatnot, which is what I do, I have complete control but I’ve also hired people. This was even before I new these organizations existed. I use a thing called usewheelhouse.com. Pricing is going to make or break you in this game. So often you’re going to price it too low, and once that little slot of time is booked you don’t get it back. If you have short changed yourself, you’re losing money, you’re leaving money on the table. Killed me for years on this. Usewheelhouse has been a game-changer for me because it dynamically prices.

I knew that pricing as well as my team, we knew the pricing pretty well, but when I saw what their algorithms were doing I was kind of blown away because they were pricing some of the peak weeks a lot higher than I was. Anyways, I made the adjustments, I still got the bookings, just more money. Dynamic pricing, but on a group like evolvevacationrental will do that.

Other Groups

There’s another group that’s like them called vacasa.com and I think there’s another one called redawning. The thing is I haven’t used theses services so I can’t tell you all of the potential negatives that could come with them. In general, the biggest problem you’re going to have is not responding quickly enough, not setting up your listing right and definitely not pricing it right.

They’re going to make sure that you get a price right, they’re going to make sure everything is responded to correctly, the ad is saying the right things, and so you should be able to more than make up for the 10% you have to pay them, and it create some automation in your life as well.

Again, to disclaim, I manage all of my own stuff with my staff but that’s because we’ve been doing it for awhile and all of my listings have been built up and have tons of reviews. If I switched over to them now then I would lose all of my reviews, so I have to keep what I’m doing. I could recommend to you if you’re first getting started, this might be a lot easier way to do than the hard road I went through because I didn’t have all of the information you’re getting from me right now, I didn’t have this, nobody was teaching this staff.

5. Bookkeeping

This is above and beyond the normal bookkeeping of a property management system. You now have to deal with what’s called “occupancy taxes”. This is what hotels and motels have been dealing with as long as it’s been in place. 12.5% to 13% is normal. This gets paid above and beyond what you get paid. You can charge this to the guest so it’s not going to be an expense to you, but you do have to pay the government what you collect.

There’s a service called my lodge tax that I just heard about that will do this bookkeeping for you. I already have a bookkeeper in place doing all this. One of the most frustrating things about setting up occupancy tax is setting up the licenses, and getting all these things in place, these different government organizations tax to get this done, this could take awhile. One of my property took over a day to get all of this done, we’re talking like 10 hours to get it setup just so I could pay the government. Mylodgetax.com supposedly will do this for you. I haven’t used them but they’re recommended by HomeAway so they might be pretty good.

Summary

Those are your five steps. Research, make sure you’re picking up properties that actually can make the money we’re looking at as well as being legal. Number two, the sweet spot property as being with the most beds you can get and also have those amenities that those travelers are looking for. Number three, renovate and also furnish. The better you furnish the better off you’re going to be. Number four, hire a booking agent. I also failed to mention, not only do they help with the listings and they can do the dynamic price, but they also can help coordinate with the cleaning and the maintenance. Number five, bookkeeping. It’s important to pay your taxes as well.

Other Benefits of Vacation Rentals

This obviously is a little bit more complicated than the normal, traditional rental, but it can make more money and there are a couple of other benefits I want to share with you real quick before we wrap up. Number one is that you don’t have to evict anyone because they are travelers, they’re coming in, they’re coming out. It’s fantastic. Evictions are non-existent. In the world of normal, traditional rentals, evictions are very common and it’s frustrating because the laws are setup mostly to protect tenants, so landlords typically get screwed.

The next thing is you get your money upfront, you’re not chasing tenants for rents. They’re paying you sometimes upwards of a year in advance, you’re always getting your rental money. I love this form of investing, but you do have to pick through right properties that are in the sweet spot and you have to have done your research right. All these things have to be in place. When you do that, this can be a magical formula. You can make a lot more money for the same property you currently have that you might be doing a traditional rental on.

 

Original Article by Phil Pustejovsky

Buying a Flat From an Investor – What You Should Know

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It is a popular concept in Mumbai to purchase Investor flats. Mostly, you find them through the builder himself, after the builder has exhausted the stock in his hands.

What is an investor flat?

An investor flat is one in which an investor draws an agreement with the builder to purchase a given flat at a certain future point of time. In return for this promise, he pays a small token money towards the price of the flat. This agreement happens even before the construction begins. So, the price agreed upon for the flat is also quite less.

Benefits of investor flats to all parties

Investors:

The benefit of this agreement to the investor is the fact that he is able to procure it at a very low rate and needs to make payment only much later.

Builder:

The main benefit for the builder is the cash flow that accrues to him even before commencement of the project. This will ensure smooth execution of the project. Also, he is making sales even before the goods are produced.

Consumer:

It is not any problem to a consumer to buy a flat from an investor. As the agreement will be made with the builder itself (in case purchase is before possession) the agreement will be one of first-sale and not of resale. Depending upon the investors needs, prices become negotiable. Recently, I heard of an investor flat being quoted at nearly Rs 1000 per square feet lesser than that of the builder. Isn’t that great?

Therefore, when you search for new flats, don’t rule out investor flats. They are as good as buying from the builder itself.

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Original article by Archana Sarat

The Top 5 Key Benefits of Purchasing and Owning Investment Real Estate

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So… You may ask yourself, why should you buy or invest in real estate in the First Place? Because it’s the IDEAL investment! Let’s take a moment to address the reasons why people should have investment real estate in the first place. The easiest answer is a well-known acronym that addresses the key benefits for all investment real estate. Put simply, Investment Real Estate is an IDEAL investment. The IDEAL stands for:

• I – Income

• D – Depreciation

• E – Expenses

• A – Appreciation

• L – Leverage

Real estate is the IDEAL investment compared to all others. I’ll explain each benefit in depth.

The “I” in IDEAL stands for Income. (a.k.a. positive cash flow) Does it even generate income? Your investment property should be generating income from rents received each month. Of course, there will be months where you may experience a vacancy, but for the most part your investment will be producing an income. Be careful because many times beginning investors exaggerate their assumptions and don’t take into account all potential costs. The investor should know going into the purchase that the property will COST money each month (otherwise known as negative cash flow). This scenario, although not ideal, may be OK, only in specific instances that we will discuss later. It boils down to the risk tolerance and ability for the owner to fund and pay for a negative producing asset. In the boom years of real estate, prices were sky high and the rents didn’t increase proportionately with many residential real estate investment properties. Many naïve investors purchased properties with the assumption that the appreciation in prices would more than compensate for the fact that the high balance mortgage would be a significant negative impact on the funds each month. Be aware of this and do your best to forecast a positive cash flow scenario, so that you can actually realize the INCOME part of the IDEAL equation.

Often times, it may require a higher down payment (therefore lesser amount being mortgaged) so that your cash flow is acceptable each month. Ideally, you eventually pay off the mortgage so there is no question that cash flow will be coming in each month, and substantially so. This ought to be a vital component to one’s retirement plan. Do this a few times and you won’t have to worry about money later on down the road, which is the main goal as well as the reward for taking the risk in purchasing investment property in the first place.

The “D” in IDEAL Stands for Depreciation. With investment real estate, you are able to utilize its depreciation for your own tax benefit. What is depreciation anyway? It’s a non-cost accounting method to take into account the overall financial burden incurred through real estate investment. Look at this another way, when you buy a brand new car, the minute you drive off the lot, that car has depreciated in value. When it comes to your investment real estate property, the IRS allows you to deduct this amount yearly against your taxes. Please note: I am not a tax professional, so this is not meant to be a lesson in taxation policy or to be construed as tax advice.

With that said, the depreciation of a real estate investment property is determined by the overall value of the structure of the property and the length of time (recovery period based on the property type-either residential or commercial). If you have ever gotten a property tax bill, they usually break your property’s assessed value into two categories: one for the value of the land, and the other for the value of the structure. Both of these values added up equals your total “basis” for property taxation. When it comes to depreciation, you can deduct against your taxes on the original base value of the structure only; the IRS doesn’t allow you to depreciate land value (because land is typically only APPRECIATING). Just like your new car driving off the lot, it’s the structure on the property that is getting less and less valuable every year as its effective age gets older and older. And you can use this to your tax advantage.

The best example of the benefit regarding this concept is through depreciation, you can actually turn a property that creates a positive cash flow into one that shows a loss (on paper) when dealing with taxes and the IRS. And by doing so, that (paper) loss is deductible against your income for tax purposes. Therefore, it’s a great benefit for people that are specifically looking for a “tax-shelter” of sorts for their real estate investments.

For example, and without getting too technical, assume that you are able to depreciate $15,000 a year from a $500,000 residential investment property that you own. Let’s say that you are cash-flowing $1,000 a month (meaning that after all expenses, you are net-positive $1000 each month), so you have $12,000 total annual income for the year from this property’s rental income. Although you took in $12,000, you can show through your accountancy with the depreciation of the investment real estate that you actually lost $3,000 on paper, which is used against any income taxes that you may owe. From the standpoint of IRS, this property realized a loss of $3,000 after the “expense” of the $15,000 depreciation amount was taken into account. Not only are there no taxes due on that rental income, you can utilize the paper loss of $3,000 against your other regular taxable income from your day-job. Investment property at higher price points will have proportionally higher tax-shelter qualities. Investors use this to their benefit in being able to deduct as much against their taxable amount owed each year through the benefit of depreciation with their underlying real estate investment.

Although this is a vastly important benefit to owning investment real estate, the subject is not well understood. Because depreciation is a somewhat complicated tax subject, the above explanation was meant to be cursory in nature. When it comes to issues involving taxes and depreciation, make sure you have a tax professional that can advise you appropriately so you know where you stand.

The “E” in IDEAL is for Expenses – Generally, all expenses incurred relating to the property are deductible when it comes to your investment property. The cost for utilities, the cost for insurance, the mortgage, and the interest and property taxes you pay. If you use a property manager or if you’re repairing or improving the property itself, all of this is deductible. Real estate investment comes with a lot of expenses, duties, and responsibilities to ensure the investment property itself performs to its highest capability. Because of this, contemporary tax law generally allows that all of these related expenses are deductible to the benefit of the investment real estate landowner. If you were to ever take a loss, or purposefully took a loss on a business investment or investment property, that loss (expense) can carry over for multiple years against your income taxes. For some people, this is an aggressive and technical strategy. Yet it’s another potential benefit of investment real estate.

The “A” in IDEAL is for Appreciation – Appreciation means the growth of value of the underlying investment. It’s one of the main reasons that we invest in the first place, and it’s a powerful way to grow your net worth. Many homes in the city of San Francisco are several million dollars in today’s market, but back in the 1960s, the same property was worth about the cost of the car you are currently driving (probably even less!). Throughout the years, the area became more popular and the demand that ensued caused the real estate prices in the city to grow exponentially compared to where they were a few decades ago. People that were lucky enough to recognize this, or who were just in the right place at the right time and continued to live in their home have realized an investment return in the 1000’s of percent. Now that’s what appreciation is all about. What other investment can make you this kind of return without drastically increased risk? The best part about investment real estate is that someone is paying you to live in your property, paying off your mortgage, and creating an income (positive cash flow) to you each month along the way throughout your course of ownership.

The “L” in IDEAL stands for Leverage – A lot of people refer to this as “OPM” (other people’s money). This is when you are using a small amount of your money to control a much more expensive asset. You are essentially leveraging your down payment and gaining control of an asset that you would normally not be able to purchase without the loan itself. Leverage is much more acceptable in the real estate world and inherently less risky than leverage in the stock world (where this is done through means of options or buying “on Margin”). Leverage is common in real estate. Otherwise, people would only buy property when they had 100% of the cash to do so. Over a third of all purchase transactions are all-cash transactions as our recovery continues. Still, about 2/3 of all purchases are done with some level of financing, so the majority of buyers in the market enjoy the power that leverage can offer when it comes to investment real estate.

For example, if a real estate investor was to buy a house that costs $100,000 with 10% down payment, they are leveraging the remaining 90% through the use of the associated mortgage. Let’s say the local market improves by 20% over the next year, and therefore the actual property is now worth $120,000. When it comes to leverage, from the standpoint of this property, its value increased by 20%. But compared to the investor’s actual down payment (the “skin in the game”) of $10,000- this increase in property value of 20% really means the investor doubled their return on the investment actually made-also known as the “cash on cash” return. In this case, that is 200%-because the $10,000 is now responsible and entitled to a $20,000 increase in overall value and the overall potential profit.

Although leverage is considered a benefit, like everything else, there can always be too much of a good thing. In 2007, when the real estate market took a turn for the worst, many investors were over-leveraged and fared the worst. They could not weather the storm of a correcting economy. Exercising caution with every investment made will help to ensure that you can purchase, retain, pay-off debt, and grow your wealth from the investment decisions made as opposed to being at the mercy and whim of the overall market fluctuations. Surely there will be future booms and busts as the past would dictate as we continue to move forward. More planning and preparing while building net worth will help prevent getting bruised and battered by the side effects of whatever market we find ourselves in.

Many people think that investment real estate is only about cash flow and appreciation, but it’s so much more than that. As mentioned above, you can realize several benefits through each real estate investment property you purchase. The challenge is to maximize the benefits through every investment.

Furthermore, the IDEAL acronym is not just a reminder of the benefits of investment real estate; it’s also here to serve as a guide for every investment property you will consider purchasing in the future. Any property you purchase should conform to all of the letters that represent the IDEAL acronym. The underlying property should have a good reason for not fitting all the guidelines. And in almost every case, if there is an investment you are considering that doesn’t hit all the guidelines, by most accounts you should probably PASS on it!

Take for example a story of my own, regarding a property that I purchased early on in my real estate career. To this day, it’s the biggest investment mistake that I’ve made, and it’s precisely because I didn’t follow the IDEAL guidelines that you are reading and learning about now. I was naïve and my experience was not yet fully developed. The property I purchased was a vacant lot in a gated community development. The property already had an HOA (a monthly maintenance fee) because of the nice amenity facilities that were built for it, and in anticipation of would-be-built homes. There were high expectations for the future appreciation potential-but then the market turned for the worse as we headed into the great recession that lasted from 2007-2012. Can you see what parts of the IDEAL guidelines I missed on completely?

Let’s start with “I”. The vacant lot made no income! Sometimes this can be acceptable, if the deal is something that cannot be missed. But for the most part this deal was nothing special. In all honesty, I’ve considered selling the trees that are currently on the vacant lot to the local wood mill for some actual income, or putting up a camping spot ad on the local Craigslist; but unfortunately the lumber isn’t worth enough and there are better spots to camp! My expectations and desire for price appreciation blocked the rational and logical questions that needed to be asked. So, when it came to the income aspect of the IDEAL guidelines for a real estate investment, I paid no attention to it. And I paid the price for my hubris. Furthermore, this investment failed to realize the benefit of depreciation as you cannot depreciate land! So, we are zero for two so far, with the IDEAL guideline to real estate investing. All I can do is hope the land appreciates to a point where it can be sold one day. Let’s call it an expensive learning lesson. You too will have these “learning lessons”; just try to have as few of them as possible and you will be better off.

When it comes to making the most of your real estate investments, ALWAYS keep the IDEAL guideline in mind to make certain you are making a good decision and a solid investment.

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Original article by Michael Justin Wolf

3 Ways to Make Money in Real Estate Investing Without Ever Buying a Property

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There seems to be what I call a fog of information about real estate investing. It is not uncommon for a wannabe investor to pay more money learning about real estate investing than he would pay for a master’s degree. Even after spending all that money, many investors never do a real estate transaction. In spite of this there are some individuals making substantial incomes without actually buying and selling properties.

Following are three techniques that individuals in the real estate industry are using to make money without actually buying and selling properties themselves. I omitted ancillary investments like tax deeds or tax liens, lease options, options, realtors as commissioned agents and other methods that do not require your actually buying properties.

1. Selling Other People’s Properties (SOPPs) is a great way to begin doing real estate deals without having any money in the transactions. The first thing to do is build a buyers list using all the usual networking and internet collection methods. Next, contact every local wholesaler and request to re-sell whatever properties they have for sale. Usually they have no objection but they want you to mark up the properties from their offering price. Finally, you will email your list of the other wholesalers’ properties as they become available. Just because the original wholesaler may not have sold the property doesn’t mean that someone on your list won’t buy it.

You should establish what your compensation is before you email anyone else’s property and I suggest you get it in writing in a simple Partnership Agreement. This re-offering other wholesalers’ properties may require some travel on your part to make sure you get credit for the buyers you send to the property. Don’t send your buyers to properties that have For Sale signs with the wholesaler’s telephone number on them – otherwise your lead will call the owner!

2. To make more money on wholesale transactions, an investor should prospect for and get homeowners to sign a contract with them that has a 15 – 30 day inspection period and then advertise the property to his wholesale buyers list. The investor will not have to have money to close the transaction if he simply assigns the contract to the end-buyer he found. A guideline that I use is; if the profit is less than $15,000, the investor should assign the contract. If the profit is greater than $15,000, the investor should do a double closing so neither the buyer or seller knows the amount of the investor’s profit. In this case, money is needed but the investor can use transactional funding that should be much easier to get than hard money.

Investors who wholesale by selling to other investors, learn very quickly that their buyers list is critical to their success. The more emails on their buyers list, the easier it is to sell their properties and the competition by the buyers on their list leads to higher wholesale prices. In fact, the most successful wholesalers have the largest buyers lists. The continued success depends on their adding names continuously because a buyer may not be ready to buy at exactly the time a property is available for sale, or the wholesaler’s whale buyers may have run out of funds temporarily.

3. The even more productive method of making money in real estate, with no travel involved, is to become an expert in your market. This may sound impossible since you haven’t done any deals and may not have any experience, but you can do this by interviewing local and national experts, posting these interviews on your website, or by doing online teleseminars. All of the national experts and some of the local experts will have products that are commissionable to you. You should be able to line up plenty of speakers who are willing to work with you and planning for an entire year can be fairly easy.

In summary, there are a number of ways to make money in real estate without buying and selling properties. The end result of whether you wholesale other investors’ properties, your own properties, or you start an internet marketing program, your key to success is building a massive buyers list and continuing to add to it as often as possible. It has never been truer to say, “Your power is in your list!”

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Original article by Dave Dinkel

Five Important Property Investment Ideas to Follow

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Nowadays, planning for property investment continues to be high among individuals. Every investment should be about increasing your capital and secure the future. However, we cannot make sure that all real estate investment will deliver positive results. Thus, here are five important investing ideas that will be essential for every land investor.

Selecting the Right Real Estate Company/Agency/Broker

You may wish to buy an empty land, constructed home or plots for sale. If you are investing through a company, agency or individual broker, then ensure about their trust among people in the society. Further, check for their track-record and previous customer feedback or testimonials. This will be an important factor to end up with a successful property investment.

Know the Fundamentals of Realty Investment

While if you go for a property agent or broker for investment, then initially you should not rely on them. You should first gather information related to the condition of the current real estate market, and then know the fundamentals of investing in properties. As this will help you to avoid any possible risks and make a profitable investment in the city you live.

Types of Real Estate Investments

Since, there are different types of property investments such as, Buy-to-let, Below Market Value (BMV) and Off-plan properties. Thus, the type of stake is also important. So, make sure what kind of investment you are looking for to yield a good profit.

Location of the Property

The location of the property always plays an important role while investing in real estate properties. As you may want to use the property, or sell it to someone in the future. A residential or commercial property that is in a better location will always gain good future appreciation. Thus, a location of the property will be an added advantage and proves to be a wise investment.

Property (ROI) Return on Investment

While investing in a residential property and if planning to let it for rent, it brings you instant profit. In this case, it is vital to make sure that you can get tenants for your residential property and the rental demand in the locality. In addition, buying a rental asset depends on the location, home type and many other important factors. Some real estate companies also help home buyers for rental needs.

Therefore, make sure you stick on with these five important real estate investment ideas and follow it accordingly for a successful property investment.

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Original article by Joel Jonathan

How to Raise Rents – The Nuisance Rental Increase

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Every landlord is faced with the question: should I raise rent? And if so, by how much and how often? I like to employ what we call a nuisance increase.

If you raise rent by too much, you run the risk of the tenant moving out. An increase of $50-$100 or more will probably get your tenant thinking about another place to call home. Now, if for some reason you haven’t raised rent in many years and your current market rent really is $150 above what you now charge, you have two options.

First, you can raise rent by the full amount, explaining to your tenant that it’s the going rate and they will have to pay that amount elsewhere for a comparable dwelling. However, there is still a good chance that they will move out because they’re probably not prepared to take such a large hit to their budget.

The other alternative is to begin using the nuisance increase strategy by raising their rent every year when their lease renews by about $20-$25 until you reach current market rent. This amount usually won’t make a tenant move out – it should feel like a minor nuisance to them, but it’s easier for them to pay $20 more per month then go through the hassle of finding a new place and moving all of their stuff.

Ideally, you should be employing the nuisance increase strategy from the beginning with all of your properties. But, there is an upper limit to what you can charge for a certain property. You don’t want to price your unit out of the current rental market; stop increasing the rent before you reach this point. Instead, reevaluate every year and only increase the rent when prices go up again.

The nuisance increase works well because tenants can understand that your costs to maintain the property go up over time. Every year, you usually see a little bump in your property taxes and insurance, and over time repair costs go up as well. Tenants are okay with this. They usually aren’t okay with you blindsiding them with a huge rental hike.

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Original article by James Orr