SALT, And The Impact, On Real Estate

Until, the discussion, about some of the components, of the tax reform legislation, enacted, at the end of 2017, few people, paid much attention, to what is often, referred to, as, SALT, or state and local taxes. This provision, appears to favor, many of the smaller states, where there are, often, lower, income and property taxes, etc, over, those, which may have higher taxes. Was this a coincidence, and mere, by – product, or, a concerted political effort, to punish, states, which, generally, vote against the party of this President? This article will attempt to, briefly, consider, examine, review, and discuss, the impact of this limitation, on the ability to deduct, local and state taxes, on various aspects of real estate.

1. Effects higher – priced, and, taxed, houses and properties, more: This provision has impacted, those owning higher – priced, and taxed houses, and properties, to a larger degree, than other homes. Since the limit (or, cap) on how much one is permitted to deduct, is only $!0, 000, it means, if a state, has both, income taxes (state, and/ or local), as well as higher real estate taxes, the owners, lose any potential benefit, from the so – called, tax reform. The higher the differential, the greater the impact!

2. Makes buying harder, especially, for, first – time homeowners: These provisions make it far more challenging, to home buyers, especially, first – time homeowners! When there is less tax benefit, the overall benefits of owning a house, versus, renting, is severely reduced! The lower the tax benefit, the net effect, is, often, severely increasing the overall costs of buying, and owning, a home, of one’s own!

3. More susceptible, when mortgage interest rates, increase: Obviously, when mortgage interest rates, rise, it means, someone has a larger, monthly responsibility. When this is combined, with higher taxes, and limited tax savings, the probability of effecting the real estate market, and pricing, becomes, potentially, pronounced!

4. Perceptions: The tax legislation, appears, to benefit, those who, do not itemize, at the expense, of those, who do! Perhaps, the biggest challenge, may be, how potential buyers, perceive it, and whether, it affects, the price, they are willing, and able to pay, for a home. Obviously, in true, net terms, if one can no longer deduct, all, of the state and local taxes, the advantage of home ownership, is reduced, and, many taxpayers, suffer, to a far greater extent!

What we need, is a fair system, where there is more understanding, than, there might be, under present circumstances! Greater involvement, and fairness, should be, the rule of the land!

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6 Commercial Real Estate Myths

There are a number of misconceptions floating around in the market when it comes to commercial real estate and it becomes important to identify them. These misconceptions can deter investment and risk-taking behavior that is required in this market to be a successful investor.

You need considerable funds to start

This is one of the most common misconceptions in the real estate industry, you don’t need to be swimming in funds to invest in your first property. Banks don’t only look at your balance to approve your funding, they look at the potential profits of your deal as well. The more appealing the deal is the more likely you will be to get your funding, however, you don’t need to rely on just your banks there are always private money lenders who’d be willing to help out if you check out.

The numbers are too hard

These days there are plenty of software options in the market to do the legwork for you, you just need to know your figures and the software will compute the rest for you. The rest just boils down to you being able to interpret the figures to make informed decisions when it comes to your real estate needs.

Most commercial properties are advertised

Contrary to popular belief most of the available commercial properties aren’t listed in newspapers nor will you find any bandit signs advertising the properties of your desire. You will need to consult a real estate broker who has considerable contacts among investors and property owners alike to get a comprehensive list of all the available properties in the area of your interest.

Managing commercial property is much more of a hassle than residential property

Managing a property is no joke, but the hitch is that the proceeds with commercial properties is much more than that of residential properties. So one can afford to hire a management service that operates in your stead and takes care of all the management aspects of your property, including using their comprehensive list of vendors.

Good deals are difficult to find

No matter the market situation it will always be possible to find a good deal in the real estate market, there are always certain types of properties and other factors that make this reality a possibility. All this is dependent on you making a reasonable effort to make the deal happen though.

A single agent can fairly represent both sides

An agent will invariably have the interests of the landlord at heart and not the investor or the buyer, the agent will always have vested interests and therefore act as a dual agent in a way. So it’s always better to hire your own agent to represent your interests.

These are some of the common myths surrounding the commercial real estate industry.

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Homes of the Future: Luxury Real Estate’s Technology Boom

These days it seems as though technology advances at the speed of light. Blink twice and the next breakthrough is available. It’s not just about phones or computers-cutting edge technology is now available in every field to make life easier. Nowhere is this more evident than in the luxury real estate market. Innovations can be found in every room of the house. From state-of-the-art security systems to tech-laden bathtubs, the high-tech home is the new dream home.

The smart home is arguably the most influential development in home technology. The idea of controlling various systems (such as lighting and heating) remotely has been around a few years now, but more products are now available that integrate into the connected home network. Home security systems, door locks, and smoke and carbon monoxide detectors can keep you safe, while programmable thermostats, window shades, and beds keep you comfortable. There are also products to keep you entertained, such as TVs, sound systems, and lighting. Refrigerators, ovens, and crock-pots are all operable with a push of a button. Imagine riding home from work in your self-driven car, making sure your lights are on, the kitchen is a comfortable 73 degrees, and your dinner is ready the minute you step in the door.

Some homes are outfitted with technology down to the studs. With smart glass, your windows can darken themselves or turn into a movie screen. Other options include solar-thermal cladding to reduce heat loss, self-healing concrete so your driveway never gets a crack, and anti-bacterial tiles to keep your bathroom squeaky clean. Even building materials themselves are advancing with the digital age. Homeowners want it all when it comes to technology, and contractors and builders can provide it for them.

Smart homes are climbing to the top of “must have” lists around the country, and many sellers are ready to deliver. In fact, in a survey of more than 500 luxury real estate agents, 60% said they are seeing more smart home features in listing descriptions than two to five years ago, with agents also noting these features help sell homes faster. High end now means high tech-an oven ought not be just stainless steel; it must also let you adjust the temperature from across town with your tablet. There’s no better, or more desirable way to deliver the comfort and extravagance of luxury real estate to buyers than with smart, up-to-the-minute technology.

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Real Estate Investing in the Time of Covid

My, how things have changed – quickly! If you’re still investing, I’d love to hear how you’re adjusting and what you see for the future. I’ll start with some of the Covid changes we’ve already made.

NOTE: Much of what I share is what we’re already experiencing and changing in our own business. Much is based on our 2008-2010 real estate investing experience.

  1. Don’t stop. Historically, real estate always works, you simply need to adapt to market changes. Therefore:
    • stay flexible
    • learn about and secure funding
    • stay involved in online networking groups – both local and national – to stay abreast of changes you need to be aware of as they happen.
  2. We’ve increased our marketing. Why?
    • People are going to need money which means selling their personal or family members’ properties. We want to be available when a need arises to offer what help we can.
    • There are fewer investors buying already because of fear of the future and lack of funding, so there hasn’t been a better time to be in the market in years!
  3. Get educated. What we’ve seen recently is exactly what we experienced in 2006-2007; everyone was getting into real estate investing because it was so easy. As the business becomes more difficult now, those who are prepared, informed, and educated have incredible opportunity.
  4. Buy for less. We all know the future holds uncertainty. Price values may drop greatly in the coming months/years. Sellers know that, too, which is why many will want to sell sooner rather than later. They also realize that you’re taking on their risk when you buy, so they understand when you offer less than they hope for. And, it’s true, you are taking on risk. Make sure when you make an offer that it’s a price you can live with if the value drops over the next 3-6 months.
  5. Properties are still selling well, so buy properties you can turn quickly – this is not a time to buy large rehabs!
  6. Buy and sell virtually. This is the perfect time to learn how to transition your business to virtual. We are currently doing due diligence online, asking permission to walk around the property and take photos, then asking the seller to either send us interior photos themselves or to leave the property while we enter and take photos. Sellers appreciate our concern for their well being. We are requiring that they allow a property walk-through before closing to insure their own photos do not omit something we should know about.
  7. Prepare for longer days on market when selling. Watch your local property days-on-market to have an idea of what to expect. As lenders begin to dry up and/or increase their borrowing requirements, there will be fewer qualified buyers and both selling and closings will take longer.
  8. Expect lenders to tighten borrowing requirements.
    • We’ve already seen private lenders stop lending due to fear of future risk and a need to keep their funds secure for themselves.
    • Many hard money lenders have stopped lending all together because they were bundling loans and selling them. Those loans are no longer being purchased, so those lenders are no longer lending.
    • Banks have stopped offering jumbo loans, which means they’re already concerned and responding.
    • Pretty much anyone still lending has begun requiring that the borrower has more funds on hand, higher credit score, and is a stronger applicant all the way around. Plus, they’re increasing points and interest rates.
  9. Higher priced properties will be the first to slow, so focus on the properties that are below your area’s median price point (and know what that price point is!).
  10. Expect this “event” to last for a while – possibly years. In 2008, the common response was that the worst was over and things were going to start getting better. “Things”, however, continued to get worse.

Remember, we’re very early in the “new reality” and what’s coming is hard to predict. Stay aware, stay flexible, stay informed, stay in touch with other investors. There’s always money to be made in real estate.

Do you agree/disagree with what I’ve shared?

What changes have you made or do you plan to make going forward?

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Real Estate Law 101

Real Estate 101: The Statute of Frauds is a really old law that originated in England in 1677. It requires that certain transactions must be in writing, signed by the party to be charged, basically the person being sued. Real estate purchases are one of the transactions covered by the statute of frauds. In real estate transactions, the SOF further requires that the writing contain a description of the property, a description of the parties, the price, and any agreed to conditions of price or payment.

There are a few exceptions to this rule. Part Performance is when someone has paid all or part of the purchase price, taken possession, and/or made substantial improvements to the land. For example, if Bob made an oral contract with Sue to buy property, paid her a down payment of 25% of the agreed purchase price, and built a house on the land, then even though the SOF would invalidate the oral contract, Sue could argue that Bob’s partial performance proves the existence of the contract.

In addition to Part Performance, Equitable estoppel and Promissory estoppel may be used to prove an oral contract for the sale of land. Equitable estoppel is based upon an act or a representation. Promissory estoppel is based upon a promise.

Once a contract has been signed, a purchaser becomes an equitable owner of title at the time of the execution of a binding contract. Under the common law, the risk of loss is on the buyer after signing the contract for sale. In other words, if the house burns down between the signing of the contract and the closing, the risk is on the buyer. The buyer will still have to close the deal.

There are some states that have a different rule. States that have enacted the Uniform Vendor and Purchase Risk Act hold that the risk of loss is placed on the seller unless legal title or possession of the property has passed. There are a minority of states have passed this statute. So, in a majority of states, the risk of loss is on the buyer.

Surprisingly, its quite common for people to make oral contracts to sell parts of their property, not realizing it must be in writing. Later, when the buyer fails to pay, the seller is at a loss at how to proceed. An attorney familiar with the nuances of real estate law can help with this.

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Real Estate Games Can Be More Than Just Pastime

Recreation is a vital part of everyone’s life. Gaming is one form in which children and adult alike can become hooked. But more than just past times, they can be used to educate.

Strategy games with some touch of real estate can be used early to teach children important aspects of the industry. There are real estate games which starts with the player owning a land. In order to prosper, the land needs to be developed. Problems soon arise with cash flowing in to the player’s side giving more opportunities to buy more properties but giving more difficulties for maintaining them.

There are also games which allows you to be a property manager, a house flipper, an interior designer, a real estate tycoon, and so much more. Almost any title or job relevant to the real estate industry has a game you can engage in.

Classic Games

Do you know that there is a very classic game which can be used to train kids to develop basic grasp of real estate? That game is called Monopoly.

In this game, the players battle for property ownership. By landing on specific properties, players buy them at the game’s bank and the title cards are awarded to them. As the game progresses, they can develop the properties to establish houses and hotels.

Other players who land on other player’s properties need to pay rents equivalent to how many houses or hotels are established on them.

The game has other kinds of properties like railroads and utility companies. The players can also own them and collect rent to other players.

This board game is actually a strategy game too. It makes the players think carefully on whether to buy a certain property or not. There are also financial constraints like taxes, maintenance repairs, and other expenses which can affect the players’ earnings.

Modern versions

This classic board game has now evolved. It can now be played on computers and gadgets. There are several versions which have slight variations on rules. Some are even made to be adaptive to certain areas like changing names of streets to those known to a certain country.

The real estate industry is a truly fascinating world. It captures not only the minds of adults but also the curiosity of children. Real estate games can be their first step towards understanding what the industry can do for them. Whether they just want to be plain homeowners or real estate tycoons, there are games to harness their skills.

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What Is a Real Estate CRM?

If you are in real estate marketing and sales, you have probably heard the term Real Estate CRM. Do you know what a CRM is and how to use one to make your business more profitable?

A CRM is simply a piece of software that is designed specifically for Customer Relationship Management. CRM software made for realty professionals usually includes a heavy reliance on email autoresponder marketing techniques to keep in touch and nurture your relationship with leads, clients, and potential return clients.

Using a CRM package usually starts with a lead capture website. While there is an art and science to lead capture, the basic process consists of offering a website visitor something of value in return for their contact information. The item of value may be a free report such as a digital download, a book, or access to an MLS home search tool so buyers can search for properties.

Once a lead makes contact with an agent, the CRM is configured to keep in touch using autoresponders, also called email drip campaigns. A series of emails can be written in advance and sent to leads in a fixed sequence to nurture their relationship with the agent and build trust.

At some point during the process, calls to action are conveyed to the lead to help convert their email contact, which is less personal, into a phone call, which is more likely to result in a sale. Agents who receive a phone call from such a qualified lead should be able to escalate the relationship into a face to face meeting and/or buyers agreement to begin the real estate search process.

From the agent’s perspective, a real estate CRM consists of not only the software to automate the lead nurturing process, but the content in the emails that does the heavy lifting of developing the relationship. The agent typically receives regular updates from the software about the leads being captured into the system, as well as tasks that need to be performed by the agent that cannot be automated.

For example, studies have shown that a phone call during the process (perhaps one that comes after an automated email message that tells a lead to expect a call the next day) greatly enhance the lead conversion rates. The bottom line is that the success rate of marketing using a CRM always comes from blend of sales automations technology, human-written content, and well-placed follow-ups and calls to action during the sales process. A well-designed real estate CRM can boost the conversion rates and sales numbers for real estate agents dramatically.

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Tips On Picking "Sleeper" Real Estate Property

Real estate investing is all about perception. Your perception of where the market is going, in conjunction with where it’s actually going. The aim, as always is to buy low and sell high.

You want to buy a cheap tract of dirt and sell it as a high priced piece of developed real estate, after it’s appreciated enough to turn a tidy profit. Selling the property is an art in and of itself.

Buying an initial tract of dirt lends itself to some solid, rational guidelines:

First, look at trend lines for housing prices in your area. While most housing markets are in decline (and the housing markets in Florida and California are adjusting from more than a decade of over-valuation), there are markets where the housing prices are going up. This is a decent leading indicator that there’s a market for expansion.

Second, look for job related news. Home purchases require a steady source of income. New employers moving into a city, or a government branch office opening up are a strong indicator that good, well paying jobs are likely to come up. Where well paying jobs roost, home purchases follow.

Related to this, talk to your local city planning office. Are there recent purchases of “right of ways” to lay down sewer lines? Is the local telephone cable making plans to run out fiber optic lines – a “must have” trend in new home construction. These things point to areas where home growth is immanent. Other big tip offs are school bond issues (found in your local news paper) and new parks being opened up.

Before you look at the land, check out the adjacent commercial real estate usage. Look for “family friendly” or “residential friendly” commercial properties: Houses that are close to grocery and clothes shopping tend to fetch a higher price than ones that are farther away. If there’s a movie theater nearby, or plans for an elementary or middle school, factor that into the size of the homes you build, and what their amenities will be; buyers looking for those features are looking for “mover upper” homes – with a bit more floor space, and two (or three) bedrooms for the kids. Other spots to look for are anchor stores, like Wal-Mart and Best Buy. These companies spend millions on surveys of purchasing patterns before buying a store location; if they’re buying a plot of land, you’ve got about a year to a year and a half window to look into nearby real estate for single family residential and rental residential properties.

You can even flip this on its side – if you can talk to a group of commercial real estate investors, building a shopping center as the nucleus for home development is also a viable combined strategy. This also applies to highly urban areas. Many downtown areas that have been abandoned by businesses can be converted to apartment buildings, and some of the older housing projects are being torn down for mixed-use spaces with combined commercial and residential areas. In particular, you can often get block grants to help with the financing on projects like this, and there are programs from HUD that can help out a great deal with “urban renovations”.

Another source to investigate is the demographics in your area. Look at the US Census figures (and local county figures) for median age, and median birth rate per capita. You want to invest in areas where the population is growing already. High skews in the ’40s and ’50s indicate that you’ve got a bunch of people who are going to retire soon, and retirees are highly prone to selling properties off. Places to watch carefully are most of the urban parts of California, and great swaths of the rural Midwest, where demographic trends have been changing entire towns since the 1950s as the country’s population has shifted to urban areas.

If there’s a local planning council, or urban development council, make it a point to get the minutes of all the meetings from the past year. The city council offices will have them on file as a matter of public record. Also try to get into the next range of meetings as an observer. Discuss with the city and county managers where they see housing and construction trends moving. What you’re looking for is real estate that will be desirable in two to three years; look at road planning atlases, and look for all the data you can find. Also look for real estate that will be scenic – lake front property is as close to a guaranteed bet as you can get in real estate investing, particularly if there’s a lake that’s at the “far end” of a development axis. Likewise, if there’s land that the city council is looking to acquire for parks, buying the adjacent lots now means you’ll be able to sell them later.

Lastly, talk to the professionals in your communities. Talk to architects who can tell you if they’re busy or not. Maintain professional contacts with engineers, bankers and attorneys. They will usually know about projects well before the general public. Also make a habit of reading the local newspaper’s business section. Often times, the first clue that a business may move in to your area is buried at the bottom of a column on page 8.

Using the guidelines suggested above will help you to find “sleeper” raw land properties. These “sleeper” properties are perfect for the buy low, sell high strategy used by successful commercial real estate investors.

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How To Find a Real Estate Agent

You may be of the opinion that you don’t need a real estate agent and that using one will add to the cost of buying your new home.

The fact is that a real estate agent’s fees are typically paid by the seller of the home. So, as a buyer, you can get the services of a professional real estate agent without having to directly pay for it. Please confirm this in any paperwork or contracts that a real estate agent may provide because policies vary greatly by state and company. Be sure to ask about fees when you interview agents.

Most of these agents may work with buyers and sellers but often they specialize in working with one or the other. Make sure the agent that you choose has experience working with buyers and with no down payment transactions.

Be careful if you are speaking with a real estate agent and they don’t seem to recognize terms like “Down Payment Assistance Program”.

Start making a list of possible real estate agents to interview with referrals from your lender, friends and family.

A referral from the lender is great because you get the services from people that have worked together in the past and are already familiar with each other’s systems. This can help prevent any last minute surprises or obstacles.

Questions to ask while you are interviewing an agent:

Please explain your fees.

Are you familiar with any no down payment financing programs?

Have you been involved with no down payment buyers in the past?

Would you mind providing sample contracts so I may review them?

Does it clearly state in the contract who will be paying your fees?

How long have you been a real estate agent?

Do you mostly work with buyers or sellers?

I’m looking for a home in the areas of ______. How familiar are you with those areas?

What specific steps would you take to help me find the home I am looking for?

You should also try to get an idea of these factors while you are speaking with the agent.

– Does this person have good negotiating skills?

– Do you feel this agent is trying to understand your situation so that they can properly represent you to sellers?

– How much knowledge does the agent have about mortgage markets?

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"Wholesaling" Real Estate – What Is It?

If you’re a real estate investor, you’ve either wholesaled properties or heard about others doing it.

In real estate, what exactly is a “wholesale”? Here are the basics:

  1. a property is purchased at a deeply discounted price
  2. no repairs or rehabs are done to the property
  3. it is resold to an investor who plans to rehab it and sell again for their own profit

Let’s break this down:

To purchase a property at a deeply discounted price, expect it to be in bad condition. The properties that need a lot of repair and have been neglected for years are the ones that are typically sold for very low prices.

How do you find properties that can be wholesaled?

  • Direct mail marketing gets sellers who call before they talk to anyone else. No competition deals are always the best.
  • Marketing also lets sellers know before they call you that you’re not an end user and won’t be paying retail.
  • To buy a lot of properties, you must talk to a lot of sellers. The nationwide average is that you must talk to 20 sellers before you buy a property. If you’re not finding these deals, you’re not talking to enough sellers. How many properties you want to buy will tell you how many sellers you need to meet with.

Why do sellers sell that deeply discounted? Many reasons, including:

  • Lived in it for years and never did anything to it (no updates and/or minimal repairs)
  • Moving to retirement home
  • Inheritance
  • Live out of state
  • Distressed and can’t afford to fix it
  • Burned out landlord
  • Hard for them to sell in this condition
  • Hoarders

What do you need to evaluate when making the purchase?

  • After Repair Value (ARV) – What will retail be? You need good comping sources to determine what the value will be after repairs.
  • What will it cost to rehab it to retail value?
  • How much can you pay to buy it?
  • Your purchase price must be low enough to allow both you and the next buyer to make profit.

What do you do to a wholesale property before selling it?

  • Typically nothing!

Why do wholesalers often get a bad name?

I think most people who have a bad taste about wholesaling either haven’t done it or have run into some who do it wrong.

I was a full time investor for 8 years before we began wholesaling. In 2013, my husband and I purchase a HomeVestors franchise – the We Buy Ugly Houses people – and we have been primarily wholesaling since.

To do it right, we spend money every month on marketing to the right people to get the phone to ring. Then we spend a lot of time with the seller crafting a solution to their problem. And we negotiate a price that allows us to resell to an investor who will rehab and still be able to make profit on the deal we sell to them.

Do all these steps, and people will respect you and come to you for deals. There is nothing wrong with wholesaling so don’t be afraid of it.

Is wholesaling legal?

Wholesaling is not a buying technique, but a selling technique. With wholesaling, you purchase the property for a low price. There is a closing with either a title company or attorney and you go on title as owner. You then mark it up a minimal amount and sell it to someone who plans to rehab and make their own profit.

It is not illegal as it is a normal purchase and sale – you buy it, own it, then you sell it. The only thing different between wholesale and a regular purchase is the low price and no work is done to the property before resell.

With wholesaling:

  • we are doing a service
  • we are a solution
  • we are helping people out
  • we are taking a terrible situation and making it better for these sellers

What can you add? Do you wholesale?

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