Did Biden’s Tax Proposal End Up Affecting 1031 Exchanges?

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Image from Pixabay

By Clinton Lu, TFS Properties

Earlier this spring, Biden proposed a number of tax law changes in regards to his Build Back Better program. Aimed at freeing up more money for the little guy, the program divided itself into various parts, one of which was the American Rescue Plan. Within this plan, Biden proposed to do away with the benefits received by performing a 1031 exchange, also known as a “like-kind” exchange, but was this portion of his proposal signed into law?

Section 1031 Like-Kind Exchanges

The IRS Code is divided into sections, one of which details the tax break individuals can take advantage of when it comes to the capital gains taxed on real estate. This particular section, allows investors to roll their profits from a real estate sale into the purchase of another property of the same, or like, type. In doing so, investors defer the capital gains tax that they would typically incur, and are able to reinvest all of the money from their sold property (downleg) into different investment property or properties (upleg.)

Possible Effects of Biden’s Tax Proposal

While it might sound like a good idea on paper, increasing taxes on real estate profits has serious consequences. “The White house emphasizes that its tax increases would affect only the top 1% to 2% of individual taxpayers,” but doing away with 1031 Exchanges would seriously impact both big AND small investors alike.

Image from Pixabay

Both big and small investors can benefit from performing a 1031 Exchange and according to the Congressional Joint Committee on Taxation, investors could save over $40 billion in taxes in the next three to four years if it were to remain in place. That’s money that could—and in many cases, will—be reinvested into other real estate properties and further drive the economy.

This cycle within the real estate industry was so important that the Mortgage Bankers Association and the National Association of Realtors appealed the proposal to halt the exchange. As a result, it seems their efforts, as well as the voices of many others, prevailed.

The Final Verdict

Many feared that ending Section 1031 exchange benefits would have a profound effect on the real estate market. However, this particular part of Biden’s tax proposal was not signed into law. Investors can still defer their taxes on capital gains through a 1031 Exchange and preserve their capital while doing so.

Learn live and in real-time with Realty411. Be sure to register for our next virtual and in-person events. For all the details, please visit Realty411.com or our Eventbrite landing page, CLICK HERE.

What We Can Learn From Zillow’s Downfall?

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Image from Pixabay

By Clinton Lu, TFS Properties

Zillow’s making headlines recently, but not necessarily in a positive way. As you may have heard by now, the well-known online real estate company Zillow had a blunder and their algorithm went a little too far. Now, the company is facing $569 million or more in debt if they can’t offload a few thousand properties.

What began as an algorithm-based way to buy, renovate, and sell a large quantity of homes has become a nightmare scenario for Zillow. But it’s not the computer’s fault. Rather, it’s the unaccounted-for situations that real estate agents see all too often. It is the very act of having a real pair of eyes on a house that lies at the root of the program’s downfall.

The good news is that where Zillow fell short, you can take note and learn a thing or two before entering the real estate market yourself. That’s true for anyone looking to buy and/or sell a home, as well as budding real estate agents.

So what exactly can you learn from Zillow’s downfall?

Real World vs. Ideal Conditions

Image from Pixabay

Real estate agents will be the first to tell you there’s a limit to how much you can ask for your house when selling it. Determining that price range includes identifying the physical aspects of the structure itself including those that can not be identified from a quick glance or through examination of the numbers.

A large part of a home’s market value comes from looking at the values of homes in the same area that have sold recently. These are often referred to as “comps,” or comparable houses. They’re more or less a way to justify the asking price you come up with, because if someone paid a certain price for a comparable house, they should (in theory) pay about the same for your house. However, an investor can not judge the value based purely on comps alone.

In the beginning, Zillow based their home values on these comparisons. The company hired real estate agents to do all the work behind the scenes. Then, it taught the software what to look for, setting parameters to then buy, flip, and sell houses. It sounded all well and good in the ideal world, but when it comes to real estate, hardly any piece of property meets these impossible standards.

Home Values are Not Plug and Play

Image from Pixabay

Whereas a computer might pick out parameters from a data set to determine that house’s value, real estate agents are the ones actually stepping foot in those houses. And what they find isn’t always caught by the algorithms. It takes an in-person inspection to truly determine the state of a home. There are factors such as the mold smell inside a house, or poor plumbing that can only be found through the eyes “and nose” of someone with experience.

In fact, this is where Zillow Offers truly set itself up for failure. It’s no secret the housing market has exploded as of late, but that doesn’t mean the houses going up for sale are perfect specimens. Zillow’s algorithm assumed that the repairs necessary to prepare these houses for market were (a) quick, (b) cheap, or (c) easily identified and addressed.

As time went on, Zillow’s software soon learned how hard it is to flip a large number of houses, especially with the rise in building materials prices and the aftereffects of a global pandemic. The get in, fix up quick, get out approach may work for reality TV stars, but real life isn’t so predictable. It takes expert eyes to gather the information about a home and come up with a well-researched estimate that goes beyond the facts to consider reality.

Real-World Warning Signs to Look For

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We’ve been talking a lot about what real estate agents can see that a computer can’t. So what exactly are examples of aspects of a home that don’t show up online?

Here are just a few warning signs to paint a picture for you:

● Water damage: rust, leaks, mold, etc.
● Warped walls
● Vintage fixtures
● Doors that stick
● Misshapen insulation
● Uncodumented work with no building permit(s)
● Water flow issues
● Cracks in walls, ceiling, foundation
● Damage otherwise (poorly) covered up

As you can see, there’s much more to buying and selling a house than just what shows up in the pictures. If you want to make a house your home, choose wisely. It could end up saving you thousands, both in terms of dollars and hours lost to headaches and frustration.

The Value of a Real Estate Agent

Image from Pixabay

Real estate agents know the home better than almost anyone else. They know what to look for when it comes to pushing past the staging to seek out the cracks. When you hire a real estate agent, you’re setting yourself up for success by choosing experience.

As Zillow found out, it’s real-world experience that separates the computer algorithm from reality. A computer might just see the three bedroom, two bath home as a prime buy for the area in which it’s located. The experienced real estate agent, however, knows that this particular house, so close to a school, may appeal more to young families than anyone else.

Hiring a real estate agent might seem unnecessary for some folks. But when you enter into a relationship with a real person, you’re gaining their experience and their connection to a world you may not know a lot about. Think of them more as a guide and you may begin to see the value of a real estate agent, no matter if you’re looking for a property to buy or wanting to sell the one you’re in.

Take it From Zillow

As Zillow prepares to attempt to unload roughly 7,000 homes in order to pay off its debts, rest assured you don’t have to make the same mistakes. Hire an experienced real estate agent to guide you in your home search and you could save tens of thousands of dollars. After all, you should be enjoying your new home, not drowning in buyer’s remorse.

Learn live and in real-time with Realty411. Be sure to register for our next virtual and in-person events. For all the details, please visit Realty411.com or our Eventbrite landing page, CLICK HERE.

Retirement Savings Gone After Investment in Fraudulent Company Resembling SDIRA Custodian

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By Stephanie Mojica

A Wisconsin woman lost her entire retirement savings by investing with a now-deceased friend’s business, My IRA, LLC, according to the Milwaukee NBC television affiliate TMJ4. It seems the company attempted to resemble an SDIRA – a Self-Directed Individual Retirement Account custodian.

My IRA, LLC was started by a tax preparer and purported investor, Michael Cuccia, who suddenly died in November 2020, according to TMJ4. When people who had invested in his company sought the return of their assets, they were stunned to learn that most of them were nowhere to be found, according to TMJ4.

Attorney Anne Cohen stated that her client Diane Conklin had a 401(K) account, but needed to figure out her best options when she broke her back in 2012.

Image from Pixabay

“She had learned that she could no longer work and wanted to make sure that the funds she had in her 401(K) were in a secure account,” Cohen told TMJ4.“Because she quickly was learning that was all of the wealth she was going to amass in her lifetime due to her disability.”

According to Cohen, Conklin knew Cuccia professionally and also considered him a friend. Cuccia told Conklin to take her money out of her 401(K) account and invest in his My IRA, LLC company, according to a lawsuit Conklin filed against Cuccia’s estate.

Cuccia claimed Conklin had no risk of losing her assets and she was guaranteed a 5% return on investment each year, according to Cohen.

“…after years and years of friendship and going to him for tax advice, she trusted his advice,” Cohen told TMJ4.

After Cuccia’s sudden death, Conklin and others could not reclaim their assets, according to Cohen.

People had invested anywhere from $5,000 to $200,000 with Cuccia’s company, according to Cohen. The total was $1 million, but Cuccia only had about $200,000 in assets, according to Cohen.

Image from Pixabay

Anyone considering making an investment should be automatically suspicious if they are told there is no risk involved, according to Robin Jacobs from the Wisconsin Department of Financial Institutions Enforcement Bureau.

“When you invest your money in something, it means you’re going to take a risk in exchange for getting a return,” Jacobs explained during her interview with TMJ4.“Of course there’s no guarantee.”

Investors should also steer clear if one or more of the following warning signs are present:

  • A vague or confusing business model.
  • Time limits on when you can invest.
  • High-pressure sales tactics.
  • A lack of disclosure documents.
  • No audited financial records.

Would-be investors should also research whether the person they’re talking to has the proper training and licensure.

Image from Pixabay

In Wisconsin, that can be cleared up with a phone call to the Department of Financial Institutions Enforcement Bureau.

“…we can tell (you) whether that person is registered either as an investment advisor or a broker-dealer and if they’re not registered…I would be very suspicious of that person,” Jacobs said during her interview with TMJ4.

Some broker-dealers and investment advisors must register with FINRA (the Financial Industry Regulatory Authority) or the SEC (the Securities and Exchange Commission), while others do not. It depends on whether the professional does business in one or multiple states.

The regulation bodies for other states include:

  • California Department of Business Oversight
  • Texas State Securities Board
  • Idaho Department of Finance
  • New York State Attorney General
  • Arizona Corporation Commission
  • Nevada Secretary of State
  • Florida Office of Financial Regulation

Any inquiry to your local business licensing or permits office or a quick Google search should point you in the right direction.

Back to Cuccia’s purported victims, the future is unknown.

Conklin and other people who claim they were swindled by Cuccia are waiting to see if the courts will award them any of what’s left from his estate, according to TMJ4.

Attorneys representing Cuccia’s estate declined to be interviewed by TMJ4.

Learn live and in real-time with Realty411. Be sure to register for our next virtual and in-person events. For all the details, please visit Realty411.com or our Eventbrite landing page, CLICK HERE.

House Flippers Need a Business Plan

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Image from Pixabay

By Stephanie Mojica

One of the biggest mistakes many would-be house flippers make is operating without a business plan, according to a recent article published by millionacres.com (a Motley Fool service).

However, this blueprint should not focus on a specific rehab property; it needs to be a document that discusses the vision for the overall flipping business, according to the article.

Any solid business plan needs the following basic information:

Image from Pixabay

  • Specific goals for the company, with a realistic time frame set for each goal.
  • Details about the actions necessary to achieve those goals with the desired time frame.
  • An executive summary, which includes details about your experience and education (this is especially crucial for any would-be investors).

A complete business plan has multiple categories and is not a static document. It is a document that will change and evolve as your flipping business grows.

Other aspects of a solid business plan for house flipping include:

Information about the structure of your organization. For example, are you a corporation, LLC, or sole proprietor? Are there other people involved in your company? How and why was your company founded? A strong mission statement, which discusses the principles under which your business operates, is also important.

A market analysis. Basically, you need to identify and analyze the neighborhoods and communities of focus. Why are these neighborhoods good? Discuss schools, crime rates, and other information important to homebuyers. Are you focusing on specific types of properties, such as single-family homes or condos? What are your price points? Who is your ideal buyer?

Image from Pixabay

Financial details. Discuss, in detail, how your first few home purchases and rehabs will be financed. Also, what are your financial projections for the future of your company? Basic documents needed include an income statement, cash flow statement, and balance sheet.

Growth, leads, and acquisitions strategies. How do you plan to grow your house flipping business? How will you find the properties you want to flip? And how will you find homebuyers?

When creating a business plan, it’s important to stay realistic and back up any claims with third-party data, according to millionacres.com. Also, the business plan does not need to be a long document. While it should be thorough, most people nowadays don’t have the time or patience to read long, meandering documents.

Learn live and in real-time with Realty411. Be sure to register for our next virtual and in-person events. For all the details, please visit Realty411.com or our Eventbrite landing page, CLICK HERE.

Why Should Physicians Invest in Real Estate?

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By Blue Ocean Capital LLC

Since the news emerged regarding doctors investing in real estate, more physicians are looking into this option. Not just because they want to get passive income but also because they want to further decrease their overall tax exposure. They want to slow down and avoid burnout. You would agree that we all enjoy practicing medicine but we want to have some degree of control over our lives and future. We can add that by including passive income for physicians. Would you agree?

Why should physicians invest in real estate? With a number of benefits, it’s a great line of work to delve into if you’re looking for a way to earn some passive income for doctors and physicians or add security to your retirement portfolio with the least amount of volatility.

The number of physicians investing in real estate is on the rise. According to recent data from the Urban Institute, a research organization based in Washington, D.C., nearly 41% of doctors have reported that they have invested in some form of real estate. The attractiveness of real estate, when compared to other investments, becomes more apparent as one takes a closer look at how a real estate investment can play an important role in the financial portfolio by increasing its overall returns.

Image from Pixabay

Real estate investing can give you a huge financial advantage as a physician, but many of you don’t even know where to start or how this investment tool could help your retirement. Today we’re going to tackle what you should know about real estate investing so that you can start taking steps towards realizing your financial potential today.

Tangible Rewards One reason physicians may want to consider investing in real estate is that they can see the rewards they reap. If you own your own practice, you probably work long hours and deal with the stress of running a business. The nice thing about passive investing in real estate is that you don’t have to deal with the day-to-day operations. Instead, you can hire someone to handle things and concentrate on growing your business and making more money. The main perk of being a physician is having the status, financial stability, and respect that come along with the job title. Investing in real estate allows you to achieve those same benefits without putting in 80-hour weeks. Your money is working as hard as you are while it grows in the background.

Image from Pixabay

Here are a few reasons that every Physician should strongly consider:

Investing in real estate is a great way to earn some passive income for Physicians and add security to your retirement portfolio. But why should physicians invest in real estate?

  1. Real estate has consistently outperformed all other investments, including the stock market.
  2. Many doctors lack the time needed to actively manage their own real estate investments.
  3. Diversification is key in any investment portfolio, and real estate can provide an excellent hedge against the volatility of the stock market.
  4. With the right guidance, doctors can get started in real estate with very little money down, allowing them to diversify their portfolios quickly while minimizing risk. Yes, you can start investing passively by investing 50k if you do it each year and compound it over 10 years at a 15% return you will end up above 1.3 million in your bank. Does it sound like an interesting way to grow your wealth while you are working at your primary job?
  5. Selling your primary residence is considered tax-free under current law, providing much-needed capital for future purchases.

Blue Ocean Capital Latest Offerings for Passive Income for Doctors

Mercury Multifamily portfolio is a fantastic value-add opportunity in the fastest-growing Arlington and Weatherford, Texas. A rare and augmented opportunity to join our team. Hurry Up! Invest Now the offering is Open for Investment. To access the Investor Kit which includes the live webinar replay, updated offering memorandum, and other details about the offering.

If you are interested in this opportunity, Schedule a free one-on-one strategy call on our calendar.

Also, have a look at our closed deals which help to earn passive income for Physicians and doctors.

Conclusion:

If you’re looking for a way to help grow your retirement portfolio without worrying about price fluctuations, investing in real estate may be right for you. In addition, if you plan on spending money on retirement travel or other expenses, investing in property can help ease the financial burden associated with those expenses. Please join our exclusive investor group for Professionals like you. www.bluoceancap.com

Realty411’s Virtual Investor’s Summit

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Join Realty411’s complimentary investing summit and learn from experts who are sharing important knowledge about real estate investing.

Join us at 9 AM PT for a special educational online REI event. Don’t miss this day as Realty411 will virtually unite some of the most successful, knowledgeable and savvy investors in the REI (Real Estate Investing) industry to help our readers make educated and informed decisions.

Joining us on this special conference to help guide our readers will be top industry experts ready to spill their secrets of success. Get educated, motivated and prepare for an amazing 2022 and beyond.

Normally, online events of this caliber have a hefty admission price, but Realty411 is making this special investor conference COMPLIMENTARY for investors of all levels who have a sincere desire to begin and/or expand their real estate holdings.

Since 2007, Realty411 has produced real estate-investing events and expos throughout the nation. Don’t miss the opportunity to experience this day in the comfort of your home or office. Be sure to read about our amazing featured educators.

Jan 22, 2022 09:00 AM in Pacific Time (US and Canada)

REGISTER NOW

SPEAKERS

Kathy Kennebrook
Founder @Marketing Magic Lady

Kathy Kennebrook is the ultimate success story. She spent over 20 years in the banking industry before discovering the world of real estate. After attending some real estate seminars this 4 foot 11 mother of two got really excited and before you know it she’d bought and sold hundreds of properties using none of her own money or credit. Kathy holds a degree in finance and has co-authored the books- The Venus Approach to Real Estate Investing, Walking With the Wise Real Estate Investor, and Walking With the Wise Entrepreneur. She is the nation’s leading expert at finding highly qualified, motivated sellers, buyers and lenders using many types of direct mail marketing. She is known throughout the United States and Canada as the Marketing Magic Lady. She has put together a simple step-by-step system that anyone can follow to duplicate her success.

Jeff Dixon, MBA, CISP, SDIP
Vice-President of Business Development @uDirect IRA Services

Jeff Dixon has been involved with financial services for over 30 years. He worked in the Mortgage field for many years helping clients understand the best way to finance and leverage properties. Currently he is with uDirect IRA Services, a self directed IRA company which helps people understand how their retirement accounts can be used outside of the stock market, into assets like real estate, loaning money and syndications, just to mention a few. He has owned investment properties and is very familiar with what landlords have to deal with. He has an MBA in Business Administration and is a constant reader.

Jim Biggs
Founder @GOB Network

The GOB Network of Apartment Investors, an open source, democratized all inclusive platform for apartment investors to source deals, partners, capital. The platform also provides coaching, mentoring, teaching and access to partnerships as GP, KP, LP, JV and other creative deal structures. Mr. Biggs has held a professional license in real estate, as an agent in the state of Florida’s Department of Professional Regulation, presided as President of Chesterfield HOA, held an insurance license and Series 6 Securities License with the Department of Professional Regulation in Illinois and is currently a Managing Broker for the State of Indiana. He is a member of the National Association of Realtors, Illinois Rental Property Owners Association, National Real Estate Investors Association, Northern Indiana Creative Investors Association, Chicago Creative Investors Association, Chicago Real Estate Investor Networking Group as well as several other community and professional associations.

Dr. Chander Mishra
Founder @Blue Ocean Capital

Chander Mishra MD MBA is an MF real estate investor and a sponsor, who has invested in over 3000 units across the US, worth over $200MM. Chander is the Founder and Senior Managing Partner of Accel Equity Group LLC, and Blue Ocean Capital a real estate investment firm specializing in multifamily investments, where he helps investors create wealth by generating double-digit returns by investing in the apartments. He is an author speaker and has appeared as a guest on multiple podcasts.Chander graduated from the MBA program at NYIT Ellis school of management and is a physician with a specialization in Cardiac Anesthesiology. He is an experienced entrepreneur, VC who has helped build and scale companies by improving their business operations and customer relations. He manages a portfolio of over 125 million at Accel Equity Group LLC, and Blue Ocean Capital he created an opportunity for investors to invest in large multifamily assets they usually don’t have access to.

Iva Mishra, MBA CPC
EXECUTIVE @Blue Ocean Capital

Over 14 years of property management, business consulting, HOA management, real estate, and asset management experience. She is a certified business coach, franchise consultant helping businesses grow by achieving goals. Iva continuously shares her knowledge and time with the local business community, nonprofits, school districts.

Deeds & LLCs: Finding Success In Real Estate Investing In 30 Days

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By Tim Houghten, Staff Writer

Whether you’ve spent substantial amounts on real estate education and are still struggling to get results, or you are ready to make a big splash and claim your piece of the pie and invest, how can you start really gaining traction in the next four weeks?

Real estate investor and entrepreneur Jason O. Myles has become a magnet for people in both of these camps. He specializes in helping those that want to get real, and meaningful results from investing in real estate, quickly.

That’s true whether you’ve been hustling and grinding hard, but just haven’t gotten in your zone yet. As well as those with capital to invest, but who need to do it efficiently and effectively, while staying on track to their real objectives.

Deeds & LLCs – An Investor’s Toolbox

No matter where you are on your money and investment journey, Jason O. Myles has been there already. He has run into the frustrations and roadblocks, and has found how to consistently navigate them for optimal success.

Twenty years ago, Myles discovered the life changing advantages of making the leap into real estate. Before there was Facebook or Siri, he spent his spare moments going to the local library to read and learn everything he could about investing in real estate. He tried reaching out to educators and the experienced by writing them letters.

He admits that he didn’t make much money in those first few years. He saw others making money in real estate and knew it was real. He just wasn’t putting those dollars in his own pocket. He had tried to piece together some strategies and tactics from gurus, but when he took them into the field most people thought he was crazy or deluded.

He got frustrated, but wasn’t going to give up. Myles started calling everyone he could find to get answers. Finally, with a few tweaks, he put his first $6,000 check in the bank in just three weeks. Then, the next week he put an $18,000 check in the bank. He was hooked. It was real.

He got noticed by Robert G. Allen for the deals he was doing, and ended up crafting the manual they would acquire to train others to invest in real estate.

Robert G. Allen has of course become a mentor to many, and has been praised by successful leaders like Brian Tracy, Jack Canfield, Robert Kiyosaki and Stephen Covey.

It turned out that Jason Myles had quite a skill at creating systems and processes. That has since led him to be involved in tens of millions of dollars of real estate deals from Florida to Georgia, to the Carolinas, Ohio, Indiana and Texas.

Going beyond just starting in single-family homes, he has engaged in multifamily, land, and commercial and industrial deals.

Today, many come to him that have invested heavily in other real estate programs, and have come out without all of the tools and organization they really need to start knocking out those deals. As well as many with over $1M in liquid capital they want to put to work in real estate. Like the dentist from TX who started investing passively with Jason, and pretty quickly was able to move on from tinkering in people’s mouths all day to operating his own real estate investment firm.

How To Be Successful In 30 Days

It is important to point out that Jason O. Myles is adamant that he is not selling get rich quick and fast money programs. There are plenty of other people out there on the web that do that, if you are just looking for the next scheme to make a quick buck.

Instead, Myles has differentiated himself and his tools, by aligning his interests with his investors, and by structuring the processes that will help them start seeing actual progress inside 30 days.

Through several programs he has structured guides and systems that mean he isn’t making money unless his clients and students are. A refreshing change from what we’ve seen in the industry over the past few years.

Additional Resources For Active Investors

Via his website, www.RealEstatePro360.com, Myles¬ provides access to a variety of paths to take you to the next level financially through real estate investing.

For those limited on capital, who are ready to hustle to achieve things and make them happen, there is Ultimate Real Estate Hacks. A process designed to help investors put everything they need in place and at a minimum get their first deal under contract inside the first 30 days.

This includes using strategies like virtual wholesaling and flipping. Along with the documents, spreadsheets and calculators you need to quickly and accurately value properties, assess renovation costs by region and types of materials, and to connect with your success team. There are weekly calls and an online support group to get answers fast.

There are funding programs and partnership programs, which provide investors the resources and support they need to do real deals and make real profits.

For Passive Investors

For those with capital to invest, Jason provides guidance and processes to put that money to work simply, efficiently and passively. Methods that generate strong returns, in solid investments, without having to deal with contractors and property managers. It is about making your money work hard for you for cash flow and returns, while you actually get to enjoy your life. Get your piece of the pie and have a life worth living too.

What’s Next For The Real Estate Market: Blood In The Streets

It’s going to be okay Chicken Little.

During Realty 411’s exclusive interview with Jason O. Miles, he told us that he is “always bullish on real estate.”

He has certainly been in the business long enough to know what the cycles look like. As well as that there is always money to be made, and how to do it.

His newest book Blood In The Streets tackles some of the fear and pessimism out there, and busts some frequent myths about the market and investing. He doesn’t believe there is impending doom. In fact, he sees ongoing growth.

When there is a cooling in markets, he says it is all about positioning yourself in advance to take advantage of the great deals.

One of the ways that he is preparing investors to do this too is through the CARV Method. A way to evaluate potential real estate deals and to structure them for multiple exit strategies and to avoid leaving money on the table in these times as most do.

Get Your 4-Week Action Plan

If you are among those craving better results from real estate investing in the next 30 days, and to be able to invest with confidence, you can download your complimentary 4-Week Action Plan at www.RealEstatePro360.com.

There you will also find more of his story, books, courses, and how to get in touch with him directly. Or connect with him on social @jasonomyles. Then be sure to stop by and meet him in person at one of our upcoming live real estate events.

No matter where you are on your financial journey in real estate Jason has probably been there already, and can show you how he found the breakthrough and process to make it through to the other side.

Forbearance Bailouts and Refinances

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Image from Pexels

By Rick Tobin

The 2020 and 2021 years have been two of the most unusual time periods in world history, especially for the real estate sector. For example, millions or tens of millions of homeowners and tenants have been severely delinquent with their mortgage and rent payments while unemployment numbers rose incredibly high. However, home values have absolutely skyrocketed to all-time record high annual percentages and prices.

How is it possible for us to see record delinquencies with or without approved forbearance (“no mortgage payments paid and the lender agrees not to foreclose”) or loan modification agreements in place and record price growth at the exact same time? Don’t these two opposing situations contradict one another in a cognitive dissonance sort of way? In past years, record mortgage delinquency numbers would typically cause declining property values nearby because these home delinquencies or foreclosures would become the latest lower sales comparable for the neighboring homes.

The true irony of record delinquency numbers is that most homeowners created much more equity in their properties by just sitting there and not making any mortgage payments. As reported by CoreLogic’s Homeowner Equity Report, the total US homeowners’ annual equity grew $2.9 trillion between the second quarters of 2020 and 2021 with an average individual mortgage borrower’s gain of $51,500 in just one year. A deferral of 12 months’ worth of $2,000 per month payments that totaled $24,000 would still be less than half of the new equity gains.

Image from Pexels

In this article, you will learn about how you can refinance out of a forbearance or loan modification plan instead of losing all of your equity in a future foreclosure sale. For most American families, the bulk of their net worth originates from the equity in their owner-occupied residential property (single-family home, condominium, townhouse, duplex, triplex, or fourplex), so this topic point is quite relevant to millions of people today.

Let’s review next some of the most mind-blowing delinquency data that’s been published here in 2021:

$833 Billion in Unpaid Mortgage Balances

  • An estimated 15 million people lived in households that owed more than $20 billion in unpaid rent as of July 2021.
  • 7.43 million rental property units were not current.
  • 5.95 million owner-occupied housing units weren’t current.
  • 8.71 million lived in owner-occupied homes where the homeowners have little or no confidence in their ability to pay their mortgage.
  • 12.71 million lived in rental properties where the heads of household had little or no confidence in their ability to pay their rent.
  • Serious mortgage delinquencies were up 20% in July from June and were the highest recorded since 2010.
  • By mid-August 2021, 3.9 million homeowners were in active forbearance, which represented 7.4% of all mortgages nationwide and $833 billion in total unpaid principal.
  • An estimated 11.6% of all FHA and VA loans were in active forbearance.

Sources: U.S. Census Bureau and Black Knight Mortgage Monitor

How Hyperinflation Creates Wealth

Most people should know by now that historically low mortgage rates for borrowers is one of the main reasons why real estate values have boomed since 2013, depending upon the region. The vast majority of homeowners need third-party loans to buy their properties. Over the past decade, a very high percentage of homebuyers purchased their homes with 0% to 3.5% down payments with or without their own personal funds for loan programs like FHA, VA, or conforming that allowed gifted funds from family or seller credits.

Image from Pixabay

Historically, 7-year to 10-year boom cycles for real estate have been the norm. Yet, we haven’t seen significant price drops in a major metropolitan region, state, or across the nation. Do we still have at least another few years of potential double-digit home appreciation growth in our future or not?

Few investments have been a better hedge against inflation than real estate. On an annualized basis, home values generally increase in value on average at least as high as the published annual rates of inflation. The Federal Reserve must continue to keep rates artificially low or they may risk causing the housing bubble to pop.

The Federal Reserve’s ongoing policy of Quantitative Easing (create more money to boost asset values related to housing and stocks, especially) and their lesser-known Operation Twist policy (the simultaneous buying and selling of long-term and short-term bonds to artificially drive down mortgage rates) that they seem to turn on and off as needed with or without notifying the general public. With record high government debt levels today, the Fed has really no choice but to keep pushing inflation higher because one of their biggest fears is massive asset deflation like seen in Japan in the early 1990s after their own Quantitative Easing program failed miserably.

Rising inflation trends for various consumer goods and services like food, clothing, cars, and gasoline are not usually viewed favorably. However, rising home values tied to meteoric inflation trends are welcomed by homeowners who see their home values rise $50,000 to $100,000+ in a year.

Year-over-year inflation trends for August 2021:

  • Used vehicle prices: +31.9%
  • Energy costs: +25%
  • Southern California home prices: +22.1%*
  • National home prices: +19.7% (a new annual US record)*
  • Export prices: +16.8%
  • Apparel / clothing: +15.52%
  • Import prices: +9.0%

*July year-over-year housing price trends

Sources: U.S. Bureau of Labor Statistics, CoreLogic, and California Association of Realtors

Forbearance and Loan Modification Refinance Solutions

A homeowner who hasn’t made a mortgage payment in several months, a year, or almost two years probably has a few options to exit out of this dire financial situation. First, they can sell the home and lease another property if their credit scores aren’t too negatively impacted.

In September 2021, multifamily apartment units reached an all-time record high of $1,558 which was an all-time record annual 11.4% increase, according to Yardi Matrix. For single-family home rentals, the monthly rents are normally much higher in the $2,000 to $5,000+ per month range, depending upon how close they are to an ocean or prime metropolitan region.

Image from Pixabay

Or, the homeowner can attempt to save their home and end their existing approved or unapproved forbearance (“no payment, no foreclosure”) or loan modification situation, and refinance with a new loan that may allow cash out, a lower rate, and better monthly payments. The mortgage companies or lenders that will consider refinancing a mortgage which is severely delinquent are likely to request that the homeowner exit out their forbearance agreement, make a few payments, and then complete the new refinance closing.

Oftentimes, a homeowner who has been in forbearance cannot provide tax returns or more formal income verification. As a result, more lenders today may consider qualifying the borrower applicant with anywhere between zero and 24 months’ worth of bank deposits while closely analyzing the averaged bank deposits. In some cases, a government-backed mortgage product may allow an almost “No Doc” loan program with a financial hardship letter that may reduce the monthly principal and interest amounts by 25%, as recently announced by the Federal Housing Finance Agency (FHFA) and the Federal Housing Administration (FHA).

For more details in regards to these new financial solutions to exit out of forbearance and loan modification programs, refinance, and save your home, please visit my website at www.realloans.com.

Rick Tobin

Rick Tobin has a diversified background in both the real estate and securities fields for the past 30+ years. He has held seven (7) different real estate and securities brokerage licenses to date, and is a graduate of the University of Southern California. Rick has an extensive background in the financing of residential and commercial properties around the U.S with debt, equity, and mezzanine money. His funding sources have included banks, life insurance companies, REITs (Real Estate Investment Trusts), equity funds, and foreign money sources. You can visit Rick Tobin at RealLoans.com for more details.

Learn live and in real-time with Realty411. Be sure to register for our next virtual and in-person events. For all the details, please visit Realty411.com or our Eventbrite landing page, CLICK HERE.

Caveat Investor (Part 2)

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Image from Pixabay

By Bruce Kellogg

#6 – Lending

Here are four things to know about lending:

A) On a purchase situation, the appraiser will bring it in at the contract price if they can. (That’s why they ask for the sale price in advance!) They try not to come in below the contract price, but they scrupulously won’t go above it.

B) On a refinance, appraisers tend to come in lower to protect the lender. Don’t expect a high appraisal because you’ll be disappointed.

C) Do not think “No Points” is a bargain. It’s a “come-on”! Lenders seek a certain yield, so any concession on points they make up with the interest rate. There’s no free lunch.

D) My adult son started a refinance with an online lender. Part way through, he found a better deal, canceled the application, and pulled the loan package. The former loan agent howled. What do you think? Is loyalty required when you are getting a loan online?

#7 – Property Managers

Image from Pixabay

Most property managers are honest and hardworking. They deal with tenants. WHEW! No fun! But here are some caveats for you.

A) Most property managers do not make the effort to inspect unit interiors regularly, so some tenants run down the unit.

Insist on quarterly inspections. Pay extra if necessary. It’s cheaper than accumulating unit damage. If your manager won’t/doesn’t do it, it’s time for “NEXT!”

B) Some managers make work for their contractors and handypersons, some of whom are often relatives and friends. They authorize unneeded repairs. Be alert to this. (I got conned out of an $8,700 septic tank installation once. The manger was in cahoots with the county sanitarian.)

C) Some managers have “kickback” arrangements with the people they hire.

D) Some managers apply a percentage “markup” to the parts they buy. They say this compensates for the purchasing effort. This is a load of fertilizer! Simply buy the parts yourself after getting a detailed list from the manager or the contractor.

#8 – Education and Training

One buzzphrase in real estate lately is “move to the next level” or “scale up”. This is accomplished only by education, training, and experience. Yet as the real estate boom has grown, teachers, trainers, and mentors have proliferated.

Image from Pixabay

Consequently, it is essential that you pick quality contributors to your growth. Sometimes, it is hard to tell amidst all the hype.

You can be pretty confident of quality if you are involved with Realty411. Linda Pliagas, the founder and publisher, has had a career in real estate of several decades as a Realtor®, multiple investor, and journalist/publisher. Her mission is to help investors grow and succeed. Realty411 Magazine and REI Wealth Magazine have high standards for their articles, and their expos nationally have high standards for their exhibiters and presenters. Charlatans are not tolerated!

Another resource is the myself. With 40 years as a Realtor® with over 800 transactions of all kinds, including owning over 300 investment properties myself, I offer readers the benefit of my experience. See the accompanying biography for contact information.

#9 – “The Rise of the Fake Gurus”

Please go to YouTube and watch “The Rise of the Fake Gurus”, which is a 21 minute detailed expose how fake “gurus” lure their victims from free “workshops” all the way up to $40,000-60,000 “bootcamps”. Definitely watch it at least once!

Wrapup

As the market continues to heat up, new investors are entering real estate all the time. This article is meant to highlight some of the larger risks, pitfalls, and cons they will want to avoid as they grow. Best wishes with that!

Bruce Kellogg

Bruce Kellogg has been a Realtor® and investor for 40 years. He has transacted about 800 properties in 12 California counties. These include 1-4 units, 5+ apartments, offices, mixed-use buildings, land, lots, mobile homes, cabins, and churches.

He writes and edits copy for Realty411 and REI Wealth Monthly magazines.

Mr. Kellogg is a recipient of an Albert Nelson Marquis Lifetime Achievement Award, listed in Who’s Who in America – 2019.

Mr. Kellogg is available for consulting about syndication, “turnkey” investments, joint-ventures, and other property purchases nationally, and other consulting assignments. Reach him at [email protected], or (408) 489-0131.

Learn live and in real-time with Realty411. Be sure to register for our next virtual and in-person events. For all the details, please visit Realty411.com or our Eventbrite landing page, CLICK HERE.

Realty411′ South Florida Real Estate Summit

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When:
April 2, 2022 @ 9:00 am – 5:00 pm
Where:
Embassy Suites by Hilton Boca Raton
661 Northwest 53rd Street
Boca Raton, FL
33487
Cost:
Free
Contact:
Realty411.com
805.693.1497

Realty411 Celebrates 15 Years of Publishing Life-Changing Magazines that Have Helped Thousands of Readers Learn about Real Estate Investing

We are going ALL OUT for our South Florida Real Estate Conference and Networking Summit on SATURDAY, April 2nd in Boca Raton, Florida.

This is an educational and fun networking expo, featuring both local and national educators and real estate investing professionals.

Join us early at 9 am for a complimentary network breakfast with fellow investors from throughout Florida and around the nation.

Realty411 will virtually unite the most successful, knowledgeable and savvy investors in the REI (Real Estate Investing) industry to help our readers make educated and informed decisions.

Joining us on this special conference to help guide our readers will be top industry experts ready to spill their secrets of success. Get educated, motivated and prepare for an amazing 2022 and beyond.

Normally, in-person networking events of this caliber are hundreds of dollars to attend, but Realty411 is making this special weekend conference COMPLIMENTARY for investors of all levels who have a sincere desire to begin and/or expand their real estate holdings.

Since 2007, Realty411 has produced real estate-investing events and expos throughout the nation — now in 12 states across the United States. Now, it’s time to connect with our readers in person.

Realty411.com is the longest-running real-estate investor media company publishing online and print magazines, e-newsletters, webinars and podcasts. Our mission to educate and empower everyone to invest in real estate.

Please register and further details of this event will be sent, click here:

https://www.eventbrite.com/e/realty411-south-florida-real-estate-summit-tickets-230614573397

Do you have questions about participating in one of our virtual or in-person events? Please contact us directly for additional information or for information about exhibiting at this event: 805.693.1497 | email: [email protected]