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Sunday, February 27, 2011
Saturday, February 19, 2011
The IRS is watching "S" corporations
I have corporations versus "S" companies collected from several responses to my previous post on "C", that many active real estate investors prefer the status "S". The reasons for the "S" status cited are flow through tax treatment, i.e., you have no separate taxable entity struggling and employment tax minimization.
For many entrepreneurs it's the second reason, the pique your interest. The thrill of flight is 13.3% additional tax on the first $106,800 a result a tempting to treat, which is hard to ignore when it feels like every public body out for a piece of your earnings. (Note.) (All wages over 106 k 2.9% Medicare taxed.) This is exactly what inspired Mr Watson 2002 and 2003 keeping salary at $24,000 and distributions of $175,000 be to take each year.
Like most strategies, everything out works until it is challenged and his condition is tested. The IRS recently challenged Mr. Watson and District Court concluded that Mr salary to reclassify Watson's salary unduly low and allowed IRS to more than $134,000. Mr. Watson costs about $48,000 in taxes, penalties and interest.
As a real estate investor could you questions, determining a fair wage? Of course, each situation is different so the IRS fact sheet 2008 25 listed some factors, the courts considered issued, when reasonable compensation:
Education and experience; Duties and responsibilities; Time and effort that dedicated business; Dividend history; Payments to non-shareholder employees; Timing and manner of payment of premiums to key persons; What comparable companies for similar services pay; Compensation agreements; and use a formula to determine compensation.Many items on this list center around the amount of time and effort you devote to your business. If you that real estate Corporation, are sole employee in your it reasonable is complete, your salary will be at the upper end of the spectrum. A rule of thumb I tell that my customers is for a minimum factor on a 50/50 match on the first 110 k in revenue.
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Saturday, February 12, 2011
Please Pay Attention
Although I in detail soon write elsewhere on this subject, I thought I at least here mentioned justified the audience was given. If you $12-20,000 +/-, 20-30-something, wondering how to get started in real estate and make $6,000 a month or more, listen up. Its future rocks.
For a 2-4 unit property in which you want to live. Buy it using the FHA financing. If possible, go your financial circumstances that given the 15 years, 4% interest route. MIP (mortgage insurance) is not. It is only 9%. 25%, what is sweet. I have some people in the above mentioned age income group that absolutely are gonna crush in the next 10 years. If you need any help, gimme a call/email me and I sure will you with a solid hook loan guy, and maybe even a worthwhile agents in your area. I'll be sure able to help most. Good luck.
For those with good looking portfolios
I speak as fellow will not sinners - even happy with your services. Back in the day, what I had done that invests in real estate compared my mistake. Most every real estate investor who wouldn't looks lost money in this scenario. Instead to compare what your portfolio vs. other similar properties in other regions give is.
Recent investor, whose best Eigenschaft would spoke compared with very experienced wicked smart he might have had blush - in the same State - just a few hours to the freeway. The difference? Huge. Think in both time and cash flow If he elects the Chief, implementation of market in 10 years, probably far less switch to will his subsequent annual income easily $ 50-$ 100,000 per year increased. And I'm not no, Makin ' this stuff as I go. Imagine the impact moving seven figures of the net assets of underperforming properties to a buncha studs. Be useful now?
A reminder of what you forgot on the shelf, can
There are some brilliant BP investors have accumulated sometimes 2-3 dozen of rental homes. You are equity slowly building, while gettin ' maybe 0-$300 per month each. Let's number Outa da hat to pull and say, you will pay over $150,000 per home are. If you have 25 of them, is an annual loss of about $100-150, 000. If the aggregate annual cash flow comes around $50,000, is $50-100, leftover 000 depreciation. $100,000, Do at your day job, IRS use ' em the maximum $25,000 against that income. Remains still 25-75,000 leftover, unused depreciation - every year, year in, year out.
Wanna get rid a subpar property, was disappointing as of late, but does not feel how the CAP can pay profits tax? You sell then apply depreciation to the gain/depreciation recapture your awesome stash of stealth and grab the cash sans control. I'll do it for clients many times a year, and it is always a smile on my face. Bet it'll do the same for you.
The advantage of using true professionals before learning the hard way to understand
Hey you all! I saw those eyes rolled and heard that sarcastically to 'Duh!'. Here's the rub though. It is the ancient paradox. Some people know so often impressive, many answers. That is, until in the buzz saw run consequences of answer to the question she knew never to go to questions. ' Course, an experienced professional have easily would provide these answers before you get to break time a kneecap or three. Grandma was right when she said it is impossible to know what you're not sure. We think things of our go stellar plans that, but remember to you seriously - what answer to a question you didn't know about waiting that best (worst) time is ambush you questions out there? Not a sobering thought, true?
A second example is the use of the CPAs and/or tax attorneys prepare your various tax returns. Yes, I know they are not cheap. In fact, I'm here, ya say you are dirt cheap for those who are now successful, and rightly expect the road to be down far more successful. Can't say, ya how many times I've seen new customers get a bit embarrassed if admit me the new CPA you agreed to hire 50-1,000% his fee the Government saved checks he got edited cuz the last three years returns. Oops.
Hire experienced professionals. You answer all these questions, which would you not asked in a million years, save you money and heartache, will never bear happily. They are the cheapest, what you ever buy - value for value.
Thursday, February 3, 2011
Find the missing pieces in seller-funded notes
It was a typical phone call, "I understand you contracts notes purchase?" I replied, "absolutely!" "What can you tell me about the terms of the note?" The answer I got was I was well prepared and you should be too. Well, the touch is for 10 years with a balance of $25,000, payments are $403.34 per month. I have questions about what is the interest rate because I know how to calculate... it... 15%. Learn how you can calculate the missing information placing a leg up on everyone else when it comes to buying notes. I created an easy to use Excel spreadsheet here, you can use to calculate missing values of a note.
By using the Excel spreadsheet, or not, remember the four components that are the key to determine which is the note. These four components are your starting point for determining how much you can pay for the note.
Number of payments (N):. Find out how many payments in the note that can expect to receive based on other variables. Expressed in the year, must multiply by 12.
Interest rate (I):. Is the effective interest rate on the note. One thing to remember when calculating interest, 12 divide by getting the interest rate. (For each month of the year)
Payment (PMT):. Identifies the current monthly payment you can expect, principle and interest over the life of the note to receive.
Present value (PV):. The present value of the note on the basis of a series of future payments.
Once you know that these four components can you start analysis, to determine, how much you can afford to pay if the note buying. You can also determine what will be your rate of return. Next week, using this framework, we determine how we can pay much for the note, on the basis of the four components and our own expected returns.
Photo credit: Horia Varlan
Welcome to our blog!
Welcome to the BiggerPockets blog. Our blog brings experts from various areas of real estate with the aim to keep our readers, informed and faster. Whether you use a real estate professional (lender, Realtor, banker, etc.), investor (landlord, Flipper, wholesaler, etc.), or simply consumer, renter or homeowner in the world of real estate, this blog are interested in is the place for you to get involved!
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Visit Kevin's Web site: http://twitter.com/#!/sdiraexpert
Kevin Kaczmarek is President of KSC capital, LLC. Serving a national and international client base, Kevin helps customers, your personal goals for long-term stability and strong financial growth through even directed to reach IRA investment and individualized passive income strategies.
Wednesday, February 2, 2011
What short selling used cars have in common?
To be successful for a short sale process like a well-oiled machine must be runningJust like a car has the short sale with regular visits (metaphorical) oil changes and other maintenance services.
If you buy a used car, it is important to your homework firstGuess what? List when selecting a short sale or purchase, is also important to do your research first. Automotive research the short sale is the equivalent of Attandant. Attandant a short sale seller is one of the most important steps at the beginning of the process short sale.
It like a little weird that you pilot would have to qualify a short seller. But, when shopping, take a used automobile it to the mechanic out first checks you get?
Getting a loan pre-qualification or pre-approval for a home before buying a home buyer must your seller before qualifications you necessarily, to ensure that the potential short sale transaction NET is a positive result. Attandant of seller's means to check hardness but also make sure that the seller will be cooperative Is the seller is willing to submit all requested documents (such as pay stubs, tax returns and statements) to the Bank? Or is the seller at any time vary the Bank requesting an element.
Some sellers are under the impression that this rule the Castle. But a short sale is a form of debt settlement. Sellers (and their agents) have put together a deal and issues, the Bank to accept the deal. The Bank must not sellers give a short sale only "because." Seller must apply for the short sale. Must approve all terms and conditions of the transaction lender Often become inconvenient times questions banks elements and give strict time limits, it is important to ensure that the seller is aware of the process the distinctive (and sometimes annoying) features and willing to work.
Another way in which the seller must work together is performances in terms of propertyAs a sales contract usually required to successfully a short sale to negotiate and receive is a letter, must make available the seller property. For some, it is not difficult. For others, especially those with tenant occupied properties, can be difficult.
So, remember that Attandant is a short sale as buying a used carSome cars look pretty on the outside (without scratches and dings). But if you're going to buy this lovely little hot rod you will definitely review it first. Take the same action in connection with your short sale. After all, nobody wants to end up with a lemon.
Photo: Flickr creative commons by Rachel_titiriga
Welcome to our blog!
Welcome to the BiggerPockets blog. Our blog brings experts from various areas of real estate with the aim to keep our readers, informed and faster. Whether you use a real estate professional (lender, Realtor, banker, etc.), investor (landlord, Flipper, wholesaler, etc.), or simply consumer, renter or homeowner in the world of real estate, this blog are interested in is the place for you to get involved!
You can subscribe to our RSS feed, get blog updates by e-Mail, join our free mailing list, or best of all, join our social network along with other 52,000 interested in real estate education, dealmaking, networking and marketing. 
Visit Melissa's website: http://www.shortsaleexpeditor.com/
Melissa Zavala is the broker/owner of Broadpoint properties and head honcho of short sale Expeditor ®. Before landing, real estate, had you career in education and publishing. Many people say that Melissa genetically pre disposed to success with short sales. Last year you and your employees over 500 short sale recorded consent letter in fact! When talking to Lien holder is not, enjoys Melissa practice yoga, walking the dog and holiday resort on the beach resorts.
Return real estate buy and hold strategy
There are cycles that occur in the real estate market dictate, methods and strategies that are most useful for growing wealth through real estate ownership. Now is one of those times where a prudent investor should stock of market conditions and view a recording of a traditional methodology. Of course I refer the strategy to "buy and hold."
Yes, though I walk through the Valley of the shadow of death will fear no evil: for me thou art; thy rod and thy staff comfort me. [Psalm 23: 4]
I had this quote from the Bible, but not for a religious reason to borrow, but because I know that my writing here is in the very the House real estate flipping, but I am about the religion of the long-term properties to preach. Heaven help me.
Away back, if (before 2002), you could monitor your local real estate market and occasionally find portfolio properties, you little under market, and that you pick up holding for a long period plan. Their primary ROI would be leveraged appreciation that would reach over time, but the cash flows were worked a nice Spiffer you, and to build a reserve for rainy days.
But once the market was booming, which find right gross rent multipliers were almost impossible. Properties were trading at prices far beyond what long-term investors keep one wanted to pay. So we stopped buy. And the wise waited for your day back.
I see evidence that returned your day now. In fact we now buy properties, result in the conservative annualized returns on investment of more than 25%. To demonstrate this, I will (over the next few blog posts) break a particular property and show how the return is achieved. But before we look at returns, we must look at the foundation of real estate buy and hold strategy.
Buy and hold strategy is simply put real estate not harder to understand than buy low, sell high. Unlike the property reflect the long-term hold Investor believes in a relevant market and while purchases occasionally slightly below market able to only merchants should reflect the competitive market of the property type. Buy and hold strategy is for true, fairly passive real estate investors.
The investor to understand cycles in the housing must for this strategy to work. By monitoring supply and demand, these investors know that the time to buy a buyer's market at the end when the glow of the offering with balance moves, but before the market has it implemented and values are low. Conversely the buy and hold real estate investor, know that the time to sell at the opposite end of the far cycle if care is scarce and properties are trading higher than the values for the replacement cost.
There are three basic rules that buy the property right and hold strategy must work. They are not difficult to understand but are mission critical:
Rule # 1 – Long term population trends must be rising. For property values rise in the long term must have the right of scarcity. Nothing better than population growth ensures the shortage of houses. Be always a correlation between population size and home sales (e.g. Phoenix, Arizona more home sales each year as two egg, Florida see).
Rule # 2 - the cost of construction will continue to rise over the years. Much as rule # 1 assume that everyone will increase costs the construction of new houses in the course of time. Given the large increase in the minimum wage in the past year, you can bet that in the long term costs will be affected, but not easy to see, until a housing market recovery starts to appear.
Rule # 3 - Value in the housing market will dictate normal rules for supply and demand. All free markets move in this way, but socialism could put a big damper on this. The prudent buy and hold Investor never his eye off the political climate, but regional and supraregional takes.
If you believe that these basic rules are sound, and you are the kind of market, where these rules are readily applicable, then you could do to keep a good candidate for a long-term strategy. Look forward to my next post for a case study of real estate buy and hold strategy.
Welcome to our blog!
Welcome to the BiggerPockets blog. Our blog brings experts from various areas of real estate with the aim to keep our readers, informed and faster. Whether you use a real estate professional (lender, Realtor, banker, etc.), investor (landlord, Flipper, wholesaler, etc.), or simply consumer, renter or homeowner in the world of real estate, this blog are interested in is the place for you to get involved!
You can subscribe to our RSS feed, get blog updates by e-Mail, join our free mailing list, or best of all, join our social network along with other 52,000 interested in real estate education, dealmaking, networking and marketing. 
Visit Joe's website: http://www.manausa.com/
Joe Manausa, MBA is a 20 + year veteran of the real estate brokerage in the State of Florida and invested in real estate since 1992. He is a daily blogger content and invest, on real estate Analytics focuses into the residential market. Joe is a former U.S. Army Ranger and a graduate of West point so that it delivers with the goal of gaining a tactical advantage in real estate investment analysis.
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