Realtors Archives

This is a WHOPPER!

I just got this in the mail from my state’s Realtor Association

Please Pay Close Attention – Don’t Allow Yourself To Get In This Trick Bag

This is a very powerful “eye-opener” for the licensed agent, real estate investor, who is GREEDY and tries to play both ends against the middle.

If you have your license as an agent or broker, and you wish to make money representing buyers and sellers, then wear this hat professionally for the best interest of your client(s).

If you are licensed as an agent or broker, and want to use these resources to buy and sell for your real estate investing business, then follow the law and rules properly.

It all boils down to good old fashion doing business the right way and with 100% full disclosure and document your disclosures.

Read this one and enjoy

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Agent buys house from under client’s nose Lawsuit leads to out-of-court settlement

In a recent column, we asked if a person who serves homebuyers and sellers for a living should be held to different guidelines if they are competing to purchase a property.

For example, should the listing be exposed to the market for a certain amount of time (perhaps 48 hours) before a licensed agent can buy a home that somebody else is ready, willing and able to buy?

The question came in light of new research that revealed nearly 43 percent of all members of the National Association of REALTORS® owned at least one rental property.

The responses fell into two main pots:

  1. Readers said agents should be allowed to buy if it was in the best interest of the seller.
  2. Others who responded thought that agents should be allowed to purchase a property as soon as it is listed provided they knowingly had no other active clients who wanted the same home.

A recent Washington state case that was settled out of court (and whose financial terms remain confidential) contained that second caveat. The interesting, complicated affair included a short sale Click Here for Full Video/Article (Members Only)

December 12th, 2011

The FHA has established minimum credit score requirements in order to be eligible for FHA financing.

The FHA guidelines specifically exclude from eligibility any borrower with a FICO score below 500.  Theoretically, any borrower with a credit score above 500 can be approved for an FHA loan but realistically, the lower the credit score, the more difficult it becomes to actually obtain FHA loan approval.

Borrowers with a FICO score between 500 to 579 are eligible for FHA-insured mortgage financing but are required to make a 10% downpayment and be able to verify sufficient income.  There are actually very few borrowers that wind up obtaining an FHA mortgage under these requirements.  A low credit score is indicative of a high level of mismatch between a borrower’s debt obligations and income, resulting in late or defaulted loan payments.  Under these circumstances, it is highly unlikely that a potential borrower would be able to accumulate a 10% downpayment.

Borrowers with credit scores above 580 are eligible for maximum FHA financing and are required to make only a 3.5% downpayment.  From a practical standpoint, however, it has become extremely difficult to obtain FHA loan approval unless the borrower’s credit score is above 620.  This is due to the fact that FHA lenders have established their own credit criteria for loan approval which exceeds the FHA guidelines.  Most of the largest banks that make mortgage loans under the FHA lending program require a minimum FICO score of 640.

The FHA and the banking industry have dramatically tightened underwriting criteria for loan approval due to the collapse of housing values and the large number of mortgage defaults. A borrower applying for an FHA mortgage today with a FICO score below 620 has a very low chance of being approved.

At the peak of the housing bubble in 2007, a huge 45% of FHA loans were approved for borrowers with credit scores below 620.  In 2008, the number declined to 33%, in 2009 to 14% and in 2010 to only 4%.  The number of borrowers approved for FHA insured mortgage loans with a credit score below 620 declined to 3% in 2011.

Borrowers with a credit score above 660 have the best chance of being approved for FHA financing as can be seen in the graph below.  In 2011, 70% of all FHA mortgage loans were given to borrowers with a credit score of 660 or higher.

 

from FHA website

WITH most lenders requiring home buyers to put down at least 20 percent — and sometimes, with more expensive properties, an even greater amount — the best gift some people might receive would be help with the down payment.

Under federal tax law, each individual is permitted to give away money or valuables worth up to $13,000 to a single recipient in a calendar year. A married couple could jointly bestow up to $26,000 a year per recipient.

“It really can be $52,000” if the recipient also has a partner, said Mike Maye, the owner of MJM Financial, a financial planning firm in Berkeley Heights, N.J.

And if the gift-givers wanted to spread even more good cheer into the next calendar year — perhaps distributing some future Click Here for Full Video/Article (Members Only)

Check out this just in time for Turkey Day and cold weather checklist.

(Members get to download the newsletter and cold weather checklist by clicking the link below)

Click Here for Full Video/Article (Members Only)

 

 

Special Report – How Depreciation Benefits Business Owners
 
First of ALL: Do NOT Allow Yourself To Feel Bad about not knowing.

When I began my real estate business, I did not understand “depreciation” until I saw the huge benefits at tax time.

Then I really began to pay attention.
 
Depreciation: A non-cash expense that reduces the value of an asset as a result of wearand tear, age, or obsolescence. Most assets lose their value over time (in other words, they depreciate), and must be replaced once the end of their useful life is reached.
 
There are several accounting methods that are used in order to write off an asset’sdepreciation cost over the period of its useful life.
 
Because it is a non-cash expense, depreciation lowers the company’s reported earnings while increasing free cash flow.
 
Simple Example:
 
Suppose a painter buys an extension ladder for $1,000.00 and let’s assume the life of the ladder is 10 years. Although the painter is out $1,000 cash out of pocket right now in his purchase of the ladder, he can only “write off” $100 per year for 10 years because theladder has an expected life of 10 years. On top of this, the ladder will probably be worthZERO at the end of the 10 year period.
 
CHECK THIS OUT:
 
With real estate, we sort of get to do the same thing like the ladder.
 
We can NOT depreciate DIRT.
 
It lasts forever; however, the things built on the dirt, buildings and improvements have an expected life according to Uncle Sam.
 
RESIDENTIAL Real Estate improvements depreciate on a 27.5 year schedule.
COMMERCIAL is on a 39 year schedule.

What’s beautiful about real estate involves it usually holds it value and since we are at the bottom of the real estate market now, it will almost go UP IN VALUE again… and not down in value like the poor old painter’s ladder.

Example 1
Contractor Buys $10,000 Gutter Machine
Life of Gutter Machine = 10 years (example)
Contractor does NOT get to write off 10k the year of his purchase.
Contractor gets to write off 1k for 10years.
the remaining 9k is carried on his books as an asset and gets reduced 1k each year until it reaches zero.

 
Example 2
Investor with 10 yr Rental bought for $80,000
You generally cannot deduct, in one year, the entire cost of property you purchased, either for use in your trade or business or to produce income, if the property has a useful life substantially beyond the tax year.
Instead, you can depreciate it. That is, you can spread the cost over a number of years, and deduct a part of the cost eachyear.

The kinds of property that you can depreciate include machinery, equipment, buildings, vehicles, and furniture.
 
You cannot claim depreciation on property held for personal purposes.

If you use property, such as a car, for both business or investment and personal purposes, only the business or investment use portion may be depreciated.

You may depreciate property that meets all five of the following tests.
• It must be property you own.
• It must be used in a business or other income–producing activity.
• It must have a determinable useful life.
• It must be expected to last more than one year.
• It must not be excepted property. Excepted property (as described in Publication 946, How to Depreciate Property) includes certain intangible property, certain term interests, and property placed in service and disposed of in the same year.

 
To Your Continued Success!

Mike Butler

P.S. ALWAYS Check with your Tax Advisory and/or CPA before taking action.
 

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NOTES From Video
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80,000 dirt value is 5k
75k over Residential,….. 27.5  (25)
10 years….. Luke will give investor 150k this week for this house?
 
Fred Flintstone 3 Finger Depreciation Formula…
75k divided 25 yr = 3,000 year in depreciation
3k x 10 yrs = $30,000
—->>>> 80k minus 30k depreciation = 50k cost basis…
 
Sell for 150k ….. capital gain of 100k

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INVESTOR NIGHTMARE STORIES
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 Yes, you can be creative and accelerate depreciation pretty darn fast.
do this only if you need it NOW and Yesterday…
500k year.. AGI….
if you got 30k in depreciation,.. yes, accelerating it would be good for short term benefit.
 
100 year AGI….
300k annual depreciation… WHY WOULD YOU ACCELERATE IT???
 
My Battle Plan is to always add to my cost basis to keep bumping.
I want Depreciation to outlive ME..
a lot of investors, veteran, they moan and complain of paying too much income tax..

paid for, FRESH OUT OF WHAT?…. depreciation…

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When You Buy a Rental Property…
EVERYTHING YOU DO TO THIS PROPERTY BEFORE YOU PUT A TENANT IN IT
Becomes Part of the Cost of this investments…\\\
50k.. and do 16,000 in Capitalized Expense Account
 … at the end of year, tx into asset account.
now your investment is 66k….

Nuff on Depreciation

The Senate on Thursday backed a measure to help bolster the housing market by making it easier for people to afford a home in wealthier neighborhoods.

The Senate voted 60-38 to attach the proposal to a spending bill that the chamber will consider later this year. It would restore the size of the loans the government buys or insures to a maximum of $729,500 from the previous cap of $625,500.

The cap, known as the “conforming loan limit,” determines the maximum size of loans the Federal Housing Administration and the government’s mortgage buyers, Fannie Mae and Freddie Mac, can buy or guarantee.

The higher loan limit expired at the end of Click Here for Full Video/Article (Members Only)

Use the Resident Rewards ALL STAR Program to keep great tenants a lot longer.

It works!


Training for Landlords and Property Managers

How To Get Your Tenants to Ask For a 3 year Rental Agreement

This is an On Demand Video Preview

Click Here for Full Video/Article (Members Only)

Fair Housing Training Part 4 

Do’s and Don’ts for Landlords and Property Managers

Click Here for Full Video/Article (Members Only)

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