The simple concept of depreciation can get complicated very quickly when one is trying to determine the proper depreciation deduction for any particular asset. Here’s only a summary of some of what’s involved.
Identifying the asset
The modified accelerated cost recovery system (MACRS) is generally, but not always, used to depreciate tangible depreciable property placed in service after 1986. The MACRS deduction is computed on Form 4562, Depreciation and Amortization. Click Here for Full Video/Article (Members Only)
Real Estate Investor Deal Analysis Review Training Audio on Single Family Home
Jimmy Moncrief interviews Mike Butler to conduct a real “Deal Analysis Review” on a single family home that Jimmy wants to buy for a rental.
Back in May of this year, week of the Kentucky Derby here in my hometown, I had the great privilege and honor to meet Jimmy Moncrief and his sidekick and best friend Brad. Both are from Tennessee and were attending their first Kentucky Derby, a bucket list sort of thing I imagine.
Jimmy is one of my Gold Member and he had requested and scheduled a private one on one coaching/mentoring session, but in a very creative and unique way of doing it.
Jimmy wanted to record it as a live interview of a “Deal Analysis Review” on one of his pending leads on properties to buy. PLUS, Jimmy wanted permission to put it on his own website as a podcast thing. Here is the link to Jimmy Moncrief’s website http://realestatefinancehq.com/turn-landlording-autopilot/
I need your help please. A Little Feedback on the 2 questions below, thanks in advance.
QUESTION: Would You Like to Have Podcasts available from Mike Butler? (please answer below by entering your answer and comments in reply area)
QUESTION: If you answered Yes, Do You Prefer Audio Only or both Video or Both? (please answer below by entering your answer and comments in reply area)
Below is Jimmy Moncrief’s article and link to the podcast interview.
Taxpayers who are self-employed must pay self-employment tax on their income from self-employment. The self-employment tax applies in lieu of Federal Insurance Contributions Act (FICA) taxes paid by employees and employers on compensation from employment. Like FICA taxes, the self-employment tax consists of taxes collected for Social Security and for Medicare (hospital insurance or HI).
LOUISVILLE, Ky. (WDRB) — Police have arrested 54-year-old Anthony Jecker for shooting and killing another man at an apartment complex on Fegenbush Lane.
According to police, around 3 p.m. Jecker and his landlord got into an argument outside an apartment.
They say the altercation then led to the suspect pulling out a gun and shooting the other man.
The victim was pronounced dead at the scene.
Neighbors and police both tell us that the apartment complex here on Norbrook drive and Fegenbush Lane is in a family friendly neighborhood, and this is very out of the ordinary.
“Someone decided to do something that, obviously, killed someone else and could have put a lot of people in danger.” LMPD spokesperson Dwight Mitchell said, “thankfully that was not the case, but unfortunately there was one person who did die from this.”
Neighbors say Jecker does live in the apartment complex with his wife and a dog.
They say his wife left in a police car.
Jecker is charged with murder and tampering with physical evidence
link to full article http://www.wdrb.com/story/26016414/lmpd-arrest-suspect-in-shooting-at-fegenbush-lane-apartment-complex
Short from Mike Butler
My prayers go out to this landlord and his family. Although at this time, the media has not released the name of the landllord who was killed by his own tenant, this is real life about how dangerous people are in today’s world. Even Mayberry, USA is not safe.
This should be a huge wake-up call to all rental property owners in how you communicate and treat your tenants. Odds are, this landlord was working his butt off to build for true financial freedom with his wife and family.
Please remember this landlord’s family in your thoughts and prayers.
Here’s the GOOD NEWS… Investor buyers can STILL get financing from any source they want.
Here’s the TERRIBLE news… Owner occupant buyers now have lots of restrictions place on who they can get a loan from.
These new rules impact “contract for deeds” and “Land Contracts” as well as seller retained mortgages (and, of course, the ever present contract for deed in disguise as a lease-option) and private financing.
So, assuming an owner occupant wants to obtain a loan from a source other than a bank or mortgage company, here are the new rules.
If the lender only lends once in a 12 month period, the lender:
a) MUST be a “natural” person (i.e. not an LLC or corporation);
b) MUST have owned the property (i.e. no private financing, only owner financing);
c) MUST NOT have built the home in the ordinary course of his/her business;
d) MUST NOT have a negative amortization;
e) MUST be for at least 5 years, and if longer and adjustable, must be tied to an index rate, such as Libor
If the lender lends 2 to 3 times in a 12 month period, the lender MAY be an LLC or corporation. But the lender also:
a) MUST have owned the property (i.e. no private financing, only owner financing);
b) MUST NOT have built the home in the ordinary course of his/her business;
c) MUST NOT have a negative amortization;
d) MUST be FULLY AMORTIZED;
e) if the rate is adjustable, it must be fixed for at least 5 years, and it must be tied to an index rate, such as Libor; and
f) MUST determine in good faith that the consumer has a reasonable ability to repay the loan (similar to what a loan officer would do).
If the lender lends more than 3 times in a 12 month period,
all of the above requirements for a lender lending 2 to 3 times in a 12 month period apply and
IN ADDITION, the lender MUST BE A LICENSED LOAN OFFICER.
As you can see, navigating the waters of seller financing has again become tricky.
Please check with your real estate attorney before embarking on a seller financing transaction for a dwelling.
Until next time, peace,
P.S. Your simple solution to stay out of trouble is to never offer seller financing to any tenant / buyer or owner occupant. You can use Seller Financing to sell to other Investors, not owner occupants.
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Odds are, if you are in the residential rental property world, you have heard or know an investor who has been scammed by one of the internet dirt-bags.
This is nothing new. Remember the online scam where the victim is sent an email from who knows where, reporting they have won or inherited a billion dollars? But in order to claim it, the victim must pay for the processing fees and government stamps, etc.
You and I both say “there’s no way anyone with any sense would fall for this.” But Guess What? It is still happening every day with normal folks. These scammers would NOT be doing this if it did not work.
Here is how I know it is still happening and the scammers are still getting money from victims. My banker told me just a few weeks ago, he gets one or two customers a week who want to wire money to these scammers. Unbelievable. The scams continue.
Even as a retired Louisville Police detective, I have been scammed on several of my rentals. Let me share with you how it works.
The scammer surfs the internet for houses for rent. They find an unlimited supply of homes for rent on various websites from www.VistaKY.com, www.TenantFinderService.com, www.RentalHouses.com, www.Zillow.com, www.Craigslist.org and many more.
They find your rental house to target. The address is 123 Main St., Louisville, Ky 40207. It’s a 3 bedroom, 2 bath home with finished basement and 2 car attached garage. The rent for this home is $1200.
Here is what usually happens in this rental property scam.
STEP 1: After finding your target property, they download your all of your photos and details about this property from the online source they viewed. Think about this for a moment. The scammer has everything you have entered on the internet for the public to view. PLUS, most of the time they can use Google Maps to drive down the street, see what is on the corner (Walgreen’s, McD’s, etc) and the scammer can describe your rental and the neighborhood in great detail.
STEP 2: The scammer enters ALL of the information on your rental by “Stealing and Pasting” into a CraigsList.com Ad or any other website allowing investors to enter rental properties for free. The scammer lists the rent for your home at $899 which is a bargain for your rental home.
STEP 3: The Scammer’s ad will always have some kind of B.S. story about them being an “Out of Town Owner.” Some times they request a deposit up front and they will give them the key to see the home after receiving their money. They also inform the interested potential tenant that they have hired a local company to help get it rented and you might see their sign in the yard. Scammer tells them he is not satisfied with their service and he just decided to rent it himself or herself.
STEP 4: Unfortunately, many times the applicants actually send money to the scammers and wait for the key to the house. After receiving no response, these folks then call the number on the yard sign and complain to the real owner (YOU) they want their money back. Don’t laugh, this is true.
You are totally blind-sided when you get this call. You are furious, ticked off, and want to find out exactly what is going on with your rental. Your jaw drops and you want to do something, take action now to stop it now.
What Can You Really Do? Think about it. Can you call the police? OK, what will the police do after hearing your story. First of all, you are NOT the victim. Your potential applicants are the victim. Who is going to pay for this? Who will get locked up and go to jail? Good Luck!
So what is a poor investor to do?
Here is your Best Tool To Prevent Your Leads from Being Scammed. It is simple and easy.
Your solution is shown below. Get some bright neon yellow paper and print.
Print 2 or 3 copies and place several on the inside of the front windows of your vacant rental and I promise, this will definitely get the attention of your prospective applicants.
Earlier this year, your real estate market was devastated with the implementation of the new flood insurance program. Previously, any home in a flood plain, that had a federally insured loan (most do), were required to have flood insurance, no exceptions,
Prior to January 2014, if a buyer got a federally back home loan and borrowed $125,000, their annual flood insurance policy premium is roughly 1% with an annual premium of $1,250 in addition to all of the other regular insurance, etc.
I first learned of this mess when my wife Beth and I had dinner with our next door neighbors, Heidi and Sean. When we met them at the restaurant on a Tuesday evening, they were furious, angry, frustrated and shocked.
Heidi and Sean were selling their previous home, had a contract on it and were scheduled to close on “this friday.” (we are in the restaurant on Tuesday evening.) Heidi just learned on Tuesday afternoon, 3 days before the scheduled closing that their buyer’s already approved loan was being cancelled due to the new flood insurance program that went into effect around January 10th or so.
Heidi and Sean’s annual flood insurance premium for their previous home they were selling was about $2,000.
Their new buyer’s flood insurance premium for the same house, jumped to $23,000 a Year because of the new changes. WOW! No wonder their buyer’s loan was cancelled.
As you can see, there was no way they could sell their previous home and they rented it for the time being.
This rocked my local market big time and killed many pending real estate transactions and it also did the same for many communities across America.
UPDATE: with a lot of uproar from the real estate industry, our federal government recently passed a bill making some modifications to the federal flood insurance program.
What triggered the original fiasco is the turning off of federal government “subsidizing” flood insurance premiums. Insurance experts explained that the flood insurance premiums were never increased. The extreme price increase occurred when the federal government stopped the funding of flood insurance premiums.
The recently passed new modification to the federal flood insurance program postpones terminating federal assistance in 5 years.
This means for right now, you are ok, but only for 5 years, then the mess is triggered again.
TIP: If you or your family members or loved ones own real estate in a flood plain, you might want to do some more homework on your local market and give serious consideration to selling now before the bomb drops in 5 years.
My personal concern about all of this flood plain and insurance changes is not so much for the investor, like me and you, but just think about the poor old homeowner. A homeowner who worked their whole life at a job, who considers their home an investment, and in one fell swoop, our federal government just causes these folks to go belly up.
What if these homeowners live on a pension and their flood insurance premium skyrockets from $1,200 a year to $12,000 annually. They are sunk. They can not sell because the value of their home has tanked.
And these homeowners are somebody’s mom and dad, aunt and uncle, brother, sister, and so on.
Not having any experience with land trust, here are a few of my questions.
1) Does a typical real estate contract need to be executed to initially lock in the terms of your deal….for instance, selling price, terms of the note (owner finance), etc, etc,?
let’s dumb it down,.. when you make an offer to purchase, your buyer will be the name of your trust
2) The trustee is the only thing that is public…..does this mean that everything else is private…like the terms of the deal, the note, receipts for payments, etc.?
Your deed is on public record and will show:
– Name of Your Trust
– Name of Your Trustee
– mailing address for your property tax bill
3) When a down payment is put down on the property, is that reflected as a percentage of beneficial interest in the trust? For example, if the buyer puts 10% down, then you would own 10% of the beneficial interest in the trust and the seller would own 90% of the beneficial interest? If that is so, then as the note is paid down, how is that reflected in the trust?
– hurts my head – first of all most lenders will not lend to a trust.
4) What happens when the note is finally paid off? Buyer/Seller?
– competent lenders will mail you the original promissory note marked paid in full and will complete a satisfaction of mortgage to record if there was a lien on your property. it is no different than a regular loan.
5) Typically, is a new trustee appointed once the promissory note is paid off?
nope, you can change trustees anytime.
As you can tell, the structure of a real estate deal from start to finish are my main questions!
it is the same as any other real estate deal except your buyer and owner of record is the name of your trust
Thanks for your time. As I get to know Mike’s product better I will definitely be using the strategy in my investing future.
hope this helps you Mike,
in the real world, do not worry about creating your trust until after you have an accepted offer; otherwise you will go nuts… keep in mind, so called experts will tell you that you must have your trust agreement in place before you make an offer… and they are correct…. but in the real world as an investor, you will experience many of your offers are not accepted… this is why i recommend to do your trust AFTER you have a contract.
keep in mind, writing a contract is not proper and many realtors use this language.
this might help you
STEP 1: using a purchase and sale agreement form, you will write up an “Offer to Purchase”
STEP 2: your seller will review and if they like, they will accept your “offer to purchase” and will sign and date.
STEP 3: At that point in time, your offer becomes a “Contract.”
Mike, you can get more information at http://TrusteeServicesUSA.com and http://5mLandTrusts.com
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