Real Estate Law Degree – What is it and is it For You?

What is a Real Estate Law Degree?

The practice of law has undergone major changes in the past 20 years. Today, real estate lawyers work in varied and complex transactions, from simple residential house purchases to commercial projects.

This degree is a mix of law, business and dispute resolution. It will prepare you to deal with issues beyond law school, understanding how law interacts with tax, corporate, and environmental law. You will be faced with issues such as workforce housing, urban redevelopment, commercial leasing and workouts, and energy conservation. It will prepare you to deal with transactions when the economy is booming and when it is not.

What can I do with this type of Law Degree?

Real estate lawyers provide their clients with advice regarding purchase and sale of property, financing and development, construction contracts, investments, environmental compliance and property management. They help clients with governmental zoning restrictions necessary to move forward with projects.

With this type of law degree you could work in law firms, corporations as well as government agencies. You could work in large firms, in the building and zoning departments of counties and municipalities. You could also work for corporations, development companies or title companies. If you decide to work alone or in a very small company you will most likely focus on residential housing. In this profession you will work together with title insurers, brokers, environmental lawyers, litigation departments and bankers.

You would spend much of your day drafting documents, reviewing them, counseling clients as well as negotiating terms. A business law foundation as well as negotiation skills are critical for success in this area of the law.

Courses and Curriculum

Most students begin their study with a basic introductory course, transactions and finance. Following this entrance course, you would be exposed to courses in finance, mortgages, mezzanine loans, bond financing, leasing, acquisitions, mortgage foreclosures and community association law.

Real Estate Landscape in India

Real estate is a highly fragmented sector in India, with only a few organized players. Most real estate developers have only a local or regional presence and there is moderate participation from large corporations till now. The top players in the Indian real estate and construction industry are DLF, Unitech, Omaxe Hiranandani and Ansal group.

Most of the real estate developers in India today are giving a lot of quality and value adds like swimming pool, health clubs, gardens in their projects. The only negative factor today is that there is limited ready stock with good developers. The demand from the information technology sector certainly has changed the urban landscape in India. The sector is the biggest driver for commercial properties in India, and residential properties in India are indirectly benefited of the economic activities created by the sector.

In the residential properties segment in India, Gurgaon has clinched the status for a case study. Gurgaon, one of the national capital regions of India, which has seen a fundamental change in not just its skyline but also in its fundamental urban demographics. Gurgaon, a few years ago, was described as just a small town built on a cow pasture. But in the past seven and eight years, it has witnessed 20 malls with many more under construction and has a skyline of shining new office buildings and call centers.

Gurgaon is considered a shopper’s paradise and the malls are similar versions of their US counterparts: five story big bazaars which house almost every international brand like McDonalds, Levis, Nokia, Nike and Tommy Hilfiger along with multiplex cinemas, escalators and large parking lots. The arrival of call center industry, information technology houses and other such BPOs in India has led to an inflow of more than 9 lakh new jobs. Outsourcing business has changed the real face of commercial properties in India, but its greater impact has been the demographic shift characterized by rising disposable incomes and increased consumerism.

Mumbai has always been the trendsetter in the indicative property prices of real estate India. Upcoming cities like Bangalore, Hyderabad, Gurgaon are seen fast catching up with this trend. But on the other hand it has been noted that there exists a tremendous shortfall of middle class housing and affordable housing in India. Majority of the developers are involved in developing high class housing, so there is a dearth of low cost affordable units.

Rental value of the properties of most of the Tier I cities has gone up at a very fast pace. Individuals have started giving a serious thought about purchasing an apartment as the installment for home loans are almost equivalent to the amount they spend on paying the rent. Moreover, at the end of the day the individual has a sense of satisfaction that he has managed a fixed asset for himself.

The boom in real estate sector, however, is restricted to areas such as commercial properties, retail and housing sectors. This growth can be attributed to various fundamental factors such as growing economy and growing business needs.

Real Estate – Putting Those Profits Where They Belong in Your IRA Account & Your Pocket!

I’m going to talk about my favorite subject in a little more detail today…Real Estate, and how it can put more of that green stuff where it belongs…in your wallet!

A self directed Roth IRA invested in real estate allows the owner to keep more profits in the account, rather than handing them over to the government. Some of you may have little knowledge about purchasing real estate in your IRA. Many people still think that the only investment options are stocks and bonds or certificates of deposit. Well, there is a lot more that you can do!

Whether you want to buy raw land, single family homes, commercial property, an apartment building or a mobile home, you are surely hoping to make a profit. You may want to hold the property for several years and wait on the value to grow or you may be a rehabber, planning to flip the property for a quick profit. Either way, the self directed Roth IRA invested in real estate has several advantages, and here are a few.

First, there are no capital gains taxes. All returns are either tax-deferred or tax-free, depending on the type of account that you have and the withdrawals that you make. Purchasing real estate in your IRA can be easy. It just takes some time and knowledge, as well as the right custodian.

Many brokerages will not handle a self directed Roth IRA invested in real estate. It’s not that the IRS doesn’t allow it. The laws regarding retirement accounts allow people to invest in almost anything. It’s just not a traditional investment type and most brokers are not familiar with it. And, you would be better of to choose someone who is.

So, in order to begin purchasing real estate in your IRA, you need to find a company that is familiar with the option. Otherwise, you could run into problems down the road. Let’s say that you decided to let the new broker down the street manage your account.

You knew about the advantages of a self directed Roth IRA invested in real estate, so you took the plunge and bought a single family home, using funds from the account. The property is held in your custodian’s name and all income and profits are returned to the account.

Your son needed a place to live, so you decided to let him rent the property, since it was vacant. Being unaware of the self-dealing rules, the custodian allowed this to go on. Once the IRS saw that rental income was going into the account from one of your relatives, the account was audited, the tax-deferred status was lost and you were forced to liquidate the account. Why?

Because one of the rules about purchasing real estate in your IRA is that family members may not live in the homes that you buy. You can’t even buy a house that you plan to live in after retirement and hold it in your retirement account. It all falls under the self dealing laws and if your custodian is unfamiliar with them, then you will become the loser.

If you have knowledge and expertise about buying and selling property, then a self directed Roth IRA invested in real estate is simply another way to grow your portfolio. If you need to learn, there are people who can help. So, get some help and start investing in your future.

Joe Fazchas is a Real Estate investor as well as owner and founder of www.iLOCAdvantage.com, a company that partners with private individuals and lending corporations nationwide for the sole purpose of financing and/or rehabbing investment properties. All of which is done using a proven “turn-key” Real Estate system…The ILOC IRA.

Returns on Real Estate vs. Stock Market

There is always going to be debate amount investors over the returns on Real Estate vs. the Stock Market. Each side has their valid points and it is mostly going to be up to the investor to make his own decision.

Real Estate has a long history of being a stable and secure investment. The Stock Market, by comparison is a relatively new creation. The value of land and property dates back to the very beginning of recorded history, but does this ancient historical value really have much to do with today’s investment market. The supporters of the Stock Market will be quick to point out that they recognize Real Estate’s historical value, but will be quick to point out that “that was then, and this is now.”

When you take a look at the average return on investment (ROI) figures for the modern era from 1926 to 1996, you find that it is pretty close to being a tie. Small stocks slightly outperformed Real Estate during this period, 12% to 11%, although Real Estate edged out the Dow Jones Industrial Average by 11% to 10%. These figures indicate that there is not much difference between Stock Investments and Real Estate Investments according to historical return figures.

There are several major differences between the management of both investments. Stocks are easily transferred. They can be bought in smaller lots or large lots. There is much similarity between Stocks of different types. Real Estate investments take a bit of time and effort to complete the transactions. The transactions costs tend to be high. The idea of an inexpensive piece of Real Estate does not mean anything at all the same as an inexpensive share of Stock. All of these factors seem to point to Stocks as being better.

But administrative details and transaction costs do not have anything to do with the rate of return. In fact, if initial costs on Real Estate transactions are higher, and historically they end up performing as well, it is obvious that once they are in your portfolio, they are going to outperform most Stocks. Also, the trick to successful investing is not graphing what happened in the past, but predicting what is going to happen in the future.

One of the most compelling arguments for Real Estate investment is the matter of finite space. There is only so much land and only so much improvement can be made to it. Corporations and other types of business entities have no such finite limit. The expansion of the Stock Market into the electronic world that led to the “dot.com” bust recently is an example. Since Real Estate has limits on its ability to expand, it would seem likely that it will continue to increase in value as it grows more and more scarce. Real Estate managed to hold its own against the Stock Market during the period of the Stock Market’s great advancement and growth. The future could very well belong again to the Real Estate investor as it once did in the past.

Real Estate Boom Blows Every One Out of Way

The Real estate sector is one sector in India that has witnessed some outstanding growth in the recent past. Being hailed as the most phenomenal development ever occurred in the Indian history, this overall changeover in the real estate has proven to be a landmark. It has directly and immensely contributed to the maturation of India as an economy. Due to this remarkable onto-genesis, India is now counted as a developed nation. This transition from developing nation to a developed one has not taken much less time than is usually taken by an economy. This clearly tells every one about the giant leap taken by India.

Many factors can be held responsible for this sudden change on the real estate front. The first and the most important being the problem of accommodating ever increasing population. Yes, it is one of the basic reasons that has contributed quite significantly to this fulminant change. India is a country that is home to around 1/6th of the total population present on this blue planet. However, despite being the seventh largest country, it is now becoming increasingly difficult to support such a huge population (which has now crossed the mark of 125 crores in numbers)with the same infrastructure. With more jobs pouring in and increasing standard of living, people are now not willing to settle down for any thing less than what they desire for. Due to this changed attitude people are now willing to buy piece of lands, flats virtually at any price. This is a major reason that has kicked in the prices of real estate property.

Another major factor is the liberal policies of government. In past few years, the development seen by Delhi and NCR region is nothing but stunning. This all began after, Ghaziabad, was declared as the ‘sixth most dynamic city to live in’ a title which no else city in India has. This title found Ghaziabad a place on the World map – rare recognition indeed. After that there was no looking back, along with Ghaziabad, Noida and Gurgoan were the other cities that became hot cakes for almost all the real estate developers situated in various parts of the world. These cities are education, job and fun hubs for the young generation. Ghaziabad is home to IMT, a highly recognised management institute and also has some 21 multiplexes. Noida and Gurgaon boast of having ample BPOs, KPOs, ITES and export centres in their region, thus making them exceedingly popular among the job aspirants.

This development has been all due to the liberalised outlook of the government. Due to these policies, past few years have seen a tremendous inflow of eminent names of corporate world into these regions, which has catapulted the prices of real estate property to an unbelievable mark. The policies adopted by government that have allowed 100% FDI participation too have played their part in this direction. Other factors such as growth in tourism sector, rise in number of nuclear families and most of all, real estate are being cited as prominent investment alternatives. All these factors have added to the rise in the prices of the properties.

With prices of property rocketing to an unimaginable level, it has now become very difficult for the people residing in country to get the residential place of their choice. Although, availing loans too have become very easy but loan products are yet to cement their place in the hearts of Indian people. But even then people today are smart enough to take the cue from others and are preferring to go the loan way. They are not hesitating to take the help of Internet and are not even shying away from the idea of seeking professional help. There are many websites that can provide adequate information about home loan products offered by various authorities. The best part of this is that you can easily indulge in home loan comparison. This feature of home loan comparison helps the prospective buyers to take a sensible decision regarding loans that could suit their budget as well as their requirement.

Real Estate Stories that Show You How!

Let’s begin easing you out of the pits. I mean, comfort zone! I’m going to slowly and methodically give you as many little sparks and insights to the relatively simple ways that ordinary people use real estate to achieve extraordinary results.

Stories are the best spark plugs. They let you casually observe from a safe, secure and understandable view point. I will write to answer most of the questions that I feel I myself would ask if I was reading what you are about to read.

I want you to know something from the very start of this report and that something is this: I care about you and I sincerely mean that. I really do want you to move to a new comfort zone, one that is pleasurable and free from fear. A place where you realize you have the power to achieve greater things than you currently can imagine.

It’s possible for you to start being a more powerfully directed purpose-driven individual who is well organized and on track to higher achievement. You will change and grow, slowly and steadily with every page you read. With every thought and insight you gain, your desire and courage will grow as well.

Napoleon Hill wrote one of the greatest books of all time. It’s called “Think and Grow Rich.” The essence of that book, the secret it reveals time and again is this: you must develop a burning desire.

Don’t put this book down thinking the previous statement is cliché and that you already knew that! I am simply leading you to my next point, the next point being is – your desire needs a starting point. So to start developing desire, my secret is you must have a purpose. Why do you want to pursue real estate? I know what you’re thinking: to make money, to have security, to feel useful and appear successful. Good points. I agree you can have all of that and more if that is what you desire.

Now here is something that comes before any of those things you desire. What is the purpose of all those things? Purpose, purpose, purpose…you need to first define purpose before you get the things. My purpose, or so I thought early in my career, was to move up to a nicer house and have my first house become my first rental property. When I moved up to the next one, I quickly learned as soon as I rented it out, I was in some way responsible for creating happiness and security in the life of another person that was of no relation to me.

It soon was evident to me how the choices I made in choosing that first property either would help me or hurt me in my quest to succeed in the real estate investment business.

All of it is cumulative, everything you do and how you do it adds up. It compounds itself and it either makes your life easier or more difficult. I am going to give you experiences that you can learn from that will make your life easier; I am going to show you how. That is my purpose.

The book that gave me the unknowing courage to take my first steps in real estate was a book called “How I Turned $1000 into $3 Million in real estate in my spare time” by William Nickerson. He was a master storyteller and by osmosis, after reading his book, I found myself gravitating towards the real estate classified section of my Sunday paper.

Eventually I leapt and my life had changed. It was an FHA foreclosure, a two-bedroom, one-bath home with a built-in, screened-in pool, with a Jacuzzi and a built-in sprinkler system. I bought it for $46,000 and used the HUD 203K rehab program to fix it up. I spent $16,000 to update and make repairs. They then gave me one loan for a total of $62,000. It took me three months to complete it and I was in; I had done it!

My life changed, I learned, I took the leap. From then on I had confidence. I had already had my first home but now I had two. Well, I was in the Coast Guard and wouldn’t you know, three months later we moved. Uncle Sam took me out of St. Petersburg, Florida and dropped me in Kodiak, Alaska, for my next tour of duty.

Well guess what? I was armed with ambition, courage, confidence and just enough knowledge to be considered dangerous, so I bought a duplex as soon as I came ashore on Kodiak Island. Now I had three dwellings and my relationships and responsibilities were growing with my new tenants counting on me to provide a clean, functional and pleasing environment for them to exist in.

It looked like this: My mother rented my first house and an elderly couple rented the second one and my duplex came with an existing tenant who was a hospital administrator, so I was lucky. I was able to ease myself into the role of landlord without getting burned early in my career. I now had two houses and a duplex in the span of about one year. My brothers and some other family members took notice and were pretty well dumbfounded.

They couldn’t figure out how I had, all of a sudden, become a real estate wizard.

It felt good to make that change in so short a time.

I got that from reading a book! And that my friend is how you are going to do the majority of everything you do in real estate, by reading and taking steps towards duplicating the success of others in a repeatable pattern. The key is to understand that you can do it if you read the right books and apply the very basic formulas that are handed to you.
There lies in: Magic Bullets in Real Estate

This is a common man or woman’s real estate manual. William Nickerson never gave me anything so easy as “Magic Bullets!” So I learned trial by fire and it has been very gratifying. I’ve since went on to collect 17 properties, 23 tenants, 2 real estate licenses in Florida and Alaska, an assistant appraiser’s certificate and over a hundred books on real estate. I just kept learning and growing and gaining momentum for the last 13 years. I am still in the Coast Guard, too, and I work at Alaska One Realty in my spare time. In two more years, I will be retired at the ripe old age of 42. Sounds like a sort of fairytale, doesn’t it? Don’t let me fool you. It’s hard work and I’m still not a millionaire, but I want you to have the truth, so I will be honest with you every step of the way.

I know why I am not a millionaire and here is why. I would periodically sell property that was going up in value and paying for itself through the rent checks. But being in the Coast Guard would dislocate me every four years, so I found myself selling out in order to avoid being what is called “an absentee landlord.”

This is an important lesson for you. It has prevented me from becoming a millionaire up to this point. The lesson is: find an area on this planet that you could and will live in, and stay close to it. Don’t move more than 10 miles from your farm area. The farm area is where all your properties are located. Long distance “land lording” is tough! It can be done but you lose the ability to control the situation compared to if you were there. I’ve served my country and saved people’s lives, so for me it has not been in vain. I have no regrets but if you don’t have to leave your area of expertise, don’t!

The networks you build and the contacts you build, in the process of “doing” real estate, are so valuable that when they are no longer at your disposal, it puts you at a serious disadvantage.

Not to mention when you move you have to acclimate yourself to an entirely different market, build new trust-based relationships and start all over again. It’s like a treadmill you’ll be running and running, however it gets you nowhere.

I’ve used it to my advantage. I have been forced to accelerate my abilities to rapidly duplicate my success whenever I am moved, but it is still an uphill battle. My point: Don’t move too far from your farm or your network of bankers, appraisers, carpenters, tradesman, real estate, friends, tenants and so on. Once you have the skill you can duplicate your success anywhere you go but if you don’t have to go…enough said on that!

I like to say, “Don’t sell the goose to get the eggs.” What that means is if you need money to buy more property, use equity lines from other property to do it. You will get the same amount of money or more by using an equity line as if you sold it. However, you get to keep the asset and the money! I go into this in “Magic Bullets,” so I won’t drone on here. Just know you don’t have to sell your property to get the cash out of them.

So here we are. You know a little bit about me and you may have picked up a nugget or two. Let’s find a few more.

There once was a man who wanted to buy some investment property, so what he did was look at growth patterns. You should do this too, by going to your city’s planning and zoning department. You can see growth patterns and you definitely want to buy property that stands in the way of growth.

This is how he used what he learned. He saw that city planners had decided that a new artery (highway) would benefit their city by creating linkage to another city about 100 miles away, so being a smart investor he only went as far as a ten mile limit to be able to be close to his investment.

Now on average, new growth will radiate out from existing prosperous cities in the direction it is planned at a rate of about one mile per year. So our smart investor had a 10 – 12 year plan to cash out in about 10 – 12 years.

What he did was buy, I believe, 10 acres of commercially zoned property very cheaply because there was no demand at the time. He bought it, fenced it in, put up some lights and a gate, and held onto that little bugger. Now that new highway was coming his way and the good folks, through their taxes, were paying to have it built.

It didn’t take long for the heavy equipment to start cutting a swath towards his fenced-in storage facility and when they got close enough to him, he started renting out a secure area for everything, from road cones to generators to backhoes. You name it – it was stored there. This more than paid his land off.

Now the men and their equipment eventually moved on further down the trail but they left a finished highway behind them. And guess what? Low and behold, people started driving on it, and then started buying property to build houses on to get away from the city. Since the new highway was a straight shot into town, ten miles out was breeze.

Well, of course, here comes the herd and everyone is just populating the whole darned area. And within ten years, residential housing surrounds Mr. Investor, and can you guess what he’s got? Yep, a prime piece of commercial property, 10 acres large.

So in accordance with his 10-12 year plan, he sells his storage facility to make room for the new office/business park complex for over $2,000,000. That, my friend, is vision, and the sooner you get a clear picture of what it is that you want to specialize in, the sooner you can retire to the islands.

How hard was that? Don’t tell me you can’t do it, you can! I’m here to help you. I’m going to give you secrets no one else dares. Do you ever wonder why people won’t tell you the secrets? Of course you already know this but I’ll tell you anyway. It is because they are operating on a scarcity mentality, as though there won’t be any left for them. Or if learn something and act on it, you will get ahead and have a great life. Well, misery loves company and silent oppression is the rule.

Here’s a little story that poor quality real estate agents won’t appreciate either but I’m going to tell it to you anyway. The reason I can tell it is because there are some great real estate agents out there who absolutely don’t fear what I am about to tell you and would let you know it if they were in my position.

Here’s the deal: Some agents want to be like the Wizard of Oz. They want to create the appearance of marketing and transacting real estate as being technical and very legal, a deep dark mystery. Well, it’s not! The truth be told, you can write a contract on a napkin and it would stand up in court. I will emphasize here that you write on that napkin along with the terms of your agreement, “The terms set forth on this here napkin are subject to my attorney’s approval.”

An attorney will cover you completely for around $750.00. Prices may vary, however that is an average home transaction. There is a lot I am leaving out here but my point is this: If you own property, you can sell it anyway you want. “Magic Bullets” will teach you. Let’s move on.

Exposure is the key to finding buyers and sellers in real estate. If a property is priced fairly and everyone who is looking for that type of property knows that it is in the availability pool, it will be found and the transaction will proceed as advertised. Price it right, advertise it properly and let the lawyer take care of the details. No commission, just a flat fee. Period.

Now that I have that off my chest, I will tell you a story about Dan, a 21-year old friend of mine, and his wife and their new baby. He’s a hardworking guy who does his work without complaint and all the other “workers” pick on him for working so hard. Can you believe it? The other guys are so insecure and lazy that they make fun of a guy who is doing the work of three men, mainly of the three who are ridiculing him. Well, believe me, this doesn’t go unnoticed by me and I take him under my wing. Dan wants to buy a house, so I begin the process of saving him years of trial by fire and save him $25,000 at no charge. That is because he deserved my help.

Anyway, here is the story: I began with him by asking him what type of home he thought he would be comfortable with and a price range. He indicated a 3-bedroom for around $100,000.

Knowing what he wanted and knowing the area, I was able to take him shopping for the house he was looking for. Now I always go after the “For Sale by Owner” homes first because I know they won’t be adding any commission figure into their price, because they won’t be paying one. So at 6% of $100,000 he will get $6,000 more “house” for his precious dollar.

I also told him besides the “For Sale by Owner” homes, we would be looking at oddball discount companies that help distressed sellers further part with their money and property. The mentality of a seller who uses cheesy companies to help them sell their property is pennywise and pound-foolish. If you’re going to use professionals, then get a professional.

So off we go. After a day or so, we have found our house. Sure enough, El Cheeso Inc. has a sign on it. The screen doors are flapping in the breeze, the weeds are dancing on the lawn, but this house is indeed a 3-bedroom, 2-bath, 1-car garage with a fenced yard and it’s selling for $110,000. Well, due to the fact that there is a divorce in progress, and a new girlfriend who doesn’t like the place, and El Cheeso Inc. giving no representation, I negotiate for Dan and he gets it for $99,000. What’s so great about this deal is this exact same floor plan in another house was for sale down the street, on the same street, for $25,000 more.

The moral of the story is good things come to those who deserve it, and that is another key to real estate. You must work hard so others will take notice of you and help you succeed.

Here’s a beauty for you. This is about being in real estate circles and keeping your eyes and ears open and often times your “yapper” closed. This is the story of Brian and Julie. Here we have two hardworking souls. They have been married for 20 years and they have weathered the storms of matrimony. Julie works at a real estate office as an office manager. No real estate license, but she works at an office that sells a lot of waterfront property. So we are talking about location and being in the right place at the right time, and here comes a seller in the door of the office stating she is going to sell her older waterfront home. She is willing to take $180,000.

Julie tells Brian, they look at it and sure enough, this pearl is right on the water. She’s a gem waiting to be polished up, so Brian and Julie sell their condominium and move in. Well, they aren’t making any more waterfront property, so Brian goes to work polishing this jewel up.

Now, they have bought this house under market value in an appreciating market. So about one and a half years later, this property is worth over $350,000 and still climbing. Well, Brian is no dummy, so he gets to know his neighborhood. He strolls, takes walks and notices, you guessed it, a vacant, neglected jewel on an inside double lot. He tracks down the elderly lady, who is living with her sister, through the county records office and buys the house, including the extra lot, for a total of $120,000. Now Brian can walk to his new “jewel” and he starts polishing it. The neighbors start noticing and are amazed at his deal. He has offers of $180,000, $200,000 and $60,000 for just the lot. You name it. Now that the exposure is there, everyone wants a piece of it.

Well, this is what Brian did. He rented his first house out, moved into the second one and used plans that I gave to him to build a third house on the vacant lot, using the equity he accumulated from the first house that went up so much. And here’s how this thing shakes out: $180,000 for his first house and it’s value goes up to $365,000; he picked up the next jewel for $120,000 and he paid cash using the equity from the first house. Now he takes out a new mortgage on his second house for $120,000 and builds a third. The value at last count was $815,000 and he owed a grand total $300,000. That’s a half million-dollar profit in 5 years!

Now what does this story tell us? #1 – it says, “work hard”; #2 – keep your eyes open; #3 – use equity lines; #4 – don’t sell; #5 – learn how to be a landlord; #6 – be in locations that appreciate; #7 – buy things that are limited in availability; #8 – know how to research owners and repair property; #9 – get your partner’s help (spouse); #10 – use knowledgeable friends to help you see potential (I gave him the plans and advised him not to sell anything!).

Can you get any more lessons out of this story? I’m sure you can. Just read it again and think on it. Jot down your ideas and put them to work. Real estate is not that hard, folks! You can do it. With a few magic bullets, some spark plugs and a good mentor to show you how, you can do it too!

Let’s you and me talk for just a minute here, OK! Have you ever been really good at something and been able to step back and see the whole thing for what it is was? You just know exactly how to do it and you can see the end result clearly in your mind before you start. It’s predictable to you. It’s almost second nature, so you are comfortable doing it. It’s almost become boring to you; your comfort zone is such that you can do it in your sleep.

I’ve gotten that way with certain types of real estate and I see people everyday that are so afraid of taking the first step that they are literally paralyzed. They make excuses and put it off, and rationalize and live a quiet life of desperation. They don’t trust themselves and as a result of the unknown they can’t trust anyone else either. This is a vicious cycle because the longer they wait the more it reinforces their beliefs.

I just want to grab them by the collar, take them to the bank and make them tell the banker, “Pre-qualify me!” Then walk them out the door and show them how to do something that will change their life forever, and that is to buy the first property, and then a second. Then their fear is gone and they grow to be of service to everyone who is ready for their assistance.

Let me tell you this: After you finish reading the rest of this report and you read the “Magic Bullets” book, your fears will be subdued and you will do something and your life will change. If you cannot succeed with what I am intent on showing you, then something is not right. I believe your desire would be your major obstacle, so if that’s the case, read “Think and Grow Rich” by Napoleon Hill and come back to me then.

Let’s get back to real estate education, shall we? Do you know who the largest commercial real estate owner in the U.S. is? It’s McDonalds Corporation. Yep, and on top of that, they also have the most valuable locations for their type of business. The research they do on demographics and traffic counts is unparalleled!

If you were ever going to open a fast food restaurant, just put it near a McDonalds. You would survive just on the volume of people who flock or pass by the location that McDonalds has already decided meets all the critical data to support their restaurant business. Your restaurant, if you had good food and service, would flourish. Just sell something a little different than McDonalds. That’s leveraging someone else’s expertise in evaluating a location for a certain type of real estate.

Now that is a principle and principles are like natural laws. A natural law always works in every situation in its own way. It’s like gravity – it always works! Here on earth, anyway.

So in real estate it doesn’t matter what type it is, whether it’s commercial, residential, industrial or recreational. Look for signs that serious market studies have been undertaken by major operators and buy things that can flourish in the presence of those concerns.

For instance, let’s use Home Depot as an example. If Home Depot decides to build on a site, every residential lot within a mile of that new center will be bought up as soon as the Home Depot commits to build! Why?

Because smart investors know that Home Depot has done the market study and the area will be a prosperous one.

On top of that, it will provide jobs, it will pay taxes, it will provide materials to actually build the neighborhoods with, and people will shop there once their houses are built. The same goes for Wal-Mart, Lowe’s and other smart business concerns.

You may or may not have noticed this but take a look the next time you are driving around. Here is what you should see. As you drive into cities from the suburbs, you’ll notice donut shops, gas stations with convenience coffee centers, bagel shops, and etcetera, on the side of the road that people travel to on their way into the city to go to work. These are morning activity business centers.
Now on your way home, out of the city, you will see restaurants that cater to the evening meal crowd: KFC, Taco Bell, Subway and Pizza Hut. That’s because people don’t go there for breakfast. They get it on their way home, outbound from the city at night. If you put your restaurant on the wrong side of the road, you could be making a huge strategical error. Think!

Location, location, location as they say, are the 3 most important things in real estate. That is a very true statement. With residential property, that boils down to safety, security and convenience. So buy homes in good neighborhoods, cul-de-sacs preferably. No noise or through traffic, no escape routes for thieves, and a private setting, where kids play in the street without getting run down.

Security = close to hospitals, police and fire protection for obvious reasons.

Convenience = stores, gas stations, restaurants, small businesses, parks and recreation and access to major highways to circulate or evacuate if necessary.

You might get a great deal on a piece of properly but if it takes you a half hour to get a loaf of bread. What kind of resale will that great deal offer? Another great deal may back up to or face a busy street. That’s often a poor choice as well…noise, pollution, the loss of privacy and curb appeal are all factors here.

The two best types of property to buy are:

1. Property that no one else knows is for sale! Why? Because you have no
competition.

2. Property no one wants! You just have to figure out why people don’t want it.

If you can turn that lemon into lemonade through some problem solving, that

jewel may just shine because you used the right magic polish.

In real estate, you get paid when you solve problems. That is a fact!

Here is a golden nugget for you. If you do this, it will catapult your real estate investment career. I guarantee you will gain more insight to real estate by doing this one thing than just about anything else you could possibly do. The golden nugget is this: Take a real estate appraisal course. It will fly by, a few weekends and it’s over, but the perspective and the information you gain from the class is priceless. It gives you vision, ideas and understanding. You will have an edge over every other investor who has not done it.

I had an instructor, who by some stroke of luck, I was privileged to be taught by. His name is Steven V. and he is truly a genius. This guy could make millions if he applied himself to real estate investment but he chooses to teach and give back to others in that way. He is very comfortable in life and money is a by-product for Steven. When I finished the class, I had appraisers wanting to hire me to go to work. Now I don’t want to work as an appraiser. I just want to think like one and that is why I took that four-weekend course. That class taught me more than both of my real estate licensing courses combined. The reason for that is real estate classes deal with state laws, contracts, regulations and ethics. Appraisal focuses on evaluating real estate and that is what you want to learn as an investor.

A real estate license can actually hold you back from being a savvy investor and here’s why: #1 – You have to announce to every seller that you are an agent. It’s an ethics rule and a disclosure law. Well, now the seller is on guard for all kinds of reasons and you waste precious time overcoming negative reactions. #2 – When you go to sell your real estate, the same things apply but add to that scenario the fact that if you make large profits on property that you sell, people can come after you, saying you took advantage of them because of your expertise. And they win!

So you don’t need to go to college for 4 years and you don’t need a real estate license. What you do need is a guy like me to convince you to go to appraisal school and read books like the one you have now.

Then go out and do it, using a lawyer to protect you every step of the way. Again, here is a good point to make. Simply weave into every agreement or offer you make the following statement: This entire agreement is subject to my attorney’s approval. I can’t stress that enough. That’s one line of text. That covers it all. It gives you time to investigate deals. It protects your interests and keeps you from getting burned in this business.

Here are a couple more beauties that I use to protect myself and you should too.
These are used with initial purchase offers:

1. Willing to pay X amount of dollars or appraised value, whichever is less.
(That says, “I’m only going to pay so much but if the appraisal is lower than

what I offered, than I am going to get it for the lower price. I don’t get

burned!)
2. Subject to my partner’s approval. (My partner was always my wife, and if she

didn’t like it, the deal was null and void, cancelled, over, kaput, finito.)

Now nothing says my partner wasn’t my dog, so if there’s no fire hydrant, well the deal could be off.

Those are examples of escape clauses that could be abused to the point of being called “weasel clauses.” Don’t be a weasel! They give you a short period of time to have the option to buy something first with the right to cancel the deal, contingent upon something or someone else’s decision.

I use them to protect myself and to get a little time to do my research on the property. Don’t use them to unfairly tie a seller’s hands. Be fair and try to move quickly when you do employ them.
What you are doing is creating a short time, zero-cost option to buy real estate. Here is a little trick and I don’t use it very often but it can be used in a fair manner so I will give you the nugget. When you write an offer to purchase property, on the top line of the contract is a line that indicates who the buyer is. On that line in certain cases, I will write my name plus the words or assigns, like this:
Buyers: Dan Auito or assigns

What that word “assigns” does is this: it allows me to sell by assigning my right to buy the property to someone else. Dirty dealers will take advantage of people with that word if they can get away with it.

Here’s where I would use it. In real estate, a lot of bargain hunters look for distressed property. You know, the fixer-uppers, the abandoned, condemned, fire-damaged stuff. I go a step further and look for distressed sellers such as death, divorce, relocation, but a lot of times I don’t specialize in that type of property.

That’s OK because if it’s a steal and I get it for 40 – 50% off, I will assign it to someone who does deal in that type of property and make a profit by assigning it.

I’ll always ask the distressed seller if that is a problem and if it is, I will buy it outright, then flip it but it costs more to do that. So I’ll explain this to the seller and get their permission to use it. I don’t slip it in on them. You will have a miserable existence if you practice real estate by deceit. Natural law will crush you; play fair! Purpose, passion and desire cannot be achieved or acquired by deceit. That’s a quotable quote. I hope you remember it.

Let’s get on with another story. This illustrates another fine example for you. This story is about a family who had business interests outside of real estate investing and as a result of the successes of their other businesses they had fairly large sums of money to play real estate like a monopoly game. Power can be dangerous in the wrong hands!

So here we go. This flush with cash family sees an opportunity to take advantage of an overlooked or left alone market. That market is the old-fashioned trailer park, or shall we say Mobile Home Park.

Anyway, the way most mobile home parks came into existence was this: Usually a man of integrity and strong work ethic coupled with a love for his fellow man would buy a piece of land suitable to the placement of mobile homes. As people moved in, he and his wife would welcome them and the neighbors would greet them and the community would become established.

The private owner would dig his own sewer lines and cut his own roads and landscape the park. Maybe put in the clubhouse complete with a swimming pool, shuffleboard, pool table and meeting hall. As time marched on, the residents bonded with each other and a family-friendly community took root. Well this man of integrity had a problem. Since all of his tenants are his friends, he is pressured not to raise the lot rents with inflation.

So the rents over the years are kept very low in the park and now this man and his wife are getting old. Perfect timing for our investors to come knocking and offer our private aging park owner a 2 million dollar price for his 10 acres of mobile home lots. This is a once in a lifetime offer and many park owners cashed out.

What people didn’t see was these investors were systematically and methodically doing this all over the place and once they cashed out as many mom and pops as they could, they lowered the boom.

Now they the investors had control of many parks in the same areas and they started raising the lot rents. You see, they didn’t have any emotional ties to the residents and they didn’t live there, so it was a straightforward business deal: either pay the new higher rent or move.

The residents said, “To hell with you new owner, we are moving.” “Well, fine, go ahead,” they said. Now the residents started calling around to find another park with low rents but guess who owned those? Yep, our investors did, and those lot rents were going up too. So the mom and pops who didn’t sell were full and it would cost on average of about $7,000 to relocate to another park even if they could find a vacancy.

The old folks who had it so good for so long were faced with a new reality and that was that they had no choice but to pay up or move, and moving, in many cases, wasn’t an option. These investors exploited a complete segment of the market and made millions and millions in profit and continue to do so today.

It wasn’t long after this happened that you started seeing signs saying, “This is a resident owned community.” People eventually got smart and started buying that little lot that their trailer was sitting on and they began paying association dues for the clubhouse and security and grounds, maintenance and road repair. The good ole days are nothing but a fond memory.

Life goes on but America did not change for the better as a result of these types of people. Their only purpose was to make money; I believe they will die alone and in misery as a result of their way of life.

So I ask you again, can you be passionate and put your heart into investing in real estate by investing the way our corporate investors did? I think not. Money is no good when you get it by deceitful ways. I encourage you to work at balancing your objectives. Lease optioning, flippers…you are walking a fine line.

Here’s a flip side to communal living. This story is a happier scenario, so let’s have a little joy here. I once lived in Key West and I lived off base. Well, I thought I lived next door to Noah, and it sounded as though he was building another ark. All summer long, hammers and saws seemed to be making some type of racket, so naturally being the neighbor I was, I got to know the man next door. He never went to work and I asked him one day, “Don’t you have a job and he kind of grinned and put his hammer down and this is Mark’s story.

Mark and his brother were from the Northeast and they had a 30-room boarding house for college kids there, at something like $300.00 a month. That was about $9,000 a month and they made the parents responsible for the rent payments. Mark would spend his time with his family in the Keys for the nine months that school was in session. His brother was a local up North and he took care of the toilets, faucets, doors and windows. Yes, they had their very own animal house going on there, but Mark factored in the abuse and would spend 2 – 3 months a year, putting the animal house back together while the animals went home for summer break.

Mark only worked three months a year and the house (ark) that he built next to us was a masterpiece; it was beautiful. He was a master craftsman and he loved his work and spent a lot of his time with his family in a wonderful climate. Makes you kind of jealous, doesn’t it? Well, don’t let it because you can do it, too, but you must get started. Mark was 45 when I met him. I believe he was 25 when he got started, so my advice to you is to get started now!

Real Estate Sales Software Solutions For Dynamic Businesses

Looking for real estate software solutions that fulfill your unique business needs? Modern real estate sales software solutions are extremely dynamic and especially crafted to meet unique business requirements. These cognitive solutions are helpful to improve business growth and produce effective insightful knowledge for the key decision takers. These are by far the most evolved systems that can deliver accurate results without compromising quality and business standards. Qualified real estate consultants and property developers who have joined experience of years rely on these insightful solutions and their associated tools.

In fact, these especially crafted real estate software solutions are well-intentioned, technically upgraded and financially secure for wide scale usage. Property developers choose it because it is good fit for their business and helps them to get more sales. Indeed, it is an investment for them. It is also responsible for empowering real estate businesses by eminently producing high-quality, qualified lead & business analytics. These specialised solutions are all built on technologies & platforms that can extend flexibility and high-end functionality for the businesses.

These business solutions are right sized & intrinsically perfect for the different level of business needs and definitely offer a choice of out-of-the-box customer service. The best thing is that such solutions are for small-size and large size businesses. It helps them to work effectively, accelerate business performance, improve business performance and grow easily and all with a high degree of scalability and reliability. Property investors often rely on dynamic real estate solutions to get real business insights, dynamics for informed business decision-making simply and easier than ever before.

This level of automation and customisation undeniably enhances the corporate value, its overall competency and real-time growth through its suitable advanced features such as initiative-driven analytics, basic reporting, lead nurturing, financials, sales conversion feature, email marketing, customer relationship management, business process management and database security features. It dramatically enables property agents and developers to differentiate themselves across industry competitors.

In short, if you want to take less business risks, ensure excellent growth & development and want to do all your business-wide operations using one centralised platform that is fast, secure and powerful than real estate software solutions are the best answer. So, if you want to create business value, define operational priorities, grow sales distribution channel as well as focus your business for continuous improvement in a unique, competitive manner then you must consider a well-intentioned, trustworthy, technically perfect real estate software solution.

TACT Program – Solving the Real Estate and Banking Crises is Simple

There have been numerous articles and books written on the theories or reasons behind the residential real estate bubble and its bursting in 2006, which led to what will likely be remembered as the Great Recession. I can add that I am not one of the parties that share the blame. I was living in Europe from 1994 – 2007 and did not even own real estate in the US during most of that time period! Chalk that up to luck, not prescience.

I would like to focus on what can be done to get out of this mess. The answer is surprisingly simple, although as so many things in life that are simple, it will not be so easy to implement due to the number of banks and organizations involved. They need to change or eliminate the policies, guidelines, and artificial barriers these organizations created to stop the free market from correcting the situation.

The easiest way to understand the solution, is to realize that a bank’s balance sheet is far stronger when it has a performing mortgage loan, rather than a bank owned (REO) property on its books. A REO property is in reality a liability to the bank, inhibiting its ability to borrow and lend. A performing mortgage loan is an asset that can be sold in the secondary market, or used to borrow against to make more loans. The situation is similar when a bank has a performing mortgage loan (even at a lower face value), rather than having a non-performing loan that exceeds the value of the real estate backing it.

In the simplest terms, the solution is for the banking industry to use some of the same strategies as real estate investors currently use since bank loans are not available. Investors whose livelihood depends on the returns they earn on their invested capital, do not wait until a buyer comes along with the ability to get financing. With few mortgage loans being made, there are very few such buyers. The investors package financing in with the property sale to have a competitive advantage. The only step the banking industry took in this direction over the last year was their proposal to allow former owners to stay in their homes as renters. The banking industry lacks property management skills, so they picked the worst strategy to try. The banking industry needs to focus on providing financing to sell the homes, not to get into the rental business.

I have been working on this solution for 18 months and so many naysayers told me it could not be done, that I initially believed them. Fortunately I heard about a gentleman across the country that had been working on the same concept. He had sufficient success acquiring bank owned properties from small local banks, that he started holding seminars on the topic. He coined the phrase “Bank Seller Financing” and pitches it as a great way to acquire properties. He appropriately cautioned that this was not a phrase that would get a positive reception within the banking industry, since “seller financing” was viewed as competition by mortgage lenders. I am indebted to Michael P. Watson and his seminar for rebuilding my determination to expand this simple solution to resolve a massive problem – the US housing market crisis.

Let me summarize the US residential real estate market issues, as if there was a US real estate market. In reality there are many sub-markets with varying degrees of these problems and opportunities. Detroit, Cleveland and Buffalo (where I was born & raised) are very different real estate markets than Las Vegas, Los Angeles, Phoenix (where now I live and invest), or most metro areas in Florida. The key issues are:

– property values have declined, in some markets precipitously,
– many homes are now below their mortgaged value, and far below their “market value” during the bubble,
– banks have too many properties they own due to foreclosure,
– banks are faced with many non-performing loans and the prospect of even more foreclosures,
– some counties (like Maricopa County where I invest) are sending out ridiculously low assessments for 2011 and scaring more homeowners into turning their keys over to their lenders, and
– with the current high unemployment rate the majority of people believe that real estate prices will continue to decline, despite evidence to the contrary.

As a case in point, I was shocked when investors at a recent meeting of the Arizona Real Estate Investors Association (AZREIA) were polled about whether they believed housing prices would fall further, are near bottom, or are rising. Approximately 75% felt they would decline, 14% said it was at or near bottom, and 1% (including me) felt they were rising. All of those investors have access to the same very detailed market data, so I was shocked how differently we each filter that data based on what the media and the gurus are saying.

Back to the issues, there is one key issue which is both the crux of the problem, and the crux of the solution. There is not enough money available to make mortgage loans to meet demand. Ask your friendly bank executive if money is available for mortgages and they will give you the party line – “yes, we are lending every day and have plenty of funds available”. Publicly available data on lending, current underwriting requirements, and government issued guidelines give a totally different answer. The truth is banks do not have sufficient reserves to make enough loans.

Since banks are not lending, hard money lenders and private mortgage lenders (like my company) cannot even meet 20% of the investor demand for loans, despite charging annual rates of 12-18%. If plenty of mortgage money is available, why do I get daily requests, far exceeding our capacity, for Private Mortgage Loans, Transactional Funding, Seller Financing, Contracts for Deed, and our Lease-to-Own program? Trust me, it is neither because of my good looks, nor because I offer rates below government subsidized bank loans.

Many people believe that demand for real estate is low, and that is depressing the market. The opposite is true in many markets. In the Phoenix market, sales in 2009 and so far in 2010 were on par with the peak years of 2004-2006. Pending sales are now at levels that make those earlier years look like slow periods. Incidentally, during the peak years the Town of Buckeye, where I live, was the fastest growing housing market in the US. By 2008 the bubble burst and about 90% of the properties for sale were distressed sales. Like the rest of the Phoenix market, sales now exceed the peak years, and I have prospective buyers asking for our financing help daily since they can’t get bank financing.

The solution to the real estate and mortgage crises is simple, and it is not new and stronger regulation. To the contrary, the more the government meddles the worse things will likely get. The banking industry, and I include the mother hens in FHA, Fannie Mae, and Freddie Mac along with the banks, need to eliminate the self inflicted policies they imposed and barriers they constructed after the real estate market collapsed. These policies are analogous to locking the doors once all the horses escaped.

I recently submitted a number of purchase contracts on bank owned (REO) and short sale properties (with non-performing loans). So to those that say there is no demand – I am ready and willing to buy hundreds of properties that meet my cash flow requirements, if the financing is available. There are another 100 investors like me in the Phoenix area flocking to the auctions, bidding on REO listings and on short sales. If financing were available, prices would be rising even faster than the 13% year-over-year increase we saw in April. That was not a misprint; Phoenix area prices rose 13% since April 2009!

Here are a few of the barriers to mortgage financing:

– REO properties require high reserves, inhibiting lending,
– non-performing loans require accruals and reserves, further inhibiting lending,
– bank REO, short sale and mortgage modification departments are understaffed,
– lending departments have policies to inhibit financing the sale of their own bank’s REO’s and short sales (notice the Catch-22),
– most mortgage loans help the bank selling the REO more than the one issuing the new loan (not a great incentive for issuing new loans),
– few investors and homeowners have FICO credit scores exceeding 720 (the new underwriting norm),
– individual investors, even those at the top of the Forbes 400 list are restricted to 10 mortgage loans in their name, regardless of assets, net worth and income,
– entities whether corporations or LLCs, as most investment funds are structured, cannot get mortgage loans regardless of their assets, profitability or book value, since those loans cannot be sold on the secondary market,
– bank executives are not aware of the conflicting policies they have put in place,
– too many separate governmental organizations regulate and “try to fix” the mortgage and banking industries, and
– there is intense pressure from the US Treasury for banks to buy T-Bills to finance the deficit.

To me it is very obvious from this list – banks do not have the money to lend due to their weakened balance sheets and reserve requirements. When distressed homeowners face this same dilemma, they reach into the bag of tricks investors use, selling their homes with seller financing, on a lease-to-own contract, contract for deed, or even turning over the deed “subject to” the investor taking over the payments.

Banking industry, meet the enemy – look in the mirror. It is time to heal thyself by implementing the TACT (Toxic Asset Conversion and Transfer) Program. Learn from and work with real estate investors and buyers to sell off your REO and short sale properties. You will strengthen your balance sheets and income statements, property values will continue to rise, fewer people will hand over their keys, and the real estate market will return to normal. This can be done in months, not in decades. For more detailed description of the TACT Program review other articles in this series.

Banking Industry: We have met the enemy, The enemy is us.

How to Determine the Best Legal Entity to Hold Your Real Estate

As a tax advisor, one of the most common questions I get from investors is “what type of legal entity should I hold my real estate in?” Unfortunately, the correct answer to this question is most likely “IT DEPENDS.” For real estate investors, the best legal entity to hold title to your investment properties should accomplish the following 5 objectives:

1) Minimize taxes due to the IRS and State agencies and in turn result in a higher overall return on investment

2) Allow for maximum asset protection against potential lawsuits and creditors

3) Provide privacy to the owner(s) of the property

4) Allow the investors to achieve a wide range of flexibility and options regarding the management and control of the property, and

5) Minimize the complexity and cost of maintaining the legal entity(s).

You may have heard people tell you “Always use LLCs for real estate”, and another person may say “Always hold your real estate in a Trust”.

As a real estate (R.E.) investor, it can be both confusing and frustrating to receive such definitive, yet contradictory advice. As a result, a lot of investors are left to wonder – just which one is correct?? Well, the answer again is: IT DEPENDS! Unfortunately, in our complex tax code, there is no “easy way” to provide an answer. Also, there is no “one size fits all” strategy that works for all R.E. investors. An analogy I often make is: Giving out tax advice without first understanding everything about the taxpayer is the same as a doctor prescribing medication without first doing a diagnosis. In both the financial and medical field, this is known as malpractice. Every taxpayer is different and unique. As such, the BEST legal entity(s) to hold title to your R.E. investments will depend on your personal, business, investing, and overall tax situations.

Here are a few examples of things I analyze when working with investors to determine the ideal entity structure for their R.E. holdings:

1) What type of property will be purchased? (Commercial, multifamily, single family, office space, etc.)

2) What is the length of the expected holding period of the property? (Long-term hold, fix and flip, wholesale, etc.)

3) What is the projected monthly/annual income for the next several years? What are the types of income to be earned? (Rents, management fees, commissions, vending income, etc.)

4) What are the investor’s exit strategies for the property? (Sale, lease option, seller financing, 1031 exchange, transfer to next generation, etc.), **TIP** – YOU SHOULD ALWAYS HAVE MORE THAN ONE!

And

5) Last but not least, what other types of income or investments is the investor involved in? (This includes a review outside of the R.E. and analyzes the taxpayer’s tax situation as a whole.)

The answers to all of the questions above will assist your advisor in determining the optimal legal entity structure for your investment. It is true that an LLC can be a great entity for those investing in R.E.. But there are times when holding your investments in an LLC will result in significantly higher taxes vs. in a Corporation or a Trust. In order to identify the ideal entity structure for YOUR R.E. holdings, here are the two action steps to help you get started:

Step One: Spend some time and think about your answers to the 5 planning questions above.

Step Two: Seek out your qualified R.E. and asset protection attorney to help you develop the best entity structure for your R.E. holdings from a LEGAL perspective based on your answers above.

Step Three: Concurrent with Step Two, seek out your tax advisor to help you develop a strategy to determine the best entity structure for your R.E. holdings from a TAX perspective based on your answers above.

Step Four: Develop the optimum entity structure for your proposed R.E. investments using the guidance of both your legal and tax advisors. Get them to work together as a team to develop the best strategy and structure for your situation!

Most investors spend time and resources on research, due diligence, rehab, leasing, and property management to ensure the profitability of their investments. Make sure you take that extra step to determine the best legal entity to hold your R.E. and further increase your return with significant tax savings.

Copyright 2010 by Amanda Y. Han, CPA

Launching the Women of Mid-Finance – Real Estate Brings Security

I had known Cecilia for several years and had spent many evenings at her flat near Coit Tower enjoying the view of North Beach and Russian Hill. She made a good income and paid a large amount in rent for the beautiful view she enjoyed. But to me it was not a smart use of money (to me, it was a no brainer for her to buy a place).

The problem was she did not have a down payment saved. So together we brain stormed solutions and determined that the best path to homeownership for her was to partner with someone and buy a 2-unit building with them. She needed a partner that had cash for the down payment and of course wanted to buy property. Her friend Catherine came to her mind almost immediately.

After consulting with Catherine they gave me my mandate: to find a 2-unit building with enough space to accommodate both of them as well as Catherine’s roommate, Lynne.

The challenge for me was to stay within their price range and find a building large enough and in good enough shape for them to move into.

After showing them property in the Castro and Noe I found them a 3 unit property with an illegal in-law unit, located in Lower Pacific Heights. This was actually a 2-unit Victorian structure (in-law behind the garage facing the rear garden) and a cottage at the rear of the property.

The property was not without issues, which is why the price was appealing. It had tenants in all three units and an abatement by the City due to the illegal in-law (an abatement is an order by the City to remedy a code or zoning violation).Finding a lender that would loan on a building that had an abatement filed against it was quite a challenge!

In the end, though, after much negotiating, the seller agreed to remedy the abatement prior to closing. However, this raised the sales price of the property, such that Catherine’s cash was not quite enough for the downpayment. After a bit of thinking, I located a private lender willing to provide second liens in order to bolster purchasers’ down payments. In those days, lenders allowed what was then called an 80-10-10 financing scenario (10% of the purchase price from the buyer in cash, 10% from a private lender and then 80% from the primary lender). After a few months of going to and fro, the deal closed and Cecilia, Catherine and Lynne moved into the property. Lynne in the cottage, Cecilia in the upper unit and Catherine in the lower unit.

Years later, looking back it was the best thing that Cecilia and Catherine could have done, from a personal and financial prospective. Catherine lived in the lower unit for 6 years and then sold her unit as a TIC interest to a third party and sold her interest in the Cottage and the in-law space to Cecilia. Catherine was able to parlay her money into several properties and is now a real estate developer in her own right! Cecilia was able to rent the cottage, live the in the upper unit and use the space that was previously the in-law for her home office. Cecilia and her new TIC partner then entered the condo conversion lottery and, after a few years, won a spot and were eligible to convert to three condominium units. Post conversion Cecilia sold the cottage (the third condominium).

The property has enabled Catherine to move on with her dream of buying and selling real estate and has given Cecilia the security every single mother desires. They are all still the best of friends, and are regularly in touch. Indeed, their purchase helped form a lasting bond such that they refer to themselves as the “Women of Mid-Finance”.

“Purchasing the property on Bush Street was a life changing discussion. A decision I would have never had the opportunity to make if my Realtor didn’t envision the potential for me and Catherine. It was a lot for two single women to take on, but my Realtor was an endless resource to us and we were good students under his tutelage. He changed my life.” – Cecilia.