What You Missed December 2011 General Meeting
by Rob Earhart
Doing Business in 2012: A Panel for Real Estate Investors
Dec. 6, 2011
This month we gathered some of the most experienced Investor-Vendors into a question-and-answer panel to get the most recent information on the state of the Real Estate Market. The members of the panel were:
Mr. Chuck Collova, owner of C & C Financial, as mortgage broker speaking on the state of mortgages today: “I started in 1966 and have owned residential homes, mobile homes, commercial, and once owned a mobile home park, on which I foreclosed. I had worked for GE Credit and came to Florida to work for a mortgage broker. We get a lot of loans done because we know the rules. There are no two alike and you have to know the rules. All lenders are not equal; some won’t do condo’s, some won’t do commercial.” Chuck cautioned investors to stay in Florida because the courts don’t have jurisdiction between states. The lenders are torturing us because they are afraid of taking back houses. “Banks can buy treasuries that won’t default, so why lend to risky people.”
Mr. Jerry Davies, of Davies and Kerr, an accounting firm, also has done rentals and rehabs. He specializes in talking about accounting strategies for investors. He has been a CPA for 30 years and advises the best way to structure your business and assist with record keeping for legal and tax purposes. “We get overloaded with info at seminars, etc. but what will fit your situation? They are not all the same,” advises Jerry.
Ms. Leslie Jones, owner of an accounting firm, talked about entities and has been a CPA for over 50 years with clients in 13 states. The important thing about hiring a professional is to make sure you get the latest advice. The tax laws change constantly and we have to keep up every day. The smart people keep properties to avoid paying taxes.
Mr. Jack Shea, talking about tax free exchanges: “I sold the 11th house that I took back and foreclosed. They were in land trusts so the foreclosure process was just leaving a message on their cell phone.” No courts, no problems. They are all sold with seller financing in trusts. Options are for all investors and an excellent tool, especially good in IRA’s, giving you a high leverage. There is no risk, and the upside is great. “My first suggestion is to do options,” advised Mr. Shea.
Some of the questions were:
What types of non-conventional loans are there? There are Fannie Mae/Freddy Mac, or private. The average foreclosure now is taking 548 days.
Are we near the bottom of values? We’re back to 2001 values, and they could go lower, but they should not go much lower.
What are personal property trusts? A personal property trust can hold assets and they are protective.
Can you still do “subject to” purchases that have an existing mortgage on them? Yes, you just keep making the payments but the mortgage company can call the note due. They normally don’t because they really don’t want the property and if the payments are current, no problem.
Where are we at with seller financing legally? The Dodd frank bill covers seller financed and limits it to three or four but there are ways around it. Read the law and find a way around.
One investor says to use a mortgage broker to set up a seller-financed deal because they are not charging a lot.
Do we have to pay taxes on options you sell? No, it is not a complete deal yet and cannot be taxed until the deal is finished, exercised or expired.
If you have over $10,000 in foreign accounts you need to file a special report with the IRS and a lot of countries are forcing the reporting of foreign assets.
Can I write off equipment this year? You can write off the total cost as section 179 expenses up to a certain limit.
Can you have a temporary resident? If someone stays in your property less than 7 months you have to pay a 10% sales tax.
If a bank issues a 1099 are there tax reliefs? If the home is homesteaded you are exempt, but they may issue it but there may be no taxes due on it.
Should you hold a home in a land trust? Two types of homestead protection where they can’t take it away from you. It mentions a person so, to protect your rights, keep it in your name.
Leslie talked about Albert Einstein explaining compound interest. A penny doubled every day creates $5.36 million in 30 days.
Compound interest in an IRA creates wealth. In an IRA, the proceeds will be taxed when you take it out but a Roth is not taxed at all. “Would you like to be taxed on the seed or the crop” was an expression.
Overall, the Board provided an excellent venue to answer questions from the audience and gave some insight into what we may expect in the next year. Thanks to all who participated and we look forward to a great New Year.