Tax-Free Profits on All of Your Real Estate Deals? Yes You Can!

After completing a successful real estate transaction, do you ever wish a chunk of the profits didn’t have to go back to the IRS for taxes? Do you ever dream about how many more real estate deals you could do or how many more properties you could buy if profits weren’t split with the government because of taxes?

Well dream no more. Realizing tax-free or tax-deferred profits on real estate and alternative asset investing is a reality.

Government sponsored retirement plans such as IRAs and 401(k)s allow you to invest in almost anything (including real estate), not just stocks, bonds and mutual funds. And all the benefits those plans provide, tax-deductions and tax-free profits, apply to whatever investment you choose, including real estate.

The Power of Tax-Deferred and Tax-Free Profits

"The most powerful force on Earth is compounding interest." - Albert Einstein

One of an IRA's greatest features is that it allows Americans to enjoy the true power of tax-deferred compounding interest.

def- Compound interest occurs when interest is earned on a principal sum along with any accumulated interest on that sum. In other words, you are earning interest not only on your original investment sum, but also on the interest earned from the original sum.

Compound interest can occur with any investment you make, but the "true" power of compounding interest is obtained when you make an investment in a tax-deferred environment, like an IRA.

By taking advantage of an IRA's tax-deferred status, you do not have to pay tax immediately on your earnings (like the sale of a property or rent collected). Thus, you are able to enjoy the power of compounding on ALL of your profit, not just what is left after taxes.

Now apply those benefits to your real estate or alternative asset investing. Tax-deferred profits on your real estate transactions allows greater flexibility to make more investments, or to just sit back and watch your real estate investment grow in value, without worrying about taxes.

Is This for Real?

Most investors don't know this opportunity exists because most IRA custodians do not offer truly self-directed IRAs that allow Americans to invest in real estate and other non-traditional investments.

Often, when you ask a custodian/trustee, "Can I invest in real estate with an IRA?" they will say, I've never heard of that" or, "No, you can't do that." What they really mean is that you can't do this at their company because they only offer stocks, mutual funds, bonds, or CD products.

Only a truly self-directed IRA custodian like Equity Trust Company (www.trustetc.com) will allow you to invest in all forms of real estate or any other investments not prohibited by the Internal Revenue Service.

Is This Legal?

It sure is. For more than 33 years and through the management of $2 billion in IRA assets, Equity Trust has assisted clients in increasing their financial wealth by investing in a variety of opportunities from real estate and private placements to stocks and bonds in self-directed IRAs and small business retirement plans.

IRS Publication 590 see http://pdfdownload.tsone.info/pdf2html.php?url=http://www.irs.gov/pub/irs-pdf/p590.pdf (dealing with IRAs) states what investments are prohibited; these investments include artwork, stamps, rugs, antiques, and gems.

All other investments, including stocks, bonds, mutual funds, real estate, mortgages, and private placements, are perfectly acceptable as long as IRS rules governing retirement plans are followed

Getting Started

“Is it hard to do?” is a common question about investing in real estate with a self-directed IRA. It is really simple and is very similar to the way you currently invest in real estate. The following five steps demonstrate how easy it is to invest in real estate, or just about anything else, with a self-directed IRA.

1) Establish an account with a self-directed IRA custodian. First, you must establish an account with a self-directed IRA custodian and Equity Trust Company is your best option. For more information on why Equity Trust is the right choice for your self-directed IRA needs, visit www.trustetc.com.

Setting up an IRA account with Equity Trust usually takes only minutes to complete by filling out a simple application and sending (or faxing) it to our office.

2) Fund your account. Next you have to fund the account, and this is just as easy as opening a self-directed IRA account. There are two ways to fund your account.

• Contributions You can contribute to your account through a check or wire transfer and contribution limits range from $4,000-$50,000 depending on which account you choose.

• Transfer/Rollover

In most cases, if you have an existing retirement plan such as an IRA, 401k, or 403b these funds can be transferred to a self-directed IRA allowing you to make real estate IRA investments.

3) Investment found: You’re set to go! Now that you’ve got your account established, funded and you’ve identified a real estate investment, you are ready to make an investment.

Making a real estate investment with your IRA is straightforward if you remember a few simple rules. First, complete a Direction of Investment (DOI) form. A DOI instructs the custodian where and how to remit funds from your self-directed IRA for your real estate purchase.

Information contained on the DOI includes the property address, cost, funding instructions (check/wire) etc. In addition to the DOI, the custodian will need accompanying investment documents to ensure proper titling of the investment.

4) Ensuring proper title: You and your IRA are not the same. One of the most common mistakes (and cause of delays) in real estate IRA investing is when the property is titled incorrectly. Frequently the IRA owner will incorrectly put their personal name on the title of the property.

Remember you and your IRA are two separate entities, and as such, the property needs to be titled in the name of your IRA and not you personally.

• The correct title for a real estate (or other asset) IRA investment is:

Equity Trust Company custodian FBO (for benefit of) YOUR NAME IRA

5) What happens after your IRA owns the property? Now that your IRA has purchased the property you need to remember two things:

• Expenses: Any expenses associated with the property (maintenance, improvements, property taxes, condo association, general bills etc.) must come from the IRA.
• Cash Flow/Profits: All net profits must return to the IRA, meaning all income (rent) and profits (selling of property) are deposited back into your IRA account—tax-free!

That is all there is to it, it’s as simple as 1-2-3. In no time at all you can be investing in real estate and other alternative assets receiving tax-free or tax-deferred profits for the rest of your life.

Don’t delay in opening an account. Every day that passes is one less day your investment can benefit from the Earth’s most powerful force (at least according to Einstein), compounding interest.

Real estate agents-brokers under FTC and Justice watch

http://reiskills.typepad.com/reagents/2007/05/feds_say_real_e.html

Please read this, agents-brokers under FTC and Justice watch

Get Organized - Use Index Cards

The Lowly 3x5 Card

Written by Michael Angier

I love technology and I'm fascinated by what it allows us to do. And I have a good bunch of cool tech toys—I mean tools. They help me operate more efficiently and effectively. They're also fun. But some of the simplest and cheapest tools we have are often the best. Abraham Lincoln wrote the Gettysburg Address on the back of an envelope. Imagine: one of the greatest speeches ever given was written without the help of a typewriter, a word processor or a speechwriter—not even a nice piece of paper. They were simple words, well written, well delivered and well received. I find the simple 3x5 card as being one of the handiest instruments in my efficiency toolbox. I use them for many things. I'm confident that if President Lincoln had had 3x5 cards, he would have written his famous address on several of them. Even though I have a Palm Pilot, a notebook, a PC and a scanner, I use 3x5 cards extensively. I keep them with me all the time. They fit in my shirt pocket and in my checkbook. I keep them on my nightstand, in my planner and on my desk. They're easy to write on and they're easy to file. I write down affirmations, quotations, ideas, addresses—even jokes. Of course, most I throw away after I've used them or transferred them to my PDA or desktop. But many I file away in inexpensive card file boxes. Every once in awhile I go through them looking for ideas and quotes. An idea that may have been impractical or untimely may now be appropriate. Or the idea may trigger a different one that can now be easily implemented. They're great for jotting down the key ideas for a speech or a presentation. When using several of them, you can rearrange them easily. Write your goals on them. Keep your mission in front of you. Jot down a quick to-do list. Put your affirmations on them and carry them with you everywhere—with ease. You can buy them in different colors if you like. You can get them lined or plain. They're cheap to buy, easy to use and they're worth their weight in truffles. If you don't use 3x5 cards, give them a try. See for yourself how something so simple and so plain can be so productive.

 

Buy Yourself a Business and a JOB with Guidant Financial - You can use your IRA and 401k money!

http://reiskills.typepad.com/privatelenders/getting_working_capital_for_rei_business/index.html

Five Things To Worry About

Common Sense Personal Finance

When you have an adjustable mortgage (not a fixed mortgage), there's five things that you need to keep track of:

    * The first thing is obvious. You have to keep track of the interest rate. Not really the Fed's fund rate, but mortgage interest rates. I usually look at Today's Average Mortgage Rates on finance.yahoo.com

    * Second thing to keep track of is when will my mortgage adjusts. I have three more years to go, and so that's a long time. So I don't worry that much about it. But in the back of my mind, I'm always thinking, when do I need to refinance out of my existing mortgage.

    * Third thing to think about is my credit score. I think about the financial decisions that I make that might potentially cause my score to go down. Because when I need to refinance, the credit score will determine whether I get a good rate or not. When you need to refinance is always unpredictable, so you have to be prepared to refinance at any time.

    * The fourth think to think about is the equity in your house. If the housing values are dropping, would you still be able to refinance. If you have only 20% down, and the housing value dropped by 20%, then you basically need another 20% down in order to refinance. Banks generally won't lend you 100% of the value. Your rate might be going up at the same time that the values of the house is going down. You can't refinance out because your loan to value ratio is too high.

    * The fifth thing that I think about my monthly payment relative to my income. Basically if my income is going down, and my monthly payment is going up, I would be squeezed doubly hard. I make sure my income is secured. As you take on more debt, you will reach a point where your monthly payment is too high and you can't service the debt. And we always normally think about reduction in income because of decrease in pay, but there are other factors that reduces your income. Higher inflation reduces your amount of consumable money from your paycheck. Your income can't keep up with inflation. Or your income can be reduced by contributing more to your 401k. Or increasing your withholding for your taxes on your W4. And of course, your debt is increasing and so your monthly payment is higher. Changes in your taxes can cause your taxes to jump. For example, your pay raise moved you into a higher tax bracket. Or you reached phase out limits for passive activity loss or for itemized deductions. Or you got hit with the AMT. You have to be aware that those things reduces your comsumable money because you have to withhold more because your tax is higher.

So those are the five things that I keep running in my head at all times.

The mortgage is my largest payment so I worry the most about that. If you have other debt that is larger than your mortgage, then you should apply the same mentality to those kinds of debt.

Are Realtors authorized to warn Sellers NOT to trust WE BUY HOUSES people offering Lease Options as viable solution to quickly solving their "Home Won't Sell Problem"?

I saw a blog from a Realtor that wants to warn Sellers about us REIs.

There is a lot of good REI training in here.

_______________________________________________

Home not selling? Beware of a selling option that may financially ruin you!
From Gary L White.
From his blog:
"It's about you and who will represent your interests best for you and your family.  I have specialized training which has placed me in the top 1% nationally in real estate specific education designations earned.  The designations I currently have are: GRI (Graduate of Real Estate Institue), CRS (Certified Real Estate Specialist), ePRO (Internet Marketing Certified), ABR, (Accredited Buyers Agent), RECS (Real Estate Cyber Space Certified) and passed the Michigan Brokers Exam in June 2006."

His forum comment about lease options:

"When homes take longer to sell than normal sellers start looking for any option to get their home sold.  Especially if they have taken a job in another community leaving a vacant home behind with the mortgage payment, taxes and insurance still having to be paid every month, along with the new homes mortgage, taxes, insurance and upkeep.

Here is something that has caused more stress than relief for some sellers and buyers who were bargain hunting.  The method of lease / option to purchase.  If you plan of doing this your worry is not the brokerages fee that will be due because of a sale or lease option, your concern is not waiting for the option period to run out so the buyer converts the lease to a mortgage in his or her name....no none of these are your big worry.  The concern is that if you write the lease / option wrong it could trigger the "due-on-sale" clause in your mortgage agreement!  This means you could be forced to pay your entire outstanding mortgage in full!  Now isn't that a kick in the pants when you were just trying to help yourself.

The best way is to consult an attorney when your are considering a lease/option sale.  The attorney can write the contract and avoid the "due-on-sale" clause until the formal purchase is ready to be executed.

Beware of anyone asking for a lease/option with no money down.  Especially when they say they will take over the mortgage, make the payments for you and you just sign here.  "If it is to good to be true, it is!", that old saying hasn't lost any of it's charm...it is still accurate today.  We have people trying to take advantage of other peoples situations when they are at their lowest.  Thankfully there are many good Realtors but we also have investors and Realtors dressed in sheep's clothing.  Your danger is that the party taking over your mortgage payment leases out your property never makes the mortgage payments, keeps the rent and your are on the hook for a foreclosure, ruining your credit.  Always ask questions first.  Ask if you can take a copy of the contract to your attorney or Realtor.  If they give you all kinds or reasons they don't want this to happen, take a breath and re-look at what is being proposed.  My guess is it will look different during the second look at the proposal.  It is one thing to be high pressured, or strong armed but very few people will object to you consulting with a professional if everything is on the up and up.

Nothing sells a home faster than proper marketing and price.  The more exposure your property has to buyers the faster you are going to get offers.  Sounds to simple but knowing how to market, where to market and for what price is the trick.  Good luck, hopefully I have just saved you some of your hard earned money by giving a word of caution.

Sincerely,

Gary L. White
Associate Broker, Five Star Real Estate

----------------------------------------------------------------------------------------------------------------------
My comment to Gary L. White:

As investors (REIs) ethics are important in Alternative Real Estate Puchasing Techniques.

I have listed below several techniques that Realtors - Sales Agents do not consider.

Advantages and Disadvantages of Sub2, Seller Held Mortgages, Lease Purchase (Sandwich) and Installment Sale-Agreement for Deed.

Sub2 -
Advantages Of Buying "Subject To"
Taking over property "Subject To" has several advantages that are especially nice if you are a beginner or have limited funds and/or limited credit. Mainly, you have the ability to own nice houses without having to come up with a large down payment or having to qualify for a loan, and the closing costs are minimal.
You also have multiple exit strategies.
For instance, you could keep the property for yourself as a rental, or you could fix it up and retail it. You can even pass the no qualifying deal onto your new buyer.

Disadvantages Of Buying "Subject To"
As for the disadvantages of buying "Subject To", as we said earlier, you always have the due-on-sale clause issue. However, as you go through this system, you'llleam more ways to get around this issue as well as limit your liability.
The due-on-sale clause also will limit your ability to resell the property without paying off the loan. This is because many homebuyers will be reluctant to invest money and move into a property when there is a chance that the bank may call the loan due, even if the chance is a slim one.

Seller Held Mortgage -
Advantages Of A Seller Held Mortgage
There are some obvious advantages when you can get a seller to hold back a mortgage.
Little Or No Money Required
First, many truly motivated sellers will not look for very much money down, if any. If the seller does want a lot of money down, then you're not dealing with the right type of seller and need to move on.
No Credit Required
You also don't need any credit to qualify for a seller held mortgage, unless the seller specifically ask to see your credit report. Even then, the seller is not scrutinizing you like a bank would.
Seller Financing Does Not Show On Your Credit
One advantage that can help you down the road is that seller held mortgages don't show on your credit report. This can be helpful when trying to get bank financing to buy other properties because your credit report does not show as much debt.

Disadvantages Of A Seller Held Mortgage
Trying to do deals by only getting a seller held mortgage, does have some disadvantages.
Finding Motivated Sellers Who Own Free And Clear
Probably the biggest disadvantage to buying properties using only a seller held mortgage, is that you must find properties in which the seller owns it free-and-clear of any loans or liens, and who is willing to collect their money in monthly installments.
Wrap Around Mortgages Violate The Due-On-Sale Clause
Also, as we said a minute ago, if the seller doesn't own their property free and clear, a wrap around will violate the due-on-sale clause on the underlying first lien. This is due to the fact that title to the property has transferred without the underlying loan getting paid off or assumed.
You can however, do a seller held second mortgage when getting a new first mortgage because you would be formally qualifying for the new loan. Or, you could qualify to assume the seller's loan and have the seller take back a second mortgage. Either of these scenarios would solve the due-on-sale clause problem. However, as you'll learn in this course, you don't need to qualify for loans or put your personal credit at risk to be able to invest in real estate.
Closing Costs
Another disadvantage with a seller held mortgage is that you'll have to pay some closing costs, because the title is transferred and a new mortgage or trust deed to the seller has to be recorded. There are also other attorney's fees and closing costs, if you want to make sure everything is done right.
If the seller isn't getting any money down, they may not want to come to closing with cash for their side of the closing costs. Therefore, you may even end up having to pay all of the costs just to get the seller to do the deal.
Seller Will Have To Foreclose
Finally, because this is seller financing in which the seller's interest is secured by either a mortgage or trust deed, the seller will have to foreclose in the event the buyer defaults on their payments. Because of this, you should never sell your property using a seller held mortgage or trust deed. There are other seller financing options you can use when selling your own properties that afford you more control and we'll cover them in more detail later.

Agreement For Deed -
Advantages Of An Agreement For Deed (Contract For Deed, Intallment Sale, Land Contract)
You Don't Have To Qualify
As for the advantages of using Agreement For Deeds when buying, it is basically a seller held mortgage except that you get title later. Because it is seller financing, you don't have to qualify like you would on a regular bank loan, nor would you have to put any money down if you found the right motivated seller.
Little Or No Money Required
In addition to possibly not having to put any money down, there are no up front closings costs. You'll be paying those costs later when you fulfill the terms of the agreement and take title.
You Can Refinance The Agreement
Also, most banks recognize an Agreement For Deed as being a seller financing agreement and will allow you to refinance as if you had a regular mortgage with the seller. Because of this, an Agreement For Deed can be a very helpful stepping-stone to getting a bank loan without having to come out of pocket for a down payment or closing costs.

Disadvantages Of An Agreement For Deed
An Agreement For Deed does come with some disadvantages.
The Due On Sale Clause
First of all, an Agreement For Deed does still violate most due-on-sale clauses even though most people may not realize it. However, many sellers are still willing to do them because they feel that a bank won't call a loan due if the title hasn't transferred and the payments on the loan are being made.
Seller May Have To Foreclose
If you are the seller under an Agreement For Deed, one of the disadvantages is that you almost always have to foreclose on the buyer in the event the buyer defaults. This is mainly due to the fact that an Agreement For Deed is considered an "installment sale", which is basically a mortgage. The seller also couldn't just evict the buyer as if they were a tenant.
As a buyer, you don't always want to counsel the seller on what would have to be done in the event you defaulted. After all, you as the buyer are supposed to follow through on the agreement and not default, so the seller might wonder why you would be disclosing this. Also, every seller can seek legal counsel if they wish. You will however want to let the seller know that an Agreement For Deed does give rise to the due-on-sale clause. At the same time, you'll want to explain to them that it is highly unlikely that any bank would call a loan due when the title hasn't transferred and the payments on the loan are being made.
If the seller is reluctant to do the deal because of the due-on-sale clause, then you'll want to offer them a Lease Option.

Lease Option - Lease Purchase
Advantages Of Lease Options
There are of course a lot of benefits to lease optioning properties.
That is why Lease Options are very popular among investors today.
As an investor there are three different positions you can be in.
* You can be the Seller (selling your own property),
* you can be the buyer (lease optioning from a home owner), or
* you can be the investor in a Sandwich Lease Option where you are sandwiched in between the owner and your tenantlbuyer.

Because there are advantages to being in each of these three positions, we'll take separate look at each of them. If you are simply a homebuyer, looking to buy a property with no down payment, you will be mainly interested in the advantages to the tenantlbuyer only. However, it is a good idea to know the advantages the seller gets so you can inform the seller of these advantages when negotiating.

Advantages To The Tenant/Buyer
The first set of advantages we're going to take a look at are the advantages to you as a homebuyer or to your tenantlbuyer if you are selling.
Sellers Don't Have To Be Very Motivated
One of the biggest advantages when Lease Optioning property, is that the sellers don't have to be very motivated. They just need to be a little flexible.
Quick To Execute the Paperwork
Lease Options are also very quick when it comes to getting you into the home. If the house is vacant you can actually start moving in the same day. This is due to the fact that you are leasing the property and there is no closing until you exercise your option.
Control With No Money Or Credit
You don't need credit or a lot of money to put down to do a Lease Option either. The most money you should be putting down is the first payment and even then, this first payment could be due and payable when the next mortgage payment is due on the underlying loan.
The buyer has the right to occupy the property and the seller does not have the right to sell the property to another buyer. This gives the buyer a lot of control not only over who lives in the property but whether or not the property can be sold.
Furthermore, the buyer is not obligated to buy and can walk away if they decide at the end of their lease term. A Lease Option only states that the tenant/buyer has the "option" of buying. It does not state that the buyer will buy or has to buy. This is different than an Agreement For Deed which states that the buyer "is buying".
Rent Credits
Depending on how the Lease Option is structured, the tenant/buyer could also build up equity while they are leasing. This is because a portion of the monthly lease payment can be credited towards the purchase of the property.
Refinancing A Lease Option
Another key benefit is that the tenant/buyer can refinance the Lease Option agreement as if it were a seller held mortgage. As we said earlier, many banks will even let the tenant/buyer get a refinance loan based on the actual value of the property and not on the purchase price (if the value is higher than what they are purchasing the property for). Most banks will also roll the closing costs into the loan.
Refinance loans are much easier to qualify for because chances are, the Lease Option payment the tenant/buyer has been making, is more than what their mortgage payment would be to a bank. This carries a lot of weight with the bank when the tenant/buyer can show they have the ability to pay consistently on time every month.
Future Discounting
As the tenant/buyer, the terms of your Lease Option may be very favorable.
Therefore, there may not be much to gain by refinancing. If the seller has money coming to them if you do refinance, you may be able to talk the seller into taking an even lower price in exchange for you refinancing sooner.
In fact, any time you can payoff someone you owe early, you should ask for a discount.

Advantages To The Seller
The next set of advantages we're going to take a look at are the advantages to the seller who actually owns the property. This may be yourself, selling your own property, or this may be the seller that you are buying from. In either case, it is important for you to know and understand these benefits.
More Potential Buyers
The biggest advantage to selling a property under a Lease Option is that you have more potential buyers.
When selling a house, you are looking for a qualified buyer. However, there are more people out there who cannot qualify for a mortgage loan than there are those who can. These people who cannot qualify for a loan do not have a lot of houses to choose from and are very interested in buying a home under a "Rent To Own" arrangement.
The right buyer is one who has the money needed to put down and the ability to repair their credit (or build the necessary credit), so that they can qualify for a bank loan. During the option period, the tenantlbuyer has time to repair or build their credit, save up for a down payment, and even make repairs to your property if needed.
Don't forget, the buyers that can qualify for a mortgage loan can still buy under a Lease Option and the more you limit how much a buyer has to come up with, the more buyers you will have as well.
No Title Transfer
You only deliver the deed when the agreement has been fulfilled. This has many benefits within itself, including easier remedies in the event of default and you can retain many of the tax benefits of still owning the property.
No Due On Sale Clause Violation
Again, as we said earlier, because the title has not transferred, a Lease Option does not give rise to the due-on-sale clause if structured properly.
Eviction Rather Than Foreclosure
Lease Options also give the seller more control in case of default by the tenantlbuyer than if the seller had given the buyer a seller held mortgage or Agreement For Deed.  This is not only due to the fact that the title has not transferred yet, but also because a Lease Option creates a landlord-tenant relationship.
Under a Lease Option, you can evict the tenant whereas under an Agreement For Deed, most states require that you file a foreclosure, which is much more time consuming and costly. Evictions, on the average, take thirty to forty-five days depending on what part of the country you live in, whereas a foreclosure could take
up to six months or more.
It is important to remember that as a tenant/buyer, it is much easier to talk a seller into doing a Lease Option because of the fact that the seller can simply evict you in the event you don't follow through.
Judgments Against Buyer Will Not Attach To Property
Remember also, under a Lease Option, the title to the property is not in the name of the buyer, therefore if the buyer gets a judgment against them, the judgment will not attach to the property.
Tax Advantages
The seller also retains the tax benefits of owning the property. Because the property
is technically still just being leased, it is still a rental and can be depreciated on the owner's tax return. The seller can also write off their taxes and insurance on their mortgage.
And lastly, the option money a seller receives is tax deferred (IRS Section 1234 Option Consideration Taxation).

Advantages To The Investor - Sub-Lease Options
The last set of advantages we are going to take a look at are the advantages to the investors under a sandwich lease. As an investor who Lease Options a property from a seller, then sub-Lease Options to a tenant/buyer, you not only get both the advantages as a buyer and a seller, but you also have other advantages as being the investor in the middle of the sandwich Lease Option.
More Paydays
One of the best benefits of dealing in Lease Options is that you have the multiple paydays we talked about earlier.
When flipping property wholesale, you get one payday and it is usually in the amount of several thousand dollars or more. But, when dealing in Lease Options you have multiple paydays, some of which are dramatically larger than the payday you get when you just flip a property. It is great to do a deal once and get paid several times.
By using Lease Options, you can keep control of a property, have a monthly income, and later realize a profit when you sell it.
You also realize immediate cash from the tenant buyer's option fee.
Future Discounting
One important payday is when your tenant/buyer exercises their option and purchases the property. At that time, you'll be paying off the seller, and where are you going to get the cash to pay them off early? .. From your tenantlbuyer who is paying you off.
If the seller has any money corning to them, it is a perfect opportunity to ask the seller for a discount if you pay them off early. The important thing here about negotiating the discount with the seller, is not to let the seller know that your tenantlbuyer will be paying them off anyway.
By getting the seller to discount in exchange for the early payoff, only adds to your payday and creates additional income for you.
Deal In Nice Properties
Best of all, when doing Lease Options, you get to deal with nice houses, in nice areas, in beautiful condition, and you get to deal with quality buyers. These will be houses you would be willing to live in yourself.
Less Repair Work
Of course, because you're dealing in nicer properties, there will be less repair work. Even if the property does need work, you can reduce your repair work by having your tenantlbuyer do some of the minor things after you have repaired any major problems.
Avoid Seasoning Issues
There may corne a time in which you purchase a property outright and you decide you want to retail the property. By only owning a property for a short period of time before you try to resell it, you many times will run into what investors and mortgage brokers call a "seasoning" problem when the new buyer applies for a bank loan. The word "seasoning" simply means how long the title to the property has been in your name.
The problem is, many banks don't like to do loans on a property in which the seller recently purchased the property for a lower price and is now reselling the property a couple of months later for a higher price. While there is nothing wrong with buying a run down property at a good price, and then fixing it and selling it for full value, banks are not always comfortable knowing the property recently sold for a much lower price than you are selling it for now. This is because banks think that if they have to take the property back, the original lower sales price is an indication of what they mi.ght get on the foreclosure market. Banks also don't like to see investors making money at what they feel is their expense.
By doing a Lease Option, the extra time you own the property during the lease period allows you to overcome these "seasoning" issues with lenders.
Can Do A 1031 Tax Deferred Exchange
Lease Options also buy you more time so that you can still do a 1031 Tax Deferred Exchange if you own the property for eighteen months before the tenant/buyer exercises their option.
By Lease Optioning the property out for the necessary eighteen months, you can save yourself from paying any capital gains tax on the deal. Remember, a dollar saved is a dollar earned. If you bought the property, owned it for a few months, and then retailed it, you would not be able to do a 1031 Exchange.
You Have Multiple Exit Strategies
Another advantage to you as an investor is that when you Lease Option a property from a seller, there are a lot of things you can do with the deal.
* You can either keep the property as a rental and not give the tenant an option to buy, or
* you can Lease Option the property to a new tenant/buyer with a higher down payment, deposit, a higher monthly payment, and a higher sales price.
* You also have the option of performing any repairs needed and then retailing the property without sub-leasing it to a tenant.
* Or you can keep the home for the purpose of making it your residence without having to qualify for bank financing or having to put any money down.
* You can even combine strategies by purchasing a property "Subject To" and then reselling on a Lease Option to your tenantlbuyer.

Selling With Lease Options Vs. Renting Out Properties
If you like having the monthly cash flow that comes from owning a rental, but you don't want the hassle of repairs and dealing with tenants, you may want to consider Lease Optioning houses out rather than doing straight rentals or straight retailing.
By doing so, you are basically combining Rentals and Retailing (rehabbing and selling to consumers) into one.
By selling under a Lease Option, you as the landlord avoid much of the hassles you would have if you had just made the property a regular rental.

* You cut out a lot of the disadvantages of being a landlord while at the same time, keeping almost (if not all) of the advantages.
* Plus, Lease Optioning has its own advantages that you can't get as a landlord, such as a higher up front deposit that is nonrefundable.
* You can also get a higher monthly lease payment, and the tenant/buyer takes care of the maintenance.

This means that tenants won't call whenever they have a repair problem, the property appreciates, you get a cash flow, the tenants pay down your loan for you, and you get the tax benefits of depreciation. It just can't get much better than that!

Disadvantages Of Lease Options
We have covered a lot of advantages that corne with doing Lease Options. So, there are bound to be some disadvantages, yet there aren't very many.
No Ownership Yet
Of course, you don't yet own the property in your own name when buying under a Lease Option. This isn't much of a disadvantage because you do control the property. However, you don't get the tax advantages that corne with ownership.
Judgments Against Seller
Furthermore, because the title to the property is still in the seller's name, you do have a slim chance that the seller might get sued and a judgment could attach to the property. If you feel you have a seller that you should be concerned about, you can solve this problem by having the seller put the property into a land trust. We'll be covering land trusts in detail in Module 3 on the Agreements Section.
Tenant/Buyers That Default
As a seller under a Lease Option, you always have to consider that your tenant/buyer may not be able to qualify for a bank loan. The tenant/buyer may not improve their credit and even if they have somewhat good credit now, their credit situation may go down hill.
No mater what, you always have to plan for the tenant/buyer not being able to qualify, or if they walk away for one reason or another.

Keys to Successful Marketing - Should You Buying direct mail leads from the internet for marketing?

Keys to Successful Marketing
March 31st, 2007

RE: Buying direct mail leads from the internet for marketing.  

In general, leads rom list companies can be used for very broad mailings, but keep in mind that we are usually looking for very small niche situations in our business. You will also need the right mailing pieces, timing, and consistency to make such broad direct mailings work.  Don’t expect much in the first 2-3 mailings to the same client. 

The factors to successful broad based marketing are: 

• 1. Use a great looking and well written marketing piece.  Post cards are my favorites as the first 1 to 2 mailings.  They always get opened…get it? 
• 2. Use full color and go larger dimensions if in doubt.   It will get more attention. Search for a great printer, mine is probably the cheapest and full service in the country. I get full color printing for a fraction of the price. Shop around. 
• 3. Make the piece about the client, not YOU.   Nobody cares about your company!  They care about what you can do for them in the message. 
• 4. Repeat, repeat, repeat.   With small changes in copy. On average in marketing, it takes 3 impression to be seen. This work in television, radio, direct mail, or most any other marketing. The viewer must "see" you ad 3 ties, not just receive it 3 times. 
• 5. Ask for action.  Call the reader or listener to action.  For example, ask them to call for a free recorded message, or get a free "thing" form you web site. And always capture the responders phone number or email before they get your "thing". Never give is up without getting the contact information first. 
• 6. Follow up with your leads multiple times.   Of course if you don’t know who is responding, you can’t follow up. (see item#5).
• Most of my deals comes after the second through fourth follow up contact. So if I never make a second to fourth contact, I would never get a deal. This is essential. Drive the nail all the way through once you get a lead. 

Good luck…

TJ Marrs

 

Hand-written notes still a powerful marketing tool

Posted January 03, 2007 17:56 by Mike Kaselnak.
About Mike Kaselnak
Mike Michael Kaselnak’s affinity for investing and financial matters began more than 20 years ago when he began investing in the stock market through a class in high school.  Now, in 2006, he is being looked to for his innovation in altering the efficiency in which financial professionals communicate with clients.

Direct mail on a large scale will inevitably appear impersonal, but smaller lists can be reached with campaigns that achieve response rates of as much as 50%, according to Michael Kaselnak of direct marketing firm Hoard.

According to Hoard, customers can potentially be faced with up to 3,000 marketing or advertising messages - some big, some small - every day. And it's this that makes a high response rate from any direct mail campaign such a hard thing to achieve. So what can a business do to break through the noise and have its message read by the target audience?

Well, it starts with a technology that's over 2,000 years old: hand-writing. When shouting louder, saturating the media, and sales gimmicks and special offers are all failing, not many people - whether at home or at work - can throw away a genuinely hand-written note. mkaselnak This article is copyright 2006 TheWiseMarketer.com).

High returns
Kaselnak highlights three examples of clients that have used hand-written notes to produce a surprisingly high ROI on their marketing costs:

    * A Midwestern USA restaurant owner sent out a series of hand-written notes to his customers and got a 20% response rate.
      
    * A financial planner in the Northeast USA sent out only 80 hand-written notes to touch base with prospects, and had 6 people call him and 2 of them set appointments immediately as a result.
      
    * A non-profit organisation was able to get 51 donations by simply sending a hand-written note to 'warm' list of 100 people.

 

The logic is simple: Handwritten notes are special. People can't throw them away without at least reading them. Kaselnak gave The Wise Marketer another example of the effectiveness of a simple note: "Recently I received a hand-written postcard from the hair studio I had abandoned 6 months earlier for one closer to my home. I knew it was probably just them asking me to come back as a client, but did I read it even though I knew it was a prospecting piece? Yes. Would I have read a prospecting form letter or an advertisement from the same studio? No."

Intelligent selection
But Kaselnak is not suggesting a mass hand-written mailing to the entire customer or prospect database. The idea is to decide on the aim of your campaign, and then segment your database to identify the best prospects. If you feel like writing (or having your production team write) a few hundred notes, then filter the top 300 prospects for that campaign.

For example, a hand-written win-back campaign could help you recover customers that have already defected to competitors. Perhaps a short note explaining that things have been changed, and that a warm and personal welcome awaits them in their local store.

Tips for a warm letter
Kaselnak offers the following guidelines for writing notes that gain high response rates:

   1. Each piece should begin with your client or prospect's name, not a generic greeting.
      
   2. Don't do rubber-stamp hand-writing or signatures. Even computer fonts are too obviously mass-produced. It has to be genuine writing.
      
   3. Give your client or prospect a reason to get in touch with you or to come and visit the store
      
   4. Put the note on a card that will get their attention (anything cute, unusual, beautiful, historic, featuring children, animals, and so on). Use a picture that catches their eye.
      
   5. Hand-write their address instead of using labels or over-printing. Labels and over-printing simply tells them - before they even see your hand-written masterpiece - that you sent the same card to hundreds of other people. You have to keep it personal, even if you are sending it to hundreds of people.

Kaselnak concluded: "You will be surprised at the huge response rate you can get. Do this, and it will be the last time you'll want to waste money on generic form letters and invitations."

Source: www.thewisemarketer.com

Don't Be Dumb - Don't let the IRS audit you and have NO Minutes Written for your REI LLC

Looks like the days of the kinder, gentler IRS are definitely gone.

Mark Everson has been the commissioner for almost 4 years now. One of the things he promised when he took the job was that he was going to get tough.

And, boy, he has. I did a search on "tougher IRS audits" and was astounded by all the press releases that listed all the places that the IRS demonstrated that they were getting tough:

• car dealers,
• manufacturers,
• real estate professionals,
• anyone with international transactions,
• anyone reporting on a cash basis
• - the list goes on and on.

It's likely that the call for more IRS audit staff (so they can audit even more people) is going to be successful as well. That's because the IRS has proven that their aggressive tactics at collecting money is working.

Now, here's the big question for you:

Are you ready for that IRS audit
that may be coming your way?

Get Permission! (email marketing)

Get Permission!

Just like in the online world, you only want to collect the email addresses
of people who want to receive your emails.

With so many situations that you can encounter offline, it's easy to think
that it's OK to add a given person to your list, when in fact they haven't
given you permission to email them.

To help guide you, we've published a set of situations, and whether or not
it's OK to subscribe someone's email address, on our Knowledge Base:

Knowledge Base: Can I Use This List?
http://www.aweber.com/faq/questions/263/#html

You can also read some commentary we've made about this on our blog:

Blog: Do's and Don'ts for Collecting Subscribers Offline
http://www.aweber.com/blog/email-marketing/collect-subscribers-offline-dos-d
onts.htm#html

www.Aweber.com

Collect Subscribers Offline

There are many opportunities to get a new subscriber when you're offline, in the "real world:"

People calling you by phone to ask questions

• You can take subscribers by phone. Come up with a short pitch/explanation of what you're offering via email (just like you would on your website) and ask for their email address.
• Put them in a spreadsheet and import the new addresses daily or every couple of days.

Visitors to your physical store-place of business

• Restaurants, bars, doctor's offices... if you have people coming in person to see you, ask if they're already getting your specials/newsletter/other information.
• If they're not already subscribed, have a signup sheet that they can fill out, or give them a card with the URL of your site/opt-in form so they can sign up there.

Conferences, Trade Shows, etc.

• If you have a booth at a trade show, or are going to a conference, you're bound to get a lot of business cards.
• Just like on the phone, come up with an "elevator pitch" for your list.
• When you're talking to someone and they hand you their business card, make your pitch. If they accept, write "Subscribe" or "Yes" on the card.
• When you get back from the event, import the addresses of the people who accepted.

www.Aweber.com

The Truth About CEO Compensation

By Alyce Lomax - MotleyFool.com
April 2, 2007

Protection from the press?

A special minimum wage just for CEOs?

No repercussions for CEOs related to options backdating or shady accounting practices?

Are you kidding us?

In case it hasn't hit you yet, our proposal of mock legislation that advocates having CEOs make mad money and enjoy unheard-of protections is, in fact, our annual April Fool's Day prank. Some of you may have figured out our joke, especially if you looked at the date on your calendar yesterday.

Others might have wondered what had happened to The Motley Fool they have known for years -- it was never Foolish to accept blatant abuse of shareholder money for the aggrandizement and personal enrichment of CEOs.

Your reactions
We got both reactions -- as well as some seemingly genuine support for our fake bill -- in our email inbox for the prank. (We asked Fools to email us at CEORights@fool.com.)

One particularly agitated and outraged reader replied to a question we posed:

"What have we left out of the CEO Bill of Rights?"

• "How about
• respect for your readership??
• Common sense??
• Integrity?? ...

Rather than waste any more time with The Motley Fool, I will concentrate my efforts on making others aware of this nonsense and work actively against it. I have forwarded the link to this legislation on to friends and colleagues -- many of whom are 'activist ninnies' and like-minded media outlets."

Another very unhappy reader replied:

"Since when does the 'underappreciated 100 times the average worker' CEO need your help? Are you serious? Now I know where your loyalties lie, Mr. Gardners."

Others told us that they were disappointed in us, ashamed of us, and angry with us; that we'd "sold out" and "truly lost (our) minds."

Some Fools, though, got the joke and wrote us with suggestions for additions to the bill, including the requirement that CEOs "be addressed, while kneeling, by the title 'Most Exalted and Omnipotent Oracle of Capitalism.'"

Another Fool told us he was with us all the way and lamented, "How can Bob Nardelli exist on his meager severance?"

A Fool from Switzerland wasn't fooled and applauded the true intent behind the joke:

"You stand for fairness and investors' rights, not for greedy (criminal at times) underperforming executives. Our role model is Warren Buffett, NOT Joseph Nacchio or Frank Quattrone! That's the main reason why I am a proud member."

And, yes, we did get more emails than you might think actually supporting the bill. We won't embarrass those folks by posting excerpts from their emails here, but we will certainly implore them to read on and learn why our joke was just that.

Compensation in the crosshairs
CEO compensation is one heck of a major news item this year, and it gives us a great opportunity to educate, amuse, and enrich individual investors regarding an important topic . So how could we not address it for our annual prank this time around?

CEO compensation is currently in our collective crosshairs, with government officials joining the cacophony of outrage that many investors feel when it comes to how much some corporate leaders are paid. Government has responded, with the SEC enforcing new accounting and disclosure rules, and U.S. Rep. Barney Frank introducing H.R. 1257, The Shareholder Vote on Executive Compensation Act, also known as the "say on pay" bill. That bill -- which has been passed by a House of Representatives committee and sent on to the full House -- seeks to give shareholders nonbinding advisory votes on executive compensation policies at their companies, as well as an additional nonbinding advisory vote on golden parachutes being negotiated when their companies are in the midst of mergers and acquisitions.

It's clear that many shareholders, including both individual investors and big organizations such as TIAA-CREF, have just about had it with some of the ways their money is used, and without any say in the matter. The trend of offering massive severance packages to outgoing CEOs seems to have been the final straw for many people.

Home Depot's (NYSE: HD) Bob Nardelli may have left his top post steeped in shareholder ire, but still he was rewarded handsomely with a $200 million severance package. And Pfizer's (NYSE: PFE) Hank McKinnel walked away with close to $200 million himself, following a six-year stint as CEO that saw the company's shares drop about 30%. It gives a new meaning to the saying "You'll never work in this town again!" Hey, you might not have to work again.

Furthermore, for CEOs who aren't on the outs, linking pay to performance is certainly a good idea. Most of us operate on the idea that how well we perform our jobs is commensurate with our compensation. Is it really so crazy to think that CEOs should be any different? While most of us wouldn't argue over the salary of a CEO who has produced great shareholder returns during his or her tenure, it's a whole other matter when a chief executive is paid copious amounts of money, but generates little in the way of return.

Those $1 pay packages you sometimes hear about may be nice gestures (not to mention positive PR), but people often forget that many supposedly "low-paid" CEOs get exorbitant stock packages. (New accounting and disclosure rules from the SEC should help investors more easily sort out exactly who's getting what when it comes to stock and perks.) For example, Apple's (Nasdaq: AAPL) Steve Jobs is one of those CEOs who gets paid a buck a year, but let's not forget his millions of dollars' worth of restricted stock.

(Whole Foods Market's (Nasdaq: WFMI) John Mackey is a notable exception. Not only was he historically very modestly paid by most standards of CEO salaries, but he has now decided to take $1 per year in salary and has decided to donate future stock options to the company's charity.)

Of course, when it comes to stealthier compensation, let's not forget shenanigans like stock-option backdating.

Huge, ongoing retirement packages have drawn considerable shareholder attention, too. General Electric's (NYSE: GE) Jack Welch may be one of the best-known corporate managers around, but the company got itself into hot water for not disclosing some of his post-retirement benefits. Did it really make sense to grant him a corporate apartment and lifetime personal use of the company jet? Welch did agree to give up the controversial extras after they came to light, but there's something a bit "dynastic" about this idea that former CEOs should enjoy certain corporate perks for life.

Well-known investing minds such as Vanguard founder Jack Bogle and Berkshire Hathaway's (NYSE: BRK-A) Warren Buffett have been critical of runaway executive compensation. Compounding the problem, it's easy for cronyism to develop as the board members charged with looking out for shareholder interests instead approve massive pay increases for CEOs. All too often, since many of the board members are CEOs at other companies, upping the ante on CEO pay ends up benefitting them as well.

People who argue that the free market takes care of all things, including justifying exorbitant pay for chief executives, forget one important point. For free markets to work properly, information must flow freely, so that consumers -- and shareholders -- know what they are buying and selling. Furthermore, when people act without responsibility or ethics, they tarnish and endanger capitalism. Runaway compensation is an abuse of power. It invites shareholders to cry foul, which can ultimately result in calls for stringent regulation.

While CEOs fulfill very important roles, they should remember that they are employees, too. They must answer to shareholders, instead of their own greed and hubris.

If you read some of the following Foolish articles from the past year, you'll see why our April Fool's prank was such a good joke:

    * "Wall Street Pays for Performance," by Matt Koppenheffer
    * "Is CEO Pay Out of Whack?," by Rich Duprey
    * "Insane CEO Pay," by Alyce Lomax
    * "Stupid CEO Tricks," by Rich Smith
    * "Your Stocks' Secrets," by Alyce Lomax
    * "Bogle Battles for Our Souls," by Selena Maranjian
    * "An All-American Compensation Plan," by Tim Beyers

Thank you to all of the Fools who wrote, designed, edited, and published this year's April Fool's joke. You know who you are!

Home Depot, Pfizer, and Berkshire Hathaway are all Motley Fool Inside Value recommendations. Whole Foods is a Motley Fool Stock Advisor recommendation. Check out either service free for 30 days.

Alyce Lomax owns shares of Whole Foods Market, but holds no financial position in any of the other companies mentioned. The Fool's disclosure policy insists that it supports rights for bears but not CEOs.