Should You Work with a Realtor?

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Naturally, many people think that the best way to initiate real estate investing is to connect with a real estate agent. However, more often than not, realtors know very little about things like seller financing and purchasing distressed properties.

Don’t get me wrong: I love realtors. My dad is a realtor. My wife has her real estate license. I understand and appreciate that realtors work very hard. But... they simply are not always well versed in the world of investing. The issue is, the main role of a realtor is to help individuals and families purchase their primary residences.

That’s a whole different ball game than real estate investing! Most realtors simply do not know about investing, including turnkey investing, finding wholesale properties, and what it takes to make a solid investment. Investing is an entirely different business. 

Unfortunately, most novice investors have no idea about this disconnect. It seems like if you want to purchase a property, the natural place to start is with a realtor. But a realtor most likely is not going to be able to help you find a property under market value; their job is to help their clients get the most for their property!

One of the best ways to insure that you'll make a high return on your investment is to purchase a discounted property. Unfortunately, more often than not, a realtor can't help you in this department. In general, my advice is to skip the realtor, and go after ROI. 

3 Awesome Ways to Learn About Private Financing

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If you're interested in purchasing your next real estate deal via private financing, it can be difficult to know where to start. How do you find a private lender? What terms should you ask for? Should you find a lender or a property first? I know that these questions hang up a lot of investors, or would-be investors! 

That's why I'm sharing three resources you can use to dive deep into the world of private financing, build your confidence, and secure your next deal! If you've ever been hesitant to enter the world of private financing, this is for you!

  1. Getting the Money by Susan Lassiter-Lyons. Susan Lassiter-Lyons is the queen of private money. Seriously. She's raised over $26.2 in private capital, and she's made it her mission to teach others how to reach their goals via private financing. Getting the Money contains tons of great strategies for securing private lending, getting in the right headspace, and so much more. 
  2. Private Money Series. Over on the Morris Invest YouTube channel, I've created an entire playlist about finding private money. You'll learn how to create a credibility one sheet, how to decide how to compensate your lender, and you'll even see me set up a lunch meeting with a private lender. 
  3. How to Secure Your First Private Money Lender [Case Study]. If you need additional motivation, you'll love this first-hand account of how a novice investor secured his first private money deal. On episode 59 of Investing in Real Estate, new investor Pablo shares how he sealed the deal! You'll hear all the details on how he did it, interest rate, repayment plan, and how to construct a mutually-beneficial note!

3 Killer Resources for Understanding Real Estate Taxes

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Among the many benefits of being a real estate investor, the tax implications are incredible. If you’re just getting started, or simply want to make sure you have all your bases covered, we’re sharing three resources you can use to better understand real estate taxes, and maximize your benefits!

  1. Tax-Free Wealth by Tom Wheelwright. This book is the tax bible, the Holy Grail, the… you get it. Tax-Free Wealth is all about using the current tax laws to your benefit. As a real estate investor, you need to know how the tax laws work, and how they are designed to benefit you. Tom Wheelwright is one of the most knowledgeable tax accountants around, and this book totally transformed my business. If you’re trying to create wealth and minimize your taxes, you need to read this book!
  2. 10 Tax Deductions for Real Estate Investors. This blog post contains ten tax deductions you can take advantage of if you’re purchasing rental real estate. Take a look over this list and make sure you and your accountant haven’t skimmed over any important savings!
  3. How to Maximize Depreciation – Interview with Tom Wheelwright. On episode 22 of Investing in Real Estate, Natali and I sat down with tax genius and Rich Dad advisor Tom Wheelwright. Wheelwright shared how real estate investing can mitigate other tax burdens, how you can make sure you’re getting the most benefits out of your investments, and the importance of depreciation! 
As a real estate investor, the tax implications are incredible. If you’re just getting started, or simply want to make sure you have all your bases covered, we’re sharing three resources you can use to better understand real estate taxes, and maximize your benefits!

What Is a 1031 Exchange?

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A 1031 exchange is a powerful tool that allows an individual to save on taxes after the sale of a piece of real estate. This tax deferral program permits the investor to sell a real estate property and then reinvest the funds in a property of equal or greater value. Doing so allows the investor to keep more money in their pocket, and defer all capital gains taxes. Here's a quick overview on how the process works: 

First, the properties involved in the exchange must be held for either business or investment purposes. This information is proven by tax returns, including rental income, depreciation records, and intent. It’s important to have this documentation in place in case of an audit.

There are also regulations in place for the new purchase. The new property must meet the reinvestment requirements. This means the new property must be of equal or greater value than the property that was sold.

Additionally, there is a strict timeline that the investor must uphold. The investor has 180 days to complete the exchange. This begins on the day escrow closes on the sale. Leonard explains that it’s important to work with an accommodator, such as his team. You also must reach out to your accommodator before escrow closing.

Finally, the IRS requires that the investor identify their purchasing plans on day 45. The investor must describe the property or properties they are planning to use as the replacement in the exchange.

For more on 1031 exchanges, check out my interviews with 1031 exchange experts, Lance Growth and Leonard Spoto

A 1031 exchange is a powerful tool that allows an individual to save on taxes after the sale of a piece of real estate. Here's how it works.

Property Management Do's and Don'ts

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Do: take the job of hiring a property management team very seriously. Your property management company is your right hand man! Without them, your passive income venture could be not so passive. Check out our list of 5 questions you should ask when interviewing a property management team.

Don’t: try to micromanage them. If you’ve done your due diligence with hiring, let go of all of the details. You hired this team because they’re qualified to screen the tenants, and collect rent. Don’t try to micromanage them. Don’t come to them with a list of additional demands or tasks. They know what to do, and how to do it!

Do: get on the same page about communication. Some companies use email, while others use text messages, or snail mail. Always get clear information about which team member you’ll hear from in each circumstance, and the method of communication they will use.

Don’t: be too impressed by flashy software. Software isn’t the most important qualification when it comes to managing rental properties. In fact, we even work with a team that sends a paper, handwritten check via email. Software can be helpful, and organization is important, but we prefer that our teams be more focused on cash flow than minor details like that.

Do: take care of the things they ask you to fix. When your team contacts you regarding a leaky faucet, rattling heat vent, or a broken toilet, give them the green light to fix those issues. It might seem like some of these complaints are small to you, but to your tenant, the little things compile. When you anger your tenants, you make your property management team’s job harder.

Don’t: be greedy with pricing. Your team is already established in the market, and they know what price is appropriate. Trust their judgment and experience.

Do: get your account numbers right, and give plenty of notice if you need to change your banking info. Most property management companies will pay your rent via ACH. If you decide you need to change the account where your rent is deposited, give them a heads up in advance.

Don’t: fall prey to the allure of the first property. Many investors think they can self-manage when they first get started in real estate. But if your plan is to grow your portfolio, you’ll want to place this job into the hands of professionals.  

Do: fill out all documents in a timely manner. When you onboard with a property management company, they’ll send you a packet of paperwork to complete. This stuff is important! It’s how you receive your payments and important tax documents.

Don't: forget how crucial a property management team is to your success! Always treat them with respect, and do your best to make their job easy. 

Your property management team is critical as a real estate investor. Make sure you understand these do's and don'ts.

What Is a Foreclosure?

About a decade ago, foreclosures were common in the world of real estate. Now, foreclosures are much less common, but as a real estate investor, you should be informed about foreclosures and how they work.

A foreclosure occurs when the borrower fails to make regular payments on their mortgage. When a mortgage is constructed, the bank places a lien on the property. This means the loan is secured, and in the event that the loan is unpaid, the bank has the rights to the property.

The process can vary depending by state law, but typically the foreclosure process consists of five steps. 

  1. Missed payment. When the borrower stops making their regular monthly payment, the bank takes action and begins the foreclosure process.
  2. Public notice. The lender makes an announcement in local newspaper. This notice indicates that the borrower defaulted on the loan.
  3. Pre-foreclosure. This is a grace period that allows the borrower to work out an arrangement. Typically the bank would rather collect some of the payment than none. (Pssst...this is a great way for investors to find discounted properties). 
  4. Auction. The property goes up for sale in a public auction, typically conducted on the courthouse steps. Often, the property is sold at a discounted rate so the lender can recover a portion of their loss, or break even. 
  5. Post-foreclosure. If a third-party does not purchase the home in an auction, it is then in the possession of the bank. 
About a decade ago, foreclosures were common in the world of real estate. Now, foreclosures are much less common, but as a real estate investor, you should be informed about foreclosures and how they work.

Portfolio Loans for Real Estate Investing

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Are you interested in accelerating the growth of your portfolio? What if there was a way to pick up a group of properties, rather than slowly accumulating properties one by one? I have excellent news for you; there is a way! It’s done through securing a portfolio loan.

In residential real estate, a portfolio loan is a means for investors to acquire multiple properties, simultaneously. Portfolio loans can be secured through either financial institutions or private lenders. The amount of the loan is based on the value of the collective properties.

A portfolio loan varies vastly from a primary home mortgage; they’re two totally different products. You might use the same terminology, like interest rate or pre-payment penalty, but that’s where the similarities end. The best way to approach a portfolio loan is to remember that the terms will be much different than other loans you’ve encountered.

If you’re expecting an interest rate of three to four percent, because of your experience with a mortgage, you’ll be sorely disappointed. A portfolio lender will typically lend at a rate between six and twelve percent. The rate varies dependent on the down payment.

If you’re looking to expedite the growth of your real estate business, a portfolio loan might be a great option for you. If you want to hear my personal experience with portfolio loans, including down payments and interest rates, head over to episode 58 of the podcast.

In residential real estate, a portfolio loan is a means for investors to acquire multiple properties, simultaneously. Here's what to know about them.