Archive for December, 2009

Investment Property 101 Seminar

[ January 19, 2010; 6:30 pm to 8:00 pm. February 16, 2010; 6:30 pm to 8:00 pm. March 16, 2010; 6:30 pm to 8:00 pm. April 20, 2010; 6:30 pm to 8:00 pm. ] From his experience of owning 15 rental properties, Ryan O’Neill will teach you a concrete, non-infomercial way to build wealth through real estate. This seminar will be a one and a half hour presentation in regards to wealth building through real estate. There is no charge at all, no contracts you sign with us, no [...]

From his experience of owning 15 rental properties, Ryan O’Neill will teach you a concrete, non-infomercial way to build wealth through real estate. This seminar will be a one and a half hour presentation in regards to wealth building through real estate. There is no charge at all, no contracts you sign with us, no consultation fees, no hidden agenda.

The seminar simply will be an excellent opportunity for you to learn more about our process: how you get pre-approved, what type of low-down loan product to choose, and then how we step you through the process of finding the home and helping you get it rented out. Whether you are a beginner or an advanced investor, this will be a great chance for you to learn more about how you can build your long term wealth through buying real estate.  Our team leader, Ryan O’Neill owns 15 single-family homes, and our mortgage coach Rob Bonahoom has over 20 properties. All of us have experienced the benefits of real estate, and we’re excited to share a free seminar with you on how you too can get into the game (or continue on).

This is an invaluable seminar for anyone that is serious about owning investment properties.  It will fill up fast so sign up on our registration form or call 612-281-5419 for more information.

Question: Is there typically a 1099 on a Short Sale

One of our team members asked the following question today:
Can you or the team answer a question about 1099 income on a short sale.  I thought a home owner who sold via a short sale wasn’t liable for the difference with the Debt Forgiveness Act?
I’ve just received an approval from the bank on my short [...]

One of our team members asked the following question today:

Can you or the team answer a question about 1099 income on a short sale.  I thought a home owner who sold via a short sale wasn’t liable for the difference with the Debt Forgiveness Act?

I’ve just received an approval from the bank on my short sale but they say the seller will be issued a  1099 for approx. $150K.  She would do better with a foreclosure than have that type of tax burden.

Here is the answer by Deborah Beneke, CPA at Olsen Thielen

Regardless of whether the transaction is covered under the Debt Forgiveness Act or not , she will be issued a 1099. Further if the property goes into foreclosure, a 1099 will also be issued and she could still be liable for debt forgiveness income depending upon her circumstances.

However if she does qualify for the exemption available under the Debt Forgiveness Act, the amount of debt forgiveness income exclusion must be reported on Form 982 on her individual tax return. As a result, even though a 1099 was issued she will not have any tax liability.

Again, she must qualify for exemption. It must have been her principal residence two out of the last five years. AND the debt that is to be excluded must be qualified residence indebtedness. In other words, if she refinanced on the property and used the proceeds for other uses (for example to pay off credit cards), the debt forgiveness income would be taxable up to the amount used for other purposes.

If she can prove insolvency or is in bankruptcy, there would be no debt income either. Again a Form 982 needs to be filed. She should consult her tax professional to analyze her situation and determine if she would be subject to adverse tax implications. Renting out the property should not be a problem if it is short term. She will need to pick up net rental income (if any) and recapture any depreciation if there is a gain on disposal (unlikely).

MAAR Report: Home prices continue to stabilize in November [Really?]

As much as I want to believe the following stats, I am skeptical.  I think they make some good assumptions and per the stats, sales prices are rising.  I think it is a little early to call the war won and that we are on a recovery.  If you pull your head out of just [...]

As much as I want to believe the following stats, I am skeptical.  I think they make some good assumptions and per the stats, sales prices are rising.  I think it is a little early to call the war won and that we are on a recovery.  If you pull your head out of just the housing market and take a look at the rest of the economy, how can you say we are on the recovery road?  With unemployment at 10%+, a 2nd stimulus package looming, congress’s approval rating at historic lows, and inflation just waiting to take off from all the money printing the Fed is doing, I suspect we are going to being the housing market get worse again before it gets better.

From the Minneapolis Area Association of Realtors, December 10, 2009

Extremely heavy buyer activity and shrinking inventory led to strengthening Twin Cities home prices in November.

The November median sales price of $170,000 was a slight increase from October—a rare occurrence in this month that typically marks the beginning of a temporary winter price swoon. This mark is 2.9 percent behind last October, the lowest year-over-year price decline in more than two years.

“This is the surest sign we’ve seen yet that we’re on recovery road,” said Steve Havig, President of the Minneapolis Area Association of REALTORS® (MAAR). “We’ve seen sales growing for almost a year and a half, and prices are starting to reflect that, particularly in the lower price ranges.”

The median sales price of traditional homes (excluding foreclosures and short sales) in November was $190,000, down 15.6 percent from a year ago. Since a heavy share of buyers in November were likely first-timers who typically buy in the more affordable price ranges, prices in the traditional segment have been weighted downward. Foreclosures posted a November figure of $127,500, up 2.0 percent from a year ago, while short sales prices were at $143,500, down 15.6 percent from a year ago.

There were 2,987 signed purchase agreements in November, a big dip from October due to seasonal trends and to the tax credit’s initial expiration date. That’s still up 10.2 percent from a year ago—the 17th consecutive month of year-over-year increases in pending sales. Closed sales posted a whopping 67.0 percent jump from a year ago, again due to the tax credit.

The Months Supply of Inventory has dropped to 5.7 months, the lowest mark since April 2006. Traditional homes have 7.6 months of supply, foreclosures have 1.4 months and short sales have 12.8 months.

“Supply is dropping in the traditional and foreclosure markets,” said MAAR President-Elect, Brad Fisher. “Short sale supply is stagnant because of the headaches involved in purchasing them. The process needs to improve, but industry and government efforts that are coming soon could help.”

All information is according to the Minneapolis Area Association of REALTORS® (MAAR) based on data from the Regional Multiple Listing Service of Minnesota, Inc. MAAR is the leading regional advocate and provider of information services and research on the real estate industry for brokers, real estate professionals and the public. MAAR serves the Twin Cities 13-county metro area and western Wisconsin.

Best Property for First Time Investor

I was meeting with another Realtor on our team on Friday.  He wanted to discuss buying investment properties sometime in the future as a long term retirement plan.  One of the questions that came up was “what type of property would you buy if you had to do it all over again”.  I had actually [...]

I was meeting with another Realtor on our team on Friday.  He wanted to discuss buying investment properties sometime in the future as a long term retirement plan.  One of the questions that came up was “what type of property would you buy if you had to do it all over again”.  I had actually answered this question a long time ago when a reader asked “What Type of Property Investment is Best for First Time Investors“.  Now 2+ years and 100’s of properties later, I would have to answer:  a nice single family home.  I have really come to appreciate the simplicity of buying, owning, and managing a single tenant in a single property.

Single family rentals have some great pros:

• More desired by the average tenant than a duplex or apartment, consequently it is easier to rent a single family home.
• Higher rent possible.
• Tenant takes care of all lawn care and snow removal (typically).
• Minimal monthly landlord expenses (usually just water/sewer/garbage).
• Single Family Home tenants tend to be less transient.
• Easier to sell this property in the future to either an owner occupant or investor.
• Problem tenants can’t sour other tenants (unlike multi-family).

Now, there are some drawbacks, but I think they are manageable:

• When the property is vacant, no rent is coming in.
• Capital improvements can not be spread out across a larger gross rent.  In other words, a duplex may generate $800 per month in cash flow versus a single family home that generates $400 per month.  Unfortunately, the roof on the single family house may cost just as much as the duplex to replace, resulting in it taking twice as long to recover that cost.

Ultimately, this Realtor friend is making the right decision to buy an investment property.  The type doesn’t matter, just get in the game.

How to Make Maintaining Your Investment Properties Easier

Who mows the grass and shovels the snow at your investment properties? Maybe you do. Eventually you may want to ask one of your tenants to take care of the work. Here are some tips on how to make this a winning situation for you and your tenant:

Find a tenant that takes [...]

Who mows the grass and shovels the snow at your investment properties? Maybe you do. Eventually you may want to ask one of your tenants to take care of the work. Here are some tips on how to make this a winning situation for you and your tenant:

• Find a tenant that takes pride in where they live. Someone that is often just making their rent payment is a good candidate. They will appreciate the extra money.
• Do NOT reduce their rent. Keep the rent at the standard amount and instead, pay them by check for the work they do. This allows you to stop paying them if they stop doing the work. If you discount the rent and they stop doing the work, you would need to have them sign an updated lease for the non-discounted amount which may be impossible to do (resulting in you getting less rent than expected and needing to find a new caretaker-or do it yourself). The only exception is for single family houses where yard maintenance (grass & snow) are part of the original rent amount.
• I have seen some landlords pay as much as $100 per month for simply mowing the grass and shoveling, both of which take less than 2 hours per month. I normally pay the caretaker $25-30 per month all year. Again, I do not pay anything at single family houses.
• You should provide all tools (shovel & mower), gas, and salt for the tenants. This is only fair considering what you are paying them.
• Never give your caretaker a set of keys to the apartments unless they perform maintenance duties and/or leasing as you can open yourself up to liability if they steal or break something or assault someone. If your caretaker has access to apartment keys, you should make sure you have run full employment-type screening on them (including background checks). Consider having them bonded for additional liability protection.
• You may need to provide your tenant a 1099-MISC form as this caretaker work could be considered income. Check with your accountant.

Finding a caretaker can lower your time requirements at your properties. Done correctly it can be a great situation for you, your tenant, and your building.

IP201 Seminar: Getting Started with QuickBooks for Investment Properties

[ January 26, 2010; 6:30 pm to 8:00 pm. ] Are you still using excel spreadsheets to track your rent amounts from each tenant?  Are your bills sitting in huge piles on your desk waiting to be turned into your accountant?  Are you unable to track your monthly cash flow or see if you are even turning a profit at this rental property thing?  Maybe [...]

Are you still using excel spreadsheets to track your rent amounts from each tenant?  Are your bills sitting in huge piles on your desk waiting to be turned into your accountant?  Are you unable to track your monthly cash flow or see if you are even turning a profit at this rental property thing?  Maybe you bought QuickBooks, but never could get past installing it (the software can have a steep learning curve).

Maybe this should be one of your New Year’s resolutions; to start using QuickBooks in 2010.  Attend our Free Investment Property 201 seminar series on January 26 at 6:30 in Burnsville.  Deborah Beneke, CPA, from Olsen Thielen will be helping you get started and answering your questions.  She will show you how to set up your accounts, where to classify expenses, and how to automate those monthly mortgage payments and rent collections.  Don’t be intimidated or disorganized any more.

This is an invaluable seminar for anyone that is serious about owning investment properties.  It will fill up fast so sign up on our registration form or call 612-281-5419 for more information.