1. real estate

Volume 18 Issue 2
GENERAL MEETING
February, 2015
Our Next General Meeting is Monday, February 16, 2015
6:30 pm. Registration; Pre-meetings
6:55 pm. Vendors Introduced
7:10 pm. Announcements
FEBRUARY 2015 METRO
METRO Real Estate & Investor's Association
7:30 pm 10th Annual Legal Eagle Night
Spend an evening with a panel of expert NJ attorneys assembled to respond to
your questions. Each one specializes in a different area of real estate, ranging
from single family houses to commercial properties. What you will learn from
this evening alone will more than pay for the cost of your annual MREIA
membership!
Harry Frieland, Esq. is a Life Member of MREIA. He has spoken at our general
meetings on countless occasions since the 1980s! His topics have ranged from tax
sales, the NJ foreclosure process, contract language and partnerships to bankruptcy.
Harry is licensed in NJ, NY, FL and is Of Counsel in the firm of Fein, Such, Kahn
and Shepard in Parsippany, New Jersey
He will reply to questions concerning entities, contract clauses, tax sales,
mortgage and tax foreclosures.
Paul Gauer, Esq. has 35 years as a general practice attorney including residential
and commercial real estate closings, zoning, wills/estates, bankruptcy, divorce,
personal injury and patent/trademark. He is a seminar instructor for real estate
licensure and continuing legal education. He will reply to questions concerning
closings, title and estates.
Derek Reed, Esq. was MREIA’s featured speaker at our July and August 2012
meetings. He is an associate with Levy, Ehrlich, Gudin & Plaza, with offices in
Newark, NJ, Manhattan. Derek concentrates his practice in civil litigation with a
focus on real estate related matters. He also an instructor at Rutgers University.
He will reply to questions concerning Landlord-Tenant issues and NJ Real
Estate Law.
John F. Wise, Esq. was the featured MREIA speaker at our August 2009 and July
2011 meeting. He has been practicing law for over 25 years and is a prolific public
speaker and specializes in the areas of First Time Homeownership and Bankruptcy.
In his private practice John focuses on Bankruptcy, Real Estate, Mortgage Banking
and personal financial reorganization.
He will reply to questions concerning buying properties whose owners are in
bankruptcy.
MREIA is
a Member of:
Inside This Issue
3 President’s Desk: We are the Good Guys: MREIA Code of Ethics by Dan Schwartz
4 Wholesaling: How Not to Wholesale by Vena Jones-Cox
5 Wholesaling: Do You Need a License to Wholesale Properties? by William Bronchick, Esq.
7 Financing: Buy Real Estate with No Money Down by William Bronchick, Esq.
9 Rehab: Seal the Deal with Curb Appeal by Pete Youngs
11 Financing: Owner Financing Dodd-Frank and the SAFE Act by William Bronchick, Esq.
14 Financing: Dodd-Frank 2014 Part1: New Federal Rules Affecting Consumer Loan Apps by Bradley S. Dornish, Esq.
16 Dealmaking: Owner Financing Deal by Tammy, Tatiana and Nicholas Boyd
17 Taxes: IRS Taxes on Short Sale of Investment Property by Michael Plaks, E.A.
19 Beginners: Q & A: Inexpensive Marketing by Mike Jacka
20 Motivation: 18 Rules for Success in the New Year by Phyllis Rockower
22 Investing: The Sobering Tale of a Neighborhood’s Decay by Robert Cain
23 Legal: What Can a Good Real Estate Attorney Do for You? by William Bronchick, Esq.
24 Asset Protection: What a Land Trust Can Do for You by Vena Jones-Cox
26 Commercial R.E.: Successful Apartment Ownership Means Having Proper Management by David Lindahl
28 Entities: Entities for Business and Real Estate Investing 2012 by Bradley S. Dornish, Esq.
31 Self-Directed IRAs: Six Strategies to Make Sure you Have Enough Money to Retire by Carl Fischer
33 Beginners: Investment Property: Strategies for Flipping a Property by Jay Redding
LANDLORDING
34 Tenant Referral Policy Agreement (form)
35 Rent Deficiency Notice (form) by John Nuzzolese
36 Management Tips from Mrlandlord.com
39 First Impressions Get a Property Rented by Robert Cain
40 Fair Housing-Harassment and Retaliation
42 Landlord’s Responsibility
43 Sponsor/Vendor Index and New & Renewing Members
49 MREIA IMPORTANT INFORMATION
Volume 18 Issue 2
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February 2015
FROM THE PRESIDENT’S DESK
We Are The Good Guys: The MREIA Code Of Ethics
In the past, MREIA has informed you about mortgage scams and various fraudulent schemes to rip off
homeowners in distress. Unfortunately, the public often has a negative attitude toward ALL landlords and investors.
Perception plays a role in influencing attitudes. Whenever possible, when dealing with the public, we substitute the
words, “housing provider” for landlord, “real estate professional” for investor and try to remember to refer to
ourselves as a real estate association and not as a real estate club. We must uphold our own Code of Ethics as
an industry or our lawmakers will do it for us, and the results may be unintended consequences that will
hurt both us and distressed homeowners. Therefore, please study our Code of Ethics below. If you are aware of
any MREIA member who is violating any of the eleven points, please bring said member to our attention. [This is
reprinted from the September 2007 Metro.]
MREIA members are expected to maintain a high standard of business ethics, competency, fairness,
honesty and integrity. As MREIA members we agree to and endorse the following statements:
1. We shall treat other members with courtesy, respect and shall refrain from making inaccurate comments about
other members.
2. Although we may offer assistance to other members, it is understood that we do not render legal, financial, tax,
investment or other professional services and disclaim all liability for actions(or inactions) taken (or not taken) as a
result of communications with other members. Our intent is to offer advice for educational purposes only. If legal
or other expert assistance is required, a qualified and competent professional should be contacted. [see ABA
Declaration of Principles]
3. We understand that we must individually perform due diligence in regard to all aspects of real estate and we shall
not rely on any project, products, services or statements made by other members, the Board of Directors, speakers,
or information published in the monthly newsletter.
4. We shall not willingly become involved in activities that may bring discredit to other members or MREIA.
5. We shall strive to keep informed about new local, state and federal real estate and housing laws and regulations.
6. We shall not construct or maintain unsanitary, unsafe or uninhabitable housing.
7. We shall respect the privacy of others and shall disclose information only when required or permitted by law.
8. We shall not intentionally misrepresent material facts or take unfair advantage of others.
9. We shall not engage in fraud or other illegal practices and shall act as positive role models when providing
housing, products or services to others.
10. We shall not discriminate against any person in regard to age, color, familial status, handicap, national origin,
race, religion or sex as defined by applicable local, state and federal laws.
11. In order to avoid a potential conflict of interest, a Board member is not permitted to also be a member of
another REIA.
The Executive Committee shall review any written allegations of conduct that materially
violates the Code of Ethics. [previously published in the June and August 2004 Metro]
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February 2015
WHOLESALING
How Not To Wholesale
by Vena Jones-Cox
Some time ago, I wrote an article about mistakes wholesalers make in dealing with their customers. Apparently, this is
going to become a regular topic in my articles, because in just the past week I’ve run across two additional heinous
examples of wholesaler/buyer relations that I feel compelled to discuss with you, even though I’m absolutely certain that
you’d never do these things.
The first case involves a buyer in a wholesale deal who called to ask my advice about another local wholesaler.
Apparently, the deal in question is never going to close: the selling bank has now delayed over nine months and
there’s no close date in sight.
This has happened to me in the past, and it’s the reason that I NEVER spend a wholesale fee until the deal closes. In this
case, though, the wholesaler is refusing to give back the buyer’s money, based on this clause in his assignment contract:
“It is agreed between assignor and assignee that assignment fee shall be non-refundable under any circumstances.”
Yes, the buyer signed the agreement, and yes, she shouldn’t have. But on the other hand, it’s your job as a wholesaler to
bring the deal to closing. If you haven’t, or can’t, you haven’t earned anything. A clause like this probably seemed like a
great idea to the wholesaler, but the reality is that it’s not fair and will almost undoubtedly NOT hold up in court, which
is where this deal is headed. The buyer is just “out” $5,000—and the wholesaler has made and spent a profit he didn’t
earn.
How the wholesaler thought that this was reasonable behavior is completely beyond me—and, in the end, the result is
going to be a lawsuit that the wholesaler will lose, the loss of a good buyer to the wholesaler, and the loss of the
wholesaler’s reputation with anyone who this unhappy buyer talks to. The second “wholesalers behaving badly” thing
DID happen to me.
A wholesaler called me last week about a property in a good resale area that he wanted $35,000 for. I quickly comped it,
called the wholesaler, and left a message saying that I would probably buy it, and was on my way there. I drove an hour
in rush hour traffic to see the property, evaluated it, and called the wholesaler back to tell him I wanted it. I then
proceeded to spend another hour driving around taking pictures of comps, at which point the wholesaler called me back
and told me that he had sold it—before I even left the house—to someone who had said “I’ll take
it, but if I look at it tomorrow and it’s messed up, I won’t take it.”
So what’s wrong with this scenario? Not that the wholesaler sold the property to someone else—it happens. It’s that the
wholesaler knew I was on my way, knew that the property was already sold, and allowed me to waste a bunch of time
evaluating a property that wasn’t available.
Folks, let me remind you again that you’re in the business of selling great deals to people who want to make money off
of those deals, and for making it easy for them to do business with you. Think of your business as what it is—a
business—and deliver the product that your customers are expecting and the service they deserve.
Copyrighted by Vena Jones-Cox. Reprinted by Permission. National Speaker Vena Jones-Cox has appeared at
past MREIA meetings and has been a full-time real estate investor since 1989 and has bought over 600
properties. Vena is also the host of public radio’s “Real Life Real Estate Investing” and Past President of
Cincinnati REIA, Ohio. Email: [email protected] or visit www.regoddess.com
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February 2015
WHOLESALING
Do You Need A License To Wholesale Properties?
by William Bronchick, Esq.
You buy a property, you wholesale it, you profit. Do you need a license to wholesale properties? In most cases, the
answer is “no.”
Real estate brokerage is an activity regulated by states on their own terms, thus each state defines which activities
require a license. There is a lot of vagueness and ambiguity in some of the state licensing codes, as well as “gray
areas,” which complicate the matter. Furthermore, if you vary the techniques and your business practices beyond
the scope of what I teach in my courses, it is not always clear how the state authorities might view your practices.
Therefore, this discussion is limited to the simple activity of buying and flipping as follows:
1. Sign a contract with a seller and assign it to another investor
2. Sign a contract with a seller, sign another one with a third party, then double close
“For Another”
The large majority of states use the “for another” language in their state licensing statutes. The “for another”
language means the law provides a laundry list of activities that require a license if you do it “for another.”
A good example is the Ohio Statute:
§ 4735.01 Definitions. As used in this chapter:
(A) “Real estate broker” includes any person, partnership, association, limited liability company, limited
liability partnership, or corporation, foreign or domestic, who for another, whether pursuant to a power of
attorney or otherwise, and who for a fee, commission, or other valuable consideration, or with the
intention, or in the expectation, or upon the promise of receiving or collecting a fee, commission, or other
valuable consideration does any of the following:
The Ohio code then goes on to list all types of activity, such as buying, selling, offerings, leasing, negotiating, etc.
This type of statute would clearly exempt you from doing any of the listed activity so long as you were doing it on
your own behalf. The following court case clearly delineates the difference between acting on your own behalf and
acting as a broker.
In Xarin Real Estate v. Gamboa, 715 S.W. 80 (TX 1986), an investor named Xarin entered into a purchase contract
with the owner, Gamboa, then assigned his purchase contract to a third party, Baker. When the deal blew up, Baker
sued Xarin claiming, among other things, that Xarin was illegally acting as a real estate broker without a license.
The court ruled that, “No evidence exists to show that Xarin was acting for anyone but itself when it sold its
interest to Baker. Xarin was shown on the sales contract to be only the purchaser and was not shown in any agency
capacity…
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There is also no evidence that Xarin acted for Baker when Xarin acquired its interest in the property from the
Gamboa’s. Generally, to establish that one person has acted for another in an normal agency relationship, there
must be an agreement between two persons and one must exercise some control over the other.”
Two important points are worth noting here. First, the court acknowledged that Xarin had “an interest in the
property” when it signed a purchase contract with Gamboa. As we will discuss later, having “an interest” in real
estate allows you to sell your interest, which is specifically exempt from many state licensing laws. Second, the court
made an important point that that the Xarin did not have a deal with Baker in place when it made the deal with the
owner of the property. This is important because the reverse can also be true; if you make a deal with a buyer first,
then find him a property, a good argument can be made that activity is brokering on behalf of the buyer.
Clear Exemptions: Other states that do not use the “for another” language clearly identify specific exemptions in
their licensing statutes. A good example is the South Carolina statute, which reads:
“This chapter does not apply to: the sale, lease, or rental of real estate by an unlicensed owner of real estate who owns any interest in the
real estate if the interest being sold, leased, or rented is identical to the owner’s legal interest.”
However, you must have an interest in the property before you sell it. In general, a contract to purchase property
gives the buyer an equitable interest in the land. 27A Am. Jur. 2d Equitable Conversion § 10. Thus, if you have an
interest in the property, you are basically exempt from the licensing regulations in these states.
Trying to Skirt the Licensing Rules
Although the basic types of activity I have described is generally exempt from licensing regulations, there are cases
in which a license would be required. For example, if you are finding buyers first, then shopping around for
properties you can wholesale to them, this could be essentially acting as a buyer’s broker. The premises of my
discussion assumes that when you go under contract with the seller you do not have a buyer to assign or flip to,
thus you are “at risk.”
Regulation for All
A few states limit the real estate activity of any persons, even if you are acting on your own behalf. SD, MN, WI,
MI, MD & MN all have limitations on the number and frequency of real estate transactions you can do before you
will need a real estate license. For example, Michigan law limits you to four transactions per year, although it is not
clear whether using multiple corporate entities will be a workaround.
There’s few, if any, reported cases of people being prosecuted anywhere in the country for not having a real estate
license. The issue of licensing is more relevant in the enforcement of your profit. For example, if you assign your
contract prior to closing and expect the buyer to pay you at closing, he may stiff you and argue “you don’t have a
license.”
The bottom line is that if you don’t act like a real estate broker, the state agencies that license brokers will leave you
alone. If you use the licensing exemptions to skirt the licensing laws, you will likely hear from the state licensing
agencies. It is important that you make it very clear to all parties in the transaction that you are not a broker and are
acting on your own behalf. Reprinted by Permission. Visit www.legalwiz.com or call 1-888-587-3253. The
author, CEO of Legalwiz Publications, is a nationally known attorney, author, entrepreneur and speaker.
He has been practicing law since 1990, having been involved in over 700 transactions.
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February 2015
FINANCING
Buy Real Estate With No Money Down
by William Bronchick, Esq.
There are at least 10 ways to buy a home, even if you have little or no money to put down. Here are a few of the
basics:
1. Sweat Equity
Sweat Equity is a way to get a home by trading work for equity in the house. This could be used for a down
payment or for purchase later. This is a great technique if you are handy with tools, yard-work, and paint.
Look for fixer-uppers in neighborhoods you are interested in. Many times these homes will have a hard time selling
and the owner is ready for just about any offer. You will find these houses ranging from just needing a little
cosmetic work like landscaping or painting, to totally trashed out houses in need of some serious renovation. If you
are into repairs, this is a great way to get a home for a good deal.
If you are not skilled at repairs and renovation, be careful about fixer-upper homes. They could end up costing you
quite a large amount of money to pay others to fix.
I also recommend getting a home inspection so that you know what exactly you are in for before you begin.
2. Assume and Seller Carry-Back
Look for a home with an assumable loan. Instead of buying out the owner’s equity, ask the seller to carry back a
second mortgage for the rest of the money owed. If you can get the seller to carry all of the rest, you can get the
home for no money down.
3. Offer an Object for the Down Payment
Offer something other than cash (land, a car, a boat, or valuable collectibles) to the seller instead of a cash down
payment. This is why it is important to listen to sellers. Find out what they want and need. Maybe you have (or can
get) just what they need. For instance maybe they wanted to use the down payment to buy an RV and it turns out
that you just happen to have one you don’t need. Offer that vehicle as a down payment, and it saves you from
coming up with the cash.
4. Offer Services for the Down Payment
Offer your services or expertise to the seller in lieu of a down payment. Some examples include $10,000 worth of
auto services if you’re a mechanic, dental work if you’re a dentist, desktop publishing services if you’re a designer,
artwork if you’re an artist or legal work if you’re an attorney.
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5. Foreclosures
Look for foreclosure properties that require little or no down payment. Some lenders and government agencies will
let you buy a foreclosure with no down payment if your credit is good and they’re anxious to have the home
occupied, or if you have skills (carpentry, landscaping or even painting) that you can use to increase the home’s
value. Distressed properties – assume with little or no down to save foreclosure.
6. Low or No-Down Loans
Look for conventional loan programs such as VA or FHA that require little or nothing down. VA loans have helps
countless veterans get into their homes. There are often programs available to first time buyers or people who are
distressed (such as with Hurricane Katrina) that will help people get into a home with little money down. You
usually will have to qualify for the loan with the bank, though.
7. Find an Investment Partner for Equity Sharing
Look for an investment partner who’ll put up some or all of the cash in an equity-sharing partnership. You make
the monthly payments and the two of you split the eventual resale profits.
8. Wrap-Around Financing
Wrap-around financing is where you take over a seller’s Loan by doing a new Contract for Deed. Since this contract
is flexible and does not have to follow the old loan, you can ask the seller to carry not only the loan amount, but the
rest of the purchase price of the house, letting you get in with little or no money down.
9. Rent-to-Own or Lease-Option
This is really is one of the best ways to get into a home of your own when you can’t get a bank loan. Remember that
you may still have to get a loan down the line. If you have a lease-option for 5 years, at the end of that time, you will
need to purchase the house, so you can use the time to fix your credit, or use one of the other options that are
discussed in our book to purchase the house at that time. You can always try to negotiate another 5-year leaseoption if you need more time.
10. Government and Community Down-payment Programs
There are many community and non-profit organization programs out there to help people get into homes of their
own. Many of these do no require any money down.
There are some organizations and programs that will pay for some or all of the down payment for you. Generally
these are for lower to moderate-income individuals, but these days that includes a lot of people. You also usually
have to be able to qualify for an FHA loan (which is somewhat easier than a conventional bank loan). If you have
been unable to get into a home because you don’t have enough money for a down payment, then maybe one of
these programs will be for you.
Reprinted by Permission. Visit www.legalwiz.com or call 1-888-587-3253. The author, CEO of Legalwiz
Publications, is a nationally known attorney, author, entrepreneur and speaker. He has been practicing
law since 1990, and have been involved in over 700 transactions.
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February 2015
REHAB 101
Seal The Deal With Curb Appeal
by Pete Youngs
Curb appeal is one of the most important aspects of any real estate transaction. For me, it is the curb appeal that
defines everything about my deal. How much will I offer? How much will it take to rehab the property? How does
it compare to the surrounding living conditions? Simply stated, if the curb appeal is not very good, I know that I can
buy the property for a discounted price. And that’s what my business is all about. Buying distressed homes and then
raising the curb appeal through repairs to the property that not only raise curb appeal, but also
the value too. Here are several ways that I use to bring up the value of houses to maximize my profit at resale.
Painting The most important thing that I can do to improve curb appeal is to repaint the structure. A fresh new
coat of paint adds value right from the start. Remember, you can only make a first impression once. Also, this will
actually get you a higher appraisal than a house without a new paint job. You want to do the outside of an
investment property first, and particularly the front. Getting the most noticeable portion in its best shape first will
attract buyers immediately.
Pressure Washing You can’t get a buyer to see the interior if they are not first pleased with the exterior. If the
house is just dirty and the paint is in good shape, then a pressure washer can be used to clean up the exterior siding,
gutters, downspouts, deck, fences and driveway. I even clean my roofs with one. Use the washer to remove any
mold and mildew that can be seen on or near the house.
Remove Debris Pull your car in front of your property and take a hard look at what you see. This is going to be
what your potential buyer see’s too. If you see something that sticks out to you, fix it. Make sure there are no leaves
piled up on the grass. Once you have disposed of any debris in the yard, make sure the lawn is mowed nicely. A
fresh cut yard is a good sign that the rest of the home has been tended to correctly. Get rid of weeds and tools that
are cluttering up any areas that can be seen from the street.
Clean Windows and Gutters Don’t overlook windows or gutters that need to be cleaned. These are simple
tasks that do not cost any money to perform, while adding a crisp clean appearance to the home. You may also
want to remove any limbs touching the house or roof. This could scratch paint or cause roof leaks down the road.
Lawn Edging Another no-cost fix is to use a lawn edger around walkways, driveways and planter areas.
Lighting If your house may be looked at near dusk or dark, you want to make sure there is good light available. A
decorative yard lamp could be added and this will help the appearance and also add security at the same time. Some
people really like to line the driveway and walkway with little footlights. This adds great character to the house as
well as a beautiful soft light shimmering as it leads people to your door. An inexpensive way to add light would be
to add a fixture at your front door either overhead or a wall mounted light. These can be bought on any budget and
the choice of styles is huge.
Landscaping While we are touching the topic of landscape, let me mention a few things. Landscape is where
some people can make expensive mistakes. Because bushes, trees, and decorative plants can cost thousands in
landscape design, you do not want to go overboard. Not even on your own home. Keep it simple and you can keep
it cheap too. Trim all the bushes to the same size and shape if they are in a group. This will make them look
uniform as well as fancy. If I spend the money to plant any decorative trees, I get ones that will look decent all year
round. Most of the trees that I would add would be fruit bearing trees or something that will bloom brilliantlyduring
the year.
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Flowers Around your mailbox post is a good place for some colorful flowers. You may also have some flowerbeds
near your front entrance. This really looks good and can be done on a budget.
Trim the Bushes Just don’t blow your budget cause you could make a mistake investing in landscaping that
cost big dollars when for a few hundred, you can dress a yard up nicely. On a house I am doing this week, we
trimmed back the bushes that had grown too high and then made a very nice design around them using decorative
pine straw and wood chips. These items run about $3 a bale for the straw and about $5 a bag for decorative chips. It
really dressed up the front of the house and I am sure will help me sell faster.
It’s better to do a lot of little inexpensive things than it is to do one big expensive thing to add appeal.
Front Door Dress up the front door with a nice color of paint that will go well with the house but add flair. It’s
just like dressing up an old suit with a new tie! Go a little further and add a fancy decorative doorknob and knocker
set. Maybe even a brass kick plate. These items don’t cost much but can add drama to the house. Keep in mind that
if people don’t like the outside of the house then they will probably never see the inside. You may not realize
it, but bad curb appeal could be the reason that a house sits on the market for months.
Adding a Fountain One of the things that I saw that was great happened as I was talking to my neighbor. She had
been working on something in her yard for a couple of days so I wandered over to check it out. She had added a
fountain in the front of her home and it was really pretty. Her and her husband bought a kit for the project for
about $300. It had some nice stone structures and rocks that the water went through and they had dug out an area
the plastic liner was placed into. As the water trickled down the decorative stonework, the liner fit nicely into the
ground and had some varieties of fish swimming in it. I thought this was a great addition, adding curb appeal and
value, as well as a nice calming effect to sitting on the front porch in a rocker looking over the fountain. That was
some thing else that I noticed.
Front Porch The charm of the front porch decorated with flowers, wind chimes and candles gave me the idea that
I could dress up my houses for sale with this same décor to let a buyer feel that they could create the same charm if
they bought my house.
Fences If you have homes that have a lot of children living in the area as well as possible pet owners, you may
want to make sure that if the house has a fence, that you make sure it is secure. On the house I have for sale now,
we had to repair some areas of the fence. It’s a six-foot tall wooden fence and we replaced some of the boards that
had been knocked down or broken. This adds security to people with kids and pets. Also, it would have been a deal
killer for buyers to see the fence run down and tacky. We just put in a few new boards, sprayed it with bleach to
clean it up and then put a good water sealer on it to make it last. We also did the same steps to the deck in the back
to clean and preserve it. For a little over $100, we made two areas that may have driven a buyer away, look new and
inviting again.
Let’s summarize a few of the tips for making sure the curb appeal will seal the deal:
•
Pressure washing is a cheap way to clean up the entire exterior of any property.
•
Painting a fresh coat raises the value and appeal and is inexpensive.
•
No-cost items like cleaning windows, mowing lawns, raking leaves as well as trimming hedges, bushes, deweeding and trimming branches from the house.
•
Lighting up your home with outside lights and fancy lamps and such.
•
Landscaping ideas that only cost a small amount for a huge difference.
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•
Pond and fountains can be done to make a dramatic statement.
•
Repair fences and decks as well as using sealers to maintain a good look.
•
Make the place feel like home with front porch swings and rockers.
•
Decorate with flowers and candles...also plant fruit-bearing trees.
There are hundreds of ways to add curb appeal...
Use your imagination!
Reprinted by Permission. Visit www.peteyoungs.com, (770) 565-0973 or
Email: [email protected]
FINANCING
Owner Financing Dodd-Frank And The SAFE Act
by William Bronchick, Esq.
Editor’s Note: Please note that the article below was written in 2013. You should check to ascertain
whether or not any modifications have been made to the regulations. See page 14 for more info.
Owner Financing, Dodd-Frank and the SAFE Act… If you are selling properties to owner occupants and doing
selling financing, you ought to be aware of some comprehensive new regulations that have been in effect for a few
years, and a real zinger that goes into effect on January 10, 2014.
A few years ago, the “SAFE Act” was passed on the federal level, then was implemented on a state-by-state basis.
The SAFE Act basically required that you be a mortgage loan originator, or use a mortgage loan originator to sell
properties with owner financing. This means getting a loan application like a FNMA 1003, comply with Truth in
Lending, and have the buyer sign the ½” thick pile of other lender disclosures.
People panicked when the SAFE Act came out, and declared that seller financing was all but dead. I simply walked
down the hall of my office building and asked a mortgage guy if he could “originate” my seller financing loans. He
printed the stack of documents from his lender software and charged the buyer $400 as a loan origination fee. No
big deal, just a waste of good trees in my opinion.
The SAFE Act was later amended in my state (and many others) to allow you to do three or so deals a year without
having to do all this nonsense. The Act did not address using different entities every three deals, so, as a practical
matter, the issue was put to bed for us in Colorado. In other states, however, there were NO exemptions, meaning
unless you were selling your own principal residence, you had to be a mortgage loan originator, or use one in the
transaction, even for one deal.
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Technically, you can’t even ADVERTISE the seller-financing feature – the mortgage loan originator has to do so.
But, again, as a practical matter I don’t think the powers that be are searching through craigslist or looking for
“owner will finance” signs on houses, and the likely scenario is a “cases and desist” letter from your state agency,
giving you a chance to get licensed. No fines, no jail time.
Enter two corrupt, knucklehead politicians named Dodd and Frank. They managed to pass the Dodd-Frank
regulations that go into effect January 10, 2014. This one is a bit more complex and difficult to deal with, largely
because it is confusing and has regulations that have yet to be clarified.
We’ll start with who is exempt and who is not. If you are selling raw land, commercial property, or to a person who
is not going to a live in the property, you have nothing to worry about. If you are a person or a trust, you can do
one deal a year, so long as it’s not a “funky” loan, like a reverse amortization, etc.
I know, you’re thinking, “I’ll use different land trusts for each property,” but that may end up blowing up in your
face if you get caught. Admittedly, however, nothing clearly in the Dodd-Frank regulations address this. We
certainly are anticipating a “controlled group” definition to come out soon. One federal regulator commented that
the rule was 25% common ownership, but nothing in the regs back that up.
If you are a corporate entity, then you can do up to three deals a year, if the deals meet the following three criteria:
1. There’s no balloon in the note (meaning it must be fully-amortizing)
2. The interest rate is fixed for at least five years, and
3. You “qualify” your buyer.
Of course, these geniuses did not lay out what the qualifications are supposed to be, except for the debt-to-income
ratio (43%) In my opinion, you’d be a fool if you sold a property and did not check the buyer’s credit, verify their
income (with tax returns and employment), and make sure their gross income is at least THREE times their total
monthly debt payments, including the mortgage. Personally, I’ve always done this and I don’t object to making this
a rule, other than the fact that there are already too many regulations in this Country. On a practical note, if you are
selling to a tenant or lease/option tenant, you can use their rental history as strong proof of their ability to repay.
Again, it is not clear if you form a new LLC or corporation for every three deals you can get around all of this, but
nobody wants to be the “test case.” Also, if you want to have a balloon after five years, simply pop the interest rate
up so it hurts the buyer enough for him to want to refinance and pay you off anyway (note: you can only increase
the rate 2% a year for a maximum of 6% above the original rate).
So, effectively you can do three deals in an entity, and one deal in a trust or your own name if you are strictly
following the law. A second entity owned by your IRA and a third owned by your spouse would add six more deals,
in theory.
If you buy and sell with owner financing more than 10 times a year, you will likely need to become a licensed
mortgage loan originator or hire one on staff, which may not be a bad idea, just a bit of a hassle because the slew of
other nit-picky regulations that come with it.
Also, when you are beyond the four deal limit, you must not only prove ability to repay, you must DOCUMENT it.
Tax returns, W-2’s, bank statements – the works. Thus, if you have a self-employed person who looks broke on
paper but has 30% cash to put down, you really can’t document his ability to repay (suggestion – lease/option for 2
years, then convert to an owner-carry sale).
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Are the Feds going to be chasing down real estate investors for this? No, the SAFE Act already covers that at the
state level. What the Dodd-Frank Act does is provide a buyer who is being foreclosed or evicted with a
counterclaim recouping all their interest paid, plus their down payment, attorney’s fees, and court costs.
I always recommend that people settle out of court when a buyer defaults, using the “cash for keys” method. But
on the off chance that they aren’t paying you and can still afford a lawyer, then you will be facing a fight. One
investor I met in Houston recently commented, “If that happens, I’ll just give them the property”. Because he was
dealing in $60k homes, that would be a simple solution. It’s really rare that you’d end up in court over this Dodd
Frank issue anyway, but what keeps me up at night is the slimy “consumer protection” lawyer who puts out an ad
that says, “Have you bought a house with owner financing? Call 1-800-BAD-LOAN”. Yikes! Even so, if you do
every deal in a separate LLC, then you are limited in exposure to the value of the equity in the home. If you bought
the property subject-to the existing loan with little or no equity, then all you really risk losing is the cash flow from
the deal.
So, to sum it up:
You can do one deal per year as a natural person or trust, three deals per year in an entity without being licensed
under Dodd-Frank.
HOWEVER… if your state has no exemption under the SAFE Act, you still have to use a licensed mortgage loan
originator on EVERY deal.
In theory, if you are married and you both have IRAs, then that’s 4 + 4 + 3 + 3 = 14 deals a year in various entities.
That’s a lot of leeway without having to get licensed.
Remember, too, this is only a summary of the Dodd-Frank and SAFE Acts. You should consult with a qualified
attorney in your state before proceeding. Remember there’s state law disclosures, RESPA, Truth-in-Lending, and
servicing rules to worry about, too!
Reprinted by Permission. Visit www.legalwiz.com or call 1-888-587-3253. The author, CEO of Legalwiz
Publications, is a nationally known attorney, author, entrepreneur and speaker. He has been practicing
law since 1990, and has been involved in over 700 transactions.
Joke Courtesy of the Diversified Investors Group. November 2014 Newsletter.
Visit www.digonline.org
A broker was dismayed when a brand new real estate office much like his own opened up next
door and erected a huge sign which read “BEST AGENTS.”
He was horrified when another competitor opened up on his right, and announced its arrival with
an even larger sign, reading, “LOWEST COMMISSIONS.”
The broker panicked, until he got an idea. He put the biggest sign of all over his own real estate
office. It read: “MAIN ENTRANCE.”
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FINANCING
Dodd-Frank 2014 Part 1: New Federal Rules Affecting Consumer Mortgage
Loan Applications
by Bradley S. Dornish, Esq. Posted on April 19, 2014
Editor’s Note: if you are planning to sell a house to an owner-occupant with seller
financing…beware! The article below explains when you would have to comply
with the new regulations.
The Dodd-Frank Wall Street Reform and Consumer Protection Act became law in July of 2010. However, the
process of changing the consumer mortgage loan process in America dictated by Dodd-Frank is not yet complete.
Two new sets of regulations promulgated by the Consumer Financial Protection Bureau went into effect on January
10, 2014. The first, regulatory changes in the loan application process, affect all new consumer mortgage loan
applications, including seller financing consumer mortgage loans.
The second, regulatory changes in mortgage loan servicing and loss mitigation/loan modification processes, affect
all outstanding consumer mortgage loans, regardless of when the loan was obtained. The second set of regulations
will be the subject of the second part of this article. Note that both sets of regulations apply only to consumer
credit mortgage loans secured by the borrower’s family’s dwelling. These rules do not apply to loans to investors
for the purchase or refinance of non-owner occupied investment real estate.
The loan application changes, applicable to loans applied for on or after January 10, 2014, require banks and other
mortgage lenders to make specific, detailed determinations of a borrower’s “ability to repay” the loan, which I will
refer to as “ATR.”
However, the ATR requirements do not apply to every consumer mortgage loan. Home equity lines of credit
subject to 12 C.F.R. §1026.40, mortgages secured by a timeshare, reverse mortgages under 12 C.F.R. §1026.33,
bridge loans and construction only loans with terms of a year or less, and the construction phase up to a year of
construction to permanent loans are all exempt from ATR requirements.
There are also certain types of loans which are subject to ATR requirements generally, but not to the very specific
bases for making the ATR determination. Those loans include non-standard adjustable rate, interest only and
negative amortization loans being refinanced by the existing lender into standard mortgage loans, and certain
mortgage loans which meet the definition of a “Qualified Mortgage” under the rules.
“Qualified Mortgages must have regular periodic payments without negative amortization, deferment of repayment
of principal or balloon payments. They must have terms of 30 years or under, and the lender must not charge more
in total fees and points than three percent for loans of $100,000.00 or more, with slightly higher fees allowed for
smaller loans.
Creditors on Qualified Mortgages still must calculate the maximum monthly payment possible under the loan terms
in its first five years, must verify the consumer’s income and assets other than the property, current debts, child
support and alimony payments before closing. The loan payment added to the known debt payments must not
exceed 43% of the borrower’s monthly income.
Right now, many residential lenders are limiting their lending to only Qualified Mortgage Loans, because those loans
are presumed to comply with the ATR requirements. It is anticipated that more lenders will loan outside the
Qualified Mortgage safe harbor after more guidance is received from the Consumer Financial Protection Bureau on
the specific bases for determination of ATR required for such loans.
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The current regulations provide that a lender must consider the following specific items in determining the consumer’s
ability to repay a non- qualified loan:
a) The consumer’s current or “reasonably expected” income, and assets not including the value of the land and home
being mortgaged, and if income is from employment, the “status” of that employment. (Lenders are seeking further
guidance now on what the quoted terms in this section really mean, because guessing at their meaning, and being wrong
could be very expensive for the unlucky lender);
b) The monthly payment on the loan the lender plans to make, and the monthly payment on any simultaneous loan the
lender knows or has reason to know will be made, together with the consumer’s anticipated monthly payment for
“mortgage related obligations” including property taxes, property insurance premiums, condominium, cooperative or
homeowners’ association fees, ground rents and leasehold payments;
c) The consumer’s current debt obligations, alimony and child support payment obligations, and the consumer’s credit
history, score and report;
d) Based on the above, the lender must analyze the consumer’s debt to income ratio and residual income after payment
of all debts.
The information obtained by the debtor to satisfy the above items must be from “reasonably reliable third party
records,” which are defined to be documents prepared or reviewed by someone OTHER THAN the consumer, the
creditor, the mortgage broker or any of their agents. Third party records also include copies of filed tax returns, creditors’
records of the consumer’s credit accounts, forms W-2, 1099, payroll or military earnings statements, financial institution
records, government records and receipts from check cashing or funds transfer services.
Anecdotally, we have heard that these requirements have slowed the loan application process. It remains to be seen
whether this slowdown in the process will remain a permanent result of the regulations, or is part of the learning curve
for lenders in complying with the new regulations. For the time being, however, borrowers particularly on non- qualified
consumer mortgage loans, should be prepared to wait longer for approval. The lender also needs the details of all
property related expense to make a final decision on the loan, so the settlement company can’t wait for loan approval
before ordering tax information, and consumers have to get their property insurance in place before final loan approval.
If you are a real estate investor who plans to sell homes to owner-occupant buyers, taking back seller
financing on those homes, note that the above rules for ability to repay also apply to you. There are only
two exemptions available under the rules to allow seller financing by someone who is not a licensed loan
originator:
The first exemption is for an individual natural person, not an entity, the estate of an individual, or a regular trust,
not a land trust or business trust. That exemption allows a qualified seller to sell only one property in a year to a
consumer, with financing which does not include negative amortization, and has a fixed rate or five year adjustable
rate. A balloon payment is not prohibited for these loans.
The second exemption allows an entity not a licensed loan originator to seller finance up to three properties per
year, but the seller/lender must follow the specific bases for determining ATR, just like a lender, and the loan must
be fully amortizing, with no balloon payments allowed. These rules apply equally to mortgage financing and to
installment land contract financing to consumers, but again, do not apply to loans to other investors on their nonowner occupied investment properties. Lease/options do not require ATR as long as they are really leases, with
only an option for the consumer to buy the property with financing for the purchase presumably to be obtained
from a lender under ATR requirements. Don’t risk calling your seller financing a lease/option to avoid the ATR
requirements. If the CFPB determines it is really a finance plan and not an option, you will lose more than you can
afford to in fines and penalties.
Reprinted by Permission. The author is a licensed Pennsylvania attorney, title insurance agent and real estate
instructor in Pennsylvania. ©2014 Dornish Law Offices, PC and Dornish Settlement Services, LLC. All Rights
Reserved. Visit www.dornish.net or email [email protected]
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DEALMAKING
Owner Financing Deal
by Tammy, Tatiana and Nicholas Boyd
CFRI Member (since 2006) Tammy Boyd - full-time investor and her homeschooled children Tatiana, age12 and
Nicholas, age9 presented their purchase of four Owner Financed Townhouses for September’s Deal of the Month.
The Boyd’s were overseas visiting family when Tammy received an email from Chris McClatchy’s “Real Wealth”
deal referrals.
This was an owner financed deal and very similar numbers to the ones that Tatiana and Nicholas buy when they are
playing cash flow 101. Tammy thought it would be interesting to approach them with an actual deal and see what
they thought. First, Nicholas woke and... Tammy:
Nic, This deal came in my email last night and I was wondering what you think about it.
Nic: Ears perking up “what’s the deal mom?”
Tammy: Townhouse, $55,000 and rents for $595 per month. The seller wants $5,000 down and will owner finance
$50,000. Who do you think should buy this deal?
Nic: Mom, I would buy it!
Tammy: There are a total of four townhouses Nic!
Nic: Tatiana, how about you and I put our money together and buy all four of these together?
Contracts were written and sent immediately. This is their first deal on their own. Past real estate experience has
been as lenders and decision makers on past flips and a buy & hold multi-family portfolio. They have cashed out
their share of the multi-family to purchase these townhouses.
Sellers Motivation: Owner is selling off smaller properties in their portfolio with owner
Purchase Price $55,000
Down Payment $5,000
Monthly Payment $250/mo
$50,000 Financed 6% Interest
Terms: No payoff before 10 years. After 10 years will finance fully amortized $50,000 for 30 years
6% (Potential 40 years of financing)
Rent $595/mo.
Why this Deal? We all have different portfolio objectives and this deal is not for every investor. This deal didn’t fit
Tammy’s portfolio objectives, because she purchases multi-family buy and holds that cash flow minimum $200 per
door. For Tatiana and Nicholas who are so young, this was a perfect deal.
Advantages:
1. Owner financing: Too young to obtain traditional financing
2. Low down-payment
3. Appreciation: Rents and building values will increase
4. Education: Priceless An investment in knowledge pays the best interest! ~Benjamin Franklin
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They will learn how to:
- Make money work for them
- Build a team
- Create jobs: Employ people to stimulate the economy
-Market and advertise
-How owner financing works, so they can do it in the future
-The power of leveraging money
-Responsibility
-Positive spending habits
-How to Maintain Good Credit and reputation
-And much more.
5. Multiple exit strategies: Retirement , sell or re-sell with Owner financing.
An education like this is not available in any school.
Reprinted Courtesy of the Central Florida Realty Investors. Visit www.CFRI.net
From the October 2014 issue of the CFRI Newsletter.
TAXES
IRS Taxes On Short Sale Of Investment Property
by Michael Plaks, E.A. Posted November 8, 2011
Q. Two months ago I did the closing on the short sale of an investment property I used to own. Prior to
sale of the property, my net worth might have been about $10K in assets & $20K in a 401K account. The
property was sold short by $110K.
My question concerns the tax liability on this. I think I was insolvent at the time of the closing, meaning
that I would owe the IRS no taxes for this year, more than my total assets value.
Right after the closing, I started investing most of my cash in the stock market and I’ve made a few
thousand dollars in profits. Are these post-short-sale winnings going to affect my insolvency for the sale of
the property? I think I read somewhere that one needs to prove insolvency right before the short sale took
place. Is that so?
A. 1. The tax liability on short sale starts with one fundamental question: what was your gain (or loss) on the short
sale itself. This question has nothing to do with $110k shortage. It has to do with what you paid for the property
originally, including original loan (basis of the property), depreciation of this property if you took any, closing costs,
and the selling price negotiated at the short sale (reported on form 1099-S).
Example: Selling price $300k minus $20k closing costs minus initial purchase price $250k plus depreciation $30k =
$60k taxable gain. What was owed on the property does not matter. What the property was worth on the open
market does not matter.
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2. This taxable gain could be large, could be zero or could be a loss. No way to tell without doing complete
calculation. And my example was over-simplified, so I will strongly suggest you hire somebody who specializes in
real estate and knows the small but important details of this calculation. The gain is taxable, and the loss is
deductible on your 2011 return.
3. Insolvency has to do with a totally different issue, tax-wise: cancellation of debt. To you, it looks like part of the
same transaction. To the IRS, it’s an entirely new game.
Cancellation of debt happens when (and if) your lender decides to not pursue you for the unpaid balance of the
loan. I’m not sure if you realized this, but the lender most likely retained the right to demand the unpaid balance
from you, even though you do not own the property anymore. Check with your local real estate attorney to be sure.
But, it’s safe to assume that, unless the lender specifically released you from the debt in writing, they can still come
after you. If so, you debt is not cancelled, and there is no tax issue, and no need to discuss insolvency.
4. Provided that your lender did release you from debt, either during the short sale or at some later point, the lender
will issue form 1099-C, cancellation of debt. It will be issued whenever the cancellation becomes official. One way
to avoid paying tax on this cancelled debt is to claim insolvency.
If you receive a 1099-C tomorrow, then tomorrow is the day to calculate insolvency. If all your debts as of
tomorrow exceed the value of all your assets as of tomorrow – you’re insolvent and off the hook as far as taxes on
cancelled debt.
5. Important to keep in mind: taxes on cancellation of debt are in addition to taxes on the short sale. These are two
separate calculations, often done in two separate tax years. One does not cancel the other and does not duplicate the
other.
6. Finally, make sure your concept of insolvency is correct. If, per your example, your net worth is $10k in assets
plus $20k in 401k – you have a positive $30k net worth, and you are NOT insolvent. Insolvent means negative net
worth. Before the short sale, you could subtract $110k and arrive to negative net worth.
However, insolvency will be figured on the day the lender forgives your debt (if ever) and not on the day of short
sale. The forgiven debt may end up being the same $110k or some other number – no way to predict. That number
will be the one to use for insolvency calculation.
Reprinted courtesy of Michael Plaks. Visit www.MichaelPlaks.com The information and opinions presented in the
above article are general in nature, not intended to address specific tax situation and/or to substitute for
professional consultation, and shall not be considered legal advice. Email: [email protected] or call 713721-3321 The author is a Houston-based accountant, working exclusively with real estate investors. He is a federally
licensed Enrolled Agent who can represent his clients in their dealings with the IRS.
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BEGINNER’S CORNER: MARKETING SUGGESTIONS
Q&A: Inexpensive Marketing
by Mike Jacka
Q: I’m just starting my marketing and I really know where to start. My question is, what would you
recommend as far as signs, business cards, advertisements, websites and post cards are concerned so I
can get the most out of my marketing budget?
A: I assume that you are more budget minded so I’m going to put together a little marketing campaign on a
shoestring budget for you. The first thing you are going to want to do is acquire some business cards for your real
estate business with your contact information, business message, and your website. The best deal on business cards
that I know of is vistaprint.com where you can get 250 business cards for free (sans shipping) and they are solid
cards that get the job done. Good, solid cards, none the wiser, just pay shipping.
Going lean, it may be better to focus less on paper, mailings, and signs and look to alternatives that build off what
you already have (at this point you have your knowledge, personality, and business cards).
I would recommend getting a website that you can address on your business card and use your fantastic personality
to encourage potential business to visit. Here at Real Estate Promo we have designed a sound website that we have
been offering to our local REIA. For a preview of the site check out www.mnbuyers.com . We are offering these
sites at $9.95 a month which offers automatic email notifications, foreclosure forms, and a place to list your leads
(which is uplinked to larger property lead lists for greater exposure).
For more information on how to get your own site, reply to this newsletter and I can fill you in on what you want to
know and get you set up.
At this point you’re looking at about $20 in marketing for a month’s worth of business cards and the site. It will be
a great start and it leaves you some extra marketing funds to test the waters of bandit signs, mailing lists, and what
have you.
My recommendation would be to find the local paper in the target area of where you are trying acquire properties
and see what you can do about acquiring some advertising space. It is possible to get a discount by using a little
creativity such as having a check ready to go (at a lower price) and an ad in the paper’s hand. So when it comes time
for them to run their paper and they have extra space, they see your check, your ad, and something is better than
nothing.
A key thing to remember in advertising in the paper is that a smaller consistent ad that is run over time will
outperform an ad that is bigger and flashier, but only shown once.
Basically, the formula I’ve laid out looks like this: Business Cards + Web-Sites + Area Specific Newspaper
Advertisements = People calling you! The ones that will benefit most from this formula are the ones who find the
best synergy between these three and develop an outstanding follow up system.
Reprinted by Permission. The author is President of Real Estate Promo and the Minnesota Real Estate Investors
Association. RealEstatePromo.com does not give legal, tax, economic, or investment advice. Real Estate Promo
disclaims all liability for the action or inaction taken or not taken as a result of communications from or to its
members, officers, directors, employees and contractors. Each person should consult their own counsel, accountant
and other advisors as to legal, tax, economic, investment, and related matters concerning Real Estate and other
investments. Copyright © 2002-2010 RealEstatePromo.com a Real Estate Investment Group. All rights reserved
Volume 18 Issue 2
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MOTIVATION
18 Rules For Success In The New Year
by Phyllis Rockower
1. Success starts with the right attitude.
Whatever you believe about your success ability is true. If you think you can't do it, you are right. If you think you
can, you will also be right.
2. Learn from mistakes.
You learn more from your failures than your successes so rejoice in failure. Look at them as learning experiences.
3. Eliminate fear.
False sense appearing real - feel the fear and do it anyway. Change is always uncomfortable. What is familiar feels
good. Something new is scary. The way to eliminate fear is to gain more knowledge and then take action.
4. Don't give up.
Colonel Sanders got rejected by many people.
5. Aim high -unrealistic goals.
If you set your goals too low you will never grow out of your comfort level.
6. You only fail if you quit.
Being persistent is one of the most important attributes to success. Look at it as a numbers game. The more
rejections you get, the closer you are to a yes.
7. Take responsibility for your actions-nwa (no whining allowed)
.
8. Make lemonade.
It’s not what happens to you that determines your success level. It’s what you do with what life deals you.
9. Continue to learn.
Read self-improve books or listen to CDs 30 minutes a day. My car is my university on wheels. Seminars - become a
seminar junky. If you think education is expensive, try ignorance. One mistake caused by ignorancecan be costly!
10. Don't be afraid to fail.
As Frank Sinatra said, “that's life. Pick yourself up, brush yourself off and get back in the game."
11. Focus on your strengths.
Don't focus on your weaknesses. Everyone has them and they areprobably worse than yours.
12. Don't listen to the negative voice inside your head.
Everyone has that little voice that tells them all the reasons why it can't bedone. Smack yourself on the side of the
head and tell the voice to shut up.
13. Hang out with winners - stay away from losers.
You are only going to be as successful as the people you surround yourself with. Learn to network up - not down.
Try to spend time with people who know more than you do and who make more money than you do. Losers love
to bring you down to their level by disparaging you.
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14. Set goals.
Those who fail to plan, plan to fail. Write down your goals and make a specific plan as to how you are going to
achieve them. Then ask yourself what you have to learn & who you need to contact in order to further your
goals.
15. Believe in yourself.
Stay positive and keep your mind free of negative thoughts. It is like a garden. If you do not plant flowers, weeds
will grow.
16. Be an opportunist.
Think about how you can use situations you find yourself in to further your goals.
17. Take action.
Just do it. If you wait until you have everything perfect, you will never get started.
18. Get a mentor. Cut your learning curve and to avoid costly mistakes and to motivate you.
The author is the President and Founder of REIC of LA. Reprinted by Permission from the R.E.I.C. of
L.A. News. March 2013. Published by the Real Estate Investors Club of Los Angeles. Phone: 310-792-6404
Visit www.realestateclubla.com
BEGINNER’S CORNER
Seven Pitfalls You Can Avoid In Real Estate Investing
by Stephen Ruback
Nothing on this planet is inherently safe. Real Estate investing can produce both great profit and great losses.
Your job, if you choose to accept it, is to make profits, often where others do not. Pitfalls abound for the unwary.
You cannot learn too much about what not to do. Here are some things to keep in mind:
Know the “comps” in your area.
When you pay too much, your profit is doomed from the start. How much should the property actually sell for in
top condition? This is a moving number, depending on the local market conditions. Certainly it is a guess, but can
be derived with useable accuracy by an experienced agent with diligent research. Some sort of discount for
anticipated market changes may be in order.
Avoid emotional involvement in the property, It is all about the numbers, usability and condition. Accurate
estimates of rehab costs are essential to maintain a profit. A thorough inspection will document the actual
condition.
You must have an exit plan.
That calls for several alternatives to complete the deal. What if it does not sell when you are ready? Are you
prepared to rent it? Rehab for rentals can be somewhat different than for resale. What if your finance deal changes?
What if the market changes? Rentals are up and buyers are down, right now.
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Excessive repair costs can eat your profit.
That means you need to know what repairs are needed and how much they cost. Every house needs repairs. Your
job is to arrange for the repairs at a wholesale cost, not retail. You can buy parts and materials from wholesale
suppliers, if you have an account.
Labor needs to be high quality and low cost. Successful investors develop a dependable team of knowledgeable
technicians who focus more on the work instead of expensive marketing.
Ill-considered repairs will increase your cost dramatically or kill your exit plan.
Redoing the interior surfaces before repairing all plumbing and electrical exchanges will require lots of rehab.
Adding a central HVAC system in a place with inadequate access will bite you in the end. Produce proper drainage
around the property before any other outside improvements.
If you fix foundation problems, be sure to fix the causes first. Foundation companies often just put in piers, but
ignore the actual causes of the problem.
If you are going to advertise granite countertops, don’t try to get by with tile – it is not the same. Never put new
shingles over old ones. Fix all leaks before redoing the inside. Replace old outdated appliances, plumbing and
electrical systems. The list is endless, so consulting with an experienced inspector as to extent and order of repairs
can avoid serious problems.
Avoid Ugly surprises
Countless would-be investors have started their rehab efforts, to find huge surprises after they invested thousands in
repairs. Know the typical life expectancy of all major house components. Nothing is as simple as it appears on the
outside. Most old systems unravel at least one stage beyond the intended repairs. A good, thorough inspection is
your best defense.
You cannot do it all.
When you spread yourself too thin, it will cost you. Your job is to envision the potentials and coordinate the efforts
toward the final goal. Any other efforts will dilute your focus and cost you in the long run. Keeping the vision on
track and coordinating all the necessary activities is a full time job.
Beware of doing it yourself, or on the cheap.
Special jobs require special tools and talents. A good technician is well worth his hire when he provides reliable
work in an efficient manner. Sure, you might save a little money by doing some things yourself, but remember to
pay yourself for the effort – if you have the skills and tools – otherwise you are working for free.
Time is also of the essence, especially when you are paying for borrowed financing. Focus on value,
instead of price. The bottom line, as an investment: it is all about the numbers. Every property needs an inspection.
Reprinted by Permission. Stephen Ruback is a licensed Professional Inspector; member of TAREI, and HAR;
approved by TREC as a Professional Home Inspection Instructor. In addition, he has earned a BS in
engineering from Trinity University, is an author of several books and teaches a variety of self-empowerment
courses. For more information, call 832-489-1071, visit www.sruback.com or email [email protected]
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February 2015
LEGAL CONCERNS
What Can A Good Real Estate Attorney Do For You?
by William Bronchick, Esq.
Real estate goes up and own, but it essentially doesn’t matter to real estate attorneys whether or not this industry is
booming. Since it is obvious that shelter is one of the fundamentals for livelihood, there exist property sellers and
property buyers at all times and in every case making real estate attorneys to be always in high demand. There are
various methods how the real estate attorneys are showing their expertise. Below are a few of the services the
attorney’s of real estate, provide you with:
1) Property Dispute: A common scenario where real estate attorneys are involved is during a property dispute.
They help in getting disputes concerning property being resolved by means of litigation (commonly by what’s
known as a “quiet title” suit). They also help in selling of disputed properties in some cases so that the money
received from the same could be used for various settlements among people involved.
2) Tenancy disputes: Any dispute concerning landlords and tenants is solved by a good real estate attorney.
3) Property Settlements in cases of death: The properties of the deceased are commonly handled by real estate
attorneys. In these cases the properties are sold off to that the heir’s accounts could be settled.
4) Divorce Settlements: These attorneys assist property disputes in general cases of divorce especially when the
owners are joint.
5) No broker: When people are not very comfortable with having a broker to deal or sell their property, they
entrust such real estate responsibility to a real estate attorney. A few attorneys take such tasks and work to complete
a transaction where no broker was involved in bringing together the seller and buyer.
6) Working as Advisors/Consultants: Quite many attorneys work for several real estate investors. The real estate
investors think it as a good option to hire an attorney as these attorneys can often have smooth transactions done
for the investor. A real estate attorney would do it appropriately and correctly in a much quicker and professional
way. Time is always short for a real estate investor due to which he would get more time as the attorney would
handle good deals.
7) Information provider: Real estate investors utilize real estate attorneys as richer information source particularly
on details about property deals and sales; those which are results of settlement procedures or disputes. The
investors gain the benefit of knowing information earlier compared to others. Good deals are frequently availed in
this manner.
8) Handling Foreclosures: When times are bad, attorneys often switch gears from closings to handling
foreclosures for lenders.
Whether or not the real estate industry booms or busts, good real estate attorneys will always have job security, so
find a good one and stick with him (her)!
Reprinted by Permission. Visit www.legalwiz.com or call 1-888-587-3253. The author, CEO of Legalwiz
Publications, is a nationally known attorney, author, entrepreneur and speaker. He has been practicing law since
1990, and has been involved in over 700 transactions.
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ASSET PROTECTION: LAND TRUSTS 101
What a Land Trust Can Do For You.
by Vena Jones-Cox
The main benefit of a Land Trust is that, assuming you are not your own Trustee, no one can tell simply by looking
in the public record what you own. This is excellent lawsuit avoidance: attorneys will not work so hard on a case
where the defendant apparently owns nothing as on a case where the defendant is clearly a millionaire.
Furthermore, when a lawyer looks up the ownership of particular property due to a slip-and-fall or other nuisance
case they’d like to file, seeing that the owner is a trustee discouraged them for the simple reason that most attorneys
don’t understand land trusts at all. So when they see a trustee, they may assume that the property is held in a more
complicated estate planning or charitable trust, both of which are difficult to “break” for the purpose of satisfying a
judgment.
Another use of the Land Trust is in obscuring the transfer of title. It’s commonly thought that land trusts
“avoid” the due-on-sale clause in mortgages, because of an exception in the Garn-St. Germaine depository act that
reads:
“A transfer to an inter vivos [living] trust in which the borrower is and remains a Beneficiary and which
does not relate to a transfer of rights of occupancy in the property”
In other words, banks can’t call loans due just because their borrower moves them into a trust. However, if you read
the whole sentence (which many real estate gurus apparently haven’t), the bank can’t call the loan due UNTIL the
borrower transfers the beneficial interest and/or rights of occupancy in the property—both of which happen when
you buy a property subject to an existing loan.
The Land Trust—a type of living trust—doesn’t “short circuit” the due on sale clause, but it can sort of avoid
questions around it because the second transfer—that of the beneficial interest—takes place outside the public
record. In a typical subject to deal, the public transfer to the trust by the borrower happens first, followed by the
private transfer of the beneficial interest, like so:
Step 1: The Seller transfers the property via a deed to the land trust.
Step 2: At the same time, the seller executes a Trust Agreement naming the seller as Beneficiary.
Step 3: You purchase the beneficial interest in the trust from the seller.
Viola! You’re the owner!
Because the transfer of Beneficial Interest is unrecorded, and since you aren’t going to tell them that the seller no
longer lives in the property, the lender has no reason to believe that the due-on-sale clause has been violated. If they
even checked. Which they probably won’t.
Nonetheless, if a bank ever DID subpoena the trust documents, the transfer would come to light and it would be
clear that the due-on-sale clause had been violated. So, while a trust can hide from the due-on-sale clause, it doesn’t
really “defeat” it.
You can also use a Land Trust to assure clear title in a delayed closing, such as in a sandwich lease, a land
contract, or any time that you want to guarantee that the seller can perform. In this case, the seller transfers the
property to a Trustee and sets forth in the Trust Agreement the conditions under which the Beneficial Interest in to
be transferred to the Buyer. This essentially instructs the Trustee - the real owner - to convey the Beneficial Interest
to you when you perform as required.
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One of the best uses of this function of a trust is to protect the SELLER in a subject to from YOUR nonperformance; much like putting a deed into escrow, you can command the trustee to sign a deed back to the buyer
under certain circumstances.
What A Land Trust Cannot Do.
Rumors abound in the investment world about the magical powers of a Land Trust. I’ve heard claims that land
trusts can’t be sued, that if sued they’re judgment proof, that they keep even a court from learning what else you
own other than the property in the trust. The truth is:
1. Having a property in a land trust will NOT make the property judgment proof. If a tenant sues you for
lead poisoning contracted while living in the property, the plaintiff’s attorney will simply drag the owner of record-the trustee--into court and, under oath, ask him who the Beneficiaries are, and will subpoena the Trust Agreement.
Then, if a judgment is issued against you, the attorney will attach the property in question as well as any other
properties covered by the trust agreement–and possibly every other property you own.
2. Having a property in a land trust will NOT protect your personal assets. Once the beneficiary is known ,
the same attorney will drag YOU into court and, under oath, ask you what else you own. Anything else-- estate,
personal property, anything--is then up for grabs.
3. An 11th hour transfer of the Beneficial Interest will NOT protect you. If you plan to transfer the Beneficial
Interest to Uncle Joe just before swearing in court, “so help me God”, God help you. This is a fraudulent
conveyance, meant to keep your assets away from creditors. If discovered, it will be reversed and you may get to
spend some time in the county lock-up.
4. Having a Land Trust is NOT tax planning! As the Beneficiary, you must claim the rents, proceeds, etc as
income. You can’t get away with not paying just because your name’s not on the title. In fact, there’s been a huge
crackdown in recent years on people who use trusts for this purpose and on the people who sell trust packages to
them. Both are going to federal prison in droves.
5. The Trustee is NOT immune from liability in regards to the property. Anything that the Trustee actively
does in relation to the property is actionable; in addition, the Trustee will almost always be named in any suit
regarding the property. Even if he was acting under the direction of the Beneficiary, it may cost him a grand or two
to get the case dismissed. Most trust agreements specifically state that the Beneficiary will pay the legal fees of the
Trustee in such an instance.
Commonly Asked Questions About Land Trusts.
Q: Can I do my own?
A: Yes, AFTER the first time! Please have a knowledgeable attorney set up the first one you do. The documentation
is expensive and extensive, and messing it up can really rock your world come selling or refinancing time. I’ve had at
least one experience where, thanks to an incorrectly titled land trust, I was delayed 2 weeks in selling a property and
ultimately ended up having to pay to have a corrective deed recorded.
Q: Should I start buying in trusts now, or when I have a bunch of properties?
A: Start now. Transferring a bunch of properties to a Trustee later is a dead giveaway.
Q: Should I have a different Land Trust for each property?
A: Why not? After the first one, they’re free; they don’t require special bookkeeping or tax preparation. The only
reason NOT to have multiple trusts is if you live in a state where trusts are subject to a high annual tax by the state;
in this case you’ll have to weigh the cost of paying the tax against the privacy protection benefits.
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Q: What happens when I want to refinance the property?
A: The loan will be made on the basis of YOUR credit. However, the lender will either make you take the property
OUT of the trust or make the Trustee sign on the mortgage. They should NOT require the trustee to sign on the
note, unless they are using his or her ability to repay as a criteria for the loan.
Q: What happens when I want to sell my property?
A: The trustee will need to sign the deed in order for the sale to happen. With a power of attorney from your
trustee, you can attend the closing and sign all other documents. Of course, the other option is that you can simply
sell the beneficial interest in the land trust, avoiding the closing.
Copyrighted by Vena Jones-Cox. Reprinted by Permission. National Speaker Vena Jones-Cox has appeared at past
MREIA meetings and has been a full-time real estate investor since 1989. She focuses on high-profit, low-hassle
strategies that leave her the time and freedom to enjoy financial independence. All told, she’s bought over 600
properties. Vena is also the host of public radio’s “Real Life Real Estate Investing” (Wednesdays at 5 pm est at
wnku.org), a live weekly program that addresses all aspects of real estate investing. She is past president of
Cincinnati REIA, Ohio. Email: [email protected] or visit www.regoddess.com
COMMERCIAL REAL ESTATE
Successful Apartment Ownership Means Having Proper Management
by David Lindahl
Blog Posted on November 4, 2009
Because a professional team is so important to your success as a real estate investor and, more specifically as an
apartment owner, I would like to take the opportunity to discuss how to find and use these team members in a little
more detail.
Just to recap, some of the essential team members that you’ll want to have in place include:
· Bird dogs
· A real estate agent or agents
· A commercial mortgage broker
· A banker (one or more)
· A title company or closing attorney
· A real estate attorney · Private lenders
· An SEC attorney (if part of your business includes securing private funding)
· An asset protection attorney
· An accountant or CPA
· Property management companies
· Contractors
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Property managers are the epitome of delegation when it comes to owning apartments. A rare few among real estate
investors actually enjoy the property management side of the business but most would prefer to have someone else
do it. The larger the number of units, the more important it becomes for you to seek professional property
management.
Among the many services they provide are:
· Tenant screening and selection
· Rent collection
· Call center for tenant questions and problems
· Marketing/advertising for new tenants
· Arrangement of property cleaning and minor maintenance
· Processing of evictions (as needed)
Would you want to have to handle all of that, especially if you owned a building with 20 or more units? Probably
not. Property managers charge a percentage of the gross rents (usually 5-10%) for their services and, when done
well, it is worth every penny because you can truly be a business owner, rather than owner, manager, troubleshooter,
and shoulder to cry on, all at the same time.
Property managers come in a variety of shapes and sizes and who you choose will largely depend upon the type of
building you own (i.e. the number of units). Smaller buildings can usually suffice with part-time managers, such as
realtors who do management on the side for extra income. Just make sure they provide the full complement of
services you’d come to expect, so it doesn’t end up creating more work for you later.
Larger buildings are more time and effort intensive for a property manager.
I suggest one of two things: an on-site manager or a fully staffed management company.
▪
An on-site manager is there to collect rents, be a resource for other tenants, arrange cleanup or repairs, and to
simply keep an eye on the place. They are usually offered discounted or free rent for what they do and this can
be a valuable resource when you have a good manager.
▪
Professional management companies can do everything an on-site manager can (absent living there) but are
usually also more involved in marketing and screening for new tenants. They can and should do all background
checks, collections of deposits, and walk throughs with the tenant when they move in.
▪
Ask other investors who they’ve had success with and you will be on your way to finding a good management
company for your own property. Can you see how your empire can now be created without you not having to
be a jack of all trades? [Editor’s Note: always remember that an individual or a management company is acting as your agent
and, in the event of a lawsuit, you or your entity would also be named as a defendant.]
Reprinted by Permission. David Lindahl, also known as the “Apartment King” has been successfully investing
in single family homes and apartments for the last ten years. He is the author of four popular, money-making
home study courses “Apartment House Riches,” “How To Estimate And Renovate House For Huge Profits,”
“Managing For Maximum Profits” and “The Real Estate Investors Marketing Tool Kit”. David was a featured
MREIA speaker in January 2008. He can be reached at [email protected] and www.rementor.com.
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February 2015
ENTITIES 101
Entities For Business And Real Estate Investing 2012
by Bradley S. Dornish, Esq. Posted January 15, 2012
A new year is a time for resolutions to open new businesses or to change the structure of the business you have for
asset protection, tax benefits, privacy, retirement and/or estate planning purposes. But before you figure out the
changes you want to make, you have to understand the basics about entities. First, what is an entity? It is a separate
legal person designed to have an existence apart from you individually. An entity can enter into leases and other
contracts, own real estate, sue and be sued in court, all without naming you individually. This is good for most
businesses, but especially for real estate investing, where the public records like deeds and mortgages are abundant
and easy to track.
There are simple benefits to having an entity, like reducing the appearance of your name in courts and other public
records, leases and contracts. Entities can also protect you from certain claims and liabilities, reduce your risk of tax
audits, save tax dollars, and reduce your exposure to mechanics’ liens.
Entities help me to keep only personal loan accounts on my personal credit report and to keep my business loan
accounts off of my personal credit report. The more money you borrow for real estate investing, the more of an
advantage this can be. Try to get a personal credit card or even a car loan when you have over a million dollars of
real estate related loans and fifty utility accounts on your personal credit! But the entity’s accounts don’t appear on
your credit report, because they aren’t personal to you, although you probably have to guarantee them all.
When you flip properties, using the right entities can keep claims from properties you rehabbed six to twelve years
ago from coming back to affect your profits today. They can also protect your profits next year from claims arising
from your current rehabs. You can also control “dealer status” for tax purposes, which is discussed below
A series of entities used together can allow you to wear several hats, as owner, manager, contractor (and in my case
lawyer) all while the entities interact to work with your properties in different ways, still keeping each role separate
and keeping your banks happy. If you own rental properties, a series of entities can give you the convenience of
common management, but can split your real estate equity into separate pieces, so “all of your eggs are not in one
basket” and you don’t lose all of your equity as a result of an uninsured claim or problem at a single property.
For those who want to take charge of their own retirement funds, An IRA owned entity can allow your IRA to own
real estate, without identifying the IRA as the owner, and without putting all of the rest of the funds in your IRA
account, now or in the future, at risk for claims arising from the ownership of the property. Once you understand
what entities can do, the next question is which are right for you? Corporations, Limited Liability Companies,
Limited Partnerships and Trusts all have roles in businesses in general, including the business of real estate
investing, but their roles are different.
A corporation or limited liability company works as an entity for a single business in any field, and particularly in
real estate to flip a series of properties and then shut down and form another, managing both claims exposure and
tax issues. We prefer LLC’s for our clients over corporations, because both can be treated as S or C corporations
for tax purposes, but the LLC has even more flexibility, being able to be taxed as a pure pass through or partnership
as well, depending on who owns it.
The LLC is also easier to maintain than a corporation, not requiring annual meetings and minutes to preserve its
separate identity. There are potential tax issues since 2011 for single member LLCs structured as pure pass through
entities, so make sure you consult your C.P.A., tax accountant or tax advisor. The biggest issue with single member
LLCs appears to be for those which provide services. The IRS considers those entities subject to self-employment
tax on their income, as though the entity did not exist.
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So if my law firm were a single member LLC electing pass through status, I’d pay the extra tax. But a single member
LLC which elects S status may avoid that problem, and single member LLCs which own real estate or derive money
from business other than providing personal services should not have to be concerned about this issue.
An entity can elect corporate “S” status until March 15th for the current tax year, so make sure you know what is
best for you, and get it done by then.
An LLC or corporation can also make a great property management entity for your long term holdings. Although
you have to be a real estate broker or an owner of real estate to manage it, I use LLCs as the general partner in each
of my Limited Partnerships holding title to real estate. That way, the deeds to different groups of rental units are in
different LPs, so my equity “eggs” are in different baskets.
But, at the same time, all of my leases, management activities and liability exposure from management are
centralized in a single LLC. Because it owns 1% of the Limited Partnerships which own the properties as general
partner, the LLC manages as an owner without being a real estate broker. This does not work in Pennsylvania with
two layers of LLCs, only with an LP as owner and an LLC as its general partner.
One set of bank accounts, one phone number, and one name to do business under all help to make management
easier. The structure also has asset protection benefits, because the LLC is like a lightning rod for claims arising
from management activities. It takes the heat, and diverts the attention from your LPs. But it also only owns just
one percent of your equity, so the other 99% is protected from those claims.
The LPs do no business, since they are just shells holding the deeds, so they don’t even need their own bank
accounts. And since any contracts for repairs or improvements are between the contractor and the LLC managing
the property, there is no contract with the LP owner, so the contractor can’t lien the property of the LP if the LLC
doesn’t pay.
Of course, the next question is how many LPs to have? Ideal asset protection would be to have every single family
house duplex or multi-unit property in its own LP. Each would then be in its own “liability basket.” protected from
the legal liabilities associated with other properties.
However, each entity you form and operate has its own legal existence, including a tax ID and corresponding
obligations to report and pay certain taxes. This adds a cost to each entity, and you have to balance ideal asset
protection against the guaranteed costs and ease of operation of doing business every year.
I choose a compromise between these two objectives, and try to structure real estate holdings almost evenly over
five different limited partnerships, so that only about 20% of equity is at risk for any given potential liability. Some
people prefer more or fewer LPs, depending on how much they are willing to pay and do each year to protect more
of their assets from potential future claims. This is something like deciding how much insurance to buy. You need
to find the balance that works for you.
The same analysis applies to the number of layers of entities you use. Some people add another layer of trusts under
their LPs, or manage different groups of LPs holding properties with different LLCs. I try to remind clients that
they can protect themselves so well that they spend too much of the revenue of their investment properties on
protection, and don’t make any money. After all, making money short term or long term, or both, is the purpose of
investing in real estate to begin with.
If you protect yourself so well that you aren’t able to make money on your investment, then you shouldn’t be
investing in real estate. Buy a Savings Bond or put your money in an insured certificate of deposit, and you won’t
have to worry about entities or making more of a return in real estate.
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You will hear that buying your properties in entities makes it harder to get them financed, but that is only partially
true. Certain lenders like Wells Fargo and Countrywide/Bank of America have had policies for a few years that they
won’t loan to entities, but will loan to you only if you hold title in your own name. However, if your credit is around
700 and the property on which you want to borrow cash flows and appraises, you can go directly to most local
banks and get a mortgage loan in the name of your entity, which you guarantee personally.
If you use a mortgage broker experienced in working with investors and entities, the broker won’t even apply to
Wells Fargo, Bank of America or other lenders who won’t loan to entities for your loan, because they also know
these lenders’ policies. You should never be in the position where you are approved for a loan, but at the last
minute have to transfer title to your own name to close. That comes from a broker who didn’t do his job finding
the right lender. It also defeats your asset protection and business strategy, and costs extra transfer taxes as hidden
costs of your loan. Find a lender or broker who will get a loan for the structure you have, instead of changing your
structure for a loan.
If you use hard money or private loans to buy and renovate your properties, most hard money and private lenders
will also loan to your entity with your personal signature on the loan. As long as they have a valid first mortgage
from the entity owning the property, and you are the owner of the entity signing the note, everything should work
out if you pay the loan, and it should be easier for you to give and the lender to accept your deed in lieu of
foreclosure if you default. We close these loans all the time, and explain these issues to private lenders if they have
any doubts.
Another issue to touch on is the choice of registered office for your entity. A registered office is the place in
Pennsylvania where a sheriff’s deputy can serve your entity with a lawsuit. That means it has to be a physical
address, since a deputy can’t hand suit papers to a post office box. Of course, using your home address means the
deputy may be waiting for you or an adult in your home. Your spouse, mother in law staying with you, cleaning lady
or child 18 or over all come to mind, and none are particularly good alternatives.
If you have an office where you do business, that can be your registered office, but you have to remember to
change it when you move your office, and pay the fee of $70.00 to change.
For years I have offered my clients the ability to use my office for their registered address at no charge. This made
sense since we are open 8 to 5 on week days, and nobody thinks it unusual for a sheriff’s deputy to visit a law office.
Last year, I became concerned that I would be changing my office address when I sell my building, and didn’t want
to have my clients pay the charge to change their registered address to follow me. I found a solution by registering
as a Certified Registered Office Provider with the Commonwealth of PA. Now, my out of state clients, and those in
state who don’t want to use their home or office addresses for their registered address, can use my office, still at no
charge. When I move my office, their registrations follow without paying the extra $70.00 each.
I have also added an extra expediting service so formation paperwork can be hand delivered in Harrisburg the same
day an entity is requested, so we aren’t waiting a week or ten days to find out if an entity is formed. For an extra
$35.00 per entity, they can be set up in a day or two. When clients procrastinate, and are waiting to sign contracts,
this service can make the difference between losing and saving a deal.
Reprinted by Permission. The author, Bradley S. Dornish, is a licensed Pennsylvania attorney, title insurance
agent and real estate instructor in Pennsylvania. ©2012 Dornish Law Offices, PC and dornish Settlement
Services, LLC. All Rights Reserved. Visit www.dornish.net or email [email protected]
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SELF-DIRECTED IRAs
Six Strategies To Make Sure You Have Enough Money To Retire
by Carl Fischer
How much money do you need for a financially secure retirement? It seems like a simple question, however the
answer is complicated because there are so many variables—some known, others impossible to pin down—that
can shape the answer, sometimes dramatically. The following strategies are presented for your review and in the
authors opinion some are better than others, but it will depend on your particular and unique situation which are
implemented.
D ev el op a p l a n
The first step is to have a plan and make some assumptions such as:
• When will you start saving?
• How much can you save every year?
• What age will you retire?
• What will your investments return?
• How long will you live?
• What are the tax rates? What will inflation be?
• Will you be eligible for social security and Medicare?
The answers to the above and other key questions will impact the odds of reaching your retirement savings
goals. Approximately 85% of working age households are concerned about having enough money for
retirement. (source: National Institute on Retirement Security).
"Approximately 85% of working age households are concerned about having enough money for retirement."
Rule of thumb:
Save at least 10 preferably 20 times (X) your ending salary to help increase the odds that you won't
outlive your savings during 30 years in retirement. The more you want to spend per year the higher the
multiple required. Setting up clear goals linked to your salary can help simplify your planning, and help
you determine if you are on track throughout your working life.
Having these milestones is particularly important in today's workplace, where layoffs, job switching, longer life
expectancy, and escalating health care costs can complicate your efforts to save for retirement. Some advisors
suggest you will spend approximately 85% of what you spend when you are working. Other data suggests it more
like 100% or the same as you spend now. to go along with it.
Life expectancy
In general, CamaPlan recommends assuming a lifetime of 92 years for men and 94 for women. However,
healthy men and women at age 65 have a 25% chance of living beyond these ages. If you’re a man and live
to 85 (88 for women) and a higher chance of outliving your assets.
As you age, your health becomes more of a factor for your life expectancy. So, you may want to look at this
assumption again, or at least understand the sensitivity of savings targets to longevity assumptions.
Of course, your life might not fit neatly into such a precise formula. However, it's important to consider
your particular situation, and adjust accordingly. The majority of individuals do not plan for retirement and
hope they will be financially secure in retirement.
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There are many on-line calculators to aid in determining the exact amount and a lot of number crunching.
Should you need help consider a fee based planner or your CPA opposed to someone making a commission
on products that are ultimately suggested.
Save more
It is easier said than done. The earlier you start saving for retirement, the better. Can you wait to save until
you're 30 instead of 25? Probably, but the longer you delay, the harder it will be to reach your retirement
savings goal. To catch up, you may have to allocate a bigger portion of your salary to retirement savings.
It may be hard to save when you are younger especially if you are raising a family, or have to care for an elderly
parent. It is very important to save as much as possible for your retirement so you are not a burden to other family
members.
Save smarter
Even though Americans are saving more, most are still not taking full advantage of their, personal savings
plans, workplace savings plans, and Health Savings Accounts (HSAs), when available to them. You must use
qualified plans to ease or eliminate the tax burden. Tax free and tax deferred plans provide a substantial
advantage over savings accounts when saving for retirement.
IRAs have different yearly limits than workplace savings plans. Plus, there are catch-up provisions that let people
age 50 and older save more in IRAs and workplace savings plans. It is far better to learn how to have your money
working for you opposed to you working for money. Self-direction of your qualified plans should be considered if
you believe "No one is more concerned with my safety and earnings than I am."
Look for assets with less volatility, not necessarily less return, as you get closer to your retirement.
Plan to spend less
As you approach retirement, envision the lifestyle you want, and estimate what it will cost. If you don't have
enough funds and working longer is not an option, you need to figure where you can make cuts in spending. A
reduction in the standard of living should not be your first choice although many individuals were forced down
this road in 2008 and 2009 as the economy, stock market, and their savings plunged.
Some consider moving to less costly geographical areas but that generally means more travel to visit family and
friends thus savings are not necessarily realized.
Work longer
Your retirement age can have an even bigger impact on your retirement savings. The longer you can
postpone retirement, the lower your projected savings factor needs to be. For example, retiring at age 67
instead of age 63 would have given four more years of income and savings, and four fewer years of
retirement spending to worry about. Plus, you would be eligible to receive higher monthly Social Security.
If you love your job this may be a viable option but many want to retire while they are still healthy enough
to enjoy it. You can't always control when you retire; health and job availability may alter your plans_
Improve investment performance
It's impossible to predict the markets, but the performance of your portfolio will affect your retirement
savings needs. It is important to dedicate time to keeping your money working for you. Diversification is
a main staple of any portfolio but CamaPlan suggests you only diversify into investments you understand
and can control. Become an investor!
Many financial advisers say, "You cannot pick your return. In practice, rate of return is driven . largely by asset
allocation and market performance. The higher the rate of return the riskier the investment will be." Many
CamaPlan clients have found quite the opposite. It is simple to determine your return when your IRA acts as a
mini bank and makes a secured loan with a specific interest rate, a specific term, and a hard asset as security.
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IRA's or 401ks
Others clients are using their IRA's or 401ks to purchase real estate with known rental rates, potential appreciation,
and potential tax savings. Again easy to predict and provides a potential for combating inflation. Precious metals
have minimal carrying costs, are very liquid, and have been known as a valid store of wealth over time. No
investment is without risk, but the riskiest investment is the one you know nothing about. Return is not necessarily
a function of risk.
Stay fully invested as much as possible. Tax free accounts such as the Roth IRA and Health Savings
Accounts are, by far, considered the best money to have in your retirement. There are many arguments as
to when is the best time to create, contribute, and convert to these accounts but you should seek help and
education to make that determination. These accounts can remove the uncertainty risk associated with the
tax rates and remove a variable in your overall plan.
There is no magic number for the amount you should have in retirement savings. Every individual's
priorities and needs are unique. Determining how much income you'll need in retirement is a critical step
in meeting your goals. Develop your plan, amend it as necessary, and stick with it.
Reprinted by Permission. CamaPlan is a self-directed IRA company. Email: infoecamaplan.com,
visit www.camaplan.com or call (215) 283-2868
BEGINNER’S CORNER
Investment Property: Strategies For Flipping A Property
by Jay Redding May 2, 2011
Fix and Flip: This is the most common strategy employed, and generally what comes to mind when people think about
flipping a property. You buy a property that needs repair, you take care of all the repairs, and you sell it as retail for a profit. It
is a reliable method that can generate thousands of dollars on a single deal. Flippers run into trouble when they pay too
much for the property or underestimate the cost of repairs. Be sure to account for all of these factors before making a
deal, and be smart (conservative) during repairs, or you will spend all of your profit.
Refinance and Lease/Option: This one starts out the same as the first strategy, except instead of reselling the property for
cash, consider reappraising the home at its new value, and restructuring the financing associated with it. That way, you can sell
the home with a lease/option, whereby the tenant's rent will cover your mortgage (or should, at least), and if the tenant
decides to buy, then you won't have to hire a Realtor® or go through the process of marketing and selling the home again.
Wholesale: Rather than selling the home as retail, consider passing it along to another flipper trying to employ the first
strategy (fix and flip). Wait to buy until you've found a good enough deal in a good enough market, where you can turn around
and flip the property to another investor without actually making any of the repairs. You will sell the home “as is,” below
market value (just what the other flipper is looking for). You may only make a small profit as compared to the rehabber, but
you won't do any work and could walk away with a few thousand dollars.
The final strategy is a bit riskier, only because it involves predicting the local economy. If you find a real hot, booming real
estate market, and are able to get the timing just right, you can enter a contract for a house or condo that's under construction
(or better yet, under planning). If the situation is right, you can wait until the development is complete, and then resell the
home or condo at its retail market value for an enormous profit. Be advised that if the local economy turns sour, you will be
stuck owning pre-construction property that is sure to deflate in value.
Reprinted by Permission. Visit www.InvestmentPropertyMadeEasy.com. Copyright © 2004-2014 BiggerPockets Inc.
All Rights Reserved.
Volume 18 Issue 2
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February 2015
LANDLORDING: FORMS
Tenant Referral Policy Agreement
It is the policy of ________________________ to pay current tenants a referral fee for
guiding new GOOD tenants to the company. Because these people may become your neighbors, we
wish to insure that only quality renters are accepted as tenants. Towards this end, we are paying the
present tenant a bounty of $100., subject to the following three conditions:
1. All incoming prospective tenants are subject to the normal screening process. Because the loss is
at the sole risk of the landlord, ALL rental decisions are at the sole discretion of the landlord or his
designated representative and are not subject to appeal. This policy will not affect the decision of
who or when to rent to any person. The screening process consists of a rental application, a nonrefundable $20 screening fee, and a background check. All tenants are screened for previous
evictions, criminal history, and a credit check.
2. The new tenant must pay on time for six months. This means the payment is to be to the
landlord by the due date EVERY month. There must be no neighbor complaints of record against
the new tenant.
3. The referring tenant must be current with his or her rent at the time of the referral and must be
current during the same six months as the new tenant. There must be no neighbor complaints of
record against the referring tenant.
The payment will be paid to the referring tenant in the following manner: at the acceptance of
the new tenant by the landlord, a savings bond in the face amount of $100 will be purchased
by the landlord in the referring tenant's name with the landlord listed as co-owner. At the end
of the six month period, the bond will be delivered to the tenant if all conditions have been
met. If conditions have NOT been met, the landlord will cash the bond and spend it on
something frivolous.
The reason for the above conditions is to insure that only quality tenants are referred to the
company. This policy will help eliminate tenant-caused problems by giving the referring
tenant a vested interest (cash incentive) in helping keep the peace. Lastly, this policy should
assist the landlord in collecting rent in a timely manner. We are VERY much in favor of
paying this bounty - for good tenants!
(Place this with your lease as a lease addendum or as part of a new tenant package.)
Reprinted Courtesy of the Genessee Landlords Association. Visit www.genesseelandlordassoc.org or call
(810) 767-3080 Source: GLA Newsletter, May 2014
Volume 18 Issue 2
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February 2015
LANDLORDING: FORMS
Rent Deficiency Notice
John Nuzzolese
Date:
Address:
Dear
This notice is to inform you that your full rent payment of $
for
Was not received. A partial rent payment was received on
A late charge in the amount of $
is now due in addition to your rent deficiency.
Please remit the balance of your unpaid rent in the amount of $
, plus any late fees listed above as
soon as possible in order to bring your account current and to keep your lease in full force. Enclosed is a
pre-addressed envelope for your convenience.
Please make all late charge payments payable to:
If the above matter has been tended to, please disregard this notice and consider it a thank you for your
cooperation.
Sincerely,
Manager
The above form was created by John Nuzzolese. Copyright © 2007-2015 The Landlord Protection Agency,
Inc. All Rights Reserved. Reprinted by Permission. Visit www.thelpa.com, email [email protected] or
call (516) 483-4785
Volume 18 Issue 2
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February 2015
LANDLORDING: MANAGEMENT IDEAS
Management Tips From Mr.Landlord.com
Don’t Accept Any Excuses-Offer Solutions!
One of the biggest mistakes new landlords make--and sometimes some of us who should know better--is to accept
any excuses for nonpayment of rent. Handle all nonpayment cases the same, whether it's a good or bad excuse. Do
not accept any excuses - offer solutions!
If you start "judging" whether or not a resident's excuse is worthy of giving them an extended period of time to
come up with the money, you will encourage them to come up with worse excuses the next time. In addition, you
dig yourself into a deeper and deeper financial hole if they don't come up with the money after the extended time
period, and you have delayed in starting the eviction procedures.
Let your residents know right from the beginning what your procedures are when payment is not received and that
there are no exceptions. I even have a list that can be shown to the resident at move-in that gives examples of
excuses that residents have tried to use in the past to no avail. This adds a little bit of humor to a very serious
discussion, but it also clearly lets the new resident know that there is no need to offer excuses for nonpayment of
rent. Then of course you must strictly enforce those procedures.
"But Jeffrey, what do you do, especially in these times? Don't you want to work with residents in 'some' way who
are having a hard time? If I took a totally no-excuse approach, I would not have any tenants!"
I hear you and I'm fully prepared to work with residents by offering them several contact names and phones
numbers of agencies and churches who may be able to offer them assistance. When doing so, I still start the
eviction process and should the resident come up with ALL the money (including court costs, attorney fees, etc.) by
the time of the court date, to that extent we will work with them.
I'll also admit this: If a resident who has paid on time for over a year and otherwise been an excellent resident, and
they give me an excuse, I still won't listen or judge their excuse, or delay the legal proceedings. But I will listen to
their proposed plan for getting caught up and offer suggested solutions. AND if they have never lied to me up to
that point, I will waive or suspend the late fees and court costs, and get them to sign a promissory note, and work
with them.
30 Popular Excuses for Unpaid Rent
"Had to get brother-in-law out of jail" (And they didn't even like each other)
"My fiance left me"
"Just use my security deposit"
"I lost my job"
"Car repair"
"Self-employed Hair Stylist - Business has been real slow this month"
"I had a big electric bill because you won't replace all the windows" (last January - walked into the house and they
had the heat set at about 80, only 50 degrees outside)
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"Had to buy schoolbooks"
"State garnished my tax refund for back child support"
"I left town because my dad died and I forgot my checkbook."
"I was supposed to work and didn't know it, so they suspended me for three days."
"I've been too busy to mail it."
"I got in a fight with my girlfriend, so had to use the rent to buy her flowers, take her out to dinner and make up
with her. I am sure being a girl, you understand."
"Maybe if I got a check book I could get my rent paid on time."
"I got a joint checking account with my boyfriend; then he left me last month and took all the money."
"Sorry, but needed new tires."
"I looked at my bank account and it was empty so I guess that means I paid you already, right?"
"I failed to pay taxes in 2008 and the IRS swept my account on the first so there was no money there. They were
not supposed to do that. My attorney is in contact with them."
"I got bit in the crotch by a brown recluse spider while I was camping at the Renaissance Fair and I had to use the
money to go to the ER."
"I am out of town but my wife said someone has accessed our checking account and there is a hold on the
account."
"Last week my bank sent the check, but it must've gotten lost. I'm not putting a stop payment on it for another
week. If you don't receive it, I'll send another one. No, I'm not writing another check until I find out what
happened to the first check."
Last Month: "My uncle died and we have to pay for the funeral."
This Month: "My aunt died......"
"I am out of checks; got to order some."
"The bank messed up my account; that is why the check bounced."
"I have lupus and I haven't been feeling so good."
"My daughter is just starting college and I had to pay her tuition."
"I won't be able to pay my rent on time unless I can get this special loan. In order to get this special loan I need you
to sign this form stating that I'm about to be evicted even though my rent is current...it's ok, the old owner has done
it in the past..."
"I got sick and had to buy meds."
"My ex-wife is trying to get sole custody of the kids and I had to pay a lawyer."
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"My bank froze my checking account because my debit card got hit."
What’s Your “Comeback” When Residents Offer Excuses?
I thought it would be helpful for some landlords to be ready (equipped) with WHAT TO SAY to rental residents
who offer excuses as to why the rent has not been paid. Several experienced landlords shared their best or favorite
comeback lines when a resident starts making excuses. I encourage you to read these different examples so that you
may identify with at least one of these lines and feel comfortable and confident in utilizing it, when the time comes
to use it. And as most landlords know, the time will come. Remember to always be professional and businesslike in
your communication. So here are some of the best suggested "comeback" lines:
Comeback: "Please understand I have bills, obligations, and collecting is a business decision and a commitment to
pay my bills. At the present time I am unable to pay your bills."
Comeback: "I do understand the financial difficulties that you have encountered. Just as soon as the rent is paid,
take the next money you have available after that and buy some food."
Comeback: "I'm sorry to hear about your situation. Our agreement is that rent is paid by the first or you owe the
rent and a late fee. We have a mortgage that is due, and if we don't pay, then we get a late fee. The mortgage
company makes no exceptions. Since I am charged a late fee regardless of circumstances, I really can't make
exceptions either. I'm sure you understand."
Comeback: "Perhaps you have a friend or family member who will lend you the money until you can pay them
back."
Comeback: "I'm sorry to hear that, I hope everything works out. Regarding the rent, we are required to follow
procedure within the timeline allowed by law."
Comeback: "No, you cannot use the deposit. Rent is rent, deposit is damages and I want you to get that back."
Comeback: "I wish I had a half a dozen tenants like you!" They look at me confused and ask why. I then say, "I
have about a dozen like you; I would like a half dozen!"
Comeback: "Sorry but by state law I can't touch that money until you are actually out of the unit. It's kept in a
separate Landlord Trust Account - it's not available to me for personal use. That's to protect YOU."
Comeback: "What can you pay today?" If they have enough for at least 50% of the rent then we work on some
kind of plan that keeps them from ever getting more than seven days behind. Seven days is when I file papers. If
they say zero, then I know for certain they have not done the best they can.
Reprinted by Permission. The above tips are shared by regular website contributors to the popular
MrLandlord.com Q and A forum. To receive a free sample of Mr. Landlord newsletter, call 1-800-950-2250
or visit their informative Q&A Forum at LandlordingAdvice.com, where you can ask landlording
questions and seek the advice of other rental owners 24 hours a day.
Volume 18 Issue 2
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February 2015
LANDLORDING: MARKETING
First Impressions Get a Property Rented
by Robert L. Cain May 1, 1999
Have you ever watched a car slow down in front of a property with a “For Rent” sign, stop, back up, then speed off
again? Why did they stop to look? If they were potential applicants, what made them speed off again, rejecting the
property?
Lots of factors enter into whether someone decides he or she might be interested in a particular place to rent, and
not all of them are under your control. But in order to rent your property, you have to get them to stop the car.
And whether or not applicants stop their cars depends on first impressions.
The rule of thumb is that the better a property looks, the better the applicants will be, regardless of what part of
town where your property is located. Quality people, the kind you want for renters, have pride in themselves and in
their surroundings. That means if good applicants drive by a property that has an unkempt yard, has peeling paint,
and has old junker cars in the parking lot, the driveway, or out in front on the street, they are going to keep right on
driving.
On the other hand, if they drive by and see a well-kept yard, freshly painted stripes in the parking lot, and a building
that is obviously cared for their first impression is of a landlord who cares about his property and who will take care
of the rest of his business just as well. At that point, if that is your property for rent, the applicant is yours to lose.
You see, that applicant has already decided that if the inside is as nice as the outside and it fits his or her needs, he
or she wants to make it his or her new home.
Just as good tenants are driven off by unkempt properties, bad tenants are drawn to them. They want to live near
people like them and to rent from landlords who don’t care much about their properties or the type of tenants they
rent to. Unkempt properties shout at them that the owner of the property meets both their criteria. This same
landlord wonders why he never gets good applicants and his tenants are always a problem.
I was driving through an upscale neighborhood the other day and noticed a “For Rent” sign in front of a singlefamily house. The front yard had dandelions two-feet tall and the rest of the yard and house gave the same
impression. I found myself shouting, “You idiot!” to the landlord, who was nowhere around, of course, and
wouldn’t have been able to hear me if he were.
Think of who is going to be attracted to rent that house. It won’t be good tenants; it will be marginal ones at best,
and probably bad ones.
An interesting sidelight is that bad tenants are often afraid to even call about nice-looking properties. They figure
that the landlord cares about his investment and whom he rents to, so there’s no point in even thinking about living
there. Maybe they are the ones who slowed down, stopped the car, backed up and sped off again, saying to
themselves, “No chance.”
Here are some of the things you can do with your properties to make them give an inviting first impression to great
tenants:
1. Mow the lawn, edge the yard, trim the shrubbery, paint the front doors, repaint the stripes in the parking lot.
2. Sweep the sidewalk for the entire block.
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3. Make sure there are no junker cars or other trash in front of or around your property. Call the city to have them
removed if there are.
4. Drive by your property and try to get your own first impression. Take a picture of the property and look at it to
see if that shows anything that needs tending to.
5. Have someone else drive by and make notes about his or her first impressions. Don’t get mad if the impression
isn’t a good one and you get the truth.
There is simply no way you are going to get a dream applicant back after he or she has driven away from a rental
property that has “bad landlord” written all over it. You’ll get the nightmare applicants instead. Take a little extra
time and get the good applicants, the people you want to rent to, to stop their cars, call you and make your property
their new home.
Reprinted by Permission. Copyright 1999 Cain Publications, Inc. Robert Cain is a nationally-recognized
speaker and writer on property management and real estate issues. For a free of the Rental Property
Reporter call 800-654-5456 or visit www.rentalprop.com.
LANDLORDING: FAIR HOUSING LAWS
Fair Housing-Harassment And Retaliation
by King County Office of Civil Rights and Open Government
The Fair Housing Partners of Washington State have developed a sample policy, "Fair Housing—
Harassment & Retaliation," to assist you and your staff in dealing with harassment and intimidation of
protected classes, and in dealing with possible acts of retaliation against a resident or employee because that
person asserted rights under fair housing laws. The sample policy includes background information defining
harassment and retaliation and provides guidelines for staff and residents on addressing related fair housing
issues.
Get your free print copy of the booklet by calling 206-263-2446. The booklet is also online at www.kingcounty.gov/
exec/CivilRights/FH/FHresources.aspx.
Harassment
Under fair housing laws, "harassment" includes abusive, foul or threatening language or conduct directed at a
resident, employee or guest because of protected class (such as race, color, national origin, religion, sex, disability,
familial status, sexual orientation, etc.). Harassment is conduct that is sufficiently severe and/or pervasive enough to
affect a person's ability to use and enjoy their housing. Harassing conduct includes:
Because of protected class, coercing means, to deny or limit a person's benefits in connection with the sale or
rental of a dwelling or in connection with a residential rental or sales transaction.
Examples:
• An employee tells a negative joke about Asians in front of the manager, who does nothing about it.
• A leasing agent makes fun of a resident who wears a turban.
• Because of a resident's or guest's protected class, threatening, intimidating or interfering with people in their
enjoyment of a dwelling.
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• A landlord warns a resident that he will be evicted if he continues to have visitors who are Mexican.
• A male maintenance worker openly ogles female residents at the pool, making them feel uncomfortable.
Retaliation
Fair housing laws define retaliation as unlawful coercion, intimidation, threats, or interference with anyone who
exercises or enjoys fair housing rights. These laws also include protection against retaliation because a person
aided or encouraged someone else to exercise or enjoy any fair housing right. Retaliation conduct includes:
Taking negative actions against someone because s/he has made a complaint to management about possible
More Examples:
• A landlord issues a 20-day termination notice to a resident because she complained about maintenance staff
making sexually explicit comments to her.
• An assistant manager rarely issues 10-day notices for noise, but begins issuing them to a resident who complained
about a neighbor making racial comments.
• A condominium board fails to notify a homeowner of an association meeting because the homeowner requested
a reasonable accommodation for his disability.
• Taking negative actions against someone because that person engages in activities designed to make others aware
of, or encouraging others to exercise, fair housing rights.
• After a landlord learns a resident handed out fair housing brochures, he denies the resident’s request to
use the community room for a party.
• A manager fires a maintenance worker who told a resident with a disability that he could request grab
bars in his bathroom as a reasonable modification.
• Taking negative actions against someone because he/she has testified, assisted, or participated in an
investigation under fair housing laws.
• A manager tells an employee he will be "watching her closely" because she gave testimony in a housing
discrimination complaint filed against the property.
• After a resident advocates for a neighbor who was experiencing sexual orientation harassment from an employee,
the manager denies the resident's request to transfer to another apartment.
• Threatening or taking an adverse employment action against an employee who assisted someone seeking to
rent, buy or sell, because of the person's protected class or because the person associated with others in a
protected class.
• A landlord tells an employee she will be fired if she rents to African Americans.
• A manager tells the assistant manager she'll get a negative performance evaluation if she continues
encouraging families with children to apply for rental.
• A condo board tells its property management company that their contract will be cancelled if they allow a
resident to keep a therapeutic assistance animal.
Courtesy of the King County Office of Civil Rights ( 206)-263-2446 or Civil Rights [email protected]
Source: Rental Housing Association of Puget Sound. From “Update,” November 2014. Visit www.rha-ps.com
MREIA is Looking for Vendors that could provide any of the following:
Landscaping & Lawn Care
Lenders & Hard Money Lenders
Home Improvements
All Vendors Must Be Licensed and Insured.
Volume 18 Issue 2
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February 2015
LANDLORDING: LANDLORD OBLIGATIONS
Landlord’s Responsibility
Author Unknown
A landlord's responsibility to his tenants is to provide a safe, functional living space. Before a tenant moves in, it's
the landlord's obligation to make sure that the property is up to local and federal housing code. City and county
housing authorities establish strict minimum standards for electricity, plumbing, and paint (lead-free), lighting,
ventilation and structural integrity. Many cities also require safety measures like dead bolts on all exterior doors,
smoke alarms and fire extinguishers in each unit.
Once the tenant moves in, it's the landlord's responsibility to repair anything that breaks on the property, from
burned-out light bulb in the stairwell down to leaky faucets. A landlord is expected to respond to a repair request
within 24 hours and fix it within a reasonable time frame. The severity of the problem usually dictates how quickly it
gets fixed.
If a landlord fails to address a known problem in a timely fashion, he could get into big trouble. The worst case
scenario is that a tenant or his guest is seriously injured by an unresolved issue with the property, like a broken rail
on a staircase or a missing floorboard. If the tenant can prove that the landlord knew about the damage and
neglected to act with reasonable timeliness to fix it, he can sue and he will win. This is why landlords have to buy
liability insurance.
Not all landlord-tenant arguments end in a lawsuit. But if a tenant gets frustrated with how long it takes his landlord
to fix the dishwasher, he has several options. In most states in the United States, he can legally withhold his rent
until the repair is made. He may also have the right to arrange the repairs himself and subtract the cost from his
next rent check.
In some states, if things get really bad, the tenant can treat the failure to respond as a breach of contract and move
out in the middle of the lease. A landlord has to keep his property up to certain standards and take care of repairs in
a reasonable amount of time.
A landlord can protect himself by documenting exactly when he receives all notifications of a problem with the
property and when he took action to resolve it. Even if the landlord can't fix the problem right away, it's his
responsibility to let the tenant know the circumstances that are causing the delay and when it might be resolved. A
good landlord will encourage his tenants to report all known problems immediately to avoid potential liability for
injuries.
It's also the landlord's responsibility to keep his tenants safe from crime. All stairways and common areas need to be
well-lighted. Main doors and gates need to remain locked at all times. If there's an intercom system for buzzing in
guests, it needs to be in working order. Exterior doors should have dead bolts and windows should have locks,
particularly those that are accessible by an external fire escape.
A landlord also has to take reasonable measure to make sure that his tenants aren't criminals. If a landlord knows
that some of his tenants are dealing drugs from their apartments, for example, and doesn't report them to the
police, the landlord might be held accountable for any neighborhood crimes that can be linked to the drug-dealing
operation.
Reprinted courtesy of Shawnee Landlords Assn. Topeka, KS. From September 2014 newsletter
Visit www.sclandlords.com or call (785) 266-4818
Volume 18 Issue 2
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February 2015
Vendor/Sponsor Table of Contents
Accounting Services
Samuel S. Fisher
Financing Services
Residential Home
Funding
Hard Money Lender
Home Funding
Mortgages
Home Staging
Stage 2 Style
PG
Construction & Renovations
45 911 Restoration – David Oknin
46
Telecommunications
No Current Vendors
Energy Services
No Current Vendors
Home Buyers
No Current Vendors
Home Inspections
No Current Vendors
Insurance/IRA
No Current Vendors
Internet/Computer
Services
No Current Vendors
PG
n/a
n/a
45
Investment Services
No Current Vendors
Pest Control Services
Pest Plus Pest
Elimination
PG
n/a
Legal Services
Fein Such Law, Harry Fieland, Esq.
44
Real Estate Agencies
No Current Vendors
Member Discounts
45 Kiuken Brothers
Ricciardi Brothers
Paints & Supplies
PC Richard & Sons
Sherwin-Williams:
Paints & Supplies
48
48
47
45
Residential Screening
No Current Vendors
Title Agencies
No Current Vendors
Our Vendors & Sponsors support us and help us maintain our low membership dues.
Please contact them first when you need a product or service.
JANUARY 2015 NEW AND RENEWING MEMBERS
Burt, Jeri
Kapsky, Mark
Riley, Kevin
Clark, Kevin
Konig, Robert
Schon, Samuel
Cosgrove, Brian
Kovacs, Olia
Shandler, Fred
Gichuhi, Paul
Merlie, Michael
Hiller, Thomas
Paullus, Linda
Jones, Benny
Riley, Thomas
Volume 18 Issue 2
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February 2015
Volume 18 Issue 2
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February 2015
Do We Have Your Correct Email Address??
In order to ensure that you, as a MREIA Member
are Receiving Our Emails.
MREIA periodically Sends an Email with a Link
to click on when you receive the email.
Thank you so much,
MREIA Board Members
Harry Frieland, Esq.
This advertising Space
Fein Such Law Group
www.FEINSUCH.com
Is Reserved
For A New Vendor Member
Email Address:
[email protected]
Samuel S. Fisher & Associates
Certified Public Accountants, LLC
100 Bayard St, Ste 311
New Brunswick, NJ 08901
Tel: (732) 846-1700
Fax: (732) 846-1788
Website: www.samfishercpa.com
Volume 18 Issue 2
Mailing Address
7 Century Drive
Parsippany, NJ 07054
Telephone Number:
(973) 538-4700 ext. 3394
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February 2015
For More Information please call Mark Kapsky at: (201) 602-9488
Residential Home Funding
100 Lanidex Plaza, 2nd Floor
Parsippany, NJ 07054
Telephone Number: (201) 602-9488
Email Address: [email protected]
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February 2015
Our 102 Years of
New Store Location: Route 70, Brick, NJ
PC Richard & Son offers discounts on appliances to MREIA members.
Please contact Nick Zampetti at (201) 343-8629 for complete details,
or e-mail [email protected] and request additional information.
At the MREIA General Meetings
there is a Wealth of Information
That is worth even more than
The cost of Your Membership
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February 2015
Volume 18 Issue 2
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February 2015
Your Board of Directors
President
Dan Schwartz
(201) 791-4639
[email protected]
Vice President
Murray Kane
(973) 476-9528
[email protected]
Secretary/Past President
Nick Zampetti
(201) 343-8629
[email protected]
Treasurer
Bob Mularz
(908) 964-1896
[email protected]
Editor
Dan Schwartz
(201) 791-4639
[email protected]
Past President
Frank Barillari
(732) 240-2050
[email protected]
Audio/Visual Chair
Shy Stan
(732) 208-3915
[email protected]
Legislative Awareness Chair
David Corsi.
(732) 923-1410
[email protected]
Lending Library Chair
Angela Fan
(201) 889-9026
[email protected]
Meeting Site Chair
Nick Zampetti
(201) 343-8269
[email protected]
Membership Chair
Peggy Martini
(201) 410-5017
[email protected]
Registration Chair
Chuck Martini
(201) 410-5017
[email protected]
Vendor Chair
Scott Linde
(732) 777-6857
[email protected]
About MREIA
We are a not-for-profit Real Estate Educational Organization and a member of
The National Real Estate Investors Association.
The elected and appointed officers are unpaid volunteers.
DISCLAIMER
We do not render legal, accounting, tax, investment or other professional services either through the Metro or at general meetings. We disclaim all
liability for actions (or inactions) taken as a result of any communications between the Board of Directors, appointed officers and the membership.
We do not officially endorse any product, project, person or organization. Before making any investment decision, you are urged to seek advice
from qualified and competent professionals and to use due diligence before using any product, services or ideas presented in the Metro or at general
meetings. At times the Board may take particular positions or points of view on matters regarding the real estate industry. Said positions do not represent solicitations.
Our speakers are permitted to sell any products or services they may have to offer our members or guests.. The opinions expressed by the speak-
M REIA LEN D IN G LIBRARY
D o you enjoy spending hundreds or even thousands of dollars buying real estate books and CD s? Som e courses are valuable to have as a perm anent part of your personal
reference library. H owever, not all inform ation available m ay m eet your individual goals. TH EREFO RE, last year we created a Lending Library for your convenience and
FREE to all M REIA m em bers. O ur goal is to help educate and to guide you in m any areas of real estate, such as creative financing, negotiating techniques, landlording,
renovations, asset protection, etc.
To use our library, there are guidelines that you m ust agree to:
1.
2.
3.
You m ust be a current M REIA m em ber.
O nly one book or m aterials m ay be checked out at a tim e.
An item borrowed m ust be returned within thirty days. N on-attendance at the next general m eeting is not an acceptable reason for failure to return the m aterials.
If not returned, the book/m aterials loan is considered LATE. Your credit card will thereupon be charged a $15 late fee.
4.
If you do not return the item borrowed after two m onths, your credit card will be charged the retail value to replace whatever was borrowed. You will then be
the owner of whatever you have not returned.
5. See Angela Fan, Lending Library Chairperson, at a general m eeting.
The above guidelines are necessary so that all m em bers will have access to all of the books/m aterial being offered.
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February 2015