Ca$hFlow EXPRESS No. 1 / Vol. 2 2012 Passive Income for Today & Tomorrow FREE Chris & Ruth California Property Flipping Experts Share their Secrets on how to rehab and flip properties for Big Profits in this great Foreclosure Market in the Southern California Area. BEFORE AFTERRehab Tips by the Southern Find MoneyCalifornia ‘Property Flip Pros’ for Deals... By Ginger MaciasBy Linda Pliagas nars and bootcamps together since www.OCWholesalers.comwww.Realty411Guide.com 2005). They also acknowledge their H team consisting of personal and vir-I ow would you like create t’s not easy to be a flipper in tual assistants, private investors, hard your own “Money List”? I Southern California. The prices money lenders, and other real estate have one, and every success- are steep, the competition fierce, brokers. ful real estate entrepreneur I knowand the deals are few and far between. “We have a lot of real estate agents has one. Your money list is simplyYet, professional rehabbers Christian and brokers who bring the deals to your list of customers who will doYepez and Ruth Ortiz not only find a us because they know we are serious business with you on a consistentway to make it work, but they profit all-cash buyers,” Ortiz says. “We also and profitable basis. This list is yourhandsomely month after month. have personal and virtual assistants most valuable asset in your real estate Known as the “Property Flip Pros,” who are looking for deals and submit- business. Without it, your businessYepez and Ortiz credit their success on ting offer after offer.” will not flourish; with it your busi-their many years of real estate educa- So many offers are made, that theytion (they have been attending semi- Continued on pg. 9 Continued on pg. 4 INSIDE: How to Turbo-Charge Your Portfolio • PLUS: What Type of Investor are You?
Decrease Your Tax Liability Tips from Robert Hall & Associates By Stephen Hall, E.A.E veryone needs to file a tax return. However, however we are not attorneys and recommend advis- tors who do rent- are you maximizing your deductions while ing a reputable attorney to plan a strategy unique to als, management, limiting your tax liability? Throughout the your situation. rehabbing, whole- year, we find that some of the same ques- Question 3: What are the most audited deduc- saling, retailing,tions get asked over and over, especially by those in tions? foreclosures, shortthe real estate industry. A: For landlords, the most audited deductions are sales, commercial, repairs on a property. The IRS verifies the expenses brokerage and manyQuestion 1: What can I do with an investment that that are deducted under repairs that fall within the cat- other types of realwent bad? egory of “wear and tear” on the property, not capital estate activities. InA: In the current economical climate, many investors improvements. Capital improvements are deductible order to qualify asare facing this issue. It is important to plan strategi- over a period of 27 ½ years for residential rental prop- a real estate pro-cally to deduct the losses from your current tax re- erties. fessional there areturn on either future income or from previous years. Question 4: Am I a real estate professional? many activities thatThis is called a Net Operating Loss (NOL) carry back. A: The requirements are as follows: fulfill the IRS hour-This strategy can generate additional refunds to get 1. More than 50% of the individual’s personal servic- ly requirements and can be easily documented.you back on your feet quickly. For example, if you es during the tax year are performed in real propertylost $500,000 on investments, the IRS may create a trade or businesses in which the taxpayer materially Some examples of these activities are:Net Operating Loss of $350,000. participates. The taxpayer has the right to carry the losses for- 2. The individual spends more than 750 hours of ser- Finding Property:ward or elect to carry the losses back two or three vice during the year in real property trades or busi- 1. Check and review sources for finding investmentyears. By tax planning, the taxpayer can get refunds nesses in which the taxpayer materially participates. propertiesfrom prior year taxes or offset future income. With 3. Real estate has to be over 50% of your time and 2. Develop a list of bird dogs as sources of good buysproper planning, taxpayers can turn a bad investment income. and motivated sellersinto an opportunity to increase cash flow or reduce One tax benefit is the ability to deduct 100% of your 3. Meet with bird dogs as sources of good buys andfuture income. rental property losses against other sources of income. motivated sellers.Question 2: Should I have my rentals in an LLC? The real estate professional classification can be usedA: From a tax standpoint, Limited Liability Compa- as a power tool to offset income and minimize your Due Diligence:nies (LLC) is a versatile tax entity with many tax ben- tax liability. 4. Do a market/location analysis including emergingefits. Based on the tax scenario of the taxpayer, the Question 5: What activities count towards my or reemerging locationsLLC can be a single member, multi-member, or even hours to be classified as a real estate professional? 5. Checkout specific neighborhoods performing aelect to be taxed as a Corporation. A: Well, a real property business is defined as a real neighborhood analysis Each option provides a unique set of advantages property development, redevelopment, construction, 6. Physically go out and search for investment proper-and disadvantages. Furthermore, LLCs are statisti- reconstruction, acquisition, conversion, rental, op- tiescally less audited than a Schedule E on an individual eration, management, leasing or brokerage trade orreturn. LLCs also provide a layer of asset protection; business IRS 469(c). This includes real estate inves- Continued on pg. 5 CashFlow Express • Page 3
Find More Money for Deals, cover storyness will grow by leaps and bounds. Let’s go over a quick scenario you maybe familiar with: You’ve spent hundreds,maybe thousands, of dollars on marketingto find sellers, you find that perfect sell-er who is begging you to help them getout of their real estate woes, you get theproperty under contract and are ready toassign that contract for a nice fee—that’swhen you realize you can’t find anyoneto sell the contract to, you don’t have themoney to close on it yourself, and you endup telling the seller you can’t help them.Sound familiar? Now let’s change that scenario: You getthat property under contract and you havehundreds of hungry cash buyers ready tobuy that property from you! Nice, right? I always tell my students that if theywant a successful and thriving businessthey absolutely must have a cash buyer’slist. By having cash buyers who are ac-tively purchasing property in your area,you will be able to sell your properties It’s called Find Cash Buy- and stream- are also included: They have a template ofquickly and you will not have to worry if ers Now created by Kent l i n e e f f i - a variety of letters you can send to thesethey (or the property) will need to qualify Clothier of the well-known c i e n c y s o buyers — they’ll even mail merge it withfor a loan. These cash buyers can close MemphisInvest.com and t h a t y o u the list you just created. Or if you don’teasily, which means more money in your 1-800-SELL-NOW compa- can extract like mailing it out yourself you can havepocket! nies. (The website is: www. yourself them do that for you! Talk about automat- So how can you find these cash buyers? FindCashBuyersNow.com) from daily ing your business.You can go the traditional route by attend- I had a chance to ask Kent tasks that What I really liked about the Find Cashing investment club meetings, network- some questions about his no longer Buyers Now system is that it’s easy to useing, maybe even blogging and drawing a business and his Find Cash require your and investors can easily start finding cashfollowing of cash buyers. I’ve done this Buyers Now system. Now time.” buyers in any area. Kent and his partnersand I know many others who have been for those of you who do not H e h a s created these systems in their own busi-successful at doing this. It’s taken years know Kent, you’re in for a certainly ness and have now started teaching oth-to grow my list — and I’m happy that I treat. d o n e t h a t ers how to use this automated system too.have a great list of buyers! After leaving the grocery w i t h t h e Currently there are over 3,000 weekly us- Now what if, instead of taking years, industry, he turned to real Find Cash ers benefitting from this system! you can build your cash buyer’s list in a estate because of its low bar- Buyers Now So if you’re just starting your real estatecouple of minutes? Well I had a chance rier of entry and ability to generate cash system I tried. My experience with the business or you want to grow it quicklyto check out a great system that not only quickly. system was great. I simply chose the ar- and effortlessly, be sure to explore thefinds these cash buyers in literally a few From there he and his family started eas I wanted and the dates when the prop- Find Cash Buyers Now system online:minutes anywhere in the country but also creating systems in their business. I asked erties in the area were purchased with cash www.FindCashBuyersNow.comgives investors the tools to contact them him what’s the one piece of advice he could and I had a list of 4,000 buyers in a couple It’s time to automate your business justand build a business the right way. give readers, and he said, “Design your of minutes! They even break it down by as Kent does: “Focus on your passion and A couple of weeks ago I had the plea- real estate business to be a ‘business’, not commercial and residential properties. build a business that will allow you tosure of testing out this system for myself. a hobby or a ‘job’ …automate processes Now let’s talk about the great tools that spend quality time pursing that passion.” Be a Guest at Our Next Expo for FREE Learn From the Top For Real Estate Investors, Home Buyers & Homeowners Ca$hFlow EXPRESS No. 1 / Vol. 1 2012 Passive Income for Today & Tomorrow FREE Investors Manifest a Experts in the Nation! Learn How to Create Stock •Credit Repair & Business Market Wealth Today “Cashflow” Mindset By Doug Carver Organizer Pasadena and Burbank estate investing, trading stocks, building a strong MLM business, etc. You will not I Cashﬂow Meetup Groups succeed. It’s like trying to grow corn in Lines of Credit a ﬁeld of sand. The seeds will not germi- can remember my ﬁrst time play- nate and you’ll end up with next to noth- ing Robert Kiyosaki’s Cashﬂow ing to harvest in the fall. board game about eight years How, you ask, does this relate to the ago and how it Cashﬂow game? started a chain Well, after playing of events that continues the game a bunch to this day. What stuck of times, I learned •Wealth Building Education with me most was not the the “how to” of “how to” of playing the getting out of the game but the people that rat race, but I still I met at the event. These was not able to were not like the normal take what I learned people in my life that from the game and sign up online at: By Tyrone Jackson companies and products with which would tell me I was crazy Dougthe Cashﬂow gameChris Hanson dis- play Carver (left) and to group members. apply it to my real- you are familiar. for trying to start my own life ﬁnancial situ- TheWealthyInvestor.net Yes! real estate business or ation. However, I •Access to Property Deals If you’ve ever opened a can of You can be Coca Cola on a hot summer day and that ﬁnancial freedom was impossible realized that the time I was spending with rich from felt refreshed and invigorated, why without a steady well-paying job. The my new Cashﬂow friends was changing owning real not own the stock? It’s a product you people I met were excited about learn- the way I thought about money and my estate and trading stocks. know with a story you understand. ing and expanding their knowledge on ﬁnancial future. I no longer viewed the We’ve all heard the story of the When I say “a story you understand,” how to achieve ﬁnancial freedom. They stock market as a giant rigged system for little old lady who lived modestly I mean to say that you understand were active investors in real estate and losing money. I began to see the tremen- and worked as a school teach- how the Coca Cola the stock market. They were small busi- dous opportunities in the sinking real es- er for 40 years. She never Corporation makes ness owners with a passion and vision tate market even as many people I knew Self Directed IRAs/401K earned more than $35,000 per money, or to ex- for creating more ﬁnancial success in were losing money on deals that had gone year, owned a modest home, press it in Wall their lives. Overall, they had a mindset bad. Overall, I saw for the ﬁrst time op- and shared her life with two Street terms, you for prosperity that I like to call a “Cash- portunities all around me to create wealth cats. Once she died, her rela- understand how ﬂow” mindset. even as the newspapers talked constantly A lot of people complain that Kiyosaki of the “Great Recession.” www.realty411guide.com/events tives discovered a $150,000 the company earns life insurance policy and $1.5 revenue. The more does not provide the speciﬁc details on Today as a result of my ongoing in- million in stocks that she left bottles and cans of how people should implement his strat- volvement playing and organizing local to the elementary school’s Coke that Coca egies to create ﬁnancial freedom in his Cashﬂow events in Southern California, scholarship fund. Cola sells around books and programs. Truth is he never I have a thriving real estate investing •Private Money Lending The national media loves the world each day, spells out a step-by-step “how to” for business. It was after speaking with one to air these stories. It seems the larger the com- building long-term ﬁnancial freedom. of my Cashﬂow friends who was a real there are several old ladies pany’s proﬁt. Over What he does teach is far more impor- estate investor that I was encouraged to who ﬁt this seemly unique the past ten years Coke stock (symbol tant, and that is how to create a “Cash- start wholesaling distressed properties. It proﬁle year after year. How could KO) has risen from around $40 per ﬂow” mindset. Kiyosaki describes it in turned out to be a great decision. More that be? share to a high of $71 — $1000 in- his book Cashﬂow Quadrant moving recently, I’ve begun to learn how to suc- Investing in stocks is not the vested in Coca Cola stock ten years your mindset from the E (employee) and cessfully trade in the stock market using world’s most challenging task. In ago would be worth $4,100 today; S (self-employed) side of his Cashﬂow options. As a self-proclaimed real estate quadrant to the B (business owner) and “zealot”, I never would have dreamed of •Mortgage Refinancing fact, at its core, it’s very simple. The $10,000 invested in Coca Cola stock truth is that the stock market creates would be worth $41,000 today. I (investor) side of the quadrant. In lay- investing in the equity markets. Howev- millionaires every year. Investing in If you spend more than $100 per man’s terms, it’s the mental shift from er, after playing Cashﬂow 202 with my stocks, with wealth in mind, is easier year eating fast food, why not own someone who seeks ﬁnancial security at Cashﬂow friend ,who is an active trader, than you think. the stock? Over the past ten years all costs to someone who can conﬁdently and learning about his trading system, I McDonalds stock (symbol MCD) has and knowledgeably take measured risks. was able to see the opportunity before Invest In What You Know risen from a low of $15 per share to a This is a simplistic deﬁnition but a very me. I now fully expect that investing in high of $95 per share. important one to understand. Without the the markets will be a huge part of my fu- or simply call 310.499.9545 Wanna be a good stock market in- correct mindset, it really doesn’t matter ture ﬁnancial success in addition to my •Apartments Investing vestor? Keep it simple and start with Continued on pg. 12 how much you learn the “how to” of real Continued on pg. 2 Personal Finance News from the Publishers of Realty411 Magazine - www.Realty411Guide.com •Tax Liens & Tax Deeds •Property Rehab Wealth Real Estate •Lease Option Vol. 1 • No. 4 • 2011 •Short Sale •Probate INSIDE: Get Out of the Rat Race with Sam Sadat The Master of Passive Income Motivation Speaks Discover Why Now is the Time to Buy! Learn from the RE Divas To get your free Credit Repair Book, visit www.SFBAI.com Call: 510.491.4161 • Email: info@SFBAI.com Welcome to Sam’s RE Club at the Beverly Hills Country Club CashFlow Express • Page 4
Decrease Your Tax Liability, pg. 37. Contact prospective prop- 27. Do a pre-closing inspec-erty owners tion of the property8. Do a preliminary quanti- 28. Attend the closing of thetative analysis on properties purchase of the property(such as the cap rate) 29. Take care of any post-9. Do a preliminary “drive- closing mattersby” property inspection10. Make and negotiate pur- Follow-up:chase offers on property 30. Follow-up to see if any11. Verify the income, ex- prior prospective sellers arepenses, vacancies on the more prone to renegotiatingproperty’s operating state- 31. Renegotiate the transac-ment tion to finalize the purchase12. Review leases, utility as per the above listbills, maintenance contracts,other pertinent documents There are many more activi-13. Do a thorough physical ties that qualify you as a realproperty inspection analy- estate professional such assis operations, management,14. Obtain Estoppel State- rehabbing, selling, exchang-ments from the seller and ing, seminars, webinars,tenants. and many others. Do this15. Forecast projected in- and fully deduct your rentalcome and expenses for a to- losses without limit.tal projected annual yield Real estate investors should not be afraid of theOffers and Contracts: IRS. As long as you docu-16. Make final offers ment your time and expens- es, YOU, the taxpayer, will17. Prepare contract for pur-chase of property win. "Price is What You Pay, Value is What you get”18. Review seller’s contract The bottom line is the fol- - Warren Buffett, American business magnate, investor, and philanthropistfor purchase of their prop- lowing: It is important toerty have a solid strategy in place when embarking on any real e s t a t e v e n t u r e . T h r o u g hFinancing Property: proper planning your taxes19. Check out sources of fi- will be minimized.nancing for acquiring prop- Remember what Supremeerty Court Justice, Learned Hand20. Review member credit said, "Any one may so ar-reports; repair or correct ac- range his affairs that his tax-cordingly. es shall be as low as possible;21. Prepare a credibility and he is not bound to chooseprofile package that pattern which will best22. Meet and develop rap- pay the Treasury; there isport with lending sources not even a patriotic duty to23. Prepare a loan package increase ones taxes.”for a property acquisition24. Arrange for financing Stephen Hall is President offor acquiring property Robert Hall & Associates,25. Negotiate the seller to an accounting firm that spe-hold financing cializes in real tax planning, including incorporating.Closing Property: For over 40 years, they have26. Prepare for closing of assisted landlords and realthe prop. purchase, such as estate industry profession-arranging inspections, cer- als on strategies to minimizetificates, etc their taxes. Need Assistance Getting Started? We Are in the Business to Help YOU. Investing Success can be Yours! Work with our Team Members. Meet Our Affiliates, Property Managers & Network Members. We are in TOP MARKETS around the country and we can refer you to reputable people in the industry. Want More Information? Need Help? Don’t Know Who Being a Landlord is to Call? Contact us anytime for Easy with information, referrals or help. the RIGHT team! Call 310.499.9545 or Realty411guide@msn.com CashFlow Express • Page 5
Commercial Property News Craig Lieberman, CCIM, discusses Realty TrendsI difficult exchange, Lieberman sure and been forced into rentership status. Even the t’s easy to sell real estate when it has is proud of the fact he was able retirees are seeking rentership in larger numbers.re- transformed your life. Craig Lieber- to save his exchange client well flecting their growing preference for travel in lieu of man, broker and founding managing over a half-million dollars in being encumbered with the cost and responsibilities director at the Apartment Investment capital gains tax. The exchange of homeownership, especially in light of the equitySpecialists, located in Santa Barbara, Ca- accommodator involved hails lost and unavailable to be tapped by these retirees aslif., knows firsthand the benefits of prop- Lieberman’s creative expertise a consequence of the recent housing bust. All thiserty investing. He traces his real estate as exemplary of why Lieber- increasing demand for rental units in our economyroots back to 1978, when he worked on the man has been such a successful means increased occupancy rates, which ultimatelyTrans-Alaskan Pipeline project. Lieberman apartment property broker – as translates to increased rents and revenues to the apart-says he was making too much money as a part of her compliment of the ment property owners.laborer on this behemoth project, accord- company’s brokerage efforts, Although apartment developers are realizing thising to his accountant, not to be involved she said “they came to bat for an commercial sector offers strong demand potentialin tax-sheltered real estate investments. That was the exchange client with extremely difficult replacement increasing feasibility potential, the number of unitsimpetus for his investment in his first apartment prop- property parameters, and it was like watching a magi- coming on line is being held in check by the lack oferty – a five-plex located in Costa Mesa, California. cian pull a rabbit out of a hat”. infill development opportunities, at least, along the As a consequence of seeing cash flow and profit Lieberman’s involvement in the ownership and coastal areas. Moreover, the cost of construction andfrom his first investment venture, he has been in- brokerage of apartment properties has grown into a the difficulty in securing construction financing isvested in apartment properties in some fashion ever strong passion putting a damper on new construc-since. This very niched experience, along with his for this particular tion activity that would otherwiseconcentrated education – earning both master’s and commercial real become a competitive threat to thebachelor’s degrees in Real Estate Appraisal and In- estate sector. He existing rental housing stock andvestment Analysis from one of the premier universi- argues apartment place a ceiling on occupancy andties in the nation, as well as achieving the premier properties are cur- rental rates.C.C.I.M. (Certified Commercial Investment Manag- rently the stron- Also adding significantly toer) designation, the highest designation available to gest real estate investment vehicle available because the bottom line of apartment owners is the historicallycommercial real estate professionals – makes him par- of the combination of the unusually strong demand low cost of borrowing. Because this expense dispro-ticularly well suited to give his clients valuable real for rental units by apartment dwellers in addition to portionately affects the total cost of ownership, thisestate investment advice to optimize their particular the availability of the “cheapest” money for apart- “cheap” money is helping owners achieve rates of re-investment goals. This very concentrated background ment financing in history, the combination of which turn not normally seen in apartment property owner-in apartment property investment has evolved into is swelling the bottom line and returns of apartment ship. Currently, with treasury rates at all time lows,Lieberman founding and developing a very success- property owners. Lieberman contends the “stars are the index in which most apartment mortgages are tied,ful and respected apartment brokerage and property aligned perfectly for apartment property investors” to some five-year and ten-year mortgages are at or aboutmanagement company, the names of which are the earn generous rates of return – apartments are current- 3% and 4%, respectively, making these mortgage rates“Apartment Investment Specialists” and “A.I.S. Prop- ly hailed as the “darling real estate investment type”. competitive with house mortgage rates.erty Management Services”, respectively. The unusual demand for rental units by the “X” and So, why does Lieberman think apartment properties His company doesn’t handle residential properties “Y” generations (the largest consuming age cohort of are the preferred real estate investment vehicle? Heand prides itself in filling a much need void.In fact, rental units) as well as “baby-boomers” and retirees, concluded our interview by noting that there is reallyhis commercial brokerage and property management stems from several significant demographic, psy- nothing negative about apartment investing from ancompany transacts with apartment properties exclu- chographic and life-style paradigm shifts. The more economic perspective – demand is very strong andsively along the central coast of California, from San youthful generations would rather rent than own, so will continue to be so, while new supply is held inLuis Obispo County down to the San Fernando Val- they can be free to take jobs anywhere in this job- check, the disequilibrium of which will continue, atley. less economy without the concern of selling a house least for the foreseeable future exert upward pres- Lieberman is a person who admits to taking his in a tough housing market, the economic conditions of sure on occupancy and rental rates and, ultimately,work very seriously but likes to have a good time and which is also leading to deferred marriages and par- on property revenue; at the same time, mortgages,enjoy life. In his own words, “I work hard and play enting and consequential increased rentership rates; normally the largest cost component of ownership,hard.” and, with the dismal housing trends of recent past, the are the lowest seen in history. These conditions are His subscribing to a strong work ethic, which in- allure of homeownership has been challenged, also providing apartment investors generous returns andcludes working hard for the best interests of his cli- making renting seen as a preferred alternative by most increased values.ents, has manifested, for example, into the company of the constituents of this population group. Consequently, Lieberman sees no downside toreceiving the prestigious 2011 Jack Kelly Exchange of The “baby boomers” have also increased demand apartment property ownership; in fact he says its po-the Year Award awarded by the Santa Barbara Associ- for rentals – a significant number of individuals in tential will be bolstered because, “everyone needs aation of Realtors. In this particularly complicated and this age generation have lost their houses to foreclo- roof over their head”. NEED A WEBSITE YOU CAN MANAGE YOURSELF? CUSTOM WEBSITES BUILT ON WORDPRESS COMPLETE DESIGN SERVICE SOCIAL MEDIA MANAGEMENT Official Webmaster for Realty411 Magazine .com 805.241.7828 CashFlow Express • Page 6