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calIFoRnIa InvestoR QuaRteRly Issue 19 octobeR 2011 FRee subscRIptIon The Moment of Truth The following are quotes from a document called, “The Moment of Truth.” It was written by The National Commission of Fiscal Responsibility and Reform. This document is dated December 10, 2010. Throughout our nation’s history, Americans have found the courage to do right by our children’s future. Deep down, every American knows we face a Real Estate Radio Show moment of truth once again. We cannot 590AM play games or put off hard choices any longer. Without regard to party, we have satuRdays FRom 6:00-6:30pm on a patriotic duty to keep the promise Inland empIRe’s KtIe 590am of America to give our children and grandchildren a better life. FEATURES As members of the National Commission on Fiscal Responsibility Kaaren Hall........................ 3 and Reform, we spent the past eight months studying the same Amanda Han ..................... 4 cold, hard facts. Together, we have reached these unavoidable Aaron Norris ..................... 7 conclusions: The problems are real. The solution will be painful. There is no easy way out. Everything must be on the table.” James Conaway .................. 9 Randy Grigg..................... 10 The President and the leaders of both parties in both chambers of Congress asked us to address the nation’s fiscal challenges in this decade and beyond. We have worked to offer an aggressive, fair, balanced and bipartisan proposal — a proposal NEWSLETTER TEAM as serious as the problems we face. None of us likes every Bruce Norris element of our plan, and each of us had to tolerate provisions Aaron Norris we previously or presently oppose in order to reach a principled compromise. We were willing to put our differences aside to Rich Durant, Graphic Design forge a plan because our nation will certainly be lost without one.” Laura Hamilton, Editor In the weeks and months to come, countless advocacy groups and special interests will try mightily through expensive, dramatic, and heart-wrenching media assaults to exempt themselves from shared sacrifice and common purpose. The nation’s interests, not special interests, must prevail. tnG calIFoRnIa InvestoR QuaRteRly – octobeR 2011 This report deals with our country’s projected debt far tax “gifts.” What other asset can you sell and have a out into the future, as well as our annual fiscal debt $500,000 profit completely tax free? What other asset in our immediate future. The choices that have to be can you sell, and in exchange, send all of your profit made will force us to deal with very taboo topics…the tax deferred to the next property? third rails of Social Security and mortgage interest deductions just to name two. At immediate risk is the policy that allows the homeowner to deduct the interest they pay. Part of the Our most immediate problem has to do with tax above comment, “special interests will try mightily to revenue and elevated expenses due to unemployment. exempt themselves from shared sacrifice,” is directed In 2010, our tax revenue was 15% of GDP (the lowest to groups like the National Association of Realtors, level since 1950). However, federal spending was about the Mortgage Bankers Association, etc. 24% of GDP, creating about a 9% shortfall. There comes a time when kicking the can down the road has Another quote in The Moment of Truth Report states: to stop and, according to the title of this report, that time has been reached. We urge our leaders and citizens with principled concerns about any of our The chart below shows where we are headed in the recommendations to follow what we call next 30 years. Isn’t it amazing what a few “mid-course” the Becerra Rule: Don’t shoot down an idea corrections can make to the end result? If we adopt without offering a better idea in its place. the suggestions of this committee, we’ll end up with a declining debt as a percentage of GDP. If we keep With that thought in mind, I think the real estate moving in the direction we’re going now, we could industry should consider, in advance, what likely will well be in excess of 200% of GDP. be asked of us. How important is the interest rate deduction to the buyer’s decision to own a home? Is As real estate investors, we need to realize that some it really why we buy or is it just a “perk” that we are of the assumptions we’ve made about write-offs and accustomed to? At 4% interest, it takes a pretty big capital gain rates may soon change. The real estate mortgage to get over the standard deduction in our industry has been the recipient of some very nice federal tax code. I wonder what percentage of owners Figure 1: Debt as a Percent of GDP The Extended-Baseline Scenario generally assumes continuation of current law. The Alternative Fiscal Scenario 2 incorporates several changes to current law considered likely to happen, including the renewal of the 2001/2003 tax cuts on income below $250,000 per year, continued Alternative Minimum Tax (AMT) patches, the continuation of the tnG calIFoRnIa InvestoR QuaRteRly – octobeR 2011 actually receive no tax break because the standard Estate event on October 14th, we’ll be talking about deduction exceeds their annual interest payments. this trade. What if we could give them what they want in exchange for something that would be extremely I think the industry will be asked to do its share. I beneficial to millions of people for many years to think that’s fair and reasonable. I also think that there come? I know we’re sold out, but I hope you particpate may be a trade we can make. During the I Survived Real in the online feed and respond to the questionnaire. Don’t Leave Your 401k BehinD Written By: In the bustle of changing jobs, many people forget K aaren Hall about their 401(k). Don’t worry, everyone makes President mistakes. But don’t make another one, not when it uDirect irA ServiceS comes to your retirement. Do your homework and 2522 chAmberS roAD, Ste 100 find the best investment for you. A partial list of these tuStin, cA 92780 714-460-5505 investments includes: • Residential real estate, including: apartments, The falling values of stocks have created a $6.6 trillion single family homes, and duplexes deficit in the retirement savings of Americans according • Commercial real estate to a study commissioned by Retirement USA. How we • Undeveloped or raw land can take control & protect our retirement accounts? • REITs (Real Estate Investment Trusts) • Real estate notes (mortgages and deeds of I say it’s time for Americans to realize what has been trusts) a best-kept secret. What is that secret? It’s the self- • Life Settlements directed IRA. For over 35 years we’ve been able to • Promissory notes direct our IRAs into alternative assets (not the stock • Private limited partnerships, limited liability market). companies, and C corporations • Tax lien certificates You can take control and roll over your old 401(k) into • Foreign currencies a self-directed IRA. Why? That part’s simple, you can • Oil and gas investments choose from over 45 different asset classes! The IRS • Publicly traded stocks, bonds, mutual funds doesn’t say what you can invest your IRA in; they only (see our Brokerage Information) tell us what we CAN’T invest in (www.IRS.gov Pub • Private stock offerings, private placements 590). That is a very short list. The IRS tells us we • Judgments/structured settlements cannot invest our IRA dollars in: • Gold bullion • Car paper 1) Life Insurance Contracts and • Factoring investments 2) Collectibles • Accounts receivable • Equipment leasing Everything else is fair game so long as it’s for “investment purposes only.” So your IRA will not Don’t ignore your old 401(k). Put it back to work with be buying, for example, a home for you to live in. a self-directed IRA. View our website at It can, however, buy a property to rent with rental www.uDirectIRA.com or contact us at income flowing right back into the IRA tax-free or info@uDirectIRA.com. Our toll-free number is tax-deferred! (866) 538-3539. 3 tnG calIFoRnIa InvestoR QuaRteRly – octobeR 2011 how to avoiD uDFi taxes when investing in reaL estate with Your retirement FunDs Written By: (meaning you do not pay taxes on that money until you take the money out at retirement age) or tax amanda Han CPA free (meaning no more taxes EVER from this point KeyStone cPA, inc, forward). So the benefit of investing with money from 1912 bAtAviA Street Suite J your IRA is your ability to let money grow year after orAnge, cA 92865 year without losing part of it to taxes. The extent to (877) 975-0975 which you will benefit will depend on the number of years you have until retirement and the number of years Over the past few years, we have seen a significant of compounding growth that money can go through. increase in the amount of retirement funds (IRA) being invested in real estate deals. I, myself, have also Another great advantage of investing in real estate utilized my retirement money to invest in various real with retirement funds is that generally, no additional estate deals. The ability to invest in real estate using tax planning is needed. For example, since there are your retirement money is called self-directed investing. no taxes due currently on the monthly income, then So why are we seeing such a dramatic increase in the we eliminate the need to do cost segregation studies amount of retirement funds being invested in real estate to accelerate depreciation. Also, because of the tax now? This phenomenon has often been referred to as preferred treatment of IRAs, there is generally no need the “Perfect Storm.” Several factors that contribute to to deal with Section 1031 exchanges on your real estate the Perfect Storm are: when you sell it because all the transactions within the retirement account are already tax deferred! 1. Significant decreases in the value of traditional retirement investments such as Having said that, there are pitfalls to watch out for stocks, bonds, and mutual funds. when investing in real estate with retirement money. 2. The opportunities which now exist in real As real estate investors, we all want to maximize our estate investing as a result of depressed ability to “leverage” our money. The great news is that property values. you can also do it with your self-directed money! 3. Increased awareness…for the first time There is, however, a tax trap associated with self- the public is becoming aware of this directed IRA investing. Some of you may have heard opportunity that has been available for of the term Unrelated Debt Financed Income Tax over 30 years. (UDFI). Essentially, this is a tax imposed in certain instances when you self-direct your retirement funds As real estate investors, we should become familiar into real estate and use leverage at the same time. with the opportunities now available in self-directed retirement investing as a result of this trend. As For example, if you purchase real estate using your an investor, you may be able to tap into your own self-directed IRA with 50% debt and earn $50,000 of retirement money to invest in real estate deals. income, that income is generally subject to the UDFI tax of 35% resulting in a tax bill of close to $9,000 for One of the greatest benefits of investing in real estate the year. with retirement funds is the ability to defer taxes. The income generated by an investment within the Before you get discouraged, there is a loophole around retirement account is generally either tax deferred this and it is very simple. Rather than using a self- 4 Thank You! Without the help of our incredible sponsors and walkers, none of this is possible. MVT PRODUCTIONS Adrenaline Athletics Las Brisas Escrow Realty 411 Magazine GOLD SPONSORS Coldwell Banker Pioneer Real Estate Leivas Associates Rick and LeaAnne Rossiter Conaway and Conaway Mike Cantu Southwest Riverside County Board Delmae Properties Northern California Real Estate of Realtors Elite Auctions Investors Association Starz Photography Inland Empire Investors Forum Northern San Diego Real Estate uDirect IRA Inland Valley Association of Realtors Investors Association Wilson Investment Properties Keller Williams of Corona Paciﬁc Sunrise Mortgage Tony Alvarez Keystone CPA Personal Real Estate Magazine Tri-Emerald Financial Group Kucan & Clark Partners, LLC Raven Paul & Company Westin South Coast Plaza Alisa Clum Geoffrey Varga Manuel Alvarado Rhonda Van Buren Susie Aincham WALK TEAM Andrea Jennings Georgette Leal Maria Torres Robert Maletti Terri Quenzer Andres Britto Gregory Norris Michael Ceccon Robert Pereira Thomas Heubach Angel Bronsgeest Iris Veneracion Mike Bacich Ronald Jung Tiffany Humfeld Barbara Plate Janet French Myron Williams Sabrina Segal Tina Barth Bobi Alexander Jean Scheidt Noelle Zhang Sandy MacDougall Vickie Watts Bonnie Kitahata Jeff Veresh Phillip Silver Sara Cramer Warren Cramer Bruce Norris Joseph Gain Reshma Patel Sarah Gain Wendy Chiem Cesar Morea Julie Falen Cristin Gonzalez Julie Oppen David Torres Kaaren Hall David Tsai Kari Silver Diana Barlet Kathryn Morea Ed Chandler Kyle Humfeld Erin Ludden Lili Etezady Francisco Ramirez Lori Renberg Freda Sanders Lorna Atterbury Gabriel Suppes Lynn Heubach tnG calIFoRnIa InvestoR QuaRteRly – octobeR 2011 directed IRA to invest in leveraged real estate, instead As you can see, a Solo K Plan may allow the taxpayers use a self-directed 401(k) to invest in real estate. to contribute a total of up to $109,000 during the year to save close to $50,000 in taxes each year! This is One of the biggest benefits of investing in real estate significantly higher in dollar amount as compared with with your self-directed 401(k) is that this vehicle an IRA contribution limit of $6,000. Not only do you actually allows you to use your retirement funds get a huge tax write off in the years of contribution, but to invest in leveraged real estate without the taxes the funds can then be utilized immediately to invest potentially associated with UDFI. With leverage being into real estate and receive tax deferred treatment! one of the preferred ways to invest, real estate investors need to tap into the benefits of this loophole. As we talked about before, retirement investing is one of the most powerful tax saving tools that is available To continue with the example above, if you make the to us as taxpayers. If you think the self-directed 401(k) same purchase under your 401(k) rather than your may be the best retirement plan for you but already IRA, you can avoid the UDFI tax all together which have another type of plan established, consider the saves close to $9,000 in taxes! This is a great benefit opportunity to roll those amounts over. Most types that the Solo 401(k) plans have above most other types of retirement accounts can be converted into a self- of retirement plans. directed 401(k) plan. Another great benefit of a self-directed 401(K) plan is in Remember, retirement investing is an extremely the large annual contribution limits allowed. Businesses powerful tool that allows you to pay towards your with a spouse on the payroll can also contribute to the retirement rather than to the IRS. As an astute investor, Solo 401k. Provided the business owner and spouse retirement planning is an essential component to your have sufficient income from the business, taxpayers tax savings plan so make sure you speak to your tax may be able to contribute up to $49,000 each ($54,500 advisor to take advantage of this powerful tool to each if both are age 50+) in 2011. significantly reduce your tax bill! Call or visit our website today California Trust Deed Investing with The Norris Group for your Free Book and DVD. Navigating the profitable world of trust deed investing with the help of one of California’s leading hard money lending companies. • 9% Return • Cash-Flowing Investing California Trust Deed By Bruce Norris • 1 Trust Deeds Only st CA Properties by • No Pooling • Ideal for Retirement Accounts (IRAs) • 8-Year Term • Experienced Team • 60-65% LTV of Experts w w w.TNGtrustdeeds.com * 951.780. 5856 C alifo r nia D ep ar tm ent of R eal E s t ate, R eal E s t ate Bro ker Br u ce N o r ris Financial G roup Inc . , D BA T h e N o r ris G roup D R E Licens e 01219 911 6 tnG calIFoRnIa InvestoR QuaRteRly – octobeR 2011 FaceBook For smarties Written By: You may be wondering why Facebook has more profiles a aron norris than people in both San Francisco and Sacramento. I ViCe President have a question into Facebook on this matter, but it’s the norriS grouP, most likely due to pages/profiles for things like 1845 chicAgo Ave, Ste. c riverSiDe, cA 92507 business, nonprofits, and brands. (951) 780-5856 In comparison, Mercury News and the San Francisco Chronicle have daily circulations of 577,665 and 235,350 What’s so wonderful about technology is that far more respectively. (Source: Audit Bureau of Circulations.) developers are focusing on user interface (UI) and Not bad, but Facebook has almost as many Gen Y’ers experience. An iPad is a perfect example of beautiful as it does total subscribers! interface design. A two-year-old and a senior can both have an amazingly tactile, intuitive, and fun experience Granted, print and Facebook are extremely different without having to know much about the technology channels. Both have their benefits, but the numbers they’re using. in social media are pretty exciting. Properly leveraged, you could be potentially reaching and engaging very Facebook is another of these intelligently-built and targeted demographics. addictively interactive sites. It has increased to over 600 million users since it launched in 2004. Here you can Enough about numbers — now for some tips to engage. see which sexy actress your grandma most resembles Hopefully I’ll reach both those that are beginners and or reconnect with your 3rd grade crush. Or, you can avid Facebook addicts. use it strategically for business. Step 1: Be Interesting It’s still shocking to see so many small businesses Ask someone extremely honest and close to you if you’re completely ignore Facebook as a serious business tool. interesting or not. If you’re told you’re as interesting as Hopefully this chart puts it into perspective. a door knob, don’t worry. Simply skip to step 6 and read the book, Tipping Point. It’s time to figure out if 1,000,000 900,000 you’re a maven, connector, or a sales person. Knowing 800,000 is half the battle. And when you know, you can use 700,000 what you’ve got to get what you want. 600,000 500,000 Step 2: Create Two Separate 226,860 400,000 191,080 125,960 300,000 Accounts 564,940 500,340 805,235 329,620 248,940 945,942 393,060 315,120 466,488 200,000 100,000 0 If you’re just beginning with Facebook, create an San Francisco San Jose Sacramento account. Use your personal email address and only 13-30 31-46 47-64 Population invite close friends and family. Have someone familiar with Facebook settings review important privacy Source: Facebook and US Census Bureau 2010 dataset. This is information on Generation Y, Generation X, and Baby Boomers on Facebook information and settings. Then? Play! Learn the site, compared to the new census numbers for San Francisco, San Jose, and Sacramento. the tools, and the games. Learn how to post pictures, post a status update, and make sure you know the difference between posting on a wall and sending a 7 tnG calIFoRnIa InvestoR QuaRteRly – octobeR 2011 private message. Then listen, but not in the auditory need for it as long as someone monitors and updates sense. Spy on what other people are doing in your the page regularly. network and get to know the rules of engagement. These pages have some additional benefits. Putting in For those where your personal network is almost your physical address allows people to “check in” to 100% uninterested in your work and you plan to use your location when they visit you — thanks to GPS Facebook for business purposes, consider opening a technology. You can also install several apps to allow second account using your business email (it must be a things like your blog, Twitter, and YouTube accounts different email from your personal account). Use this to automatically post content to your Facebook page. exclusively for engaging in business, for networking, These pages can also be used for the “like” buttons on and for customer service. Separating to a business your website and/or to advertise on Facebook to reach account gives you more freedom to talk about work more fans. without your personal friends finding you annoying. It also allows you to “friend” acquaintances without 4. Show Up showing them high school photos of you with a Many people make the mistake of creating an account permed mullet or foot-high bangs. and disappearing. This reminds me of an 8th grade dance. No one is going to talk to you cowering in a In all seriousness, use common sense and watch dark corner. Post interesting content, become an what you post online. If you’ve created a network of indispensable resource, and engage those willing to acquaintances, they don’t always need to know where “like” your page. If you can’t do these things, see you’re at, what your kids are doing, and how many number one above. times you brush your teeth. Facebook has built in some rich privacy features and filters to separate who 5. Advertise sees what, but some might prefer a separate profile only for business. Once you’ve set up a page, why not post an ad to get even more followers? The best way to start is to create a 3. Create a Business or Fan Page simple ad delivered to friends of friends. Set a very low cost per click or cost per thousand (you get charged Facebook has made a lot of changes to the way fan pages work in the last few years. Creating a business when Facebook delivers your ad 1,000 times). Your ad will then only be delivered directly to the networks of page allows you to post information strictly on your the people who already love you. business ranging from address, times open, pictures, and web links. This is not as personal as having a Word-of-mouth friending is a great way to test the personal Facebook account but could easily replace the waters of Facebook ads. Be sure to watch your progress I Survived Real Estate 2011 (SOLD OUT) Watch free online Friday, October 14, 2011 Register at bit.ly/isurvived Limited online spaces. 8 tnG calIFoRnIa InvestoR QuaRteRly – octobeR 2011 and budget. Don’t be afraid to try different wording It’s absolutely acceptable to hire someone to help you and graphics to see what works and what doesn’t. I manage Facebook. However, not your 13-year-old promise it’s much easier than you think if you give it niece who knows nothing of your business and who some time. might litter your wall with lmao, lol, brb, and a host of other acronyms you know nothing about. 6. Hire Someone Treat Facebook like any other serious advertising Facebook marketing can be extremely complex channel. Make sure whomever you have managing depending on your product, budget, and how much understands your product, your values and mission, time you personally have to spend managing pages. and how you expect them to engage your fans and potential customers. However, it’s worth it. Facebook is extremely detailed on what demographics can be reached. Unlike paid Facebook leveraged correctly can be an incredible tool advertising on Google, Facebook can easily target for customer service, networking, and referrals. It’s not genders, ages groups, education levels, hobbies, and just for college kids anymore. interests. Imagine delivering your ad over and over only to single women over the age of 50 who like the book How to Win Friends and Influence People and live in San Francisco. Yep, it’s that powerful. Doing weLL BY Doing gooD Written By: As real estate investors, we know that every property James Conaway has a “personality.” Sometimes this personality is FinAnCiAl strAtegist pleasant and a joy to be around, and sometimes it is conAwAy & conAwAy, quite the ornery personality. So what is one to do? 300 e. birch Street, Suite 109 breA, cA 92821 Well, you could sell it! After all, one man’s poison is (714) 577-8758 another man’s meat! However, it seems like around every corner is a dilemma. If you end up selling the properties for more, you will have to pay taxes on Let me tell you a hypothetical story. Mr. Smart had them! If you sell for less, you will be at a loss. And some extra cash lying around, so he decided to buy keep in mind that there is also the hassle factor a bunch of little houses for $17,700 apiece, and of trying to deal with the properties. So in a case promptly lost money on them. From the start, these such as this, is there a way to do well AND do good? little houses caused him nothing but trouble. They constantly broke down and needed repairs due to Yes! Mr. Smart’s team found out that a “qualified poor tenant management. In turn, no one really appraisal” evaluated the properties at a value of $36,000 wanted to live in a house that constantly caused for each little house. Mr. Smart had already owned them problems, so the houses remained vacant more the houses for more than a year and he was in a 46% often than not. Poor Mr. Smart had to deal with tax bracket! So, to avoid the hassle of renting out his vandalism when they were vacant, and he still had to properties, or trying to put them back on the market pay insurance on them (which never seemed to cover to sell them, he decided to leverage his situation by anything.) To add insult to injury, the property taxes “giving” the houses to charity. In turn, he received a were extremely high. These properties weren’t just $72,000 tax deduction (fair market value), which saved badly behaving properties; they had bad personalities! him $33,120 in taxes. The amount it saved him in taxes is half of the appraised value of the four houses. His 9 tnG calIFoRnIa InvestoR QuaRteRly – octobeR 2011 cost was the appraisal (this can sometimes be paid headache, and help out a charity of his choice, all by by the charity) and the cost of a Quit Claim Deed. thinking smart. Now that’s doing well by doing good! So what did Mr. Smart end up doing with his James and Lorraine Conaway are owners of Conaway & Conaway, a misbehaving properties? He got rid of the little strategic planning firm in Brea, California and hosts of Smart Money Talk houses that were taxing not only his money, but Radio every Monday from 3-4 pm on KCAA 1050AM or on the web also his mental shelf space. He stopped taking www.kcaaradio.com. Conaway & Conaway does not provide tax advice; be losses on those properties, and was able to help sure to consult your tax advisor about your individual situation. out a charity! His true gift to charity was roughly $3,000 (the hard cost of the transfer appraisal and Securities offered through J.P. Turner & Company, LLC (Member $17,700 x 2 - $33,120). The charity may net $40,000 SIPC). Financial planning and investment advisory services offered to $50,000 dollars once they sell the properties. through J.P.Turner & Company Capital Management, LLC (a registered investment advisor). J. P. Turner & Company, LLC and J.P. Turner & So you see, Mr. Smart ended up living up to his Company Capital Management, LLC are not affiliated with Conaway & namesake. He was able to get a valuable tax deduction, Conaway, Inc. or the Norris Group. get rid of the little houses that caused him such a eFFective strategies to maximize income (anD reDuce risk) using singLe FamiLY houses Written By: The goal of this article is to offer you some ideas that, if implemented, might make your life easier and maybe r andy GriGG President even more productive as a single family house investor. elite AuctionS, 1700 cherry Street The information I’m going to share with you hopefully bAKerSfielD, cA 93304 will give you another perspective on buying and (661) 325-6500 holding houses for cash flow. If you’re somewhat lucky and listen to Bruce, you may also capture the growth Holding houses long term for monthly income can that price appreciation offers. Growth that comes create financial independence if you do just a few from appreciation, however, can only be realized if things right. you sell or refinance. Also “appreciation growth” can vanish quickly as we all well know (sort of like stocks). I’ve been the manager of the houses my wife and I Growth through amortization, on the other hand, is own now for 34 years. About 8 years ago we stopped pretty much automatic if you make your mortgage buying houses to hold because we didn’t need any more. payments. The net income produced was sufficient to support our family’s lifestyle. Many of the mortgages have been I would recommend securing a decent paying job or paid off by the tenants who occupy our houses. career to supply the income you need to pay your bills. Flipping houses could work if you could get paid on a Although property values in Bakersfield haven’t consistent basis and made enough each month to pay increased much over 34 years, except during the the bills. When you buy houses to hold using high incredible speculation boom of 2004-2006, rents have leverage, typically there will be little net income that doubled. A decent 3 bedroom 2 bath house in a decent you can use to supplement your immediate cash flow area rented for about $500 per month in 1977. Today, needs. the same house can fetch about $1,000 per month. 10 tnG calIFoRnIa InvestoR QuaRteRly – octobeR 2011 If you can buy right, you should at the very least break even from a net rental income standpoint. My first of many mistakes was to buy houses that my tenants couldn’t afford because I didn’t structure the payments terms properly. You should figure on an expense factor using 40% of the estimated gross rental income. This formula should give you a fairly conservative guideline when you negotiate payment terms when you buy. Many new investors don’t realize the cost of vacancy (especially resulting from a non-paying tenant) and expensive capital expenditures that occur in the future (i.e. sewer lines, old galvanized water lines, roofs and heating/cooling units). A $3,000-5,000 replacement cost for these “components” can take you quickly out of the game if you didn’t buy right and didn’t have an emergency fund for these high-priced repairs that come when you least expect them. Offering potential sellers a few choices to buy their houses worked well for me over the years. Usually two of the proposals were low down with favorable terms (for me), and the third proposal was an all cash offer at After completing the necessary repairs, mowing the usually 50-55% of retail value minus repairs. Because I lawn, trimming the trees and scrubs, possibly spot was buying to hold, the all cash offer was used to make painting the exterior trim, and having the interior the higher priced “term” offers look more enticing. thoroughly cleaned, I was ready for my tenant/ potential buyer. If the cash offer was accepted, I either assigned it to a retailer for a small fee or brought in a well-heeled Over the years, I found out two important things: investor with cash who closed. I then leased back the property with an option to buy half of any equity when 1. They didn’t complain about the cosmetic condition we decided to sell. of the house. 2. They very rarely exercised their option to buy…but When one of the term offers was selected…bingo…I stayed much longer than when I was cosmetically landed another long term keeper. fixing the houses prior to occupancy without allowing my tenants the chance to buy. In the book I recently wrote in honor of Marsha Norris, The Carrot Approach to Monthly Income for Life, the letter to In California, it’s best not to give a tenant an option potential sellers and marketing pieces to generate leads to buy until they’re ready to close. Several other are included. precautionary measures should also be taken so the court, in case of a lawsuit, doesn’t claim your tenant The real thrill starts when you become a landlord! has an equitable interest in your property. In the book Offering a tenant the chance to buy made my life much there are seven specific things you should follow if you easier and my house portfolio more profitable. allow a tenant the chance to buy your house. 11 tnG calIFoRnIa InvestoR QuaRteRly – octobeR 2011 As I indicated, very rarely have my tenants exercised If you want more specific information on buying, their options to buy. If they do, you lose rental income, managing, and using land trusts to hide ownership/ but if you finance the purchase, your cash flow can sell on terms to your tenants, get a copy of The Carrot increase without the concern of management. If they Approach to Monthly Income for Life. It’s FREE if you cash you out, on the other hand, and you don’t want donate a minimum of $75 to Susan G. Komen for the the cash, you can use a delayed exchange to buy more cure. rentals. Another great benefit of selling to a tenant is you don’t pay a commission, and there are no holding Please review the final page of the newsletter for more costs that occur with a vacant property. details or email to Grigger12000@yahoo.com for an order form. the norris group caLenDar = tnG lIve event = specIal a ll day tRaInInG Oct 14th I Survived Real Estate 2011 To attend online for free, register at Please Call (LIVE EVENT SOLD OUT) www.bit.ly/isurvived or to be placd 951-780-5856 on the waiting list call the office Oct 21st Women’s Council of Realtors: East Property ID Buidling Open 8:30am- Valley Chapter 2086 South E Street (@Hunt’s Lane) 10:00am San Bernardino, CA 92408 Oct 27th IVAR Realtors and Technology Ontario Convention Center Open Conference - Bruce and Aaron 2000 East Convention Center Way Norris are both featured speakers Ontario, CA 91764 Oct 28th The Mighty Riverside Sunrise Rotary Riverside Marriott Hotel Open 3400 Market St. Riverside, CA 92501 Oct 29th Cutting-Edge Financial Tactics Mission Inn Hotel & Spa Open Brunch featuring Bruce Norris, 3649 Mission Inn Ave Conaway & Conaway, Keystone Riverside, California 92501 CPA, uDirect IRA. Nov 16th Chino Valley Chamber of Commerce TBD Open 12 tnG calIFoRnIa InvestoR QuaRteRly – octobeR 2011 current trust DeeDs avaiLaBLe The Norris Group has the following 9% trust deeds available. If you’d like to be notified about upcoming trust deed investments, sign up for our free ebook on www.TNGtrustdeeds.com. These are being funded by retirees, doctors, nonprofits, self directed IRAs, and many other sources. For more information on any of these investments or the program, call our office at 951-780-5856 or visit www.TNGtrustdeeds.com Location: Hesperia, CA Location: Victorville, CA Appraised Value: $141,000 Appraised Value: $68,000 Loan Amount: $84,000 Loan Amount: $38,000 Loan to Value: 59.57% Loan to Value: 55.88% Payment to Investor: $630 Payment to Investor: $285 Rent Range: $950 Rent Range: $865 Term of Loan: 8 Years Term of Loan: 8 Years Location: Indio, CA Location: Lancaster, CA Appraised Value: $96,000 Appraised Value: $90,000 Loan Amount: $54,000 Loan Amount: $54,000 Loan to Value: 56.25% Loan to Value: 60% Payment to Investor: $405 Payment to Investor: $405 Rent Range: $1,100 Rent Range: $950 Term of Loan: 8 Years Term of Loan: 8 Years Location: Banning, CA Location: Lancaster, CA Appraised Value: $87,000 Appraised Value: $80,000 Loan Amount: $52,000 Loan Amount: $48,000 Loan to Value: 59.77% Loan to Value: 60% Payment to Investor: $390 Payment to Investor: $360 Rent Range: $1,000 Rent Range: $950 Term of Loan: 8 Years Term of Loan: 8 Years of p of one h the hel For your free book on trust ng wit inv esti ies. t dee d g com pan ld of trus len din ble wor d mo ney pro fita ing har ting the ifor nia’s lead Nav iga Cal g Investin st Deed By Br uc e No rr by deed investing, visit is California Tru www.TNGtrustdeeds.com or call 951-780-5856 13 tnG calIFoRnIa InvestoR QuaRteRly – octobeR 2011 Saturday, OctOber 29th Cutting-EdgE FinanCial taCtiCs BrunCh Tax, Planned Giving, and Investment Strategies for 2011 and Beyond The 2012 tax year may be several months away, but now is the time to strategize on ways to leverage tax, giving, and investing tactics to maximize savings and profits for 2011 and beyond. Join our elite panel of experts Saturday, October 29th, for a unique brunch and learn experience as we explore: • What legislative and regulatory changes could mean for the Southern California real estate market • The 2011 BIG tax write-off opportunity you can’t afford to miss • Tax free & tax efficient ways to extract profits out of your business • Tax deductions NOW for a future gift • Zero estate tax strategies • Alternative investments using self-directed retirement accounts • Selling property in a tax exempt trust • Passive and secured 9% annual returns without the hassle of being a landlord • And much more Whether you’re a retiree, doctor, teacher, government employee, real estate investor, business owner, or just someone wanting to learn more, join us for brunch and get your questions answered by the experts. Bruce Norris James & Lorraine Conaway Amanda Han & Matt MacFarland Kaaren Hall Real Estate and Trust Deeds Expert Financial Strategists, LUTCF, CPA, MBT President The Norris Group CSPG, CRC Keystone CPA uDirect IRA Services Conaway & Conaway When Where Early Pricing Until Saturday, October 29th Mission Inn Hotel October 21st $39 8:30am – Registration 3649 Mission Inn per 9:00am-1pm – Event Ave Riverside, CA 92501 person Register Online at ( $49 after October 21st ) www.tngtrustdeeds.com or call 951-780-5856 California D ep ar tm ent of Real E s t ate, DR E License 01219 911 14 $39 When Where per Saturday, October 29th Mission Inn Hotel person ($49 after October 21 ) 8:30am – Registration 3649 Mission Inn st 9:00am-1pm – Event Ave Riverside, CA 92501 Register Online at www.tngtrustdeeds.com or call 951-780-5856 California Depar tment of Real Estate, DRE License 01219911 Bruce Norris Amanda Han & President of The Norris Group Matt MacFarland Real Estate investing, trust deed Keystone CPA investments, real estate market CPA, MBT analysis. Is the California real estate market really what it 2011 year-end tax strategies you can't afford to seems? Bruce will discuss: miss including: • The statistics behind Southern California real estate • The 2011 BIG tax write-off opportunity trends and the real behind-the-scenes scoop • 3 strategies to legally delay paying your taxes • What government intervention could mean for the • Strategies to pay yourself rather than the IRS future of Socal real estate • Tax free & tax efficient ways to extract profits • Alternatives to owning real estate, without the out of your business hassle of land lording • How to create tax free income from your real • Passive and secured 9% returns with trust deeds estate James Conaway & Kaaren Hall Lorraine Conaway President, uDirect IRA Conaway & Conaway Services Financial Strategists, LUTCF, CSPG, CRC Doing well by doing good including: The ins-and-outs of leveraging the mighty power of IRAs including: • Tax deduction NOW, for a future gift! • Sell your property in a Tax Exempt Trust • Using your IRA as a tool for alternative investing • Zero estate tax strategies • The do’s and don’t’s of Self-Directed IRA investing • How to give without writing a check • How to use your IRA to invest in real estate Securities offered through J.P. Turner & Company, LLC (Member SIPC) • Avoiding prohibited transactions Investment advice and financial planning offered through J.P. Turner & Company Capital • The basics on the “Checkbook IRA” Management, LLC (a registered investment advisor) J.P. Turner & Company, LLC and J.P. Turner & Company Capital Management, LLC are not affiliated with Conaway & Conaway, Inc., The Norris Group, Keystone CPA, Inc., or uDirect IRA Services, LLC. 15 e Carrot Approach to Monthy Income for Life by Randy Grigg Please help the cause of nding cures for cancer! Donate $75 and get a FREE eBook entitled e Carrot Approach to Monthly Income for Life written by Randy Grigg, a 34 year veteran “in the trenches” real estate investor. e book was written in honor of Marsha Norris who courageously battled cancer for 17 years. Her passion for life and her family as well as her incredible tenacity gave me the inspiration to try and give back. Please join me by giving back too! 10 Reasons to get a copy of “ e Carrot Approach to Monthly Income for Life” Plus 1 BIG Reason 1. Where to nd the best houses to buy on terms for long-term investments and the easiest way to make o ers to buy 2. Why o ering tenants the chance to own a home can give you the highest possible net monthly cash ow with the least amount of hassle 3. Why you don’t need to own or option houses in beautiful neighborhoods to make substantial monthly income 4. How to convert houses that need updating and cosmetic improvements Course includes: to cash cows without xing or wholesaling them • eBook 5. How to use an auction to generate the highest possible upfront move-in • All forms, contracts, letters money from your tenants and marketing pieces in Word format 6. Why it’s best not to give a tenant an option to buy until they’re ready to close… especially in California 7. How to create multiple income streams from tenants who rent and tenants who buy your houses Please email Randy Grigg at 8. Using land trusts to participate in future price increases from houses Grigger12000@yahoo.com and you assign a percentage of the bene cial interest. If the feds disallow request an order form for the seller nancing you now will have another tool that you can use ebook. 9. Eliminate holding costs, commission and other selling expenses when you sell your houses All proceeds of your donation will be given to Susan G. Komen for 10. Get all the forms, letters and agreements to become nancially the cure. independent from someone who has 34 years of “in-the–trenches” experience Minimum donation $75 (Please 11. Help women who have or will be dealing with breast cancer donate more if you can). All proceeds of your donation will be given to Susan G. Komen for the cure.
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