Cash Flow From Sale Of Asset At Capital Loss Tax The New Real Estate Bubble

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The New Real Estate Bubble

The economy couldn’t be better for some people. Why? This is because they are in a position to profit from the drop in prices today. Today’s value discounts haven’t been this good since the 1980s. For some, it’s even better than that.

Think it over. Low interest rates. High motivation of the seller. Fewer buyers. Low prices. Government rebates. Tax incentives. You couldn’t ask for a better climate to make a lot of money fast. This is a negative bubble that won’t last forever. Negative news lowers prices and increases profits. I take advantage of it and you should too!

Why are people running away from real estate when it’s so great? Simply out of fear. They don’t know what’s going on. They listen to the news and it’s all bad. They don’t look past the headlines to see an opportunity. Have you ever heard that adversaries get rich? These daredevils are the ones who look at the fundamentals of the economy, then find business sectors with larger than average losses and buy big.

Think of Warren Buffet. That’s what made him rich. They know they will thrive when the economy bounces back because that sector will recover sooner and more than the rest of the economy.

So what am I doing in this economy? I have over 33 years of real estate experience. Bought, sold and held commercial, residential, single family and land. Here are some points I consider:

1) I believe that ownership is the key to long-term wealth.

2) Residential real estate is great in that it is the least risky of all real estate. After all, everyone needs a shell. Err… it’s a house.

So now you know what you need to buy to thrive in this economy (and all others forever). Then you need to know where to buy, what to buy, how much to pay and where to get money for it.

These are key questions that apply to every business. You might even think you know these answers. But what most investors lack is a reproducible plan that addresses all the questions, guides you through the entire process, and delivers profits.

First, let’s focus on where to buy. I believe most people can build a business in their own backyard. This means that there are at least two neighborhoods within a 5-mile radius of your house that would have moderately priced housing. Average price for your market. This is important because it will generate cash flow.

Second, the question of what to buy, I call our business plan Street Smart. Nice houses in nice neighborhoods that nice people with nice checkbooks want to own. Ultimately, my exit plan is to sell houses to clients who live there. More on that later.

Third, how much to pay. This is where skills come into play. Sure, you can avoid all the foreclosure investors and buy on the courthouse steps, but that’s a very risky start and requires all cash. Instead, I look for other ways to find deals that allow me to buy at a discount and control the process. I can evaluate the property, condition, closing time and even financing. The skills and tools I have created for this process provide the discount I need to profit.

The fourth is where to get money. Welcome to my “Seller IS a Bank” program. With proper training, you’ll find that vendors will be your allies in the process. If you know the right words, they will allow you to take over their loan payments. Not only that, but they’ll refund the seller’s financing for the difference. I could never do that if I focused on foreclosures on courthouse steps or short sale deals.

Of course, you need a plan to make this happen more than once. It should include specific education, skills training and proper documentation that will link your profit centers and protection. This is a key business strategy that many investors would miss. They hope for the best and fail miserably.

When it comes to selling real estate in this economy, you need to have a plan for that as well. Here is the next phase in my master plan to make the most money with the least amount of effort that will pay off for many years to come.

We offer our properties in the Rent to Own program. We give clients up to three years to buy, approve the rent for timely payment and then finance if they choose to do so. Friends, there is a HUGE market of people who would like to own a home. They have bad, poor or no credit. They will pay money for the right to build credit with you. Some call them tenants. Yes, the same people who would rent wish they could own a home someday if only they had the chance.

Just imagine all the problems that solves. The tenant (we call them customers) feels that this is their home, and they treat the house and you completely differently. Not only that, but they pay you first, so they’ll earn a rent-to-buy credit.

Here’s an example of the real deal. My Street Smart training clients do deals like this on a regular basis.

A lady inherited a house. She lived there. She had a brother and bought out his share a few years earlier by getting a loan for 50% of the value and then giving the money to him.

She was now struggling with cash flow as work cut her hours. She couldn’t pay the mortgage and worse, every time she turned around the house, it cost her money – taxes, insurance, new roof, new water heater, new privacy fence, etc. That’s why she wanted to sell and move into an apartment. no maintenance headaches.

She knew the property was worth at least $160,000. She was willing to take a discount to get rid of him quickly. Using my seller’s banking philosophy and the right words to make her feel comfortable that she made the right decision, here’s the deal she made:

1) $130,000 purchase price financed as follows:

2) 75,300 Existing Loan Underwriting Payments of $454.24 per month (5.5% interest rate)

3) 45,000 payable at $300 per month until paid (zero interest)

4) 8,000 cash, from which she paid all closing costs.

To fully understand why this is a good deal, you need to compare it to a traditional loan. Since it is an investor property, interest rates are usually higher than for a primary residence. If you could get a loan, the interest rate would be say 7%, 30 years fixed rate. Now in today’s market $8000 down would not be acceptable to a lender. We would like to see at least a 20% reduction. This means that you should get (at least) $26,000 in CASH from the investment properties.

Not only that, but you would pay loan points and loan closing costs of about 3%…or $3,660 CASH. So with the traditional purchase method, most investors would tie up $29,660 CASH and have to pay $691.92 over the next 30 years, for a total of $249,272.42.

Because of my “Seller IS Bank” program, I am able to pay off her loan of $300 PRINCIPAL per month with only interest. This loan is paid off in 150 payments or 12.5 years, with payments starting 3 months after purchase. The loan we took over runs for 26 years. This puts my cost of funds at $197,448.32 or a savings of $81,484.41. Not only that, but I don’t need a loan because the seller is a bank and the loan insurance is their property. Plus, there are monetary savings and no closing costs. Wow! Lots of numbers, but read that again. Same offer, two different offers. Do you like this plan better?

By the way, almost every typical investor is excited to get a $160,000 house for $130,000, even if they have to go to the bank to get the money. So the cost of financing savings is in addition to the capital earned.

With the right strategy and offering, I was able to make as much additional profit from this one trade as most investors make from 6 to 8 trades.

Now let’s look at the exit strategy. I sold it in my “Work for Justice” program where I give my buyer credit for a down payment if they do the painting and repair. So I had no more monetary expenses.

They put down $15,000 and agreed on a $1,300 monthly rent. They agreed on a purchase price of $169,900. That’s an initial cash flow of $546 per month that will increase due to inflation and will increase again when my $300 per month loan is paid off in 12.5 years. And of course I recaptured all of my cash outlay and pocketed the money as well.

Now you can see many profit centers when buying:

1) No credit problems. I didn’t have to use my credit to qualify for the loan

2) No bank financing

3) No loan approval fee

4) No loan closing costs

5) No 30 year loan

6) No delays in loan qualifications

7) Short-term cost of funds

8) Low deposit (many times there is no deposit and in some cases the seller PAYS us for the purchase)

9) Opportunity for greater profit if the seller later decides to sell their seller financing note at a discount

10) Nice house, nice neighborhood, wanted by nice people with nice checkbooks.

Now let’s look at profit centers in sales:

1) Repayment from your buyer (more than security deposit)

2) No refunds. You do not have to pay back the down payment (option fee) compared to the return of the security deposit

3) No correction. The customer may be qualified to take the property in an “as is” condition, saving you the delay and cost of repair

4) Cash flow as rental income is hundreds of dollars a month higher than paying the seller or their bank

5) No out-of-pocket costs. Use the rent payment to pay and repay the base financing

6) Less stress. You have a satisfied customer who you have given a real opportunity

7) Increased business. You receive referrals from new potential customers, allowing you to build a customer list

8) Less repair costs. You have a homeowner in training who takes responsibility for minor maintenance and repairs

9) Less collection worries. You have a customer who has a financial and life-enhancing INCENTIVE to pay on time

10) You have the best of both worlds. If they buy… Yes!! You sell at your price and they pay the closing costs. If they don’t buy…yeah!! You get your funds back and have to do it all over again. Either way, you win.

All of this fits nicely with my business philosophy… we help people when we buy, we help people when we sell. We are problem solvers and dream givers.

Here you have. Instead of dealing with real estate, I teach you to deal with finance. We use easy-to-learn skills to get creative financing from the seller when we buy, then offer creative financing to our buyer when we sell, and make hefty markups in between.

I hope you enjoyed this look at how to succeed in today’s economy. This business model has seen me through all the economic ups and downs. This downside bubble is a time when low interest rates, market anxiety, a large supply of homes, and willing sellers can make you much more successful than usual.

Over the past 25 years, I have designed a process, complete with all the tools, training, technology, and team coaching and mentoring, to share this method with others. This process works and has led many to become millionaires in no time because they were wise enough to realize that adopting someone else’s already perfected process is smarter than trying to create your own. I now have users and followers of this system in all 50 states and 15 foreign countries. You too can build a long-term fulfilling business that will be extremely profitable for you and your family. Read this again and see if this is right for you.

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