Utah Real Estate Investors Association

 

This blog begins a 4-part series on the real estate investing technique of self-direction, which creates the ability to use retirement accounts for real estate investments. This first blog will cover retirement accounts generally.

NOTE: Self-direction is an advanced real estate investing technique with a lot of nuances. This blog is meant as general information and not legal, tax or investing advice. You will certainly need more education and advice to truly understand this amazing technique.

Self-direction is when a person uses their retirement account money in investments outside of typical brokerage investment products. It is often used by real estate investors looking to use their retirement money to invest in real estate, which is not offered by their broker. In other words, they have greater ability to “direct” their money into different investments. Self-direction, then, requires more work and education on the part of the investor.

Really, any kind of retirement account can be self-directed: IRAs, 401Ks, SEPs, SIMPLEs, 403(b)s and the like. Because most Americans have IRAs and 401Ks, those are the two that will be the focus of this blog. First, let’s talk Roth v. Traditional accounts.

The terms “Roth” and “Traditional” are applied to many types of retirement accounts. Both IRAs a
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In our last blog, we covered being a better landlord on your buy and holds. Here we’ll discuss a few tips to make working with contractors a little easier, whether on a flip or rental.

First, set a plan before starting, and stick to it! The plan should have a good, clear outline of how you want the project to finish. This includes materials and a budget. Many newer investors either don’t set a budget or blow past it. This is a recipe for disaster.

Second, contact your entire list of possible contractors and get bids. Many investors, to save time, may only talk to one contractor or sub. Take the time to really explain what you’re looking for, provide the plan & budget you’ve set, and get several bids. It’s worth your time.

Third, take the time to compare and contrast the different bids. Make sure you are comparing apples to apples. You’ll need to understand how and where the contractor is making money. Is there a line-item fee? Is the contractor “padding” materials or labor? Does the contractor include labor & materials in one line-item? You may need to go back and get more specific information from the contractor. Take the time to do this.

Fourth, ask and learn how the contractor handles changes, whether those come from you or them. This seems to be one of the bigges
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This blog is going to cover some tips to make being a landlord a great experience. Owning rental properties means dealing with tenants. Many investors either don’t like or don’t want to deal with tenant and property issues, so they will hire a professional property management company. But if you decide to self-manage, here are some things you should understand.

First, remember asset protection. Title to your rental should be held in a well-designed, protective LLC. Not all LLCs are created the same! What you get online is not sufficient. It should be created by a competent asset protection attorney. This will protect you and your personal assets from tenant slip-and-fall lawsuits.

Second, have really good lease agreements. There are numerous free forms available. So I would recommend getting at least 3 or 4 options and read through them. See what clauses are in them and which are important to you. If you need to amend or revise one, you should work with an attorney to draft it as you may accidently do something that might hurt you.

Third, make sure you have the appropriate liability insurance. This is the one you get from your insurance agent and not t
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“Tough times never last, but tough people do.”  - Dr. Robert Schuller

Your new mortgage company sticks you with high interest. The best credit cards are out of your reach. You finally found that great new car and your loan application comes back with a big fat DENIED. None of these are situations anyone wants to find themselves in.

And feeling like you have the plague when it comes to people lending you money or trusting you to pay your bills stinks (just like your credit).

But, you CAN fix it… if you start putting time and money to the right uses...

Know the score
First, do not jump to use a credit repair company. A lot of what they do, you can do for free. Save your money, at least initially in your repair process. You’re going to need it.

Second, don’t be
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The real estate purchase contract (REPC) is the basis of just about every deal you do. Yet, very few investors really understand it fully. This blog will teach you some key aspects of the REPC that can make a big difference in your next deal.

The REPC is a binding contract between a buyer and seller of real property. They are the only “parties” to the contract. Your agent, title officer, lender and etc. are not bound by this document. Only the parties may sue to enforce it or for breach of it.

You’ve heard that “everything” in real estate needs to be in writing. While there are other ways to buy and sell real estate without a written document, don’t rely on those! Always put it in writing!! This means not just the REPC, but all addenda. It does NOT matter what someone promises, only what is in writing AND signed.

In the event of lawsuit, texts and emails, in certain limited circumstances, can be evidence to substantiate your position. BUT DO NOT RELY ON THIS! If you want it to happen, put it in writing and get it signed! And a title company cannot go off texts or emails to change terms of the REPC. Don’t trust other agents or investors when they say, “Yeah, I’ll sign it and get it to you.” That is meaningless and you don’t have an agreement until it’s actually signed. They can be
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"Most people give up just when they're about to achieve success." - Ross Perot

Using Sec. 1031 has long been handy as a tax-deferral tactic (aka “a 1031” or sometimes, “a Starker exchange”). It basically lets real estate investors avoid capital gains taxes when they sell property if they invest the gains into the purchase of more property. (There are many other conditions, which we’ll get to in a sec).

The 1031 has been especially good for landlords who juggle side-gig properties and who want to do their taxes a favor at the same time.

A kind of special swap

If you sell an investment property (residential or commercial), you typically must pay capital gains taxes on the profits. You can defer these taxes -- notice that I said “defer” -- by doing a special like-kind exchange under Sec. 1031 for another  property.

These exchanges are available no matter if you file taxes as an individual or as an LLC, C or S corporation, or other type -- pretty much any taxpaying owner of real propert
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We’re going to finish up our discussion of short-term rentals with a real estate investing topic called arbitrage. What is arbitrage?

Arbitrage, basically, is the simultaneous buying and selling of an asset. For example, if you lease a property from the owner (the “buying” part) then turn around and lease the property to a tenant (the “selling” part), that’s arbitrage. You are simultaneously buying and selling an asset. The terms “buying” and “selling” have a more broad definition that actually purchasing and selling real estate. In our world, what I just described is commonly known as a lease sandwich.

Another term you might be familiar with is wholetailing. This is where you actually do buy a property (you become the owner) but immediately sell it. In fact, it’s common that the investor will put it under contract for sale before she buys it. This is also arbitrage.

So why are we talking arbitrage, lease sandwiches and wholetailing? Because that’s how many real estate investors are picking up both short- and long-term rentals, and other deals. In the long-term rental world, that’s a lease sandwich. But you can do the exact same thing for short-term rentals.

The process is mostly the same and doesn’t matter how long you’re renting out the property fo
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If you’ve been following along, we’ve discussed the regulatory side and an introduction to the tax side of doing short-term rentals. Today we will discuss how to hold title and save on the self-employment taxes we mentioned last month.

First, hopefully you now understand that the rent you make from short-term rentals is taxed differently as active income. That means it’s taxed more like your flip projects that you run through an s-elected LLC. (We’ve done other blogs on s-election and tax savings! Go back and review some of those if you don’t understand how the s-election saves on taxes on ordinary income.) While is it totally fine to own your flip in an s-elected LLC, it is NOT good to own a rental property in an s-elected LLC. This is because there is a “sale of asset” tax that can apply when you transfer or sell an asset you’ve held for a long time. You don’t want to pay this tax!

So, just like any other rental property, you should “own” the property in an LLC that is taxes as either a single member or partnership. And if available to you in your state, a Series LLC. This will be the same LLC that you own all your other rental properties in. So that’s good news! You will own your short-term rental the same way you own all your rentals.

But what about the tax savings on thi
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As A Real Estate Investor, This Is  Where The Rubber Meets The Road

Usually, keeping track of numbers is tedious.

Check it out! What are the bene’s that make this task more attractive than the usual alternative…”Oh Geez. I’ve got a closing on Monday and I need financials.”

Your business obviously makes and spends money. The pluses and minuses add up (you hope) to being able to stay in business, and a look at the books tells you if your business is doing okay or headed for trouble.

What are your books telling YOU?

In our experience, it’s often the company’s financial system (or lack thereof) that makes the answer easy to discover or downright difficult.

Have you looked at your own business’s financial system lately? Would you know how to read between the lines to interpret what you see there?

Because a financial system for business s
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“Discussion is an exchange of knowledge; an argument an exchange of ignorance.” - Robert Quillen

No matter what industry you're in, or how far you go in your career, the ability to effectively negotiate can make the difference between success and mediocrity. You may have heard me quoted, "Be World Class At ONE Thing, Rather Than Mediocre At Everything!"

Whether it's a multimillion-dollar contract, a job offer, or a luncheon, here are some trenches-tested business negotiation skills that will bring you closer to your ideal outcome:

Know what you want in advance.  Don't go to the table without a clear, realistic idea of what you want to achieve. It will help you negotiate with confidence.

Ask for what you want. Don't be afraid to make the first offer. You'll set the tone for the discussion, and studies (and my experience) suggest that the negotiator who goes first usually comes closer to getting what he or she wants. In chess, white moves first and continues the advantage.

Understand what your partner wants.  A successful negotiation should satisfy both sides. Instead of trying to crush your competition, find out what he or she hopes to get, and work together toward a solution that works for you both.
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