Author: Jeff Breglio (42 articles found) - Clear Search


Understanding the REPC

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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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Understanding Nightly Rentals #4

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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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Understanding Nightly Rentals #3

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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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Understanding Nightly Rentals #2

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In the last blog, we talked about short-term rentals and the need to confirm the licensing and zoning issues that may apply. Here we are going to talk about the taxation of short-term rentals. What follows is a summary of some tax issues. This is NOT meant as tax advice. Please consult your own tax professionals.

Rented for Fewer than 15 Days During the Year – When a property is rented for fewer than 15 days during the tax year, the rental income is not reportable, and the expenses associated with that rental are not deductible. Interest and property taxes are not prorated, and the full amounts of the qualified mortgage interest and property taxes are reported as itemized deductions (as usual) on the taxpayer’s Schedule A. This would only apply if you rented out your residence or a vacation property on occasion.

The 7-Day and 30-Day Rules – Rentals are generally passive activities. However, an activity is not treated as a rental if either of these statements applies:


1.  The average customer use of the property is for 7 days or fewer—or for 30 days or fewer if the owner (or someone on the owner&rsquo
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Understanding Nightly Rentals - part one

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There has been a big push for landlords to look into short-term rentals (think, Air BnB) as opposed to longer-term (monthly or yearly) typical rentals. The reason for the push is that renting a property nightly can bring in much more per month—even including vacancies. It has become almost an entirely new real estate investing technique.

While a great way to make additional rents, there are things that you should understand before jumping in with short-term rentals. The first is legality. All rental properties are regulated by the city in which they are located. You will also see county or state-wide regulations. But typically, state laws govern the relationship between landlords and tenants and other larger matters. In most jurisdictions, the specifics of what types of rental properties are allowed are done at the city level.

This city-sponsored legislation arises because cities are charged with protecting neighborhoods and the “look and feel” of their respective cities. And they have a lot of authority on rentals. Most cities require landlords to register ALL their rentals properties, pay a licensing fee and make determinations as to how many unrelated tenants can live in a give property. If you are
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Keys to Title #4

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Hopefully you now have a solid understanding of how title works and is transferred. When you submit your purchase contract to the title company, you’ll get the Property Report (PR) back (we discussed this in our first Keys to Title Article last month). The PR will list any problems there might be. Normally, these problems would require the sellers to fix them. But in real estate investing circles, typically the investor will at least help the sellers out in getting these resolved.

Death of an owner: If one of the titled owners (that means a person who is actually listed on county land records as an owner) has died and either there is no surviving joint tenant or the owners are tenants-in-common, then the deceased owner is not able to transfer his ownership by way of a deed. Remember, that deeds need to be signed under notary, and if the person is dead, he can’t sign. The easiest way to resolve this problem is for the deceased person’s estate to be probated. Probate is a court action where a judge can appoint a personal representative of the estate who has the legal authority to sign on behalf of the dead person.

If the deceased has a will, that does not matter. All wills must also b
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Keys to Title #3

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So far is our series on title companies and title insurance, we’ve covered the basics of the title industry and the three types of insurance policies you will encounter in closings. In this article, I will cover holding title to real estate and in the next, common title issues that you’ll see as investors.

Owning real estate is done through recording “deeds” at the county recorders office (where all land records are held). These deeds transfer ownership from one person to the next. A Warranty Deed transfers title, and the seller warrants (guarantees) that the buyer is getting clean, marketable title. This is the kind of deed that title companies use because the title company is searching and insuring that title is clean.

A Special Warranty Deed transfers title, and the seller only guarantees that title is clean from the date the seller first took ownership. So, this one does not guarantee any problems with title before that point. You may see this if people are transferring title but not going through a title company. And finally, a Quit Claim Deed is simply a transfer of ownership with no guarantees at all from the seller. The new owner takes the property simply as it is.


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Keys to Title #2

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In my last article I discussed some of the key elements of title like the settlement statement (CD) and the title commitment (PR). Go back and read that article if you haven’t already. In this article I will cover the three types of insurance policies.

There are two policies that protect the new owner and one policy (essentially) for lenders. The two owner policies are the Alta Homeowner’s policy and the Standard policy. The Homeowner’s policy is the default policy provided on almost all retail transactions and covers the most things. It is also more expensive than the Standard. For a complete review of coverage, ask your escrow officer for a sample policy or list of coverages and exclusions.

Some of the important things the Homeowner’s policy covers that the Standard does not are boundary lines (fences and shrubs in the wrong place), adverse possession (when a neighbor encroaches on your property without you knowing it), unrecorded easements (like a right of way or access) and mechanic’s liens. These are the most common problems that you will find affecting your property. So, I do recommend the Homeowner’s policy to protect you. But you can opt for the Standard and add on
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Keys to Title #1

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Title closings and title insurance are very important real estate investing topics that don’t get a lot of attention. Along with the real estate purchase contract, title is something that you will need with every transaction. Next month I will cover the contract.

The first thing you need to understand is that your title company (or attorney) is really an insurance sales company: they sell title insurance on real estate transactions. The underwriter (who you might not even know about) is the title company’s insurance company—the company that actually insures the transaction. As insurance agents, title companies are heavily regulated by the state, including their fees. Most investors choose a title company not necessarily based on costs, but on experience doing investor transactions.

So, the first key is to choose a title company and escrow officer that are highly experienced working with investors! Investors use techniques like seller financing, wholesaling, private lenders, etc. that require knowledge and experience beyond processing the closing. Without experience, the title company may not close the transaction correctly.

Split closings are another important thing to understand about title. In Utah, we’re allowed to have split—where the buyer and seller close their side at different title companies. But, a title c
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Partnering v. Syndications Part 2

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In our last blog, we covered the considerations that determine when you might be engaged in a partnership or a syndication. And, if you fall in the syndication category, then you’ll need to comply with SEC regulations. Or, if it’s an actual partnership, then you do not. That is an important question to answer and not always as clear cut as you might think. There are a lot of variables and uniqueness to your specific deal that can make a big difference in the answer.

In today’s blog, we are going to cover the legal structures of these two types of investing techniques. Let’s start with a syndication.

A syndication is almost always an LLC structure. But, before that, you will also need a Private Placement Memorandum (PPM). This is a business plan with the terms of what you’re offering that will be giving to potential investors. You may also need a Subscription Agreement. This is an investor’s pledge to contribute to the deal at the stated terms before the syndicators actually need the investment. Then at some point the Subscription Agreement is “called,” and the investor will wire funds at that time, completing the exchange. Then, of course, there is paperwork to be submitted to the SEC and to states in which you are raising funds.

Now let’s talk about the operating agreement for the LLC.
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