I learned early on in my real estate investing career that virtually all real estate agents were only educated for and interested in helping you and I buy and sell our own homes. They really didn’t know or understand the investing side of real estate.  As a result, within my first year of investing, I decided to get my own real estate license to make my investing life a little easier. Consequently I learned some valuable lessons about the rules of engagement for real estate investors and agents! More about that later but first I want to share with you the biggest problems I saw and myths that I busted. For example:

1. Investors think they are saving money by not using and even avoiding real estate agents as much as possible.
   1. This is such a limiting belief and is easily busted. When we step back and look at our investing activities and they are focused solely on FSBO’s (For sale by owner), owner financing, expired listings (They didn’t sell using a real estate agent), people going through pre-foreclosure, divorce, bankruptcy, etc. and we don’t use one of the greatest information tools available – the MLS (multi listing service) available through real estate agents, we are missing the majority of the investing opportunities that are out there. So, on the acquisition side of the business, we are leaving a tremendous number of potential opportunities untapped. Furthermore, any commission due is customarily paid by the seller.
   2. On the selling side of an investment, by not using a real estate agent, who provides the MLS, we are not marketing to the majority of consumers who are using real estate agents to find properties for them to buy. The truth of the matter is that when you sell your investment property though as real estate agent, that agent is actually marketing to the thousands of other agents who are then providing the information to their buying clients. So instead of you trying to do it all yourself and maybe tapping into 1% of the potential buying marketplace you can now have not one but potentially thousands of real estate agents working to sell your property! Furthermore, who do you think would be inclined to pay more for your property? People looking to buy For Sale By Owner or people who use a real estate agent? Statistics conclusively show that on average, properties sell for closer to list price and in less time using a real estate agent than without. In fact, it’s not even close!
2. Real Estate agents believe that real estate investors are cheap.
   1. While there are many investment transactions that are small in price there is no law that says an agent has to take a relatively small commission. Actually, a good agent, an agent who really knows the investing rules of engagement and how to work with investors, is worth their weight in gold and as such should ask for and receive a minimum commission. The wise Investor Agent, asks for and receives, minimum commissions based on an assumed 3% of the medium sales price for the area. I did this when representing other investors. But this pales in comparison to the true value of building long term relationships with investors.
   2. The real beauty of this Investor agent relationship is that many investors, including mine, evolve and grow their portfolios to include bigger and better properties with bigger and better list prices and therefore bigger and better commissions for you. When you read my Investor Agent you can see that I have made some pretty substantial commissions, in the 10’s of thousands, on a lot of these transactions.
3. Investors think they don’t need agents because now everything is online through systems like Zillow, Trulia, Realtor.com, etc.
   1. First of all, these systems, Zillow, Trulia, Realto.com, etc. are all leech systems. In other words, they get the bulk of their data form the one true source, the MLS! What’s even worse is that their data isn’t complete and they don’t have adequate systems in place to keep the data current. For example, have you ever seen Zillow attempt to display a multi-unit property correctly? They can’t get it right because their systems are designed to focus on single family homes! And when a property gets sold it looks like it still active for sometimes months! Ridiculous.
   2. What’s most important though is that when you use an agent and data from the MLS you make available to yourself an abundance of tools and information that just can’t be gotten anywhere else and can broaden your investing activities and achievements. One of the best developments recently is that a lot of MLS systems are now integrated with the local tax records. How do you like them apples!
4. Agents think investors only buy run down pieces of junk.
   1. Actually, Good investors, the kind you will work with, look for the best property at the best price and needing the least amount of work relative to perceived value after repairs are made. In other words, while there are investors who focus on war zone properties because they think that’s all they can afford, the better investors focus on moderate-income areas for rentals, particularly multi-units, and middle class, and in some areas, upper middle class and even luxury neighborhoods for flips.
   2. I personally have made a ton of money working with flippers because I earn a commission when they first buy the property. I earn a commission when they sell it for profit. And I can even earn a third commission if I bring the buyer! How about that – one client, one property, three commissions!
5. Investors believe they can do much better investing without agents.
   1. The bottom line is this; you can make good money investing in real estate. You can make incredible money with a team of rock stars working on your behalf. You spend time to build relationships for financing, title work, insurance, remodeling, inspectors and appraisers. Add one more, real sate agent, more specifically, Investor- Agent, and watch your wealth and income go form linear growth to growing exponentially!
6. Agents think investors are crooked and/or are breaking all the rules.
   99. This is simply a case of lack of education and information. As agents, we are trained by our brokers and other providers to focus virtually all our energy on owner-occupants, who 99.9% of the time use traditional contracts, negotiating strategies, deal structuring. As a result, they are never exposed to the whole wide world of techniques and strategies available in real estate. While real estate is the only body of contract law that is required to be in writing in order to be supported in the court of law, there can be an infinite number of variations in how sales agreements and negotiations are structured. Plain language laws do come into play now so I have a solution for investors and agents.
   100. Use the pre-approved real estate agreements that are provided by your state’s board. Then add addendums to present the language that you require to make your deal work for you. Addendums override the agreement they are amending. I do this and it works every time. Agents, remember, when an investor wants something out of the ordinary, it isn’t crooked its creative!
7. In conclusion, it’s not an “OR” world, it’s an “AND” world. Instead of operating in a world that is mutually exclusive, the worlds of investors and agents intersect in a way that can and should be immensely profitable for both. Investors should get their real estate license and serve other investors, thereby, opening up a very relevant and easy to implement a line of business that compliments and leverages their already existing investing activities. Agents should further leverage the use of their real estate license to serve investors, thereby leverage what they are already doing and as a result, they will learn how to invest themselves – the right way and really expand and grow their wealth and income!

About the Author:

Gary Wilson is widely considered the leading authority on teaching Real Estate Investors and Agents alike how to leverage what they’re already doing and create massive new wealth and income.

Gary has been investing in Real Estate for nearly 30 years building a rental portfolio worth millions of dollars, flipping other properties and even wholesaling. He has been a licensed Real Estate agent for more than a dozen years and Broker for more than half of that time, creating the fastest growing Real Estate brokerage company in Pennsylvania during the Great Recession, while others were shrinking by 50%. Gary also went onto create an Appraisal business, a Title Closing business and a Property Management business that grew from 40 units to nearly 500 in less than 3 years with virtually no marketing costs.

Gary has grown into a sought-after speaker, writer, teacher and coach to investors and agents across the world. Fortunes have been made by those who follow Gary and implement his systems of creating massive wealth and income by using their Real License as an income producing asset to serve the Real Estate Investment community

Gary spends his personal time participating in high adventure activities, visiting friends and family far and wide and promoting his greatest accomplishment – The Healing House Foundation.

A portion of all proceeds from Gary’s business ventures goes towards the support of the Healing House Foundation – a Non-Profit venture that serves families who are healing and rebuilding their loving relationships after suffering from the wounds caused by the illness of addiction of a loved one.

 

How I Did 110 Transactions A Year With NO Assistants…And You Can Too… Get My Case Study Now>> https://www.myinvestmentservices.com/gift/ “Guiding You to Massive New Wealth in Real Estate in 1 Year or Less Guaranteed!”

1.4  Substantially Increase Depreciation Deductions via Componentizing (Cost Segregation Analysis).

Depreciation is your most valuable deduction because it does not require you to expend cash to get the deduction, yet it creates cash flow in your pocket from the deduction’s tax savings.

For example, a $20,000 depreciation deduction reduces your ordinary income. In a 30% bracket, this will save you $6,000 in taxes.

This is like found money because you did not have to spend any additional cash to get the deduction. The $6,000 as a 10% down payment can allow you to buy an additional $60,000 worth of real estate, which, at a 20% yearly return, would be $12,000 more income every year. Plus, like money in the bank, you get the deduction and tax savings every year (for the recovery period of the property).

Yet, when you sell, you can have no recapture and thus not have to pay any of these tax savings back by selling the property, tax-free, via the powerful 1031 exchange (covered later). You still continue to pocket the tax savings from depreciation. Money makes money; but saving taxes (every year) makes a whole lot more money so you can get wealthier, quicker!

So how can you make this already valuable deduction save you even more? Componentized!

Componentizing (or Cost Segregation Analysis) is something that I have been using for over 25 years to dramatically increase my cash flow (and wealth) via tax savings from much larger depreciation deductions. Many of my students also use it with the same money-saving results.

Reason: With componentizing, you break out components, from the property cost, that allow you to use shorter recovery periods with the result of much larger deductions and savings. An overview of these components and strategies follow:

5-Year personal property — Included in the cost of your property are many items of “hidden” personal property that can be written off over 5 years, using a faster-accelerated method, instead of 27-1/2 or 39 years, using a slower straight-line method. Typically, the amount of personal property will be at least 10 to 20% of the cost of a rental property. Some Examples: Kitchen cabinets, shelves, storage, carpeting, appliances, movable wall partitions, including “non-weight” bearing interior walls. One of my students, Ron, installed $80,000 of non-weight bearing movable walls in his commercial property. Result: Because the walls can be moved without adversely affecting the building structure, they are considered personal property and can be depreciated over 5 years (accelerated) instead of 39 years (slower) straight-line. This equates to a $16,000 a year deduction vs. $2,000. Tax savings of over $5,000 for five years! (Plus Ron expanded his rental market with the movable walls giving his tenants more options as to office space). There are many other items of such personal property fully supported by tax law citations.

15-year land improvements to the land — Also included in the cost of your property are many items of land improvements that can be written off over 15 years, using a faster-accelerated method, instead of not being depreciated at all if they were part of the land. Some examples are landscaping, paved surfaces, and parking lots.

Land improvements to the building — These are depreciated along with the building (27-1/2 or 39years), instead of not being depreciated at all if they were part of the land. Some examples are outside lighting and utility connections to the building.

A low land value maximizes depreciation deductions — The land portion of the cost of the property is not eligible for depreciation deductions. The less of the property cost allocated toward non-depreciation land, the more toward the other depreciable components, the more non-cash deductions, the more savings. Don’t be talked into using a high land value! You can justify a very low (or no) non-depreciable land value if you know the rules. Keep the following in mind – Allocations toward depreciable land improvements reduce the amount allocated to non-depreciable land. Special valuation factors have also worked to the taxpayer’s advantage in lowering the value of land (such as housing shortages).

Fully deduct the remaining basis of components that are replaced (gut out). For example, in doing a rehab, if you replace existing property components with a remaining componentized cost basis of $30,000, you can claim the entire $30,000 as a full ordinary deduction. In a 30% bracket, this puts $9,000 of savings in your pocket, yet you did not have to expend cash for the deduction!

So how much extra did you pay in taxes not using componentizing because your tax advisor did not know about this incredible legal strategy? According to the following quote from one of my students, probably a lot!

“Al, your component depreciation method saved me almost $20,000 dollars in income taxes. It helped me financially having four girls in College at the same time.” …Angelo D. Guerra, Investor, Broker/Owner, ERA Platinum Realtors, Conshohocken, PA.

By the way, that’s $20,000 a year, which if invested at 10% a year for the next 10 years would accumulate to over $318,000! That’s how much you lose!!

How I Did 110 Transactions A Year With NO Assistants…And You Can Too… Get My Case Study Now>> https://www.myinvestmentservices.com/gift/ “Guiding You to Massive New Wealth in Real Estate in 1 Year or Less Guaranteed!”

Know why saving taxes makes you wealthy and is well worth the effort.

In my tax presentations, one of the first things I cover is why and how saving taxes can make you richer, faster. Well, here it is…

If you take $1.00 and double it tax-free for 20 days it’s worth $1,048,576 (over a million dollars). Take that same $1.00, taxed every year at 30%, it will be worth only about $40,640 — A LOSS of a MILLION DOLLARS!

Why is this so? Because with tax-free compounding, earnings accumulate not only on the principal amount of money but also accumulate on the tax-free earnings as well. (“Earnings on Earnings”).

Thus compounding combines earning power on principal and earning power on interest. Compounding has been called the “8th wonder of the world”, a “miracle”. Compounding money at high rates of tax-free return is a definite advantage of real estate, especially with a great tax plan.

The wealthy know that taxes are a primary factor in determining whether you get rich or stay poor. Let’s say, for example, you’re able to save just $2,000 annually on your tax bill. (With a good tax plan it will be much higher).

You invest the $2,000 annually in an IRA which earns a tax-free annual return of 10%. After 20 years, you’ll have over $114,000! If you can save $10,000 annually on your tax bill and invest it in a Simple IRA for 20 years, you’ll end up with almost $573,000!

$5,000 in tax savings (which is found money) as a 10% down payment can allow you to buy an additional $50,000 in real estate! Assuming a 20% yearly return you would earn $10,000 which is 5 years would accumulate t to $50,000!

You can use the tax savings to upgrade your rental properties for more monthly cash flow. One of my students, Richard, used $2,000 of tax savings (like found money) to employ the Mr. Landlord technique of adding optional upgrades to his facilities and increased his cash flow by $200 a month or a yearly total of $2400 which divided by $2000 = 120% return! But because the $2,000 in tax savings is found money, the return is really infinite!!

So does Saving Taxes Makes You Wealthy? – What would you say now?

How I Did 110 Transactions A Year With NO Assistants…And You Can Too… Get My Case Study Now>> https://www.myinvestmentservices.com/gift/ “Guiding You to Massive New Wealth in Real Estate in 1 Year or Less Guaranteed!”

 

 

 

Employ “Audit-Proofing” Techniques To Be Free of The Worry & Costs of IRS Intervention.

There are over 30 ways to audit-proof your return against the IRS. Here are two powerful ways:

(a) File an extension for your tax return. File as late as legally possible, with typically is October 15 following the tax year. Because of the IRS computer’s “first come, first serve” system, returns filed early are more prone to audit.

To file extensions, use IRS Forms 4868 for individuals and 7004 for entities such as LLC’s and partnerships. Understand, that filing an extension does not postpone the payment of any taxes you owe.

This is not its purpose. The purpose is to reduce your chances of an audit, stop the April 15th mad rush and numerous other advantages.

(b) Attach written explanations to your return, for items that you believe unusual or audit prone. Include the appropriate tax law citations with these explanations.

For example for high travel and entertainment deductions you can attach this audit-proofing statement: Auto, entertainment, and travel deductions are necessary for my business and are done in strict accordance with the substantiation requirements of IRS regulation 1.274-5T(c), including maintaining written account books with date, place, persons, amounts and business purpose.

Also on file are related bills and receipts as well as notarized statements explaining and attesting to the business use and purpose of these items.

Sign and notarize the statement. This will help keep you out of the audit pile.

How I Did 110 Transactions A Year With NO Assistants…And You Can Too… Get My Case Study Now>> https://www.myinvestmentservices.com/gift/ “Guiding You to Massive New Wealth in Real Estate in 1 Year or Less Guaranteed!”

 

 

Deduct Unlimited Property Tax Losses Even if Over $25,000 or Your Income is Over $150,000 by Being a Real Estate Professional.

With the aforementioned non-cash componentizing deductions piling up, your properties are going to be throwing off paper tax losses which you want to fully deduct against your other income.

Except for $25,000 of losses, rental property losses are subject to passive loss limitations. This means real estate investors cannot deduct property tax losses against non-passive income such as salaries, business income, gains, IRA distributions, etc. If the investor’s adjusted gross income (AGI) is above $150,000 they will not even be allowed the $25,000 exception for deducting such losses.

Moreover, even if the investor is eligible for the above exception, but has over $25,000 in property losses, the excess over the $25,000 is still subject to the limitations. Being subject to these limitations means the investor cannot currently deduct the losses in the year incurred.

The losses are “suspended” and must be carried forward until the property is sold at again. The savings from the losses are also delayed as well as the investment use of such savings.

What to do: To avoid being subject to these limitations, the investor must document at least 751 hours (or an average of about 14-1/2 hours a week) with the majority of their time in the real property business.

A “real property trade or business” is defined as any real property development, redevelopment, construction, reconstruction, acquisition, conversion, rental, operation, management, leasing or brokerage trade or business.

This includes real estate investors who do rentals, management, rehabbing, wholesaling, retailing, foreclosures, short sales, self-storage and other type’s real estate activities.

With the right planning and documentation, even those with full-time jobs can meet these requirements.

Do this and fully deduct your property tax loses without limit, save a ton of taxes, and increase your cash flow every year!

 

How I Did 110 Transactions A Year With NO Assistants…And You Can Too… Get My Case Study Now>> https://www.myinvestmentservices.com/gift/ “Guiding You to Massive New Wealth in Real Estate in 1 Year or Less Guaranteed!”