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REAL ESTATE INVESTOR ELEVATES A NEIGHBORHOOD

An investor, we'll call him Bob has a very good associate, we'll call Jim. Jim was approaching older age and the owner of an 18 unit building. He had been managing this building for years and in his mind still felt capable to continue in this role.

One-day Bob stopped by to visit Jim to discover the building was in poor condition with mounting code violations and debt. In addition, Jim was renting to an undesirable element who was behind on the rents and not taking care of their units. Bob knew Jim's attorney, we'll call Andy. Bob called Andy after visiting with Jim and asked had Andy spoke with Jim recently. Andy replied he had not spoken with Jim in some time. Bob asked Andy to take Jim to lunch and afterwards to give him, Bob a call because he had an offer for Jim. Several weeks went by before Andy called Bob. When they spoke, Andy acknowledged that Jim had a serious problem. Bob and Andy agreed that something needed to be done before the building was either condemned or taken over by people whose only interest was to obtain this property at a deep discount, not having any concern for the current owner. This property was threatened both physically and financially. Bob, the investor proposed to Andy, the attorney that he would purchase this property for no money, and evict all the current residents. Bob proposed to spend approximately one million dollars in a gut rehab project, which he did. As a result of this type of transaction, which is called "Contract for Deed", Bob contractually agreed to place Jim in an equity position, where Jim would receive a handsome check every month for the rest of his life from the net rental income which was now much greater without Jim having to do anything. This was a financial benefit to Jim for accepting this type of contractual agreement. As it turns out, Jim was suffering with Alzheimer's and on his own would have surely lost this property and his income, which was solely derived from this building.

The other positive result was that the neighbors were thrilled to have this building completely renovated and the undesirable tenants gone. Property values improved on this block and the entire neighborhood.

Jim is doing as well as can be expected physically and living comfortably, receiving his share of the rental proceeds through a trust that was created for his benefit. Again, this is referred to as an equity position. He is able to maintain his independence to a large degree. You might attribute his continued stability to much less stress in his life. The building is being managed by a reputable property management company.

This type of transaction can be accomplished quite simply with proper legal advice for any property that may be threatened or unwanted.

This is an example of a win-win real estate transaction that was made possible because Bob was familiar with this method of creative financing and how to structure the deal to benefit everyone involved, including the neighbors. A positive ending for all.

By: Ron Baxter/Real Estate Investor
President/Capital Resource Funding, Inc.
Ronbuyshousesfastcash.com
Call: 773-531-4553

Section Title

REAL ESTATE INVESTOR ELEVATES A NEIGHBORHOOD

An investor, we'll call him Bob has a very good associate, we'll call Jim. Jim was approaching older age and the owner of an 18 unit building. He had been managing this building for years and in his mind still felt capable to continue in this role.

One-day Bob stopped by to visit Jim to discover the building was in poor condition with mounting code violations and debt. In addition, Jim was renting to an undesirable element who was behind on the rents and not taking care of their units. Bob knew Jim's attorney, we'll call Andy. Bob called Andy after visiting with Jim and asked had Andy spoke with Jim recently. Andy replied he had not spoken with Jim in some time. Bob asked Andy to take Jim to lunch and afterwards to give him, Bob a call because he had an offer for Jim. Several weeks went by before Andy called Bob. When they spoke, Andy acknowledged that Jim had a serious problem. Bob and Andy agreed that something needed to be done before the building was either condemned or taken over by people whose only interest was to obtain this property at a deep discount, not having any concern for the current owner. This property was threatened both physically and financially. Bob, the investor proposed to Andy, the attorney that he would purchase this property for no money, and evict all the current residents. Bob proposed to spend approximately one million dollars in a gut rehab project, which he did. As a result of this type of transaction, which is called "Contract for Deed", Bob contractually agreed to place Jim in an equity position, where Jim would receive a handsome check every month for the rest of his life from the net rental income which was now much greater without Jim having to do anything. This was a financial benefit to Jim for accepting this type of contractual agreement. As it turns out, Jim was suffering with Alzheimer's and on his own would have surely lost this property and his income, which was solely derived from this building.

The other positive result was that the neighbors were thrilled to have this building completely renovated and the undesirable tenants gone. Property values improved on this block and the entire neighborhood.

Jim is doing as well as can be expected physically and living comfortably, receiving his share of the rental proceeds through a trust that was created for his benefit. Again, this is referred to as an equity position. He is able to maintain his independence to a large degree. You might attribute his continued stability to much less stress in his life. The building is being managed by a reputable property management company.

This type of transaction can be accomplished quite simply with proper legal advice for any property that may be threatened or unwanted.

This is an example of a win-win real estate transaction that was made possible because Bob was familiar with this method of creative financing and how to structure the deal to benefit everyone involved, including the neighbors. A positive ending for all.

By: Ron Baxter/Real Estate Investor
President/Capital Resource Funding, Inc.
Ronbuyshousesfastcash.com
Call: 773-531-4553

Section Title

A Tale of Two Taxes

(Strategic Planning For Asset Protection )

As we approach tax season, I want to share a tax related story with you. As real estate investors, we try to pay particular attention to asset protection. There is a saying we’re all familiar with, “It’s not what you make, it’s what you keep.”

A real estate investor and his wife have been investing in real estate for quite some time and was used to a very nice refund from the IRS most years. Usually a healthy five figures. One year their refund was much less and they were not very happy. After some days of dealing with their frustration, they decided to review their financial documents for that fiscal year to detect any mistakes or items that may have been overlooked. They scoured over their documents and receipts but could not find any oversight.

Eventually, they decided to contact their CPA, who is also a real estate attorney and investor. They shared with him their concern. The CPA, we’ll call Rick began to ask them questions about their financial activity and investments for the year. After some Q & A, it was discovered that they forgot to do what had been working well for years. They usually purchased and investment property or invested in real estate in some fashion each year. That year their lives got busy in other directions, and they simply ignored or just forgot about this area of investment planning and asset protection.

Part of the reason for this oversight was a major adjustment in the wife’s successful business and traveling to different locations around the country searching for the right university their daughter would attend the next year. I suppose these are valid reasons for the distraction. (perhaps)

Rick asked them questions regarding their plans for the coming year, and they were not sure. He got around to asking them where their daughter was attending college the next year. They replied, Texas. He said, there’s your answer. He suggested they buy a multi-unit rental property in Texas, near where the daughter would be attending school. They began an online search for a suitable property in the vicinity of their daughters’ school. Before her registration, the family went there early to perform their due diligence on several properties. Upon collecting the pertinent data, they made their selection and conducted the transaction. They purchased a neat looking 4 plex in this college community where they would be assured of a low vacancy factor.

The financial effect of this maneuver created the following results. They were now able to deduct all trips to visit their daughter, as managers of this property, in addition to the business deductions this purchase provided, including depreciation. In the daughter’s 2nd year of college, she moved into one of the units to manage the property, which allowed the parents to put her on salary. The daughter was excited about her new responsibility. Having grown up in an environment where real estate helped create a stable and above average lifestyle. She then started to learn first-hand about property investments and management at a young age. The parents ultimately benefited from this transaction in numerous ways.

Their IRS refund returned to its customary average, which pleased them, and also reminded them to always pay attention to fiscal affairs, despite other distractions that may encroach upon daily life. Their income also increased by a significant amount.

For those of us who have the ability to engage in this type of investment activity, you may consider some type of real estate investment, whether active or passive. W-2 employees should really consider this as a viable idea for asset protection because they get taxed at a much higher rate, with few options to offset tax liability.

For those of us who are entrepreneurs, you may wish to have a conversation with your attorney or CPA regarding establishing the property entity for such investment opportunities, i.e. S-Corp, LLC, LLP, Series LLC, etc. Having the proper entity in place where you channel this type of revenue is vital.

By: Ron Baxter/Real Estate Investor
President/Capital Resource Funding, Inc.
Ronbuyshousesfastcash.com
Call: 773-531-4553