Tag Archives: real estate investing

Saved from a $40k mistake . . .

While this is not a mortgage, I am glad to say I saved one of my long- time clients about $40,000.

This client came in to find out about buying an apartment building in Lomita that was a house with 4 units in the back.  We had determined that to retire in the South Bay, this would be the best way to live for free AND have room for both their elderly mothers.

So in discussing this, the client said as a “Oh, by the way,” I’m going to feed myself onto my mom’s property to protect her equity from fraud and manage her affairs.

STOP the PRESSES.  

What?  You have 3 siblings and they are ok with this?  And by the way, were you planning to sell this home when she passes?  Well, guess what?  If you inherit her property, her sole asset, it’s tax free.

If you are on title and have rented it out, guess what?  You owe capitals gains and will pay Uncle Sam $40,000+ in tax.  Oops.

Best to create a trust for her, be her trustee, and put another sibling on to minimize the blame game when she passes.

I love when people tell me their plans before they make huge, costly mistakes so I can help them avoid them.  Yes, he was grateful to avoid a $40,000 tax hit and have a plan for a financially healthy retirement.

If you are interested in getting set up for your retirement with property, give me a call on my cell before jumping in.

Rates are up and inflation could be too…

2 big days with 2 different outcomes.  On Tuesday, Fed Chair Janet Yellen in her annual speech before Congress, called the Humphrey Hawkins testimony on monetary policy, suggested that “waiting too much longer to raise rates would be unwise” (i.e. prime rate).

This sent the markets reeling, as investors see this as negative for their investments.  Interest rates went up on that news.

The very next day on Wednesday bullish economic numbers came out: the January retail numbers were up 0.4%; excluding auto sales they were actually up 0.8%.  The January CPI (Consumer Price Index) was up 0.6%.   Both are indications that inflation could be kicking in.   That caused rates to go up a little more.

Thursday and Friday were quiet as far as economic news, and the bond market recovered a little.

Interest Rates Flat but Slightly Better . . .

This week had mostly weaker than expected economic data which helped interest rates only slightly.

Tuesday the Existing home sales for December were weaker than expected, down 2.8%.

Thursday the initial weekly jobless claims jumped up 22k to 259k and the December new home sales were the worst in 10 months, down 10.4%.

Friday it was announced that the GDP was down to 1.9%, which means a shrinking economy.   All this and the rates were flat to slightly better.

Don’t gamble: lock in your rate.

Need to lock in for 60, 90 even 180 days? Yes, we can do that on a purchase!

Your buyer’s interest rates can be locked in, so if you have a client who is close to having an accepted offer and is nervous about rates we can lock that interest rate in.

Remember, we also have the float down: if rates improve more than .25% after lock-in and after full approval, your client gets the lower rate.  All rates are quoted at a 45 day lock in and assume a 720 credit score with 20% down, except for FHA and VA.

Have a great week, and call me if you need anyone qualified.

How Does a Homeowner to Get a Low Down Payment for Investment Property?

I own a home, but I want to buy units to invest for retirement income.   Can I put 3.5% down?

Great question Derek!

That’s a great idea to create cash flow for your retirement!

Unfortunately, when you already own a home your live in, you are not eligible for the FHA 3.5% down for units.   And since FHA does not finance purely rental properties, you would have to get financed with a Fannie Mae or Freddie Mac backed loan. The minimum down payment for this would then be 25% down.

If your house were a rental property (and showed that way on tax returns) you would then be eligible for an FHA loan with 3.5% down on units.   You would have to be moving into one of the units.

 

Listening and Learning Works – Investor Success Story

6 years ago, a 25 year old man was dragged into my real estate investment class at TUSD.  He listened and learned.   A few months later he came in for his 90 minute free consultation.  He also played CASH Flow 101 a couple of times and had fun.

During the consultation and loan pre-approval that I gave him, he learned that he could buy a duplex for $500k.

1 year later he bought a duplex where his payments were $3000 per month and the rent from the 2nd unit was $1700 and he lived in the 2nd side of the duplex (his unit could rent for $1800).  When he moves out, it will be positive cash flow, BUT while he lives there with tax benefits, his expense is $900 per month.

1.5 years later, he decided he was ready for his next property.   He ended up buying out of state, investing $30,000, and getting $300 per month in cash flow. He is now onto his 3rd property.

How to Purchase Investment Property for Beginners

There’s Still Time!

Join me for “How to Purchase Investment Property”
3-Hour Intensive Workshop September 29th, 2016

Why depend on your employer to flip the bill for your retirement when you can start a Real estate investment business.
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I am happy that I no longer have to rely on social security for my retirement, because now I am exchanging my 4 units in Hawthorne for better cash flow and more units. Now I am officially a paper millionaire. Thanks Athena!”
–K.H., Palos Verdes

When you start investing in your future, instead of working for a paycheck, you have the opportunity to be:

  • More independent.
  • Have more choices for yourself and your family.
  • Create a sustainable legacy for your family.
  • Work at a job because you want to, not because you have to.

All you need are the proper tools and guidance to get started. I can help!

During my 3 Hour Real Estate Investing Intensive, you will:

• Discover how to go through the numbers and determine what is a good investment and what’s a bad investment.

• Discover how to calculate the “true” return on an investment property.

• Understand the tax benefits of owning real estate.

• Be given real life examples of recently purchased properties to help you better understand and apply your knowledge.

• How to fix and flip a property.

• How to hire a property manager.

• How to hire a Realtor.

• And much, much more…

This workshop is for beginners, but experienced investors will get some gems out of it as well.

When: Thursday, September 29th

Time: 6:00 to 9:00 PM

Cost: $39–Includes Workbook.

Where: Torrance Adult School 2291 Washington Avenue, Torrance, CA 90501

“It was a pleasure taking your class the other night at Torrance adult school. Thank you for the good information and insights and for offering to help in my quest to find a renter! I definitely am interested in the Cash Flow game night!” –Fred Dai

“Athena opens your mind to what you DON’T know about your money and finds ways to grow it or leverage it.”
–Jessie O.

“The class is great! I wish I had taken it BEFORE I bought real estate.”
–Glenn D.

“You Rock Athena!!!”
–Kevin S.

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an unusual investment that could earn big

This Unusual Investment Could Earn Big

Have you ever said to yourself, “I don’t have enough money to invest in real estate.  It takes hundreds of thousands to invest.”  OR “Prices have gone too high and cap rates are being squished!”

It’s true that in some cases you may need lots of money to buy real estate. And yes, the pressure on cap rates lately has been increasing (meaning the ROI is shrinking) yet those properties are still going.

Why?

Because uncertainty in the world markets, the low interest rates, and the uncertainty in our economy in general,  have made other investments either just not worth it (can you say .01% return on savings?) or too risky for the return.

One of the overlooked areas in investing is billboards. Yes, like the kind you see off the freeway or along other busy streets. With the decline in print media and the high cost of pay-per-click ads on the internet, billboards are once again becoming the go-to media for many businesses.

There are many ways that you can profit from billboards.

1. You can buy the land, build the billboard and sell the advertising.

2.  You can buy, build, and flip the billboard and the property.

3.  You can even lease the land, build the billboard, and rent the billboard out.

Many would-be investors have never heard of investing in billboards, but this is just one of the areas I’ll be discussing further at my next investor’s class.

I hope you’ll join me.

How to purchase investment property

To your financial freedom!

Should You Invest in Real Estate or Stocks?

I am asked this question quite a bit.

When looking to invest, you need to consider your goals.  That is, do you want appreciation (the asset to go up), cash flow (income from the assets), or both.

Real Estate has 4 advantages over stocks and bonds

With real estate, you get leverage, control, tax benefits, and the tangibles aspects that stocks and bonds don’t give you.

Advantage #1–Leverage: You can buy real estate with only 3.5% down if buying for yourself to live in or 20% down if you are buying the property as pure investment.

Hypothetically, this means you would control a $200,000 asset with only a $7,000 to $40,000 investment (down payment) and enjoy the benefits of it increasing in value over time, creating income or both.

With stocks and bonds you may have a margin account (ability to borrow against the value of the asset) but only after you paid 100% of the price. If the value of the asset goes down they can call the margin loan due and payable.

If you like control, but don’t want to spend too much of your money real estate wins this one.

Advantage #2—Control: Unlike securities, real estate allows you to take over a problem, say an old apartment building, fix it, and profit from your efforts.

Rarely will a company, where you own stock, allow you to come in and tell them how to improve their bottom line…that is unless you are Warren Buffett.

Real Estate, gives you the opportunity to own a tangible asset, see and fix a problem, manage people and finances, and profit from it immediately or over time.

This is called being a value buyer.

Advantage #3—Tax Breaks: Real estate gives you some tax advantages that stocks and bonds don’t.

Real estate can earn money and be offset by a tax write off called depreciation.

Depreciation is the tax incentive that the government gives for you to maintain and improve the property over the years.

Whether you spent money or not they assume you are. This is a paper loss or phantom loss.

So if the property has $300 per month in cash flow you may keep this income tax-free, as your tax liability may be offset by the depreciation.

Real estate and securities both have a tax treatment called the “exchange” that can defer income into eternity, so they are equal there.

To learn more go to http://www.IRS.gov and look up IRC 1031 and 1033.

Advantage #4—The Tangibles: Real estate also fulfills a need for altruistic “feel good” endeavors.

You can make a positive difference in the world knowing that you are providing quality housing for others.

By owning rental property, you are improving the tenants’ lives and neighborhoods in which they live. Improved neighborhoods mean more money for schools, and better schools means increases in property value.

Usually you wouldn’t get those “feel good” feelings by investing in stocks.

When you buy a beat-up 14 unit building in a low income area, clean it up, get rid of the nuisances, and maintain it, you know you have done “good.”

If you’re interested in knowing more about investing in property, then contact me today for your free 90 minute consultation.

“The Good Life is Within Your Reach!”

The above illustration is for demonstration purposes only and is not a true case study. Investing in any asset involves risk and you should therefore consult tax, legal and financial experts before investing as individual results may vary.