Lou Brown:

Hello everyone and welcome to another Street Smart Group Q and A where you send in a number of questions that I plan to get to today, but first I wanted to update you on the latest that I’ve heard on the neighborhood stabilization program.  You know it’s amazing what our government is doing right now to try to stabilize the incredible housing market, and I say incredible because it’s great for us.  We’ve got so much opportunity to put folks in homes and give them an opportunity to someday own that home with our program.  Remember that our program really provides that, rather than just being landlords we give people an opportunity to someday own that home and as a result of our rent to own and owner finance programs it really attracts a whole different group of people with a whole different mindset.  Better quality folks that are willing to buy properties in better neighborhoods.  They’re willing to give us money down.  They’re willing to take properties in as in condition and do work in order to earn credits.  They’re willing to stick with us.  They’re willing to make payments on time.  They’re willing to take better care of their property and all these things come as a result of your offering a program that is desperately needed in today’s economy.

Now keep that in mind that we do things that other people simply don’t do and that’s what we want to emphasize in our marketing that we have a program that really, really works.  Now in today’s economy there are a number of programs that have been introduced by the government.  One is the $300 billion dollar housing rescue act of 2008 and this was signed into law by President Bush at the end of July, this year.  Now what’s great about it is it really gives money to all the counties and the way the money was divided up is the counties that have the most number of foreclosures are the ones that get the most money, and it’s really divided up simply by virtue of the amount of foreclosures that happened in that area.  So that is a real plus for many of our communities.  Our own county, right here, in _____(2:17) county, Georgia is getting a $151 million dollars from that program, and it’s really a great opportunity for us my friends to influence what happens with this money in our own local economies and our own local communities.

Now the other thing that’s been introduced is the neighborhood stabilization program.  This came out as part of the $700 billion dollar banking bailout program or rescue program, whatever you want to call it and that is being administered by HUD.  Both of these programs are very interesting in that they were hastily put together and they have very broad range application.  So what it really is allowing is the local economies and the local politicians to come up with their own programs, which is very exciting to me because we already have a program.

Ladies and gentleman this is a real opportunity for us to step in and make offers to your local government of exactly what we do and many of you have heard me teach you that building a buyers list is so incredibly important to your business and your future.  If you simply had a group of folks that were willing and able to buy your properties you would be motivated to go out and find properties for them, because you’ve got customers.  Let’s face it that’s the big key.  You’re afraid to buy properties because you’re afraid you won’t be able to sell it.  Well I’m not afraid at all because we’ve got a different plan altogether.

According to the US Department of Housing and Urban Development they were only given 30 days to come up with the guidelines for this program.  Local governments with 45 days to draft their own programs have to apply for the funds for the neighborhood stabilization program by December 1, and that’s really great because the money should be available by mid-February.  Governments have 18 months to commit to specific projects and 4 years to spend it all, whatever is not reserved or spent goes back to HUD.  This is a real opportunity for us all because if you just take a look at it, we can take my program, the one that I have espoused and used for over 20 years, we can take that to our local governments and say “Look, here’s what we can do for you.  We’ve already got a program and even though the neighborhood stabilization program is limited to bank owned foreclosures and it’s limited to governments paying no more than 85% of current appraisal, we can sell homes to the local governments, but more than that we can offer our program on the homes that we already have to folks that the government pays their down payment.”  The government pays their option fees.  There is our real opportunity folks.  They can spread so much of this money so much further if they simply created grants to folks like you and I that are entrepreneurs, private citizens who have housing for the folks that can qualify for the program.

So what are the qualifications of those folks?  Well it says here that according to this information it says that it will set income limits on who can buy any house the repairs.  No buyers can earn more than 120% of the area’s median income, about $85,000 for a family of four.  Gee, I think a lot of my clients don’t make anywhere near $85,000, how about yours?  This is pretty exciting.  Some of the money must be reserved for families living on as little as $35,000 a year.  Government will also be prohibited from making any profit on any flips.  Yea, but it goes on to say they can use contractors, professional flippers, or local housing nonprofits.

Now the idea of your working with a nonprofit will be covered in another call that I’m doing for you, but we also provide you with the ammunition to be a nonprofit in your local community and that way you can have access to some other opportunities that are really available.  It goes on to say governments could choose to tackle houses that need complete overhauling or search out properties flippers like to call fluff and buff specials, houses that need only cosmetic repairs.  A government could target its worst area or it could take a well established area blighted by fewer foreclosures to keep it from falling.  Some might go after communities that have already dropped significantly to prevent freefall.  Folks this is a real opportunity for us, all we have to do is step up to the plate and let’s go to our local government, let’s go to the people that are in the housing office in your local communities and let’s tell them how they can spend this money.

Now let me describe to you exactly what I’m recommending.  First I want you to say “Look we’ve already got the houses.  We can get the houses.  We don’t really need your help there, what we need your help with is to help people qualify for our program.  Many folks have jobs, and they have sufficient income to get our houses.  The only thing is they have absolutely no down payment money.  We can’t take the risk of putting them in on our program with no money down.  We have to have 5% down on our rent-to-own program or 10% down on our in house financing program.  Either one of those will work and, we have criteria that people have to qualify for.

First of all they have to have jobs.  They have to have sufficient income to be able to qualify and what we do is take one-third of their family income and that shows exactly what they can afford on a monthly basis and not only that if they only have the limited amount, the smaller amount down we’ll even give them credit every month towards the purchase of that home.  Every month that they pay their rent on time, they earn an approximately 10% credit of their rent towards the purchase of the home.  If they don’t buy they don’t get that credit, but in the meantime we will also credit the original option fee that they put down towards the purchase of the home.”  Now folks how could this not be great for your community?  This is absolutely a godsend and the governments are going to think you’re a godsend as well because they have absolutely no idea how to do this program.

All we have to do is go in and say “Look we don’t need your money for fix up.  We don’t need your money to help buy the properties.  We don’t need you to buy properties.  All we need you to do is provide the down payment money for these citizens”, and if the program is restricted in your area and some people are going to misread this, and say that it’s restricted well please then help them find properties and then you be the one to handle the whole process and they fund it and they become essentially your funder for that deal.  You find the buyer.  You put them in on your rent to own program and then pay the government off when these people finally qualify for a new loan.  Folks this is a godsend for us.  I hope you’re paying attention.

This is incredible and it’s going to be those few folks that listen to this that actually pick up the phone, take action, call the Mayor’s office, find out who’s handling this in your local community, and you having the gumption to get out of your house, get in your car, drive down there, sit down in front of them, and say “Look we have a program.  Let me tell you I’m affiliated with a national organization, Street Smart, who teaches us exactly how to do this in our local communities and they have licensees of their system in all 50 States and 14 Foreign Countries that are doing exactly this and have done if for years and can do it in this local community and help put people that have already been foreclosed on back into homes right away and actually give them an opportunity to restart their lives.  Where right now they may be living in rental houses, heck some of them may even be living in cars, now we’re giving them an opportunity to get back into their home and wouldn’t that be a great thing and don’t you think that the Mayor would be interested in announcing this program here locally and shaking hands with me because we’re going to be the ones that are going to be able to provide that here locally.”

Folks this is an opportunity for you to get some credibility and some publicity for your own business right there in your local community.  I think you should absolutely do this and it’s got so much opportunity because even on the housing rescue bill the one that has the $300 billion dollars in it, it’s says qualified buyers must live in their homes and have loans that were issued between January 2005 and January 2007.  Additionally they must be spending at least 31% of their gross monthly income on mortgage debt to be eligible for the program.  You see not only can this money be made available to folks that are looking for housing but we can also work with folks that are already in homes and we can help them to modify their existing loans and then we can even take over those loans after they’re modified.  There’s so much opportunity folks and in fact I’m going to provide this information as a link as part of this Q and A session so that you’ll have all the details for what you need right there.

Now let’s jump to all the questions that you’ve submitted over the last couple of weeks for the Group Q and A.

First of all we’ve got a marketing question for Flora Villa.  She says, “How should I start a marketing campaign that involved direct mail, e-mail, internet?  How soon should I see results?  How much does it cost?  Thank you.”

Flora that’s a great question.  Well first of all I think we have to identify your market.  What market are you going for?  One of my favorite lists of folks is people that are owning properties free and clear.  Now just imagine that you could get a list of people who have mortgages that are basically paid down or paid off and they own those properties free and clear.  That list is available.  In fact we’ve identified 18 different markets that you can buy 18 different lists or obtain 18 different lists for and that becomes what you campaign for.  Now not all 18, what I want you to do is identify four.  My favorites are free and clear properties.  Why?  Because with the Street Smart system we have the ability to help those sellers be the bank and that means that they can offer financing to us.  Now we have to have the right words because many times these folks will actually carry back the financing for us and many times at zero interest and I teach you exactly how to do that in Volume 1 of your buying system where we get you the right information to be able to buy properties with the seller as the bank.  Now that’s just one of them.

Another is out of town owners.  We get the list folks and these lists are available from Melissa Data, Info USA, Merlin.com.  There are several different lists providers out there in the world that you can buy these lists from.

Now my favorite though is our Mail Whiz that actually does all of it for you and what they do is they get the list, they mail it for you and all you have to give them is the zip codes and the areas that you want to attack.  How are you going to identify that for them?  First of all you’re going to get out a map, put a pin in the map where your home is, and then go out say about five miles from that pin, draw a circle around that pin five miles out and then drive all of those neighborhoods, find at least two neighborhoods that you like and then identify those zip codes and boom that becomes a target market that you’re going to mail to.  Not only that you can drive those neighborhoods to find ______(15:25) that come up from time to time.  Not only that you can tell realtors if they have anything come up in those neighborhoods you’re particularly interested.  You see that becomes your ability to build a business in your own backyard and that’s what I want you to do with your marketing dollars.  Let’s direct those marketing dollars to the best possible location.

Now the internet we have our buyer web site, seller web site, and lender web sites that we’ve already designed and what we do is help you get your own domain name and then we let you use the same web sites that we use.  That gives you beautiful public credibility but the real news is the back end database, that allows you to manage your leads, sift and sort your leads, and have them all available from any computer in the world, at any time 24 hours a day, 7 days a week and anytime you talk with a seller that conversation is stored right there in your database, you’re able to pull up that lead, and get all the information about what was said and when the next follow up is with that customer.  This is so critical so that you don’t waste your dollars and what’s great about those web sites is that we can make them location specific with what’s called key words, and these key words populate the internet so that when someone does a Google search or a Yahoo search or any other kind of search your web site will pop up as one of those finds on that search because we’ve already helped you identify the key words that are findable on the internet and Flora that’s what’s going to help your business catapult in the right direction.  You simply have to spend the time in the beginning to get your programs and your marketing up and running.  When you do your next time should be spent in just following up with those leads, identifying if it’s a lead or not, and then analyzing that lead and making the offer to the seller.  Great question Flora.

Okay we’ve got Brian _____(17:37) who asks, “Hi Lou I’m going to visit an overleveraged cardiologist who has a house worth $1.2 million dollars which sits on 57 acres that can be subdivided.  He also is being transferred to California.  The plans show it can be subdivided into 10 lots.  The lots are worth $120,000 to $180,000.  Assuming the mortgage balance is $800,000, 30 year fixed, at 6.5%.  Can you give me a couple of ideas on how to buy this property?  What if I bought the house subject to with little up front and then sold one or two lots and made annual payments of $50,000 to $100,000.”

You know what Brian that’s a pretty wise way to approach that because if you were able to take over the property then you’d have the ability to liquidate that property in chunks and hunks to be able to pay down and pay off that debt, and that’s exactly what I would recommend on something like this.  Now I would also quickly say though that I would ask yourself what real background or experience do I have in subdivisions?  What do I know about creating things like this?  You’re in one of the toughest markets in the country for this and that’s called Massachusetts.  Massachusetts simply doesn’t want further development that seems and they put all kinds of hurdles in the local townships and even State government in the way of any type of development.  So I would get very grounded in what the obstacles are going to be that you’re going to face in order to get this subdivided.

You see it’s not subdivided yet, it’s merely plans that show it can be subdivided, but let me tell you it’s a long way to temporary.  I’ve already been down this road many times before and I can tell you that what you can do according to code and what you can get done according to the county commissioner’s office and the local housing office are dramatically different.  So what I’d do Brian is if you really want to pursue this put it under contract on an option using the one that I’ve got in Book 1 or the more in-depth details that are in Volume 9 Lease Options and use the details there to go ahead and get this property under your control.  Then you can go out and seek the answers to all these questions before you get yourself in trouble.

You see I wouldn’t close on this thing until I had all of those things ironed out and in fact my option would say and what I recommend is that you say on your option “This option will be closed once all these details are determined and finalized and financing is put in place based on those options” and yes you would be wanting to take over the existing mortgage balance if you possibly can, but make sure though that you have investors or at least you have the ability to make those payments.  The sad thing about the property that you’re working on is it’s not going to be an income producing property for quite a while.  It does have a home on there, that’s wonderful but unless that property can be leased for enough money to make the payments on that underlying loan I don’t think this is something you should pay a lot of attention to.

You go on to say “How can I confirm that the town will let me subdivide and build here?”

Well you’re going to have to take those plans in and got to the local housing code enforcement office and find out exactly what they can do.  Now depending on how large your township is, they may have a separate division that actually does development plans.  So you’re simply going to pick up the phone and call the county and find out who handles these things and it’s best to make an appointment and then go in and sit down and show them exactly what the current plans show and what you’re planning to do and then get complete understanding and the best is to get written statements of exactly what can be done there.  Otherwise you’ll find out that they often change when you submit your final plans and that’s a very dangerous place to go.

“When selling a house that I own who signs the contract, who’s the seller?  Is it the land trust, the personal property trust, or me as agent?”

Well when you’re using my purchase and sell agreement that’s in Volume 1 I recommend that you put “You, as agent”.  Now who are you the agent for?  You’re the agent for the buyer.  Who’s the buyer?  The buyer will be the land trust, but we don’t have to disclose all of that in the purchase and sell agreement.  Just put “You, as agent” as the buyer because my agreement allows you to assign that contract at closing to the buyer and the buyer’s going to be the trust that you’re going to own the property in.

Now Victor says “What do I do with properties that have adjustable mortgages?  What must I do to get the bank to modify the mortgage and what if the seller’s credit and income are now lower than when they first bought the property?”

Well Felipe that’s a great question and here’s the answer.  You can get adjustable rate loans modified these days.  Not all lenders are participating just yet, but I believe in the next few months it’s going to be very simple and easy for you to go back to a lender and say, “Look my client” by the way I recommend that you go not as you as an investor but you as a financial advisor and you say, “My client is not able to make the payments any longer that they were able to make in the past” or let’s say that the loan has now adjusted and you say, “Okay my client cannot make the payments of this new adjusted rate and what we’re asking to do is modify this existing loan” and let me point out the fact that many times the banks are trying to get you to refinance.  We do not want to refinance, we want to modify.  So you say “That what we’re looking to do is modify the existing loan down to X percent interest.”

Now you are going to have to determine what that interest rate is.  You can put it in some of your Street Smart calculators that are on the back side of your web sites, by the way on the back side of your web sites all of our forms and calculators are listed there.  So you can go right there on your private side of your web site and pull up any form, any calculator, anything and be able to calculate the answer and what you’re really trying to solve for is what interest rate will give the lowest payment that you need to see in order to make this profitable to you.  Now what is profitable?  I say in our world it’s at least $200 a month positive cash flow, that’s after principal, interest, taxes, insurance, and homeowners association dues.  After all of that is paid then we want to be able to see at least a $200 a month cash flow.  So you’re going to have to back end to what the interest rate will need to be in order to get the number to a number they actually can hear, and what’s good about this is that your clients credit and income is lower which is actually good because that’s why we’re calling to ask them to modify the existing loan.  Great question.

Felipe also has another question, “Does it matter how much I pay for a house as long as it cash flows and the mortgage is reduced as I pay the mortgage?”

Felipe absolutely not, you can pay any price for a property as long as, listen to me carefully, you have a buyer.  I want you to not tie yourself up and put yourself at risk if you don’t have a buyer for that property.  So it sounds like you’re looking at maybe making an investment in a property that’s pretty high priced.  Well yea, only if you have a buyer and only if you’ve qualified them that they indeed want that house and they can afford it.

Now Eduardo Ginsberg has a question, “I could not make it to MDM and I understand you covered how to negotiate loan modifications with the lender.  I have a couple of mortgages myself and would like to negotiate better terms.  However since my loans are current the lender told me that they can’t modify the terms.  Please take 10 or 15 minutes to cover this topic thoroughly including what are the magic words to say to the lender, what to do exactly if the lender is not very receptive, and how the new legislation works.”

Well Eduardo the new legislation kicks in actually it’s already kicked in but most lenders are waiting for the HUD guidelines and guidelines are what comes from the Federal Government that tells the lenders actually what they can do, but right now they don’t really know what they can do so they are going ahead and modifying but it’s usually on properties loans that are already in their own portfolio.  So you’re just going to have to wait like me to see what the guidelines are going to be.  However, let’s take that question of loan modifications and say, “Well wait a minute, many times we are dealing with servicers of loans that have already purchased the loans at a huge discount.  Litten Loan Servicing is one example.  _____(28:02) is another.  Aurora is another.

These are all lenders that typically buy mortgages rather than make loans and they buy mortgages at huge discounts and what that means is, is let’s say that there’s a property that you’re looking at and let’s say it has a $100,000 loan on there and let’s say that unbeknownst to you the lender has actually purchased that loan from somebody else at pennies on the dollar, maybe $0.20, $0.30 cents on the dollar so that means they only have $20,000 to $30,000 dollars invested in that $100,000 defaulted loan.  Now what that means is you’ll be able to go back and negotiate with them again unbeknownst to you they only have so few dollars in it that when you come in and say, “I’ll pay you $50,000.”  They say, “Yea, we’ll take it.”  Because they’re going to make that huge spread.  The other thing that they’ll do is if you have $100,000 loan and you say, “Hey this loan is $100,000 we’re willing to still pay you the $100,000 but we’re just not willing to pay you at 9-3/4%.  We can pay you off at say 5%” and what do they say, “Yea” because they only have maybe $20,000 or $30,000 invested in that loan and now they actually are getting $100,000 loan at whatever percent interest rate.  It really doesn’t matter because they’re making all of that profit in between and not only that interest on top of that.  So it’s an enormous opportunity for people in that business to be able to buy loans at a huge discount and put them right back out.  So that could happen to you Eduardo.  The loans that you’re currently paying on and they say they can’t modify, well what you’ve got to do and what one of the smart things to do is not go back to the bank as you.  Have you or someone else go back to the bank as a financial advisor for you and saying that, “Look this existing loan is on the property and it is current, however it’s about to not be current and it’s about to go into default.

Wouldn’t you rather work with us now to fix this problem before it becomes a default, before it becomes another bad loan on your books, and that’s exactly what we’re here to do today?  If we can work with you to get this lowered to a payment that our client can afford then we’ve got an opportunity to work together on this.”  Now Eduardo your next step and you already should have done this is to get my short sale profits kit that has all the paperwork that you send in on a short sale, and you’re going to do roughly the same thing and get the authorization to release information form and you’re going to send that into the bank so that you have the right, as their financial advisor, to work with the bank and get them to lower that loan.  And when I say lower the loan I mean that.  Maybe the house now is only worth $80,000 and you owe $100,000 on it, well in some cases these banks are even lowering the balance on the loan and then on top of that they’re also lowering the interest rate and then on top of that they’re even wiping out arrearages, they’re just forgiving that debt, so there’s real fantastic opportunities.

One of our licensees a platinum Joe was able to get his own personal loan that was not in default lowered from 9-3/4% down to 5% for two years fixed and then it goes to 6% fixed for the life of the loan.  Again it really depends on who the lender is and what their particular situation is.  Now that and I’ve coached Joe through that as part of our Platinum program, he was able to get that modification done.  It took about five months to get it done but it increased his cash flow on that particular property by $600 a month.  So it was well worth the pain and suffering that it took to get it done.  Eduardo hopefully that helped you and yes you should go for it, I just want you to change how you’re making the offer.

Now John Q has a question, “I bought a single family house in Charlotte back in 2006 for $100,000, while it did not drop in value my mortgage went up $40 a month due to an increase on property taxes from previous year, I have an option ARM in which I got 10 years of interest only at 8% and after that it fully amortizes for the remainder 20 years at 8%.  Since my payments are current and the lender is not interested in lowering my rate or payment, how can I do a loan modification in a way that would lower my rate and payment?  Can the new legislation help me in any way and how?  How do I negotiate with them so they would be more cooperative with the?  By the way the lender is Homecomings Financial and this is an investment property, non-owner occupied.  Thanks for your help.”

Okay John I would do exactly what I described to Eduardo.  In this case you’ve got a little bit different situation.  The one he described was on his own personal residence and this is on an investment property.  Now just as they don’t want personal residences back they don’t want investment properties back either, but I would look to definitely get that interest rate lowered.  Surprising we’re even in some cases going for one percent interest but I think you’d probably be very happy if you could convert that loan as it stands right now to a 5% fixed for the life of the loan and carry it out the full 30 years minus the two years that you’ve paid in, so for 28 years at 5% would be a wonderful thing.  Now something else I have my high level coaching students doing right now is signing up with a connection that we have with a 501c3 nonprofit organization, which means that just imagine that you could call up the bank, not as you, not as a financial advisor but as someone who is volunteering and working with a 501c3 organization that helps people in housing crisis.  It gets a whole different listening and again I’ll give you more details on that as time progresses because I have my Platinum students on this right now and they’re having tremendous results from it, so I want to be able to report some of these results to you as they develop and then we’ll take you down that path when the time is right.

Now Ryan Gillespie has a question.

Hi Ryan.  I appreciate you picking me up at the LA airport and taking me to the meeting that we had there in LA and taking me back.

And Ryan says, “If I have an LLC in Iowa or Delaware, but live in California and do business there, do I have to qualify as a foreign corporation in California and still pay their $800 a year franchise tax fee or something similar?” and he’s in San Bernardino, California, “In case you’re short on questions this session here’s another.”

Okay well let me come back to that one.  All right so the LLC in Iowa or Delaware.  Here’s how I would recommend that you do this.  Let’s say that you acquire 10 properties over the next year and let’s say that each of those properties is bought into a trust, a land trust.  In actual fact it’s the trust that’s “doing business” in California, the way I see it and so what that means is that the trust is actually the owner of the property.  The trust is the one that hires the manager, maybe you to collect rents and the trust is the one that’s going to deal with all the issues regarding the property.

Now you may chose to have an LLC someplace else as the beneficiary of that trust, well that beneficiary can be a foreign corporation and it can be registered, but remember with these flow through entities it flows through to the beneficiary, whomever the beneficiary is.  So Ryan in your case it might make sense just to acquire the property in the land trust, have a personal property trust as the beneficiary of that, still have an LLC in one of these other States, I suggest Wyoming by the way.  I think it’s more powerful than Iowa or Delaware and has all the benefits of Nevada LLC and Delaware benefits all in one place, and it’s called Wyoming isn’t that interesting?  But now you could put that in place but then have it be the beneficiary at any time you chose.  So if you had a reason to later because there was a problem, let’s say that someone there was a slip and fall accident at your property and they’re coming after you, then you might want to assign or quick claim your beneficial interest in that second trust, the personal property trust to that LLC that’s been sitting there all that time and that would give you the best of all worlds because one of the great things about trusts is the information about who the beneficiary is, is not revealed on public record.  So that means that beneficial interest can be changed at any time just no different than the _____(38:20) to a will.

A will can be changed at any time simply by adding a _____(38:24).  So what happens with the trust is you merely change the beneficial interests of the trust at any time and those beneficial interests can be assigned in quick claim at any time to any other person or entity.  So that would be a good strategy Ryan for where you are in California.  You’re absolutely right that they have an $800 franchise tax in California and what all the attorney’s in California want you to do, if you want to be protected, they say well why don’t you just go ahead and get 10 different LLCs for those 10 different properties and then now you have annual dues, annual fees, annual tax returns, and on top of that is $800 tax, let’s call it what it is, this $800 tax per entity, far different with my program.  In Volume 4 Land Trusts you can set this up yourself and there’s no annual dues, no annual fees, no annual tax return required for the trust and no $800 a year franchise tax.  Isn’t that a brilliant thing and it’s smart that you’re Street Smart, Ryan and welcome aboard.  I understand you stepped up to the Grande Package and you’ve also stepped up to our coaching.  So we highly encourage you to get on board and stay on board, all of you who are listening because you’re going to see some phenomenal things happen in your life in a very short period of time.

Now we’ve got Janice _____(40:00) up in Connecticut who asks, “Hello Lou, great MDM.  Thank you so much.”

Well thank you too Janice, I’m glad you were able to make it.  For all of you on the call that don’t know what MDM is that’s Millionaire Deal Maker where we create an craft deals while we’re together and design, and take you down a different skill path that’s so important.  It’s vital for your business that you learn how to create and structure deals from the information that the seller is giving you and that’s what we do at MDM.  We do that twice a year.  So you’re welcome to come again next Spring when we do it again.

“Would you please explain the differences regarding tax liability for the various type deals, i.e. what date is used to calculate capital gains for an agreement for deed?  When are those gains paid?  What about owner financing when the deed is transferred?  How about when the deed is not transferred but is held in escrow?  What about subject to when the deed is put into escrow and again when the deed is transferred?  I seem to be getting myself quite confused and would like to be able to use the tax advantages/disadvantages as part of my persuasive discussion with the seller when appropriate.  Is there a place in the training materials that explains all of this?  Thanks so much.  See you at MBA.”

Well thank you Janice I’m glad you’re coming to MBA, that’s our Mastering Business Advancement in depth training that’s coming up in December for those of you that want to take your business to the next level.  It’s absolutely designed to do that.  Call our office at 1-800-578-8580 and get yourself registered.

Now Janice to clear up your tax questions and I understand what’s confusing you because our tax code is confusing.  It’s confusing for the very enforcement agents that the IRS uses to enforce the very code that they’ve created.  Imagine over 10,000 pages of tax code data and it’s just impossible for anybody to truly understand it but here’s what we know to be true.  First of all when you sell a property it’s a sale but when you sell it with owner financing that gain can be spread out over time.

So let’s take capital gains as an issue, let’s say someone sells their property today for all cash.  Let’s say it was $100,000 property and they had written off the property, literally written down over all these years all of the write offs that the government gives in terms of depreciation, now when they sell that property they have the potential of $100,000 gain which means there’s a capital gains tax.  Currently 15% but with the new administration who knows what that is going to be.  It could be very scary.  Now that gain, if that’s not enough what’s really great though is if we instead go a different direction and we say “Okay let’s sell the property on time.  Let’s sell it with an installment sale.”  Under an installment sale we have the opportunity to do something completely different.  Whatever cash comes in at that beginning is the cash that the capital gains is paid on, the balance of the loan is what’s financed and you only pay capital gains tax on that money as it’s received which is really great.

So let’s say that in the same example it’s a $100,000 house they accept $10,000 down, okay they’re going to have to pay $1500 dollars tax on that $10,000 but the balance of $90,000, let’s say you’ve made a deal with them to pay them off say $6000 a year for the next X number of years, say 15 years.  All right that means that they’re only paying capital gains on that $6000 as they receive it.  So the capital gains are only chargeable as the seller receives the gains.

Now there’s another alternative as well.  Let’s say that they haven’t written down the property entirely, in fact maybe they haven’t written down at all.  Well that’s fine, we can go ahead and calculate it based on what their purchase price was versus what your purchase price was.  So let’s say in the same example, that they had purchased the property for $80,000 and they’re selling it to you for $100,000.  What that means is that their proportion of gain is only that difference between the $80,000 and $100,000.  Well that proportion even if the home is owned free and clear, that proportion is the only part that’s taxable and that proportion is taxable only as they receive it as a proportion of the entire amount that they’re receiving.

So in this example let’s say that it’s a $100,000 dollars free and clear property.  They have a proportionate gain of 20% on that because of the difference between the $80,000 and $100,000, but you’re paying them only $6000 a year for the next 15 years, let’s say.  Well that’s great because that means that they’re only paying 20% of the $6000 which is the $1200 dollars now and that $1200 dollars now gets taxed at the capital gains rate, which may if it continues at 15% that means their tax on that deal would only be what $180 a year just a very limited tax, under that example.

Now there’s one more scenario Janice that you can have in your bag of tricks when you go out there talking to sellers and that’s what’s called a 1031 tax deferred exchange and we use them in our business as well.  So when we sell a property we can take that gain and we can put it into other real estate.  When we put it into other real estate our gain that means that we don’t have to pay taxes on that gain at all.  It’s merely deferred into the new piece of real estate and written off based on the new piece of real estate information.  So that is a phenomenal question Janice.  Folks on this call if you’re new I think you can see the depth we get to on calls like this, it’s amazing.  Call our office at 1-800-578-8580 and get yourself registered.

We’ve got another question from Brian here that says, “If there are multiple owners on a property can one of the owners legally enter into a lease option agreement on this property without the signatures of all the other owners?”

No, no, no and no again.  The only thing they could do is lease option or sell their own individual interest if their own individual interest is actually apportioned.  So if it said that they owned a 20% interest in the property, then that’s what they have control over but they do not have control over the entire deed and they cannot assign or give or gift any other part of that deed only their part is what they can deal with.  If they were tenants in common, in other words it’s merely a deed that’s listing all the owners, no they have very little control.  You’re going to have to get the cooperation of every holder of that deed in order to be able to get your lease option done correctly.

Okay Filipe has another question, “Can I have a list of documents to use when taking subject to or through lease options in and out of a trust?  Also what documents do I use when selling via lease option or land contract in and out of a trust?  I like the step by step system.”

Okay well Filipe that’s a great question and in your Land Trusts Volume 4 go to page 148, there it actually breaks down for you step-by-step and item-by-item exactly what you’ll need to do to do subject to and in fact it gives you every document in order, and even tells you how to fill out the documents, gives you a filled in version and a blank version of every document.  The first one you come to is the first one you use, second one you come to is the second one you use, and it even gives you a scenario that you can follow all the way through so you can figure out exactly what they’re doing in that subject to transaction.  The same is true in your Volume 9 Lease Options where we’ve got an entire lease option scenario and the Volume is divided into two parts Buying versus Selling, so if you’re selling on a lease option you just go to the selling section and again it gives you document-by-document, item-by-item, step-by-step exactly what to do.  I don’t really want to spend your Q and A time on answering that by reading the documents to you because it’s really right there and it’s far better if you can read it and check it off as a checklist because all the information is right there.

Now if you don’t have Lease Options Volume 9 then go to Selling and Holding Volume 2 where you’ve got the quick start version and it’s got one of our option agreements in there and it’s got our rental agreement and it’s got even your move in inspection report and some of the other documents you need in order to move a customer into the property.  But if you are going to get in depth with our program and really do a lot of these then I encourage you to go ahead and get Volume 9 Lease Options that has a lot more depth and detail about our rent to own and also Volume 10 Owner Financing that’s about the owner finance program and on our owner finance program what we do is sell on agreement for deed, which also is known as land contract, contract for deed, bond for deed.  It’s all the same thing and so I encourage you to definitely go ahead and review those things and understand fully what the rent to own and owner finance programs are.

Because as I started off this call we’ve got so much opportunity by going to the local governments now and cutting our own deals by offering to merely provide our rent-to-own and owner finance programs to the public, if the government will provide their down payment money.  Now understand that politicians are in business to get one thing, it’s called votes, and if they want to continue to have that job, by the way when you hire a politician you are giving them a job, and they get paid for doing that job.

So if they want to keep their job they’ve got to please the voters and one of the things they’re looking to do is please as many voters as they possibly can and one of the things that we do is try to please the most people.  With our program think about all these hundreds of millions of dollars coming into these communities, think of how many voters they could please if all they did was cover a few thousand dollars in down payment money.  They don’t have to sink tens of thousands even hundreds of thousands of dollars into one single family house or give it to one voter.  Now they can touch many voters with $3000 to $5000 dollar down payment grants provided that they fit the program.  You see where I’m going with this folks?  This is an unparalleled opportunity for us to step up to the plate and offer my program that we’ve perfected over 20 years of being in this business and in fact I’ve done lease options now for about 25 years and I’ve done my owner financing program for about 20 years and we’ve been in the business of buying, selling and holding property for over 30 years.  So we’ve seen all kinds of markets ups, downs, ins, outs and what we look at on an ongoing basis is how do we profit in today’s market and we always teach and show you exactly what you need to do in today’s market.  So that’s why I’m highly emphasizing this because this is an opportunity that your competitors simply won’t have.  They’re not going to have any clue about this.  They’re not going to be able to participate in it because they’re not going to know about it.  You’re going to be the one that actually not only knows about it, you’re going to create it.  You’re going to create the opportunity.

So I challenge all of you to step up to the plate, make the calls, get this done and we’re really going to have a tremendous chance to grow your business doing this one thing and not even worry about other people qualifying for loans and other competitors.  You’re going to be able to literally go out and buy properties because you need them.  You need them because you have customers.  You have customers because you’re offering to get those people qualified for loans.

Now we’ve got a trust question from _____(54:19) who says, “You’ve stated before in the Advance Training that after a property is placed into trust you can then work to get the debt loan off your credit report.  Can you go into more detail?  Is this done by simply changing your social security number to the trust TIN number on the loan or is it a letter needed to request this with the mortgage company?”

Well _____(54:43) you’re right there are actually a number of steps that are going to be needed in order to get this process done.  First you do have to obtain an ID number for the trust.  Then notify the lender of the new ID number.  Get the lender to begin reporting under the new ID number, reporting the interest that you’re paying under the new ID number.  Then when you order your credit report you find that that mortgage may still be on there and it may still be reporting under your social security number or you may find that it now reads assumed by another party and that’s exactly what our goal is.  But let’s say we didn’t reach our goal, then what you have to do is write back to the credit bureau and say, “Hey this is still showing up under my name.  This has been assumed by another party.  Please take this off my credit report.”

So then they write back to the lender, the lender verifies indeed that they’re now reporting under this other ID number and they write back to the credit bureau, “Yeah sure enough, this is not under that same social security number.”  The credit bureau then marks it usually assumed by another party, they don’t disappear it, they just say it’s assumed by another party and now it doesn’t get counted as part of your overall credit score anymore.  Hopefully that cleared it up for you.

There are some steps in this process we do go into a lot more detail at MAS which is Maximum Asset Shield.  We’re going to be doing another of those in January, that’s one of our in depth training certification programs.  We’ve got four trainings in our certification program.  It’s our Millionaire Deal Maker, Massive/Passive Income, Maximum Asset Shield, and Mastering Business Advancement.  Those are the four training programs as part of the certification process and one is specifically related to buying, one is specifically related to selling and holding, one is specifically related to protecting your assets and the other is specifically related to moving your business to the next level.  So all of those are necessary.  You definitely need to become a member of those programs and learn more about them, so call our office at 1-800-578-8580 and get yourself registered.  They’ll give you more details about the program and how your certification process works.

Eduardo has a question, “How do you set up the beneficiaries of a land trust as successor beneficiaries of the main beneficiary?  I did not see that in the manual, I only saw a place to write down the main beneficiaries and the percentage each owns.  Please provide exact language to accomplish this.”

Sure.  All right Eduardo what you’re referring to is one of the great benefits of trusts, our particular kind of trusts.  Land Trusts convert real estate into personal property interests and that means that the beneficiary of the land trust can be a personal property trust.  So land trust is your Volume 4 and personal property trust is your Volume 5.  So essentially what happens is where it states beneficial interests you’ll put the name of the personal property trust and it’s trustee and in the beneficiary section of your declaration of trust and land trust agreement, you’ll put the signature of the trustee of the land trust but when it says beneficiary the beneficiary will be the personal property trust and the trustee of the personal property trust.  That’s who’s going to sign as beneficiary of the land trust and that’s the nuance of adding the additional layer of trust protection.

This is called our multiple layer strategy and you’re right the land trust book really shows the initial strategy of moving the real estate into the land trust and stopping there.  The advanced course is adding the layers of protection and then below the personal property trust you could even have another beneficiary instead of being you it could be an LLC or corporation or limited partnership or you or a living trust and that gives you the ability to further create additional layers of protection.  It’s a great method; I highly recommend that you all get trained on it because there are so many different additional benefits of using trusts.  I’ve identified over 30 benefits of using trusts that you cannot find anyplace else.  No other entity, no other corporation, LLC, or anything else has these benefits that I’ve found for you.  In fact that’s how we start the MAS is actually going through all those additional benefits of trusts that you can’t find anyplace else.  Call our office at 1-800-578-8580 and get yourself registered.

Brian has a question on trusts he says, “Using your auto-fill disk what’s the best way to change the beneficiary on my trust?”

Well Brian, unlock the document itself and follow the instructions that are included on your disk and it tells you exactly how you can change those beneficiaries anytime you want to.  By the way everyone who is now saying what in the world is he talking about an auto-fill disk.  Every time you graduate one of my certification programs we gift you with an auto-fill of all the documents related to that particular area, whether it’s buying, whether it’s selling and holding and that’s the management side, or whether it is protecting the trusts the land trusts and personal property trust we gift you with all the documents in auto-fill format.  That means that you simply fill out one page and click one button and it auto-fills all your paperwork automatically, press print and it prints out all your paperwork.  Isn’t that a great thing?  Why don’t I give that to you now?

Because you’re not trained and we found that people who have the right to fill in documents without the training to fill in those documents can make a lot of enormous mistakes.  So we’ve found that it’s much better to have you come to the training and then gift you a bonus that’s worth well more than the full cost of the training, and that is the auto-fill format.  So we highly encourage you to get involved with our certification program because it’s got so many extra bonuses that go with it as well.  Call our office at 1-800-578-8580 and get yourself registered.

I’ve got another one here from Debbie Miller in Reno, Nevada, she says, “Lou when we call leads in the newspaper, in the for rent section what is the best way, the magic words to talk to the seller about buying the property?”

Okay, “Hi Mr. Jones, we see that you’ve got an ad in the paper to rent this property, tell me a little bit about it.  All right well let me ask you a question.  Would you be interested in selling that property?  You would, fantastic.  We’ve got a program that could work for you and in fact we’ll take the property in its as is condition and work with you on the details.  Tell me is there an existing loan on that property?  Would you be willing to sell the property for what you owe on it?  Let me get a little bit more information about this property.  What we do is take over payments for you until we get the house sold.  Will that work for you?  Yes, good then I’ll need a little bit of information.”  And that’s where you get the details about the existing financing.

Essentially it’s our seller questionnaire.  Debbie just go back to the seller questionnaire and follow it and gather all that information and it’ll work on the For Rent section of the newspaper as well.  What we’re really looking for is burned out landlords that would love to have the opportunity to get rid of that property if they possibly could.

Debbie goes on to say, “You have counseled to make the offer, show the seller presentation kit in person.  Since we are marketing to out of town sellers, how can we wine and dine them through e-mail, letters and on the phone so we can build credibility and sell them on doing business with them?”

Well Debbie one of the great things to do is take them by phone while you’re on the phone to our buying web site.  Now so you’re going to give them the proper domain name for our buying web sites and there you just simply go with the seller through your program and this tells them exactly how you do the business and exactly how it works and that’s a wonderful thing because you’ve shown them the credibility of your web site.  You look now like a multimillion dollar business that’s totally got their act together and then while you’re together with them you can literally fill out the questionnaire while you’re with them.  They can be sitting there looking at it and in fact you can get off the phone and let them fill it out and press submit and the whole lead comes to you by e-mail under our system and then auto-loads your backend database.  How good can that get?  Now we can, we do have our seller presentation kit available on PowerPoint and we can provide that to you as well and set up a PowerPoint for you with that if you want to go through a PowerPoint presentation of the seller presentation kit.

“And then finally the majority of the leads we are receiving seem to be from people who have no internet access and barely have e-mail.  How can we use that info to better attract this seller into doing business with us?”

Well you just ask them.  Do you have internet access?  Can you get internet access?  What we like to do is work with our folks and we know that there’s a lot of questions that you might have to look at your paperwork to get the answers for so we ask that you go and fill out the questionnaire there.  If that doesn’t work for you that are fine we can do it right now over the phone.  Which is best for you?  That’s how I’d handle that Debbie.  Fantastic questions folks.