Question:
Let’s start with Feridune on a trust question. He says hi Lou. Hope you can answer these questions. I have 15 four plexis in Nevada and have a few questions about them. What software do you recommend for tracking the income expense of these 60 units?
Answer:
Well first let’s start with your property management volume eight. There’s several different things we have to do, on an ongoing basis, with our properties. One is we should have a written ledger and it’s an annual ledger and when setting up your Volume Seven “Business Management System”, we have you set up a binder and it’s an income binder and it’s divided into sections to divide up exactly what type of income is it, and what source is it coming from.
For example rentals are in one section, lease options in another section, agreement for deed in another section so, that you can manage those separately, because they have different accounting. Now what can happen is that once a month you can take all that section and enter it into what I think is the best right now, is QuickBooks Pro. It’s the least expensive and most robust system out there. There’s others such as Peachtree and others, but they’re very expensive and somewhat complicated to follow. I think for your 60 units this is very easy to manage like I say.
The handwrite system also allows you to have a backup. One thing we’ve learned in business is that computers crash and information gets lost, and information gets misplaced. So, we always have a backup writing system.
It’s fascinating that they said computers would replace paper that is just the opposite. They say that paper has gone up three times with the advent of computers, because people now have to have a written back up as well as a technological backup. Just as a tip off, some of you have our web sites. I highly recommend that, on the backside of our web sites we are building a software system so that you will be able to manage your properties online as well. But right now, we recommend QuickBooks Pro, plus an overlay from CPA John Hirits. It’s his KISS system. Keep it simple and what it does is overlay all the chart of accounts on QuickBooks and merge them into the particular lines of your tax return that you need to have information for. So, you can get that through our office by calling 1-800-578-8580 and that will take you into the system that we use.
So, again the business management is how you set up your office, your file folders, your binder everything for your property management. There’s also some property management forms in the Volume Eight “Property Management” and then…but if you have Volume Seven those are just ancillary to that. Then the third step like I say is to input it online with QuickBooks Pro with the KISS system overlay.
Okay, now everybody on the call should take note of that, because that’s very important information. I’m glad you asked that Feridune.
Question:
Okay the next question is I am in the process of putting these properties into land trusts 15 land trusts and then have three LLC’s. One for five land trusts. That means one LLC will be the beneficiary of five different land trusts. The equity in each LLC would be around $500,000.00. A few questions here, what scheme should I use to name the trusts. There are 15 of them and they are next to each other.
Answer:
What I would recommend is that you actually use a variety of naming strategies. Those are covered on the CD’s in volume Four “Land Trusts”, and just to give you a few hints here I would recommend that some of them be in the name of let’s say the Nevada Preservation Trust, another one could be the…I’ve forgotten what count…McLaren County XYZ Trust. You know you can create street names, county names, State names. You can refer to preservation, you can refer to protection, you can refer to even religious names all kinds of different things can be brought into play when you’re naming the various trusts. One of the great benefits of naming properties into trust, and placing properties into trust is that people assume that it’s owned by a particular entity that has that name. They hold the owner in a different or the manager rather in a different esteem, because you are a trustee of a trust or you are a manager for a property that’s held into trust. It’s a lot better position to be in and in your case you would be the manager of these properties I presume.
All right very good question on that. Use a variety of names.
Question:
Then the next question is any comment on the number of LLC’s? Should I have LLC’s for just three, or just three is enough? Also, any names scheme suggestions for LLC’s?
Answer:
Well I’m not sure if you’re one of our total package owners Feridune but if you’re a total package owner another benefit of that system is that we connect you with a CPA that actually understands our structure, our entity structuring and can answer those questions for you. In fact what they do is help you set up two LLC’s. One becomes what you call your hot LLC. The hot LLC holds all of the beneficial interests of all the trusts. Then the second LLC is a cold LLC. This LLC is a lender and it lends against all the beneficial shares of the other LLC. So, what happens is it has a lien against those shares if anything ever happens on the law suit side and someone blows through the trust they get to the LLC. They get a judgment against the LLC, but that judgment is going to be subject to the mortgage that’s held by the other LLC. So, effectively what this does is wipe out all the beneficial interests all of the income from those things. In other words it is siphoned off to the other LLC, because it holds the lien against those beneficial interests.
Hopefully, that made sense because it’s a really great strategy. If you do not have that CPA service just call our office at 1-800- 578-8580 and we can connect you with them, and also get you upgraded to the total package if you don’t have that. As I said you can buy it separately or it is included with our LL…with our total package system. We want everyone to be using the same structure because we happened to have checked this out and found this to be absolutely positively the best structure you could set up and they know how to do it. They provide all the forms. They provide all the services. They provide everything. You literally don’t have to do anything. They’ll take it from there. Okay very good question. So, that’s our equity stripping system, if you need a name for that.
Question:
All right Marilyn Rich has a question. Can an LLC be the trustee or the beneficiary of a personal property trust?
Answer:
Marilyn the answer is yes. An LLC can be the trustee or it could be the beneficiary. It should not be both. The reason is it creates what’s called a merger of interest so, we what the LLC to be a trustee or a beneficiary. My preference though is that we use people as trustees rather than entities as trustees, and I get a lot deeper into that at the MAS which is Maximum Asset Shield training, which is coming up again in August. Is that correct Bruce? It’s coming up again in August.
Question:
Okay, now Sue Mayfield from Los Angeles, California asks a question. Hi Lou, Your coaching calls are great. I learned a lot. Here’s my question. I own a home in southern California it’s under my living trust name and it has some equity in it. How do I protect my house from a potential law suit such as my teenage kid gets into a car accident? I also own an S corporation in California. Can I use it to help mitigate the risk? Thank you Sue Mayfield.
Answer:
Well Sue, first of all, thank you for the compliment on the call and I understand that you’re your home is in living trust which is great. Now my recommendation is that you now deed it out of that living trust into a land trust. Now that doesn’t mean that we’re going to get rid of the living trust. We’re going to have the living trust be the beneficiary of the land trust. So, in other words house owned by land trust, beneficiary is living trust. That allows you now to have multiple properties in various land trusts, but pull them all back together into your living trust and that will protect you and protect your beneficial interest. The sad thing is when attorney’s set up living trusts they have you deed everything you own into that single living trust. If it gets sued everything you own is potentially at risk inside t hat living trust, because the judgment would go not against you, but against that trust. And that’s exactly what we’re trying to do is segregate and separate the beneficial shares into several different pockets by transferring each property into its own land trust, or into each piece of personal property into its own personal property trust. What we’re doing is segregating and separating those assets into various and separate pockets. Hopefully, that made sense to you Sue.
The answer to your second question on the S corporation is yes. You could use that as a beneficiary of your land trust and then take the shares of the S corporation and have those held by the living trust.
Do you have the dates of that August event Bruce? It’s coming up in August, August 23rd, 24th, 25th, and 26th, in Atlanta. We’re going to have the MPI, which is the Massive Passive Income event and there we’re going to take you through, all these different issues of land trusts, personal property trusts, living trusts. Even our CPA and attorney advisors are going to be there to guide you through actually setting up your entities all the various entities and it’s like sort of one stop shopping. I’ll take you through the land trust, the personal property trust, and the living trust and we actually do those right in class. Then they take you through all the entities, corporations, LLC’s and limited partnerships. We’ve created that so that all of your questions and problems are solved in one place.
Question:
The next question is a trust question from Curtis Webster is Lou, we live in Florida and sold our Pennsylvania farm in December 06′. The developer pays 45 hundred dollars a month. Simple interest with a balloon payment in three years is it possible to put the property/note in a trust or is it too late? If it is possible how do we proceed and should we use the real estate attorney we had at the closing?
Answer:
Well first of all the property is sold so to put the property in trust is too late. The property is already sold, however what was generated from that sale was the note and the mortgage. Now that can be placed in trust at any time. What you would do is create a personal property trust. You would list as the asset of the personal property trust that note and mortgage. You would detail out the name of the note and all the details. You would also do a loan modification which would modify and assign that note…excuse me not modify. You would do a note and mortgage assignment, and that would assign that asset to the name of the trust. This happens all the time in the real world. If you think about properties that you have a mortgage on constantly when you set up the mortgage initially that mortgage is sold to a third party, and you’re notified that now you have to start paying XYZ instead of ABC. You started out with ABC and now you have to pay XYZ. You’re going to do exactly the same thing. You’re going to assign that note and mortgage to the personal property trust that is now going to own the asset, and then you’re going to notify the developer to pay that name instead of the name that you’ve got it now.
Let’s see and can we use the real estate attorney we had a closing? Yes you can, but frankly this is something Curtis you can do yourself. You’re just doing a mere assignment to the third party. Now we have assignment forms just let us know and we can get that to you. That’s part of our lending system that we’re actually putting together when you lend money you’re going to need an assignment of mortgage, and we’re going to provide that to you.
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Question:
Okay, now let’s see oh also a PS I purchased a whole enchilada at Robin Thomson’s February event in Orlando. The package is great, but a bit overwhelming I’m looking forward to utilizing the entitlement certificate to come to the boot camp.
Answer:
Absolutely Curtis we will look forward to seeing you there, and I promise you coming to the live events makes all the dots connect, and it’s so much easier to understand once you come to our live trainings. They’ve been designed to connect to the dot in the entire enchilada system, so that you can go back home and apply those things and use them in your every day business.
Question:
Now the next question is Regina Usavitch, and she says Hi Lou, I have a time share does that go into a personal property trust. Does putting it in trust…
Answer:
Alright let’s answer that one first. Does a time share go into a personal property trust? The answer is no. It goes into a land trust. The reason being that if you have an interest in real estate, if it has a legal description attached to it it goes in a land trust, if, it does not have a legal description, but instead only has a personal property interest than that goes in a personal property trust. For example when we put real estate into a land trust that land trust itself converts real estate into personal property interest. Then we have the beneficiary of the land trust be a personal property trust and we design that to make it simple and easy for you to follow the step. Just follow Volume 4 “Land Trusts” and the asset of the asset of the land trust will become that time share and the legal description of that time share.
Question:
All right the next question is does putting that time share in trust save me on capital gains tax as I am planning on selling it very soon.
Answer:
Regina the answer is no. It will not save you on capital gain, however we can refer you to our exchange wiz who can do a 1031 tax deferred exchange who would then help you avoid all of the capital gains, and 100 percent of the capital gain. In fact those of you who are total package members you get one free tax deferred exchange with your total package membership. That’s one of your bonuses. If you don’t have the total package contact the office or if you just want to use the services of our exchange wiz contact our office at 1-800-578-8580, and they will give you the contact information on the exchange wiz. We’ve searched the world over and we found somebody who truly understands who we are as real estate investors and what we’re trying to accomplish so it’s a great benefit to you guys to not have to decipher and discern that we’ve all ready done that for you.
Question:
Joanne Conrad has a question it was nice meeting you on the cruise. I have been studying your materials and I’m very impressed. Here’s my questions. Well first of all thank you Joanne I appreciate the compliment.
We are very confused we have a living trust which I need to update and get our name off of it. Number one can we use it The Sister Mary Digloria living trust after my aunt who’s with us as beneficiaries.
Answer:
Well yes you can Joanne. You can name that trust anything you want to. However, again I’m going to recommend that if you have assets that are outside of that living trust then first we’re going to name them in the name of the land trust, and then have the beneficiary be the personal property trust. Then have the beneficiary of that be the living trust. So, we’re going to kind of plinka, plinka, plinka, set you up for success and have layers of protection in your trust strategy. Not just one strategy but multiple layer strategies and yes, you can use the name that you suggested after your aunt as one of your trusts names.
Question:
All right the next question is can I modify my existing trust myself and make the necessary changes? Do we put our toys, motor home, airplane etcetera into it, or do I have to put it into an LLC to show toys as business expense.
Answer:
Well that’s an interesting question Joanne. Yes, you could indeed have the LLC own those toys. You could as part of your business plan, require certain things such for example let’s say that in our real estate business we needed capital. Of course we always need capital for our real estate business so one of the things we could use our airplane for is to take up potential clients and take them on trips and things like that over what everything you see when you’re up in a plane is real estate right? So, we could go on a real estate expedition and that way you could write off all those expenses on the airplane. So, you just want to document that from time to time you take clients up and keep a log of that, and yes those could be owned by the LLC. Remember that what we’re trying to do is have a life without taxes, and the way we do that is to use all the tax benefits that Congress has all ready very nicely given us, but they’ve spread it out all over the place. What we want to do is to do those things.
Motor homes, is another good example. Of course we want to take lenders from time to time on our motor home to trips to look at real estate and also talk to them about their investment into our business and that becomes another write off. So, number one you can modify the trust yourself, and number two you can have the LLC own those toys. The modification of the trust would depend on the terms of the trust. So, if you are a direct Q and A member Joanne that means that you can fax any details to me and I can actually take a look at that and see give you my opinion of what you should do next. Everyone on the call remember that the group Q and A is for general questions. But the direct Q and A is for specific questions that you can fax to our office at any time, and we will take a look at your specific issue and get you a specific answer back on that rather than your having to wait for the group Q and A. By the way when you become a direct Q and A member you also get the benefit of the group Q and A as well. You get both levels.
Question:
Then the third question is we have rental property in the name of living trust just for estate purposes. How do I need to structure our stuff land trust, LLC, property management company etcetera, it’s confusing.
Here’s what I think. Our living trust is a beneficiary of the LLC which we need to set up. Starting at the top it seems that we have to put each property in its own land trust. Then do I have to have a property management company LLC which we would run, or can I just be the property managers since the land trust owns the property.
Answer:
All right let’s stop there. First of all, you’re on the right track. The…except that the rental property should not be in the name of the living trust it should be in the name of the land trust and each property in its own land trust for estate purposes.
You can have an LLC as beneficiary of that and then let’s go to step two you said, “Should I set up an LLC for a property management company”? Well that actually depends on your tax situation. Your tax situation may be that you want to take advantage of being a professional property owner, and in the profession of real estate. If you’re in the profession of real estate which means that you spend 750 hours per year in the direct relationship to your investments and your management of your investments then, and by the way that’s only 14 hours per week then you qualify as a real estate professional. If you qualify as a real estate professional that means that you have unlimited write offs. Other folks in other professions doctors, lawyers, people who have other jobs are limited and it’s what’s called passive loss limitations. So, if you’re acting as a business, and you work for that business you could be taking yourself out of the realm of being a professional property in the profession of the real estate business. We want to be very careful about that. So, here’s what I want you to do. Again, contact our office and find out who we use for that service. They can go through your personal situation and look at exactly what to do and guide you through that process. Those of you who are total package members by the way are receiving this financial road map. Also those of you who are Platinum Masterminds receive a free financial road map as part of your total package membership. If you don’t have that, you can upgrade to that or you could just ask us who we use, and we’ll refer you onto them and they’ll take you through the process. Joanne marvelous questions, very good questions to ask, and again the land trust would own the real estate and you would simply manage it for the land trust. To finish that one last question that you had there.
Great questions I wanted top go ahead and answer some trust questions today, because we’ve been kind of accumulating up some of those questions.
Now let me get to some other questions that have come in very recently. Let’s see in the last day or so.
Question:
JP Johnson asks, Hello Lou I am in Broward County, Florida. How do you go about stopping or delaying an auction for sale?
Answer:
So, this is a short sale question and what he’s…or a short sales/foreclosure question, and JP is asking how do you get them to stop the sale?
Question:
I have a client who is willing to sign the paperwork I’m ready to go I just need some more time.
Answer:
All right, well number one JP let’s call the bank. Let’s tell them that…and ask them will they stop the sale. Now don’t stop there, if they say, “Yes we’ll stop the sale”, then I want you to send them a memo saying this is what they have agreed to do and make sure that that gets there and ask them to notify you if that is not their understanding.
Number two you also send that same memo to the foreclosing attorney. Number three you ask the bank to contact the foreclosing attorney as well to stop the sale. Number four you follow up with the foreclosing attorney and you make sure that indeed they have gotten the notice they have agreed to stop the sale. All right, so we’ve got to go through several steps in the process to make sure that that occurs and I want to make sure that you do all of those steps.
Now if they say, “No we won’t stop the sale”, ask them, “Why”. Tell them that you have a ready and willing and able buyer for the property if they just merely give you time. In order to get them to agree to that I want you to send them a contract, and the contract should show a later closing date after the foreclosure sale. Once they receive that contract than that should convince them. So, the first thing we’re going to do is ask, and we’re going to go through the process I just outlined. If they won’t do it then we’re going to send them a contract which shows a later closing date, and of course you’ll want to go out as long as you can. 30 days after their foreclosure sale so that they don’t have time to reinstate the foreclosure proceedings while they’re waiting for your sale and that can sometimes buy you some good time and make you some additional profit. Because you’ve now got more time to raise your funds to do the short sale. Now remember that another aspect to this is to do a workout rather than a foreclosure. That’s called a forbearance, rather than a cash sale. That’s another aspect of it that I’m going to get to in, some other questions here.
Question:
All right Craig Berry asks a question. Greeting Lou, what is the best way to work with uncooperative listing agents representing short sale or bank owned properties?
Answer:
Well, first of all, I doubt that they’re representing short sale properties. They’re usually representing the property after it’s gone back to the bank, so that’s what’s called an REO, or a real estate owned property of the bank. They typically don’t list short sale properties, although if the client the borrower has allowed the property to be listed, then that goes to the next aspect of it. That the bank will, actually consider a short sale and many times that agent knows that answer that they will consider a short sale.
Question:
You go on to say I have identified several properties that fit client and partner criteria and the realtor is getting in the way, and will not let me be present to present the short sale or REO offer. What to do in both scenarios are financially attractive?
Answer:
Well, first of all, let’s have a business conversation with this realtor. Let’s talk about exactly what’s occurring. Let’s say your situation is that you have a problem that is being addressed here. We have found a buyer for the property, but I’d like to find out any objections that the bank has. Do you mind all I’m trying to do here is help you earn a commission? Does that work for you? Well if that works you, do you mind if I’m present? I know that in your position you’re trying to act as agent and protect the banks interest, and if it can’t happen I’ll understand, but if it can happen I’ve seen many situation s where I’m able to chime right in and come up with a solution for the bank that they may have otherwise rejected the offer. So, hey it’s completely up to you Mr. or Miss Agent. It’s completely up to you, but I have just found that I could actually help you get your commission and we could go ahead and get a contract written on this property right away. Would that work for you and you know just kind of be on their side, and remind them that by the way you’re interested in any other listings that they have. How can you work more closely with them? And you are aware that they receive notice of properties before they’re listed in the MLS and could they go ahead and contact you on those in advance and get you…you would be glad to give an offer on those properties before they go into the MLS and now that gets you more of a tighter relationship with them. It’s a really powerful thing to do.
Question:
Now Michael Lane asks Hello Michael. Hi Lou I find a bunch of properties that are in pre foreclosure with zero equity and even are upside down. I don’t care to waste a bunch of time with these types of properties in a lengthy short sale negotiation. Is it advisable to take over the payments, negotiate a workout so I can add the arrears onto the back end of the loan? Perhaps a modification of the rate. If the rate is ugly and then find a buyer using the agreement for deed technique?
Answer:
All right let’s start there. I agree with you Michael that it’s not a good idea to waste a bunch of time on the lengthy short sale process, however if the numbers make sense and there’s a few criteria you want to look at. What is the seller’s situation? In other words what is their bad news that we can take to the bank? The badder the news, in other words the worse the hardship the more the bank will listen. So, if it’s a bad news situation many times the banks will work with us.
Number two what is the condition of the property. The worse the condition of the property the more likely the bank is to do the short sale. So, we’re putting together a list of criteria. If, it’s a beautiful house, in a beautiful neighborhood, with not much of a hardship it’s very unlikely the seller the bank excuse me, is going to take a discount or much of a short sale discount. But again, it depends on the banks situation themselves. What’s their problem? What do they need to deal with? This helps also as part of the process; if they have a big mess then they’re going to be able to…such as all the banks are hurting right now, because of default. The worst condition the bank is in the more likely they are to do the default. So, once with all of that said, and us going through that check list before we make a decision about making a short sale. The next part of your question is is it advisable to take over the payment and negotiate a workout so I can add the arrears onto the back end of the loan and that goes through that filter process if the rate is ugly, maybe they’ll do a modification. I agree that’s a going to be part of the forbearance process, not the short sale process. In other words that’s our workout plan to change the ugly rate on the loan to a good interest rate, and change it from an adjustable rate to a fixed rate. Once we get the financing in place and that we don’t have to write a check for a big amount then it can make sense to go ahead and try to sell it on agreement for deed which means that we’re going to get a hunk of money down. Cash down and cash later in terms of a monthly income, because we are providing the financing for our new buyer and it’s a great way and because of the people who could fog a mirror before could get a loan that’s all changing now and the banks have all announced new underwriting criteria. It’s not going to be as easy for people to get loans anymore. Which is good news for us now that people can’t do that anymore? That means we’re going to be able to be the bank for those people with our agreement for deed technique. And I know you’re a total package member Michael so you’ll go to Volume 10 which is “Owner Financing” and you’ll follow the paperwork in the selling side of Volume 10 for that…for the details on that piece of it. Also, listen to the CD’s on that.
Question:
You go on to say, “I’ve been passing up these deals, because there isn’t any equity, and I don’t want to spend a tremendous amount of time with the loss mitigation guys. But I’ve been wondering how to make a deal out of these properties. Any suggestions would be helpful.
Answer:
Well of course arrears…let’s take a look at the loan itself. What is the interest rate if that looks good then does the property look good? Is it in a good neighborhood? Is it a good long term property? Is it going to be easy for us to sell it or rent it? Then you can do it, because it makes sense to do it, but try to get some income from the seller. In other words sell it as we taught in Millionaire Deal Maker. Sell it with the seller carrying some of the load and paying you to buy the property, even if they’re behind in payments. That doesn’t mean that they can’t afford a couple of hundred dollars a month to pay you over term. Remember to have them sign a promissory note if they give you any payments towards your purchase of the property.
Second thought is spread is a factor. So, if we’re getting a six percent interest rate on the purchase side and we can sell that on an agreement for deed at say ten eleven percent owner financing than you’ve got a really nice spread in there. Another thing to look at is term. Maybe they’ve already paid in seven years of a fifteen year loan, and that looks good to me and even though there may not be much cash flow on a monthly basis that pay down is another factor that we want to look at. The balance on the loan is a factor too. You know what…is there any equity at all going into the property?
The next factor is the lack of equity comprised with two parts, one part being the underlying financing on the first, and the second part being a second mortgage. So, if there’s a second mortgage we may be able to short sale the second and reinstate the first. Maybe the first has a good interest rate as we teach in Millionaire Dealmaker maybe the first has a good interest rate, but the second is ugly. Maybe that’s got an eleven percent interest rate and we want to get rid of it. We can short sale that, but keep the first and actually reinstate and buy the property subject to the existing loan. So, that’s a great question Michael there’s so many answers to it. That really kind of represents a snapshot of some of the things that we cover in Millionaire Dealmaker too.
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Question:
Now Michael Daly in Florida says, Hi Lou. I really enjoy the calls. Well thank you Michael I appreciate you’re saying so.
Could you briefly describe the basic or minimum spread required to ensure a good deal when creating a lease option sale on a property that you want to buy on a lease option? IE you’re lease optioning your way in and then right back out again on a lease option to a new buyer.
Answer:
Well Michael my first question would be is this after you have exhausted all other possibilities? Because my recommendation is that the best thing for us to do is buy on of course get the deed to the property and that means get the deed subject to the existing financing. That’s our first approach.
If we can’t do that, our second approach is to do agreement for deed. Now agreement for deed means that we can buy on agreement for deed and all the documents to buy on agreement for deed are in Volume Ten “Owner Financing” agreement for deed and that’s available through our office if you don’t have that. But you’ve got all the forms. You’ve got the CD’s and you’ve got the guide book to guide you through that process. If you cannot buy on agreement for deed which means that the seller gets to keep their deed, but you’ve got an agreement for deed, which puts you in a stronger position then a lease option. Then the next plan is lease option. So, again subject to or agreement for deed…subject to first. Can’t do that then we do agreement for deed second, if you can’t do that, we do lease option third. Then we can now say the basic or minimum spread required to ensure a good deal when creating a lease option.
Well Michael I like to see a $200.00 positive cash flow. Now there can be extenuating circumstances that would lower that down. I mentioned one a few minutes ago. For example if we’re in year seven of a fifteen year loan and there’s not much cash flow, but there’s a really good pay down. Then it can make sense for us to keep that property long term and lease option it out. Doing that then even though we’re not making much cash flow we have to make sure that we’re capitalized enough to make the payment when the property is vacant, or when there’s issues with repairs or things like that. Make sure you’ve got enough capital to keep it long term, but that would be an excuse for accepting less than my $200.00 mark. But, let’s call them blue collar houses and blue collar neighborhoods that everyday people that are plumbers, electricians, they work at Wal-Mart things like that live in, then those I want to see a nice 150 to $200.00 a month positive cash flow. Michael that’s a…Michael Daly that’s a great question, and I’m sure that a lot of people on the call benefited from those answers.
Question:
Okay Robert Young asks. I have a tenant, who’s rented for two years and has a hard time paying even the minimal rent, but he hopes to buy the property one day, and I would like him to do that. The family will inherit some cash soon, but I don’t know how much. I have two questions.
Number one how to avoid the income tax on this sale? About $200,000.00 capital gain, yeah baby that’s good news. I know I could do a 1031 exchange, but I do have need for some of the money now.
Answer:
All right Robert let’s answer that one first. There’s a thing in the 1031 exchange process called boot. Now that means that let’s say that we took Robert, maybe you only need 30, or 40, or 50 thousand dollars of this $200,000.00 gain. Well you can take that and you can keep that, and all you’ll do is pay capital gains taxes on the boot. In other words the amount that you keep the rest you can tax defer until you die. The rest you can tax defer into your overall estate, which is a wonderful thing to do. I’ve mentioned it before on this call, but we have our exchange wiz that can help you through that process. If you’re not a total package member you’ll have to pay for that, but it’s very reasonable. But if you’re a total package member you actually receive that service for free. So, we want you to get that, and by the way our Platinum’s that are on the call as well. You receive unlimited exchanges, because we’ve…our intent is to grow you into a different level in your business, and so we have covered that for you in your Platinum program.
Question:
All right very good question Robert and I’m very excited for you. Your next question is number two. Would I likely be…would I likely have trouble if I finance this sale myself? Louis thank you I really get a lot out of your teleconferences and he’s in Naples Florida.
Answer:
Well Robert I’ll take your number two question and say it like this. If you’ve had a customer who’s had a history of paying late in the past. It’s likely you’re going to have that same history in the future. Now here’s the good news though, if you get a sizable down payment from them, with that…with that inheritance that he’s got then that could likely lower the payment making it easy for him…easier for him to pay. The second part of that is now that you have gone from being the manager of the property to the bank on the property. You’re wearing a different hat. Let’s say that you’ve sold to him on an agreement for deed that means that you can either just merely evict him from the property or if that doesn’t work you can foreclose the property and completely wipe him out of the picture. If you wipe him out of the picture that means that property can be yours. You will have to be like any other bank and go to the foreclosure sale and you can bid your balance on that. So, it depends on your short term and your long term goals Robert that it can make a lot of sense for you to keep that property and actually just finance it for your seller. Now what does this do for you from an exchange or tax stand point that puts you into a 1031, excuse me that puts you into an installment sales category. That mean you only pay on your gain as you receive it. So, let’s take this hunk of money that you’re going to get from his inheritance. Then you’d have to pay the gain portion of that money when you receive it. If that happens to be the amount of money you were looking for anyway, as part of the overall $200,000.00 gain that could be the key to doing exactly that. The balance then you can spread out over the next say 40 years. As you receive that gain next year you’ll only pay the portion of that income towards the gain and that can be reduced by your overall depreciation on all your properties. That might be the smartest thing for you, if your goal is to create income. So, that would be the best of both worlds. You’d have cash now and cash flow later. Robert I’m sure a lot of people benefited from that answer. I thank you for the question.
Question:
Pam Paquet asks how do I approach someone about investing their money into a real estate deal? The luncheon thing is not an option at this time. I’m just starting to feel comfortable enough to ask about seller’s mortgage info. I’ve never been real outgoing so this whole concept of starting conversations with complete strangers about such personal information is something that has taken a long time for me to do, but I am doing it. Now I just need to find the correct words to say to a possible private lender. I’m from Florida and my local REA group are not thinkers outside the box. So, although they invest they only invest the traditional way, going to banks, mortgage brokers, and they all insist that you can’t do land contracts they all invest in their own name or their own LLC’s .
Answer:
Wow Okay Pam, well you’re absolutely right this is a whole different way of doing business the Lou way, as my Platinum’s have now deemed it. When they’re doing deals they’ll day, “We’re doing deals the Lou way now”, and you’re absolutely right that it doesn’t match what other people will do out there in the world. So, we do have to have guidance and training on doing it the Lou way, because it happens to be the most profit in the least amount of time with the least effort and that’s our overall goal when we’re putting together these transactions.
So Pam here’s what I want you to say. I just want you to chat with people. “Hi my name is Pam. What I do is buy, sell, renovate, and rent properties. Let me ask you a question. Do you have an IRA account? From time to time we need capital for our real estate business and we found that we pay a lot more than the banks do. Let me just ask you something, how much are you currently earning on your uninvested funds in your IRA account” and many times you’ll hear the word zero, or one percent, or one and a half percent. So, the next thing you say is, “What we do is…or how would you like it if I could triple that return in well secured real estate”? Then you wait for their answer. So, first of all, you’ve asked them do you have an IRA account. If they say no, then say well do you have personal funds that are not working to the top potential right now? If they say no, then you say, “Do you have corporate or business funds that are not working to their top potential right now”? If they say no, they’re not a candidate for our program. They’ve got to have money to be able to do…or the next thing you can say is, “Do you know someone that has funds like that, because we pay referral fees as well? Well here’s what we do, we can pay much more than the going rate that the banks are paying right now, and it’s in well secured real estate. How much are you currently earning? How would you like it if we could triple that or quadruple that and see now what you’ve done is you’ve peaked their interest.
Now Pam here’s what I want you to do next. Shut up and stop talking. The next thing to do is to get out the lender presentation kit, and that is…if you don’t have my lender presentation kit it’s available for $79.95. I give it to you on disk and all you have to do is pull it up on your computer type in your company name, your name, print it out and then have it bound with like a spiral binding with a nice slick cover on the front and back that cost $2.44 at Office Max. Now when you bind that, after you’ve said the right words I want you to print that out on nice thick paper. Not 20 pound bond, but you know like 80 pound bond or 100 pound bond something really thick and nice. It makes it feel like a presentation kit. It’s not different from what a salesperson would do when their selling property. Now, or selling their program. You’re going to sell your program and what I want you to do Pam is hand that to your potential lender and say, “Here’s what I’d like you to do. I’d like you to go through this and let me just answer any questions along the way. It’s pretty self explanatory, so I’d like you to go though it, because this is exactly how our program works. Now let me tell you something Pam, and by the way everyone on the call listen to me carefully. I’ve had students tell me they’ve raised the most I’ve heard so far is 1.9 million dollars doing exactly what I just laid out for you guys. 1.9 million dollars. I’ve heard numbers like a million dollars, 750 thousand dollars, 500 thousand, 200 thousand, 3 thousand dollars you know it’s all over the board. This particular kit will do that for you and that script that I just went over with you and some other back up words are in your borrowing system. Volume Six “Borrowing” that actually gives you all the words to say exactly how to approach people, how to get the lead in the first place, what to do once you get the lead, what to say to them on the phone, what to say to them in person, how to make the presentation. Every step of the process so that’s Volume Six, “Borrowing”, and the add on The Lender Presentation kit. If all you have in your pocket today $79.95 just get that, because it’s going to make an enormous difference in how you do business and I’m so glad Pam you said that you know people in your local REA group they just don’t do things the way we do business, because you’re absolutely right. Nobody does business they Lou way, except our licensee’s. So, that was an extremely good question and I think everybody on the call benefited from it.
Question:
Here’s where the time gets so short here. Let me just hand this off to Bruce. So Adam Solensione. If’ I’ve butchered your name Adam I apologize for that. I live in Florida he says and have been getting some success with defaulted home owners. I was told to use a corporation as the trustee when I use a land trust to take title for subject to’s and lease option deals. What kind of corporation should I use? How should I structure the land trust using the corporation? Still keeping my name off records and also giving me the best tax benefits.
Answer:
Well Adam you are exactly right to be thinking that way. Now you’re also right that in Florida you can use a trust as the trustee of the trust. Let me explain what I think is a problem with that.
Let’s say that you buy 25 properties in the next year, and let’s say you put them each in a separate land trust, but you use the same trustee for all of the land trusts. Haven’t you just connected the all the dots back all together? Haven’t you made it easy for them to see exactly who the trustee is on all the properties, and isn’t that really what you don’t want to do? So, I want to ask you to just think though that process and my recommendation is that you do it the Lou way. Which is to use people rather than entities as trustees, and we use the same person for say four or five properties in the same county. Then we can use that trustee for four or five properties in another county or so on.
What’s happened in our Platinum Mastermind group is that they have now started becoming trustees for one another. For one another in different states and that’s another powerful thing that you can do, because what our Masterminds have is they have an internal email system where they can email one another within the Mastermind. That also opens up the opportunity to have like minded people operating the Lou way without having to go find a multitude of other trustees out there in the world. Not that I’m recommending that you do that. I’m just saying that that is one of the solutions that people have found for using people for trustees.
Then you ask what kind of corporation should I use? How would I structure the land trust using the corporation? Well you merely name the land trust, and the corporation would be the trustee of that land trust. So, it would be XYZ trust, XYZ incorporated…ABC incorporated as the trustee, if you were to use a corporation. Otherwise you would use an individual as the name on the deed, and you can literally deed out of your name into the trust name with an individuals name and you can do that immediately. The guidelines for that the steps in the process everything is in Volume Four “Land Trusts” and that guides you through the entire process. Also the CD’s that do it for you.
Well my goodness now the other challenge by the way with using a corporation for the rest of you guys on the call is that most states require that a corporation or an LLC acting as trustee must be approved by banking and finance…the banking and finance department of the State Legislature, and that is State government rather. That is a tedious process, and I would not recommend it for anyone that’s going to do it just going to do it for their own account. In fact only 15 States don’t allow using…excuse me 15 States allow using corporations or LLC’s . The other 35 require that you go through banking and finance to use an LLC or corporation as a trustee. So, that, hopefully, will benefit all you guys on the call and see why Lou’s recommendation and suggestion is that you do something else.
Okay well we have come to the end of another group Q and A call. We’ve answered about 34 questions on this call so you can see that by having you guys fax or email your questions in and then let me include them on the call. It allows me to get through so many more call and allows me to give me to give you so much meat on the call.
I’ve made some suggestions to you on this call. Of course I recommend that all of you be total package members. If you don’t know what the total package is please call my office. And by the way I’ve mentioned other products and services, and things that you guys can benefit from please call the office for those ,things as well, because we want to make sure you have the tools that you need in order to do this business.
Now remember too that there are levels to our coaching program. There’s our groups Q and A which you’re on now.
There’s the direct Q and A which is an individual answering service that, basically, answers your question anytime during the month that you need it. My staff will answer the question if they can. If it’s a Lou question they will hold that until I’m available and then I’ll answer it for you.
The next level is the one on one Q and A where I am your coach on the call for a 25 minute call once a month. Now included with that is your direct Q and A, which is your individual Q and A, and also the group Q and A. Then the final step of the process is for those folks that want to take their business to a whole other level. That you want to accelerate your business and accelerate your success in this business, and what you’ll do is become a Platinum Mastermind, now that’s for an exclusive group of folks that meet three times per year. We meet for two days three times per year as a group and we mastermind one another’s businesses. We deal with what’s stopping you in your business and all of the masterminds give feedback to how they’ve been able to solve those problems in their business. Also, how to solve your problems, there’s two levels to that. There’s the Apprentice and the Pinnacle level. Now that’s based on the number of deals you’ve done. The experience level you have as to whether you qualify for the Apprentice or the Pinnacle and we will guide you in the selection of Apprentice or Pinnacle. Also, included with that is your one on one with me, your group Q and A, and your individual Q and A as well.
So, folks take advantage of that because I can tell you that I’m being able to watch the growth of the folks in our coaching program. They are getting there so much faster and so much more successfully than other folks, who are out there, basically, spinning like a top and trying to get it down themselves. Take advantage of that. Call my office at 1-800-578-8580 and let’s get you started now.
Folks it’s been a real pleasure for me to teach you and I will see you again in two weeks. Good luck, good health, good profits. Take care and my God bless.
