Embed Size (px)
Citation preview
N E W S
4 R E A S O N S T O I N V E S T I NR E A L E S T A T E
F o r S e l f D i r e c t i n g
from Home Rental Services
N E W S L E T T E R F O RM I D - A M E R I C A A S S O C I A T I O N O FR E A L E S T A T E I N V E S T O R S
OCTOBER 2016
Legislative UpdateCalendar of EventsMarket UpdateBusiness Directory
from Jeff Watson
PLUS
RE INVESTMENT
T O P 1 0 T H I N G S F O R
This ordinance would require an inspector toenter the private homes of renters,continually, every other year, withoutpermission, without due cause, and without awarrant. If the renter refuses the inspectorentry to their home, then a judge can issue awarrant and then force entry. We as a groupof Concerned Missouri Property Owners feelthat this is a violation of the home renter’s4th Amendment Constitutional Right.Our Group has collected 100 signatures ofregistered Independence Voters and won theright to collect signatures from otherregistered Independence Voters so that theycan petition to have this Ordinance put tothe vote. We now have until October 7th tocollect enough signatures and we need yourhelp.
We have assembled a petition package toprovide every other concerned citizen ofIndependence to be used to collect as manysignatures as possible and turn them in byOctober 6th.
LEGISLATIVE UPDATE OCTOBER 2016
"Rental Ready"Passed inIndependence
Please helpcollectsignatures onrepeal Petition
As you may be aware the City Council ofIndependence Missouri voted and passed anew Rental Ready Ordinance #18637(Article 15 – Chapter 4 of the city code –read here) that will require landlords to havea Business License for every rental unit andas a condition to obtaining and keeping thatBusiness License will be required to hire aqualified inspector to inspect the rental unit,occupied or not), every two years. MultiFamily of 4 or more units shall have 10% ofunits inspected very two years. . Inspectorsto inspect for some basic safety issues andfor many tenant issues such as not using toomany extension cords, debris around furnaceand hot water heaters our around egresswindows and doors, insect and rodentinfestation, animal or human waste on wallsor floors.
C A L L T OA C T I O N
We need help collecting signatures. Please go online to get all thedetails and a Petition Package atwww.MAREI.org/Indep-RentalReady
R E I N V E S TM EN T N EWS | 3
Self Directed IRAArticle from Jeff Watson& National REIA's RE Journal(https://issuu.com/nreia/docs)
In the previous article, I discussed five of mytop ten recommendations for retirementaccount holders who are doing self-directedinvesting. Let’s continue with that list.
6. Do small-dollar deal until you get reallycomfortable with doing all the due diligence,underwriting and documentation that goesalong with self-directed investing.
If you do a small-dollar deal (remembers, allaccounts started out small) and somethinggoes wrong, you only lose small dollars. If youdo a large-dollar deal, particularly at thebeginning if your investing career, andsomething goes wrong, if could be fatal. Asyour confidence and experience grows, youcan do large-dollar deals.
7. Dealing and acting like a business owner insidea self-directed retirement account is not a goodidea.
Many people will tell you that UBIT can be yourfriend, and I would agree that in certaincircumstances, UBIT or UDFI are potential alliesto your retirement account; but acting like adealer or owning a business inside your self-directed retirement account is not wise. Not onlydoes it create a higher risk of liability and lawsuits,but there is a greater likelihood that it will attractthe attention of the IRS. You will also have to file amore complex tax return because the debt orbusiness Activity Income inside your self-directedretirement account is not tax-free.
I’ve had people say to me, “But, Jeff. I’ve been told
4 | MAR E I .ORG
that in order to have a truly self-directedretirement account, I must havecheckbook control.” Checkbook controlscomes when the IRA owns an entity, suchas an LLC or trust that is funded with IRAdollars, and the checkbook is in thecontrol of the account holder. Myresponse to that is that IRA-ownedentities can either be awesome or awful.You had better know when, which andwhy.
It’s a rule of practice in my office that I willnot assist a self-directed retirementaccount holder in setting up a single-member LLC to be owned by an IRAwherein the account holder insists onbeing the manager (person in charge of
INVESTING
Part II
understands that you cannot take moneyfrom your self-directed retirement accountand use it for you own investments or putsome of you current assets into thoseaccounts, so you must learn how to work withother individuals in a cooperative manner, Youneed to find individuals by networking withthem at your local REIAs to determine if their business standards are the same asyours, if their objectives are similar to yours,and if they seem like the right kind of person toput on your investing team.
When you play nicely with financial friends allof you prosper and benefit. Avoid doing a dealwith someone who believes they alone needto be the one who profits and benefits fromthe transaction. If the investment is notmutually beneficial, it shouldn’t be done by agroup of financial friends. One of the benefitsof developing a group of financial friends is thatyou can do repeated deals with them asvarious situations and opportunities arise.
This was originally published in the RE Journalfrom National REIA Winter 2016.
9. Make sure you double check thebeneficiary designations for the accounts youhave established.
This rule actually applies to every type ofretirement account, investment account, orbank account you have. You need to doublecheck your beneficiaries. Is that money goingto go to the person you want it to go to in theevent of your death? Is the beneficiarydesignation consistent with your overallestate plan?
Jeffery S. Watson serves as general Counselfor National REIA and practices law at theJeffrey S. Watson Law Firm, LTD located inConneaut, Ohio.
10. Become creative and learn how to playnicely with financial friends.
Self-directed retirement account investing is ateam sport. It is not a solo activity, Anyonewho understands the prohibited transactionand disqualified investment rules
R E I N V E S TM EN T N EWS | 5
the funds), I insist that they have an independent,non-disqualified third party as the manager ofthat LLC or the trustee of that trust.8. Open a Roth account
Many investors who are getting up in years havelamented that they only have traditionalaccounts, and they don’t think there is any waythey can get a Roth account. My response to thatis that anyone with a pulse and a way to earn andreport active, earned income can have a Rothaccount, and they need to get one NOW! Thereare simply no excuses. Once you have learnedthe definition of what constitutes active,ordinary, earned income (income that is subjectto income tax or self-employment tax such asW-2, paycheck, 1099 or Schedule C income),you will understand the importance of gettingsome of that money into a Roth IRA or Solo401(k) with Roth component. The magic of theRoth is absolutely crucial. Not only does themoney get to grow tax free, but under the rightcircumstances, it can be withdrawn from theaccount in the form of a qualified distribution taxfree.
SELF DIRECT
A C A D E M YSELF-DIRECTED IRALEARN TO BUILD WEALTH AT MAREI'S
OCTOBER 22 • 8:30 TO 5 • HOLIDAY INN8787 REEDER ROAD, OVERLAND PARK, KS
JEFF WATSON : TIM KUHMAN : QUINCY LONG
LIMITED SEATINGEARLY PRICING THRU THE 18TH
MEMBER'S $49 (REG $69)NON-MEMBER $69 (REG $99)
SPOUSE OR BUSINESS PARTNER $20 (REG NA)
By requiring your tenant to carry
renters insurance, you ensure that
your property has the extra layer
of protection that you already
require. For as little as $5 a
month, your tenants can purchase
basic renter's insurance and for an
additional premium, they can add
coverage for their belongings and
valuables.
Renter's Insurance
Renters Insurance
Protects Your
Tenants & Gives
You Peace of Mind
Get a Quote!www.realprotect.com
phone: 800-579-0652 (#3)
Protects tenant's belongings
Provides tenants with
personal liability coverage
In the case of tenant caused
loss, the renter's insurance
may become primary, thus
avoiding a claim on your
policy.
Avoids you
otentially becoming liable
for tenants pets and guests.
SDIRA
By Je f f Watson
T H E MO S T C O MM O N
As you probably know, I’m verypassionate about individualslearning how to take control of andmanage their selfdirectedretirement accounts, whether theyare Roth or traditional IRAs,401(k)s, or HSAs. Through theyears, I have been asked all sortsof interesting and sometimescomplex questions, and over thelast year or so, I am seeing what Ibelieve is the most commonmistake being made by most selfdirected account holders.
They have failed to disciplinethemselves to make regularcontributions to these accounts inorder to have more capital toinvest in good deals andopportunities that come their way.
I don’t think it’s because mostpeople are bad with moneymanagement and don’t have amonthly plan for what is going tohappen to their money. Instead, Ithink it stems more from the beliefheld by the typical account holderthat they can make up for the lackof contributions with astute andaggressive investing.
The steps to correct this arerelatively simple.
1. Outline a written plan for whatyou are going to do with yourconsistent monthly income.
2. Designate a portion of thatmoney, whether it is wages youdefer for a 401(k) or other takehome pay, to be deposited into theretirement account you haveselected with the custodian of yourchoice.
For those of you who want to do aquick math exercise, take aconsistent contribution of $100 amonth with a rate of return of 12%and see what that would becomeafter 40 years. Can you say theword “millionaire”? If you don’tthink you have 40 years, try thesenumbers: $300 a month at 12% forjust 20 years. That’s nearly$300,000.
Allow me to share with you aquote I picked up from my friendPete Fortunato: “It is a terriblething to be physically alive andfinancially dead.” In order toavoid that terrible thing, selfdirected account investors need tomake sure they are consistentlyputting money into their retirementaccounts on a regular basis.
MISTAKES
R E I N V E S TM EN T N EWS | 7
WinVestor'sHosted by Brian & Michelle WinberryWednesday Mornings at 9 amLucky Brewgrill5401 Johnson Drive, MissionOn Facebook
1st SaturdaysHosted by Jim & Beth Kasper1st Saturday of the Month 9 amNetworking Coffee / Denny's9001 Shawnee Mission Pkwy, MissionOn Meetup
Landlords of Johnson CountyFirst Wednesday of the MonthMatt Ross Community Center8101 Marty, Overland Park, KSjocolandlords.org/Meetings.cfm
Cass County Landlords3rd Tuesday of the MonthCarnegie Village103 Bernard Drive, Belton
Landlord Inc of KCK3rd Tuesday of the MonthLoan Star Steak House1501 Village West, KCKOn Facebook
Landlords Inc.
4th Tuesday of the MonthCentral United Methodist Church5144 Oak Street, KCMOsites.google.com/site/kclandlordsinc/
Landlords of EJC4th Thursday of the MonthAllen's Banquet Hall11330 E Truman RdIndependence, MOlandlords-of-ejc.com/
Jackson County Real Estate InvestorsLast Wednesday of the Month4 West Monroe StreetBuckner, MissouriOn Meetup
Jeff Watson is an Attorney & Real Estate investor who has
conducted & assisted others in structuring Real Estate
Transactions in Self Directed IRA's and other Self Directed
Accounts . !Be sure to RSVP Online and join us at the Holiday Inn
at 8787 Reeder Road from 6pm to 9pm on Tuesday October 11th
FREE for Members and 1st Time Guests. All others pay $25 at the
door or $15 when they pre-regsiter at MAREI.org.
SELF DIRECTED IRAS &REAL ESTATE
MEETINGFROM OTHER GROUPS >
November 8th is not only Election Day but also ourNovember Meeting. So go vote and then join us atthe meeting at 6:00 for networking and at 7:00 forour meeting. This month we will be talking aboutlegislation. Most specifically how to create orchange law in KS and MO to protect our industry. We will be talking about Seller Financing, RentalLicesning & Inspections, and City Owned Utilities.
Please mark your clanedar for Tuesday November8th.. We may add a few more webinar events, sowatch the calendar of events.
LEGISLATIVE PROCESS
MARE I .ORG /CA L ENDAR
THE CALENDAR
This is a one day hands on workshop designed to show investors the
nuts and bolts of profitable real estate transactions with small dollar self
directed accounts. Jeff Watson will be sharing deals he and his clients
have done and showing how you can do them too. He will be joined in
training by Tim Kuhman from Kingdom Trust and Quincy Long from
Quest IRA. Early Bird Price is $49 for Members, $79 for Non-Member and
Bring a Guest for $20. Register by Oct 18 at MAREI.org for early pricing.
SDIRA ACADEMY
WORKSHOP
See full day workshop
page 5
NOVEMBER
"We are beginning to be successful in buying and holding rentals, and a component of that has beenyour MAREI organization and the people you’ve had as guests. We thank you for good REIAand all the influential real estate and investing people you’ve brought in these last few years!"
ElectionNight2016
MARKET UPDTATE august 2016
3,580homes sold
6.4% Increase over 2015
58average days on
market14.7 % Decrease from 2015
96.6% of asking price1.2% Increase over 2015
$17k$17,141 average
sale priceincrease fromsame time lastyear (5.5%)
3,393pending sales5.0% Increase over 2015
8,047houses for sale30.5% decrease2.6 month supply
average: $222,192median: $186,900
Closed sales began to cool for much of the country last month, and conventional wisdomindicates that year-over-year declines are going to be present for the remainder of the year,given the low inventory situation in most markets. Demand is certainly present and has createdcompetitive situations that have kept prices up. Rental prices are also up, which may lure moretoward homeownership.
vAs inventory continues to drop, the contradictions of today's market are evident. Sellers shouldfeel confident enough to list homes at fair prices and receive meaningful offers in a healthyresidential real estate and overall economic environment. However, there may be lingeringworry over the availability of move-in ready homes to replace what was sold. On a brighternote, building permits are trending upward. That news should be weighed against the fact thatthe highest level of activity is in multifamily rentals.
For further detail see http://www.kcrar.com/statistics
4 REASONS TOINVEST IN REAL ESTATE
4 REASONS TOINVEST IN REAL ESTATE
By Home Rental Services
#1 Cash Flow is the profit you haveeach month after you’ve paid for allof the expenses on your investmentproperty.
Let’s say that you get $2,500 permonth in rent. Let’s also assume thatyour mortgage and propertymanagement fees are $1,800 permonth, leaving you $700. During themonth, you had a garbage disposalthat needed to be replaced for $300,leaving you $400 in cash flow.
You might be thinking to yourselfthat $400 is not going to make yourich. And it probably wouldn’t unlessyou had multiple properties yielding $400 per month in cash flow… butthis is just one of the four reasonsinvesting in real estate is agreat investment.
1 0 | MAR E I .ORG
If you currently live in a home thatyou own, you’ve probably seen thishappen first hand. You get a taxassessment every year and it’s rarethat the assessed amount goes down.Let’s say that you bought your homefor $250,000. Ten years later, thathome might be worth $270,000-$300,000 based on how well realestate performs related to theeconomy. If you sold your home, youwould realize $20,000-$50,000 ofgain (minus closing costs, etc.)
And that’s an example for just onehome.
In the cash flow section, we talked
Many of our investment clients ownmultiple properties that we managefor them.
Let’s say that you were able to buyfive properties over the course of 5-10 years. If they were all cash flowing$400 per month, you would have$2,000 per month of passive income.That’s starting to become a numberthat matters. It’s a number that couldallow you to buy the boat you’vealways dreamed about or retire a bitearlier.
#2 Appreciation is the historicaltrendthat properties rise in valueover time. Sure, there are correctionsin price when the economyis suffering like in 2007, but over theyears, property values usuallyincrease.
5. If you decide you want to sell your
investment property at some point
and you are looking at a sizeable
profit, the IRS has a great program
called a 1031 Exchange. This program
has some specific date limitations but
essentially allows a perfectly legal
way to defer capital gains taxes
(always a good thing).
Be sure to consult a tax advisor who
knows all the deductions you can take
when you own rental property. You
want to be sure to take advantage of
all of them!
We recommend that you work with
your attorney or CPA before making
legal or financial decisions.
Conclusion: When you consider cash
flow, appreciation, paying down your
loan, and tax benefits, owning an
investment property can be an
excellent way for you to generate
passive income.
To learn more, please give us a call at
(913) 469-6633 or email
#4 Tax Benefits Many landlords are notaware of all the great tax deductions you canget when you own investmentproperty which means that many landlordsare overpaying on their taxes… who wantsto do that? Rental properties allow more taxadvantages than pretty much any otherinvestment vehicle. That is good news!
1. When you think of the rental income youare going to get, it’s great to know thatexpenses such as repairs, maintenance,leasing commissions, property managementfees, interest on the mortgage, utilities, makeready costs, HOA dues and more are usuallytax deductible.
2. Real estate taxes on your investmentproperty are… tax deductible.
3. The IRS allows you to not only depreciatethe house (not the land) but also capitalexpenses such as roofs, replacementwindows, etc. All of these things work toreduce your taxable income.
4. If you have one of those not-so-fun yearsand you lost money; your losses canalso help offset other income which is abright spot. (There are some annual limits tothis…check with your tax advisor.)
R E I N V E S TM EN T N EWS | 1 1
about buying multiple investment propertiesand assumed that you were able to purchase 5homes over a period of years. When you startmultiplying appreciation gains across multipleinvestment properties, the numbers really startto add up. You could be looking at $100,000-$250,000 of potential gain after 10 years. (Wesay potential, because you won’t realize a gainuntil you sell the properties, and many investorschoose to hold them for the long term.)
#3 Paying Down Your Loan When youpurchase a rental property with a mortgage,you make a monthly payment to the lender.That payment includes two parts: principal andinterest. Interest is the profit for the lender, butthe principal is money you are paying down theloan with.
For example, if you purchased a house fiveyears ago for $100,000 and got an $80,000mortgage. We’ll say it was a 30-year mortgagewith a 5 percent fixed rate.
Today, you would owe only $74,000 because$6,000 of your monthly mortgage paymentswent towards the principal of the loan amount.Ten years from now, you would owe only$65,000. This means that every year yourequity increases, you would gain value in theproperty as long as the market value didn’t godown. Equity is the difference between what aproperty is worth and what you owe on themortgage.
If you are in a financial position where you canbuy the property outright, you have 100%equity. But you’ve also tied up a sizeableamount of your liquid assets (cash) in thatproperty.
The decision to take out a mortgage orpurchase a property outright is influenced bymany factors including interest rates, tax law and more. We recommend that you talk withyour accountant about the best way tofinancially acquire a property.
RENTAL PROPERTY
A C C U R A T E T I T L EA Full Service Title CompanyDavid Greenwww.AccurateTitleCo.com913-338-0100
A L P H A T I T L EFull Service Title CompanyPatsy Archerwww.AlphaTitleLLC.net913-498-8999
A N D E R S O N & A S S O C I A T E SLaw FirmJulie Andersonwww.MOKCLawcom816-931-2207 / 913-262-2207
A Z U R E W A T E R F R O N TLuxury Waterfront Property InvestmentBrad Reddickwww.AzureWaterfront.com800-240-3606
B R I D G E M A N A G E M E N TA Turn Key Real Estate ExperienceNathan Brookswww.BridgeTurnkey.com913-695-8213
C O N T I N E N T A L T I T L EA Full Service TitleCompanySharon Bowerwww.CTitle.com913-338-3232
Build Your TeamWith MAREI Business MembersSave time and money by starting with serviceproviders who already know your business. Who cansolve problems as they arise to help you get the dealcompleted on time and for maximum profit.
MAREI.orgCLICK ON
VISIT
businessassociates
1 2 | MAR E I .ORG
J A M I E S O N H O M E T E A M
G U A R A N T E E D R A T EFirst Digital MortgageBeth Langstonwww.GuaranteedRate/com913-225-9323
H E A R T H M A S T E R SChimney & Fireplace RestorationMage & Gene Padgittwww.ChimKC.com816-461-3665
H O M E D E P O T2% Rebate on all PurchasesChristine Putman PRO Account Rep816-377-9534
Sharon BeckPPO Account Rep913-313-8912
H O M E R E N T A L S E R V I C E SKansas City Property ManagementSandy Fisher or Paul Brantonwww.Home4Rent.com913-469-6633
K C I N V E S TInvestment Property SellerKim Tuckerwww.KCInvest.com913-735-0018
K C M O H O M E B U Y E RProperty BuyerDon Tuckerwww.kcmoHomeBuyer.com816-200-2198
M E R C H A N T S M O R T G A G EReal Estate Finance CompanySusan Aubinwww.MerchantsMtg.com720-554-9480
K C C A B I N E TC O L L E C T I O NCabinet SourceMark Yandawww.CarriageHouseCabiinet.com913-980-4260
DIRECTORY
R E I N V E S TM EN T N EWS | 1 3
C R O S S R O A D S I N V E S T M E N TL E N D I N GInvestor LendingBritton Asbell and BarakTschirhartwww.KCLend.com913-766-2900
D I S C O V E R H V A CHeating & AirconditioningComplete System for $2785www.DiscoverHVAC.net816-500-2900
Realtor & Property ManagementKevin Jamiesonwww.KevinJamieson.YourKWAgent.com913-384-8331
I N V E S T O R S C H O I C EF U N D I N GThe Flexible Funding SolutionL. Scott Ficinuswww.InvestorsChoiceFunding.com816-668-7223
O F F I C E M A X / D E P O TA further sign of health is that we don'tbecome undone by fear and trembling, butwe take it as a message that it's time to stopstruggling and look directly at what'sthreatening us, said Pema Chödrön.
R E A L T Y R E S O U R C EReal Estate BrokerageScott Tuckerwww.RealtyResourceKC.com816-406-0701
P A T L I V EProfessionally Answered TelephonesFree Trial & Discountswww.MAREI.org/PatLive
P R I D E P R O P E R T I E SReal Estate ProfessionalsMarcus and Matt Braywww.PrideProperties.com913-213-5370
R E A L E F L O WReal Estate Investor PlatformMarketing, Management, Deal Flowwww.MAREI.org/Realeflow
R E A L E S T A T E I N V E S T I N GT O D A Y Real Estate News from National REIA.www.RealEstateInvestingToday.com
R E N T A L S . C O MAdvertise Your Rental PropertiesDiscounts for Memberswww.Rentals.com
Y O U R C O M P A N Y H E R EBecome a Business Member Today$499 Annually or $135 QuarterlyOther Advertising Included
R E N T P E R F E C TTenant Screening, Leases & Insurancewww.ISCScreening.com
DIRECTORY
N A T I O N A L R E I A UOnline TrainingProfessional Housing Provider Creditswww.NationalREIAU.com
R E A L P R O T E C TInsurance for InvestorsBrought to you by National REIAwww.RealProtect.com1-800-579-0652
1 4 | MAR E I .ORG
Investigative Screening & Consulting’s ISC Connect
is the solution rental property owners & managers
have been crying out for. They’ve combined the
hands-on human element of
investigative techniques with the speed,
convenience, and cost-cutting power of the digital
age to provide you with an all-in-one, mobile web-
enabled screening process. The ISC Connect
Online Lease Agreement allows you to send your
tenant(s) a customized lease agreement,
electronically and securely!
No more having to create or search for a lease; just
generate it, and they’ll securely hold on to it for you!
They have included all the legal greatness of a
normal lease, and made it easy to customize to
your specific property by adding terms such
as: Lease Start and End Dates, Monthly Rent,
Additional Lessees and Authorized Occupants, and
of course Security Deposits and Concessions. Your
tenant (and you) will then electronically sign the
lease, which is then conveniently stored and
available in your account, viewable at anytime!
National REIA members receive a discounted
$0.95 set up fee for this program.
In addition to their Online Lease, ISC now features
a way to make renters insurance required for your
rental property addresses. Tenants are notified via
the ISC portal and, through a partnership with
realprotect, given access to special discounts on a
new policy – starting as low as $5 per month.
Sign up today and see why ISC Connect has
become the one tools hundreds of property owners
and managers cannot live without. ISC allows you
to rent perfect!
Take the Hassle Out of
Leases and Rent Perfect
EXPAND YOURBUS INESSWITH MARE I
40,000professionalsNational REIA 514 MAREI Members
4 membe r bene f i t sdesigned to promotec o m m u n i t yN E T W O R K I N G : E D U C A T I O N
A D V O C A C Y : C H A R I T Y
5Key Investing Areasfor members to share knowledgeRental : Rehab : Wholesale : Notes : Creative
30+local and national service providers many with discounts
PROFESS IONALhousing provider
CERTIFICATION
$750Average Member S A V I N G S
$500 Average Home Depot Rebate$100 Average Saving Office Depot$100 Saving on 5 Training Events
$50 Savings on Other BenefitsPeople / Networking PricelessDeal Connections Priceless
JOIN TODAYmembe r s h i p$99 Annually
marei.org
