The three most important things that you can do in real estate  – or in any sales position, for that matter- are lead generation, lead conversion and lead follow-up. These are ?rain-maker? activities that will make you profitable. They are the 20% of your daily activities that will generate 80% of your income; they are that important.

No matter what area of real estate in which you have chosen to focus, if you do not have a steady stream of leads, you will not be successful.

For investors, leads will be property, people and partners. I like to start with property, because if you find a good deal, everything else will fall into place. The tenth article in this series focused on where to find properties. Some of the possibilities included:

• Listed properties on the NWMLS
• FSBO’s (For Sale By Owner)
• For Rent signs (often a frustrated seller and reluctant landlord)
• Distressed and neglected properties found through drive-bys
• Wholesale properties found by bird dogs
• Foreclosure auction properties, pre-foreclosure properties and REO’s (bank-owned properties)
• Advertisements from distressed sellers (Craigslist, for example)
• Advertising for distressed and motivated homeowners, cash buyers or equity partners.

If you do not have a steady stream of leads in your pipeline, there are several ways that you can advertise to attract them. These may include bandit signs, door hangers, flyers, classified ads, on-line ads, cold-calling, door-knocking, direct mail campaigns with postcards or letters. You may want to read a good book or two on sales and marketing to learn about the most effective techniques to generate leads. And then test and track different methods to see which generates the most quality leads for you.

In order to effectively generate leads, you must have a clear and very specific idea of the target homeowner you are trying to reach. You may get lists of homeowners from a title company for a nominal fee or from an online source such as listsource.com. For example, perhaps your target homeowner is an out-of-state owner in a three-bedroom, two-bath house which they have owned for at least ten years in the 98052 zip code, with a tax-assessed value under $350,000. Your list can and should be that specific.

If you do not have one, a good database (even Outlook or Google mail can suffice) and a good customer relations management (CRM) system are essential for the next two rain-maker activities  – lead follow-up and lead conversion  – as they allow you to keep track of your contacts and prospects. Persistence pays off in this arena! Follow up on your prospects, more than once!

As so many of our new investors are interested in wholesaling, the next article will focus on ?bird letters,? the letters you send to target homeowners with properties that match your buying criteria. Please feel free to send any sample letters you like to me at HomeLandInvestment@gmail.com and I will include them in the next article. This series of articles is a regular feature of the REAPS newsletter, and as REAPS Membership Coordinator, I welcome your feedback. Please let me know what topics you might like to see addressed in future articles for the novice real estate investor.

About the author…
Wendy Ceccherelli is the volunteer membership coordinator for REAPS. She has been a full-time real estate investor for the past six years, and is the designated real estate broker for Home Land Investment Properties, Inc. Prior to her career in real estate, she spent twenty-five years as a government arts funder. More information on real estate topics may be found on her website at www.HomeLandSeattle.com.

“REAPS is the oldest – and largest – Professional Association for the real estate investor this side of the Mississippi. We provide education and networking resources for real estate investors, those who want to be investors and anyone who provides value to our members. Our goals are to motivate and support our members and guests through education, discussion, legislative action and networking. We host over 40 live events a year around Puget Sound and they are all open to the public. If you’ve never attended one of our meetings, just email our office at info@reapsweb.com and be our guest for free!”

Nothing sends a buyer packing faster than a dirty, outdated bathroom. Well, almost nothing.  You can beat a dirty bathroom with a home that wafts an aroma of stale cigarette smoke or animal urine, but a bathroom that isn’t spotlessly clean will turn them off every time. I’ve heard stories of buyers that love a home, but when they see just a little soap residue on a shower door, or those bright and shiny outdated brass faucets walk out without so much as a “maybe we could fix it.”  The comment is “If they didn’t take care of the bathroom, what else didn’t they take
care of?”

Okay, you got it right? Clean and update the bathrooms.
Here’s seven tips for inexpensive must do’s for the bath:

1. Replace the shiny chrome or brass faucets with brushed . You can get a nice modern Glacier Bay brushed nickel faucet at home depot for $34.

2. If the bathroom mirror is cracked or the silver is failing, replace the . I find nice framed mirrors for under $50 at Ross, Marshals, TJ Max or Tuesday Morning all the time. Make sure and inspect them carefully though, especially the corners. Shoppers can be  on the edges in bargain
stores.

3. Update the light fixtures. I’ve seen bathrooms where the seller has gone to the trouble and expense to replace the counter tops with granite or tile and left the  shiny brass light fixture with the round glass bulbs. ICK! A brushed nickel fixture will make a world  difference! Call me for suggestions, or to find out about discounts I can offer my clients. I’ll pause here for a moment. I have staged bathrooms, where all that the sellers did were those top three things.  bathrooms were spotlessly clean and after staging they looked very nice. But, if you really want the home to sell quickly and the Master Bath has 80?s blue counter tops, or worse a nice rose pink toilet, I strongly recommend going on to number 4.

4. Replace cracked, colored or dingy toilets and sinks with new white fixtures. At a minimum, if you have one those old spongy toilet seats, TOSS it! Ewww!  And yes,  1980 oak seat with matching toilet paper holder really has to go.

5. Reface or replace the tub if its stained cracked or damaged. In an entry level home replacing the tub and outdated tile with a nice tub surround is perfectly fine.  a higher end home, I recommend tile.

6. Replace the blue, pink or otherwise outdated laminate counter tops with tile or granite. Especially in the master bath.

7. New vinyl flooring can do wonders in a guest bath and powder room, however, if there is just one bathroom or in higher end homes I recommend tile. In a master bath with a soaking tub, I think tile is a must. It goes without saying that the bathroom should be freshly painted a
nice designer neutral like Benjamin Moore Practical Beige or Sherwin  Urban Beige or Relaxed Khaki. Staging the bathroom with a new cloth curtain, plush towels and art  add the frosting to the cake. If you would like personalized advice for  colors, fixtures or finishes for  bathroom call to schedule an appointment for a walk through . Or if you are out of the  area, I offer online consultations, using your pictures and a Webex meeting tool we can  walk through any room of your home together.

Do you have specific staging questions? Send me an email  I will feature your question with an answer on my biweekly radio show on the Chat with Women Network.
Listen in the 1st and 3rd Wednesday of the month on 1150 AM radio from 8:00am to 9:00am, or listen to past shows by going to www.stagingforcharisma.com.

About the author…
Pam Christensen is an Accredited Staging Professional Master who specializes in working with investors to help them maximize their return on investment by providing high quality staging that get results!

“REAPS is the oldest – and largest – Professional Association for the real estate investor this side of the Mississippi. We provide education and networking resources for real estate investors, those who want to be investors and anyone who provides value to our members. Our goals are to motivate and support our members and guests through education, discussion, legislative action and networking. We host over 40 live events a year around Puget Sound and they are all open to the public. If you’ve never attended one of our meetings, just email our office at info@reapsweb.com and be our guest for free!”

Though foreclosures have been in the news for quite a while, the issue has received even more media attention in 2011, and probably will continue to dominate the financial headlines well into next year.

According to new RealtyTrac data, lender delays in processing home-loan defaults are slowing down the foreclosure process across the U.S. Compared to last year, average time from initial bank notice to complete seizure is now 318 days, as compared to 277 days a year ago.

Foreclosure filings are also declining. From the third and fourth quarter of 2010 to the first and second quarter of  2011, the national average for  foreclosure filings declined by 25 percent.

The drop in filings is temporarily inflating home prices. As Greg Hebner of Community Rebuild Partners states, “You’re seeing an artificial floor. If supply flooded the market without all the delays, you’d see another 10 percent price drop.” However, Washington State is bucking the trend. A report on King and Snohomish County foreclosure filings compiled by Fairplay Foreclosures shows rates here have also declined, but not as rapidly.

Though RealtyTrac shows national filings are down 25 percent, King County’s only dropped 20 percent during the same period. Snohomish County’s are down by just 14 percent. Compared to the national average, these counties have more properties in the foreclosure process, many of which are expected to come up for auction soon. “If you’re considering investing in foreclosures, this is a prime time to get your ducks in a row,” says Bill Widmer, CEO of Fairplay Foreclosures. “There’s a backlog of properties in Washington that will make it to auction sooner rather than later.” He adds that it’s also a good time to invest in traditional real estate. “As compared to much of the U.S., prices here are steadier and more accurate.”

As a full-service real estate investment firm, Fairplay is dedicated to helping all levels of investors succeed in both the traditional and distressed real estate market. It offers free online tools, personal mentorship and an exclusive database of properties, which is updated constantly to reflect any change in status of those properties. “Our goal is to bring these outstanding investment opportunities to anyone willing to take the time to learn,” Bill Widmer, CEO of Fairplay Foreclosures, says. “We provide a number of resources they can use to become savvy, successful investors. And, let’s not forget how important investors are to the recovery of the market.”

Every Thursday, Fairplay holds new investor workshops to introduce people to the basics of foreclosure investing.  Afterward, they hold their weekly Investor Café, which meets over drinks and appetizers to discuss investment strategies, home improvement, financing options and “featured properties,” selected for their excellent investment potential.

All services are free to members. Fairplay only charges a fee when they purchase a property at auction. If they choose, members can also take advantage of optional services, which include lending through Fairplay Financing, which offers competitive traditional mortgages as well as Bridge 3.0 an easy, streamlined approach to purchasing properties at auction with cash from a bridge loan. Fairplay Financing is available for any property, even those acquired through other real estate companies.

Fairplay represents clients in Washington and Oregon, with plans to move into Los Angeles County in California, Clark County in Nevada, and Maricopa County in Arizona. We encourage anyone with any interest in distressed properties to visit www.FAIRPLAY.com to sign up for a free membership, or attend one of our Thursday workshops, and prepare yourself for opportunities that will keep coming up, now and well into the future.

About the author…
Shane Gallagher is one of the co-founders of Fairplay Foreclosures and is responsible for the sales, marketing and growth of the company. His background in the real estate and financial services industries includes multiple awards and an unbroken track record of sales and revenue increases. Respected by customers and colleagues alike, Shane is known for his integrity, follow through and
commitment to excellence, which he brings to his position at Fairplay.

“REAPS is the oldest – and largest – Professional Association for the real estate investor this side of the Mississippi. We provide education and networking resources for real estate investors, those who want to be investors and anyone who provides value to our members. Our goals are to motivate and support our members and guests through education, discussion, legislative action and networking. We host over 40 live events a year around Puget Sound and they are all open to the public. If you’ve never attended one of our meetings, just email our office at info@reapsweb.com and be our guest for free!”

In today’s market for residential property, foreclosures are a significant source of potential investments for people who anticipate buying low, improving the property and then selling high(er).  So the investor attends the trustee’s sale, bids on the property and if successful in the auction, receives a trustee’s deed.  Is the investor then free to enter the property, make the changes that the plan calls for and sell the house at a profit?  What if a tenant is occupying the property?

An investor who buys at the trustee’s sale is entitled to possession of the property twenty days after the sale, as to anyone except tenants who were in possession of the property at the time of the trustee’s sale.

In order to gain possession against tenants who were in possession of the property at the time of the trustee’s sale, the investor who bought the property must give the tenants a special statutory written notice saying that the tenants must vacate the property within sixty days after receiving the notice.  First, it must be provided by regular mail and second by either certified or registered mail, with return receipt requested.  The notice must follow required wording in the statute.

If the tenants do not leave the property by the end of the sixty day period after the sending of the notice, then the investor must begin an unlawful detainer case against them in court in order to obtain an eviction.  The unlawful detainer case requires a summons and complaint which must be served on the tenants and the tenants must be given time to respond, usually at least seven days.  The tenants must be named in the summons and complaint as the defendants in the lawsuit.  The investor must ask the court for a writ of restitution of the property, and if the tenant does not contest the complaint, the writ can be issued and the sheriff will then execute the writ and physically evict the tenants.  The writ of restitution is the document that directs the sheriff to restore possession of the property to the purchaser.  If the tenant does contest the complaint then the court may order the issuance of a writ of restitution after the trial.

The investor also has the right to offer a tenant that was in possession of the property at the time of the trustee’s sale a new rental agreement.  If the investor does this, what happens to the tenant’s deposit that was given to the previous owner whose interest was foreclosed?  Under the Residential Landlord Tenant Act, the tenant’s deposit is to be transferred from the foreclosed landlord’s trust account to a trust account of the new landlord.

Investors who plan their holding periods to be approximately ninety days in order to allow for all necessary rehab work to be done and the property marketed and sold will be pinched for time.  It may take almost the entire ninety days for the investor to gain possession of the property if it is occupied by tenants at the time of the trustee’s sale.  Technically the tenant who was in possession at the time of the trustee’s sale should be paying the rent to the investor who bought at the trustee’s sale, until the tenant leaves the premises.

Some investors use a “cash for keys” approach to shorten the period they must wait to begin their rehab work.  Under this technique the investor approaches the tenant cooperatively and offers to pay some amount such as five hundred dollars if the tenant agrees to move out in two weeks rather than forcing the investor to go through the statutory notice procedure and file an unlawful detainer case.  The trustee in the foreclosure should have notified the tenant that the foreclosure sale would be occurring and so the tenant should not be surprised at being asked to move, and sometimes this approach can be successful in helping the investor’s schedule to remain on track.  The foregoing is intended for instruction only and should not be considered as legal advice.

About the author…
Doug Owens practices real estate law and general business law from his office in Seattle.   He offers a 10% discount for REAPS members and he can be reached at (206)985-6679 or dnowens1@clear.net. ?

“REAPS is the oldest – and largest – Professional Association for the real estate investor this side of the Mississippi. We provide education and networking resources for real estate investors, those who want to be investors and anyone who provides value to our members. Our goals are to motivate and support our members and guests through education, discussion, legislative action and networking. We host over 40 live events a year around Puget Sound and they are all open to the public. If you’ve never attended one of our meetings, just email our office at info@reapsweb.com and be our guest for free!”

When most of my clients hear the words “estate planning,” they first think about avoiding estate taxes. However, under current law, federal estate tax (maximum rate of 35%) does not kick in unless someone passes away with more than $5 million in assets, and the State of Washington death tax (maximum rate of 19%) does not get triggered unless the estate value is more than $2 million. I certainly have clients that will fall within this taxable range (especially when taking into account life insurance – which many people fail to consider), but even for those clients, estate planning is more about passing their assets to their children, grandchildren, other relatives
and/or charities in a responsible and organized manner.

For clients that are real estate investors, estate planning is almost always intertwined with structuring their affairs to avoid current liability concerns and to allow for smooth management/ ownership transition in the event of disability or death. In other words, avoiding taxes at death is normally a minor issue in comparison to other estate planning objectives.

In a general sense, there are two basic methods for passing assets at death: (1) a Last Will and Testament (“Will method”); and (2) a Revocable Living Trust (“Revocable Trust method”).  Under the Will method, a deceased client’s “probate assets” will pass according to the terms of the Will. Probate assets include real estate, personal property (e.g. jewelry, cars, household items, etc.), bank accounts, business entity ownership (e.g. LLC membership units) and other property that does not pass according to a “beneficiary designation form” (e.g. retirement plans, life insurance, etc.). The wording of a Will can pass assets directly to heirs (e.g. “all of my assets to my spouse, and if he/she is deceased, to my children equally”) or can pass assets into a trust (e.g. “all my assets to my Family Trust to be administered as described in Section 8 of this Will”). The Will also names individuals that become very important at death, for example: the “Guardian” is the person who will care for the client’s minor children if both spouses have passed away; the “Personal Representative” is the person who will act out the wishes of the client based on the terms of the Will; and the “Trustee” is the person who will manage the trusts (on behalf of the beneficiaries of the trust) created under the Will. In general, the first time a person should start thinking about creating a Will is when they own significant probate assets (e.g. first home) and/or have minor children. A Will can be amended at anytime, and clients often make changes as they age and their family situation and/or assets evolve.

One of the downsides of the Will method of estate planning is that some of a client’s assets will pass through “probate” at their death. Although this legal process is relatively painless under Washington law, there are several downsides, including: (1) the deceased person’s Will becomes public record, which has the potential to raise hostility within the family, particularly if some family members have been excluded from the Will; (2) the probate process can take along time and can cost thousands of dollars to complete.

The Revocable Trust method involves creating a Revocable Trust and transferring assets into the trust. The potential benefits of this method include: (1) assets held within the trust at death will pass directly to the beneficiaries of the trust without going through probate; (2) although more expensive to initially setup, the Revocable Trust method can save probate costs at death (note: this benefit is the primary motivator for the widespread use of Revocable Trusts in states like California, where the probate costs are much higher than in Washington); (3) if the client holds real estate in several different states at death, multiple probate proceedings can be avoided (note: most states require a separate probate proceeding if real property is held within their jurisdiction  – unless the property is legally owned by a trust).

In most instances, I do not recommend the use of the Revocable Trust method for clients that are relatively young (e.g. 30s or 40s) unless the client owns property in multiple states. The reason is that Revocable Trusts not only need to be drafted properly, but also need to be funded and maintained correctly. I have had many clients tell me that they have a Revocable Trust in place, only to find out that their former attorney did not assist them in legally funding the structure. A Revocable Trust that is never funded will not result in the benefits described above.

Several other reasons why the Revocable Trust method is not always the best for some clients include: (1) if real estate held within the trust is sold and new property is acquired, the trust needs to remain appropriately funded (I have seen many situations where the new property is never legally placed into the trust); (2) the eventual probate cost savings do not outweigh the cost to create, fund and maintain the trust structure. However, for clients in their 60s or 70s with relatively fixed assets, the Revocable Trust method can make a lot of sense.

Regardless of the estate planning method used, I always recommend that my clients also have a Healthcare Directive and a Power of Attorney in place. A Healthcare Directive allows a client to decide what they would like their doctors to do if they are ever in a “permanently vegetative state.” This document can help relieve the client’s family of the difficult decisions that can arise in this very specific situation. The Power of Attorney document allows the appointed “Attorney-in-Fact” to make financial and healthcare decisions on behalf of the client if the client is ever incapacitated (whether temporarily or permanently) or otherwise unable to act. The Power of Attorney document can either be currently effective or it can “spring” into place if the client is ever diagnosed (by his or her doctors) as incapacitated. In either case, the client must be very careful not to name someone as Attorney-in-Fact that might abuse their power. For real estate investors, it is particularly important that bills are paid and properties are managed appropriately, regardless of the mental state of the property’s owner.Special estate planning considerations are also necessary for clients who invest into real estate using “self-directed IRA” (or IRA-owned LLC) structures.

About the author…
Warren L. Baker, J.D., LL.M. (Taxation) is a tax attorney with Amicus Law Group, PC in downtown Seattle and his areas of practice include estate planning, self-directed IRA tax consulting, and business transactions. Warren can be contacted at: 206-624-9410 or waren@amicuslawgroup.com.

DISCLAIMER: THE FOREGOING IS NOT INTENDED TO BE GIVEN AS LEGAL, FINANCIALOR TAX ADVICE, BUT INTENDED AS GENERAL INFORMATION ONLY. IF YOU REQUIRE LEGAL, FINANCIAL, OR TAX ADVICE YOU SHOULD SEEK THE ASSISTANCE OF A QUALIFIED PROFESSIONAL.

“REAPS is the oldest – and largest – Professional Association for the real estate investor this side of the Mississippi. We provide education and networking resources for real estate investors, those who want to be investors and anyone who provides value to our members. Our goals are to motivate and support our members and guests through education, discussion, legislative action and networking. We host over 40 live events a year around Puget Sound and they are all open to the public. If you’ve never attended one of our meetings, just email our office at info@reapsweb.com and be our guest for free!”

The holidays are rapidly approaching and the number one question that I’m asked by home sellers and Stagers during the holidays is: “to decorate or not to decorate?”

There is no question that we all have strong feelings and memories about the holidays, and what sells a home? An emotional connection! Holiday staging done well can help a buyer form that connection faster than you can say gingerbread!

Adding holiday touches to staging just makes sense. Adding subtle touches will invoke memories of Christmas’ past and those yet to come. What stronger connection than an image of the family gathered around a Thanksgiving feast or Yule tide celebration.

Here are my top ten tips for holiday staging:
1. Do not over decorate!! Rather than tons of Christmas stars and angels, subtle decorations such as a glass bowl filled with holiday ornaments used as a centerpiece create a holiday feeling without going overboard. If the home doesn’t sell by Christmas, you simply replace the ornaments with polished rocks, potpourri, shells or small fruit.
2. Do use clear lights around shrubs in the front yard or if there aren’t shrubs add silk weather resistant plants with clear white lights on either side of the front door. Small clear twinkle lights feel festive during the holiday season, but can be used year round.
3. Rather than a fake Christmas tree, add white twinkly lights and ornaments to silk trees inside. This creates an elegant holiday décor that is easily changed once the season is over.
4. Use cinnamon, ginger, spiced apple or other holiday scented candles to fill the home with holiday fragrances. You don’t even need to burn the candles to bring out the aroma of Christmas past!
5. Do not use religious holiday decorations. As you all know decorating is personalizing, staging is de-personalizing. This rule totally applies to holiday decorations. The last thing you want to do is to turn off a prospective buyer because of different religious beliefs.
6. Do add a touch of whimsy to your holiday staging! A tray decorated with a faux glass of milk and Christmas cookies placed on an ottoman or coffee table is bound to bring a smile to your buyers face and evoke nostalgic memories.
7. Do use instrumental holiday music during showings and open houses. Some of my favorites are Windham Hill Holiday Guitar Collection, and all of the Winter Solstice Collection, especially the Silver Anniversary collection. The instrumentals are soothing and appeal to everyone regardless of the holiday they celebrate during the winter months.
8. Bring the outside in. Using fresh evergreen boughs as part of your holiday center piece in the living or dining room adds both a festive and fragrant look!
9. Remember to retake pictures. If the pictures on the MLS, your website or your flyers include holiday decorations, remember to retake and replace them if the home doesn’t sell during the holiday season.
10. The Three C’s of staging: Clean, Color and Clutter free still apply. Keep holiday decorations simple, use colors that compliment the home’s color scheme and keep the home meticulously clean!

Don’t hesitate to put your home on the market during the holiday season. The fact that’s it’s a slower market could work very well in your favor. While there may be few buyers, the ones that are out there are very serious. They want to buy and get in before the end of the year. Plus, while there may be fewer buyers, inventory is also going down, so if your home is priced right and well staged it will easily out shine the competition.

I hope you are looking forward to the holiday season and take time for yourself and your family. Most of the staging tips above apply to your home as well. Keep your holiday decorating simple, even beloved holiday décor can become clutter if you over decorate.

Theme gifts are great, and for you Realtors out there or those of you who have Realtors as friends and clients, consider giving them an “EcoJoe.” This cute little guy is the perfect gift and is available on Amazon.com for only $14.99, or on my website for only $11.99. EcoJoe is an environmentally friendly St. Joseph, who when buried in the yard by the for sale sign, will help to get your home sold!

Do you have specific staging questions? Send me an email or post on my Facebook Fanpage, and I will feature your question with an answer on my weekly radio segment on Chat with Women. I’m on between 8:30 and 8:45 every Wednesday morning on KKNW 1150 AM radio, or you can listen on the wen just go to www.chatwithwomen.com!

Hope you have a happy and safe holiday season!

About the author…
Pam Christensen, APSM is the owner and founder of Staging For Charisma. She is an Accredited Staging Professional Master who specializes in working with investors to help them maximize their return on investment by providing high quality staging that gets results! She is one of only 15 ASPM’s in the state of Washington, in fact, there are under 200 in the Nation! Find Pam at: www.facebook.com/stagingforcharisma.com or visit www.stagingforcharisma.com.

“REAPS is the oldest – and largest – Professional Association for the real estate investor this side of the Mississippi. We provide education and networking resources for real estate investors, those who want to be investors and anyone who provides value to our members. Our goals are to motivate and support our members and guests through education, discussion, legislative action and networking. We host over 40 live events a year around Puget Sound and they are all open to the public. If you’ve never attended one of our meetings, just email our office at info@reapsweb.com and be our guest for free!”

With the implosion of our economy, most Americans have been affected in some way. Whether it’s loss of job, income, house, investments or savings, we’ve all suffered.

What does this have to do with IRAs? Everything! IRAs are our safety net for our financial future and retirement. Social security, for anyone younger than 40, is uncertain at best.
Most institutional IRA custodians offer limited options for you to invest your funds and thus you are at the mercy of their investments. Typically, these are geared toward the investor who desires to have little input on his or her financial future and would rather hire someone to make decisions. Doing this leaves your financial future up to the best guesses of your advisor and the random fluctuations of the market.

Do you want to gamble with biased investment opportunities with an institutional custodian or do you want to be involved in protecting your financial future? Self-Directed IRA custodians like Equity Trust Company allow you to take control of your IRA investments. That is, you provide direction regarding your investments and hey follow your instructions as long as it’s within the guidelines set by the IRS. But, with so many investments available, what should you invest in? When considering your investment choices, keep in mind that every investment has two components that are invariably interwoven: degree of risk and rate of return. Usually the higher the rate of return, the more risk involved. As we get older and approach retirement it’s quite normal to look for more safety in our investments instead of the rate of return. It’s very painful to lose a piece of your nest egg and then try and make up for it when you’re older. When you’re younger, you have more time to recover from any losses that may occur due to higher risk investments. In the end, a loss of capital at any age will severely impact your overall accumulation of wealth.

Real estate and real estate byproducts have been one of the best bets for stability over the long run. Set aside the recent foreclosure debacle that was fueled by runaway lending practices. Real estate and byproducts of this industry such as, rental properties, mortgages and options are still one of the safest places to put monies – IF DONE CORRECTLY!

Owning Real Estate in Your IRA
The silver lining in today’s real estate market is that opportunity abounds for cash buyers. Forget about the days of negotiating the terms of sale, as this REO market is purely discounted cash purchases on volume acquisition. The real estate landscape has changed and knowing which markets and structuring safe investments in your IRA is paramount.

The problem with owing real estate is your IRA is the liability that comes from property ownership. You never want to expose your IRA to lawsuits. It is much safer for your IRA to be a lender instead of an owner. What if you could get the benefits of ownership by being a lender? That is, receive the cash flow and the “buy in equity” without going on a title. That is exactly what can be accomplished by using an EQUITY PARTICIPATION NOTE (EP). An equity participation notes keeps you off the title and is secured by a recorded mortgage. Thus, your investment is protected by the recorded mortgage, which puts you in the chain of title. The terms of the note could be that you receive 50% or 99% of all the cash flow and future income from the sale of the property.

Equity Participation Note Example
Recently, an investor bought a 50% interest in one of our properties. We own the property in a land trust and the investor paid us $30,000 for 50% of the net rent and future cash out to the lease/option occupant.

Here are the numbers: $30,000 paid by Investor The net monthly income, after expenses, is $650 per month. The investor receives $325 monthly, which is cash on cash rate of return of 13%. That’s a safe rate of return and the kicker is when the occupant closes out the option at $90,000 the rate of return will exceed 52% if closed in one year.

There are many variations on the theme of Equity Participation Notes and they are an IDEAL investment for self-directed IRAs. You can allow the investor to receive the first six months or 12 months of cash flow and their return is ever higher. In addition, the percentage of the EP notes could be higher. The key is well-selected properties bought under value that are managed properly from the onset.

Turn Your IRA into a Bank to Ensure a Secure Investment for Absolute Returns – That is, be a pure lender.

Let’s assume a house is worth $85,000 in today’s market, based on a lease option purchase price. There is a tremendous lack of credit in today’s institutional lending environment, which opens up the door for private investors to fill the void. How would you like to lend $35,000 for a first mortgage position on this house at 8% amortized in full over seven years? That would be a payment each month of $545.52. An 8% yield in your IRA is like a 16% yield outside your IRA when you factor in state and federal income taxes. From a safety standpoint, this investment is very sound and your loan to value is approximately 42%. And what if the borrower didn’t pay? You’d have terrific equity in a house and could rent it forever. These are the kind of opportunities that are opening up for investors in every part of the country.

Self-Directed IRAs Provide a Tax-Free Vehicle for Higher-than-Average Returns These types of investments are not available at traditional IRA custodians. They limit you to their own financial products like mutual funds and CDs that just don’t provide the kind of return that alternative investments can. You must have returns that beat inflation. CD’s don’t do that and there is an inherent risk in the stock market.

Only a truly self-directed IRA can offer you the control you need to make the right investment choices to ensure you own financial future. When you combine a strong and secure investment with the tax-free environment offered by a self-directed IRA, you truly have an unbeatable combination. For more information on owning real estate in your IRA through Equity Participation Notes and achieving above average safe yields, sign up at AllInvestorNetwork.com (you’ll also get a free property analyzer). You will be notified of our upcoming webinars and receive our newsletter. Call anytime 813-435-1551 ext. 1000 for more information.

About the author…
Jim Case is a real estate investor with over 30 years of experience and cofounder of The All Investor Network. The All Investor Network (AIN) is a free online community for Professional Real Estate Investors and those just starting out. It has been designed to help you promote and grow
your business. Disclaimer: Equity Trust is a passive custodian and does not provide tax, legal, or investment advice. It does not endorse or recommend any contributor, company, or specific investments. Any information communicated by Equity Trust Company is for educational purposes only and should not be construed as tax, legal, or investment advice. Whenever making an investment decision, please consult with your legal, tax, and accounting professionals.

REAPS is the oldest – and largest – Professional Association for the real estate investor this side of the Mississippi. We provide education and networking resources for real estate investors, those who want to be investors and anyone who provides value to our members. Our goals are to motivate and support our members and guests through education, discussion, legislative action and networking. We host over 40 live events a year around Puget Sound and they are all open to the public. If you’ve never attended one of our meetings, just email our office at info@reapsweb.com and be our guest for free!

Early on in my real estate career I was a novice investor. I was learning the ropes of the business as I went along. In my early days of real estate investing I would pay contractors and subcontractors in full, and in advance, to do some of the rehab work on my properties. The contractors I paid in full, and in advance, would often do inferior work and/or would not complete the work I assigned to them. I would have to fire the original contractor or subcontractors I hired, and hire, and pay a second time, a new contractor or subcontractors to do the work over again properly.

I lost tens of thousands of dollars because the original contractors I hired to do work did the work incorrectly or the work was not completed at all. On several occasions I was forced to fire the original contractor or subcontractors I hired to do a job and hire a new contractor or subcontractors to correct or complete a job the original contractor or subcontractors failed to complete or do properly. This cost me time and money that I could not afford to lose.

I was paying contractors and subcontractors who poorly completed the work I assigned to them, only to have the city building inspector come out and inspect the work and not approve the work that was done. Few novice real estate investors know anything about window headers, framing, rough end plumbing installation, roof work, etc. Because most novice real estate investors don’t know about these types of things, they must do everything possible to safeguard themselves from financial losses due to contractors and subcontractors poor or incomplete work. It is also important to make sure that the work completed by a contractor or subcontractor is completed to the standards of the city‘s building code.

How To Avoid This Costly Mistake
The best way to avoid this mistake is to first of all make sure you pay your contractors and subcontractors by work progression only. Only pay your contractor enough money to start the work assigned to him or her. Never pay the total amount of the work assigned to a contractor or subcontractors in full, up front. You will surely regret it if you do.

Pay your contractor and subcontractors by work progression and pay the balance owed only after the job has been successfully completed AND after a city building inspector has come out, inspected the work and approved the work completed. Pay your contractor or subcontractors the remaining balance owed in full after you receive approval from the city building inspector. This way you will ensure the work is complete and you will only pay once to have the work completed correctly.

The Rehab Construction Money Secret
Who doesn’t put a cushion on the rehab construction cost? I have certainly been guilty of it. I would prefer to have more money in the escrow account for repairs than to run out of money and have it come out my pocket to finish the job. In addition, there is another little trick that you can use to guarantee the job gets completed and puts tens of thousands of dollars in your pocket immediately after you get your final inspection from the private lender and a Certificate of Occupancy from the city inspectors.

For simple math, let’s say that you take out a loan with a private lender to buy a $50,000 home with $10,000 in “real” repairs and an After Repaired Value of $125,000. The lender will loan you 70% of the After Repaired Value = $87,500 less $8,750 closing cost (estimated at 10%) for a total of $78,750. The “real” repairs to rehab the home are only $10,000. However, you put a little cushion in the estimated repair sheet you submitted to the private lender to reflect a repair cost of $28,750. Three weeks later you rehab the home and spend only $10,000. You receive a Certificate of Occupancy from the building department, the lender inspects the home, and it passes the inspection. What about the remaining $18,750 that is in the escrow account? Guess what? The lender has to cut the check to you.

In addition, if you are handy with a hammer and nails and are willing to earn some “sweat-equity,” the Rehab Construction Money Secret works great because you can lower your expenses on your rehab construction cost and put more of the remaining rehab escrow funds in your pocket after you are completed with the project.

About the author…
Kenny Rushing is a remarkable tale of a life turned around. A resident of Tampa, Florida who is an evolving account of transformation that is simply extraordinary.
Kenny is best known for the moving story of his humble and troubled beginnings, and his phenomenal success as a real estate investor – in spite of the seemingly insurmountable odds he faced. He is a phenomenally successful real estate mogul, civic leader and devoted philanthropist. His company, Rehabbers Superstore, Inc., now grosses millions of dollars per year through real estate transactions and investments. Kenny Rushing is quickly becoming known for the life transforming impact his uncommon wisdom is having on the lives of those who have benefited from his knowledge, wisdom, training and coaching. His goal over the next five years is to teach 1 million people how to achieve financial independence and flip their life through real estate investing. Kenny Rushing is a living testament that: If KEN Can Do It – So KEN You!

“REAPS is the oldest – and largest – Professional Association for the real estate investor this side of the Mississippi. We provide education and networking resources for real estate investors, those who want to be investors and anyone who provides value to our members. Our goals are to motivate and support our members and guests through education, discussion, legislative action and networking. We host over 40 live events a year around Puget Sound and they are all open to the public. If you’ve never attended one of our meetings, just email our office at info@reapsweb.com and be our guest for free!”