July 17, 2006

Starting A Foreclosure Business

I would like to get started in real estate investing and would like to do it with foreclosure homes. Can I start a foreclosure company, how do I do it or is there even any such animal?

Thank you.

Wow, that is a huge question with so many answers. Let me see if I can give you some basics. I am not sure what you exactly mean by a foreclosure company. But let me try to give you some foreclosure basics

1st. You must get training beyond just courses. What I am saying is that you need to get good quick and be complete in your business.

2nd. You need to go get some deals as fast as possible. Deals will lead you to experience. Experience will lead you to expertise and expertise will lead you to success.

3rd. You must focus on growing your business in a way that a business is grown.

Paul Wells

Posted by paulwells at 5:19 PM | Comments (0)

February 8, 2006

Building your real estate team

How do you form a good team...accountant for capital gains issues +, attorney, realtor, rehabbers, etc so you can move your investor business forward?

I would go to my real estate club and start asking some of the principals of the club for these real estate experts. If they have a good reputation within the club then they are worth a try.

Posted by paulwells at 7:22 PM | Comments (0)

February 6, 2006

Starting a real estate investing business

If you were starting all over. What would you do first?

The first thing I would do is join my local real estate club and start to network with other members of the club. I would then find a disapline that I was interested in. I.E. Foreclosure, lease option, subject to, rehabs, reos, etc. Then I would search out those club members that specialize in that area that I am interested in. I would then invest in a course that covers that area that I am interested in. I would also search the internet for sites that have chat rooms on real estate and I would start to read and learn. Then I would go out and find deals by making tons of offers that were below market. Someone is going to except an offer and your off and running in the business of real estate investing

Posted by paulwells at 6:55 PM | Comments (0)

February 5, 2006

Avoiding Dealer Status

Can one avoid being classified as a dealer by setting up a series of LLCs where each one does a limited number of transactions each year?

I would suggest that you do not try to defraud the Govt. as that can only lead to trouble. You will want to check with your CPA and have them research the IRS rules in this area.

Posted by paulwells at 6:45 PM | Comments (0)

Investing in Real Estate with No Money

Hello Paul, Thank You for visiting us in Portland Oregon! How can I get started when I'm living from paycheck-to-paycheck living within our tight means and over-coming this great fear of foolishly stumbling during a progressing transaction by not knowing what to do or doing something wrong?

The best strategy for someone in your position is to go and find a deal that you can flip it to another investor for a finders fee. You want to get your contracts with your name "and/or assigns".. Such as "Paul Wells and/or assigns" This way you can "sell" your contract.

Posted by paulwells at 6:28 PM | Comments (0)

January 17, 2006

As a real estate Investor, when am I considered a Dealer?

Thanks for the interesting and informative talk in Lake Mary/Orlando, FL recently. Your comments about the number of properties you're finding and working with through your system got me thinking:

What is the possibility of being seen as a "dealer" by the IRS, and what are the specific implications? How can you avoid being considered a dealer?

Thanks for your question; it's reasonable to be concerned about how the IRS sees your Real Estate Investment business. There are many implications, and you can find tax information for real estate investors in many Real Estate Investment books available today. Here's some ideas and advice:

A commercial real estate developer who buys large tracts of land, subdivides them and sells individual lots would be considered a dealer in most cases.

If you are marked as a real estate dealer for tax purposes, you will be taxed (up to 39.6%) on the full gain of a real estate transaction when the property is sold. You also lose the tax advantages of the installment sale when you sell real estate.

As an investor, you could be taxed as little as 28% under the capital gain tax laws for the same transaction. Until recently the tax difference between being a dealer (31%) and an investor (28%) was minimal. The Clinton Tax Act changed all of that by increasing the possible spread to 11.6%.

An 11.6% additional tax on a $250,000 real estate transaction equates to $29,000 of extra tax on the same transaction, all because you're considered a dealer.

Real estate investors need to do everything possible to avoid being labeled dealer status.

Unfortunately, there is no single answer to the question of how to avoid dealer status.

How many deals per year are too many to be considered an investor by the IRS?

If you're flipping (buying and selling in 12 months or less) 1 to 5 houses per year you probably have little to worry about if you keep a low profile. Especially if you keep a few houses here and there as rentals so you can show rental income on your tax returns.

Probably when you hit the 15-20 house mark you will be identified as a dealer.

It's a good idea to keep a few properties every year as rentals or lease/options to show passive real estate income on your taxes. If the IRS sees huge capital gains from multiple deals with no passive rental income you will raise your visibility and increase the danger of acquiring dealer status.

Posted by paulwells at 10:01 PM | Comments (2)