Submitted by: Shawn Yesner, Yesner Law Firm

DO NOTHING!

Real Estate “Gurus” will often discuss asset protection strategies for various forms of real estate investments. The danger occurs when inexperienced investors use these techniques on their Florida homestead property.
Among some of the more popular techniques used to shelter real estate include the following: Florida Land Trusts (under Section 689.071, Florida Statutes); Limited Liability Companies; Limited Liability Partnerships; S-Corporations; C-Corporations; Private Annuity Trusts; Family Land Trusts; Irrevocable Trusts; and Equity Stripping. This article will not discuss these devices. This article will also not discuss any income tax or estate planning advantages or disadvantages. The purpose of this article is to explain that these devices are not necessary to protect Florida Homestead Property.

Florida’s Constitution and State Statutes provide Florida Homestead Property with protection from sale by creditors. Specifically, Section 4, Article X of Florida’s Constitution provides that no creditor may force the sale of homestead property unless that creditor is the county tax collector, a mortgage company, or someone holding a construction lien. This means that judgment creditors – for things like failure to pay credit cards, personal injury judgments, etc. – cannot foreclose Florida homestead property to satisfy their judgments, even if those judgments are properly recorded in the county public records.

In addition, subsections (b) and (c) of Section 4, Article X of Florida’s Constitution extend the homestead protection to the homeowner’s spouse. Therefore, if a husband and wife take title to property “as husband and wife,” a judgment recorded against one spouse only cannot result in the foreclosure (or forced sale) of the Florida homestead to satisfy that judgment. However, under a recent ruling by the United States Supreme Court, IRS liens recorded against one spouse only will attach to real property titled in the name of both spouses “as husband and wife.”

The final protection afforded to Florida homestead property is governed by Chapter 222, Florida Statutes, “Method of Setting Apart Homestead and Exemptions.” Section 222.01 and 222.02 provide a statutory framework for removing a judgment lien from homestead property by recording a “Notice of Homestead” in the county public records. Once a Notice of Homestead has been recorded and sent to the judgment creditor by certified mail, return receipt requested, the judgment creditor has 45 days to file a lawsuit challenging the validity of the property as homestead. If a lawsuit is not filed, or if the judgment creditor loses the lawsuit, then the lien is removed from the homestead property (although the lien would still be valid and would still attach to non-homestead real property). Again, the protection provided by the Notice of Homestead procedure does not apply to county property taxes, home mortgages, or construction liens.

Given the protections granted to Florida Homestead Property by both Florida’s Constitution and State Statutes, it is this author’s opinion that the often effective, but sometimes unconventional protections available to real property are unnecessary when applied to Florida homestead property. Furthermore, using some of these devices for Florida homestead property may result in the loss of Florida’s “Save Our Homes” cap and other homestead or homestead tax advantages.

Please note that information contained in these materials is not intended as a substitute for legal advice. If legal advice or other expert assistance is required, please consult with an attorney.

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1. For purposes of this article, “Homestead Property” is your primary residence and assumes that you are a resident of the State of Florida. “Homestead Property” does not refer to the tax exemption provided by your county’s tax collector and property appraiser.

By: Larry Goins

How many times have you seen a run down vacant property and thought to yourself... that would be a good investment? You see it for several weeks or months and do nothing about it and all of the sudden you see someone is now rehabbing it and you see a “for sale” or “for rent” sign in the yard. Then you say to yourself... “I knew that would be a good investment! Darn, I missed that one”! You just weren’t sure how much you should offer and how much profit you should allow before making an offer.

Well, I want to take the next few minutes explaining exactly how much profit you should allow whether you are buying a fixer upper or buying a property that is already rented or ready to rent or sell.

The bad news here is that there are as many different ways to analyze a deal as there are ways to put a deal together. There is software programs that you can purchase that will calculate your internal rate of return every year from now until the property is ultimately paid off and beyond. There are spread sheets that you can buy to do the same thing and you can even design your own. You can use a calculator or a simple pen and paper method. My point is that no matter what system you use the most important thing I can share with you is a simple computer term called “garbage in – garbage out” It doesn’t do any good to have the most complicated software program if you don’t know what kinds of margins you need or if you don’t know your repair cost and closing cost. You have to know what numbers to enter into your calculations to get the right answer.

I’m going to butt heads with a few people here but I am very much a big picture person. I don’t use all of those fancy calculations when I’m buying. I basically need to ask the seller or realtor a few specific questions and then I can make an offer on the spot before we ever get off the phone. Is that great or what? This is why I can buy 10-15 houses every month on a consistent basis.

Here are a couple of hard and fast rules of thumb. And I want you to keep in mind that they are just what I said... rules of thumb. The first rule of thumb when analyzing a deal that I actually first learned from my friend Scott Patterson is very simple: “If you need a calculator, it’s probably not a deal”. Let me explain. If you can look at a deal, knowing the after repaired value, the repair cost and how much they are asking then you should be able to tell whether or not it is worth pursuing. If the profit numbers are so close that you have to figure it on the calculator then you probably need to say “NEXT” and move on to the next property, after making your low ball offer of course.
Let me mention here that it is extremely important that your deals are home runs, especially your first few. That is the critical stage in your investing career that will make you stay in or get out.

The next rule of thumb is also very simple. “If you have to ask someone if it’s a deal it probably isn’t”. Lets face it, you have at least read some books, been to a seminar or two, taken an investor to lunch, listened to a teleconference or training audio or something. You know what to do for the most part. YOU can tell whether it’s a deal or not so if you have to ask someone then it probably isn’t.

Now, how do we put all this stuff to use? As I mentioned I only need to ask a few specific questions before making my first offer right over the phone. Here is what I need to know before making an offer. I need to know the after repaired value, the amount of repairs and closing cost and that’s it. And if it is a rental property then I want to know the rent or potential rent. Sure I will eventually find out more information but we are talking about getting our offer out there on the first call.

I know what your asking...How much should I pay. This is very simple. If you are looking at a fixer upper then you don’t want to have any more than 70% of after repaired value invested and this includes the purchase price, repair cost and closing cost. Keeping a margin of 30% insures that when you are finished making the necessary repairs, after closing cost you will still have 30% equity. Then you can sell it, refinance it and pull out some cash on a refinance or you can lease option the property.

Now, if you are looking at what I call an “instant landlord” property then you can pay a little more than 70% of value. After all there are no repairs to do on your part. My rule is not to pay anymore than 80% of value and maybe 85% of value if the cash flow is good and there is good possibility of appreciation.
I have used a simple calculator for years to figure what to offer while on the phone but with having several people in my office that work all day making offers and buying property for me, I recently had a top notch programmer design me a simple, easy to use computer program to use in our office to help my buyers make the calculations very fast and accurate. One of my people who normally makes between 8 and 10 offers a day told me that on the day he started using my new “Ultimate Property Analyzer” he made 17 offers in that first day alone!
I hope this article has helped you to determine how much you should offer for a property... FAST! For more articles about investing, a free weekly teleconference for investor training, wholesale property listings and investor financing you can visit www.LarryGoins.com. Be sure to sign up for our free weekly newsletter for investors. Thanks, Larry Goins.

© 2005 by Wendy Patton

Here are two issues that involve realtors and investors.

1. Should I become a Realtor? (and)
2. How can I work with Realtors?

Working with Realtors:
Many investors think that real estate agents don’t have the best deals, or they have all been picked over by the time they actually hit the market. I believe that some of the sweetest deals are sitting on the market. We automatically think that Realtors or their clients will snatch up the best deals before they hit the market. It is true that some of the best deals do get snatched up before they hit the market, but ……there are many other deals left behind that no one sees. The reason that no one sees them is because they are looking for ‘traditional’ or what I call ‘retail’ homes, not ‘lease option’ homes. These are two very different markets. The retail market is what 90+% of the people and investors understand. The Lease Option market takes up a portion of the remaining 10% of the market.

I look to work with Realtors that understand the concept of lease options and can help their sellers understand lease options. This understanding can take time. Your job is to assist Realtors to understand lease options. I do this by using several techniques. First, I have a letter that I send to a listing agent explaining the concept, second, I have a presentation that I do for my local real estate offices, and third I network and continually tell Realtors what I do. I hear investors tell me all the time that Realtors just don’t understand or want to understand what they do. I can only say that patience and persistence pays off. Realtors aren’t trained in unique selling techniques, they are trained in the ‘Retail Market’ which is 90+% of what is out there. As investors, it is our job to continue to help those around us understand what we do so they know when to call us.

The type of home I am looking for through a Realtor is one that the seller:
1) Doesn’t need their equity out
2) Doesn’t have any equity in their home

When a Realtor hears a seller say, “If my home doesn’t sell soon I might have to RENT it!”, then the Realtor should think of you. (assuming you have continued to remind them of what you do)

All you need is 2-4 good listing Realtors. They work directly with the sellers and know which sellers are in trouble, which ones can rent, and which homes are vacant. Once a Realtor knows what you do and has a seller that can accept your terms – viola! You are the proud new owner of a lease option.

One of the most important things for anyone is that they get paid for what they do. Realtors are just like everyone else in this regard. When I am taking on an option, I am asking the seller to wait 2-3 years to get cashed out. I don’t want to make the Realtor wait that long. If I do, they won’t even tell the seller about what I can offer. Why should they? It might not do them any good. They are doing all the work now to get the deal done and want to get paid for it. So I give them the listing agent portion of the commission up front. This is my option fee and is applied to the purchase price when I get my mortgage or when I sell the home. The agent is therefore paid on what they do just as if they sold it conventionally to another buyer. When you sell the home you will be asking for 3-5% down from your tenant/buyer, therefore, you are still minimal or zero down/out-of-pocket. If you aren’t a licensed agent/broker and entitled to ½ of the commission, then let the Realtor “Double-Dip”. They can get the listing agent portion down upfront from you and the selling agent portion when the home closes in 2-3 years. They will wait for the second half if the first half is paid up front. The second half would just be a bonus that most agents wouldn’t expect anyway.

Becoming a Realtor:
Investors tend to be adamant one way or the other about being a licensed Realtor. I am on the side of being licensed. Being licensed has been one of the best tools that I have as an investor. Being licensed allows you access to your database of ‘comps’ or comparables. This is the data you need to buy and sell real estate. If you have a great Realtor and you don’t want to be licensed, fine, but I still think it is better to be licensed than not.

Some investors say it gives you more liability to be licensed. I have two answers to that:
1) What are you doing to create liability?
2) Don’t you think a judge is going to know you are an ‘expert’ anyway when they find that you do real estate investments?

Some investors say that sellers won’t sell to you if you are licensed. I find the opposite is true. Most sellers are happy that I am licensed and ‘know what I am doing’.

My recommendation is to GET LICENSED!!!

Wendy’s website is http://www.wendypatton.com

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