Your Questions About Purpose Of Investing In Real Estate

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George asks…

How can I prove physical/legal feasibility of a Real Estate Investment Proposal??

I have to do a project for a class where i have to propse a real estate investment project. I need to prove that the investment is physically and legally feasible. Any suggestions or ideas on things i could include to prove this?? The investment will be for the purpose of rental income and I was assigned a single family residence.

Justin answers:

I think what that means is that you need to show the title is clear, the home has no liens, the home passes an inspection and possibly an engineers report. That the home is a bargain show the land value, and home value from the county tax office. Search google for (county name) tax appraisal district, and then search by address. Show that the taxes are current or of nominal balance owed. Do a market analysis of the area, you may get lucky and a realtor might help you out by giving you a copy of a recent one they already did. If the house needs work but is in a good area you can resale it and make a profit. Any lender likes that because if the property forecloses they can get money back on it. You have to show every aspect of why they SHOULD invest in your investment. Make them believe that if they pass it up they will be making a mistake. Since this is a class, you may say that you have already received a voucher from a lender, so your credit is good. You may add in something like consideration of the age of the home and what sort of maintenance costs your looking at that would be above the income you would make renting the property. Your income vs. Expendature ration should be in the black. If you can’t get a real market analysis, just make one up. You could say that as a backup plan if you can’t find a renter you are willing to rent section 8. Good Luck and HAVE FUN!!!

Daniel asks…

Is it the best time for invest in real estate in USA?

I am going to start my own business. I want to invest in real estate in USA. is it appropriate time for invest in this sector? and also want to know about Real Estate Investors Association (REIA) of USA.

Justin answers:

Real estate investment isn’t cut and dry. So just because it SEEMS like a good investment doesn’t mean it is.

Are you hoping to be a landlord and collect income that way or are you talking about flipping? If you’re thinking about being a landlord, I highly recommend you get acquainted with your state’s tenancy laws so you make sure everything you do is above board (ranging from how much security deposit you can ask for, minimum notice required, lease stipulations, late fees, pet deposits etc).

If you’re thinking about flipping, well the market hasn’t recovered to the point that you can do flipping, even in major cities like NYC and LA. The thing about flipping is it takes time. You have mortgage payments to make as well as property taxes the longer you own the property. Also, in this market where things are still relatively cheap, people can afford to buy and do their own renovations rather than pay jacked up prices from renovations made for the sole purpose of flipping. With shows on tv now, people can identify a cheap for-sale renovation and a quality one. So the idea of flipping is great, but it’s not as easy as it looks. On top of all the expenses, you also have to get a profit. Your profit is also subject to capital gains tax.

Donald asks…

When is the next stock market and real estate crash expected?

Stocks and real estate both are getting out of reach of middle class, want to know should I wait or just invest my money at current rate.

Justin answers:

No one can foretell either the stock market or the real estate market, if any one claims they know, they are a fool and if any one belives them they’re bigger fools.

The stock market is not now, nor never has been out of reach for anyone. The are many investment programs available to those that have modest means. Actually, the sole purpose of mutual funds is to prove an opportunity for investors from all financial means..

Yes you should invest, There are many people just like you that are, or were looking to invest and those that did bought Mutual Funds and/or Exchange Traded Funds (ETFs). One purpose of mutual funds is to help investors like you, who are either just entering the investment world or who have no investing experience. Once you feel you at least have an understanding of investments you should look into ETFs which are similar to mutual funds but are traded on the exchanges.

Mutual Fund companies as well as ETFs have an entire array of products many will fit your needs. You can go to the MSN.Money website
http://moneycentral.msn.com/home.asp it has an entire section on mutual funds and Exchange Traded Funds. Read about the various products and in doing so you will be getting investment ideas and at the same time educating yourself about investing.

You could also contact the funds companies for more information. I have found that Vanguard & Fidelity can meet your needs for mutual funds. The service and information they provide is all free and you will find it helpful.

Regardless of what you decide, do not ever let anyone tell you not to invest, especially those that do not invest themselves.

Joseph asks…

Are there any solid books on Real Estate investing evaluation and Analysis?

Hello

I’m looking to learn about evaluating properties for development purposes.

Please don’t recommend stupid books that are “top sellers” by swindlers who write playing to emotions and hopes of instant millions.

What I want is a thick ‘dry’ textbook that will teach me how to evaluate the value of property. Hard core.

The real estate equivalent of “Security Analysis”?

Does it exist?

Justin answers:

Hi Kavemons,

I dont have a specif title for you, but I do have an idea.

Why dont you start you search by looking for articles on the internet about that subject.

This way, you can hunt down authors of your mentioned subject !

Kind regards, LASSE

Robert asks…

How hard is it for a US citizen to get a green card in another country for business purposes?

Is it possible to get approved for a green card in exchange for plans to start a small business in the country you want to immigrate to.

Like, let’s say that I have two lifelong dreams:

1. To open a sports bard

2. To move to Australia

I now have enough capital to open a sports bar, but I want to do it in Australia instead of the US.

Since my bar in Australia would mean hiring multiple full time employees and investing in Australian Banks and real estate, is there any Green Card program available for someone like that?

Like since providing jobs in Australia is beneficial to them?

Justin answers:

Not hard (see link below).

Michael asks…

How hard is it for a US citizen to get a green card in another country for business purposes?

Is it possible to get approved for a green card in exchange for plans to start a small business in the country you want to immigrate to.

Like, let’s say that I have two lifelong dreams:

1. To open a sports bard

2. To move to Australia

I now have enough capital to open a sports bar, but I want to do it in Australia instead of the US.

Since my bar in Australia would mean hiring multiple full time employees and investing in Australian Banks and real estate, is there any Green Card program available for someone like that?

Like since providing jobs in Australia is beneficial to them?

Justin answers:

Only the US has green cards other countries have there own version
you need to look at investment visas

http://www.immi.gov.au/immigration/

http://www.immi.gov.au/visawizard/

Mark asks…

Is there a tax peanalty for taking out too much cash from the equity on your primary residence over time ?

My accountant says there is some penalty about taking out too much equity over a long period of time on our primary residence.

My husband bought our home in the 1970s for around $50K and we’ve refinanced it several times over the years. In terms of cash, we took out $200K in 2004 (having taken $600K over the years prior to then) and have a $200K unused home equity line. Does anyone know what she’s talking about?

I know we’ve long maxed out on the mortgage interest deduction, but will we be taxed on our cash out?

We took the $ out to invest in real estate, which we have not yet done, but are now looking at doing. Thanks!

Justin answers:

There is no actual tax “penalty” for borrowing money based on the equity in your primary residence, BUT there are two other tax consequences that can catch you by surprise: The AMT and the gain on the sale of your home (see below).

As you mentioned, you have maxed out on the home mortgage interest deduction which is based on (a) borrowings to purchase the home, (b) additional borrowings used to improve the home and (c) and up to $100k in home equity debt used for any purpose. Interest beyond the $100k home equity debt limit may be deductible as investment or business interest (see page 10 of IRS Publication 936)

Surprise 1 – The AMT (alternative minimum tax) disallows the interest deduction on home equity debt not used to buy, build or improve your home UNLESS it is deductible for AMT purposes as investment or business interest.

Surprise 2 – The GAIN ON SALE with no cash to pay the tax. Let’s say you sell your principal residence for $850k, selling costs including commissions are $50k and you have mortgage debt on it of $800k. You will end up with no cash from the sale. HOWEVER, you will have a taxable gain of $230k equal to the sales price $850k, less cost to sell of $50k, less your original purchase price of $70k, less your $500k home gain exclusion (if you qualify) on a joint return. Paying the tax on the $230k without receiving any cash from the sale is a BIG surprise for many people. If you live in a community property state and your home is community property AND one of you die, the other will inherit the home with a step-up in basis for tax purposes. With this step-up and a $250k exclusion, you will likely avoid any taxable gain.

Richard asks…

When a S-Corp buys another corp and changes its status to S too, how will the parent corp be taxed?

I wanted to know if a person owned a s-corp and bought a aged corp with good credit and used it to obtain the funding it needs to invest in like real estate how will the profits be funneled to the parent corp be taxed. I know that an s-corp’s income is not taxed while the employees are taxed on the pass thru income. My question is is the profits from subsidiary s-corp passed up to the parent s-corp tax free until its passed to its employees?

Justin answers:

Tax effects of mergers and acquisitions is a tricky area of law. Generally, if you make a Q-sub election (qualified Subchapter S subsidiary) for a subsidiary of an S corporation, then for tax purposes it is as if the subsidiary does not exist and all the income would flow through the parent company S Corp to its shareholders. However, you really need someone who knows the tax laws to look at your particular situation because the tax code contains tons of exceptions to every rule, especially if you have a corporation that in previous years was a C-Corp.

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