Your Questions About Purpose Of Investing In Real Estate

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Joseph asks…

What are some good books and/or videos that help increase financial intelligence?

I need basics on financial intelligence.
Things like:
accounting, and investing, and real estate, and tax laws and stuff.

Just basics and tools for financial independance.

Justin answers:

Books to help you financially :Fool Proof Finances by David Mallonee, The Nine Steps to Financial Freedom – Suze Orman, Financial Peace- Dave Ramsey,The Millionare Moses- Catherine Ponder, The Purpose of Prosperity- FKC Price,DD, Rapid Debt Reduction- John Avanzini

Donald asks…

What are investment banks, and what do they do?

I know Goldman Sachs, Morgan Stanley, and others are them but I just want to know what purpose they serve. I know during the financial crisis they invested heavily in real estate debt securities, then couldn’t collect on those assets. On top of that, they financed those assets with short-term debt. Then, investors pulled money and short sales on these companies caused a liquidity crunch. All this is besides the point, I want to know what investment banks are.

Justin answers:

Investment banks underwrite securities. On one side there are companies that need capital to expand. On the other side there are the people who have money to invest. Investment banks link those two sides together for a fee.

Those “banks” are actually enormous financial companies that have a whole plethora of operations. The losses they sustained from speculating on derivatives weren’t actually related to their Investment Banking operations.

Paul asks…

what Canadians can right off in taxes for US investment property?

If I buy a US property (for investment/rental purposes), what things I can claim as expenses in my Canadian tax return like property taxes, association fees, maintenance costs, etc….? Also, would I have to file a US tax return? I am not a US resident. This is purely for taking opportunity and invest in real estate there.

Justin answers:

If you have US rental property, your tenants are required to remit 30% of each rental payment to the IRS. If you do not file, you have paid the tax.

If you decide to file and elect to treat the rental property just like an US citizen, you can deduct expenses, depreciation, etc. At that point you can tell the tenants they are not required to withhold 30%.

When you sell, either way, you need to file a return to show capital gains. If you depreciated, the depreciation is added back and tax as 1250 gain.

Thomas asks…

Q about tax laws applicable to a Limited Partnership?

Situation: I am a partner in a small LP that invests in residential real estate. I record the miles I drive to visit potential properties with our realtor, and I do not get reembursed for that personal expense from the partnership, but it is technically a “non-cash” business expense. Because it is a “non-cash” business expense, can I still deduct it from our partnerships net income for tax purposes? We are using a cash basis for accounting. Thanks!

Justin answers:

If you are not being reimbursed for your auto expenses as a partner, I would make a journal entry: debiting auto expense, and crediting your capital account.

If the LP is not willing to do this, you can claim the auto expense as a Schedule E adjustment, combined with other
items flowing from your K-1.

Robert asks…

What are the basics for beginning to understand real estate?

I’m purchasing my own home and in about 4 or 5 years I hope to be able to purchase one or two more – and grow from there.

What do I need to know to begin a real estate career? Is it better to rent houses out OR try to sell them for a profit?

What are some of the best resources (especially online) for real estate beginners?

Justin answers:

There are no good online sources for you to learn real estate.

The best place to start is at your local junior college. Take the real estate classes that they offer. Get to know the instructors.

Offer to help the instructors for free in their business for the purpose of learning the business.

One very important skill to learn is how to determine the true fair market value of a property. The best source for that is The Appraisal Institute. Contact The Appraisal Institute and tell them that you want to learn to be a real estate appraiser and that you want to earn your MAI (Member of The Appraisal Institute) designation.

Take all of the training classes offered byTheAppraisal Institute and go to work for a firm that is owned by a Member of The Appraisal Institute. Earn your MAI designation.

This is the best foundation that you can get for a real estate career.

You can then get your real estate brokers license,, which is easy to get, and sell real estate, invest in real estate or you may decide that you wish to stay on as a real estate appraiser.

If you do what I have outlined for you, you will have a better foundation than 99% of the people out there who are running around with real estate licenses but do not know what they are doing.

With respect to renting or selling houses. I have been investing in real estate for 40 years. I do not recommend that you sell realestate if you do not have to.

I recommend that you build up a portfolio of rental houses and keep them. The rent that is paid is a good stable source of income, and the houses appreciate in value.

I wish you great success with your new career.

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