How to Find Real Estate Investing Deals by Getting Yourself a Coffee and Jumping on the Internet

One of the most difficult things for new real estate investor is finding real estate investing deals. In fact, there are some experienced investors that continue to have this problem, even after working at it for several years. Although it can be difficult to find real estate investing deals, it is not entirely impossible.The first thing that investors must do to find deals is lose the mentality that a fairy will allow deals to fall in your lap. Did you notice any deals coming to you before you were an investor? Why should you attract more deals after you start real estate investing? The answer is that you won’t. To find real estate investing deals you have to look for them. Some of the more traditional ways are knocking on doors, which is very effective technique, but you have to either walk from one house to another or hire someone to do it for you. Either way, either you or someone else has to go through a tedious process.One of the more recent, 21st century technique to find real estate investing deals is by using the power of the Internet. The Internet can and will allow you to have motivated seller contacting you instead of you chasing them. So how do you go about doing that? Well, there are several ways to approach this process.One way is to set up an AdWords campaign on Google. AdWords are those tiny ads you see at the top and right sides of your screen when doing searches on Google. People pay certain amount for each ad and Google posts them on each and every single page. There is a lot of different criteria that go into creating a successful AdWords campaign that I just cannot get into it here. It would take me page and pages trying to explain it to you. I do have a valuable Internet resource on my website that is specifically optimized for real estate investors.Try running real estate investing newspaper ads. Many investors don’t purchase ads because they are deemed as being expensive. Think about it like this: all it takes is one real estate investing deal for you to come up with the money to pay for an entire year of ads. Sound better? It should. The best place for your ad is in the “Money To Lend” section of the newspaper. When foreclosure is looming, many homeowners want to borrow the money to save their home. Once you receive a phone call from a potential distressed seller, you can begin working your real estate investing magic.How would you like to find out about an alternate Internet resource that lets you post those same ads for free? Well there is such a resource and many people oversee the power it holds. it is one of the biggest and most popular sites on the Internet and is specifically targeted to your local market. it doesn’t get any easier to find real estate investing deals than this. This free resource
is called craigslist. Just type that into Google and it will be there, trust me. The you just go to your local market and post your ads.Don’t think that because it’s not raining real estate investing deals that there are none out there. There are plenty of deals all around you, you just have to look for them. Until you establish your reputation, you have to do the work it takes to find deals in real estate investing deals. People won’t just bring them to you right off. Do the work that other investors aren’t willing to do. Soon enough you’ll find yourself with more deals than you can handle.

Holding Investment Real Estate – LLC, Trust, Or Both?

The Issue: How to Hold Property in California?Countless individuals invest in real estate every day. Some dream of becoming the next real estate mogul, while others simply wish to supplement their salary with additional income. Whatever your motivations, owning investment properties can produce big rewards, but also big problems. This is why it is important to hold title to your property in the most beneficial way. The internet is saturated with various posts and articles touting the most effective techniques to manage your property. It can often be a daunting task weeding through the mass of information in an attempt to discern what advice is reliable and what advice can get you into trouble. Our goal here is to provide a succinct and clear summary of the safest and most important strategies for holding investment property in California. We hope the result will be a valuable starting point in considering the best ways to both protect you as the owner/landlord from liability and also guarantee the best treatment of your assets.The Risks of Owning Real EstateAs stated above, while property can be a valuable investment, there are also significant risks. One of the biggest risks is lawsuits. From common slip and falls, to environmental contamination, landlords and owners are easily exposed to legal judgments. Landlords have also been successfully sued by victims of crimes — such as robberies, rape, and even murder — that occur on their property on the theory that the landlord provided inadequate security.Options for Holding Real EstateFaced with the risk of lawsuits, it is crucial that you do not own investment real property in your own name. (The only real property you should hold in your own name is your primary residence.) Thankfully, there are several ways in which an individual can hold property other than in his/her own name. These include as a corporation, limited partnership, limited liability company (“LLC”), trust, and many others. While there are many options, when it comes to real estate investment, LLCs are the preferred entity by most investors, attorneys and accountants.For many reasons, few investors hold investment real estate in C corporations. A corporation protects the shareholders from personal liability, but the double taxation of dividends and the inability to have “paper losses” from depreciation flow through to owners make a C corporation inappropriate for real estate investments.In the past, partnerships and limited partnerships were the entities of choice for real estate investors. Limited partners were protected from personal liability while also being able to take passed through tax losses (subject to IRS rules–you’ll need an accountant or attorney to sort out the issues of at-risk limitations and so on) from the property. However, the biggest downfall with limited partnerships was that someone had to be the general partner and expose himself to unlimited personal liability.Many small real estate investors also hold property in a trust. While a living trust is important for protecting the owner’s privacy and provides valuable estate planning treatment, the trust provides nothing in the area of protection from liability. However, although a trust provides no liability protection, it should not be overlooked, as it can easily be paired with an LLC.1. Benefits of a LLCLLCs appear to be the best of all worlds for holding investment real estate. Unlike limited partnerships, LLCs do not require a general partner who is exposed to liability. Instead, all LLC owners — called members — have complete limited liability protection. LLCs are also superior to C corporations because LLCs avoid the double taxation of corporations, yet retain complete limited liability for all members. Furthermore, LLC’s are rather cheap and easy to form.A. One LLC or Multiple LLCs?For owners of multiple properties, the question arises whether to hold all properties under one LLC, or to create a new LLC for each additional property. For several reasons, it is generally advisable to have one LLC for each property.First, having a separate LLC own each separate property prevents “spillover” liability from one property to another. Suppose you have two properties worth $500,000 and they’re held in the same LLC. If a tenant is injured at property 1, and wins a $750,000 judgment, he will be able to put a lien on both properties for the entire $750,000 even though property 2 had nothing to do with the plaintiff’s injury.On the other hand, if each property had its own LLC, then the creditor could only put a lien on the property where the plaintiff was injured (assuming that they cannot pierce the corporate veil).Additionally, many banks and lenders require separate LLCs for each property. They want the property they’re lending against to be “bankruptcy remote”. This means that the lender doesn’t want a problem at a separate property to jeopardize their security interest in the property that they’re lending on.2. Benefits of a TrustAs stated above, an LLC may be used concurrently with a trust to provide the best protection and estate treatment for your property. There are many types of trusts, but the revocable living trust is probably the most common and useful for holding title to real estate. The major benefit from holding property in a trust is that the property avoids probate after your death. As many are aware, probate is a court-supervised process for transferring assets to the beneficiaries listed in one’s will. The advantages of avoiding probate are numerous. Distribution of property held in a living trust can be much faster than probate, assets in a living trust can be more easily accessible to the beneficiaries of the trust, and the cost of distributing assets held in a living trust is often less than going through probate. [Note: One should also be aware of other ways to avoid probate. For instance, property held in joint tenancy with a right of survivorship automatically avoids probate whether or not the property is in the living trust. Consult an estate planning attorney for more advice regarding probate matters.]3. Use Both an LLC and a TrustBecause an LLC and a trust both provide significant benefits to the owner of real property, a smart investor should consider using both a LLC and a trust to adequately protect himself and his property. Utilizing both a trust and a LLC creates the best combination of liability protection and favorable estate planning. To accomplish this, the owner should hold the investment property in a single member LLC, with the living trust as the sole member of the LLC. Here, the trust is the owner of the company and holds all of the interests of the LLC. This form of ownership gives you an added layer of protection from the LLC as well as the additional estate planning benefits of a trust.A. CostsFor the most part, the costs of forming and maintaining an LLC and trust are rather minimal. For an average LLC, the costs are simply nominal filing fees and an $800 per/yr fee to the state of CA. While simple incorporations may be done on your own, it is strongly advised that you seek the advice of a knowledgeable attorney so that no mistakes are made. The same may be said for forming a trust. A little money now is worth the price of avoiding big problems in the future.B. The CA LLC FeeWhile the costs of forming a LLC are generally small, there are additional fees that may be imposed on LLCs in California depending on gross profits. The California Revenue and Taxation Code Section 17942(a) includes an additional fee on LLCs if total gross income (i.e. rent) exceeds $250,000. “Total gross income” refers to gross revenues (not profits). Under this Tax Code Section, the amount of the fee is determined as follows:1. $0 for LLCs with total gross income of less than $250,000;
2. $900 for LLCs with total gross income of at least $250,000 but less than $500,000;
3. $2,500 for LLCs with total gross income of at least $500,000 but less than $1,000,000;
4. $6,000 for LLCs with total gross income of at least $1,000,000 but less than $5,000,000; and
5. $11,790 for LLCs with total gross income of $5,000,000 or more.Although the fee is relatively small, one must consider that the fee is assessed against gross revenues, not profits. This means that the fee is due whether or not your property is profitable. For a property with high revenues but narrow profit margins, the fee would reflect a higher portion of the property’s profitability than it would on a property that is highly profitable. For example, a company that owns an office building with revenues from rent totaling $1 million, but a mortgage of $995,000, would actually operate at a loss after the $6,000 fee was imposed. Furthermore, the fee would be particularly irksome for those companies that foresee incurring losses in their early stages of development.4. Limited Partnership: a Possible Strategy if Gross Receipts Exceed $250,000For the vast majority of investors, the CA LLC fee should not dissuade you from forming an LLC. If, however, the impact is severely detrimental, there are several potential solutions that may be explored. A competent attorney or accountant may be able to work with you to avoid this fee. One method may be to form a Limited Partnership. The partnership should be set up with an LLC as the General Partner (assuming liability) and the owner(s) of the property as the limited partner(s). By forming a limited partnership with an LLC acting as the general partner, the landlord can likely avoid the higher fee imposed on an LLC while still protecting his/her personal liability. While this may be a possible solution, it is strongly recommended that you consult with an attorney or accountant regarding the best course of action.While there are risks associated with real estate, with intelligent decision-making and thoughtful preparation, real property can be a valuable investment. The first step though, is to make sure that you have adequately protected yourself and your property. We hope that this article helps property owners begin to discover the various ways in which one may hold investment property, as well as the protections and benefits provided by such ownership.