Minnesota Real Estate Investors Association, Inc.

Beginning on January 1, 2013, a new real estate capital gains tax will take effect to pay for Obama Care. When Obama Care was passed back on March 23, 2010, one of the funding measures was to take from Medicare.

“Bet you didn’t know that, did you?”

So how are they going to recover those costs for Medicare that they stole for Obama Care? Simply increase taxes on real estate and other interest and dividends. This new 3.8% tax is expected to raise $210 billion over the next 10 years.

The new 3.8% Tax Rate applies to:

• Individuals with adjusted gross income (AGI) above $200,000
• Couples filing a joint return with more than $250,000 AGI

Types of Income:

• • Interest, dividends, rents (less expenses), capital gains (less capital losses)

The new tax applies to the LESSER of:

• Investment income amount
• Excess of AGI over the $200,000 or $250,000 amount
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When I first started real estate investing back in the early 1990’s, it was a struggle to find good training for beginners.  So I eventually got my real estate license and through marketing, I found a few local and successful investors who took me under their wings and that is where I got most of my training, but it was still very limited, because those investors only did one thing, but they were good at it.  However, for me to get out on my own and do things their way would require me to have a rich uncle who died and left me a fortune to invest with.  But I didn’t have a rich uncle so I had to learn something different.

That is when I started looking for alternative training sources, and in my state, there was no local resource.  That is when I started seeing a rise in infomercials and I started buying their training courses, and I got upsold to their seminar, and then their coaching programs.  And slowly, I started to do a few deals that I never even knew could be done before I bought those courses.  I started creating seller carry back notes, selling those notes to raise the down payments.  We did substitutions of collateral, wrap around mortgages and then I learned how to buy pre-foreclosures.  I was doing short sales for years before the term short sale was first used outside of the loss mitigation departments.  I was rehabbing and then I learned how to Wholesale, which I said couldn’t be done, until I bought a course on wholesaling and I made it work J

I learned all that because of infomercials.  However, these days, our inbox is loaded with infomercials.  And finding resources to learn real estate investing is easier than ever before, thanks to the internet, emails and webinars.  It seems like no matter where you turn, there is another infomercial in your inbox, on your smart phone, on the TV and everywhere you look.
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We knew this was coming, just a couple of weeks ago, BoA (Bank of America) sent out a letter to 1,000 customers who are currently in default offering them the option to rent the property back from BoA at fair market rent if they simply deed the property back to BoA in lieu of a foreclosure. This will only add to the currently unknown number of properties in the Shadow Inventory.

On Thursday April 5, 2012 the Federal Reserve issued a policy statement on the rental of REO’s.

The general policy of the Federal Reserve is that banking organizations should make good-faith efforts to dispose of OREO properties at the earliest practicable date. Consistent with this policy, in light of the extraordinary market conditions that currently prevail, banking organizations may rent residential OREO properties (within statutory and regulatory holding period limits) without having to demonstrate continuous active marketing of the property, provided that suitable policies and procedures are followed. Under these conditions and circu Read More...

On Friday September 2, 2011, the federal government sued 17 big banks for selling mortgage-backed securities to Fannie Mae and Freddie Mac after those securities turned toxic.  This is just another example of the underling disease infecting this country.

In the 90’s, the federal government was pushing banks to make it more affordable to first-time home buyers and lower income families to qualify for a mortgage to promote their American Dream agenda of everyone in America owning a home.  At first the banks pushed back and said this was a bad idea, because a good percentage of the borrowers would never be able to pay the loans back.

The federal government, in their infinite wisdom cr
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I wrote about the Anti-Flipping Rule Waiver just over a year ago and at that time I predicted that it would get extended: Flipping-is-Legal-Again.

Three days before the expiration of the original waiver, they extended the Anti-Flipping Rule Waiver till the end of this year, December 31, 2011. This is good news for everyone because the real estate market needs investors right now to help clean up the foreclosure mess.

Wholesalers can do what they do best, find and negotiate good deals on rundown REO properties. Rehabbers can do what they do best, quickly rehab the properties and bring them back up to code. And first time home buyers can get into a home at a good price that is completely rehabbed and ready to move in without having to worry about painting, fixing a leaky faucet, replacing the carpet or any other cosmetic improvements that they can not afford to do or don’t have the time for right now.

Have you been making offers on REO’s only to get frustrated that none of your offers are getting accepted? I feel your pain and frustration. This is something that I have also been struggling with.

So why are our all of our offers getting rejected at such a high rate? There are a few reasons that I can think of. First of all, the banks have received so much federal bailout money that they are not hurting as much as one would think; therefore they are not pressured to liquidate their inventory fast. In fact a lot of their inventory never even makes it to the market, but rather quietly slides into the “Shadow Inventory” category.

Secondly, we have been competing with first time home buyers who are looking for a deal and beginning investors who are looking for rentals and plan on doing a light rehab rather than a full blown rehab, which enables them to offer less than most of us do. But don’t feel bad, the dirty truth about a lot of these investors is that their inexperience causes them to get hurt financially in the long run. I get calls from these types of investors all the time asking me how to get out of trouble with these properties. Unfortunately the only thing I can tell them is that they have no choice now but to hold on to the property for the long run and hope that the market value increases to recover their losses. I have even had two recently that came to me for help after they out bid me on the same property. Opps... 
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It has been a couple of months since I have been able to post anything on the blog. I have been rather busy lately as we have made a lot of changes around the office, and I was working on a new project that I finished just before the holidays. Hopefully I will be able to post more frequently now that things are starting to settle down a little bit again.

In December at out Monthly MnREIA Meeting, we had a great panel of REO agents. And we had one of our largest attendances in a long time, we usually have between 125-160 people at all our meetings, but December brought in 181 for the REO Panel. If you missed the meeting, the audio archive is available for MnREIA Members at www.MnREIA.com/Events.aspx?ID=REO-Agents-Panel-10-12-7-2010.

The biggest project I have been working on though is a Rehab Estimate Worksheet. The worksheet is designed to allow anyone, regardless of your level of experience to easily and quickly determine the estimated cost of a rehab for a property. First you have to setup some default costs/factors, which will be easy enough to determine the defaults, because it shows you the state/local and national averages, and with one click of a button, you can set your defaults to either the local or national average defaults. You can then come back and adjust each individual item as time goes on and you get a better feel for your own individual costs/factors. 
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You’ve heard about SEO, but have you heard about Local SEO?  It’s not your fault if you haven’t, but if you don’t take this moment to begin building your knowledge of Local SEO you will only have yourself to blame.  This is where your attention should be if reason #1 has any meaning to you whatsoever... this is what you need.

#1 - LOCAL SEO IS THE REAL ESTATE INVESTOR'S DIRECT PATH TO THE FRONT PAGE OF GOOGLE!

Over the past year you may have noticed that a peculiar little box providing a map and local results are popping up more and more for real estate related terms.  It is most commonly referred to as “The 10-Box” and as you have probably noticed… this “10-Box” displays local results prominently on the first page of Google’s search results!

Below is an example of the first page of search results where we can identify 3 distinct areas when doing a search for the term “home buyers.” 

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The new headlines catch phase is “Robo Signer”. These robo signers have been signing foreclosure documents at a rate of up to 1 document per minute. That’s 5,000 – 10,000 per month. Everyone knows that it is not physically possible for these robo signers to have read every document. That is the reason everyone is calling for a moratorium on foreclosures. Or is it?

If everyone was upset with the fact that these robo signers were not reading all the documents, then why wasn’t everyone upset that congress has passed health care and over a trillion dollars in stimulus programs while all along admitting that no one could possible read all of it before voting on it. So ask yourself, are they really upset that the robo signers didn’t read the documents. If you are honest with yourself, then the answer would have to be no.

So what is the real reason everyone wants a moratorium on foreclosures. Politics… In 3 weeks there is a major midterm election and this could be one of the most historic elections in our country. The politicians on both sides of the isle are looking for something to blame and point fingers at to make themselves look like they care and that all our problems are the banks. 
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Over the last few years we’ve been predicting records were going to be broken for years to come and that it would be a uniquely incredible environment for real estate investors. Today RealtyTrac issued a press release for the month of August that illustrates the fulfillment of this prediction in no uncertain terms.

Here are the key numbers to note:

• In August, 1 in 381 housing units received a foreclosure filing.
• RealtyTrac has seen 1.2 million repossessions so far in 2010.
• Before the housing bubble burst, in 2005 only 100,000 houses became REO’s.
• 95,364 property foreclosures in August, a historic record.
• An increase of 25% since the start of the 2010.
• In August, 96,469 homeowners receive a notice of default.
• 1% decline in the number of NOD’s filed in July.
• A 30% decline since August 2009 after a peak of 142,064 NOD’s issued in April 2009.

For a complete list of notable numbers you’ll find them all just above the comment section. Our initial prediction was that with the drastic turn in the economy. This would create a flood of opportunity for real estate investors based on the sheer volume of properties vulnerable to a declining economy. 
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