April 2019 Breakfast Meeting Recap
In today's breakfast meeting led by Brian Mann and Dave Corsi, we talked about options, buying as-is, the flaws of HGTV, acquiring long-term wealth, opportunity zones, and seller financing.
Brian and Dave shared their stories about rent control, seeing houses with foundation issues, oil tanks, and much more.
As Is Condition
Be aware of...
Foundation shifts (horizontal cracks)
Oil tanks (leaks, contaminated ground)
After you buy a property, you are responsible for handling environmental issues caused by your property.
Conduct an oil sweep to check for oil tanks. If there is, get an environmental inspection.
Go to the basement. If there's a switch with a red cover, check if it's labeled oil or gas. It's a shut off for safety. Look for the filler pipe.
Value Is Subjective
Don't worry about paying top price. Determine what you're going to do with the house. Look at the whole picture.
Terms are important. Seller financing? Pay the price if the value works.
When purchasing a multifamily, make sure each unit is legal.
When you're calculating your NOI (net operating income), make sure to use rental comps on LEGAL multifamilies and not comps on the building.
Find out from your town if there is rent control.
To keep the building in good shape, you're going to pay a minimum of 40% of market rent on expenses.
Build your team: hard money lender, attorney, home inspector, broker, surveyor, and title agency.
Title agency, home inspector, and surveyor should be quickly responsive.
You have to be ready to close quickly. Check if the title is clean.
Always get title insurance.
Convenance Versus Grantors (CVG): Warranty deed. Anything from me on, there was no title defects.
Find open permits on the property your interested in via an OPRA request.
Confirm number of beds, baths, rooms and improvements are recorded.
You can check NJ Property Tax Records Search:
Talk to the Right People
Find out who are the decision makers and talk to them. Are they the owner?
Keep terms simple and understandable. Keep it conversational. Be willing to spend time with them.
"What would you like me to do for you?"
Buyers can talk to sellers even if they're being represented by an agent. You have every right to tell the realtor "I'd like to go with you to present the offer."
Structure your deal so that everyone benefits. Know each party's situation.
Long Term Wealth
Always stay in the market for long term wealth. One possible strategy could be buying 3 houses a year, where you can keep 1 and flip/sell 2.
The idea is to get properties free and clear. Don't get hung on the rate of return.
Focus on hitting singles and doubles.
If you don't sell anything, you don't have to pay sale taxes. You buy that house in the area, you let it sit there, and let the value grow.
Finding the Deals: Focus on Your Market
Focus on one area. If you have a town in mind, know what parts of the town you want. Know the communities and know the law.
Methods: Door knocking. Talk to people in your target area. Talk to realtors, real estate attorneys, brokers, etc.
Find the niche that works for you. Invest in an area you know.
Watch the video by Bill Cook below on door knocking. Have a conversation with people.
Catch REOs before it hits the market by reaching out to portfolio lenders and small banks instead of large banks.
Finding Out Appreciation
Check with a realtor and the association of realtors.
Look at income levels.
National Association of Realtors
Local Market Updates
NJ Realtor Research
Make sure to have landlord-registration form. If you're ever brought to court, the judge will ask for this form.
The best way to build wealth. Section 121 transaction. Buy and live there for 2 years of the next 5 years then sell and receive profit up to $250,000/person or $500,000/couple that would be tax-free.
If you're buying a tax certificate, always see and research the property before committing. There could be conditions that can make the property not marketable.
Dealer vs Investor Status
When engaging in fixing and flipping and holding properties long term, make sure to keep both businesses separate. Use separate entities. One for the fix and flip business and one for your long term rental holdings.
To learn more talk to your accountant and attorney.
The federal government recently created this program where they identified different communities, economically depressed based on income of residents through the census bureau. There's a lot of benefits investing on these zones.
According to the State of NJ Department of Community Affairs,
"The Opportunity Zones program was enacted as part of the 2017 federal Tax Cuts and Jobs Act and is designed to drive long-term capital investments into low-income rural and urban communities. This federal program provides opportunities for private investors to support investments in distressed communities through participation in Qualified Opportunity Funds.
Investors can defer paying federal taxes on capital gains reinvested in Qualified Opportunity Funds that invest in low-income communities, under rules released by the U.S. Department of the Treasury. Reinvested capital gains are deferred from taxation until exit from a Qualified Opportunity Fund or December 31, 2026, whichever comes first. However gains from Qualified Opportunity Fund investments held for the long term are taxed at reduced rates, with the rate reductions increasing at the 5, 7, and 10 year marks. Any gains from Qualified Opportunity Fund investments held for at least 10 years will be permanently excluded from the capital gains tax."
Official website: https://nj.gov/governor/njopportunityzones/
More info on state website: https://www.state.nj.us/dca/divisions/lps/opp_zones.html
Saturday, April 27, 2019
APA Hotel, 120 Wood Ave South, Iselin, NJ 08830
Taught by Dave Corsi
Overview of the basics and brief recap of the last general meeting on options
Get more control of the deal with options
Specific real-world examples
Different kinds of options
How to structure a lease option
How to secure your interest with a mortgage
Real Estate Attorney (Central NJ): Harry Frieland
Real Estate Educators Worth Looking Into
Cash Flow Depot – Jackie Lange (Make sure you mention that MREIA has referred you.)
Videos Recommended by Brian
Subject to: https://www.youtube.com/watch?v=yTUH38xyFlY
Learn Accounting: https://www.youtube.com/watch?v=ii91oi0OpXM
Estimating Rehab Costs Like a Pro: https://www.youtube.com/watch?v=cHnwnCOe1MY
Watch Property Ladders. It gives more realistic scenarios.
Thank you for attending! We hope to see you again soon.