All Forum Posts by: Ned Carey

Firstly, You are NOT looking for properties, you are looking for motivated sellers. Real estate is not hard to find; the earth is made out of it!:D What you are looking for is GOOD deals and they come from motivated sellers.

Think about what might motivate a seller; bankruptcy, divorce, death, job change, job loss, foreclosure, burnt out landlord etc etc. Now find a way to reach those sellers.

As someone already said most of the best deals come from dealing directly with the owner, not listed properties. Also many good deals are negotiated. I have heard of some massive drops in price that have been negotiated. You have to make offers. You just don't go looking in the MLS for owner financing, no money down deals at 60 cents on the dollar. They may be in there but they are negotiated that way not listed that way.

Ned Carey

The intent that TWatson mentions is important. You have to be careful that you are not considered a "Dealer" by the IRS. If have Dealer staus acording tothe IRS even if you hold a property longer than one year you still pay ordinary income on it and all your gains are subject to self empoyment taxes (ie: Social security @15%~~). They can even include rentals into that equation. You also are not allowed to use 1031 tax defered exchanges.

Dealer status is a very bad thing. IRS considers intent. If you buy the property with the intent of selling it quickly at profit it will be considered dealer property. This is a complex issue and you should get advise of a competent CPA that understand real estate.

Dealer status asside any rehabs or "flips" will not get favorable capital gains treatment. Profits will also be subject to SS tax. You can use an S corp to help with the SS tax issue. Again see your CPA.

Ned Carey

It depends on where you are. I have seen the interest rate bid down to as low as 2.5% in Baltimore and less than that in Anne Arundel county in Maryland.

But just like any investing the best deals are the needle in the haystack. How good are you at finding them.

As far as the Ebay buyers paying a premium I haven't a clue why they would do that. Maybe they believe the late night TV guru hype. You might as well buy lottery tickets.

Ned Carey

My lowest purcahse price was $2500. The seller negotiated himself down from $5000 before I could say anything :D

Including closing costs I was into it for $4000. I sold it for $15,000. The seller actually had to bring $1,200 to closing for back taxes. I was afraid he wouldn't show but he did. He just wanted to get rid of the thing.

Ned Carey
http://baltimorerealestateinvestingblog.com/

Yes and LLC or any entity can be harder to finance. The reason is the criteria for government backed mortgages doesn't allow loans to entities. What you need are comercial loans.

Often your best source for these will be small "portfolio" lenders. These lenders loan their own money as opposed to selling the loans in the secondary market to Fanie Mae or Freddie Mac. Mortgage brokers may have other sources of funding that don't use the same criteria as Fannie Mae etc. and can make loans to LLCs.

Keep in mind you will probably pay higher rates for commercial loans. Some people buy in their own name and then transfer the property subject to the mortgage into their company name.

Ned Carey

I am not Maverick but perhaps I can help here.

Rental income is passive income and not subject to Social Security tax. Flipping houses (rehabbing or wholesaling) is earned income and subject to approximately 15% SS tax.

If you have an S corp (or an LLC taxed ans an S corp) you can pay yourself part of the profits as dividends. The dividends are also passive and not subject to the SS tax. You do have to pay yourself at least some wages subject to the SS tax but your accountant can help you decide that ratio.

Ned Carey