All Forum Posts by: Vincent Polisi

@Layla Savant, an owner occupied primary resident would be foolish to convert his property to a rental for the purpose of doing a 1031 exchange. 

Here's why:

If the owner has lived in the home 2 out of the last 5 years, he gets a $250k capital gains exclusion if single and a $500k capital gains exclusion if married. 

What this means is that he can make a profit of $250k or $500k tax free simply by selling it if he's lived in it 2 of the last 5 years. 

The 1031 would serve no purpose. 

But, to answer your question, it depends. The length of time to be considered an investment property depends on who you're talking to. 

For example, the minute he no longer occupies the property and has a tenant in place paying rent, it's an investment property. 

Lenders, however, won't generally classify it as an investment property for debt to income ratio purposes until there's 12 months of seasoned rental payments or more AND it's declared on his tax return as an investment property. 

@Heather Angelo, 

I'm going to try to help you here because this is a huge pet peeve of mine. 

First, it's important to understand language, legal definitions, and semantics. 

Wholesaling, as it relates to real estate investing, is the purchase of a property that you close on and then re-sell to another investor. 

If you don't have cash or credit, can't close on it, and/or don't sell it to another investor, you are not wholesaling. 

Unfortunately, the info shills who don't know what they're doing coined the term wholesaling and aggregated contract assignments into it because they don't know any better. 

A contract assignment is where you contract on a property (could be a purchase and sale agreement, could be an option, could be a contract for deed) and then you assign that to another party who can be an investor or the end user. 

Contact assignments and wholesaling have NOTHING in common except the lead generation methods typically used (yellow letters, probate lists, postcards, bandit signs). 

That's where the similarities end.

The contracts are different. The processes are different. The income is taxed different. 

They aren't the same thing. 

The one point Bill didn't point out was that simply having a contract on a home isn't sufficient to obtain equitable interest, which you must have to legally market the property. 

The contract must be a valid contract with good and valuable consideration changing hands and without fraudulent intent to lock up a property under the pretense that you're a buyer so you can then market it to other investors. 

I actually just released a series of posts on these issues that will help clarify reality versus what the shills are selling. 

Now, having said that, given your stated financial situation, your fastest path to cash is contract assignments which can be done anywhere in the U.S. with no money or credit or clearing titles or going to closings while using nothing but a computer or iPad. I do them virtually all over the U.S.

The beauty is, you can start a day with nothing and close a deal and have money wired to your account that day which you can't do with wholesaling. 

Owner finance or get a credit partner that you can JV the deal with.

Dustin Faeth

If I understand what you're asking, I do these all day everyday for clients. I use an option contract to control the property based on predefined terms (price, payment, etc.) and this eventually gets converted to a contract for deed directly with the end buyer.

In your situation, it depends on what you're trying to accomplish. We're "flipping" these out and retaining the down payment as our fee for securing a buyer for the property.

Most properties are not free and clear and are highly leveraged so the payment to the buyer becomes actual carrying cost (PITI, HOA, maintenance and repairs, etc.) plus any juice you want to add.

When the property is free and clear, to ensure the buyer avoids any possibility of the payment shock guideline when they refinance, we generally use a factor of current market rate + 1.5% or 6%, whichever is greater plus or minus any juice you want to add.

Scott:

You are correct and incorrect at the same time. While HUD publishes the "90 Day Seasoning" rule, they don't abide by it if the file can be properly documented. We went through this last year on a short sale flip with an FHA buyer as the end buyer. Here's the insider secret that most investors do not know:

What HUD is concerned about is not a flip. They are concerned about a fraudulent flip with an overinflated appraisal due to collusion among the buyer/seller/appraiser.

The internal regulator at HUD that makes the determination is actually a HUD appraiser.

Where the initial issue rears its ugly head is with the FHA appraisal. The appraiser doing the FHA appraisal is required to document through public record that the property is in the seller's name. Which, in a double close flip, it obviously won't be.

So, when this happened to me, HUD had just eliminated the seasoning requirement on HUD REOs. Though, it can be an exercise in futility, I called and finally got through to an actual FHA underwriter at HUD in Atlanta. The initial answer was what we expected, that there is a 90 day seasoning requirement.

So I said, "Let me get this straight, HUD will waive the 90 seasoning requirement on a HUD REO for an FHA buyer, but they will NOT waive it for an FHA buyer on a short sale that would prevent another HUD REO?".

Put that way, she saw the logic.

She quickly directed me to a HUD appraiser.

After explaining in excruciating detail what we were doing, the HUD appraiser (actually a really nice guy) got it and told me that he would sign off on the deal and instructed me to have the FHA buyer's underwriter/lender call him if they were concerned about the FHA guideline. He was kind enough to provide his direct line, email address and cell phone number.

We then provided this information to the buyer's lender.

Where this can become a dilemma for the buyer's lender is with their concern over not being able to get the loan off their warehouse line. This where overdocumentation of the file with addenda actually from a HUD appraiser can help.

I don't suggest this path because it is akin to the frustration you deal with in negotiating a short sale with the loss mitigation department, but, it is possible despite what the guidelines say.

1st Rule of Real Estate Investing:

"Improvise, Adapt, Overcome" (and never believe what they tell you is a guideline or policy because it often isn't carved in stone)

One definition of the word secret is, "marked by the habit of discretion."

Using this definition, there are many real estate "secrets."

Most successful people are very tight lipped about how they make money for fear of competition and losing a competitive edge.

Not sure what your area of expertise is, but I assure you if you are doing it and making six figures or more, there are a myriad of "secrets" you could teach someone who doesn't do what you do or know what you know

AND that aren't readily available in the public domain.

Mike, with all due respect, this definition suggests that Donald Trump, Robert Allen, Robert Kyosaki, Carleton Sheets (I could go on) are all gurus who cannot do it so they fraudulently rip off other people in a get rich quick scheme. This simply isn't substantiated. Every one of them are self made millionaires (or billionaires) from doing real estate deals PRIOR to ever becoming a guru.

And if I am not mistaken, every one of them are still actively doing real estate deals.

This entire thread has been somewhat cathartic. I would like to remind everyone that the purpose of EVERY business is to develop a legal and ethical product with perceived or inherent value and then market it and sell it to the broadest base possible to yield the highest possible profit utilizing every legal and ethical marketing means available.

This is Business 101.

That being said, multi-billion dollar corporations spend billions of dollars on Madison Avenue marketing to convince us that product A is better than product B because of X, Y and Z.

So, given that an investor is going to bottle his knowledge and sell it, the investor has a professional obligation to his business and a personal obligation to himself to present his product in the most marketable light to attract the largest number of paying customers.

If the purpose is to educate people on methods to attain financial success and independence, shouldn't they be applauded for getting the information out to as many people as possible?

If that means that he or she is selling a "secret" that he wants you to pay for, is that great marketing or does that make him the rip off guru?

Correct me if I am wrong, but I believe the jist from this entire thread is that the answer to this question is, "It depends".

It depends on the quality of the information he or she is selling and whether or not it has quantifiable monetary value using normal metrics that a layman can translate into profits, not whether or not they are utilizing proven marketing techniques to sell a product.

Any business or product that isn't focused on effective marketing to attract paying customers and repeat customers is headed for bankruptcy. Likewise, in the digital age of social media, any product without value is destined to be shelved as word spreads and people vote with their dollars.

I don't believe I said anything about leaving it "up to them to do it" but at the end of the day, no one else can do it for them. Will would be doing his students a disservice if he trained them how to do it and then he did it for them.

It is the old adage, "Give a man a fish, feed him for a day, teach a man to fish, feed him for a lifetime". At the end of the day, someone has to bait the hook and throw the pole in the water and Will will not always be there to do it.

And incidentally, what you are referring to is philanthropy. The world's greatest philanthropists had to first MAKE MONEY so they then had experience and money to give away. You have never heard of the pauper philanthropist. It is an oxymoron.

If you read one of my prior posts, I explained my personal experience trying to help the hundreds of people approaching me asking for help. I spent tens of thousands of dollars and thousands of man hours "helping" them for FREE.
I was happy to give of my time and resources to help people thrive in an imploded market so they didn't face car repossessions, foreclosures, bankruptcies and getting a day job.

The end result is that people do not respect or appreciate anything that is free. It is a wierd fiber of human nature.

When you charge for something, there is the connotation that you get what you pay for.

Isn't that true?

Using that analogy, something given away for free has to be worthless, and that is exactly how people treat it.

So, despite any suggestion to the opposite, I truly want to help people (but not at the detriment of my family) and we are creating a system where they can receive all of the training they need AND then have an ability to plug into a working platform so they aren't cast aside. I am unaware of any "guru" who sells any system of any kind that will allow you to plug into their existing business and make money once you are up to speed.

If it exists, let me know who it is.