Mar 16, 2017
Jan 18, 2017
Foundation issues can be one of the scariest property flaws for many of those investing in real estate. What issues should be looked for when evaluating a property? Can these problems be fixed? When should you walk away? Real Estate Investment and the Foundation Challenge Foundation problems can be very serious. These are structural defects which can prevent financing. They can also get very expensive to tackle. They are often the result of grading problems, but not exclusively. In some parts of America foundation issues are quite commonplace, like in Texas. They may be rare in other states like Florida. Most investors and companies such as ours avoid at any sign of these types of problems. There can be unforeseen costs and financing challenges associated with these properties. At the same time this makes these properties a great opportunity for those ready to take it on. There can be less competition from other buyers, and that means potential for big discounts. Grading & Foundation Issues to Look for in a Property Some properties have obvious grading and structural issues. Some are easily spotted by uneven building lines. Walls, floors, ceilings, or the entire structure may be at odd angles. Previous inspection reports or appraisals may reveal the presence of these problems, even if they are not immediately visible in photos. Other signs of potential problems may include wear and erosion around the exterior walls of the home, standing water, trees in close proximity to the dwelling, and interior leaks. Uncorrected these issues can erode the foundation. Other foundation issues are a result of excessive pressure on the foundation and pressure load which causes stress on the foundational walls. You’ve got to be alert to these issues before making an offer, or price in the worst case scenario. How to Handle Foundation and Grading Issues The first thing to do is to get multiple inspections and quotes on fixing the issues. You want to know exactly what the problem is, how long it will take to remedy, and how much that will cost. If current damage isn’t that bad foundations and grading can be fixed or supported. This may range from costing $500 to well over $30,0000. In some cases you may want to tear-down and rebuild. More affordable and minor remedies and preventative measures may include; improved grading, better gutters and drainage, tree and root removal, or installing new foundation piers and beams. Summary Foundation and grading issues can be very common in some real estate markets. This is something to be alert to, but which can also present great value opportunities. Know what to look for, who to ask for guidance, and when it makes sense to move forward or pass it up.
Jan 18, 2017
How can landlords best protect their rental properties during the winter? Extreme weather, as we experience in the lovely Midwest can definitely test and threaten rental homes. What smart moves can landlords make to winterize properties and protect their investments? Getting Prepared Going into winter it is a great time for owners of rental properties to inspect their holdings, take stock of condition and needs, and to ensure they are prepared. Prevention is far better and less costly than trying to fix things after the fact. That applies to all types of severe weather and natural disasters, including harsh seasonal weather. Make it a habit, and system to routinely schedule property inspections before heading into the worst weather each year. A part of this is having clear rental lease agreements which define whose responsibility certain items are (landlord or tenant). Then of course making sure you as the landlord have your end covered. That means supplies, contractors, and systems for dealing with maintenance, and responding to emergencies. Be Proactive A part of routine maintenance and inspection at this time of year is certainly checking the gutters and keeping them clear. Be sure drainage is set up right to keep melting ice and snow flowing away from the property and foundation. Check roofs for leaks and condition. Check doors and windows for drafts and water tightness. You don’t want unnecessary damage. If you are responsible for utilities this can be an area which creates or depletes cash flow as well. Check heating. Will the furnace last through the winter? Has the filter been recently changed? Whether it is your responsibility in the lease or not, you certainly don’t want a grandmother or young family freezing in your property. Cracks in sidewalks or porches or driveways are best fixed before a freeze and thaw which can make these problems and liabilities far worse, and more expensive. Be Covered One of the real challenges for real estate investors at this time of year is that they are not local. Either they have been investing from a distance, or they are off to spend the season in sunny/ warmer weather. That’s great, but someone needs to be on hand to keep an eye on the property and respond to calls. Get a property manager and have a plan for how to respond to various issues like the heat going out, slip and falls, and tenants being snowed in. This is also an ideal time to check your insurance coverage. If your property has gone up in value you may want to raise your coverage. Make sure premiums are up to date. What are you doing to protect your investments this winter?
Jan 16, 2017
Despite the fabulous displays of rehabbing and staging homes on ‘reality’ TV, the most experienced and savvy real estate investors typically avoid trying to be over-achievers when it comes to property renovations. Why is that? How do they tackle rehabs for rentals and fix and flips? The Mindset of Success The biggest way that the most objective real estate investors are different from the amateurs and flops is that they approach property renovation with a business mindset. Warren Buffett says “investment is best, when most businesslike.” This is a business. It could be a hobby. But most people don’t get paid for their hobbies. If you want to actually do well in real estate, you have to be business minded. That means watching costs and profits. A big mistake most new investors make is trying to over-achieve when it comes to repairs and rehabs. It is easily one of the top three reasons investors fail and lose money. Remember, you are not going to live in the property. The key is doing what is necessary and profitable to rent or resell a property, not just to wow with looks. That would be like a real estate agent turning down a listing because they didn’t think a client’s home was up to par. They aren’t going to live there. Their job is just to sell it to someone. Everyone has different tastes and plans and needs. Top Property Renovation Mistakes to Avoid Spending too much on improvements Improving items which the next buyer will replace, and discount the price for Overspending on items a tenant is sure to break Taking too long to finish a remodel Renovating according to your personal tastes Devaluing the property by poorly reconfiguring the layout Adding features that give little ROI when you go to sell i.e. swimming pools Don’t forget these two factors: Buyers will revamp the property to their personal liking Renters will put a lot of wear and tear on a property You can put in gold plated toilets, but if the new buyer likes silver, they are just going to throw it out. Hence they aren’t going to pay more for your property. They may actually lower their bid due to the need to replace the toilet. Most renters won’t pay more because you have a $2,500 fridge versus a $700 fridge. Over a period of years those tenants will cause wear and tear on the unit. Which price fridge do you want to replace? How to Nail a Profitable Renovation Conduct thorough research on recently sold properties Set a standard of improvements that will quickly yield a renter or buyer Get multiple quotes and select a reliable contractor Create a tight scope of work and deadline for completion Know your budget, allow for overages on necessities Commit to providing a healthy, safe, product which fits local renter and buyer budgets Summary Overspending and taking too long on a property renovation can get you in trouble. The property may never sell or rent, and you will eventually run out of money. Do provide a safe and healthy place to live. Yet, make sure you can make a net profit on the rates end users have proven to be willing to pay for comparable properties by location, square footage, and bedroom count. Stay objective, stay profitable.
Dec 6, 2016
International investors have the opportunity to diversify their investment portfolios by investing in Real Estate in the United States. There are a few things to keep in mind when preparing to invest with Holdfolio. International investors from anywhere can invest in Holdfolio offerings but there are a few requirements necessary prior to investing. Working with International Investors International investors from anywhere can invest in Holdfolio offerings but there are a few requirements necessary prior to investing. Holdfolio requires our International Investors to fill out a W-8ECI which is the IRS Certificate of Foreign Person's Claim That Income Is Effectively Connected With the Conduct of a Trade or Business in the United States. The form can be found here : https://www.irs.gov/pub/irs-pdf/fw8eci.pdf International Investors must also obtain a valid ITIN. What is an ITIN? An Individual Taxpayer Identification Number (ITIN) is a tax processing number issued by the Internal Revenue Service. It is a nine-digit number that always begins with the number 9 and is issued to those that are not eligible for a social security number. ITINs are issued regardless of immigration status because both resident and nonresident aliens may have a U.S. filing or reporting requirement under the Internal Revenue Code. What is an ITIN used for? ITINs are for federal tax reporting only, and are not intended to serve any other purpose. IRS issues ITINs to help individuals comply with the U.S. tax laws, and to provide a means to efficiently process and account for tax returns and payments for those not eligible for Social Security Numbers (SSNs). Other examples of individuals who need ITINs include: • A nonresident alien required to file a U.S. tax return • A U.S. resident alien (based on days present in the United States) filing a U.S. tax return • A dependent or spouse of a U.S. citizen/resident alien • A dependent or spouse of a nonresident alien visa holder The international investor files a Non-resident US tax return. This way taxes are not withheld from the investor’s income upfront. Withholding requirement is on the LLC. 1099 issued from Property Management Company to the LLC, LLC provides W9 to Property Management company. LLC provides K1 to the international investor Investor needs to obtain an ITIN (does not need W-8) LLC required withholding federal income tax unless Investor’s tax liability from the LLC income is estimated to be less than $1,000 AND the investor provides the LLC with a properly completed form 8804-C. If investor tax liability is more than $1,000 then withholding is required. Any income of less than $13,500 will result in a tax liability of $1,000 or LESS and therefore no withholding is required. Investor is required to file 1040NR to report the K1 income (1040NR = Non Resident tax return) Tax brackets: Exempt up to $4,000. $4,000 to $9,300 is 10% tax rate $9,300 is where 15% kicks in & max is 39.6% We always encourage investors to seek the help of an informed CPA to help determine the structure & implications of their investment with us. Recommended CPA -- $495 one time fee for tax compliance Christopher J. Picciurro, CPA, MBA, PFS, ARA Executive Officer & Co-Founder, Integrated Financial Group [email protected] www.integratedfg.com 1-888-IFG (434) 7791 Extension 106 Although it can sound complicated, working with a competent CPA and doing a bit of work ahead of time can make the investment process with Holdfolio, straightforward, easy and a passive way to invest in Real Estate in the US Midwest market. Because we are a Real Estate Company comprised of specialists in our field and we are not tax professionals, we always encourage investors to seek the help of an informed CPA. This will help the international investor to determine the structure and implications of their investment with us.
Nov 27, 2016
Everyone seems to have opinion on the best way to invest in real estate. There are many arm chair quarterbacks that have “the right play” to achieve the best returns. The “noise” around investing, the stock market, the economy, the housing market and cash flow vs/ appreciation is loud even for the seasoned investor. There are five myths that we seem to hear a lot that we would like to quiet down! #1 I don’t know enough about real estate and construction to invest. Real estate investing and the rewards that come from this are not just intended for the highly intelligent, ivy league, entrepreneur subset of society. Real estate investing and reaping the rewards is for anyone that is interested enough to learn about strategies to help them achieve streams of income, and anyone savvy enough to do some research on leveraging other folks knowledge. There is no need to reinvent the wheel if it is already rolling. There are companies that have done the heavy lifting, do the property management and allow you to sit back and reap the rewards of their hard labor. #2 I am not an accredited investor and I’m not rich. . It is true that a lot of real estate investing opportunities are only open to accredited investors. There are many, however that do not require accreditation. Crowd funding opportunities often allow for the everyday investor with some money in the bank to invest for a much smaller amount than it would ordinarily take to purchase a home to renovate or to flip. We often hear “I don’t own a home, don’t I need to do that first before investing in real estate?” It is not at all a prerequisite to have owned real estate prior to investing. Sometimes there is a better opportunity to invest when you aren’t encumbered by a high debt/income ratio. #3 Passive means that I don’t have to do anything. Wouldn’t it be nice to sit back and just look at your bank account grow without doing anything? Passive investing does not mean that you don’t have to do the work on the front end. Doing your Due Diligence, understanding the market, the risks, the operating nuances of the companies you want to work with are all part of what determines your satisfaction and success in passively investing. Also monitoring your investments, and keeping track of the market, the economy in general and the terms of your investment all require you to be focused and aware. #4 Banks and financial institutions are the only way to invest in real estate. Coming from the old school perspective of real estate investing getting a bank loan was the way you obtained real estate. Today there are companies, and individuals that have opened up the loan market to support more creative ways of financing. Although there are still requirements and restrictions there are more options than you might think. #5 Owning real estate is all about Appreciation. There are always investors that have benefited from the spike or nosedive of the housing market and are eager to tell you that it is all about appreciation. There is a ton of speculation when it comes to investing and no one really has a crystal ball to predict what the housing market will do or where there will be a boom. Another option to invest is to invest for cashflow with the hopeful bonus of appreciation. By investing for cashflow there is the ability to avoid the high price housing bubbles and focus on the rent ratios. As you investigate your options in investing in real estate, ask lots of questions, align yourself with like-minded individuals and read the right forums. You will be able to hear some of the myths and discern with the knowledge that you have acquired. We wish you many happy returns!
Nov 7, 2016
Real estate investing can be an expensive proposition. Many would-be early adopter investors rushed into the “flipping” business without the overall big picture knowledge of a “hold” potential. They ended up not being prepared when the flip did not quite go as planned. There are 5 factors that need to be taken in account when considering the “flipping” business. Upfront Costs — The first expense is obviously the acquisition cost. Those that are able to do so with cash are in a better position and can avoid paying interest on financing. There are holding costs such as property taxes and utilities and potentially general contractor and renovation expense. Think also about your time and how valuable it is. If it takes you 6 months to find, renovate and sell a property for a profit of $5,000 that might equate to a very low hourly income rate. All of these costs need to be factored in from the beginning with a significant enough “padding” to make it realistic. Understanding Rehab limitations — If you can trust yourself in the renovation process to not OVER renovate for the market your home is in, you have some self-restraint and are a good match to flip. If you know that you can’t resist the upgraded tile and the granite counter tops then you either need to put a realist in charge of the renovations or consider a different side business OR consider holding that property and filling it with a quality tenant willing to pay extra for those amenities. Market Variables — Be knowledgeable of the market in the area you are buying. How is it functioning and is there a surplus of homes being sold or are other investors trying to unload properties? You might be in for months or years in waiting to sell if so. When you hold a property you are not at all dependent on the whims of the market and you have the option to sell only when it is financially advantageous for you to do so. Risks — When you decide to fix & flip you will have monthly costs that you will carry until the house sells. You might have a loan payment, taxes, insurance and utilities. There can be other unforeseen costs if there are repairs, if a pipe breaks or if there is vandalism. This can easily blow your budget wide open and prevent you from making a profit. When you hold a property you can balance out your risks over the long term of the property and can maximize the probability of making a profit. This is why it’s crucial to buy right. Tax consequences — Many experienced investors know they can flip for a profit and how this directly impacts their bottom line, but many others don’t understand the tax implications on the other side of that deal can significantly reduce the profit that they actually make. Residual income versus Capital Gain taxes needs to be thought out in the beginning. Long-term investors actually pay a lower tax rate and only pay long-term capital gains if they sell their property (or not if using a 1031 Tax Exchange). Flippers are often subjected to higher taxes because they are classified as “dealers” of real estate. In conclusion consider these factors when deciding “To Flip or Not to Flip” so you don’t end up FLOPPING.
Oct 29, 2016
The due diligence period in a real estate means embarking on the necessary steps to perform calculations, review documents, research the company and essentially do your homework for the investment BEFORE you actually make the commitment. As you are working through your Due diligence process remember that there are many facets that need to be taken into consideration. The economics of the market, looking at the track record of the investment operator, understanding the Investment agreements and your level of commitment are all considerations to explore. Knowing the economics means understanding the long-term viability of the real estate market and what the overall climate is in the way of job growth, industry and livability of the area of the investment. It is also up to you to vet the investment firm, read the fine print and look at the historical data and seek information about them from other investors. Having a thorough knowledge of the investment documents is a key element of the process. Another, not to be forgotten piece of the Due Diligence puzzle is assessing your own personal financial goals and investment strategy. Understanding your personal tax implications, your potential risk quotient and if you want an active or more passive investment opportunity are all questions that need to be answered prior to embarking on your real estate investment journey. Although it may seem like a daunting task, know that on the other side of that Due Diligence is the opportunity for a positive investment that will help you move toward financial freedom.
Oct 20, 2016