Never Pay Off Your Mortgage

CONVERT THE ''DEAD MONEY'' YOU HAVE IN HOME EQUITY INTO USABLE CASH. Investing in real estate is exciting and can bring huge returns. But, especially if you are new to the game, you have to be careful about how you allocate funds. By following conventional advice, you may have been making a profound and costly mistake in how you dispose of your money. This all-too-common mistake is in transforming all of your potentially usable cash into equity in your home. Sadly, most people have taken the...

Use Tenants In Common Agreement In Order To Make It Easier To Use Exchanges And Cost Segregation Analyses

These arrangements enable the budding real estate pro to utilize functions like a 1031 Exchange and cost segregation analysis more effectively than such traditional ownership vehicles as limited partnerships, limited liability companies, and S corporations because Tenants in Common are treated more as independents than they are as central management. Since 2001, the Tenants in Common industry has grown roughly 100 every year. By 2004, some 4 billion was invested in the Tenants in Common...

Interest Only Mortgages The Increasingly Popular Way to Free Up Usable Cash

People have been rushing to buy real estate in South Florida and elsewhere. Houses that were once priced well beyond the means of potential real estate investors have suddenly become affordable. The reason It is the new financing method called interest-only loans. Interest-only loans have become increasingly popular because they afford investors the chance to reduce monthly mortgage payments, while keeping that portion that would normally go toward principal either in the bank or in some kind...

Use Leverage To Create Wealth

As we like to say, there is ''good'' debt and ''bad'' debt. Of course some would say all debt is bad. In some respects we might agree with that, but we're aware that ''good'' debt enables you to create wealth. The one advantage you have in a real estate transaction is that real estate can appreciate in value. It's leverage that makes money for you. If you do not use leverage in a real estate transaction, you might as well go buy a bond because it's the leverage that increases your return on...

Create the Ideal Exit Strategy

The primary goal in investing in real estate should be to convert the value of your property into cash. This conversion is known as an exit strategy. There are various exit strategies. Some convert money tied up in equity into cash, and some convert property into other property (performing a 1031 Exchange, for example). When you refinance that new property, you convert that property into cash, and reduce your taxes all part of an exit strategy. Employing cost segregation analysis, i.e., using...

New Smart Loans Give You Available Cash

The whole notion of adjustable rate mortgages (ARMs) is relatively new. Until the early 1980s, there had been no more than ten or so of these ARMs those that did exist offered no caps and they were available for residential properties only. Back in the early 1980s, when inflation was as high as 20 , no one wanted to be tied to an adjustable rate mortgage. But when interest rates dropped by the late 1980s the banks came out with adjustable rate mortgages that offered annual and lifetime caps....

What Are New Smart Loans

There are a whole series of catchy names for the product that we advocate and call the New Smart Loan . Others call it the ''Option ARM,'' ''Cash Flow ARM,'' ''Choice Pay,'' ''Flex Pay,'' ''Personally Tailored Mortgage,'' the ''Mortgage Stretch, '' and ''Advantage ARM.'' All amount to more or less the same mortgage product. New Smart Loans are suitable for real estate investors for a number of reasons. First and foremost, they offer one of the best opportunities to leverage a mortgage with the...

Dont Be House Rich and Cash Poor

We will soon turn to the newly created mortgage and real estate programs that should have a powerful and positive impact on your finances. But first we want to explain why new investors have had such a hard time taking advantage of these programs before now. For a long time, anyone with pretensions of becoming a real estate investor had been trapped in the old-school way of thinking everyone advised him or her to pay off a mortgage as quickly as possible. That meant turning over his or her cash...

Gaining a Tax Advantage Performing Tenants in Common Real Estate Transactions

Tenants in Common and 1031 Exchanges are the fastest growing real estate transactions occurring in commercial real estate. Tenants in Common (TIC) transactions have become more prevalent in the last two or three years more and more people are choosing them over limited partnership or limited liability companies. They buy properties under an ownership title called tenants in common. 1031 Exchanges will be covered in the following two chapters. Tenants in Common arrangements have become quite...

Negative Amortization A Mouthful of a Phrase a Generator of Quick Cash

If interest-only mortgages were meant to be an inducement to the real estate investor to divert hard-earned cash into useful endeavors, the negative amortization mortgages are an even greater inducement. Within the New Smart Loan program, by far the most popular is the minimum-payment option. ''Minimum payment'' is another term for negative amortization. Amortization is the gradual repayment of a mortgage loan, both principal and interest, in installments. Amortization allows for monthly...

Stop Thinking That Being Debt Free Is Good

Spurred on by the banks, new investors mistakenly thought that becoming debt free was desirable. They owned homes that were sometimes worth millions and certainly hundreds of thousands of dollars but they had no disposable cash making for an absurd situation. They were the classic house-rich and cash-poor victims of the old school way of thinking about mortgages. And, to make matters worse, they have been making this mistake for years. In the early years, when there was something they could...

Surround Yourself With People Who Are Smarter Than You

One of the best secrets I've learned from being in this business for 35 years is this I've always surrounded myself with people smarter than I am. All of my associates in the mortgage and real estate business are experienced real estate people, whether accountants, lawyers, or other kinds of professionals. Whenever they open their mouths, I listen. You cannot succeed in this business if you are cheap plain and simple. I'm not saying you have to be irresponsible but when you go to hire a lawyer,...

Save Taxes and Improve Cash Flow Do a Cost Segregation Study

TO SHELTER LARGE AMOUNTS OF MONEY FROM TAX LIABILITY, ENGAGE IN A COST SEGREGATION STUDY. Tax-deferral strategies are a great way to minimize taxes, and cost segregation and section 1031 Exchanges are two of the most valuable tax-deferral strategies available to commercial real estate owners today. We've dealt with 1031 Exchange programs in the previous two chapters. Now we turn to cost segregation analysis. New investors are improving cash flow and finding immediate tax savings from their...

Significance Of Code Section 1245

ACRS , 133 acceleration clause, 181 additional principal payment, 181 adjustable rate mortgages ARMs , see also interest-only mortgage minimum-payment mortgage adjustment period of, 46-47 attraction of, 54 common indexes for, 47 defined, 46, 181 fully amortized, 189 hybrids, 190 and interest-only mortgages, 71 interest rate and payment caps, 47-48 negative amortization feature, 85 recent history, 53 risk of rate increases, 71 adjusted basis, 181 adjustment date, 181 adjustment period, 182...

Dean Budney A New Investor Who Went to Work for the Cutaias

I was born in Schenectady, New York, and raised in nearby Clifton Park. My wife and I currently live in Boca Raton, Florida, and have two children. In 1999 we had just had our second child. We were living in our first home in Boca Raton. We wanted to find a larger home and so I went to a realtor to help me start looking. On our existing house I had a 30-year fixed mortgage at 7.75 interest. The realtor asked what I planned to do with the present house. Sell it, I suggested, not really realizing...