In this show we update real estate investors on what affect the credit crisis has had on product availability for investors. A very important show for investors.
Archive for August, 2007
20
Aug
Tools of the Trade - HBM
Home Buyer’s Marketing is a cutting edge resource for anyone shopping for a home online. HBM is the #1 real estate website in the country! Listen in and learn what this amazing tool can do for you.
20
Aug
Credit Crisis 8-12-07
Get a front row seat to the national credit crisis that has slammed our nation! Listen in as we share our powerful story of how the crisis affected the team and how we survived! We also shed light on why this credit crisis has occurred!
19
Aug
Doing it Right 8-19-07
This show is a continuation of the credit crisis show. We explore what has caused the credit crisis, who is responsible for the mess, solutions and a look ahead of what changes will occur in the industry and economy.
Below are the Show Highlights, click the more button to continue reading. You may also download the PDF of the highlights at the bottom of the page.
Host: Patrick Allman, President, Strategic Equity
Guest: Sandy Botkin , Founder, Tax Reduction Institute
Tax Strategies and Mortgage Interest
When it comes to mortgage interest, some is deductible and some is not. Many people believe they can deduct all interest no matter
what. Prior to 1987 you could do this but Congress changed the law and broke down tax interest into seven categories:
• business interest
• investment interest
• passive real estate interest
• construction interest (limited to 24 months)
• student loan (up to $2,500 per year)
• personal interest (none of this is deductible)
• home mortgage interest (including acquisition debt and home (equity)
Note: If you refinance your home, interest deductions depend on what you use the money for so document it thoroughly.
HOME MORTGAGE INTEREST
You can deduct interest based on the acquisition or improvement of your principal residence and one second home. For example, you
can buy a $600,000 home and spend $300,000 improving it then deduct the interest on that $300,000 because you are using it to improve
your principal residence. If you have several second homes, choose the one that gives you the highest deduction each year. An
RV, boat or apartment can also qualify as a second home as long as it contains and eating, toilet and sleeping area.
BOTKIN’S INVESTMENT STRATEGY
I. Acquisition indebtedness
• You can deduct $1 million of interest on your principal home and one second home and $100,000 can be a home equity loan for a
total of $1.1 million. Therefore, if a client buys a $5 million house, he or she can only deduct interest on indebtedness of $1.1 million.
That might involve liquidating some stocks and bonds.
• Wait 91 days. On the 92nd day, refinance the home and take out as much as possible to buy back the stocks and bonds sold in the
first step.
• The first $1.1 million is still acquisition indebtedness but the rest is investment indebtedness. The debt has to be on the principal
residence or the second home and must be secured by the property you want the deduction for.
II. Construction
• If you build your own home, you can deduct 24 months of construction-period interest as home mortgage interest.
III. Points and Deductibility
• Points on a principal residence are deductible but not on a second home.
• You can only deduct points if it is for the purchase or improvement of your principal residence.
• The IRS says you can finance the points as long as the cash you put down at closing equals the amount of the points.
• If you incur points to refinance or buy a second home or an investment property, the government says you must take these
points and amortize them over the life of the loan.
• The biggest mistake many people make is that they incur points and forget they could have written them off. Check if there were
any prior unamortized points if you are selling or refinancing a home. If so, then all the unamortized points become immediately
deductible.
IV. Graduated Payment Mortgages
• These are the negative amortization mortgages or deferred payment mortgages.
• You can deduct the full amount you are paying as interest because you are only paying the interest.
• As your payments go up and you start reducing the amount that was deferred, all those payments are still considered interest until
you get back to the original balance.
• If you are deferring a payment each month for a year or two and you then refinance the entire mortgage with a different lending
institution, the entire deferred portion becomes deductible by the buyer.
Sandy Botkin is a CPA, attorney and principal lecturer at the Tax Reduction Institute. He is a former trainer of IRS attorneys and the author of
“Lower Your Taxes: BIG TIME” and “Real Estate Tax Secrets of the Rich.”
01
Aug
Darin Zuber
Darin attended college at Fresno State and graduated with a degree in urban and land economics (Real Estate). He is a partner with his father Darryl.
Fresno’s population is approximately 750,000. Darin’s average sale price is $404,000 and the average for the area is $320,000.
ASSISTANTS/TEAM
Darin and Darryl manage the Team:
- Two buyer specialists;
- One listing specialist;
- One ful1-time office assistant;
- One part-time college student as a “runner”
Darin has found that referrals greatly increase the odds of a good hire, and one of his primary requirements is that they want to have fun.
SYSTEMS
There is a system in place for everything. Listings, prospects, FSBO’s, expireds, price reductions, and all of their marketing.
If something goes wrong, it is usually a breakdown in systems. The Zuber Team is always working to improve them.
MARKETING
The Zuber Team has 8 different websites, and they have seen the percentage of their business attributed to their websites increase from zero to 20% in the past 18 months.
Their marketing philosophy is largely to focus on people who have already decided to sell. Every FSBO, expired and withdrawn, in Fresno is being touched by the Zuber Team on a weekly basis.
An initial package is sent. Then, there is an 8-week follow-up campaign, after which there are monthly follow-ups for a year. Call-in listings follow this activity on a regular basis. Darin observes that no one else does this consistently, and that makes all the difference. No calls are made - it’s all done by mail, so Darin refers to it as a “soft campaign that works.”
There are 1300 people in the database. The Zuber Team focuses on maximum touches. With mailers, postcards, phone calls, private invitations to sporting events or plays, and client appreciation parties.
As to getting properties priced right, Darin points out that showing the facts and being straightforward with them, is their best approach. lf sellers are unreasonable or unmotivated, they will choose not to work with them. If sellers are motivated but focused on a different price, Darin will tell them what he thinks and then start working on price reductions after about 2 weeks. Every two weeks he does a mini CMA and emails or calls the client.
KEY ELEMENTS OF SUCCESS
Darin observes that hard work and the ability to network are the two primary reasons for their success. Darin and his wife focus on taking “A” clients to dinner and events personally.
