Attorney William Bronchick: William Bronchick Best-Selling Author

Let’s say through savvy investing, you have managed to accumulate a portfolio of properties. It doesn’t matter if it’s a large or small portfolio. You may have even tried to self- manage them yourself. Now as you procure more properties you may find you may not be as organized as you once thought and find that some things may be falling through the cracks. Possibly you are just getting tired of getting the midnight or weekend calls (or both), the whining, repairs, trying to collect rents, keeping up with the books and everything else that goes into being a property manager. For purposes of this article, we are dwelling more on single-family rentals or small multi-family units. Larger multi-family units are normally handled quite differently. On the plus side, as a budding landlord, you may find that managing your first few rentals will be a great education! However, as your portfolio grows you may find that you are repeating past mistakes such as not screening tenants properl...

 Short sale flips – the process of shorting a property then reselling it for a cash profit in a simultaneous closing has been taking heat lately from title companies and real estate brokers.  Realtor blogs are filled with drivel about how these transactions are illegal or unethical. What’s the real truth? The Basic Process The process of the short sale flip works as follows. Step 1: Investor signs a contract to buy a house from a seller who is behind in payments. Step 2: Investor contacts seller’s lender to negotiate short sale Step 3: Investor gets lender to approve short sale Step 4: Investor lines up backend buyer Step 5: Investor closes with seller, paying off lender, then resells to backend buyer in simultaneous closing for a profit. In essence, this is no different than a regular wholesale flip except instead of paying off seller’s lender in full, investor pays off seller’s lender at a discount. The Hoopla Some Realtors and title companies think the...

Capital gains, exchange rules and installment sales rules apply for properties held for “productive use.” I.R.C. §1234. If you are actively buying and selling real estate on a regular basis, you may be considered a “dealer” in real estate properties. A dealer is one who buys with the intent of reselling rather than for investment. There is no magic formula for determining who is an investor and who is a dealer, but the IRS will balance a number of factors, (See, e.g., Winthrop, Ada Belle v. Tomlinson, 417 F.2d 905) such as: The purpose for which the property was purchased How long the property was held The amount of sales by the taxpayer in that year Amount of income from sales compared to taxpayer’s other income How many deals the taxpayer did in that year The amount of gain realized from the sale “Flipper” Properties May Be Subject to Self Employment Tax If the IRS pegs you as a dealer, your properties are not “investments” but rather “inventory.” If you are flipp...

William Bronchick : Foreclosure investing can be difficult if you are not sure what to look for in bank-owned homes. There are certain learned skills that come with consistent investment in foreclosures. Let’s take a glance at what a trained foreclosure investor’s eye looks for when seeking out the best home for his or her buck. Location Just like the price of homes sold normally, different locations offer different price ranges for foreclosed homes. Depending on the budget, foreclosure investors will decide which area they want to purchase in. Usually, the bigger the price tag of other homes in the area mean the investor will make more money off of the single sale of the house. With smaller investment neighborhoods, the single sale may not be a high return, but there is usually a quicker turn around on the sale. Some investors only secure funds for short periods of time, which means the house needs to be flipped and sold quickly. This would call for a smaller investment n...

William Bronchick : The first thing that should be noted is that flipping houses is a great way to bring home a rather large profit in a relatively short amount of time when doing so in a seller’s market so to speak. The problem is that we currently seem to be experiencing what is known as a buyer’s market from one end of the United States to another. Foreclosures are at an all time high, which means that the market has suddenly been saturated with properties for sale. While this is excellent news (believe it or not) when it comes to getting your hands on a property at a lower price, it also makes a difficult time of convincing buyers to pay top dollar when there are better bargains down the road. This of course is one of the primary risks involved in the real estate investment venture that is known as flipping properties. The massive profits that most investors seek cannot be accomplished if the property cannot be purchased, rehabbed, and sold quickly. Unfortunately, at the ...

William Bronchick : Taxes are your biggest expense in your lifetime, so choose your source of income wisely! Real estate has some of the BEST TAX BREAKS of any investment in America! The more you earn through your job, the more you get taxed, and the system is setup that way to punish hard workers and reward investors.  Have you looked at the bottom stub of your paycheck lately and seen how much the government steals from you?  Wage income not only requires work, it gets taxed at a very high rate, plus the government takes FICA, which is put into a system that may be bankrupt when you retire. Real estate has so many tax advantages over wage income: Capital Gains Rates The maximum federal tax rate on capital gains is 15%, whereas wage income is taxed at 35%.  There’s state taxes, too, and some states offer further discounts on capital gains income.  Remember, capital gains requires that you hold a property for 12 months or more before selling, as in th...

William Bronchick: Many investors are generally familiar with the concepts lease option and Colorado installment land contract (aka “contract for deed). Many investors confuse the two, and this article will help you understand the tax, legal, and practical issues between them. Lease Options First, let’s start with the lease option, which is really two things, a lease and a purchase option. A lease is a contract for the use and possession of land, creating a landlord/tenant (or “lessor/lessee”) relationship. A purchase option is a unilateral agreement wherein the optionor (“seller”) agrees to give the optionee (“buyer”) the exclusive right to the purchase the leased premises. The option price is generally set at a fixed price at the inception of the lease, although it does not have to be. At any time during the option period (which generally corresponds to the lease period), the tenant can exercise his option to purchase. An option is not the same as a regular purchase...