Retirement Planning and Charitable Giving

Charitable giving is a popular strategy among the wealthy for diminishing their tax payments. But this strategy doesn't just have to be for the Michael Dells and Kim Kardashians of the world. Wouldn't you like to reduce your taxable income and save money too?

Intelligent real estate investors, just like you, can use charitable giving too. But even savvy investors don't always know that they can make charitable gifts from retirement accounts.

The funds in IRAs and 401ks are among the most heavily taxed that the average investor will hold. Whether you want to donate money from your 401(k) to a cause close to your heart, save on your taxes or both, this article is for you. Read on to learn more about your options for giving charitable gifts with your Self-Directed 401(k).

Why You Should Designate Your Retirement Funds for Charitable Giving

Ultimately, it would be best to consider designating your retirement fund for charitable giving to reduce your taxable income and save money. The tax break is why many highly wealthy individuals donate in large quantities. Sure, many of them may be philanthropic at heart, but there is also a distinct tax advantage to making donations. The higher your taxable income, the greater your tax responsibilities when Uncle Sam comes to extract his pound of flesh and collect tax bills.

Giving to charity also qualifies you to receive a Charitable Gift Tax Credit. Anyone can take advantage of this deduction. Generally, the credit is figured by taking the market value of an item or the actual amount of cash donated, then subtracting the percentage of your tax bracket.

This strategy can lead to thousands returning to your pocket. Of course, there are limits: you cannot donate more than half of your income in a given year. Similarly, for these benefits to apply, you must itemize each donation.

What Options You Have for Giving to Charity

Some of these may already be familiar to you. Others are less obvious. Here are some, but not all, of the many methods you can use to donate funds to a charitable cause:

⦁ Real Property Gifts (includes real estate, stocks, etc.)

⦁ Trusts (Charitable Remainder Trusts, Charitable Lead Trusts, and more)

⦁ Charitable Sales (purchases will benefit a charitable organization or purpose)

⦁ Deferred or Traditional Charitable Annuities (the donor receives a tax deduction and a fixed income for the remainder of their life)

⦁ Life Estate Gifts (allows donors to claim a charitable deduction for the remainder value of real property donated to charity)

⦁ Retirement Plan Asset Gifts (passes the retirement plan assets to a charity)

⦁ Life Insurance Gifts (name the charity as a beneficiary, and it may reduce the donor's taxable estate)

Which Options Are the Most Beneficial?

Life estate gifts, retirement plan asset gifts, and life insurance gifts are the most beneficial options.

While any of the previously mentioned options are undoubtedly beneficial and generous, intelligent investors may be wondering which will benefit their bottom lines. You may be surprised to learn that the final items on the list are among your most robust and lesser-known gift choices.

Many potential donors do not know much about life insurance or retirement plan asset gifts simply because charities are less likely to request them. Many nonprofit organizations need immediate cash that these donations do not address. They are nonetheless useful for the organizations--and you.

Ways to Give to Charity from Your 401(k)

Option 1: Donate Directly from the Plan

You can liquidate an asset (or several) held by your plan, then directly donate the funds to the nonprofit group or cause of your choosing.

Option 2: Name a Charity as a Beneficiary of Your Plan

Naming the charity of your choice as a beneficiary works the same way as designating any other beneficiary. However, this option has the advantage of allowing plan funds to pass through to the charitable organization completely tax-free. If you have tax-deferred funds, this is a more intelligent expense than passing those same funds on to your heirs. Your heirs would have to pay the taxes, but the charity does not.

Key Takeaways for Effective Retirement Planning and Charitable Giving

Charitable giving is a popular and effective strategy to reduce your taxable income and save you money. One strategy that most people don't know about is the ability to make charitable gifts from retirement accounts.

It would help if you considered giving to charity from your retirement account for the following reasons:

The tax benefits of charitable giving are multiple. It may result in you pocketing cash when tax season rolls around.

You have a lot of options available to you, but one of the most beneficial options is to give from your 401(k) by:

This strategy will reduce the tax burden on your estate and may save your heirs a hefty tax bill down the line.

Do you want to learn more about charitable giving or other strategic plays that may be useful to you? Join us and learn more! Register for your FREE Royal Investing Group Mentoring Wednesdays at 12:30 pm EST.

Navigating Historically High Inflation Combined with Low Interest Rates

Let's discuss what's happening with the cost of goods and how you can navigate historically high inflation with low-interest rates. 

We recently held a Royal Investing Group Mentorship with Ron Galloway, an expert financial researcher with 35 years of experience to answer the inflation question. Galloway has been featured in The New York Times, CNN, CNBC, and The Wall Street Journal. 

Please keep reading to learn more about inflation, how it's measured, and the potential impact on low rates in your real estate investments.

What Is Inflation?

According to expert financial researcher Ron Galloway, inflation is "simply an increase in the money supply." In the past year, nations increased their money supply up to four times, says Galloway, which led to historically high inflation. 

The rate currently reduces your money's value and drives up prices. 

When you shop, do you notice that things cost a little more each time you go back?  

For example, last year your shopping cart cost $300. An identical shopping cart might cost you $320 or more this year. At its most basic, that's inflation.  

Contributing Factors

Galloway explains that the economy is not as strong as it is reported because of:

Each of these factors contributes to the inflation situation we are experiencing. 

How Is Inflation Measured?

We measure inflation by measuring the cost of many items over a specified period. The Bureau of Economic Analysis and the Bureau of Labor Statistics measures goods and services costs, categorizes the expenses, and creates different price indexes. 

Price Indexes

Price indexes are lists of prices. There are different price indexes; one measures households and their consumption of personal goods and services. Another price index measures commercial companies and their raw materials consumption and needs for machinery. 

Measuring Inflation

To measure inflation, we look at the level of a price index. If the price index level is higher than over a year ago, we know that prices are higher on average, and there is inflation. 

Galloway argues that inflation numbers provided by government statistics agencies do not adequately account for essential goods like food and fuel. Necessary commodities like food and energy cannot negate an increase in prices and other goods that aren't essential, like electronics. 

That means that real inflation for essential goods may be even higher than the reported rate of 7.5%.  

What Is the Impact of Low-Interest Rates on Banks?

The impact of low-interest rates is that banks are less willing to loan money. Banks have increasingly heightened their standards and investigated and thoroughly vetted potential borrowers. All in all, interest rates are low, but there hasn't been a corresponding increase in loans. 

Galloway explains that real interest rates are "the rate of interest minus inflation." Accordingly, the combination of low-interest rates and rising inflation disincentivizes banks from loaning money. 

As a result of that unprofitable combination, top institutions would instead use their cash for trading derivatives between each other. Galloway notes if one of those significant banks defaults on their derivative, we'd have a repeat of the 2008 recession. 

Expand your portfolio, diversify your assets, and hedge against inflation. To do that, you might consider investing in Carbon Credits

What Is the Impact on People Who Hold Assets?

Inflation eats up your cash, but people in debt and assets benefit from it. If you hold assets, like real estate, during an inflationary period, those assets increase in value. 

Now might be a good time for you to invest in real estate. 

Indeed, prices are up, but so is demand. So far, there are no obvious indicators that the housing market will slow down. In addition, as Galloway mentioned, real estate, a tangible asset that appreciates, is a good investment during inflationary periods. 

If you are ready to take the next step to secure your financial freedom, check out: 

Key Takeaways

Never in history have we had interest rates this low and inflation rate so high. As a result, you need to protect yourself and your assets. Here are the key takeaways from today's discussion: 

During this period, it is an excellent time to be a real estate asset owner. If you want to learn more about market trends or other real estate investment topics, register for FREE Royal Investing Group Mentoring Wednesdays at 12:30 pm EST.

Real Estate Syndication to Diversify Investments

Suppose you want to invest in real estate but don't want to personally oversee or manage the investment. In that case, you might want to diversify with real estate syndication. Ideally, a real estate syndication would provide you with the benefits of real estate investment, and you wouldn't have to worry about personally being a landlord.

In this diversification strategy guide, we will discuss real estate syndication basics.

What Is Real Estate Syndication?

A real estate syndication occurs when investors pool their money to make large real estate purchases. Here is a list of some things that real estate syndications commonly invest in:

You can diversify with real estate syndication and enjoy the benefit of your partner's shared expertise and experience.

If you want to learn more about real estate syndication as a diversification strategy, check out our article Real Estate Syndications.

How Does a Real Estate Syndicate Work?

There are two parties in a real estate syndicate: a real estate syndicator and passive investors.

What is a real estate syndicator? 

The first party, the real estate syndicator, will:

After your group finds a property for investment, then the syndicate will:

The real estate syndicator handles virtually all aspects of the investment. Their role is to create, execute and deliver a business plan that brings cash flow to you, the passive investor.

What is a passive investor?

The passive investor is someone like you.

A passive investor would provide a percentage of the syndicate's capital to purchase the property. Then the passive investor would receive a portion of ownership in the property.

The ownership you have in the property entitles you to:

Should I Diversify with Real Estate Syndication?

There are several benefits to investing in real estate syndications. Those include, but are not limited to:

Another beneficial aspect of real estate syndication is that the property will appreciate over time. When you get ready to sell the property, you could potentially increase your return on investment.

Perhaps the most intriguing aspect of real estate syndication is the ability to control which properties you invest in and the ability to diversify. As a passive investor, you have the opportunity to split your investment across several syndications.

What Are the Risks of Investing in a Real Estate Syndication?

All investments carry an element of risk–investing in a real estate syndication is no different. The most considerable risk comes from finding someone you trust with your investment.

You have to find an experienced, trustworthy, and competent syndicator as the investor. Ensure to do your due diligence and research that company before you invest with a real estate syndication company.

How Can I Diversify with Real Estate Syndication?

You must be either an accredited or sophisticated investor.

An accredited investor must:

A sophisticated investor refers to an investor who has enough money, investing experience, and net worth to conduct complicated investments. Sophisticated investors must be knowledgeable and have a track record of successfully identifying and evaluating winning investments opportunities.

What Are the Steps to Invest in a Real Estate Syndication?

You have to do a little bit of research to find just the right place for your investment. One thing you will want to do is communicate and network with other investors. As you develop strong bonds with other investors, they will be able to direct you to trustworthy real estate syndicates.

You can also attend real estate conferences to meet other investors, learn more about investing in real estate syndications, and land your first deal.

All in all, you (as a passive investor) will need to find a trusted, successful, and experienced real estate syndicate. Once you identify and invest, the real estate syndicator will do almost all the work, find an investment property, structure the syndication, and conduct the business.

Key Takeaways

If you want to invest in real estate but don't want to control the day-to-day aspects of owning property, you may want to diversify with real estate syndication.

The benefits of this type of diversification strategy are appealing. You can invest without the hassle of being a landlord, earn passive income, enjoy the benefits of appreciation and real estate tax rules.

As always, you need to ensure that you know about any investment you make. To learn more about real estate syndication and other real estate investment opportunities, Register for FREE Royal Investing Group Mentoring Wednesdays at 12:30 pm.

Judgment Enforcement Effective Strategies for Collecting

Have you ever wondered how about judgment enforcement on non-paying tenants? Or maybe you want to know what your options are other than evicting someone and putting them out on the street?

If so, you’re in the right place. Keep reading to learn more about:

What Is Judgment Enforcement?

First, it’s helpful to know that a judgment is merely a court order or a decision from a lawsuit. Sometimes, the court will order the defendant to pay the plaintiff a certain amount of money in the judgment.

Lawsuits happen. In most cases, it’s not if but when they occur. As a real estate investor, you must protect your financial future and assets. Take our FREE, five-minute investor quiz to learn more.

Why does this matter for real estate investors?

Here is a typical example you may encounter as a real estate investor. Imagine you have a tenant who has stopped paying rent. While it may not be easy to evict your non-paying tenants, they still owe rent to you. You have other options available for judgment enforcement.

What Should I Do If a Tenant Stops Paying?

You don’t always have to evict. You can sue the tenant for breach of contract, get a judgment, and then enforce the judgment. Remember the tenant signed a lease agreement with you. You can sue the tenant in small claims court.

What is a small claims court?

First, you should know the rules that control your state’s small claims court system. Second, you should know that small claims court is a low impact, relatively cheap, and hassle-free way to get paid.

In general, small claims courts are:

How does small claims court work?

What’ll happen is this, you will file a suit in small claims court against your tenant for breaching their rental contract with you. After that, the court will set a hearing date. Then you serve your tenant with papers (this is easy because you know where they live).

Both you and your tenant have the opportunity to represent yourself in court. Present your facts:

After that, the court will most likely issue a judgment in your favor. Here are some things to consider about court decisions:

After you win a case, you will need to enforce the court’s judgment.

What Tools Do I Have for Judgment Enforcement?

If your state allows it, you can:

These options are convenient because you most likely have your tenant’s job history and banking information already on the leasing contract.

Wage garnishment

Suppose you’ve won in court against someone that is gainfully employed. In that case, you may be able to garnish (or collect) a portion of their wage to satisfy your judgment.

Just the threat of wage garnishment is enough for most defendants to pay. Generally, to garnish someone’s wages, you don’t have to expend much effort:

There are various rules and limitations to wage garnishment, but this is an effective judgment enforcement strategy.

Bank levy

You have your tenant’s bank information, so it might be better for you to enact a bank levy.

When you win a money judgment, you become a creditor, or someone owed a debt. As a creditor, you may be able to tell the bank to withdraw money from an account without the debtor’s permission.

Sell the judgment

Another option for judgment enforcement is to sell the judgment to an enforcement specialist. Selling is a win-win situation because it allows you to relinquish the responsibility of debt collection to a third party.

Selling debt might be a good option for you if you think the debtor cannot pay or will not pay. The enforcement specialist will usually enforce the judgment and pay you a portion of the debt.

Key Takeaways About Judgment Enforcement

You have rights as a landlord too. When a tenant does not keep their promise, you should follow the law because it’s the right thing to do.

We discussed what judgment enforcement means, how to take action against non-paying tenants, and what tools you have available to enforce judgments. Now that you know this information, you have proven strategies at your disposal to ensure that your real estate investment journey is successful.

Secure your financial future, and register for your FREE Royal Investing Group Mentoring Wednesdays at 12:30 pm EST!

How to Maintain Operational Anonymity

How do I maintain operational anonymity after a structure is in place?

Maintaining operational anonymity isn’t easy, which is why most real estate investors worry about being the target of a lawsuit, regardless of the protection in place.

Does this sound like you? You’ve made it to the right place. In this article, we’ll explain:

We invite you to read on and learn how to maintain anonymity operationally.

Why Is Operational Anonymity Important?

Anonymity is essential because it stops lawsuits before they start, as belligerent parties will be unable to find the actual target of the suit.

How Do We Obtain Anonymity?

We obtain anonymity by using a variety of tools. These tools include using:

We hide assets using Anonymous Trusts, which allows you to keep ownership information hidden. The Anonymous Trusts keep you safe by owning your LLC and serving as the Title Holding Trust, the name disclosed when filing Articles of Incorporation.

In practice, it would look like this:

When someone goes to research the owner of the real property, the Count Clerk’s records will show the anonymous trust as the owner. Neither the trust owner nor you registered with the state, so your identity is safe.

How Do You Maintain Your Operational Anonymity?

There will be times when you need to maintain operational anonymity throughout running your business. As you continue on your real estate journey, you want to make sure that you protect your investment and your livelihood.

What follows are three common scenarios in which you will want to maintain your anonymity:

#1 How To Purchase A Home

What matters is how you plan to purchase the home. If you buy it:

#2 How To Enter Into A Contract With A Third Party

When you contract service providers, you will want to interact through an anonymous operating LLC. These providers include, but are not limited to:

The operating LLC will be the party that contracts with the service provider, and you will sign as the manager of the LLC.

When you contract with a tenant, you will interact through an anonymous operating LLC or a third-party property manager. The operating LLC will be the party that works with the service provider, and you will sign as the manager of the LLC

#3 How To Sell Your Property

When you sell your property, anonymity is not a priority. To sell, you should move the title back to your name and sell. When you sell the property in your name, it simplifies the closing process. Finally–as the seller–you ensure the proceeds check comes directly to you.

What Parties Can You Disclose True Ownership To?

In some cases, you will want to disclose actual ownership. Some of the most common parties to tell include:

How Should I Disclose True Ownership?

Sometimes you may not need to maintain complete operational anonymity and disclose true ownership. When considering whether you should tell your identity to each of the previous parties, ask yourself the following questions:

What Happens If Your Anonymity Has Been Compromised?

Don’t panic if someone compromises your anonymity. You have options available to you to address the situation. The initialism “STACK” details the steps you should follow:

Conclusion

Ideally, it’s clear how to maintain operational anonymity while managing your real estate investment.

Now that you know how to protect your privacy, here are some key takeaways about the protection provided by anonymity:

Do you want to join other savvy investors and learn more about how to protect or grow your investments? Register for FREE Royal Investing Group Mentoring Wednesdays at 12:30 pm EST.

Roth Conversions to a Solo 401K to Offset Losses

Are you a self-employed real estate investor? If so, the solo 401K may be the best option for you. The solo 401K is an IRS-approved retirement plan that enables you to minimize your tax burden. Read on to learn more about how this tax strategy works and how you can offset losses with a solo 401K and Roth conversions.

What is a Solo 401k?

As mentioned, a solo 401K is an IRS-approved retirement plan. Also, the solo 401K is ideal for self-employed business owners or business owners with one other employee, usually their spouse.

This retirement plan allows contributions of up to $60,000 each year.

If you want to learn more about the solo 401K and its many benefits, read our informative guide: Solo 401K vs. Self-Directed IRA: Which Is Better For You?

What is a Roth IRA conversion?

A conversion is a taxable movement of cash, real estate, or other assets from a Roth IRA to a Solo 401K.

When you convert from a Roth IRA to a solo 401K, there's a tradeoff. You will face a tax bill, possibly a big one, due to the conversion. If you decide to convert a portion of your Roth IRA conversions into a Solo 401K, you will pay taxes on the money you convert.

However, you'll be able to secure tax-free withdrawals as well as several other benefits, including no required minimum distributions, in the future. With proper tax planning, you may even be able to mitigate the tax bill from the conversion.

All in all, you pay taxes on the money you convert to secure tax-free withdrawals and several other benefits. One of the most significant benefits is that you will no longer have the required minimum distributions in the future.

Why are Roth conversions a popular tax strategy?

Roth conversions remain popular as many taxpayers fear that tax rates will only increase in the next few years. A Roth conversion enables you to convert now at lower tax rates, let your account grow, and let you make a tax-free withdrawal over the life of your retirement!

How is a solo 401K different from a traditional IRA or 401(k)?

Remember, if you have a traditional IRA or 401K, that money grows tax-deferred, but you pay tax on the distributions as you withdraw the funds at retirement.

The tax rate might be much higher when you retire. That means you would potentially lose more money to taxes each time you make a withdrawal.

Another thing to remember is that once you reach age 72, you must withdraw a certain amount of money each year, or the "required minimum distribution."

How can I offset losses with a Roth conversion?

One of the ways to mitigate the tax impact of the conversion is for a business owner to offset net operating losses (NOL). The income generated by a Roth conversion may offset the NOL, and the business owner may not incur any additional tax liability. Additionally, there is no limit to the amount of income that an NOL can offset.

What is a net operating loss?

Generally, a net operating loss (NOL) is an excess of deductions over income from the operation of a business. These deductions are expenses from the operation of a business.

For individuals, an NOL may also be attributable to casualty losses. A casualty loss occurs from the destruction or loss of your (taxpayer's) personal property. The casualty loss is a single, sudden event.

For instances of theft, you will need to prove that someone stole the property.

Example of how you would offset losses with a solo 401k

First, a disclaimer: these calculations can be complex, and investors should consult with a tax professional or financial advisor to decide the best strategy for them.

The following example illustrates the calculation.

INCOME

Spouse’s wages
$75,000

Interest and dividends
5,000

Total income
80,000

DEDUCTIONS

Net business losses
(itemized deduction and personal exemptions not allowed in net operating calculation)
(170,000)

NOL for tax year
(90,000)

Income from Roth IRA conversion
90,000

Net taxable income
0

This example is for illustrative purposes only.

In this case, the couple may decide to convert $90,000 from the IRA. Then they can use that $90,000 to offset the loss and possibly avoid generating any tax consequences.

If you want to learn more about how the solo 401K lowers your tax burden, read Self-Directed Solo 401K: How to Avoid Tax Penalties.

Here's The Bottom Line

The solo 401K is probably right for you if you are self-employed. You need to decide if it's the right time for you to convert money in your Roth IRA to a Solo 401K.

If you do decide on a conversion, remember the tax bill upfront secures your freedom from "required minimum distributions." Also, you may be able to offset your losses with a solo 401K.

To learn more about this powerful tax savings strategy and others that you can use to keep more of your earnings, book a tax consultation by taking our tax quiz. The information you provide will enable us to have a productive discussion the first time that we speak.

Invest in Carbon Credits to Diversify Your Portfolio

By Ron Galloway,
Researcher, Finance and Healthcare Expert

One area of investing that has taken off in the last few years is socially aware investing due to the dual influences of the environmental movement and the sustainability movement. Most people don't think of carbon emissions as an investment, but they are. And this is accomplished when you invest in carbon credits.

In this article, we will cover:

What Are Carbon Credits?

A carbon credit is a bit like a stock certificate. It represents a certain amount of carbon emissions, for instance, one metric ton of carbon emissions. A company that emits a lot of carbon during its business process can offset its carbon output by purchasing carbon credits. If the company emits 30 metric tons of carbon, they buy 30 carbon credits to counteract this. This investment in carbon credits has become so common now that carbon credits are routinely traded in major markets worldwide.

Watch Episode #12, Investing in Carbon Credits, to hear our experts discuss investing in carbon credits. The webinar is on Wistia and does not require a log-in.

Why Should I Invest In Carbon Credits?

Let's look at this a little bit more. Carbon credits are a function of the government's "cap and trade" policies. The "cap" refers to the amount of carbon emission (in metric tons) a company can produce as a part of its normal business process. The "trade" refers to the number of carbon credits a company is allowed to buy or sell to bring its carbon emissions under the "cap."

If you decide to invest in carbon credits, remember the market is relatively new. Still, it is a market that represents tens of billions of dollars per year and is growing. Environmental regulations on companies increase every year, and carbon credits have become the default mechanism for adhering to these regulations.

For instance, when Ford Motor Company is building cars, their factories emit a lot of carbon. The government allows Ford a certain amount of carbon pollution. If the carmaker goes over that allotment, it needs to purchase carbon credits to offset its overages.

Investing in carbon credits is attractive because the number of existing credits is relatively fixed; it's not infinite. There is a limited supply, but ­not limited demand.

Therefore, it's not just companies that can profit (by balancing their carbon emissions). There are also many opportunities for investors to benefit from this area. There are a few different ways to do this.

How Can I Invest In Carbon Credits?

One straightforward way is to invest in companies that trade carbon credits as part of their everyday business. Companies that have announced that they're going to become 'carbon negative,' such as Boeing, need to contract a certain amount of carbon offset credits to achieve these goals. Some companies, such as Shell, directly buy and sell carbon credits with other companies as a trading profit center.

Another mechanism is to invest in carbon credits through an exchange-traded fund (ETF). This investment pool tracks the performance of the assets that comprise it. For example, the QQQ exchange-traded fund mirrors the S&P 500's performance. There are existing ETFs benchmarked to different carbon indexes that track the performance of carbon credit-related futures contracts. ETF such as these commonly returned double-digits in 2021.

Probably the most active market for carbon credits exists in the futures market. Much as you can trade corn, gold, or hog bellies in the futures market, you can also trade carbon credits. This market is more complex, but returns can be much higher in the futures markets because you can use leverage. There are lots of risks and lots of potential rewards.

As with any investment, there is risk involved. There is some risk in investing in carbon credits through the aforementioned vehicles. Remember that investing in carbon credits is a very specialized and targeted investment. It does not by any means represent a diversified investment, but what it does represent is an asset class for an overall portfolio.

This particular investment is attractive because it is new and growing at a tremendous rate. Institutions at first did not invest in carbon credits; now, they do.

What Do You Predict For The Carbon Credit Market?

Here's where things get interesting:

Of the world's 20 largest countries that emit the bulk of the carbon, 19 of them have set a "date certain" for when their net emissions will reach 0. Hitting that goal means subsidizing lower emission activities, taxing higher emissions, or simply banning some activities. Essentially carbon credits are a "tax" on higher emission activities. Offsetting emissions with cash is the path most countries and companies will use to hit their emission targets.

Worldwide accounting standards will soon have standardized metrics for measuring carbon emissions. The new metrics will create explicit standardized targets that companies and countries must follow. It's the same principle that currently has oil trading settled in dollars. It's a standard. And the accounting of carbon credits will soon be standardized.

As more and more companies deal with the reality of reducing their carbon footprint, the easiest way for them to accomplish this reduction is to trade carbon credits. After all, it's much easier to pay a tax than shut down a factory or retool a factory to produce fewer emissions. Carbon credits are taxes in the form of a tradable asset.

The emerging asset invites speculation into the market as hedge funds and other portfolio managers invest in carbon credits. Since the number of carbon credits is limited, higher demand will create higher prices. Suppose a portfolio manager looks at a company and realizes that it has not set aside enough money to pay for its carbon credit targets. In that case, that portfolio manager can go for "long" carbon credits.

Or, more deviously, they could "short" carbon credits. A short squeeze would occur if companies went into the market and realized there weren't enough carbon credits to buy at their intended price. The companies would have to buy at any cost. In this scenario, the price of carbon credits could go parabolic. A short squeeze on carbon credits is inevitable at some point.

In 2021 we witnessed short squeezes in several stocks that caused prices to go straight up. There's no reason this cannot happen in the carbon credits market because:

Carbon credits act just like stocks.

There's more potential for upside in carbon credits than in many other investments because governmental and institutional pressure drives the need for these carbon credits. It's artificial, but that doesn't mean that demand doesn't exist. It does exist and provides much of the momentum for rising carbon credit prices.

Key Takeaways

The opportunity to invest in carbon credits is relatively new and not very well understood. Hopefully, the discussion we had in this article gives you some actionable advice.

In this article, we:

The market is not well known and relatively new.

Still, credit carbon investments will be part of any portfolio that follows the "prudent man" rule sooner rather than later. Being early will be much better than being late in this particular investment.

Do you still have questions? We have experts ready with answers. Join a community of like-minded investors. Register for your FREE Royal Investing Group Mentoring Wednesdays at 12:30 pm EST to learn more.

Tax Savings Strategy to Achieve Financial Freedom

Are you ready to grow your real estate business? To do that, you need a solid tax savings strategy.

You already know that there are considerable advantages to investing in real estate. The passive income, substantial tax savings, and long-term security most likely drew you to real estate investing.

Real estate investing is the first step in your plan for financial freedom. The first thing you need to focus on is finding good real estate deals.

The next step is to maximize how your money works for you. Read our list of six tax savings strategies to achieve financial freedom and build wealth.

#1: Start with the children, house, and vehicle

#2: Maximize your deductions

This tax strategy is primarily for single-family home investors and the available deductions.

You have a multitude of deductions available to you as a real estate investor.

Deductions that do not impact financing Deductions that do impact financing
- Amortization
- Auto
- Depreciation
- 529 Plan
- Home office
- HSA
- SDIRA
- SOLO 401K
- Business expenses
- Credit card processing fees
- Legal fees
- Office furniture
- Office supplies
- Repairs and maintenance
- Tax prep fees
- Travel expenses

As a sharp real estate investor, you need to know which deductions impact financing because it affects your ability to get loans, secure more properties, and generate wealth.

#3: Start a SOLO 401K

With a SOLO 401K, you can save $58,000 a year in taxes. If you're married, the tax savings increase to $116,000.

How a SOLO 401K works as a tax savings strategy:

Do you want to know more about this powerful tax vehicle? Visit our SOLO 401K Hub to learn more!

#4: Create a Self Directed IRA (SDIRA)

You can add a Self Directed IRA on top of your SOLO 401K.

This SDIRA enables you to manage everything as long as you set up an LLC owned by the IRA. Then, you can invest through the LLC and shelter about $7,000 more per year from taxes.

#5: Use the DB(K) Tax Savings Strategy

The official name of this plan is the Eligible Combined Plan which Congress created as part of the Pension Protection Act of 2006 under Section 414(x) of the Internal Revenue Code.

You can combine the SOLO 401K and SDIRA with the DB(K) strategy. You gain an additional shelter which allows you to grow your wealth with a deferred tax, more capital in play, and higher returns.

#6: Get a Real Estate Professional Designation

If real estate is the primary source of your income or you are a "stay at home" husband or wife, use this strategy.

You can use your depreciation and other losses from real estate to offset other income.

If you are a high self-employed or 1099 income earner, you should consider investing in commercial and multifamily investments. You can use cost segregation, accelerated, and bonus depreciation to avoid taxes.

Even if you are a W2 employee, you have to document your time thoroughly and may be able to secure the designation.

Learn more about the requirements it takes to earn a real estate professional designation.

Tax Savings Strategy Key Takeaways

We went over six tax strategies you need to take to grow your real estate business. These six strategies will help you achieve financial freedom and grow your wealth.

Remember to:

  1. Start with the children, house, and vehicle
  2. Maximize your deductions
  3. Start a SOLO 401K
  4. Create a Self Directed IRA (SDIRA)
  5. DB(K) strategy
  6. Get a Real Estate Professional Designation

We've covered a lot of information that may include concepts that are new to you. To hear this content presented by Scott Smith check out Royal Investing: Episode #1 Tax Savings Strategies on our Wistia channel.

To learn more about this powerful tax savings strategy and others that you can use to keep more of your earnings, book a tax consultation by taking our tax quiz. The information you provide will enable us to have a productive discussion the first time that we speak.

Wyoming Statutory Trust vs. Delaware Statutory Trust

Asset protection isn't easy, especially if you are a California-based real estate investor. The good news for you is that LLCs aren't your only option. A Wyoming Statutory Trust, for example.

Using LLCs is a last resort for the California investor when looking for comprehensive asset protection. The $800 per year franchise taxes probably make a non-starter for you as you seek to compartmentalize every asset you own.

Does this sound like you?

The truth is that you don't need LLCs for protection in California. Also, you can use trusts that function just like traditional LLCs and Series LLCs. That's important as a real estate investor because these trusts provide:

To protect real estate investors like yourself, you might consider reliable and proven options, like the Wyoming Statutory Trust and the Delaware Statutory Trust.

Read on so you can evaluate the Wyoming vs. Delaware Statutory Trust, then decide which one is right for you.

Wyoming Statutory Trust: A Unique Tool for Savvy Investors

The Wyoming Statutory Trust and Missouri Statutory Trust function like LLCs, but they are trusts.

If you use the Wyoming Statutory trust for protection, you can:

Since you create these trusts with anonymity through the use of a nominee trustee, you can anonymously own both:

We recommend using an attorney to create the Wyoming Statutory Trust. Your attorney should also serve as the nominee trustee to ensure your anonymity. Your attorney protects you and your trust with attorney/client privilege as a trustee.

Valuable Evaluation of Pros and Cons

The Wyoming Trust may be the right trust for you if you have fewer properties or have no plans to grow.

The upsides to the Wyoming Statutory Trust include:

Wyoming privacy laws do not require the registration of trust agreements. That means privacy about you, your family, assets, and your estate plan.

You should be aware of the limitations of the Wyoming Statutory Trust. The main issue with the Wyoming trust is the complexity it adds to scalability. It may turn out that this trust proves too complex and expensive to provide the proper protection for you.

The first is management. Management of each trust requires:

You would have a multitude of entities that may each require their tax reporting and filing. The amount of reporting on the entities can be an operational nightmare as you grow.

The second limitation deals with scalability. As you scale, you will be financially responsible for:

What follows is more information to help you decide on the merits of the Wyoming Statutory Trust vs. Delaware Statutory Trust.

Delaware Statutory Trust: Proven Asset Protection

The Delaware Statutory Trust functions like a Series LLC, but it is a trust. That means the Delaware Trust might be for you if you have multiple properties to protect and you have plans to grow your business.

The Delaware Trust allows you to:

An attorney is acting as nominee trustee and masks the actual ownership.

Promising Security from Delaware's Trust

The upside to the Delaware Statutory Trust includes:

The trust allows you to scale freely without additional operational complexity or tax filings.

Everything in your life should stay precisely the same as if you managed everything through a single entity that you wholly owned.

The primary downside is that the Delaware Statutory Trust cannot hold any active businesses such as typical commercial businesses, and you cannot "flip" your investments.

The limit on commercial businesses and the inability to "flip" properties may not fit your specific situation. Still, the Delaware Trust is a solid option in many investing cases.

We know the decision is an important one for you to make. Read our "Step-By-Step Statutory Trust Beginner's Guide" for more information.

The Bottom Line: Wyoming Statutory Trust vs. Delaware Statutory Trust

The Wyoming Statutory Trust is an excellent option if you have a single asset and don't plan on acquiring more.

If you are an investor with intentions to scale, then the additional upfront costs of a Delaware Statutory Trust will pay dividends in the long run.

You want to protect your assets and ensure your financial freedom. Let us help you! Register for FREE Royal Investing Group Mentoring on Wednesdays at 12:30 pm EST to learn more.

1031 Exchange Update for 2022

Are you fed up with paying taxes on your hard-earned real estate profit? Are excessive taxes preventing you from securing your financial freedom as a real estate investor? If so, you should read further to learn more about the 1031 Exchange update for 2022.

As a savvy real estate investor, you can use this little-known tax break to increase your wealth. Once you've mastered the 1031 Exchange, you'll see an increase in your purchasing power as you keep your money working for you and not filling the federal government's coffers.

What Is A 1031 Exchange? 

First, you have to know what we mean when talking about a 1031 Exchange. In general, a 1031 Exchange is a tax provision that lets you sell an investment property, take those gains from the property, and reinvest those gains into another property without paying taxes. 

When you sell real estate and earn gains, you have to pay tax. Appreciated property means more tax when you sell. The flip side of that is true too. If your property depreciates, you are subject to depreciation recapture taxes when you sell. Those taxes apply to you whether you claimed the depreciation deductions on your taxable income or not. 

Either way, the federal government will try to extract their pound of flesh from your gains. 

The beauty of the 1031 Exchange provision is that you get to defer the taxes on your gains. That means as a real estate investor you pay no taxes when you sell your property and exchange it for a new real estate investment. If you follow the rules, you may be able to defer the taxes indefinitely as you reinvest into bigger or better properties. 

If you want to learn more about the finer details of the 1031 Exchange, we recommend that you read Understanding 1031 Exchanges And Asset Protection Entities

What Is The 1031 Exchange Update? 

When President Biden won the election, one of his campaign promises was to eliminate the 1031 Exchange because of the perception that it gave an unfair advantage to the ultra-wealthy. 

The Biden administration had planned on either eliminating the 1031 Exchange program or modifying it somehow. One of the planned changes was the complete overhaul of the 1031 Exchange program, but that plan hasn't come to fruition. 

The other plan included a $500,000 limit on the amount of money exchanged per year. That plan has also failed to earn widespread support.

One of the reasons the government failed to eliminate the 1031 Exchange program is that it is not in their best interest to kill it. Here's why. 

If the government were to limit the 1031 Exchange successfully, it would mean less tax revenue in the long run. In the short term, the government would enjoy the taxes from the sale of the property.

However, a limit or drastic change to the 1031 Exchange would probably chill the real estate industry. That means that more people will hold onto property to avoid taxes. When people hold

onto their properties, all the ancillary sources of tax revenue dry up. 

That means the contractors, cleaners, attorneys, real estate agents, and title companies do not participate in those deals. When you eliminate those people from transactions, you eliminate the taxes they would have paid. On balance, the federal government earns less in tax by removing or reducing the effectiveness of the 1031 Exchange benefit. 

Fewer taxes and political gridlock have prevented any significant changes from the tax code yet. However, as a competent real estate investor, you should prepare for changes, just in case. That means you should look into all tools available to you right now and take advantage of them. 

You might wonder if the 1031 Exchange is the right investment strategy for you. Answer that question by checking out Is a 1031 Investment Strategy Right For Me? 

Key Takeaways

The 1031 Exchange update doesn't take away from the fact that it still might be the right vehicle for you to avoid paying capital gains taxes. Right now, there is talk in Washington D.C. about making policy changes, but nothing has emerged from those discussions yet. 

That's not to say that nothing will happen, but a lack of support and institutional gridlock are keeping policy changes at bay. As an intelligent real estate investor, you should plan, but don't worry too much about things out of your control. 

The best thing to do right now is to use all your tools. That means finding out which real estate investment strategy is suitable for your particular and unique circumstances. 

Do you have a plan for your financial freedom? If not, let us show you how to secure your financial independence and build generational wealth to pass on to your family. 

To learn more about this powerful tax savings strategy and others that you can use to keep more of your earnings, book a tax consultation by taking our tax quiz. The information you provide will enable us to have a productive discussion the first time that we speak.

The Ultimate Estate Management Guide for Savvy REIs

Here is your ultimate guide to estate management and a list of things you should do to get started.

As a savvy real estate investor, you know that you don't have to be ultra-wealthy to need estate planning. Your estate includes everything you all own. Protecting your assets for future generations makes estate planning worthwhile.

Keep reading to learn how to protect your assets!

Basic Overview

Estate management, also called estate planning, is the action of picking who receives your estate and manages your responsibilities if you are dead or incapacitated. The process ensures your beneficiaries enjoy your estate with less tax burden.

Estate planning establishes a procedure that can align with your personal and financial goals. How do you want your assets divided if you die or are incapacitated?

If you want to learn more about estate planning benefits, check out our guide, Estate Planning for Real Estate Investors.

Here are three estate management tips to protect your financial future.

Estate Management Tip #1: Inventory All Your Assets

You have enough stuff to start estate planning. Once you take a closer look, you will realize how many assets you have. In general, you can have tangible assets and intangible assets.

Tangible assets include:

Intangible assets include:

Once you know how large your estate is, you need to estimate its worth. You have options for assessing the price of your assets:

Either way, you choose to estimate the value of your assets, you will ensure that your heirs inherit your possessions equitably.

Estate Management Tip #2: Establish Your Legal Plan

Once you know what's in your estate and how much it's worth, you need to think about how to protect your family and assets once you're not in the picture.

As a real estate investor, you have more things to consider, and your estate management plan needs to include legal directives. A wise option for carrying out your directions is establishing a living trust.

A living trust might be right for you. A living trust allows you to designate which portion of your estate goes where. If you're incapacitated, your trustee takes over. But, how do you find a trustee for your living trust?

Finding a trustee can be tricky. At a minimum, you want your trustee to be someone who:

Read our article Finding A Trustee For Your Estate Plan to learn more about selecting the right trustee for you.

If you die, your trust assets transfer to your beneficiaries, and you get to skip the probate process.

Probate is a time-consuming and expensive court process that determines how to divvy up your estate. It's best to avoid court in these matters, so you might consider using a pour-over will in addition to a trust for the best protection.

A pour-over will is a standard will form stating that the assets not included in your trust should be moved into the trust and distributed via the living trust terms.

Read more about the benefits of establishing a living trust in our article Living Trust Versus A Will: What's The Benefits For Rei?

Estate Management Tip #3: Determine Your Beneficiaries

Whether you choose a will or trust to carry out your wishes, you will need to determine who receives your estate.

Follow these steps to ensure that your assets go to the right people:

Key Takeaways

Change is the only constant in life. As a result, your estate management plan needs to be flexible. To keep your assets protected, make sure to revisit your plan regularly and if you have a life circumstance change.

We went over the importance of inventorying your assets, estimating their value, establishing a legal plan, and determining your beneficiaries. If you follow our ultimate estate management guide, you will take a huge step toward protecting your assets.

To learn more, check out our Estate Planning hub. This page serves as a knowledge base on all things related to leaving your legacy.

Real Estate Professional Designation

As a real estate investor, you have to contend with mortgage payments, repair and maintenance, insurance, and other myriad fees. On top of all of those fees, you still have to pay tons of taxes—capital gains, net income investment, and income.

Sometimes, it’s hard to carve out profitability, and you want to have all the weapons in your arsenal to combat your tax burden.

Sound like you? You’re in the right place.

This article doesn’t list every tax break you have available to you as a real estate investor.

What is in this article is a tactic that works. Establishing a real estate professional designation for yourself reduces the amount of tax you owe, improves your cash flow, and acts as a step toward securing your financial freedom.

Why should I get a real estate professional designation?

The short answer is that it might save you money. It’s essential to determine whether your involvement in real estate activities makes you a real estate professional for tax purposes.

First, the real estate professional designation establishes if you can deduct losses from your real estate activities against ordinary income. Second, it determines if your income from real estate investing is subject to the net investment income tax.

What are the rules that determine the deductibility of real estate losses?

IRS Sec. 469(c)(2) states that rental activities are considered passive activities regardless of your level of participation.

That is important to you as a real estate investor because:

That means your passive losses from those activities are only deductible against your passive income activity income.

However, if you qualify as a real estate professional, the passive activity loss rule doesn’t apply to you.

That enables you to deduct losses from rental real estate against nonpassive income. Examples of nonpassive income include:

You have the potential to reduce your taxable income close to zero and increase your cash flow.

A net investment income tax of 3.8% applies to income over the threshold amount. The threshold amount is:

However, there is an exemption for gross rental income from being included in investment income for real estate professionals.

What constitutes a real estate professional?

You, as a taxpayer, qualify as a real estate professional for any year as long as you pass three tests with your real estate business:

Test 1: Material participation means that you participate through the year on a regular, continuous, and substantial basis. There are seven ways you can “materially participate,” so finding a way to qualify is surprisingly easy.

Test 2: You must spend at least 750 hours per year in real property trades or businesses in which you materially participate. Personal services performed as an employee do not count unless you (as the taxpayer) are at least a 5% owner of the trade or business.

Test 3: You must spend more than 50% of your working time on real estate activities in which you materially participate.

For the real estate professional designation, an actual property trade or business includes, but is not limited to:

If you meet the requirements of the three tests and have documented proof, when you file taxes, you will file an IRS Section 469(c)(7)(A) Election to Aggregate Rental Real Estate Activities. The election is a written statement sent with your return for the tax year of the election.

Why should you become a real estate professional for tax purposes?

The IRS recognizes three categories of real estate investors. The third category, “real estate professional,” enables you to deduct 100% of your real estate losses against ordinary income. You can even deduct your real estate losses against your spouse’s income!

You might have one rental property or several properties. As a property owner, when you take the real estate professional election, you can create thousands of dollars in tax deductions. Those tax deductions may result in no tax liability at the end of the year.

Key Takeaways

As you will quickly learn, real estate has incredible potential with the sheer number of tax breaks to create cash flow.

One of the top strategies that savvy investors use is qualifying as a real estate professional.

As a real estate professional, you can:

To learn more about this powerful tax savings strategy and others that you can use to keep more of your earnings, book a tax consultation by taking our tax quiz. The information you provide will enable us to have a productive discussion the first time that we speak.

Asset Protection for Financial Freedom

Whether you are an experienced real estate investor or building a new real estate business, asset protection & financial freedom have to be on your mind. Scott Smith, Royal Legal’s founder, and lead attorney, recently sat down with real estate investor Whitney Sewell to discuss Asset Protection for Financial Freedom.

This informative discussion covered the importance of protecting your assets and why a real estate investor should not solely rely on insurance policies for protection against lawsuits.

#1 Insurance doesn’t provide asset protection from lawsuits

As a real estate investor, you have to know that you can’t hold assets in your name and rely on insurance to protect you. The amount of coverage insurance is insufficient, and you may find yourself on the wrong end of a lawsuit.

Scott provides a personal anecdote about a friend who got sued for breach of contract and lost. Because his friend relied only on insurance and held his assets in his name, he lost $3 million in real estate.

That’s not to say that you shouldn’t have insurance. It would be best to get insured, but you must realize that insurance does not completely protect your assets. Insurance covers you from things like negligence. However, it does not protect you from things like breach of contract, fraud, and gross negligence claims.

Breach of contract, fraud and gross negligence claims have the potential to derail your real estate investment business. To get 100% bullet-proof protection, you have to think and conduct business like a wealthy person.

#2 Think like a wealthy person

We live in a litigious society, and having assets may make you a target for lawsuits. To protect yourself, adopt the same strategies that wealthy people use. That means:

Think about it like this: Wealthy people don’t own things. Instead, they have companies that own stuff for them. When someone sues a wealthy person, there isn’t anything to get. The asset holding company protects wealth and ensures privacy from litigation. That’s why asset protection for financial freedom is such a critical step in wealth generation.

#3 What is the most cost-effective way to achieve asset protection for financial freedom?

The Series LLC is the most cost-effective way to protect your assets. With a Series LLC, you can isolate your investments from one another.

If the worst happens and you get hit with a lawsuit, the plaintiff cannot get to your other investments, nor can they get to your assets. The Series LLC helps you think and do business like a wealthy person because:

These layers of a Series LLC work together for maximum protection of your assets and investments. Savvy investors use the anonymity of the LLC to prevent people from locking onto them as a target to sue, and it allows them to keep their investing strategy private from competitors.

#4 How does the Series LLC provide asset protection?

The Series LLC efficiently and affordably protects your assets from lawsuits by using a “parent-child” structure. The process goes like this:

Each of the “child” LLCs protects assets and isolates them from the rest. If you did not have a Series LLC, you would have to pay to establish an individual LLC for each of your assets to create separation.

The best protection from lawsuits is anonymity. When people think that you have nothing of value, they have no motivation to sue you. A Series LLC shields your assets from the public and makes it an unprofitable decision to sue you.

If a plaintiff sues you, the Series LLC “parent-child” structure makes it so that only one of your assets is at risk.

Do you have a plan in place already? If not, let us show you how to achieve asset protection for financial freedom and build generational wealth through the use of a Series LLC.

Read this article to decide if it is the right way to get bullet-proof protection for your assets, Series LLC For Real Estate Investors.

Asset Protection for Financial Freedom Wrap-Up

And there you have it! An explanation about how to achieve asset protection for financial freedom.

We started by discussing the shortcomings of focusing solely on insurance for liability protection, noting that insurance provides some, but not all, of the asset protection you need.

We’ve also talked about the tips and tricks that wealthy people use to protect their wealth. Then, we went over what a Series LLC is and how it provides the most cost-effective way to protect your investments.

Ready to take your education to the next level? Get FREE Access to the Asset Protection Vault. This contains access to our top 5 video Masterclasses and ebooks for real estate investors.

Year-End Tax Preparation: What You Need to Know

Are you ready for year-end tax preparation?

It's hard to believe that there are only a few days left between you and 2022. As 2021 ends and you forge your path forward into 2022, you must undertake some housekeeping to close out 2021 and start 2022 in the best position possible as a real estate investor.

As a real estate investor, it might not seem that there is much to do. However, each year, you need to assess your plans, goals, and the state of your investments. Before the year closes out, make sure to go over this essential end-of-year checklist.

To prepare for tax season, we strongly suggest you:

Read below to find out the best ways to accomplish the preceding tasks.

#1 Organize Your Tax Documents for Year-End Tax Preparation

You want to make sure you prepare everything for filing. Tax day seems far off in the distance, but April 15th comes fast in reality. As a result, it's never too early to get your documents in order.

Right now is the optimal time for real estate investors to collect all documents related to filing taxes. Some things you can do to make this process easier includes:

Ensuring that you have all your taxes settled ahead of time reduces stress and allows you to move past the financial commitments of 2021 and focus on growing your business in 2022.

Paper receipts can be burdensome, so it might be easier to pull out your bank records and highlight all your expenses. Some apps make tracking expenses more manageable. We like Expensify.

#2 Optimize End of Year Deductions for Year-End Tax Preparation

You plan on growing your business in 2022. One way to maximize your deductions is to purchase business vehicles and additional assets. Then you can schedule business meetings. Then, claim them as expenses on 2021's taxes.

As the year ends, you want to recheck your deductions to get your taxable income as close to zero as possible. One of the ways to lower your tax responsibility is to file deductions. You can file deductions on:

Being a real estate investor comes with plenty of tax deductions. The following list is not comprehensive but provides you with some ideas of what you can deduct in addition to the standard deduction:

It's hard to maximize your profit if it's getting eaten up by all the sales, properties, federal income, and state income taxes you must pay. As a savvy real estate investor, you need to finesse your documentation and deductions and realize the benefits of being a landlord.

An easy way to make sure that you are optimizing your end-of-year deduction is through Royal Legal Solutions' Peace of Mind Program. We hold all your tax accountability through the program, work with your account executive and CPA to maximize deductions, and shelter your assets.

Contact [email protected] to learn more about how the Peace of Mind Program will protect you and your assets.

#3 Prepare Your LLC for Tax Season

As a real estate investor, you know the importance of having your assets protected by an LLC. Depending on where you do business, having an LLC means paying a yearly franchise tax.

The franchise tax is a required fee that your LLC pays for the right to do business in any given state. This tax is separate from other federal or state income taxes required by government entities.

Franchise taxes are required:

In addition to franchise tax considerations, as an LLC owner, you will want to:

Key Takeaways

When you began your real estate investing journey, you had a set of goals in mind. Now is the time to revisit those goals, assess your performance, and make needed adjustments to accomplish your goals.

As you enter the new year, you should focus on growing your business. That means putting 2021 tax burdens behind you. Make sure you finish 2021 strong by having a clear and detailed plan where you:

A solid plan in place will allow you to earn more and grow your real estate portfolio.

To learn about powerful tax savings strategies that you can use to keep more of your earnings, book a tax consultation by taking our tax quiz. The information you provide will enable us to have a productive discussion the first time that we speak.

Real Estate Investing as a Married Couple Successfully

You've chosen a life partner and are married. You may be asking yourself, is it wise to make my spouse my business partner? The answer could be yes. You would want to be sure to have a game plan in place. Good communication would also be necessary to balance the commitments of your marriage and business. Real estate investing as a married couple can be a very rewarding and lucrative endeavor.

In this article, we discuss:

Keep reading to develop a solid plan that safeguards your marriage and business.

Benefits of Real Estate Investing as a Married Couple

First, let's talk about why operating a business that involves real estate investing as a married couple is a good idea:

You and your spouse will share financial goals in your business. For instance, there will not be interoffice politics to navigate, and you will both work to secure your financial freedom.

Working with someone you trust, like your spouse, there is also peace of mind. Since you trust your spouse, the business will benefit from your stability and commitment to your marriage and the company.

Before You Start Real Estate Investing as a Married Couple

Before you dive into a real estate business with your spouse, you should discuss:

After you answer these questions with your spouse, make sure to write your decisions down. Having these agreements in writing protects both of you in the event of:

No one wants to think about the bad things that can happen in a marriage, but those adverse events have ramifications for your business. That's why it's essential to have plans "just in case" different types of scenarios occur.

Options for Running Your Real Estate Investing Business as a Married Couple

In general, the IRS allows for four different types of business structures:

Did you decide that only one spouse will be an owner? You might choose to create a sole proprietorship or a single-member LLC.

Are both you and your spouse going to be owners? You will most likely choose either a partnership, LLC, or a corporation.

Sole proprietorship

The following conditions must be met to be a sole proprietorship:

Taxes on a sole proprietorship, each spouse must file:

Considerations for running your business as a sole proprietorship:

If you want more detailed information about this business structure, check out our article, "Can My Husband And I Own Our Business Together As A Sole Proprietorship?"

Partnership

Typically a partnership:

Taxes on a partnership:

Considerations for running your business as a partnership:

Read up on how a Limited Partnership can structure your real estate and other business deals in "Limited Partnership for Real Estate Investors" to see if this structure will work for you.

Limited Liability Corporation (LLC)

You will want to check your Secretary of State web page for more details, but in general, to form an LLC:

Taxes on an LLC:

Considerations for running your business as an LLC:

If you want to learn more about how LLCs protect you, your spouse, and your assets, read "What Are The Different LLC Types USe By Real Estate Investors?"

Corporation

This business structure is a separate entity from either your or your spouse. In general, a corporation:

Taxes on a corporation:

Considerations for running your business as a corporation:

Final Thoughts

Real estate investing as a married couple can be a massive advantage for both of you. You can secure your financial future together and reduce your tax burden. However, it's essential to know how to maximize your savings as a real estate investor.

For more information about how to keep more of your hard-earned money, read the following articles:

Consider attending our FREE weekly group mentoring calls if you are just starting with real estate investing as a married couple. During these calls, we discuss topics such as: how to best structure your business, how to protect your assets, what tax savings you can take advantage of, and more. Join us for Royal Investing, Wednesdays at 12:30 p.m. EST by Registering Today.

Millennial Real Estate Investors Outlook for 2022

Some might think that ‘millennial real estate investors’ sounds like a contradiction in terms. Until recently, this generation was happy to rent because of substantial student debt and the desire for flexibility in changing jobs.

Millennials also waited longer than previous generations before getting married and starting families. However, current trends show more millennials have begun to invest in real estate.

More Millennial Real Estate Investors

In recent years, real estate purchases by people ages 25 - 40 increased significantly. Buyers in this age group now make up close to 65% of the total population. Millennials are also the largest living generation in the U.S.

Financial Benefits

Millennials recognize the potential for income tax savings when buying a home. They also see property as a potential income source through renting.

Crowdfunding Options

Younger buyers have typically had difficulty investing in real estate because of the large down payments required. However, online investing platforms now offer lower-cost options through crowdfunding.

You can have a real estate offer accepted at the cost of only $500 to $5,000. In addition, most syndication or crowdfunding companies outsource property management, leaving the owner free of landlord duties.

Flexibility, low cost, and variety are vital characteristics of crowdfunding that appeal to millennial real estate investors. It’s also easy to manage online, fitting the lifestyle of this tech-savvy generation.

Changes After Covid

The pandemic changed millennials’ perceptions regarding homeownership. The following factors played a significant role:

Comfort and Practicality

After spending so much time working and studying from home, millennials realized they might enjoy more comfort than their rented properties afforded. Many professionals continue in a remote or hybrid model, making it critical to have adequate residential space.

Couples who work and study from home often look for homes with two workstations and an open kitchen.

Preference for Real Estate over Stocks

Most millennials believe property provides a better return than the stock market. Many of them were looking for their first job during the 2008 recession and had trouble finding work. After this experience, they became skeptical about purchasing stock.

Spacious, Multipurpose Homes

Except for some minimalists, most millennials prefer spacious larger homes with spaces that can serve multiple purposes. For instance, a large balcony may double as an exercise area and mini garden.

Location

While a few millennials prefer the suburbs, many choose to settle in the city. Some reasons include:

There’s a trend toward leaving larger cities like Los Angeles and New York. Instead, millennials choose places with low-income tax rates, for example:

Newer Homes

Most millennials prefer to invest in homes that are new construction or recently renovated. New dwellings carry several benefits with the decreased chance of a peril claim, leading to better insurance coverage. Modern houses are also more likely to be compatible with many smart home options that improve ease and comfort.

Sustainability

Millennials have always been interested in sustainability, so it makes sense that this characteristic carries over to real estate decisions. Living in the city allows for a shorter commute and a smaller carbon footprint. There’s also access to parks and walkable neighborhoods.

Millennial Real Estate Investors Strategies

Maybe you’re looking to invest in property to increase your income. Here are some specific approaches to try:

Subletting

Once you purchase a property, you may wish to share costs with a roommate or rent out a portion of the home. These strategies can help free up funds to invest in more real estate.

Short-Term Rentals

If you live in an area with significant tourism, short-term rental properties can yield a notable increase in income. A service like Airbnb or Vrbo can help you find tenants and manage bookings.

Investment Trusts

Real estate investment trusts (REITs) offer young investors the benefits of owning property without the responsibilities of private ownership. They require a smaller investment and give you access to returns that might not be possible as an individual.

You can buy into a REIT involving a collection of assets like:

To take a deeper dive into the details of Real Estate Investment Trusts, you should read:

Renovating and Reselling

This strategy, also known as flipping houses, requires an excellent understanding of the housing market. You want to find an undervalued property and renovate it as quickly as possible to sell it for a profit. To do so, you’ll need maintenance expertise or excellent contacts with skilled contractors who charge reasonable prices.

Pre-Construction Investment

Pre-construction involves purchasing an “option” on a property before the groundbreaking on the development project. You pay a fraction of the cost of developed land.

This type of investment is most successful in high-demand areas with frequent housing shortages. In such locations, prices can skyrocket, and new units often sell before they’re complete, leading to substantial profit for the investor.

Millennial Real Estate Investors Takeaway

Millennials are investing in real estate more than ever before. The Covid-19 pandemic led to conditions that favored these investments.

This generation looks for newer, spacious, multipurpose homes in urban areas. Sustainability is also a significant concern for millennials.

Millennial real estate investors interested in learning more are encouraged to register for our weekly FREE Strategic Group Mentoring sessions. We discuss the best practices for protecting your assets, strategies to achieve tax savings, and pitfalls to avoid when investing in property.

The Rental Property Asset Protection Checklist

Keep potential lawsuits at bay by viewing the rental property asset protection checklist we have prepared for you. By doing so, you’ll be able to protect your assets without worry or distraction.

The following checklist recommends some protective measures you can take for your real estate investments, cash, other assets, and financial future:

The bottom line is that the best asset protection strategies stop lawsuits from happening. This list will help you decide how best to protect your assets.

Anonymous Land Trust for Rental Property Asset Protection

Anonymous Land Trusts are highly effective but lesser-known instruments that protect your privacy as a real estate investor.

One vital benefit that anonymous land trusts provide is that unknown ownership makes it harder to file a lawsuit against you.

Here are some frequently asked questions about a Land Trust:

What are the parts of a land trust?
They are vehicles to help savvy investors hold properties anonymously. An anonymous land trust has three components: a grantor, a trustee, and a beneficiary.

How does a land trust work?
When you decide to form a land trust with Royal Legal Solutions, we serve as your trustee and manage the trust. You are the beneficiary which means you (1) are not publicly identified and (2) can enjoy the profits from your property.

Read “Anonymous Land Trust for Real Estate Investors” and get more details to help you decide if this sound legal strategy is the right solution.

Setting Up a Traditional LLC

Limited Liability Companies (LLCs) legally separate you from your business.

Benefits of an LLC:

We want to provide accurate information so you can make a sound decision. To that end, here are the most common drawbacks to using a Limited Liability Company:

Read “Texas LLC for Real Estate Investors” for more information. Ultimately, LLCs are okay for one asset, but a Series LLC is better for multiple assets.

Benefits of Setting Up a Series LLC for Rental Property Asset Protection

Series LLCs, a “parent-child” structure that ensures protection for your assets. Here are the steps of the structure:

Benefits of a Series LLC:

You might be having questions about a Series LLC. Here are the most common questions we encounter about this legal structure.

How does the Series LLC protect my assets?
Each asset is isolated from others.

How can I minimize my losses in a critical case?
The Series LLC structures your business in such a way that only one asset is at risk in any given lawsuit.

Why would I need anonymity?
If people think you own nothing, they have no motivation to sue you. Thus, the anonymity of the Series LLC shields you from lawsuits.

Read “Series LLC for Real Estate investors” to get a detailed account of how a Series LLC might benefit you. Overall, Series LLCs primarily help real estate investors with multiple properties or types of assets.

Avoid These Common Situations to Stay Out of Court

When you sign a lease with a tenant, you begin a legally enforceable contract that covers the terms of their tenancy.

Your tenant pays rent, and you conduct repairs and maintenance in exchange. When your tenant feels like they have no options, they might seek to sue you.

You don’t want to end up in a lawsuit, so make sure to:

Use this checklist as a guide to help you decide what type of asset protection is right for you. No matter what level of real estate investor you are, you need to protect your assets. Make sure to apply the lessons from this checklist today.

Bottom Line: Protect Your Assets

As you continue along your real estate investing journey, ensure that you protect your assets with the right financial strategies and business structures in place. Learn how to get bullet-proof asset protection with our FREE, 5-part educational series for savvy real estate investors.

Request your access to the Royal Academy Asset Protection Vault today!

Lessons in Multifamily Property Investing

Do you want to learn how to get started with multifamily property investing? If you’re ready to expand your investment portfolio to include this niche, continue reading for tips from seasoned investors.

In this article, you will discover fundamental lessons in multifamily property investing, including:

Class C Multifamily Property Investing Risks and Rewards

You have several options for multifamily property investing. As a result, you need to know the different classes to invest in a property that suits your goals. Property classification highlights the level of risk and returns for a variety of residence types.

To determine a property class, investors consider:

As the price of real estate and the cost of building materials increase in the United States, there is a trend toward investing in Class C properties.

Characteristics of a Class C Property:

Benefits of Acquiring a Class C Property:

Partner Up With an Experienced Investor

If you have decided to explore multifamily property investing, you may have taken the first step by scouting properties and deals.

However, closing the deal is where your inexperience could become an obstacle. Part of the problem may be money, and you can raise some, but not enough. One thing you might consider is partnering with an experienced investor.

Here are the benefits of partnering up:

Location, Location, Location

A fundamental truth in real estate investing is that location matters. For your first multifamily property investing endeavor, you might be looking into a Class C property. These types of properties exist in low-income areas. Despite that, you will still want to look for high-growth, high-yield areas where property demand is high.

As an investor, familiarity with your area of purchase is vital. Some of the things you can look for that indicate improving neighborhoods include:

Multifamily Property Investing Assumption Agreements: Risks and Rewards

An assumption agreement is when a new owner takes over loan payments from the previous owner. In other words, the assumption agreement shifts the financial burden of the loan to the new owner.

Possible risks and rewards for an assumption agreement are detailed below:

One thing to remember is that in an assumption, there are three parties:

At times, the bank doesn’t care what terms you and the seller agree to, and as a result, the bank may impose additional terms on the deal.

The Importance of Inspections

Don’t let the seller try to pull a fast one on you. Unscrupulous sellers may demand that you give up your right to inspect the property. Denying you access to the property should be a huge red flag.

You need to be present on your multifamily property so you can check for vacancies. In addition, if a unit is not rent-ready, you can negotiate a clause that enables you to recoup some of your closing costs.

Beware Fraud in Multifamily Property Investing

Not all sellers are fraudulent, but the temptation to commit fraud increases with the amount of money changing hands. Shady sellers will want to make their property look as favorable as possible to you so that you feel comfortable closing on a deal.

One thing to look out for is a type of fraud called phantom leases. This type of fraud occurs when the property owner claims a unit is occupied, and that a contract exists, but no paying tenant lives in the property.

This shady tactic makes it appear that the property has fewer vacancies and fraudulently increases its attractiveness. Properly accounting for your tenants is why it is so critical for you to inspect your property personally.

Another unethical strategy involves owner contributions. Review bank statements for the property. Anything ending with “000” is a huge red flag. That amount of money is most likely an owner contribution (not rent), indicating a poorly performing property.

Your Multifamily Property Investing Journey

No matter what type of multifamily property you choose to invest in, you need to be protected. Be sure to apply the lessons in multifamily property investing you learned today to protect your assets.

One way to get rid of the risk you will encounter is to form an LLC. Read more here to learn about the benefits of using an LLC as a multifamily home investor.

Before you dive into the world of multifamily property investing, ensure that you have rock-solid protection, financial strategies, and business structures in place. To discover how you can achieve bulletproof asset protection, check out our FREE, 5-part educational series for real estate investors.

Request your access to the Royal Academy Asset Protection Vault today!

Blockchain in Real Estate Unlocking New Potential

Blockchain in real estate has the potential to revolutionize the industry. Historically, real estate transactions could not occur using purely digital means. Overwhelmingly, real estate transactions take place face-to-face between buyers, sellers, and various intermediaries, but blockchain has the potential to change real estate investing as we know it.

An unknown person or group of persons named Satoshi Nakamoto invented blockchain in 2008. The technology is a digital database that computer network nodes share. The database stores information digitally.

A blockchain collects information into groups called "blocks" that hold the data. Once data fills the block, it is closed and linked to the previously used block. This information is recorded and distributed and is uneditable or immutable.

Since it is secure, blockchain works well as the foundation of ledgers with records that are permanently unable to be altered, deleted, or destroyed.

Here are four ways blockchain in real estate may unlock new potential.

1. Profitable Opportunities for Blockchain In Real Estate

When you invest in real estate, you have to engage with real estate agents, lawyers, and mortgage underwriters, each playing their part in the process. But, the emergence of blockchain in real estate may make those players obsolete.

Blockchain platforms can automatize each of their roles by handling real estate listings, legal documents, and payments. Reducing the role of 3rd party intermediaries means buyers and sellers saving money on intermediaries' fees, thus keeping cash in their pocket.

An added benefit of eliminating the need for 3rd parties is that the closing process will go much quicker. The presence of blockchain streamlines the transaction by removing the need for discussion between the middlemen, buyers, and sellers.

2. Secrets of Using Blockchain in Real Estate

Blockchain in real estate saves money through:

Blockchain's status as a decentralized technology gives it trust and security. Everyone in the network has access to the information on the blockchain. That information is transparent and unchangeable.

The fact that the system is decentralized means creates trust within the system. The information is available to everyone on the network. Thus buyers and sellers are confident in their transactions. In addition, everyone having access to the data reduces the chance for fraud.

Transparency in the system cuts down on costs of conducting real estate transactions in other ways too. Blockchain in real estate can automate inspection costs, registration fees, loan fees, and taxes. As a result, those fees can be reduced or eliminated.

3. Build Wealth Easily Using Blockchain in Real Estate

Blockchain enables novel ways of trading real estate via multiple platforms and marketplaces. For instance, Overstock's tZero sold a security token representing fractional ownership in a Coloradoan luxury resort.

In addition, tZero and real estate crowdfunding company NYCE joined together to tokenize $18 million worth of property. Tokenizing real estate makes it like a stock, where buyers purchase "shares" of the property.

Then, investors buy, sell, or exchange real estate assets in online markets similar to stock exchanges.

These platforms counter one of real estate investing's drawbacks, the lack of liquidity in real estate investments.

Real estate transactions typically take time for the sale to conclude, thus making them lack liquidity. Theoretically, blockchain in real estate makes the process faster because:

4. Unlock the Value of Blockchain in Real Estate

Tokenization, or fractional ownership, makes real estate investing flexible by reducing:

In general, real estate investments require a large amount of upfront capital to purchase the property. More expensive and larger purchases required multiple investors to pool their money.

With blockchain in real estate, investors only need access to a marketplace (usually via an app) to buy and sell the tokenized property.

Also, owners of tokenized real estate do not have to manage the property alone, which means the collective owners deal with maintenance and leasing issues.

What Impact Will Blockchain in Real Estate Have on the Future?

It remains uncertain what significant impact the emergence of blockchain in real estate will have on investors. If we watch the finance industry, history tells us that change is imminent and may occur at a dizzying pace. For instance, last year, 13% of Americans invested in cryptocurrency and earned $4 billion.

Whether blockchain and cryptocurrency continue to grow at this meteoric pace, we can assume that the technology is here to stay. That is why it is more critical than ever to ensure that your assets are protected and that you are in a position to take advantage of the potential.

Finally, we recently held a Royal Investing Group Mentoring meeting on this very topic. Listen to the replay on our Royal Investing Wistia Channel.

We encourage readers to take a closer look at other articles we have posted on this topic, such as:

Starting Your Real Estate Investing Journey

Are you currently considering starting a real estate investing journey?

Real estate investing makes people wealthy. Of the 400 richest Americans, 24 made their money on real estate investments. At one time, they were like you--starting as a novice real estate investing professional. Below we have compiled some of the opportunities and challenges you may encounter so that you can hit the ground running.

Here are the things that you should know as a beginner on your real estate investing journey.

The First Step Is Forming A Series LLC

Real estate investing is not without risk. As a result, before you take this monumental step towards securing your financial freedom, you need to have rock-solid legal and financial structures in place. One way to ensure that you have the proper legal and economic systems is to create a Series LLC.

Take a moment to discover how Royal Legal Solutions can protect you with a Series LLC. This business structure will safeguard your investment and livelihood.

Real Estate Investing Journey Fundamentals

You must be financially prepared to start investing in real estate. Read on for six tips to start on a solid foundation.

1. Reduce Your Debt for Maximum Advantage

As a new real estate investor, carrying debt is not ideal. Adding to your current expenses such as student loans, medical bills, or paying for essentials may put you in a challenging position. Ideally, you will want to have some money in savings to use as a safety net.

2. How to Use a Simple Method For Increased Profit

Depending on your investing goals, you will have to decide whether it would be better to purchase with cash or finance your real estate investment.

One benefit of a cash purchase is that you start accruing positive monthly cash flow. On the other hand, financing may generate a higher return on your investment.

For instance, you use cash to buy a property for $100,000. After collecting rent, deducting taxes, and other operating costs, you might see about a 10% return on your investment. A 10% return equates to a cash flow of $10,000 per year.

Another option is to finance the property with a 20% ($20,000) down payment and an annual 3.5% mortgage rate. After paying taxes, operating costs, and additional interest, your earnings will be about $6500 per year.

The cash flow is lower with financing, but the return on investment is much higher at 32.5%

3. The Bottom Line on Mortgages

Primary residence mortgages and rental property mortgages are similar. However, there are some critical differences.

First, people default much more often on rental property loans. That makes sense because a borrower who runs into financial trouble is more likely to focus on their primary home mortgage first.

In general, the additional risk associated with rental property loans results in lenders charging higher interest rates.

Second, rental property mortgages come with more stringent underwriting standards. The lenders closely inspect your credit score, down payment, debt-to-income ratio, and cash on hand.

4. Beware High-Interest Rates

In 2021, the interest rate is relatively low for a conventional mortgage. You should know that the interest rate on investment properties is higher than a traditional loan.

When you decide to become a professional real estate investor, you need to secure a low monthly mortgage payment so that your monthly payment does not disproportionately eat into your profits.

5. Seek Real Opportunities to Generate Wealth

You should set a goal of a 10% return on your investment. When developing your expectations, you need to consider the following factors:

An easy way to estimate your monthly operating expenses is to follow the 50% rule. Simply put, you need to figure that about 50% of your operating income will go to operating expenses.

For instance, if you charge $1500 rent, you should expect to pay $750 in total expenses.

6. Landlord Insurance: Important and Useful Security

It would be best if you protected yourself with landlord insurance. Landlord insurance covers property damage, lost rental income, and liability protection from a tenant or visitor injury on your property.

Profitable Tips to Give You the Edge

Surging Locations Are Key To Success

You will want to avoid making a real estate investment in a dying area that may become a burden to you.

Instead, find a city or location where the population is growing or where a community revitalization plan is in place. A revitalization plan in a community increases the likelihood of employment, living wage jobs, and tenants.

Here are some things to look out for in profitable rental properties:

Each of these factors will likely contribute to a healthy set of potential renters.

Be Shrewd With Rental Properties

Remember, the more expensive the home means higher operating expenses. An excellent place to start your real estate investing is finding a $150,000 to $200,000 home in a growing neighborhood.

You want to follow the Goldilocks Rule, "You are looking for something just right." Don't buy the best house in the neighborhood for sale, nor should you invest in the worst.

Beginners Should Avoid Distressed Properties

Part of finding a home that is just right is avoiding a fixer-upper. You might think you are getting a bargain and can flip a distressed property into a cash cow. If you are only beginning your real estate investing journey, that's a monumentally bad idea.

The price of building materials and a labor shortage make the house flipping industry an expensive and dangerous endeavor--ask Zillow.

The Hidden Benefits of Property Managers

Should you hire a manager or go at it alone?

Using a property manager is a significant consideration for you as an investor. As a landlord, you would be involved with vetting tenants, coordinating maintenance, collecting rents, and resolving disputes. You may prefer to offload those duties to someone else so you can focus on activities that grow your business.

Hiring a property manager can be a tough decision because it will cost a portion of your operating income. The cost can be a considerable chunk of your profits, typically between 8% and 12%.

That said, an experienced property manager might still be worth it to you. Realistically, a property manager eases the burden of being a landlord and brings lots of experience and expertise to the table.

Most property managers:

Consider the following to determine if a property manager is worth the cost: 

Pros v. Cons of Starting a Real Estate Investing Journey

As with any financial decision, you must decide if the benefits outweigh the costs. Real estate investing is a great way to increase your wealth, but it is not without risk.

See the table below to help you decide whether starting a real estate investing journey is right for you.

Real Estate Investing Journey Recap

First, one way to mitigate some of the risks you will encounter in real estate investing involves forming an LLC. Read more to learn about the benefits of using a Series LLC to protect your assets.

Second, make sure your finances are in order before you embark on your real estate investing journey. You can reduce your debt which will help lower your debt-to-income ratio and improve your credit score. A higher credit score means better rates and terms and more cash in your pocket.

Third, find affordable housing in growing areas. Remember, the key is to get affordable housing without buying a money pit that needs a lot of work.

Fourth, consider hiring a property manager--the hassle and time saved might be worth it to you!

Before you decide to begin real estate investing, ensure that you have the appropriate asset protection and business structures in place. To discover how you can achieve bulletproof asset protection, check out our FREE, 5-part educational series for real estate investors. Request your access to the Royal Academy Asset Protection Vault today!

8 Creative Ways to Fund a Real Estate Investing Startup

If you're considering a real estate investing startup, you may be wondering where you can get the capital to fund your first deal. Read below to find out about some of the many options available to you.

1. Conventional Loan

The most frequent type of mortgage is a conventional loan. You make a down payment, and the bank gives you the rest of the money in exchange for a lien on the property secured by a mortgage.

Investors who put down at least a 20% payment are not required to carry private mortgage insurance (PMI). PMI is a form of mortgage insurance that you may be required to pay for if you have a regular loan. PMI protects the lender if you stop making payments on your loan.

Not every real estate investing startup has the capital to go this route for their first deal.

2. Federal Housing Authority Loans

The Federal Housing Authority loan is a government-sponsored loan that encourages individuals to buy houses by allowing borrowers to make a down payment of 3.5%.

Because the FHA assumes some of the financial risks by ensuring the cost of the loan if the borrower fails to make payments, more borrowers can qualify for an FHA loan than a standard loan, and the lender can offer a competitive interest rate.

FHA loans come with some drawbacks for funding your real estate investing startup:

3. Private Lenders

A private lender is a person or entity that uses its own money to finance investments such as real estate and earns interest payments on the loan. Private lenders operate independently of banks or other financial institutions, and they deal directly with the borrower.

Here are some tips for finding private money lenders:

4. Venture Capital

Look for venture capital, aka angel investors. A real estate angel investor may help you finance the purchase of a property.

If an angel investor has faith in the proposed investment property's chances of success, they will supply the money required to finalize the transaction. Sometimes, angel investors will join forces to form angel groups to participate in more significant transactions.

Where can you find real estate angel investors?

Most people who have secured private investor angel capital claim that networking is the most effective method for locating real estate angel investors.

You'll need a polished presentation to approach potential investors. It doesn't matter how excellent you are or how helpful your services are if you can't communicate them effectively through a good pitch. A successful and effective sales pitch demonstrates your enthusiasm, proves that you know what you're doing, and answers questions. Practice your presentation to improve your public speaking and sales skills so that when the opportunity arises, you're prepared.

5. Crowdfunding A Real Estate Investing Startup

Real estate crowdfunding is a relatively new approach to investing in real estate.

Real estate investment platforms (also known as crowdfunding sites) link individual investors with real estate developers and other real estate professionals who want exposure to the sector without dealing with buying, funding, and managing properties.

Here is a list of real estate crowdfunding sites that may be suitable for your needs:

6. Hard Money

Hard money is similar to private capital, but it comes from a hard-money lender instead of a person. The term "hard money" is appropriate because the lenders secure the loan using the hard asset (the property).

Individuals use hard-money, short-term loans to purchase a property they intend on renovating and re-selling.

Typically, you'll get hard money to cover 70–80% of the property's purchase price before rehabilitation. So the lenders must be confident that the property is worth more than the loan and their cost to sell it if you default.

Hard-money lenders usually charge high-interest rates and include other expenses such as loan origination fees.

7. Home Equity Line of Credit (HELOC)

If you already own a house and have some equity tied up in it, you may use a home equity line of credit or HELOC.

Let's assume that you've spent ten years in your primary home paying down the mortgage and reaping the benefits of appreciation.

Your home appraises for $300,000, and your mortgage payoff amount is $150,000. Your equity in the property is $150,00 ($300,00 appraisal - $150,000 mortgage payoff).

You may use a HELOC to borrow against the equity in your home and use the $150,000 to purchase an investment property.

8. Fund Your Real Estate Investing Startup With a Self-Directed IRA

Many of our clients invest in real estate through their Self-Directed IRAs because there are several advantages, tax perks, and little-known secrets that only real estate investors with a Self-Directed IRA can utilize.

Do you want to learn more about Self-Directed IRAs and how they help you earn more from your real estate investment? Read our comprehensive guide on Self-Directed IRAs.

Critical Takeaways For Funding Your Real Estate Investing Startup

Royal Legal Solutions is here to help you along your real estate investing journey.

Real Estate Market Post-Covid Outlook 2022

In this article:

This is a follow-up article to one we published earlier this year: Real Estate Markets & Coronavirus: Construction & Home Buying In a Post-Pandemic World.

The real estate market constantly changes. One factor that exacerbated the volatility of the market was the COVID-19 pandemic. We saw unprecedented changes during the opening month of the pandemic:

The rebound continued, and home sales and prices have hovered around historically high rates.

The trends will not continue in 2022. The world is shifting back to normalcy, and the real estate market has adjusted accordingly. As a real estate investor, your livelihood relies on your foresight and ability to capitalize on the evolving market.

What real estate trends will you expect to see in the final months of 2021 and into 2022? Below we outline what's likely to occur and the influences that lead us to our predictions.

Real Estate Market Influencers

What causes a change in the real estate market?

As a real estate investor, you must know the fundamental principles that drive change in the housing market. Once you understand the principles, you will identify trends and adjust your investment strategy to match those trends.

People have an impact on the real estate market.

The demographic makeup of the United States affects the housing market. You can use demographic data to answer questions like:

For instance, The National Association of Realtors released a trends report that identified Millennials as the largest share of home buyers. Millennials aged 22 to 40 who are in their peak buying years will migrate out of cities in favor of suburban areas. The ability to work from home, growing family sizes, and the desire to have a yard have driven this suburban migration.

Money makes the world go round, and this is true for real estate markets as well.

Housing markets generally reflect the overall health of the economy. Loss of employment displaced people and work from home opportunities contribute to an increasingly mobile population. As a result, short-term rentals exploded in popularity because of their flexibility.

Read more here about how short-term rentals are gaining in popularity and make for excellent real estate investments. If you maximize your profits and cash flow, take a look at our strategy guide for real estate investors.

Interest Rates impact a buyer's ability to purchase a home.

Bankrate's current mortgage interest rates as of October 20, 2021, are:

The increase represents a three-month upward trend from July when rates were 3.04%.

As mortgage interest rates increase, it becomes more expensive to secure a mortgage which lowers demand and prices in the housing market.

On the contrary, it is cheaper to get a mortgage when mortgage rates drop, which increases demand and price in the real estate market.

The Mortgage Bankers Association forecasts a rate increase to 4% for a 30-year fixed mortgage rate in 2022. However, even with a higher interest rate, the MBA predicts the growth of mortgages to buy a home.

Legislation influences the real estate market.

The government enacts policies that have short-term and long-term ripples in the housing market. Either state or federal governments may provide homebuyers with:

Be aware of these mortgage policies to stay up to date with the factors impacting the market.

A central government policy that will affect the housing market in 2022 is the end of the moratorium on evictions. On June 24, the Biden administration extended the moratorium until July 31, 2021.

People had until September 30, 2021, to request a forbearance. For some mortgage holders, there is an additional three months of protection. For now, the only properties moving into foreclosure are vacant or abandoned properties. But that is set to change.

Why Does This Matter To You As A Real Estate Investor?

If a foreclosure started this minute, it would not resolve until mid-2022. There is a backlog of foreclosure homes that needs addressing before a current foreclosure can process.

As a result, there will be a wave of foreclosed single-family homes well into 2022. The foreclosures create a buying opportunity in local housing markets if you can secure funding or have cash on hand to buy once the backlogged inventory enters the market.

Are you ready to take control of your financial future with real estate investing? If so, read our beginner's guide to real estate investing for incredible tips.

Three Real Estate Market Predictions For 2022

  1. Single-family homes will appreciate because of the principle of supply and demand.
    1. There is a shortage of 5.2 million new homes in the US and indicating a low supply.
    2. Homes perform multiple duties: office, home, gym.
    3. There is increased demand as Millennials are in their prime home-buying years.
  2. Buying a home will be difficult.
    1. Construction supply chain issues are contributing to an affordable housing shortage.
    2. New construction homes cost, on average, $298,432.
    3. This price puts new construction homes out of reach for most buyers.
    4. The mortgage rate will increase to 4%, making it more expensive to buy a home.
  3. More people will have to live in rentals.
    1. There is a housing shortage.
    2. Homes are more expensive and unaffordable.
    3. The trend towards renting is growing and will continue to grow.
    4. Rents are increasing and will continue to increase.

Key Takeaways

Although the housing market constantly changes, identifying real estate trends maximizes your investment earning potential. Currently, the market favors sellers--demand is high, and prices for homes are even higher. Millennials are moving out of cities and into suburbs, looking for a house and office combo that suits their remote working needs. Your knowledge of these trends will result in smarter investment decisions and a higher return on investment.

Royal Legal Solutions keeps our clients informed of real estate investing trends. In addition to providing valuable insights for structuring a real estate investing business, we guide clients through the process of growing it in a scalable and easily manageable way. To find out if you could benefit from our services, take our financial freedom quiz

Offshore Holdings Ethics Debate Sparked Following Leak of Pandora Papers

Beginning on October 3rd, 2021, a document dump dubbed the Pandora Papers was released involving nearly 12 million pieces of evidence by the International Consortium of Investigative Journalists (ICIJ). More than 600 journalists from 150 news outlets contributed to the investigation. Information contained therein exposed a global network of powerful financial interests and raised questions about the legitimacy of shell companies, offshore holdings, and anonymous ownership. 

While this wasn't exactly a bombshell revelation, it verified what many people had already come to realize. Yet, the Pandora Papers scandal has revealed something more significant than the known corruption happening in our world. It has brought to light the toxic attitude towards the general public held by those in the highest positions of power and influence. The publicity that the story has garnered has many investors wondering how they may be impacted by what could very likely be the criminal dealings of others.

As summarized by the ICIJ, "The Pandora Papers reveal the inner workings of a shadow economy that benefits the wealthy and well-connected at the expense of everyone else."

Highlights of Findings in the Pandora Papers

Records reveal covert dealings that implicate: 

Read the full exposé here.

Offshore Holdings and Their Potential Negative Outcomes

Loopholes in law enable people to legally avoid a portion of their taxes by moving their money, assets, or businesses to tax havens. Using a tax haven brings into question several ethical concerns. 

While it is not illegal to hold assets offshore and anonymously, the risk of abuse is an indication that oversight and regulation are necessary. There have been repeated calls for governments to make it harder to avoid tax or hide assets, particularly following previous leaks such as the Panama Papers from years ago.

It's no surprise that existing legislation has had little impact considering that those prominently taking advantage of offshore holdings are often the very people responsible for oversight.

Whose Names Did the Pandora Papers Reveal?

Among the extensive list of those implicated in the Pandora Papers includes the following political leaders and notable influencers:

View the complete list here.

Legitimate Reasons for Creating Offshore Holdings

It would be foolish to think that anyone who has offshore holdings is involved in nefarious activities. There are several legitimate reasons why a person may want to hold money and assets in different countries.

Scenario #1: Asset Protection Benefits

While you can accomplish asset protection goals with domestic tools, offshore banking offers you the luxury of simply moving your cash from a position of vulnerability and to one of security. In this case, you would be moving money overseas into a different jurisdiction rather than into an entity structure.

Scenario #2: Guarding Against Unstable Governments

Here you would be dealing with a sovereign nation with its laws, each with advantages and drawbacks. Those nations with reputations for being tax havens have implemented legislation to prevent blatant abuse of their banking systems. Such laws are generally designed as a prevention to money laundering and should not pose problems for investors.

The above scenarios illustrate valid reasons for having offshore holdings and should not be considered an exhaustive list. 

What Impact Will the Pandora Papers Have on the Future?

It remains uncertain what significant impact the Pandora Papers will have on those involved. History has shown that political fallout is minimal, if existing at all, and slow to occur. For example, the similar Panama Papers from 2016 only resulted in the conviction of a single US taxpayer so far.

Some news outlets speculate that the US will take a long hard look at its offshore banking regulations to ensure transparency. In turn, new reporting requirements are likely to be imposed on attorneys, financial advisors, and CPAs. 

Pandora Papers aside, we can be sure that changes in reporting are on the horizon. Sweeping tax reforms proposed by the Biden Administration would require all financial institutions to monitor deposits and withdrawals in accounts that have balances above $600 at any given time.

Whether the new tax proposal is adopted or not, we can deduce that tax reforms are a high priority for the current administration. That is why it is more critical than ever to ensure that your assets are protected and that your business structures are legally compliant.

How Are the Structures Used by Royal Legal Solutions Different?

Royal Legal Solutions allows investors to use offshore investing and tax havens to minimize liabilities in such a way that:

We encourage readers to take a closer look at other articles we have posted on this topic, such as:

Our current clients benefit from regular consultations with our legal and tax teams. For anyone else with questions or concerns about your holdings, we invite you to reach out.