How Do I Collect Rent From Renters That Have Moved Out?

You have to collect rent that is past due. That's not fun, but it's sometimes necessary. This whole process can be a sticky situation for any real estate investor. 

Maybe you disagreed with your tenant over their excessively late rent. Or maybe they broke the lease and added another pet without your knowledge. Maybe their kids dropped a firecracker in the toilet, and it exploded. 

For whatever reason, either you had to evict, or your tenant packed up and moved out, denying you the ability to collect back rent.  

That's not an ideal situation. It's an unpleasant annoyance that a real estate investor contends with as part of doing business. But it doesn't have to be. 

In this article, we'll cover three practical and actionable strategies that enable you to collect back rent for the services you rendered. 

Collect Back Rent From The Security Deposit

You can't control that your tenants violated the terms of their lease, broke it, and left. You can control how you respond to their actions.

Suppose your tenant left without paying rent. Their violation is a situation in which they surrender the security deposit to you. Being behind on rent or breaking the lease is probably enough for you to collect back rent. 

Check with your real estate attorney to be safe. You never know when your absent tenant might demand the security deposit back. 

Use The Courts To Collect Back Rent

Even if your tenant left, they still have the responsibility to fulfill the terms of the lease agreement. First, you should try communicating with the tenant to explain their financial obligations. That doesn't always work out.

A lease is a legally binding contract. In other words, your tenant signed a legally binding contract stipulating that they would pay rent to live on your property. Once they violate the terms of the agreement, you have legal recourse in the form of your state's small claims court system

How Does Small Claims Court Help Me Collect Back Rent?

Small claims court is a relatively cheap and time-efficient way to collect back rent. The process differs from state to state, but in general: 

You'll get an enforceable judgment if you win in small claims court. With that enforceable judgment, you can collect back rent from your tenant via:

Use Other Legal Remedies to Collect Back Rent

Another excellent, straightforward legal remedy to collect back rent is to sue in assumpsit. 

When you sue your former tenant in assumpsit, all you're doing is asking the court to get them to pay what they owe you. That's it. Some states don't believe you're entitled to just back rent but also interest on the unpaid rent. We're fans of such landlord-friendly statutes.

It's always a good idea to check local laws and retain counsel if you plan to go to court. The court may be a worthwhile endeavor for large enough sums that the tenant could plausibly pay. Others may prefer to negotiate directly, arbitrate the dispute, or seek small claims damages as alternatives.

When Is Suing Worth it?

Your mileage with success in court will vary. The most significant considerations are their likelihood of success and the value of their own time. State law largely determines the former, how much you can recover, and in what venue.

The second consideration--about the value of your time and how you wish to spend it--is far more personal. Lawsuits are lengthy, often painful affairs. Most people will go well out of their way to avoid one. The reward and chances of victory need to be sufficiently high for the stress to be worth the trouble for most of us.

That said, court remedies exist for a reason. They're there when all your other, more straightforward solutions to your problems fail. When diplomacy, asking nicely, raising your voice, lowering your voice, offering to solve it between yourselves, offering to "release" from or any won't do anything. 

If you've lost money from nonpayment, you can be made whole financially. Just understand that with anything court-related, there are never any guarantees.

Key Takeaways

It's never fun to have to collect back rent. It's time-consuming for you and takes you away from running your business. Unfortunately, collecting back rent is a necessity sometimes.

You have several options to collect back rent that we covered. You can use each or all of the following strategies to get your money:

Royal Legal Solutions helps real estate investors protect their assets. Secure your financial future, and register for your FREE Royal Investing Group Mentoring Wednesdays at 12:30 pm EST! 

Why Millennial Homeownership Is At A Record Low: What Real Estate Investors Should Know

Millennial homeownership is historically low. According to the most recent Census data, about 49% of millennials own homes. It's become a national pastime or running gag to blame the millennial generation for killing different industry types. Or they are chalking up the low millennial homeownership to avocado toast and overpriced pumpkin spiced lattes. 

In this article, we give an overview of the struggles that millennials face. Also, we cover how you, as a real estate investor, can benefit from understanding their plight. 

Millennial Homeownership Is Historically Low

Millennials want to own homes but can't afford the price tag. More than 75% of millennials still view homeownership as part of the American Dream. But, a growing number (more than 20%) believe they will never own a home and will be eternal renters. 

Millennial homeownership is much lower than the rate of 26-41-year-olds of the past. There are reasons beyond any person's control for that. 

Several factors characterize the low rates of millennial homeownership:

All these factors combined are squeezing millennials as they enter the financial prime of their lives. But the issues are forcing many millennials to delay marriage, kids, and homeownership. 

First-time home buyers are in a disadvantageous position; home prices are to the moon; mortgage rates are spiking. Low wages and debt make wealth generation more difficult. These realities form the perfect storm for low millennial homeownership rates. 

America has become a much more difficult place to secure an affordable mortgage. "First homes" (single-family homes, even multis under $250,000) make up less of the market than ever before.

After the 2008 crash, real estate investors scooped up hot deals on all kinds of properties, enjoying a single-family budget property free-for-all. By now, most investors have upgraded these homes, upsold them, or maintained them to be competitive in today's market.

That means the homes are worth more than appreciation alone. Yet, it's the same asset investors got cheap after the crash. Millennial tenants are now more likely to become lifelong tenants instead of purchasing their own homes. It's bleeding down into Generation Z too. They're the generation with the most people in crisis. As a whole, they're the generation struggling to transition from renters to buyers. 

Yesteryear's Stats Don't Apply to Millennials: What REIs Need to Know About This Population

Even assuming 18-35 years olds are still the "homebuying age group" is foolish and inaccurate. Ask any 18-year-old how likely they are to own a home soon. Seriously. Any college student, even. The American Dream of homeownership isn't dead, but it's on life support.  

Millennials faced a different world: 

These factors present difficulties and challenges that prevent millennial homeownership.

Renting is often tricky. Millennials are more likely to move in with their parents than any other generation. Many in their 20s and 30s move home under financial duress, while others lack that option and live with housing insecurity.

These problems are natural barriers to home ownership. We haven't even delved into this generation's many cultural crises. Everything from later marriage age to the ongoing opioid crisis that continues to rage through mid-2019 can affect how this population rents and buys.

Why Millennial Homeownership Trends Matter for Real Estate Investors

Most investors count Millennials among their tenants or desired demographic. Single-family investors and those starter homeowners can stand to benefit in a seller's market. While the housing market has cooled somewhat, there are still ways to benefit from understanding your tenants. 

Millennials as tenants

As millennials learn that homeownership is just one path to building wealth, their preference for renting may align with your investment goals. Attracting and keeping these tenants is essential. 

You want consistent rental income, spend less time preparing a unit for rent, and avoid uncertainty with a new tenant. To keep your millennial tenants, consider: 

In general, Millennials are well-educated and tech-driven. For them, home prices, supply chain issues, and low cash reserves have made renting a certainty for the foreseeable future. Typically, a well-educated, employed tenant is an ideal tenant for you to have. 

Millennial homeownership as an exit strategy for you 

Millennials want to buy a home. That desire may provide you with an exit strategy. It's not all doom and gloom. A NAR report from March 2022 shows that millennials make up 43% of home buyers. Instead of McMansions, they are looking for good deals on properties and efficient use of indoor and outdoor space. 

If you have a property worth under $250,000, you're sitting on a high-demand property. Millennial buyers are competing, and investors can play fair while profiting.

Key Takeaways

Millennials sometimes turn to real estate investment to "escape" debt or employment barriers. Knowing this group's challenges helps you relate (or understand the real estate issues if you're a Millennial) to life and business. All real estate investors benefit from understanding their Millennial tenants, partners, and fellow investors' struggles. 

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

How Renting Can Be Profitable For Astute Beginner Real Estate Investors

Starting in real estate isn’t easy. It isn’t easy. The challenge is why most beginner real estate investors struggle to build their business regardless of the blood, sweat, and tears they invest. 

Sound like you? Good news, you’re in precisely the right place! 

This article doesn’t list out a million mindless strategies. 

What we’ll show you instead are targeted strategies that work. These strategies are easy to replicate for your real estate journey. These strategies help you grab onto the bottom rung of the property ladder and climb your way to financial freedom. 

Surprising Path To Financial Freedom For Beginner Real Estate Investors

Renting is a solid option for beginner real estate investors. I know it seems counterintuitive, but let me explain. 

Should I rent, or should I buy a home? That question is especially salient now with interest rate hikes and inflation. Despite the projected drop in home prices, interest and inflation may make purchasing your first property too expensive. In other words, beginner real estate investors find it tough to get on the property ladder. Tough, but not impossible. 

The reality is that when you buy a home, you take on debt. Taking on debt is always a risky proposition, no matter how secure it seems. Renting enables you to mitigate that risk. 

I want to disabuse you of the notion that renting means throwing your money down the drain. That’s a lie. In exchange for rent, you get a place to live. No matter where you live, it’s going to cost money.

Indeed, you aren’t building equity in a home with rent. The thing is, not all that money goes to building equity in the house. For instance, mortgage interest eats up a large chunk of the cash a homeowner pays in the early life of the loan. 

Also, there are many associated costs that a property owner incurs that a renter never sees. A few of those costs include: 

The landlord typically covers most or all of these expenses when you rent. That means you have an opportunity to keep more cash in your pocket. As you build a nest egg, you should look into the following so that you can get on the property ladder as a beginner real estate investor: 

The ultimate goal is to transition from renting to owning a property.

How Do I Start As A Beginner Real Estate Investor?

To start as a beginner real estate investor, you must plan. Some of the more immediate options include:

Another way to invest in real estate is through a Federal House Authority Loan

An FHA loan is typically for home buyers who do not meet the requirement of a traditional loan. These loans have low credit scores and down payment requirements. Also, FHA loans are for buyers who intend to use a property as their primary residence, also called the occupancy requirement. 

If you decide to use an FHA loan, you must possess the home within 60 days and use it as a principal residence for one year. 

As with all things, some exceptions apply. You can use an FHA loan to help you start your real estate investing business by buying a multifamily property.

Here is how it works. The FHA allows property owners to buy homes with up to four units (fourplex). The only rule is that the owner has to live in one of the units as their primary residence. That way, the owner can rent the other three units for income. 

Here is an illustration of how that might work: 

Suppose you use an FHA loan to buy a multifamily home for $250,000. The mortgage for that home will be about $2,000 per month. You have to occupy one unit, but three units are available. 

The average renter pays about $1,330 per month in rent. That means you could potentially live in your unit and charge three other renters $1,330 per month (or more, depending on market forces). In this case, you will earn $3,990 per month, have a place to stay, and a way to progress up the property ladder as a beginner real estate investor. 

No matter what step of this process, you need to protect yourself. Royal Legal Solutions offers expert advice and proven strategies to help secure and keep your assets safe. Take our FREE 5-minute quiz to get powerful wealth-building insights. 

Key Takeaways 

Renting is not throwing your money away. Remember, you get a place to live and don’t have to deal with the pesky taxes and costs associated with home ownership. For beginner real estate investors, renting is an opportunity to save money and reduce your debt. 

While renting, you can consider subletting out (if you’re allowed) or dabbling with REITs to increase your cash flow. Ultimately, you will want to transition to your first property. An excellent way to do that is with an FHA home loan, provided that you meet the requirements. 

Want to learn more about how to get started in real estate investing? Register for FREE Royal Investing Group Mentoring Wednesdays at 12:30 pm EST.

Residential Assisted Living Facility Investing

Why would you be interested in residential assisted living facility investing when you could stick with single-family and multifamily homes?

Residential assisted living facilities have the potential to provide a greater return on investment than other types of properties. Also, the country is aging and needs a place to live its golden years. This type of investing should be pretty lucrative in the coming years. 

Below you will find a simplistic guide that explains the fundamentals of this emerging investment opportunity. Keep reading to see if residential assisted living facilities are a promising addition to your portfolio. 

Check out our video session with residential assisted living facility investment expert Isabelle Guarino Smith. 

What Is Residential Assisted Living? 

Residential assisted living is a group home for seniors that helps the residents with their daily lives. The help runs the gamut from hygiene, eating, and physical therapy. These are typically in single-family home neighborhoods with homes made accessible for seniors.

These are not nursing homes, nor is it independent living. It's somewhere in between.

Is Residential Assisted Living Facility Investing Feasible?

Yes, residential assisted living facilities are a reliable investment. The facilities are a reliable investment because of demographics. Like Bob Dylan says, "the times they are a-changin'."  

Let me show you how times are changing. To put a finer point on it, let me show you how the US is getting older. There are more than 73 million baby boomers in the United States the age 70 or older. By 2030, all boomers will be at least 65. In general, US citizens are living longer, and in 2034 there will be more older adults than under 18 children for the first time in history. 

More elderly mean increased demand for certain goods and services. One of those goods and services might be a residential assisted living facility. You can take advantage of this inevitable shift in the country's demographics by investing in a facility. After all, aging boomers will need a place to stay.

As with all real estate investments, you want to be protected. Please look at how we provide asset protection strategies in all 50 states for all asset classes. 

Debunking 7 Common Residential Assisted Living Misconceptions

If you're anything like me, you hear "assisted living facilities" and think of bed sores and elder abuse. It doesn't have to be like that, though. Here is a list of 7 common misconceptions. 

#1 You have to work at the home

The facility is an investment that is similar to your other assets. But it's also a business. As with any business, you will need to dedicate time to the front end to become operational. One aspect of this involves hiring staff. You do not have to work at the home.

#2 Liability insurance is expensive

Insurance does cost money. However, if you shop around, you'll be able to find the appropriate amount of coverage for the right price.

#3 Seniors all died from COVID

Seniors did not all die from COVID. While they were the most at risk and constituted the most deaths, many older people still need a place to retain their dignity and call home. Also, aging boomers are entering this market, so there will be plenty of residents on the horizon.

#4 Good employees are hard to find

Good employees might be hard to find for huge nursing homes. Those types of homes have a 50 to 1 resident-to-employee ratio. With that many people, it's hard for anyone to give the required level of care and attention. In contrast, a residential assisted living facility has a much lower resident caregiver ratio, meaning better care.

#5 You don't need medical experience

You didn't need to be a contractor or real estate agent to invest in real estate. It might have helped, but it wasn't a requirement. Likewise, you don't need to have medical experience. It might help, but it is not a requirement. 

#6 HOA's can't prevent you from creating one

The Federal Fair Housing Act outweighs and supersedes any complaints. 

#7 Seniors can't afford the service

Since the pandemic began, boomers have a combined wealth of $71 trillion. This means they have the money to spend on dignified housing for the final stretch of their lives. 

3 Simple Routes To Investing

Here are the three ways to invest in residential assisted living: 

  1. own the real estate and lease it to an operator
  2. own the real estate and operate the business
  3. private lender or partner

#1 If you own the real estate and lease it to an operator, you are a preferred real estate provider. That's important for you as a real estate investor because you potentially:

#2 You own the real estate and operate the business. Owning the real estate and owning the company might be profitable. Here's why–the average cost of care in an assisted living facility is $4,500 per month. There are no standard configurations for a residential assisted living facility. Still, anywhere from 6-16 people can stay on your property.

#3 You act as a private lender or partner. Maybe you have cash, and you invest in someone who is going to be an owner and operator of the business. 

Key Takeaways

Residential assisted living facility investing might be a solid investing strategy for you. Here are the key takeaways from the discussion today: 

Are you ready to speak with an expert? Learn about our comprehensive solutions you can use to achieve financial freedom, reclaim your time, protect your assets, and build your legacy. Book a FREE discovery call now.

Due Diligence: 6 Tips for Notes Deal Vetting

Due diligence involves investigating, auditing, or reviewing circumstances and facts around a deal. As a competent real estate investor, you’ll want to conduct due diligence so that you have a clear understanding of the financial ramifications of any agreement. 

Doing your due diligence is especially important when you consider note deals. Suppose you want to invest in first-position non-performing notes backed by real estate. Non-performing notes are when the borrower has stopped paying. You want to ensure that the investment you are committing to is fiscally sound, right? 

After all, notes are an asset class with growth potential. Like all investments, note deals carry some risk. Royal Legal Solution mitigates the risk to your property with our asset protection strategies in all 50 states, for all asset classes–including notes. 

This article outlines six factors you should consider when vetting your note deal. Continue reading to get a primer on due diligence best practices.

Want to watch a video about the information in this article? Watch the replay in our Royal Investing Group Mentoring Session

#1 Property Valuation

Property valuation is essential when looking at what notes to buy. You can analyze the property using online research tools. The next step is to have someone who is boots on the ground do an inspection and value the home for you as well. 

The property valuation is the basis for your discounted purchase price. You won’t necessarily pay the unpaid principal balance. 

#2 Verify The Property 

Sometimes note investors can get into a sticky situation by only doing online searches. You need to follow up by sending someone to see the lot and verify that a structure is on the lot. 

If you don’t do your due diligence here, you might buy a note and end up with an empty lot. That’s a devastating oversight!

Here are the things that you will want to get verified: 

If you choose to get into note investing, you’ll want a good return on your investment. Reasonable due diligence maximizes your profit and minimizes your risk. 

#3 Inspect The Asset

The bank might tell you that the property is a single-family home. What might happen is this–it might be a mobile home or a condo. Those types of structures might not be in your plan. Trust but verify because the banks get it wrong sometimes. 

#4 Check For Unpaid Taxes

Make sure that you know how much delinquent property taxes are. When someone stops paying a mortgage, they usually stop paying their taxes. In this case, you will want to know when and if a tax sale is scheduled. 

Steps to take when checking for unpaid taxes: 

#5 Research Liens Or Judgements

You will want to verify any liens, judgments, or junior lien holders. Knowing about other lien holders is vital if you accept a deed instead of foreclosure. 

For instance, suppose you receive the deed as payment in full for the loan from the borrower. Even though you are in the first position, someone with a lien, HELOC, or judgment against the property will move ahead of you. That means you become responsible for those liens. That could be costly.

#6 Follow Chain Of Ownership

You have to follow the chain of ownership with notes. Make sure you are intimately familiar with where the loan originated and all the subsequent note holders.

The county courthouse will have records of all assignments of mortgages for each transfer of the mortgage to subsequent note holders. These records will be in the correct order, so you should be able to follow the chain of ownership. 

Due Diligence Key Takeaways

Suppose you decide to get into note investing. Don’t you want a risk-free return on your investment? You’re in luck because doing due diligence maximizes your profit and minimizes your risk. Here are six critical factors in doing your due diligence when vetting notes: 

Are you ready to speak with an expert? Learn about our comprehensive solutions you can use to achieve financial freedom, reclaim your time, protect your assets, and build your legacy. Book a FREE discovery call now.

Note Investing: You Become the Bank

What options are available when inventory is low and priced too high to be profitable? You become the bank with note investing!

For a real estate investor, note investing might be an excellent option for you. With this type of real estate investment, you won’t have to manage property or deal with other types of transactions actively. It’s passive income. 

As with any asset, you need asset protection. We provide asset protection strategies in all 50 states for all asset classes, including real estate notes. Take a FREE 5-minute quiz to see how we can help. 

Use this guide and our Royal Investor Group Mentoring Session to start you down the right path. Are you in the market for an investment that provides passive income without the dregs of property ownership? If so, note investing might be the answer to your prayers. Keep reading to evaluate the feasibility of this investment for your financial situation.

Note Investing Explained

Note investing is when you purchase real estate notes. The idea is that you change the terms of the note by reselling it, or you foreclose on the property to generate cash flow. 

What’s A Real Estate Note?

Simply put, the real estate note is two things. The first is the promise to pay or a promissory note. The second is a lien. A real estate note is the same thing as your mortgage note. 

In other words, it’s a written promise to pay money plus interest for a predetermined time. The mortgage places a lien on the title of real property to secure the written contract. If you default on your mortgage, the property may go into foreclosure. Defaults and foreclosures provide unique opportunities for real estate investors. 

When you start note investing, you know the difference between performing and non-performing notes:

Why Should I Invest In Performing Notes?

Performing notes provide passive income. There is less risk in note investing with performing notes because the borrowers are keeping up with their mortgage. That means they make on-time payments. Those on-time payments provide a source of relatively reliable passive income. 

Why Should I Invest In Non-Performing Notes?

Note investing has several advantages. They are: 

Cheaper: The non-performing real estate is secured by the equity in the property. If the borrower defaults, the real estate is more affordable to buy. You can purchase these notes from .38 to .62 on the dollar. 

Income potential: Another advantage is that depending on how you resolve the note, you could experience an excellent return on investment or create ongoing passive income. 

Secured by real property: Inflation. Stagnant wages. Whatever the reason, people are increasingly defaulting on their homes at a higher rate. For instance, there has been a 24% increase in foreclosures post-Covid indicates. Those homes represent a tremendous opportunity in this note investing space.

How Do I Get Started? 

You will need to find someone who will sell real estate notes to you. Typically, you will be able to buy notes from banks, other investors, note investment funds, and real estate brokers. 

Risks of Note Investing

No investment is without risk. Before making any financial decision, you should consult a qualified financial advisor or attorney to decide what’s right for you. There are a few perils associated with note investing:

Rewards of Note Investing

Note investing has several rewards if you decide it’s the right investment strategy for you. Number one is it might make you a lot of money if you do it right. 

The first step, you have always got to cover your assets. You don’t want your assets exposed, so protect them. 

After that crucial step, you could potentially enjoy the benefits, including: 

What Does It Mean To Become The Bank With Note Investing?

When you buy a note, you become the bank. As the bank, you have complete control over your exit strategy. As a real estate investor, that will bring some peace of mind. 

Key Takeaways

There are several things to consider when deciding whether note investing is right for you. Here are the primary takeaways from this guide:

Are you ready to speak with an expert? Learn about our comprehensive solutions you can use to achieve financial freedom, reclaim your time, protect your assets, and build your legacy. Book a FREE discovery call now.

Pro Tips to Acquire and Manage Real Estate Remotely

Why would you want to take the time and effort to acquire and manage real estate remotely?

Due to the demand, legislation, or tax laws, investing in your local real estate market is not always feasible. Remote real estate investing provides some distinct advantages that we discuss below. These advantages may provide the right mix of value and autonomy that you desire as you balance your investment strategy.

We featured this topic of discussion in a recent session of Royal Investing Group Mentoring. This session featured guest host Chris Weiler, who spoke in-depth about his experience investing in real estate opportunities outside of his immediate geographic location. Watch the Royal Investing replay.

Why Invest in Real Estate Remotely?

When you invest in real estate remotely, vast swaths of markets become available. You are no longer looking at markets in your state but all 50 states. In some cases, you may be looking globally for deals. That means you will have more chances to find properties with favorable terms.

Suppose you live in California. Typically, an investment property in California will cost more than one in the South or the Midwest. For instance, California's median sales price is $505,000; in Ohio, the median sales price for a home is $145,700.

In reality, people in Ohio also have to find a place to live. If they can't buy, they will need to rent. As a California resident, you may want to stay local and purchase a single-family home for the median sales prices.

Or it might be financially sound to shift your investment to Ohio, where you could purchase three homes for the less. Then you could convert each of those homes into rental properties.

An unintended benefit of remote investing is that it's more passive. You won't be there to contribute your sweat equity. Instead, you will be able to find better and more profitable uses for your time–like finding more deals.

How Do I Find Deals With Remote Investing?

Here's the thing, you don't find the deals. To successfully invest and manage real estate remotely, you must establish a strong network of trusted partners. Networking is a critical step in increasing your net worth.

Partners include, but are not limited to:

Your partners should have skills and core competencies that you can leverage. Also, offering your partners an incentive to work with you is essential. It can't be a one-way relationship that only benefits you.

Another way that you could potentially find real estate opportunities is to look where you vacation. Investing where you enjoy visiting can be advantageous because:

How Do I Track My Remote Investments?

All the day-to-day considerations are the responsibility of your partners. In other words, they are your boots on the ground. Preferably, you will provide strategic decisions and capital while your local network will handle the operational decisions.

Delegating requires a lot of trust and communication, which is why having a solid network is crucial to your success.

One thing that is non-negotiable for your success is following accounting and bookkeeping best practices. At a minimum, you and your network will need accounting practices to know:

Detailed and dedicated bookkeeping provides an accurate assessment of your ROI. It enables you to make the best decisions for your future. Since you are working remotely, you will need to do online accounting and bookkeeping. It's just more convenient.

Here is a list of accounting and bookkeeping products that may work for you:

How Do I Split Profits?

When it's time to decide how to split the profits, everything is negotiable. There is so much fluidity because every situation is unique to you and your partner. A potential way to divide the profits is to structure the partnership based on each party's value to the deal.

One key fundamental is to get everything in an ironclad contract. A contract provides clear expectations about how the business should operate, who is responsible for what, and how you split profits. As an added protection, you might consider including an anti-embezzlement clause.

Can I Scale Investing In Real Estate Remotely?

Scaling is entirely possible, but you have to make sure you delegate responsibly and appropriately. It's much easier to scale with a reliable and solid network.

What Are My Exit Strategies For Remote Investing?

In remote real estate investing, you exchange control for an opportunity. Protect yourself by being flexible and having multiple outs. You may decide to have plans to do the following:

Your decisions will rely on the market conditions and your discussions with your network of trusted professionals.

Real Estate Investing Remotely Sounds Good. What Are Some Drawbacks?

Some things may give you pause. You may not have the risk tolerance that remote real estate investing requires. After all, you may experience fear from being so far away to be on-site and control what's happening.

Another thing is that you have to be reliant on others and trust them to do their job right. That's tough because finding the right team can be challenging. When you find the right people, you still have to incentivize and grow the team.

Key Takeaways

If you have an internet connection, risk tolerance, and an ability to delegate, remote real estate investing might be right for you. To be successful, you will want to:

For more education about opportunities for real estate investors, join our Royal Investing Group Mentoring on Wednesdays at 12:30 p.m. EST. We meet weekly for an hour as a large group to learn, share, and collaborate on relevant topics in a fun and friendly format.

Multi-Family Real Estate Investing Benefits and Nuances

Are you ready to move beyond single-family home investments? If this sounds like you, multi-family real estate might be a good investment.

Before you invest in any asset, you must consider the pros and cons of each move. Also, you need to know what you specifically want as an investor. For each decision you make, there will be a variety of outcomes.

Here is a list of 4 multi-family real estate investment tips and tricks.

These tips may be just the thing you need to make an addition to or transition from single-family home investments. You'll enjoy these tips if you're ready to move in a new direction on your real estate journey.

Tip #1: Passive Income: Sensational Value!

A multi-family is any residential property that contains more than one housing unit. These properties include, but are not limited to:

With more units come more tenants and more rent. Keep in mind that in the United States, the average rent is $1,326 per month.

For a real estate investor, that means more sources of cash flow.

Maybe you don't want to deal with finding deals, securing financing, and hiring a property manager. You still want to invest in multi-family real estate. A real estate syndication might be best for you.

With syndication, you pool your money with other investors and invest in a property. You get to spread the risk and responsibility among multiple investors.

Finally, multi-family real estate investing is an excellent way to create a diverse portfolio. When you diversify, you collect a variety of asset classes. A combination of assets reduces your risk. Any single asset class's performance doesn't tank the rest of your portfolio.

Tip #2: Professional And Reliable Team Fundamentals

When you invest in multi-family real estate, you need a reliable team to help you.

Multi-family is different from single-family home investments. It's both real estate and a business based on net operating income. So part of your team needs to be a mentor who has experience in the industry of multi-family real estate. Also, a mentor can find the sweetest deals and craft a safe exit strategy.

Next, you'll need a person to manage the asset. Your management might be a local person who can handle the property's day-to-day operations. For instance, you might employ a property manager who oversees the maintenance, finding and managing tenants, and emergency repairs.

Generally, people struggle with multi-family real estate investments when they mismanage the property. This type of investment takes a team and reliable partners.

It helps to increase your net worth when building your team. Part of growing your net worth is networking. You enter into a mutually beneficial relationship with someone who shares your vision.

Tip #3: Colossal Profits From Scaling

Economies of scale provide advantages when the cost of business spreads over a large number of units. With multi-family real estate, math and the law of averages works in your favor. Keep this in mind; people need a place to live regardless of market conditions.

You might have started with a single-family home and had success with your tenant. That's the limitation of your single-family home; you will only ever have one tenant. You can't scale that rental income.

With a multi-family property, you can scale exponentially. When you have more units in a property, you get more benefits, including:

Tip# 4: No Compromise On Due Diligence

When looking for the right place to buy multi-family real estate, you must do your diligence. At a minimum, you need to research:

The population needs to be growing. Typically, people want to live in a safe area of town, so you have to know the crime statistics for your investment area.

The economy needs to be both strong and diverse. For instance, Killeen, TX, is home to an Army base called Ft. Hood. The entire economy revolves around the base. In most rental properties, you will find a soldier renting. The thing about soldiers is that they move or get deployed. When that happens, you are subject to the Servicemembers Civil Relief Act.

Find areas where the economy and renters are not homogeneous to avoid being stuck with empty units in the case of deployment or an economic downturn.

Good school districts are attractive to tenants with children. 32% of renting households have children, so you should keep that large chunk of the market in mind when doing your due diligence and research.

Key Takeaways

If you are ready to change your investment strategy or are looking for additional investment opportunities investing in multi-family real estate might be for you.

When you invest in multi-family real estate, you should:

For more education about opportunities for real estate investors, join our Royal Investing Group Mentoring on Wednesdays at 12:30 p.m. EST. We meet weekly for an hour as a large group to learn, share, and collaborate on relevant topics in a fun and friendly format.

First-Time Homebuyer Tax Credit: Can You Qualify?

Are you a first-time homebuyer? Good news, there are some excellent tax benefits for you!

You should know about a tax credit that puts more money in your pocket. The first-time homebuyer tax credit currently provides a refundable credit equal to 10% of the purchase price. The maximum tax credit is $8,000.

In 2021, President Biden and the 117th Congress submitted H.R. 2863-First-Time Homebuyer Act of 2021, which increases the tax credit to $15,000. Congress referred the bill to the House Ways and Means Committee, where it still sits. 

Read on to learn more about: 

First Time Homebuyer Rewards

According to the IRS, a first-time homebuyer is a person (with your spouse) who has not owned any other principal residence for three years prior to purchasing the new principal residence for which the credit is being claimed.

A principal residence is the dwelling where you and your spouse live most of the calendar year. You can only have one principal residence at any one time. 

You can either be a first-time homebuyer or a long-term resident and still qualify to get the tax credit. As a long-term resident, you are entitled to receive up to $6,500 in credit for purchasing a new principal residence.

First-time homebuyers are subject to gross income requirements.  

Income Tip And Secrets 

The income requirements to qualify are different for single and joint filers. The IRS looks at your modified adjusted income (MAGI) for this credit. Your MAGI is your adjusted gross income plus exempt or excluded income and certain deductions.   

MAGI limitations for the first-time homebuyer tax credit are:

How To Circumvent Challenges

Several situations can arise in which you are ineligible for the first-time homebuyer tax credit. First and foremost, if you exceed the MAGI limitations, you will not qualify for the tax credit. That’s not ideal, but you should know about the myriad of tax deductions available to you as a real estate investor. 

Check out our expert and informative articles on taxes to see what strategies you have available. 

Another reason the tax credit would not apply is if you purchased a home outside of the United States. In addition, you cannot sell the house or have the home stop being your principal residence in the year you bought it. That means you cannot use this tax credit to help you flip a house. 

If you received your home as a gift or inheritance, you cannot claim this tax credit. 

Shrewd Strategies To Stay Profitable as a First-Time Homebuyer

There are some situations where you will have to pay back this tax credit. For instance, suppose you decided to purchase a home and qualify for the credit. If you choose to sell the house within 36 months of the purchase date, you will have to pay back the credit. 

Perhaps you buy this home as your residence but decide to convert the home to a business or rental property. That means the house is no longer your principal residence. Since the home is no longer your principal residence, you will have to repay the credit. 

If you cannot keep up with the payments on the home and it goes into foreclosure, you will have to repay the credit.

You will have to include the credit amount as an additional tax on your tax return to repay the credit. 

If I Lose The Home, Do I Always Have To Pay The Credit? 

In some situations, when you lose the home, you will not have to pay back the tax credit.

For instance, suppose an act of God or some other disaster destroys your home. You do not have to pay back the credit if you purchase a new principal residence within two years of the home’s destruction.

Suppose the government finds your house unfit to be lived in and condemns it. No one is allowed to live on the property because of the safety hazards. In the instance of condemnation and your subsequent property abandonment, you don’t have to pay back the tax credit provided you purchase a new principal residence within two years of the condemnation. 

Maybe you get a divorce and lose the house to your now former spouse, the person who receives the home is on the hook for the tax credit.

Spotlight: The Bottom Line for a First-Time Homebuyer

As it currently stands, first-time homebuyers can earn up to an $8,000 credit to purchase their principal residence. Long-term residents can also qualify for a more minor $6,500 credit if they buy a new principal residence. 

The income limitations are $125,000 for single filers and $225,000 for joint filers. There are some situations where you will either not qualify or have to pay back the credit. Overwhelmingly those situations involve selling or losing the house. 

Taxes can be complicated, but they don’t have to be. To learn more 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 we speak.

Improved Accounting and Bookkeeping Best Practices

Why would you want to take the time and effort to learn accounting and bookkeeping best practices? It can mean the difference between the life or death of your business.

As a real estate investor, your accounting practices provide you with a valuable snapshot of the health of your business, expenses, and possible avenues of profitability.

With sloppy or inaccurate accounting and bookkeeping practices, you will miss critically important information and have no sense of your overall financial health. That ignorance may turn out to be catastrophic. Read on to learn more about the benefits and importance of accounting and bookkeeping best practices for you.

We also featured this topic in one of our Royal Investing Group Mentoring sessions that you can view a replay of.

What Are Accounting and Bookkeeping Best Practices?

It depends on where you are in your real estate journey. A sole proprietor or married couple investing together may be perfectly suited to self-managing their books. In that case, you can keep detailed records with Quickbooks desktop.

The software gives you local control. That means you don't need a CPA or an accountant. One factor to keep in mind is that doing your books is time-consuming.

Ultimately, maintaining your books is a best practice because it keeps you intimately familiar with the details of business:

There are additional benefits to keeping good financial records, especially if you are looking for a business partner.

Why Bookkeeping Best Practices Are Important for Partnerships

Sloppy books kill business partnerships. For instance, you can't have garbage books and claims transparency. Making sound financial decisions based on accurate information undergirds importance in bookkeeping.

It takes effort, but maintaining accurate financial records is worth it because it helps bring peace of mind to your investments. Sloppy books might cover up embezzlement. Detailed and accurate bookkeeping is a good return on your investment because it provides peace of mind. And you can't put a price on that.

You can't make well-informed decisions when your books aren't straight. Excellent books help you make informed, unemotional decisions. You have to make sure you keep track of your records no matter what.

Here are some benefits of following accounting and bookkeeping best practices:

When Is the Right Time to Outsource Bookkeeping?

Finding good deals and building wealth are your most dollar-productive activities. The right time to outsource is to define standards and what it means to have good bookkeeping. Hire someone as a bookkeeper to increase your ROI. Your time spent on bookkeeping produces less value to you than finding good real estate deals.

When you decide on hiring a professional, they should be able to give you a tax strategy. Whether you hire a CPA, CFO, or tax attorney, they will show you how bookkeeping is essential for peace of mind.

You will also learn how your business is performing and how much it makes. Getting a solid understanding of your financial situation is the first step you have to take before leveraging tax strategies. All in all, your relationship should produce detailed, robust tax strategies from good, accurate bookkeeping.

What Do I Need to Do for My Accounting and Bookkeeping?

All business owners must regularly review their monthly operational expenses. Only by understanding your financials will you be able to achieve your financial freedom goals.

Another thing you need to do is find someone whose advice you trust and who you can listen to. It might be a person who has experience with the same real estate investment or a similar business. Part of doing the research is determining the scope and need of your relationship.

What Does a Good Bookkeeper Do?

You should find someone who is competent. That means your professional would have:

A dedicated partner will listen to your specific situation and help you think through your scope and needs. Also, they are more likely to provide upfront value to you before you make a financial commitment.

The ability to communicate is essential. Your partner needs to be able to tell you what is happening with your business at your level of understanding.

They need to be familiar enough with you to be able to speak to you on your level, just like Goldilocks–not too high and not too low. That helps them identify pain points and how to mitigate them. One of the critical things you can do to help yourself out is to make sure your expectations are clear.

Your professional needs to be an expert in real estate. That means they focus on real estate and have excellent knowledge about real estate. Don't waste time here with someone who doesn't provide value, as developing relationships are expensive in both time and cost.

Key Takeaways

Regardless of an individual's situation and the appropriate approach they choose, maintaining and regularly reviewing your books is crucial.

For example, the scope of your investments may dictate the bookkeeping process or processes you follow. A sole proprietor or married couple investing together may be perfectly suited to self-managing their books. Alternatively, investors who enjoin with partners or have many properties will prefer a solution accessible from the cloud by their team of professionals.

Ensuring that you have a solid understanding of accounting and bookkeeping best practices for real estate investors is one of the first steps to sustained wealth development.

Do you want to learn more about how to secure your financial freedom? Register for FREE Royal Investing Group Mentoring on Wednesdays at 12:30 pm EST to learn more while networking in a casual, fun, and friendly environment.

Buy Real Estate through a Solo 401K to Achieve Total ROI

Your Return on Investment (ROI) is the most vital metric to measure success. When you invest in real estate, you may be able to achieve total ROI with a Solo 401K.

Do strategic investments with high returns interest you? Then you're in precisely the right place. This article will cover investing in real estate using a Solo 401K.

What Is A Solo 401K?

Unlike a traditional 401K, a Solo 401K (or self-directed 401K) is designed specifically for self-employed individuals. To qualify for a Solo 401K, you must be the sole owner or operator of a business with no employees other than your spouse.

What Are Some Advantages of Investing Through My Solo 401K?

Your Solo 401K offers unique advantages that make it an efficient and powerful investing tool. For a real estate investor, those advantages include:

Another key advantage of using your Solo 401K to invest in real estate is avoiding the Unrelated Debt-Financed Income (UDFI) tax. For a real estate investor, you do not have to pay the 40% UDFI tax on income or gains on your investment paid for by your Solo 401K.

Here are two scenarios that illustrate the advantages of investing through your Solo 401K.

Scenario 1: Bob uses a Solo 401k and invests $100,000 of Solo 401k funds to acquire a real estate property. Bob also secures a nonrecourse loan from a bank for $100,000 and purchases the property for $200,000.

Assume the property generated $10,000 of net income in a year after calculating all eligible deductions. The UBTI tax would not apply to any of the income or gains generated by the real estate investment!

Scenario 2: Bob uses a Solo 401k and purchases a property for $200,000. Bob then sells the property three years later for $400,000. The $200,000 earnings Bob captured are tax-free!

How Can I Achieve Total ROI with a Solo 401K?

Typically you cannot use a traditional 401K to invest in real estate. However, the Internal Revenue Service (IRS) allows Solo 401K holders to invest in:

The Solo 401K is a powerful investment strategy that you can use for total ROI. Here is how you would go about using your Solo 401K to invest:

Step 1: Open Your Solo 401K Connected To Your Business Entity

The process entails making sure that your Solo 401K account is the only entity associated with:

Step 2: Fund The Solo 401K

You can fund the Solo 401K and make contributions using:

Step 3: Choose How You Want To Purchase The Property

Typically, you have three options when you invest with a solo 401K:

  1. Cash purchases: are the most straightforward options in which you use funds from your account to purchase a property
  2. Tenants-in-common: allow you to use both personal money and Solo 401K funds to invest in a property
  3. Nonrecourse business loans: protect your assets from lawsuits, bankruptcy, and other potential risks

Step 4: Conduct The Transaction With Your Solo 401K

Your Solo 401K must be the purchaser of any investment property. If you use your name on any documents on the purchase, the IRS will prohibit the purchase. Conduct the transaction by having your Solo 401K:

You are the trustee on the Solo 401K. As a real estate investor, you need to submit the purchase documents to your escrow agent. Store all the documents in a secure place.

How Can I Get Cash From My Solo 401K?

You can lend to yourself from the retirement plan, and the funds have no restrictions. You can take out half of your retirement account, or $50,000, whichever is lower.

For instance, if your retirement account had $75,000, you would be able to take out half of that amount, or $37,500. On the other hand, if your retirement account had $150,000, you would only be able to take out $50,000.

The loan money comes out of the fund as cash, but you must pay the retirement account back with interest. As long as you pay the market interest rate, you have the option to pay your loan back quarterly over five years.

For unique investing opportunities, check out our additional resources: Buy Tax Liens With Your Self-Directed IRA LLC OR Solo 401K.

Is A Solo 401K Plan Safe From Creditors?

Solo 401K plans do not automatically include protection from creditors. However, you do have protections under federal bankruptcy laws.

For non-bankruptcy creditors, protections fall at the state level. Solo 401K plans do not receive protection from the Employee Retirement Income Security Act (ERISA). State laws protect you in most cases subject to certain exceptions, such as child support.

Total ROI with a Solo 401K IS Possible

Investing in real estate may result in a total ROI with a Solo 401K.

There are some distinct and attractive advantages of investing with a Solo 401K:

We covered four critical steps to investing with a Solo 401K:

  1. connecting your 401K to your business
  2. funding the retirement account with your contributions
  3. choosing how to acquire the property
  4. using your 401K for all transactions

Are you interested in learning more? Register for FREE Royal Investing Group Mentoring Wednesdays at 12:30 pm EST.

Complete Guide to Selling an Inherited House As-Is with Siblings

Are you considering selling an inherited house with your siblings? Dealing with the death of a parent or guardian is an emotional period, complicated by the administrative and legal tasks that go hand-in-hand with death. If you're inheriting a house with siblings, there are also financial and sentimental challenges to navigate.

Many families opt for selling an inherited home as-is to minimize the timeline and see the financial returns as soon as possible. However, what's intended to be a gift can become a burden if this process isn't handled properly.

Types of Home Inheritances

Inheriting a home may seem pretty straightforward. However, different types of inheritances can impact how you handle the sale of the property: deed inheritance, will inheritance, and trust inheritance.

A deed inheritance works similarly to a life insurance policy. Also known as a "Title by Contract," this applies to mortgages that have a beneficiary or beneficiaries listed to receive the property in the event of the contract holder's death. The beneficiary is listed as a "Remainderman."

A will inheritance is a bit more complicated to manage. This type of home inheritance is what most people envision when they consider an inheritance. The property owner leaves the house to you and your siblings in the will. However, as the will is not a part of the original ownership contract, you must use the will to go through probate proceedings to secure the property. This process delays the sale of the home by months.

Finally, a trust inheritance indicates that you and your siblings are entitled to the home after a certain age. This type of inheritance typically doesn't apply to adult children or siblings.

Determining the type of inheritance you've received will help you understand the timelines and legalities involved. It's worth hiring an attorney to navigate these processes.

Selling an Inherited House? Understanding Inherited Ownership

When you inherit a house with your siblings, state law dictates that you share ownership equally. In addition to sharing the asset, you're also equally responsible for any outstanding liabilities and debts (i.e., the mortgage and property taxes) and for claiming income from the property.

This means that you and your siblings will be equally responsible for paying debts— especially if there's no life insurance to cover the outstanding mortgage— even if you have different income levels. Additionally, you'll all have taxable income from the sale to navigate with the IRS. It's worth getting professional legal and accounting advice as individuals when navigating the process.

It's also important to note that selling an inherited house can't take place without agreement from all of the listed beneficiaries. If a sibling is pushing back, you may require legal intervention before listing the home.

It should be no surprise that handling the administration of dividing debts and income and listing the home is a significant undertaking. If one sibling handles the majority of the work, they are legally entitled to additional compensation for their time from the estate. Again, having legal counsel in place to assist is beneficial.

Dealing with an Outstanding Mortgage

Getting mortgage insurance is one of the best things a homeowner can do to protect their family should death occur— unfortunately, many opt out of this coverage. When mortgage protection is in place, the costs are covered, and the beneficiaries don't have to worry about paying it off.

So what about those cases when the parent didn't have mortgage insurance or life insurance, and a mortgage is still outstanding?

Rest assured that under federal law, a mortgage lender cannot demand the entire mortgage in a lump sum from the beneficiaries of inheritance. In some states, there are even protections in place to give beneficiaries the right to walk away from an inheritance with a mortgage without the bank being able to go after their personal assets.

The process of transferring a mortgage after death is contingent on each lender's policies and procedures. Generally, it's a lot of tedious paperwork, but not too difficult. Inheriting a mortgage does mean you'll be required to make those payments until the house is sold. When the home sells, the profits will be applied to paying off the mortgage before being divided between the beneficiaries.

Home Inheritance Taxes

When you inherit a home, a policy called "stepped-up basis" comes into effect. This policy ensures you only pay gains on the selling profit versus the home's value today rather than the original value. Suppose your parents bought the home for $50,000, and it's now worth $200,000. You sell it as-is for $220,000. You and your siblings would be taxed on the gains of $20,000 rather than $170,000.

It's important to understand this concept, as many parents mistakenly "gift" the home to their children before their death. In that case, you would be taxed for the $170,000 gain.

Selling a House As-Is

Selling an inherited house as-is means that you're listing the property in its current state with the understanding among buyers that you won't be making any repairs. Buyers still retain the right to have an inspection completed, negotiate the price, and access a full property disclosure from the sellers.

The advantage of selling a house as-is is that you won't have to put any time and money into the property before selling. This streamlines the process of paying off the mortgage, potentially getting extra money, and moving on with your lives.

As inheriting a home with siblings can be complex, it's important to hire a professional attorney and consult with a skilled accountant.

Key Takeaway

Spare loved ones the pain of probate and ensure that your assets are distributed exactly according to your wishes by having a professional estate plan put in place. This can be accomplished through a 3-part strategy that involves a Living Trust, Pour Over Will, and power of attornies for making medical, financial, and managerial decisions. By not having a proper estate plan, you are at extreme risk of losing up to 1/3 or more of your estate to probate court and attorney fees. To learn more about Royal Legal Solution's rock-solid estate plan service, visit Estate Planning for Real Estate Investors.

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.

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.

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.

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.

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:

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.