How To Get Full Price For Your Property

SELL IT FAST

Put Cash In Your Pocket – Save Tens of Thousands in Taxes –

Create a Safe, Secure Annuity That Has a CASH Value and Pays You

A Monthly Income Stream For a Very Long Time

Selling a piece of real estate in tumultuous times like these can be a real challenge.

Multiples of foreclosures on the market, pre-foreclosure short sales, lease options, bank owned liquidation sales, REO’s, etc. There is multitude of motivated sellers all competing for the same thing – a cash buyer.

In Case You Haven’t Noticed ….  Cash Buyers are Very Hard To Come By.

Enter the tightening of financing from banks and lending institutions, you end up with everyone fishing in the same pond for a limited amount of buyers.

Then, thanks to the media, the cash buyers are well aware of the situation and have become even more brazen in their stance of getting the biggest bang for their buck. And who can hardly blame them? If you were looking to invest in a piece of real estate, and everyone was chasing or begging you for your cash, wouldn’t you be selective?

There is a better way … and by the time you finish reading this report, in its entirety, you will begin to question yourself why you would possibly want to sell for cash in the first place.

There are only 4 parts to a successful Real Estate transaction nothing more and nothing less.

Let me explain:

Part 1) Seller: Someone has to sell

Part 2) Buyer: Someone needs to buy

Simple enough … right? Keep reading because the next two get a little more complicated.

Part 3) Cash

Part 4) Terms

Let’s explore numbers 3 and 4 in a little more detail.

Each one pretty much stands on its own and neither the buyer nor seller can have both. Even in a win/win transaction, one party has the negotiating advantage over the other.

Let me explain:

Cash: If the seller demands Cash, the buyer has the upper hand and will dictate the price. Cash is king and those who have it make the rules. It can’t be much more simple than that. There are a lot less buyers out there with cash, and they absolutely know they set the rules. Things were a little different when there was easy money out there to borrow, but that is not the case in today’s new economy. Again, Cash is King, and Those Who Have It Set The Rules (And Control The Price).

Terms: If the seller offers terms, this begins to open up to a whole new world of buyers. Because the seller will help with the terms, there becomes a whole new group of buyers out there. This, in turn puts more pricing power in the seller’s hands. Many more buyers will be interested in investing and paying a higher price for the property.

It is important for you the seller to understand this and for you to give some serious thought to exactly what you want to accomplish by selling the property in the first place.

No matter what the condition of the property, the location of the property, or anything else matters as much as the terms the seller is willing to accept and the deal they are willing to negotiate. The seller ALWAYS gets a better price for the property by offering terms than demanding cash. Many times, by offering terms, you can actually get more for the property than it’s worth at the time because of the terms. The buyer is much more willing to “work” for the equity knowing that it is more the term that is allowing them to buy it in the first place.

• As a seller, you get a premium for it,
• You can put cash in your pocket at closing,
• Create a monthly cash flow or annuity,
• Eliminate management headaches,
• And in many cases, retain a portion of the ownership.

Let’s look at a couple of the more basic and simple ways this type of sale could be accomplished in the shortest amount of time allowing you the seller, to move on with your life as soon as possible.

Wrap-Around mortgage: The seller Wraps a new mortgage around the existing one and makes a premium on the whole thing. Here is a very basic example: Sale price is One Million dollars, Existing Mortgage is Five Hundred Thousand dollars with an interest rate of 7% and monthly payments of $3,326. Seller Wraps the 1 Million dollar mortgage into an interest rate of 7.5% with monthly payments of 6,992. After the seller makes the $3,326 payment to the bank (this can easily be done with a 3^rd party so the seller simply receives a check), the seller gets to keep the balance of $3,666. This can be done for a limited amount of time, say 3 to 5 years until the new owner can go to the bank and re-finance the property. Refinancing a property is much easier than getting purchase money.

PLUS – since this can be in the form of an interest only wrap, when the refinance time comes, the seller receives the entire sales price in cash!

Master Lease Option: The seller offers the property out on a lease option. In this scenario, the buyer takes over the property for a pre-determined amount of time and in effect, pays rent. Part of the rent is credited back to the sales price upon exercising of the option creating an equity position for the buyer. This helps the buyer get new money on the property for its purchase, and in some instances, the banks will recognize the new mortgage as a re-finance.  The seller benefits are: Cash or something of value upfront for the option consideration, and monthly income. This income is taxed as regular income thereby eliminating any capital gains tax until the sale. I have a friend who purchased an apartment complex from his dad. The deal they made was, John lease-optioned the apartment complex for 30 years at a rate which it tied to the CPI index. At the end of the 30 years, John has the option to buy the property from his dad for $1. This gives John’s dad a steady monthly income for the next 30 years and legally eliminates any capital gains tax.

Seller Carry Back Mortgages: This is perhaps one of the most common terms of “creative” sales because it is the simplest to understand. Maybe not the best way to sell because of tax reasons, but it is used often. The Buyer comes to the table with new bank money or assumes the existing debt, and the seller takes back a mortgage for the balance and collects monthly interest and principal payments.

With this type of sale, the seller gets interest income taxed as regular income, and have to pay capital gains tax on any equity received. Depending on the amount of depreciation taken while owning the property, there will be additional tax on the principal because of the re-capturing of depreciation (what the IRS giveth, the IRS taketh away) This can sometimes add up to a surprise tax bill for the seller and should be checked out with your accountant before selling with a seller carry-back second.

(this is not to be taken as tax advice and should be checked with your CPA before doing a seller carry-back second mortgage)

However, with this type of financing, the seller can receive a monthly income for the life of the loan, and can sell all or a portion of the mortgage if you want to raise cash in a lump sum.

Many sellers will hold second and even third mortgages for the distinct reason of selling one of them to raise cash, and keep one for monthly annuity income.

Make 144% Return in your IRA:

Little known strategy to fund your IRA, or the IRA of family members:

Carry back a 3^rd, 4^th, 5^th, or more mortgage. Depending on the position of the mortgage determines the amount of a discount you will need to take if selling it. So …. Sell your lower position mortgage at a huge discount to your or a family member’s IRA account. Let me give you a basic example.

Suppose you had a $50,000 3^rd mortgage for 30 years paying 7% interest with a monthly payment of $332.65 and a balloon payment in 5 years of $47,065.79.

You sell the mortgage to your IRA at a discounted price of $25,000. Let’s see how this works out. A monthly payment of $332.65 and a balloon in 5 years gives you IRA a 14% annual interest rate return which is very respectable. However … with a balloon payment of $47,065.79, and a total interest amount paid of $17,024.79, giving you a total return of $61,090.58 on a $25,000 investment. Now we take the $25,000 you invested and subtract it from the total of $61,090,58 equals a profit of $36,090.58, or a 144% Return! Let me ask you this: what did you make on your IRA last year??

Like that example? I got plenty more where that came from.

1031 Tax Free Exchanges with Seller Take Back Mortgages: This is very similar to the seller Carry Back Mortgages, but with a little twist. Some of the equity, instead of taking in the form of cash or mortgage, the seller takes one or more pieces of real estate in exchange via the IRS code 1032 tax free exchange. This eliminates any tax consequence until the exchanged property is sold for cash. A terrific way for a seller to “park” additional equity for any other reason.

There are numerous other strategies and I could go on and on, and they can also be combined. Again, if the seller is willing to help create the term, the seller can almost always control the price.

If you want to sell an income property, you need to explore all the possible exit strategies and decide which one is best for you.

You Now Know a FEW Strategies on

How To Get Full Price For Your Property ….. SELL IT FAST ….. Put Cash In Your Pocket ….. Save Tens of Thousands in Taxes ….. and Create a Safe – Secure Annuity That Has A CASH Value And Pays You A Monthly Income Stream For a Very Long Time.

Don’t Allow Yourself To Be Forced To Give The IRS a Huge Portion of What You Worked To Hard For-

Where do you go from here?

You really only have one choice at this stage of the game, and that is to turn the page and answer all the questions honestly. After you complete them in their entirety, you will most likely arrive at a decision you never really thought about.

After you complete the following pages and would like to have a no-obligation conversation, please fax everything to me at 866-528-2261 or email to me at paul@pbforsberg.com.

No other Real Estate consultant will offer you this type of information that I know of.

As far as I know, I am the only one because I actually do this stuff. I’m not a salesman or a listing broker looking to hopefully sell an overpriced piece of real estate to an unsuspecting or wishful investor.

I’m in the trenches – working it and doing it every single day.

To the best of my knowledge, I am the ONLY one who gets his hands dirty and actually plays the game.

Call me – let’s talk.

Real Estate Market Cycles

“A Real Estate Investor Buys Low and Sells Higher”

“Anyone Who Buys Praying for Appreciation

is a Speculator… Not an Investor”

You Don’t need to work seven days a week in order to build a real estate empire.

As a matter of fact, you don’t have to work very hard at it at all if you know what strategy you should use depending on what part of the market cycle you are in, or, where to locate the market that is in the cycle you prefer to invest in . Sound confusing, read on because I will begin to explain. You will need to come back regularly to this posting because I will be expanding at great length on each market cycle, what creates them, and what you need to do about your investments during the cyclical periods.

Before we begin, let me tell you up front – what I am about to share with you did not come from a book, and is not theory – it comes from studying history, market forces, and quite frankly, from my personal experiences in making millions of dollars and equity in Real Estate, to losing millions, and then making a come-back and what I am currently doing to make it all back and more.

You will learn exactly what I did right and more importantly, what I did wrong. It is easy to brag about what you did wrong and let me tell you it is very humbling to admit what I did wrong – however, it is more important for me to share what I did wrong so I don’t repeat the same things “learning experiences” again.

In a nutshell, look at the hand-made graph/chart below – and the explanations below them.

In the coming weeks and months, I will expand in great detail, and supply you with useful links for more information on each of the market cycles and what you need to do about them.

The chart above is a “hand-made” chart for illustration purposes – it is not scientific, and has been created solely for illustration.

Explanation of colored arrows below:

Explanations:

Buy Income Properties with high CAP Rates when prices are below long term trend line: Income properties with high CAP rates mean you can “buy income” because the rate of return is high. Furthermore, the spread between the CAP and the interest rate you can borrow at is large, thereby making interest and CAP rate spreads large.

Flip Lots and Homes on way up in value when prices are below long term trend line: Flipping homes and land while real estate is going up is the only time to participate in this type of investing strategy. It lessens the chance of paying too much because if for some reason you do, time will fix it.

Buy and Hold: This is also a good time for the buy and hold strategy. Buy homes, rent them out and hold for a term for appreciation. During an upward cycle you can also raise rents and increase residual income. You want to hold some real estate to offset income you make from flipping lots and homes. The way you offset the income is because of the IRS Tax code allowing for depreciation of real estate.

Sell everything when CAP rates are close to/equal to interest rates and above long term trend line: This marks the top of a cycle. When CAP rates are close to interest rates, it means the spreads between CAP and interest rates are narrowing. Historically, this has always happened toward the top of the cycle. Occupancy rates are high, vacancies low, rents have not been raised, and john Q public is getting into commercial real estate. When everyone is getting into it, it is time to take your profits and sell it to them. Do not buck the market cycle – when it is a seller’s market, sell.

Begin selling Income props when CAP rates drop and prices rise above long term trend line: As soon as CAP rates begin to fall, make sure your income properties are operating at the highest possible efficiency. Raise the rents, do any and all differed maintenance, and get ready to liquidate.

Invest in Tax Certificates with the cash you raise by liquidating positions – All the Way Down: What to do when you sell? Because you timed the market by reading the cycle, it is time to begin buying Tax Certificates. They will be a little scarce in the beginning, but will become more and more available during the downward cycle. This is the time to acquire as much in tax certificates you can. The interest rate you will receive is enormous. The safety margin is incredible. First position over all other lien holders.

File for Quiet Title immediately upon maturity of Certificates: As soon as your tax certificates reach maturity, file for quiet title. The county will do all the work for you. By filing for quiet title, the county will notify the property owner of the process and begin the collection process. If the property owner does not pay the back taxes and all of the interest, the property will be placed on Tax Sale auction. If no-one bids on the property, you will end up with it. IF someone does, you will get paid all you are owed. Of course, you can go to the auction and bid on it as well, and buy the property from auction. If you are the winning bidder, you will have to bring the purchase price to the county, and they will in turn issue you back a check in the amount of back taxes that are owed to you.

Long Term Trend Line: Real estate has historically gone up in value. The trend line is a long term average of price appreciation. I like a 25 year trend because most real estate cycles last 20 years. This will give you a good overall view of the trend. If you use a short term trend such as 5 years, you will not get a good overall average. The long term trend is a visual measuring tool.

What is a Short Sale in Real Estate?

A short sale is a sale of real estate is when the sale price of the property is less than the amount owed to the lender or lenders.

In times like we are facing today, there are thousands and thousands of short sales going on right now.

It often occurs when a borrower cannot pay the mortgage loan on their property and the lender decides that allowing the homeowner to sell the property for less than what is owed and taking a loss on their balance sheet is a lot better than foreclosing on the property and selling at an even bigger loss in the future.

Both parties consent to the short sale process, because it allows them to avoid foreclosure, which involves hefty fees for the bank. This agreement, however, does not necessarily release the borrower from the obligation to pay the remaining balance of the loan, known as the deficiency.

If you are considering doing a short sale on ANY property, be very careful and make sure a deficiency judgment will not be filed against the owner by the lender.

GET IT IN WRITING

If you would like to learn more about the Short Sale process either for yourself, or explore the possibility of getting into the shore sale business and helping people, there is actually a very good short sale eBook/course on the subject – explaining short sales and the entire process in great detail called “How to Become a Real Estate Rock-Star” and Make Huge Money with Short Sales” drop me an email and if you qualify, you can get the complete course.

An Introduction to Exchanging Real Estate

The Ultimate in Creative Real Estate

The first thing that we need to understand in real estate investment is value.

How do we value the property that we are going to buy or sell?

First of all, we want you to understand what real value is, so lets start with the basics of understanding true value…

What is a dollar bill?

A dollar bill is a piece of paper that has absolutely no value until it is traded!

If you put it under your mattress, or bury it in the ground and don’t spend it, it has NO value.

The only time it has value is when you claim its face “value” in an exchange.

You must exchange that dollar bill for whatever property or asset it is that you are buying.

You must realize that to earn that dollar bill – You had to TRADE something of equal value! In another words, you had to DO something.

(unless or course, you are on the receiving line of a government handout program)

Example: We sold an asset and received that dollar bill for it, or created the asset with our labor and were paid wages for our services.

How the Dollar Standard began:

There were no banks when the first settlers came to America.

They formed communities. One community was established to herd sheep and a few miles away maybe a cattle ranch. Further down there was a hunter who shot beavers and bears for pelts to make clothing.

• Imagine what it was like back in those days.

• Imagine how difficult it must have been with no currency -

There was no paper currency back then because there were no banks!

How to get a cow

If you wanted a cow, in order for you to own that cow, you had to give something of value in exchange for that cow.

There was no other way for you could get the cow legally and they dealt with thieves swiftly back then – public hanging was common.

By using basic barter, (exchanging), principles, you would go to the owner of the cow and say “I know you have X number of cows and I would like one of

them. I would like to exchange one of my sheep for your cow”

If the farmer was agreeable, you would deliver a sheep, he would deliver a cow, you would shake hands and go on your way.

If the sheep had less value than the cow, you would work something out. Perhaps give a few pelts, a few coins, or something else. What we now call “boot” short for “bootie”

What you just did was, you performed an exchange.

This went on for years and years.

Moving on, as America grew, and more communities were formed, it became inconvenient to travel with your cow to find a farmer who would trade you a sheep.

Additionally, suppose the guy with the cow didn’t want your sheep, but wanted a pig instead  …. this created a little more of a problem and you then needed to find someone with a pig who wanted a sheep.

You would have to go to the man with the pig and trade your sheep for a pig.

Packed Room – Standing Room Only! People entrenched in learning “Creative” real estate strategies. Those in the know understand the power of creativity when cash is hard to come by.

Then you would carry your pig over to the farmer with the cow and exchange the pig for what he wanted, the cow.

You ended up with the cow and the person got what he wanted- the pig.

As you can see, this could get confusing. What this is called by the way, is a 3-way barter or exchange.

And everyone went happily on his or her way!

Well, as life became more complicated and commerce grew, this became impractical.

What solved the problem were………  Trading Posts.

All over America trading posts came into existence. These were the “storer of value” for the new world and were strategically located on “trade” routes.

These trading posts would be the only “storer of value” until the gold exchanges came into existence.

Your goods had VALUE and so the Trading Post operators began to build an inventory and hold that “storage of value” in their facility. When you came through you could trade what you had for what you needed using a third party mediator …or TRADER.

In essence the Trading Post became a barter BANK, (for profit of course)!

This worked very well until America became heavily involved in commerce.

Then the immigrants brought in the banking system that was functioning in their home country. This banking system was established so that you had a vehicle of currency.

This began with gold and silver, or IOU’s backed by them.

You could now sell your cow for a gold coin and you could take that gold coin and purchase whatever you wanted by using this new “storer of value”.

It became easier to barter, but understand that we are still bartering.

We are still exchanging our goods and services daily.

In order to earn the “gold to buy the cow” you worked or invested. You gave up five or six hours of your life in exchange for that which you preferred to own.

We now understand how the banking system of today came into existence, the banking system grew (I won’t get into how it changed and how the gold standard went away), however at this point in time we basically exchange our goods and services for a potentially worthless piece of paper!

However, the dollar is universally recognized as a medium of exchange.

Now let’s talk about the value of real estate. In the exploding market we had a few years ago value was changing almost daily.

This is because value is a function of supply and demand.

Up-front and personal presenting -

If there were no houses available and you wanted to invest in houses, you would pay more for them. Couple this with easy money and we had unsustainable reap estate price appreciation.

What happened next was a bubble bursting of enormous proportions and (history repeats itself – remember back in the 1980’s?) the market turned around and there are more houses available than there are investors wishing to buy them.

Cash has become king!(my next blog I will explain the differences in negotiation power with cash and terms).

If you are an investor and you have cash in your portfolio you can go out and buy with cash, and dictate the price.  In today’s market there are some phenomenal deals.

For example – lets take a quick look at the residential real estate market today -

There are builders  that were selling houses for $275,000 36 months ago and they have reduced their price to $120,000.

Some have even broken the $200,000 mark and are building houses under $200,000. This was an unheard of figure two years ago!

Everybody is after the cash, I call it “fishing in the same pond” and the Cash buyer know it. If you require cash, you are going to give up an ENORMOUS amount of equity (what you worked hard for)

Cash is king in this current selling frenzy – and not many people have it.

Again: The cash buyers are dictating the price they are willing to pay. If you demand cash in this market, you are  going to give away a lot of equity. In another words, you are going to slash your price.

Lets take the Cash out of the formula for a minute……

When we decide that there is no cash readily available, (unless we are willing to drastically reduce our value/price), then we have to go back to the early American Trade/ Barter way of doing business.

If you are a seller, you need to be willing to take something in exchange of cash – maybe a private mortgage, vacant land, a boat, car, or something you may have a need for. In some instances, you can say, take a car or boat, sell it, and convert that into cash.

Lets look how to BUY without cash and pay the seller the price they are willing to accept and create a win/win transaction.

NOTE: My personal motto “Win/Win or no deal.”

We still want to acquire investment properties and have very little cash.

Assume we had invested in vacant lots in the past and have them in our portfolio (or know of someone who does), and now we desire to invest in income producing real estate.

By owning a builder’s new home we could rent it and generate cash flow.

But there are some problems to solve…….

• Lots are a great “storer of value” but  do not generate cash flow.
• New homes do not rent for the mortgage payments in this market.
• We cannot sell our lots for full value.
• The builder cannot sell his home for, (prior), full value.

So, we go to a Creative Real Estate meeting.  We offer our lot to “purchase” a piece of income producing real estate. The lot becomes a down payment and we assume a mortgage, for the difference in our Equity position.

What we have done is transferred our “stored value” (Equity) into another piece of real estate which we feel will be a fruitful investment.

It may be that the cash value of that lot has depreciated but so has the value of the house.

Both Parties Win:

The Trader ( seller ) of that house can receive full value and we can pay full value because now we have taken cash out of the equation and we give…

An exchange value is entirely different from a cash value because we are solving problems- without the medium of currency!

More to come in future posts.

If You Want To Sell Real Estate in Times Like These, You Have a Problem & Need to Talk With Me.

I Can Help You Get All Cash For Your Property (unfortunately at a steep discount), or I Can Help You “Get Full Price For Your Property, Save Tens of Thousands in Taxes, Raise Cash, & Create an Ongoing Income Stream…..

Here is a link to a newspaper article about an exchange I did when the Real Estate market was just beginning to correct ==> http://perfect-storm-marketing.com/?attachment_id=77