Newsletter - March 2009

Investment News Newsletter of Mid-America Association of Real Estate Investors MARCH 2009

First-Time Home Buyer Tax Credit A tax credit of up to $8,000 is now available for qualified first-time home buyers purchasing a principal residence on or after January 1, 2009 and before December 1, 2009. Unlike the tax credit enacted in 2008, the new credit does not have to be repaid.

duced proportionally for taxpayers with MAGIs between these amounts.

The Basics of the $8,000 Home Buyer Tax Credit

Modified adjusted gross income or MAGI is defined by the IRS. To find it, a taxpayer must first determine "adjusted gross income" or AGI. AGI is total income for a year minus certain deductions (known as "adjustments" or "above-the-line deductions"), but before itemized deductions from Schedule A or personal exemptions are subtracted. On Forms 1040 and 1040A, AGI is the last number on page 1 and first number on page 2 of the form. For Form 1040-EZ, AGI appears on line 4 (as of 2007). Note that AGI includes all forms of income including wages, salaries, interest income, dividends and capital gains.

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To determine modified adjusted gross income (MAGI), add to AGI certain amounts such as foreign income, foreign-housing deductions, student-loan deductions, IRA-contribution deductions and deductions for higher-education costs.

In its efforts to stimulate the economy and revive the housing market, Congress has enacted legislation providing a tax credit of up to $8,000 for first-time home buyers. But time is of the essence for buyers who want to take advantage of this opportunity. Only homes purchased on or after January 1, 2009 and before December 1, 2009 are eligible.

The tax credit is for first-time home buyers only. The tax credit does not have to be repaid. The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000.  The credit is available for homes purchased on or after January 1, 2009 and before December 1, 2009.  Single taxpayers with incomes up to $75,000 and married couples with incomes up to $150,000 qualify for the full tax credit. First-time home buyers purchasing any kind of home—new or resale—are eligible for the tax credit. To qualify for the tax credit, a home purchase must occur on or after January 1, 2009 and before December 1, 2009. For the purposes of the tax credit, the purchase date is the date when closing occurs and the title to the property transfers to the home owner. The law defines "first-time home buyer" as a buyer who has not owned a principal residence during the three-year period prior to the purchase. For married taxpayers, the law tests the homeownership history of both the home buyer and his/her spouse. For example, if you have not owned a home in the past three years but your spouse has owned a principal residence, neither you nor your spouse qualifies for the first-time home buyer tax credit. However, unmarried joint purchasers may allocate the credit amount to any buyer who qualifies as a first-time buyer, such as may occur if a parent jointly purchases a home with a son or daughter. Ownership of a vacation home or rental property not used as a principal residence does not disqualify a buyer as a first-time home buyer. The tax credit is equal to 10 percent of the home’s purchase price up to a maximum of $8,000. The tax credit amount is reduced for buyers with a modified adjusted gross income (MAGI) of more than $75,000 for single taxpayers and $150,000 for married taxpayers filing a joint return. The tax credit amount is reduced to zero for taxpayers with MAGI of more than $95,000 (single) or $170,000 (married) and is re-

An example of how the partial tax credit is determined? Just as an example, assume that a married couple has a modified adjusted gross income of $160,000. The applicable phaseout to qualify for the tax credit is $150,000, and the couple is $10,000 over this amount. Dividing $10,000 by $20,000 yields 0.5. When you subtract 0.5 from 1.0, the result is 0.5. To determine the amount of the partial first-time home buyer tax credit that is available to this couple, multiply $8,000 by 0.5. The result is $4,000. Here’s another example: assume that an individual home buyer has a modified adjusted gross income of $88,000. The buyer’s income exceeds $75,000 by $13,000. Dividing $13,000 by $20,000 yields 0.65. When you subtract 0.65 from 1.0, the result is 0.35. Multiplying $8,000 by 0.35 shows that the buyer is eligible for a partial tax credit of $2,800. Please remember that these examples are intended to provide a general idea of how the tax credit might be applied in different circumstances. You should always consult your tax advisor for information relating to your specific circumstances. The most significant difference between this tax credit and the one enacted in July of 2008 is that this tax credit does not have to be repaid. Because it had to be repaid, the previous "credit" was essentially an interest-free loan. This tax incentive is a true tax credit. However, home buyers must use the residence as a principal residence for at least three years or face recapture of the tax credit amount. Certain exceptions apply. Participating in the tax credit program is easy. You claim the tax credit on your federal income tax return. Specifically, home buyers should complete IRS Form 5405 to determine their tax credit amount, and then claim this amount on Line 69 of their 1040 in(Continued on page 12)

Investment News

MAREI Mid-America Association Of Real Estate Investors Mid-America Association of Real Estate Investors (MAREI) is one of the largest real estate investor associations in the mid-west. MAREI members consist of full and part-time investors, beginning investors, real estate brokers and agents, attorneys, contractors, accountants, property managers, renovation specialists, appraisers, bankers - people who want to enjoy the many benefits of real estate investing. MAREI was established in 2003 and promotes networking and educational opportunities to its membership. MAREI services members in Kansas, Missouri and Nebraska.

MISSION STATEMENT To provide education, discussion and networking opportunities to help real estate entrepreneurs & investors reach their financial goals using sound, honest business practices.

INVESTMENT NEWS © 2009 by Mid-America Association of Real Estate Investors (MAREI), a Real Estate Trade Association. Published monthly by MAREI and included as benefit for our members. Quotations and reprints are permitted with full credit given to author, plus “The Investment News: Newsletter of Mid-America Association of Real Estate Investors.” Subscriptions are $59 per year or are included with membership. MEMBERSHIP Twelve month individual membership is $99, 2 Person Membership is $149. Guest Fee is $25. Articles must be received by the 1st of the month two months prior to issue date to be considered for publication. To be considered for a specific issue, it is recommended you contact the Editor at least three months prior to issue date. All submissions are at the discretion of the editor and are subject to editing. Advertising space deadline is the 1st of the month one month prior to publication. All camera-ready artwork and materials for non-camera ready ads are due by that date. Please see www.MAREInet.com for more information. CODE OF ETHICS MAREI members are expected to be civic minded and willing to operate with high standards of honesty and integrity. It is our duty to conduct ourselves with the highest principles of the free enterprise system. We strive for MAREI to be synonymous with competence and fairness. As MAREI members, we hereby bind ourselves to this code of ethics: 1. 2. 3. 4. 5.

We shall not discriminate against any person with regard to race, color, religion, age, national origin, sex, handicap or familial status as defined by current Kansas, Missouri, or Nebraska law. We shall recognize that real estate is a service related industry. We shall refrain from engaging in any illegal practices, or defrauding any member, customer, or association, with the aim of always conducting business in a professional manner. We shall endeavor to stay informed and updated on matters affecting housing in our communities, and adhere to local, state and federal laws. We are individually responsible for our own due diligence and continuing education. Members are expected to verify any and all assumptions regarding business decisions to prevent falling victim to fraud, misrepresentations and illegal practices.

Further, if any allegations of conduct considered detrimental to the purposes and interest of MAREI are received in written and signed communication to the management, we will consider the matter. Should a decision to take further action be made, a furnished copy of said allegation (s) to the accused, who shall be given adequate time to reply. Thereafter, management shall take such further action as it may deem property and in accordance to this code of ethics.

BADGE POLICY All members of Mid-America Association of Real Estate Investors and guests must wear a name badge to all General Meetings. There will be no exceptions.

The information contained herein is believed to be accurate; however, it is not guaranteed or warranted in any manner and is subject to change without notice. Writers’ and speakers’ opinions are not necessarily those of MAREI. You are advised to seek professional advice.

Mid-America Association of Real Estate Investors PO BOX 8685 Prairie Village, KS 66208 Phone: 816-523-4400 Fax: 816-523-4448 www.MAREInet.com [email protected]

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Mid-America Association of Real Estate Investors is a Member of the National Real Estate Investors Association And the National Association of Responsible Homebuilders & Remodelers

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Saving Tenant Eviction with 401(k) Assets Many Americans today participate in a 401(k) Retirement Plan sponsored by their employer. Individuals make an election to have a certain amount taken from their paycheck each pay period and the money is then invested tax deferred in the Plan to help build assets for retirement. This money cannot be taken out of the Plan prior to retirement except in certain circumstances. Knowing those circumstances may be important to you, especially if you have rental or lease to own properties. First, understand that not all 401(k) Plans are created with the same provisions (rules). So it is important to know what the Plan rules are for the Plan you or your tenant is participating in. This can be determined by asking the Employer for a copy of the Plan's “Summary Plan Description”. These are often found online through the Employer's website or by contacting the Human Relations Department. Generally speaking, there are three ways to take assets from a 401(k) Plan prior to termination from the Employer. The first way is to take a Loan from the Plan. These are a common Plan provision and require payback each pay period through loan payment payroll deductions. The second way is to take an In-Service Withdrawal. These are less common but where available, allow a person to take money from the Plan without having to pay it back. The third way to remove money from a 401(k) Plan while employed is to take a Hardship Withdrawal. This type of withdrawal is almost always included in a 401(k) Plan, especially where Loans and/or In-Service Withdrawals are not allowed. It is designed to be a last resort in cases of financial difficulties. Like the In-Service withdrawal, money taken from a Plan through a Hardship does not have to be repaid to the Plan. However, both withdrawal methods do require the removed funds to be fully taxable if not rolled over to another Retirement Plan or IRA within a certain period of time. The Internal Revenue Service has allowed Hardship withdrawals from 401(k) Plans for six reasons. They are: 1) Payment of medical bills, 2) Payment of college tuition, 3) Funeral expenses, 4) Repairs to the Participant's principal residence, 5) Purchase of the Participant's Principal residence and, 6) To prevent the eviction from the Participant's primary residence. Let's explore each and see how this information can help you sell a property or prevent a tenant from having to be forced out of your rental. Suppose your tenant claims that they could not make their payment(s) because they had an unexpected medical problem that incurred a lot of medical bills. Or that it was college tuition time again. Or that there was a death in the family. Do they have a 401(k) account with their em-

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ployer? If so, perhaps a Hardship Withdrawal could help solve the problem. What if a hurricane blew a roof off or a tree limb crashed into the garage? If the tenant was obligated to make the repairs, could not a Hardship Withdrawal potentially save them from walking out of your deal with them? How about a prospective buyer of your property who has little or no money for the down payment. A Hardship Withdrawal for the purchase of one's primary principal residence could allow them to buy the house after all and create a win-win situation for the both of you. Do you have a tenant(s) that is behind on their payment and never seems to get caught up. Eviction from a primary residence applies to home owners as well as renters. Re-read this last sentence and understand it. Before landlords make any decision to evict a renter, explore whether the renter participates in a 401(k) Plan with their employer. If so, a letter of eviction notice from you as the landlord is all that is necessary as proof for the tenant to give their 401(k) Administrator and get approved for a possible Hardship Withdrawal due to eviction. Take the time and become familiar with Loans, In-Service and Hardship Withdrawals from 401(k) Plans. If you participate in one yourself, use your account and learn its Plan rules. What can you do or not do with your own money? Then apply this information when the opportunity calls. Selling a house or saving a good tenant may just be worth spending 30 minutes one night reading your Plan's “Summary Plan Description” (SPD).

About the Author: Edward Griffin has worked over 20 years in the mutual fund industry with 16 of those years working with multiple types of retirement accounts including IRAs, IRA-SEPs, Profit Sharing Plans, and more. The past 11 years he has specialized in 401(k) plans and holds the industry’s certification of “Qualified Pension Administrator” issued by the American Society of Pension Professionals and Actuaries. He is a member of MAREI and is offering consulting on a limited basis on 401ks and Self Directed IRAs. Please look for Ed at MAREI meetings or give him a call at 913-825-5257.

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General Meeting ~ March 10th ~ 6pm Networking ~ 7:30 pm Presentation ~ Marriott, Overland Park

MAREI Presents:

Lease Options With Member Marck de Lautour

What is a Lease-to-Own? How does it differ from Contract for Deed / Option Contract / First Right of Refusal etc… When should you use one? WIN – WIN…..indeed! How does it benefit Landlord? How does it benefit Tenant? Pitfalls and rookie mistakes…..

Marck de Lautour Property Manager

How NOT to get beat up by the tenant. How NOT to get stuck with 100 lease to own homes! Credit repair and the mortgage ready stage. Contracts – Lease and Lease Option joint & several. Legal steps to avoid & look out for. Should you record the Option? Closing the transaction – getting paid!

SBD Housing Solutions [email protected] Wk: (816) 994-9401 Fax: (816) 994-9449 OUR BUSINESS IS PEOPLE, OUR PRODUCT IS REAL ESTATE!

This meeting is sponsored by U First Financial. MAREI has recently became an independent associate with U First Financial and invites all MAREI member and guests to visit their personal web site to learn more about how to pay off your mortgages early and to put your money to work for you. Visit http://www.u1stfinancial.net/934513 to request your own analysis to see how much faster you could be debt free. (See page 14)

Tuesday March 10th, 2009 6:00 pm Networking 7:30 pm Presentation Sponsor Meeting: $200 Reserve Networking Table: $35 for Member’s Page 4

Overland Park Marriott 10800 Metcalf Members Attend FREE $25 Guest fee at Door Reregister for $15 on Web Site More info www.MAREInet.com

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Lease Option 101 Tax Implications of Lease/Options The lease/option strategy is a great way to leverage your real estate investments because it requires very little cash. The lease/option is more of a financing alternative than a financing strategy because you don’t own the property. The basic lease/ option strategy involves two legal documents, a lease agreement and an option. A lease gives you the right to possess the property, or, as an investor, to have someone else occupy it. If you can obtain a lease on a property at below market rent, you can profit by subleasing it at market rent. An option is the right to buy a property. It is a unilateral (“oneway”) agreement wherein the seller obligates himself to sell you the property, but you are not obligated to buy. By obtaining the right to buy, you control the property. You can market the property and sell it for a profit. The longer you can control the property in an appreciating market, the more value you create for yourself. By combining a lease and an option, you create a lease/option. Financing Alternative The two primary objectives of the real estate investor are cash flow and appreciation. You don’t need to own a property to make cash flow or benefit from appreciation. A lease entitles you to possession, which allows you to make cash flow. An option gives you the right to buy at a set price, which allows you to benefit from future appreciation. Lease - The Right to Possession Under a lease agreement, the lessor (landlord) gives the lessee (tenant) the right to possess and enjoy the property, which is one of the most important benefits of real estate ownership. The lessee is usually not responsible for property taxes and major repairs. Once you have the right to obtain possession of property, you can profit by subletting or assigning your right to possession. Sublease

A real estate sales contract is a bilateral or two-way agreement. The seller agrees to sell, and the purchaser agrees to buy. Compare this agreement with an option; an option is a unilateral in which the seller is obligated to sell, but the purchaser is not obligated to buy. On the other hand, if the purchaser on a bilateral contract refuses to buy, he can be held liable for damages. A bilateral contract with contingency is similar to an option. Many contracts contain contingencies, which, if not met, result in the termination of the contract. Essentially, a bilateral contract with a contingency in favor of the purchaser turns a bilateral contract into an option in that it gives the purchaser an out if he decides not to purchase the property. Though the two are not legally the same, an option and a bilateral purchase contract with a contingency yield the same practical result. The receiver of the option (optionee) typically pays the giver of the option (optionor) some non-refundable option consideration, that is, money or other value for the right to buy. If the option is exercised, the relationship between the optionor and optionee becomes a binding, bilateral agreement between seller and buyer. In most cases, the option consideration is credited towards the purchase price of the property. If the option is not exercised, the optionee forfeits his option money. An option can be used to gain control of a property without actually owning it: A speculator who is aware of a proposed development can obtain options on farmland and then sell his options to developers. To take advantage of appreciation in a hot real estate market, an investor can use a long-term option to purchase property. To induce timely rental payments, a landlord can offer the tenant an option to purchase. There are literally hundreds of ways that an option can be structured and every detail is open for negotiation between the optionor (seller) and optionee (buyer). An Option Can Be Sold or Exercised

A sublease is a lease by a tenant to another person (subtenant) of a part of the premises held by the tenant under a lease. The sublease can be for part of the premises or part of the time period. For example, if the tenant has a three-year lease agreement with the landlord, he can sublease the rental unit for two years, or sublease part of the unit for three years.

An option, like a real estate purchase agreement, is a personal right that is assignable. If you were able to obtain an option to purchase at favorable terms, you could sell your option. The assignee of the option would then stand in your shoes, having the same right to exercise the option to purchase the property. As with a lease, an option is freely assignable absent an express provision in the option agreement to the contrary.

Assignment

Alternative to Selling Your Option

An assignment is a transfer to another of the whole of any property or any estate or right therein. As with a sublease, the master tenant is not relieved from liability for obligations under the lease. However, the assignee of a lease is in contract with the landlord, and thus the landlord can collect from the assignee or the master tenant for nonpayment of rent. Assignment and subletting are always permissible without an express provision in the lease forbidding the tenant from doing so. As a tenant/ investor, it is imperative that there are no anti-assignment or anti-subletting clauses in your lease with the owner of the property.

Rather than sell your option to purchase, you may wish to exercise the option yourself, then sell the property to a third party buyer in a double closing, as described in chapter five. The Lease/Option A lease/option is really two transactions: a lease and an option to purchase. Under a lease, a tenant may have the option the buy the property. The option itself can be structured in various ways. For example, the option may be that of a right of first refusal in the event the landlord intends to sell the property. The option may also be an exclusive option for the tenant to buy at a certain price.

More on Options - The “Right” to Buy

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When combined with a lease, a purchase option may also include rent credits, that is, an agreement that part of the monthly rent payments will be applied to reduce the purchase price of the property. There are literally hundreds of ways that an option or lease/ option can be structured and every detail is open for negotiation between the landlord and tenant.

Take a Security Deposit. Sellers don't take security deposits, landlords do. Make it look like a landlord/tenant relationship, even if the security deposit is small. Pay the Taxes and Insurance. Do not let the tenant pay the taxes and insurance. This makes it look like a sale. Don't Give Large Rent Credits. The more "equity" the tenant has, the more likely a judge will favor an equitable mortgage. Watch Your Language. Refrain from using the words "credit," "seller" and "buyer" in your agreements. Instead, use the words "non-refundable option," "landlord" and "tenant."

Tips & Strategies Lease/Options can be fun and profitable, but there are certain pitfalls. The following are some practical, legal and tax tips I have learned from doing many lease/options deals over the years. Protecting Your Option Lease/options are great, except when the seller decides not to live up to his end of the bargain. Sure, you can always sue the seller to force him to sell you the property, but this can cost you thousands of dollars in legal fees and take years to accomplish. You need to be in a better position if you want your investment to be protected. Here are three good ways to protect your option: Record the Option. If your option was signed before a notary, you can record your option in the public real estate records. This will give the world public notice of your interest. If the option was not notarized, you can sign an affidavit called a "memorandum of option" and file it in the real estate records where the property sits. Keep in mind that this does not create a lien, it only creates a "cloud" on the title.

Sell Your Option for Capital Gains Treatment If you lease/option, then sub-lease/option, we call this a "sandwich." When your subtenant is ready to buy, you simultaneously "buy and flip." This profit is taxed as ordinary income. If you held the option more than a year, you may qualify for capital gains treatment. Instead of selling the property, sell your option and let your subtenant exercise it directly from the owner. Take A Loss On Your Personal Residence As you may know, you cannot write off a loss on the sale of your personal residence. However, if you lease/option the property you may be able to convert it to a rental and take a capital loss when the buyer exercises.

Escrow the Deed. If your seller has died or disappeared, you will have a big problem getting him to sign a deed. An escrow should be created up front in which a title company or attorney holds an executed deed. When you are ready to exercise, you simply tender the money to the escrow agent and collect the deed. Record a Mortgage. Typically a mortgage is recorded to securepayments on a promissory note. A mortgage can be recorded to secure performance of any agreement, even a purchase option. You as optionee (buyer) will now be a lienholder, in the same position as a secured lender. If the seller refuses to sell the property, you foreclose. Now the seller has to go to court to protect himself, rather than the other way around. Avoiding The "Equitable Mortgage" Tenant/buyers who default on a lease/option do not always go away quietly. Sometimes, they fight the eviction and go into court kicking and screaming, "I HAVE AN EQUITABLE INTEREST IN THE PROPERTY." What they are arguing is that the lease/option is not a landlord/tenant relationship, but rather a seller/buyer relationship. If the Judge agrees, your lease/option is "recharacterized" as an installment land contract. This may require you to foreclose the tenant, not just evict him. Here are some tips for avoiding the equitable mortgage: Use Separate Agreements. Give your tenant a lease and a separate option agreement. Make certain the lease does not refer to the option. More than 75% of the time, the tenant loses his paperwork. Keep Your Term Short. Do not give tenants more than one year lease/options at a time. If the tenant insists on three years, give him a one year with 2 rights to renew. Draw up a brand new lease and option agreement each time he renews. If you give a cumulative rent credit, raise the purchase price each time.

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About the Author: William Bronchick, CEO of Legalwiz Publications, is a Nationally-known attorney, author, entrepreneur and speaker. Mr. Bronchick has been practicing law and real estate since 1990, having been involved in over 600 transactions. He has appeared as a guest on numerous radio and television talk shows including CNBC Power Lunch. He has been featured in Who's Who in American Business, Money Magazine, the Los Angeles Times and the Denver Business Journal. William Bronchick has served as President of the Colorado Association of Real Estate Investors since 1996.

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Call Anthony @ 816-606-0266 or Emily @ 816-252-0095 [email protected]

On MAREI Classifieds Investors, General Contractors, Reo Specialist: Kansas City's Premier Foreclosure & Bank Owned Property Specialists. Full Construction Services. Rehab Specialist. Real Estate Investors. Foreclosure Experts. REO Bank Experienced. Consulting Bank owned Properties. Licensed Realtor On Staff. Over 400 Homes rehabbed Strong. Been in and out of over 5,000 Foreclosures. Highly Experienced. Scott Clifton— [email protected]. Remodeling: T.O.T.L. Renovations is a full service remodeling company specializing in assisting investors in flipping properties quickly. Whether you need to rehab an entire property, complete a quick make-ready, or have general maintenance issues, we can get the job done! We are licensed and insured and have been in the business for 24 years. References from MAREI members and investors outside the group can be provided upon request. Anthony or Emily Culp. 816-252-0095. [email protected]. Hiring a Professional Property Manager...They say imitation is the highest form of compliment. Make sure your property manager in the state of Missouri is a licensed agent under the direction of a real estate broker it is the law! It also helps if they have credentials in the industry, certifications, training, professional accreditation's etc. Liability is one of the biggest problems in owning investment property, insured, licensed, professional property managers differ greatly from an investor who is looking for a sideline while the market is down. In addition if your "property manager" owns investment property, who's do you think they will rent first? http://www.turnkeyproperties.org~ Turn-Key Properties LLC ~ Ben Edsall ~ 816-313-9976. WHOLESALE WITH CASH FLOW. Fully rehabbed Wholesale with Cash Flow in Kansas City, MO. 1374 sq ft - Three bedrooms/two bathrooms - Tenant in Place at $650 monthly. In addition to first floor living there is private living area, bedroom and bathroom on second floor. ARV $56K - Asking $22,500. John. 816-267-0775. [email protected]. Investor special - 2 homes for $30K. Two Homes located side by side, minutes from downtown in KC KS. Both need full rehab. Will sell separately or as a package deal. Call for details. Luke Williamson. : 816-289-3636. Rented property Lead in Hamilton Mo. I have a lead for rental property in Hamilton, MO (off hwy 36 & 13 in Caldwell county) It is a 4 Bed 1.5 bath property asking the upper 40's. This is outside my target area, so if you invest in this area, please contact me for added details. You can email me at [email protected], or check out my website www. sdsrealestatesolutions.biz. Steven Swanson. 816-914-2163. southern calif is back for bank repos 50% discount. calling all investors so.calif is back for buying bank repos!imagine buying a propety for 60,000 and reselling it for 125,000 or for rental purposes get 500.00 to 700.00 cash flow.should you require more details go to our website www.privateinvestorswanted.org. CARLOS JIMENEZ. . 1(866)624-6178.

vices: • Marketing , Showings/Open Houses, Lease Preparation . Collect Rent/Deposits, Applicant Screening, Criminal Background Check, Credit Check , Check Rental History, Verify Employment/History, Move In/Out Inspections, 24/7 Maintenance Service, Handle Residents Concerns. Evictions, Yearly Rental Rate Assessment , $0 Fees On Lease Renewals, Monthly Management Statements, Yearly Expense Statements, “Let Us Do The Work For You" Call Today 816-333-5133 ~ or visit us online at: www.mlhproperty.com. Marsha Hall, marsha. [email protected]. ATTENTION INVESTORS HANDYMAN SPECIAL 40% OFF, Located in a calm peaceful neighborhood in south KC with convenient highway access. Features: 3bed/2bath 2 car garage, Split level, family room, dining room, added great room w/ skylights, hardwood flrs, large deck, and so much more. Home needs minor TLC: ARV:$110,000 Total repair:$7,860 Will sale for:$69,500, BRING ALL OFFERS!!! MUST SELL!!! FOR MORE INFO:816.686.4805, EMAIL:[email protected], Bilal Hazziez. 3 pack of section 8 houses for $85,0000. 3 homes renovated in past 5 years. All rented section 8. See www. TuckerOneProperties.com for more information. Call Joe or Paul at 816-523-4400. Investors Special: Investors Special $36,000, Property Description: Single Family in good condition . 3BR / 2 BA, Built 1953, Huge back yard that is fenced. Appraised at $48K. House across the street sold for $83K, In good condition need minor cosmetic, Only needs HVAC, Jason. [email protected]. $8500.00 72nd & Olive - Great Investment Property! 1Bd/1Ba Bungalow. Had started rehab. Nice Neighborhood. Vinyl siding with new gutters. Will need new roof. All materials on site. But overall in good shape. Will rent for $400.00 a month. Estimated Value-$57,500. Great Equity Potential! A $1500 deposit required with contract. Laura Bullock. 816-5608243.

MAREI members: Be sure to log into the MAREI Member’s area and click on classi fieds to post your own classifieds. Vehicles, Properties for Sale, For Rent, Job Postings. Include your Phone & Email & Upload a Photo.

MLH Realty & Property Management. A Full Service Property Management Company For Owners & Investors. Serving the Kansas City - Jackson County Area. Some Of Our Ser-

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INVITE A FRIEND To a MEETING .MAREI Members do you have a friend, coworker, or person who provides you a service that is interested in real estate investing? Our Next meeting will be an excellent opportunity for a new potential member to check us out. Please cut out or copy this page and provide it to all of your friends who want to attend and have never been to a meeting and they will be able to attend for FREE! If they have attended before, please encourage them to join, it’s only $99 a year and the get access to so much training through the web site. And if they are just not quite ready to join, and they have attended before, remind them that the guest fee at the door is $25, but if they reregister at www.MAREInet.com through the Calendar of Events, they can save ten bucks.

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Free entrance is limited to the October 2008 meeting at the Overland Park Marriott from 6 pm to 9 pm for first time guests. If you have attended before, remember guest fee at the door is $25. Membership is just $99 for one and you can join right now on our web site at www.MAREInet.com! Be sure to bring your business cards and flyers for networking. Don’t forget your note pad, because you will want to take notes during the presentation and take down names and contacts while you are networking. Arrive early and have dinner at one of the fine establishments in the area!

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Referral Based Investing: Part 1 I’m all about getting more for doing less. Not (usually) because I am lazy, but because by spending less time on one thing, it frees me up to do something else that I couldn’t have done otherwise. Or, by spending less on something, it means I have more money to spend on other things. And when you’re talking about motivated seller prospects, more is better. Yet we investors continue to advertise in ways that require us to find and win over new customers over and over again, every time. Think about it — has a seller in distress ever sold you his house, and later, because you did such a great job the first time, decided to fall behind on payments again and sell you another house? It doesn’t happen (with the possible exception of finding a burnedout landlord who wants to dump his entire portfolio on you). This means that time and time again, investors have to run ads, send out our message, build trust, and get people to respond. That sounds like a lot of work, and it is! Ask any business owner... What is easier to do — to win over new customers or to get a repeat sale from the same customer? The repeat sale is much easier because the hard part (ads, message, trust) has been done already. (And, of course, our "customers" are sellers who we buy from, not sell to, but the marketing principles are the same). Running ads costs money and takes time. Over and over again. I want to suggest a different way to generate leads, that isn’t going to be the main method you use, but will probably get you qualified leads for years to come, with a minimal cost. I’m talking about referrals. From whom? Not from people you have bought houses from before. Because even if you did everything you said you would, bought their house on the date of their choice, and even hired a moving company to help them get into their new home in style, Average Joes only know so many people. Motivated sellers are just good, regular people. They hardly know any motivated sellers anymore than you would if you weren’t actively searching for them for a living. Our business is not normal. You won’t find many mailing lists of motivated sellers. There aren’t TV shows made for motivated sellers during which you can run commercials. There aren’t chat rooms where motivated sellers hang out and talk where you can easily find them. This is why I recommend fulfilling your promises to those you buy houses from, but don’t expect them to send a flood of referrals your way. They just don’t come across other people in distress that often, and they frequently move out of state, never to be heard from again. So who can you get referrals from? People in a position where they meet potentially motivated sellers. Think about who they might be. I’m going to name a few types, but I’m sure I’m missing some (or saving them for my next course). So think of the reasons why sellers become motivated, and then think of the types of people who might know about their problems. Wholesalers are obvious, and probably the most consistent producers of referrals since they are actively searching for them every day. And frankly, some of them are geniuses at finding tons and tons of potential deals. How they do it, I’ll never know. Why they don’t fix up and sell the houses themselves, I’ll never know

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(and will never ask). But they find them, so be sure to network with them as much as possible. The only downside is that they will want to be paid, and you might make $5,000 $10,000 or so less than you would have, but so what, as long as your profit is acceptable. Some less obvious types of people to get referrals from are bankruptcy attorneys, probate attorneys, realtors, and the person in charge of loss mitigation in small banks (big ones have call centers for that purpose several time zones away). I’m going to go into more detail later about the means by which you introduce yourself, deliver your marketing message, build a relationship with them, and get them to respond (does this process sound familiar?). For the time being, just understand that it makes more sense to do the work with these people once, with some follow-up from time to time, and have them refer motivated sellers over and over again over time. This will allow you to get more (deals) for doing less (hustling and bush - beating), which, as I said, I’m all about doing in just about every endeavor.

Alan Brymer is the creator of The Assistant Who Pays Their Own Salary and the Founder and President of the Utah Valley Real Estate Investors Association. He has been a fulltime investor since his first property at the age of 22 and has raised millions in private funding. Alan’s investment company was named by the Utah Valley Entrepreneurial Forum as one of the “Top 25 Companies Under Five Years Old.” He is a frequent guest expert for the news media, having been featured on multiple television programs as a real estate expert, published in 12 magazines nationwide, and as a speaker at seminars and associations around the country. In addition to his real estate experience, Alan is an expert at systemizing businesses. Like many, he attended seminars and bought courses but found that while the techniques of real estate are frequently taught, there were no courses that showed how to run a business in the level of detail that he was searching for. He began to develop systems for his own real estate business, which has allowed him to do more deals in less time each month. He has incorporated these into his consulting and is now presenting them as complete systems modules, the first of their kind for real estate investors. MAREI members can log in to our web site and click on Guru’s to access a recent teleconference with Alan Brymer. And to catch part two of this article, please watch the articles page on www.REIClub.com

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Tax Credit Continued (Continued from page 1)

come tax return. No other applications or forms are required, and no pre-approval is necessary. However, you will want to be sure that you qualify for the credit under the income limits and first-time home buyer tests. Any home that will be used as a principal residence will qualify for the credit. This includes single-family detached homes, attached homes like townhouses and condominiums, manufactured homes (also known as mobile homes) and houseboats. The definition of principal residence is identical to the one used to determine whether you may qualify for the $250,000 / $500,000 capital gain tax exclusion for principal residences. The tax credit is "refundable,." which means that the home buyer credit can be claimed even if the taxpayer has little or no federal income tax liability to offset. Typically this involves the government sending the taxpayer a check for a portion or even all of the amount of the refundable tax credit. For example, if a qualified home buyer expected, notwithstanding the tax credit, federal income tax liability of $5,000 and had tax withholding of $4,000 for the year, then without the tax credit the taxpayer would owe the IRS $1,000 on April 15th. Suppose now that the taxpayer qualified for the $8,000 home buyer tax credit. As a result, the taxpayer would receive a check for $7,000 ($8,000 minus the $1,000 owed). For buyers who bought a home in early 2009 and have already filed to receive the $7,500 tax credit on my 2008 tax returns can amended a 2008 tax return with a 1040X form. You should consult with a tax advisor to ensure you file this return properly. For buyers that hired a contractor to construct a home on a lot that they already own, they can stilll qualify for the tax credit. For the purposes of the home buyer tax credit, a principal residence that is constructed by the home owner is treated by the tax code as having been "purchased" on the date the owner first occupies the house. In this situation, the date of first occupancy must be on or after January 1, 2009 and before December 1, 2009. In contrast, for newly-constructed homes bought from a home builder, eligibility for the tax credit is determined by the settlement date. Buyers can still claim the tax credit if they finance the purchase of their home under a mortgage revenue bond (MRB) program. The tax credit can be combined with the MRB home buyer program. Note that first-time home buyers who purchased a home in 2008 may not claim the tax credit if they are participating in an MRB program. If a buyer lives in the District of Columbia, they cannot claim the first-time home buyer credit in addition to the Washington D.C. first– time home buyer credit. Anyone who is not a nonresident alien (as defined by the IRS), who has not owned a principal residence in the previous three years and who meets the income limits test may claim the tax credit for a qualified home purchase. The IRS provides a definition of "nonresident alien" in IRS Publication 519.

A tax deduction is subtracted from the amount of income that is taxed. Using the same example, assume the taxpayer is in the 15 percent tax bracket and owes $8,000 in income taxes. If the taxpayer receives an $8,000 deduction, the taxpayer’s tax liability would be reduced by $1,200 (15 percent of $8,000), or lowered from $8,000 to $6,800. Home buyers may be able to access the money allocable to the credit sooner than waiting to file their 2009 tax return. Prospective home buyers who believe they qualify for the tax credit are permitted to reduce their income tax withholding. Reducing tax withholding (up to the amount of the credit) will enable the buyer to accumulate cash by raising his/her take home pay. This money can then be applied to the downpayment. Buyers should adjust their withholding amount on their W-4 via their employer or through their quarterly estimated tax payment. IRS Publication 919 contains rules and guidelines for income tax withholding. Prospective home buyers should note that if income tax withholding is reduced and the tax credit qualified purchase does not occur, then the individual would be liable for repayment to the IRS of income tax and possible interest charges and penalties. Further, rule changes made as part of the economic stimulus legislation allow home buyers to claim the tax credit and participate in a program financed by tax-exempt bonds. Some state housing finance agencies, such as the Missouri Housing Development Commission, have introduced programs that provide short-term credit acceleration loans that may be used to fund a downpayment. Prospective home buyers should inquire with their state housing finance agency to determine the availability of such a program in their community. If a home buyer qualified for the tax credit and buy a home in 2009, they can I apply the tax credit against their 2008 tax return. The law allows taxpayers to choose ("elect") to treat qualified home purchases in 2009 as if the purchase occurred on December 31, 2008. This means that the 2008 income limit (MAGI) applies and the election accelerates when the credit can be claimed (tax filing for 2008 returns instead of for 2009 returns). A benefit of this election is that a home buyer in 2009 will know their 2008 MAGI with certainty, thereby helping the buyer know whether the income limit will reduce their credit amount. Taxpayers buying a home who wish to claim it on their 2008 tax return, but who have already submitted their 2008 return to the IRS, may file an amended 2008 return claiming the tax credit. You should consult with a tax professional to determine how to arrange this. For a home purchase in 2009, a homebuyer can choose whether to treat the purchase as occurring in 2008 or 2009, depending on in which year the credit amount is the largest. If the applicable income phaseout would reduce your home buyer tax credit amount in 2009 and a larger credit would be available using the 2008 MAGI amounts, then you can choose the year that yields the largest credit amount.

Note that a tax credit is not the same as a deduction. A tax credit is a dollar-for-dollar reduction in what the taxpayer owes. That means that a taxpayer who owes $8,000 in income taxes and who receives an $8,000 tax credit would owe nothing to the IRS.

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Fannie Mae Increases Investor Loan Limits from 4 to 10 Properties Apparently someone somewhere in government has also realized investors, real investors, can make a huge positive impact on the current national real estate inventory, not to mention the national economy. Go figure. Fannie Mae has increased the total number of loans a real estate investor may have in their system to 10. It’d been reduced to 4, which had produced what many, included yours truly had predicted. That is, for government at least, unintended negative consequences. Anywho, if you’d like to read the announcement in full, along with the guidelines, you can read it here.(https://www.efanniemae.com/ sf/guides/ssg/annltrs/pdf/2009/0902.pdf) It’s important to reflect on how this increase came into being. You can bet your last dollar one of the most vociferous groups clamoring for this increase was lenders. Which reminds me of one of my 5 favorite axioms. BawldGuy Axiom: Lenders lend. Once they realize they haven’t made many loans lately, they recall their #1 Rule — If you ain’t makin’ loans, you ain’t a lender. The impact will be almost immediately felt. Already, several Brown and Brown clients will be able to resume their Planned, prematurely (artificially?) halted acquisitions. Bottom line — this is a good thing. For the doom ‘n gloomers out there, not to worry. The bar has been set pretty high. As I said in a recent post (http://www. bawldguy.com/how-to-get-real-estate-flyin-off-the-shelves-againthis-would-help-big-time/), limiting the ability of highly qualified, experienced real estate investors in their quest to acquire some of the excess inventory out there is just plain stoopid. I sense Captain Obvious is groaning somewhere nearby. As you’ll see, their guidelines are far more stringent for investors than the “I think I can” borrowers they’re letting in the front door through FHA. You want an empirical example? Glad to oblige. FHA currently allows home buyers buying primary residences with FICO scores in the mid-600’s. Investors must sport a minimum of 720. Also, even though the home buyer slips by with a sometimes marginal credit score, the down payment required is just 3.5% of the purchase price — over 7 times less than the investor, if the investor falls into the 5-10 property range. (Over 8.5 times the down payment for 2-4 unit props.) The reserve requirement for investors are also more stringent — as they should always be. So for those who think this is a risky move by Fannie Mae (And I’m confident Freddie Mac will soon follow suit.), put yourself in the lenders’ shoes.

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Would you feel more secure with 3.5% down, or 25% down?

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A 660 credit score, or 720+?

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Smaller or larger reserves (Sominex Account)?

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A first time home buyer, or an experienced investor?

Gee, I dunno. A close call for some? Here’s another factoid to ponder. The lenders themselves are selling packages of 20-60 REO’s

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(foreclosed props) to investors and investor groups at monster discounts for cash. These groups are then dollin’ the places up, and selling ‘em to either investors or end users. Now they’ll be able to buy more from the lenders ‘cuz their pool of potential buyers has just exploded. In many cases it’ll be the same buyer who was abruptly halted by the ‘4 prop’ rule. It’ll be interesting to look back on the impact of this guideline change, say around Labor Day or so. The impact on my clients in the next 60 days will be very positive. In one case alone it will mean an immediately acquisition of well over $1 Million in additional property — acquisitions which were already in their Purposeful Plan, but had been artificially stalled by the silly 4 property investor limit. You want further impact? Not a problem. We’ve dealt with several builders the last few years in many states. One literally halted projects when the 4 prop limit hit. Their sales slowed by over 75% almost overnight. Others slowed their building pace, or had to let employees go. I know one who told me they were gonna be forced to layoff employees who’d been with ‘em for 10-20 years — next month. Now? Those workers’ families can rest easier. This one guideline change will save who knows how many jobs across the country — and not just for builders either. A lender we used quite a bit in another state, a bank, closed the doors of its mortgage operation, not too long after the loan limits were reduced to 4. They did much investor loan business — millions with our clients. Four full time employees were immediately unemployed. Their chances of finding a new job is now significantly enhanced. Every full time job lost due to the ill conceived reduction from 10 to 4 represented a family thrown into turmoil needlessly. There are many other examples in related industries. Ironically many of our clients will be advised by us to opt for our portfolio lender’s loans. They’ve been ignoring the ‘4 prop’ rule from day one, as they don’t sell their loans to Fannie or Freddie. They also require a smaller down payment. Not by much, but enough for some investors to be able to buy an extra income property or two. It makes a huge difference in the long run for them and the income produced for their retirement. If you’re already over the former ‘4 prop’ limit, and would just like to refinance some of them, the new guidelines address that also. The maximum loan to value for a refi is 70%. If that fits your situation, you could be a few short weeks from new loans. If you don’t have a lender versed in ‘investor’ loans, and for the record, that’s most lenders in my experience, contact me and I’ll try to connect you with one. Did someone say connect? Let’s connect and explore what your retirement could become with a solid Purposeful Plan. (Says the segue king. ) Your emails are returned within an hour or two if not immediately. I give out my cell number freely. Have a good one. Recent Blog Post from Jeff Brown on www.bawldguy.com.

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Jeff Brown has spent most of his 36 years in the real estate industry helping investors meet their financial goals. Jeff specializes in creating a Purposeful Plan for each client, and then relentlessly pursues each plan’s execution. He began his real estate career while a student, on the home side of the business. However, he soon realized his real passion was for creating and growing wealth. He also discovered the most reliable way to grow wealth is to consistently apply the basics he’s learned over the years. The basics include tools such as tax deferred exchanges, installment sales, and more importantly, knowing when not to implement them. Even more crucial is the ability to use comparative analysis to demonstrate which approach is best for each client. For example, it might be a better approach tax wise for one client to exchange, but for his friend to take a sale and pay the capital gains taxes. The next person might be better off taking an installment sale. The next might be better served simply keeping their property, refinancing it, and buying more. There has been more than a few times when he's employed a combination of many or all of them for one client. Knowing which tool or combination of tools to employ is based upon knowledge of the tax code, the predictable consequences of each approach, and the experience of having ‘been there and done that’. Fantastic results come from solid plans, relentless execution, and never violating the number one commandment: Thou shalt do all things on purpose. Jeff’s favorite result is the reactions he gets when calling clients to let them know they’re now net millionaires.

Monthly Advertising Special Business Card Ad in Newsletter Newsletter emailed to 5000 and posted for year.

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1/2 Vendor Table at Meeting We currently have between 80 and 110 people visiting our meetings each and every month. These are New & Experienced Investors, Local & Out of State, Residential & Commercial.

1 Email Blast of Your Ad To the Database Sent out on date of our choosing with in the other monthly emails. $100 for Package, Prepaid Call 816-523-4400 or email [email protected]

Maybe the most important lesson Jeff has learned is to base each client's Purposeful Plan on their individual situation and financial objectives.

General Meeting Newsletter & Service Guide Our monthly newsletter is the Investment News. All of our MAREI Business members receive a Business Card ad or a monthly $25 credit for a larger ad. The Investment News is currently mailed out in paper version to approximately 320 addresses and handed out at our monthly meetings. We also post our newsletter archives on our web site for any new members or guest to read past articles. Or write an article to be included in our newsletter that will showcase your expertise. We will include your contact information at the end of the article. Cost is currently just $50 for a one page article in the newsletter and posted on the web site for members.

Vendor Expo Each of our General Meetings feature about an hour trade show before the presentation. Please arrive around 6 pm to visit with all of our vendors who have reserved tables. If you would like to have a table at the meeting or would be interested in sponsoring a meeting, please visit the calendar on the MAREI web site for more information. Vendor Tables are $35 for members and $75 for non members or sponsor the entire meeting. Reserve your table through the Calendar online or email us at info@MAREInet. com.

Overland Park Marriott 10800 Metcalf 110th & Metcalf, S of I435 Tuesday March 10, 2009

Lease Options with MAREI member Marck de Lautour Registration, Networking, and Vendor Trade Show open at 6 p.m. See page 4 for more information.