need some help with starting in sellers market - Posted by josh rushing

Posted by Dave Whisnant on June 28, 2001 at 09:43:27:

Thank you for your question. I am not affiliated in any way with Carleton Sheets. I am a full time real estate investor in the Atlanta area. On my web site, I do offer comments on Carleton Sheets’ course, and other real estate articles, but I do state that I am not affiliated with him or his corporation.

I am surprised that you were given the run around on your question, one that active investors are all to familiar with come tax time.

Basically, if you have some other business or profession that is your primary occupation (where you spend most of your working time), your real estate investing activities will be seen as investment activities. Investments will be subject to capital gains, so long as you hold the properties for the required time period.

If you start to do a significant number of deals, or if you primarily do real estate as your means of earning a living, the IRS may reclassify you as a “dealer.” If you are a dealer, you are not able to claim capital gains, and any income you make from flipping properties is seen as income, and is taxed at income tax rates.

Your friends that own more than one property are probably trying to claim that the property is a residence, and as such escape taxes when they sell it. Remember that if what they are claiming is not true, then that is fraud – not good. I wouldn’t suggest that anyone do anything like that, as eventually they will catch up to you.

If you are only doing a few per year, and you have a full time job, you probably are o.k. to take capital gains (provided you hold it for long enough). This will be an issue to hash out with your accountant, and you always need to realize that whatever you claim can be tossed out by the IRS if you are audited.

As you grow, you can develop corporate strategies to minimize taxes like having a corporation that handles your long term rentals, and another corporation for flips. When you sell a long term rental in the long term rental corporation, you should still be able to take capital gains as that business is in the long term rental business, not the property flipping business.

I hope this helps!

Dave Whisnant

P.S. I have an article on tax deferred exchanges that is relevant to this discussion, and other real estate articles. My autoresponder can give you the info you need to access this. Any reader can e-mail me at
wiltshire-properties@getresponse.com No message is needed, it will automatically send out info to you when you press send.

need some help with starting in sellers market - Posted by josh rushing

Posted by josh rushing on June 26, 2001 at 17:26:43:

I live in a sellers market I have no moeny or capital in enything IM just starting out in investing I havent even BOT A HOUSE YET. WHAT TO DO?

Re: need some help with starting in sellers market - Posted by Dave Whisnant

Posted by Dave Whisnant on June 27, 2001 at 10:36:59:

Josh,

It seems like most markets are still seller’s markets in the robust economy we’ve seen over the last few years. This makes things a little tougher, but is nothing that you can’t overcome.

If you truly have no resources, your best bet is to lease-option a property. If you are really strapped for cash, you will probably need to move into the property at first, as the security deposit and monthly payment will be all that your budget can handle.

You will have shopped for a deal below market. Once in the property, you can fix it up (cheap cosmetics only), and put it on the market to sell, or find someone else to assume your contract.

If you put it on the market, your buyer would pay you more for the property than you agreed to pay your seller. Thus, you might agree to pay 100k for the house. If you find a buyer who will pay 115k, you’d keep the 15k as your profit.

If you find someone else to assume the contract from you, your buyer will pay you a larger “down payment” than you gave your seller (which should be a security deposit only), and will give you a higher monthly rent than you are charged by your seller. You would keep the difference. The final sales price that you charge your seller will be higher than what you agreed to pay the original seller as well, so you can profit on the back end.

In terms of finding the right deal, you need to find a target market area, and really learn the prices that homes are selling for. Contact landlords with vacant properties for your intitial deals. They will be eager to rent the property to you and will be more likely to give you an option to buy than a homeowner.

Best wishes! I have written a series of articles that might also be helpful to you in getting started. If you send an e-mail to my auto-responser address below, info on where you can find them will be sent right out to you.

Best wishes,

Dave Whisnant
wiltshire-properties@getresponse.com

Re: need some help with starting in sellers market - Posted by Jimmy Reed

Posted by Jimmy Reed on June 28, 2001 at 12:26:43:

Dave I would like to add to your answer. I would mention that Josh run an ad that says he has properties for lease option, diffrent areas. Then start getting profile sheets on those buyers and how much they have along with areas they like. Then go find lease options in those areas for less than the amount down that your buyers have. Then make the spread. Good Luck Josh, and Dave I would like to get one of your articles also. Thanks Jimmy Reed

Re: Owner’s tax fears :frowning: - Posted by Sandra Collins

Posted by Sandra Collins on June 27, 2001 at 14:55:31:

I recently purchased a Carleton Sheets no money down program and I’m very eager and scared to start. I have one geographical area I want to try the program in. I have spoken with a real estate agent and with Mr. Sheet’s staff trying to get a streight answer on how purchasing properties will effect me in taxes; Specifically speaking, capitol gains tax on quick turn overs & property tax. Can you tell me how this will effect me?

My fear is that I’ll increase taxes owed (e.g. property, income, capitol gain, etc.) and property won’t turn over fast enough. This could get me cought up in using my current home to cover dept.

I have spoken with people that own more than one property. They have had to live on the second property or claim marital separation or sold the second property to avoid some other type of tax penalty. Have you heard of such penalties? I am using the word penalty because I feel any time one is assessed a fee, outside of income tax, for making money, I feel one is being penalized.

Since I found your web site searching under Carleton Sheets, I want to know if you are part of the Carleton Sheets team (e.g., a real estate coach or customer services rep.)?

Thanks in advance,

Sandra