In Parts 1 and 2, we explained that loaning your own money could be a licensed or regulated activity. We also explained that loaning other people’s money for a fee is always a licensed activity. The other risk I see is when investors are doing these loans without the proper protections. Here is a good checklist to follow.

1. Confirm the licensing issues for the kinds of loans you or your pocket lenders are making.
2. Be competent at valuating the property and do so yourself. Do not rely on the borrower’s numbers. Learn loan-to-value!
3. Always use a well-prepared promissory note (loan document). I see many that are not sufficient. You should have one drafted by an attorney, not a title company.
4. Always secure the loan with a trust deed (mortgage). ALWAYS!
5. Always run the loan through a title company or attorney’s office that confirms the recording of the trust deed in the appropriate position! The biggest fraud in real estate is people simply giving others money.
6. I recommend title insurance on all first and second position loans.
7. Oversee the project. Keep in contact with your borrower.
8. Understand how to make modifications to the loan if necessary.
9. Understand what constitutes default and the foreclosure process.

Lending is risky from both a licensing standpoint and protection of funds standpoint. Good hard money lenders understand how to comply with regulation and protect their money. In the next two posts will cover defaults and foreclosures.

Jeffrey S. Breglio, Esq.
Br ... Read More…

In Part 1 we defined various types of loans and mortgages, which you should read if you haven’t. Be clear that making a closed-end, first position loan for the purchase of real estate is a licensed activity. This is where a lot of investors are taking a big risk.

This is because many investors are loaning funds without understanding the licensing issues. And many others are getting friends and family to loan them money. This can put your Uncle Joe or Aunt May at risk as well. While there may be arguments or exemptions that permit making these loans, there are arguments that it requires a mortgage originators license! The Division has broad authority over these kinds of loans!

Just because there are arguments in your favor, does not mean you will be successful if you—or your lenders—are investigated by the Division. If they deem that you have engaged in mortgage loan origination, the fines can be very steep. Before you engage in making or getting these loans from others, you should truly understand the rules and risks, and how to structure these loans correctly. That is beyond a blog post. You should consult an attorney.

In the above examples, I have assumed that the lender earning the interest is loaning his own money. There is a big difference if you are loaning other people’s money in which you make a fee or spread. What you’re doing now is “connecting” a money-lender with a borrower for compensation. This ALWAYS requires a license!

I see this happening all the time ... Read More…

"Oh, my friend, it's not what they take away from you that counts. It's what you do with what you have left." - Hubert Humphrey

As difficult as it might be right now, let's project forward to next year.

Let's cross our fingers and believe that we all get through this donkey of a year that is 2020.

Maybe you have a business that clung to life, and you're headed towards recovery in 2021. You took the PPP, or perhaps the EIDL (or both). Or perhaps you had to take unemployment for a period of time, but are slowly (but surely) getting back on your feet. The economic stimulus checks helped.

But then ... taxes are due.

Uh oh.

Well, don't fear my friend: Janet Behm is here to set your mind at ease.

Let's start with the economic stimulus payments. Those are easy -- they're completely tax-free.

But things get trickier with unemployment benefits. Those are, in fact, taxable income. Depending on your state, you can elect to have tax withheld from those payments ... and if you're currently receiving these benefits, you will need to plan to pay taxes on it (depending on your total income, and other deductions, of course).

For the students, what about student loan forgiveness? Well, it depends on how you are receiving that forgiveness assistance. Employer-paid student loan repayment assistance is tax-free through 12/31/20 (per the CARES Act). Any other student loan forgiveness programs are taxable.

I recently covered mortgage forbearance. This and other debt forbearance program ... Read More…

It feels to me that we're all in need of some good news.

I have some great news for the young (ish) and the old (ish), but before I get there, I'd like to encourage EVERY person who is reading this:

Keep your head in the game.

Yes -- we can so easily get caught up in seemingly nefarious schemes on every side. Whether you are Team ReOpen or Team StayLockedDown ... there are data points and new stories plentifully available to bolster your case.

But what are you doing about what YOU can control?

That's the game right now.

Many people receive these emails that I send out. But of all of them, in point of fact, there might be only a small handful that have actual power to enact change by influencing minds or implementing action.

So, what are all the rest of us doing?

When we argue on Facebook or shake our collective fists at the wind, we are merely creating yet more noise.

Let's raise our game. Let's be the people who pull one another out of the pit and provide tangible help and encouragement.

This is a difficult season for everyone, including our political leaders. Believing the best, let's focus on the things within our control and leave the arguing to the small-minded and easily distracted.

We have better things to do.

Like -- saving money!

First ... some good news for the young (particularly those with student loans):

The new CARES Act indicates that you do NOT need to pay interest or ANY payments on eligible student loans for six months. (!)

Effective 3/13/2 ... Read More…

This article continues our discussion of trusts, specifically the real estate trust. First, only a couple of states, like Florida and Illinois, have true “land” trusts. I won’t get into the legal details on how they are different, as that gets complicated. Just know that unless you live in these states you are NOT using a land trust. This gets confusing as many investors attend educational events where these trusts are taught or sold without distinguishing them.

The rest of us have something a little different. We call these trusts real estate trusts, asset holding trusts, property trusts or the like. They are really just simple living trusts but should be created by a knowledgeable attorney. They are designed to hold title for privacy purposes and facilitate transactions such as wholesaling or even selling real estate.

Trusts are a kind of legal entity (like LLC) that can own things. They can be a named buyer on a purchase contract and be named on county land records. Because trusts are not registered with the state, no one will know who owns them. That’s where the privacy comes in. They do, however, have a trustee (think, manager) who will be named on county land records. So be aware of that.

Wholesalers create these trusts to “pass on” the purchase contract. They can be used to buy seller-financed deals with anonymity. And, they can be used to sell real property without a title closing. Finally and importantly, this trust does not provide any asset protection value s ... Read More…

All investors will certainly hear about the use of trusts in their real estate business. Most investors may encounter these trusts in some way. A few will use them regularly. The fact is, there are a number of different kinds of trust used both in real estate and our personal lives. This set of 4 articles will highlight the types of trusts most commonly encountered by real estate investors. Here we generally cover the 3 trusts used in REI, and then we’ll follow up with an article on each one.

The first one is most commonly called a “land” trust. This is not super accurate! Only a few states actually have true land trusts as they are very specific types of trusts authorized by the state. For the rest of us, we use property trusts, real estate trusts, holding trusts or the like. These are simple revocable (changeable) trusts designed to simply own real estate—either by contract or title. These trusts are used for privacy purposes and to facilitate many REI transactions.

The second trust is the standard family living trust. This is a much larger and complicated trust as it’s designed to define, control and allocate your assets after you pass away. You can think of this trust as a traffic copy, directing things when you can’t. You should work with an asset protection attorney to create your family trust because this should be part of your overall asset protection plan and work with your other protection vehicles, like LLCs.

The third trust is the asset protection trust. Thi ... Read More…

Anytime (like now) that there is a rollout of government assistance, you can count on two things:

1)    Bumps in the road (it's hard to manage many millions of people needing help)

2)    SCAMS

I haven't yet heard of any of my clients or friends being taken in by this stuff, but I did want to alert you to this dynamic.

How to make sure your check is the right check.

Most of the Economic Impact Payments (i.e. stimulus checks) have been direct deposited by now. So if you have NOT received it, you might want to check the status using the tool the IRS has set up here:

https://www.irs.gov/coronavirus/economic-impact-payments

Some who did not set up direct deposit, or for other reasons, might receive a check instead. That said, a couple things to note:

First, as with tax refunds issued by check, there's always the possibility that crooks could steal the relief payments from their curbside mailboxes.

Second, some scammers have created fake stimulus checks. This is the latest variation of the bogus government payment scam that's been around for years. Criminals send fake checks to their scam victims, advising them to quickly deposit the checks. Then the second part of the scam kicks in, with the crooks telling their prey that the checks are too large.

Since they "got more than they were due", the recipients of the fake checks need to send back part of the money. Yep, send the alleged excess back to the crooks who issued the worthless counterfeit checks in the first place! ... Read More…

 Learn more about tenant screening and grab a discount to get set up with RentPerfect at www.MAREI.org/RP

 Learn more about tenant screening and grab a discount to get set up with RentPerfect at www.MAREI.org/RP

 
Learn more about tenant screening and grab a discount to get set up with RentPerfect at www.MAREI.org/RP