208: Season Two Wrap Up and What’s Coming in Season 3
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Episode Transcript
Welcome to Episode Eight of Season Two of The Growing Empire Show. Today we're gonna wrap up Season Two and talk about what you can expect for Season Three, so stay tuned.
00:10
Welcome to Growing Empires hosted by real estate entrepreneur and trusted investment advisor Jennifer de Jesus. Growing Empires provides insight to building wealth through passive income producing real estate investments for those who want to build and manage a more profitable real estate portfolio.
00:29
So Season Two turned out to be an awesome season. We talked about the real estate potential of the Lehigh Valley and went very in depth with facts about the Lehigh Valley what makes it unique, what makes it attractive to investors and how to really capitalize on investing in this local area. In Episode Two, we talked about how to buy for cash flow and appreciation, things that you need to know about it, how to buy those proper value add properties, how to make sure that they're successful, and the things that you need to know to avoid when investing in the Lehigh Valley. Episode Three was my special guest interview with Tejas Gosai. And we really went in depth on the facts about the Lehigh Valley market and things that we experienced from the broker side of the transaction. Episode Four was about Empire Capital Fund and why you should invest in a hedge fund, and if it's right for you. Episode Five was all about negotiating deals in the Lehigh Valley, and we really talked in detail about how to win deals. So if you haven't listened to that episode, I certainly urge you to do so. Of course, we ended the season with our question and answer segment as well as our Mythbusters episode. So I really hope you enjoyed all that season two had to offer.
01:45
Season Three is shaping up to be my most favorite season of all. Why? Because we're talking about money - one of my most favorite topics - how to win the money game. I’m fortunate enough to work with so many very smart, very sophisticated investors. And I'm constantly learning myself about creative ways to invest your assets. We are always talking about strategies and tricks or tips, I should say, to keeping the most cash in your pocket. And there's so many ways to do that when you're talking about real estate investing. There's creative financing, there's specific things that you can do with certain local banks here that allow you to really maximize your finance ability, your leverage, and again, keep most of the cash in your pocket. We're going to talk about whole life policies and the benefit for investing some of your assets in those. You're going to get to hear my special guest interview - it's actually a two part episode - with the 1031 corporation. And this is a company that I've done a tremendous amount of business with - they are so professional and so amazing. And one of my favorite topics about real estate in general is being able to defer capital gains with the use of a 1031 exchange. So Cindy, and I go in depth in Episode Two and Episode Three, where we're talking about everything that you need to know about how to complete a successful 1031 exchange. So I really hope that you look forward to season three as much as I do.
03:19
And let's get into a little bit about some of the things that I get asked in regards to money in general and how it pertains to real estate investing. So one of the questions that I get asked a lot is when to use cash or leverage and how do you know which one is right for a deal? And this is really a great question, because it really depends on the deal. You know, you've heard me say in previous episodes, that cash is no longer king. And that is true for a lot of real estate deals. You don't necessarily win the deal anymore, because you offered a cash deal. But there are some times when it absolutely is the right thing to do. And it really goes to: who is the seller? what is the property? what is their experience? If you're going into a situation where you happen to potentially know what their experiences with a particular buyer, maybe they were on and off the market went under contract, the contract fell apart, and now they are back on the market. Especially if that deal fell apart for financing reasons, you're going to find that offering them cash is going to allow you to kind of take advantage of the negative situation that they had previous and likely that cash offer in that situation is going to allow you to potentially get a better deal. So I do think it's important that before you actually offer on a property that you have your real estate broker or agent, a little bit due diligence, and try to find out any history on the property - whether it's on or off market, and anything that the seller may have previously experienced so that you can use it to your advantage when negotiating the best deal. The proper time to use leverage is to spread your money. And it really is not so much deal specific as it is an overall concept of, again, how to keep the most amount of money in your pocket. I am an advocate of leveraging properties to the best of your ability. First of all, in investments, you never have to worry about over leveraging today. Appraisals are a fact of our of our industry. And there is always going to be a third party assessing the value of the property and making sure that the bank is protected, and that you're not over leveraging. And most banks are going to only give you 75 to 80% of the value of the building anyway. So you should know that that means that when you're going into these investment properties, you already have some built in equity, which gives you a little bit of a foundation to get going on your investment property and turning it around and capitalizing on some of that cash flow, or stabilizing the property if you need to. So again, I come back to - I'm a really big advocate of leverage. And unless there's a specific situation, and it's very few and far in between where cash really is going to be the difference between a good deal and a great deal, I would highly suggest that you use leverage, but you really do need to shop around. And please feel free to reach out to me if you ever need any contacts or connections to any lenders. We have a lot of great lender partners that we work with, and I'm hoping that over the next couple of seasons, you get to meet some of them with special guest interviews. But I'm always willing to connect you to help you really maximize your leverage potential. Because I think it's such an essential part of winning the money game.
06:49
And you know, I use the analogy before that, you know, let's just say I have $100,000 and I spend $100,000 to purchase a property. Well, I don't have any more money left. But if I use that hundred thousand dollars, and I leverage that hundred thousand dollars, I may have been able to buy four or five properties, maybe less, but I certainly have more than one. To me, that's a win win scenario. And I really can't think of any specific reason why that would not be a win win option for you. I think it's pertinent for you to know everything that you need to know about tax strategies. You need to have a good accountant to make sure that you are taking advantage of all the things that you can depreciate leverage, and defer as far as capital gains. You need to make sure that you are really sophisticated in this particular topic. And you know, if you need connections, again, I'm happy to connect you with an attorney with an accountant or anybody that you particularly need. But having a really good accountant on your side to really help you maximize your income and your profitability is key to winning the money game. If you are into real estate investing, and you are still doing your own taxes, or doing them online, I urge you to stop and I urge you to get in business with a great partner, a great accountant, and somebody that can really help you maximize your dollars. That is such a key piece of winning the money game.
08:19
The episode will continue in just a moment.
08:23
As a real estate investor, understanding the nuances of the market is critical to sourcing the right property for your portfolio. Knowing what the market will support in terms of lease-ability and potential rental income is a vital part of that equation. You want your property to be in good condition and in a location that's attractive to high quality tenants. If you wish to acquire a property that becomes the gem of your portfolio, you're going to need help to do it right. The good news is you have a great resource who can help you slice through the challenges of finding your ideal property. And that's me. So whether you're just getting started and are unsure of which market to start with, or whether you know the market but can't find the right property, I can help visit growingempires.com and schedule a call with me today. One simple conversation can help you avoid wasted hours, days and weeks. And also help you avoid costly mistakes that will weaken your portfolio schedule that call with me today at growingempires.com. That's g-r-o-w-i-n-g-e-m-p-i-r-e-s.com. And I'll make sure that I help you find that home-run property to add to your portfolio.
09:25
And last but not least, I really think it's important for you to make sure that you are protected. Because the more money you make, and the more successful you are in real estate investing, the more people watch you and the more properties you own, the better you have to protect yourself. One of the questions that I commonly get is should I purchase in my name or should I purchase using an LLC? And while that's not really a question that I can answer for you and you really do need to seek legal advice - what I can explain is what I do and why I choose to do what Ido. I am I'm an advocate of buying everything that I own in an LLC. I do not own anything in my personal name for a couple of reasons. One, I don't want anybody to have my information. I don't want anybody to know who owns what property. So being able to purchase an LLC allows me to a little bit of a shield, giving the general population a little bit harder time to actually try to locate me or find me. Second is, I want to protect my assets. And the reason that I invest in and I purposely purchase everything in an LLC is because I want to diversify my risk. That is the number one reason. Diversifying my risk to me means that for every LLC I own, if I were ever to get sued, the person suing me could only really capitalize on the value of whatever that LLC owns - they cannot touch my personal assets, they cannot touch my personal home, they cannot touch anything that I own with my family. So when you have individual LLCs, if somebody goes after and sues you, let's just say they trip and fall on your property, they can really only sue the value of that LLC. And to me, that's a lot of risk protection that I'm willing to take. And it does come with a price. I mean, there's no question about it - to set up an LLC, there's a cost involved. And there's no doubt about it that come tax time, creating returns for each individual LLC is a little bit more complicated and a little bit more costly. But to me that cost is nominal when you compare it to the risk that you have, the more properties that your own. So again, I can't really give you any legal advice, I can point you to the people that can give you that legal advice, but what I can tell you is that my personal opinion is you want to protect yourself, you want to protect your assets, if you're working hard to win the money game, and you're working hard to be successful, potentially creating a platform for your family to live off of and for you to retire off of and to provide things for your children, your grandchildren and whoever else you want to take care of, I think it's really important that you take the extra step to protect your assets and protect your your nest. Okay. And I find that purchasing in an LLC is really the way to go about that. Now, when it comes time to make an offer on a property, perhaps you don't have the LLC set up. And that's okay. You don't necessarily need to have it set up as long as you use an assignment clause in the contract. And the assignment clause really just states that you yourself are going to buy the property or you're going to assign the contract to an entity that you own prior to settlement. And that assignment clause will allow you to adjust the contract prior to settlement, so that the person or the entity that's purchasing the property is the entity that then is recorded as the new deed owner. And that will help you avoid any kind of like extra transfer taxes and stuff like that. What you don't want to do or I should say not that you don't want to do it. But what — something that you want to consider is I've actually heard people say to me, “Well, I'll just buy it in my name, and then I'll transfer it to an LLC later.” Why would you do that? Because although I understand why you want to do it — do it ahead of time, get prepared, talk to the people that you need to talk to before you purchase the investment properties. Because if you wait until the property is transferred into your name, and then you want to transfer it again to an LLC, you are subject to transfer tax again in the state of Pennsylvania, and is essentially wasting some of that money that you were trying to keep in your pocket. So I urge you to if you're going to set up LLCs to get them set up as soon as you possibly can. But you certainly want to make sure that they're set up and formed prior to closing so that you could take the title in your LLC entity’s name. And something that you also need to know is don't wait till the last minute because any title company or any attorney that's hosting a closing for you or a settlement is going to need those LLC docs prior to closing. They need to physically verify your entity, EIN number. They need to verify that it was that you have an operating agreement in place, they're going to need all of that information. And they're going to need your Certificate of Formation as well. So in the event that you're going to set up an LLC, and potentially it's after contract time, do it as soon as you possibly can. The filing does take a couple of weeks. So you're going to want to make sure that your entity is formed and all of your documents are received long before you go to closing so that you can purchase in an LLC name. The rest of Season Three is going to be an absolute blast and I really, really hope that you enjoy the content. Please don't forget to submit your question and answers for the question and answer segment and I look forward to speaking to you soon. Until next time, take care.
14:52
For more information about how Jennifer can help you plan, develop and manage a strong real estate investment portfolio visit growingempires.com