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Breaking News: Proposed CA Bill Would Impose 25% Gain Tax, Plus Time Restrictions on House Flippers

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Image from Pixabay

By Stephanie Mojica

Alleging that house flipping is preventing average people from buying a home, a California Assembly member has proposed a law that would require short-term real estate investors to pay a 25% gain tax, according to CBS 8.

If passed, the California Housing Speculation Act would start on January 1, 2023. The Assembly member behind the bill is Democrat Chris Ward from San Diego County’s 78th District.

There is an “influx of short-term investors trying to get into the market, outbid San Diegans and Californians with all-cash offers, and drive the prices up for everyone,” Ward told CBS 8.

The Assembly member also cited concerns with California housing shortages making it difficult for people to find affordable housing.

Norm Miller, a real estate professor at the University of California, San Diego, said even if the law passes the odds are still favorable for real estate investors.

Investors will still get “unlimited tax write offs from the mortgage interest and the property taxes,” Miller said. “[They’ll] also get depreciation, which is something an owner does not get on their own personal residence.”

To voice your opinion on Chris Ward’s bill, call his office at 619-645-3090. Visit https://findyourrep.legislature.ca.gov to find the contact information for your representative and call their office as well.

Use it or Lose it: The Countdown for Year-End Tax Planning Begins…

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Welcome! You are invited to join a webinar: Use it or Lose it: The Countdown for Year-End Tax Planning Begins…. After registering, you will receive a confirmation email about joining the webinar.

Where did the year go? With 2021 coming to an end, are you prepared from a tax strategy standpoint? It’s no secret that saving taxes accelerates wealth and compresses your time frame towards financial independence. But what are the best strategies to accomplish this? And when should it be implemented? Tax consultant and Real Estate industry specialist, Tony Watson of Robert Hall & Associates will share the best tax-saving strategies that investors should know. Some of the topics he’ll discuss are:

  • Why is it important to know my tax situation by the end of the year?
  • What is a W4 review?
  • Top 5 tax write-offs
  • Deductibility of mortgage interest: how much does it really save?
  • Do I have to make estimated tax payments?
  • 401K/IRA vs. self-directed IRA/Solo 401k
  • Understanding President Biden’s wish-list of tax changes

Register now!

To learn more about Robert Hall & Associates, visit: www.roberthalltaxes.com

Dec 2, 2021 01:00 PM in Pacific Time (US and Canada)

Got Taxes?

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Photo by Karolina Grabowska from Pexels

By Bruce Kellogg

Dealing With Taxes

Most people, including investors, need to deal with income taxes. Many prepare their own returns manually or using purchased software programs. Others trundle down to franchise tax preparation offices with their brown bags of pay stubs and receipts. (Hah!) Some have their own CPA or EA (Enrolled Agent) prepare their return for them. Everyone here tries to be frugal, to minimize their tax preparation expense.

What often is missing is “Tax Strategy”, which can vastly overshadow the supposed benefits of filing parsimony. For example, Tony Watson (EA), of Robert Hall & Associates, spoke at a recent investor meeting of 323 attendees regarding the features of the just-enacted CARES Act. One feature will allow certain taxpayers to go back and amend prior returns to receive a tax refund. Will the tax software company, or the franchise tax preparer, or your CPA or EA, contact you to alert you to this taxation tactic that could produce thousand$? Right. Not hardly.

Tony Watson, EA

Tony Watson is an Enrolled Agent who focuses on providing personalized financial guidance and tax preparation services to individuals and businesses. As a federally-licensed tax practitioner, Tony helps his clients make sound financial decisions, and works to ensure all eligible deductions are received when preparing taxes. Should a client need assistance with audits, collections, or appeals, Tony is empowered by the U.S. Department of the Treasury to represent taxpayers before all administrative levels of the Internal Revenue Service. In addition to his one-on-one client work, Tony Watson is the keynote speaker for Robert Hall & Associates. He speaks on various tax-related topics at over 200 engagements throughout California each year. His dedication to his clients and expertise in the field of taxation led him to win the Glendale Readers’ Choice Award for Best Tax Preparer in 2016, and 2019. Tony loves tax work!

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Photo by olia danilevich from Pexels

Hiring a Tax Professional

Investors who view their property ownership as a business often create entities like Limited Liability Corporations (LLC’s), or partnerships or corporations of various kinds. Even with individual ownership there are good reasons to hire a tax professional. Here are several.

  1. Small errors that you make can result in large penalties.
  2. You could miss paying quarterly estimated tax payments, or underpay them, and owe additional tax. If you expect to owe $1,000 or more when you file your return, you should file for your estimated taxes, according to Tony Watson.
  3. If you have employees and practice withholding of employment taxes for federal, state, and local, including Social Security and Medicare, you need to timely file and pay both the employees’ and the business’ payments.
  4. Filing late has penalties.

A personal illustration is the author’s son. Age 36, he owns a consulting business that grosses $210,000. He pays his accountant $3,500, and says he saves four times that compared to filing his own tax return. The savings comes from the tax strategy that the accountant provides. That’s where the high dollar benefits come from, strategy. That’s the big benefit from hiring a tax professional.

Following up

Interested readers can follow up by going to https://www.roberthalltaxes.com/contact/ and setting up a complimentary initial consultation.

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Bruce Kellogg

Bruce Kellogg has been a Realtor® and investor for 38 years. He has transacted about 800 properties in 12 California counties. These include 1-4 units, 5+ apartments, offices, mixed-use buildings, land, lots, mobile homes, cabins, and churches.

Mr. Kellogg is a contributor and copy editor for two national real estate wealth-building magazines: Realty411, and REI Wealth Monthly. He is a recipient of an Albert Nelson Marquis Lifetime Achievement Award, listed in Who’s Who in America – 2019.

He is available for consulting with syndication, turnkey, joint-venture, and other property purchasers and note investors nationally, and other consulting assignments. Reach him at [email protected], or (408) 489-0131.

Overcoming The Unknowns of Texas Tax Deed Sales

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By Arnie Abramson

Texas has a thriving economy, population growth and an incredible rental market.  It also has a tax sale structure that is very, very investor friendly, which makes it very attractive to tax lien and tax deed investors alike. But sometimes people don’t profit as much as they could (or may even lose money) because they don’t understand all the nuances of investing in Texas tax deeds.

For example:

Texas is a tax deed state and when you buy a property at the auction it is a judicially caused foreclosure and you get a deed to the property.  You buy the property – not the tax lien. 

The auction bidding starts with the amount owed for taxes plus administrative charges, and the price of the property is bid up from there.  The winning bidder gets the property but the former owner has the right to buy it back, or redeem it.  The redemption period is either 6 months or 2 years, depending on whether or not the property is a homestead, mineral lease or has an agricultural exemption. But, regardless of the duration of the redemption period, it is unlikely that a title policy can be obtained prior to 2 years.

If the previous owner or lien holder does redeem the property, they must pay the investor their costs plus 25% if they redeem in the first year, and 50% if in the second year.  This is a penalty, not an annualized interest rate and it is not prorated, meaning that if they redeem it the month after you buy it you get the entire 25% profit.

Therefore, it is best to buy the properties and rent them out at least until the 2 year period is over.  While this is what we do for our clients, and their returns are almost always in double digits, there is one BIG CATCH!

Until you buy the property and are the owner, you are not allowed to disturb the occupants of the house and it is deemed trespassing if you do (Remember, this is Texas-you do not want to trespass).  What this is means is, THERE ARE SEVERAL UNKNOWNS ABOUT THE PROPERTY UPON WHICH YOU MAY WANT TO BID!

IS IT OCCUPIED OR VACANT?  It is very easy to be fooled when the neighbors park a car in the driveway, cut the lawn, and maintain the outside appearance.  I started buying tax sale properties in Texas in 1992 and I have been fooled by neighbors that do not want to “advertise” a vacant house on their block.

WHAT IS THE CONDITION OF THE INSIDE OF THE HOUSE?  This may be the most important unknown of all.  From the outside, you may not know whether it needs $1,000 worth of work or $30,000, or even more.  Remember, you are advised not to knock on the door and ask to see the inside of the house.

WHAT WILL IT RENT FOR?  MLS, Zillow, etc. are not always accurate.  Remember, you do not know when it was last refreshed, rehabbed or even if everything works.  Many investors do not list their houses for rent on MLS so they are not always so accurate either.

WHAT WILL BE YOUR TOTAL OUT OF POCKET COST?  How would you know if you do not know how much rehab is necessary?

WHAT WILL BE YOUR CASH FLOW AND ROI?  Let’s see, if you do not know how much it will cost you nor what the rent will be, it might be pretty tough to know how much cash flow you will have and what your return will be.

Let me summarize with a question.  WHEN WAS THE LAST TIME YOU BOUGHT A HOUSE WITHOUT YOU OR ANYONE YOU KNOW SEEING THE INSIDE?

The correct answer usually is NEVER!

So, we now know some of the unknowns that can burn you, how are they overcome?

SIMPLE.  GET SOMEONE ELSE TO BUY THEM FIRST SO YOU CAN TURN THOSE UNKNOWNS INTO KNOWNS!

THATS EXACTLY WHAT WE DO FOR YOU !

In fact, that is so simple we call it the TEXAS 2-STEP FOR TAX SALES !

STEP 1.          WE BUY THE PROPERTY

STEP 2.          WE OFFER IT TO OUR INVESTORS AFTER IT HAS BEEN INSPECTED, REHABBED AND RENTED.

Guess what?  You then know that it is occupied, rented, what your total out of pocket cost will be and what your cash flow and return is.

It is completely TURN-KEY!  We do all the work for our ”priority members”.

Other programs offered or to be offered starting in January are:

All day workshop teaching about and how to purchase tax dees in Texas.

Learn and Earn program that pays you while you learn.

Sharevestor for smaller investments to partner with us.

List of services to do what investors want to outsource.

Arnie Abramson

Before becoming a Texas real estate investor in 1991, Arnie Abramson had successful careers as a financial planner and Vice-President of Marketing for a national real estate management company that marketed public Real Estate Limited Partnerships.  He began buying houses at Sheriff Sales in 1992 and has been an investor, landlord, mentor, educator, speaker and property manager for over twenty years.

Arnie is a national speaker on Texas tax deed sales and is the Texas provider for tax deed purchases for several of the national tax lien gurus seen on the Internet.  He is past president of the Texas Real Estate Investors Association (TxREIA), on the Advisory Board of several REIAs  and was a co-founder of the REI EXPO.

His company, Texas Tax Sales Resource Group LLC, HAS THE ONLY COMPLETELY TURN-KEY PROGRAM THAT COVERS THE ENTIRE STATE OF TEXAS.  This includes the research, due diligence, previewing, bidding, inspecting, rehabbing, renting and management of the properties purchased at the Texas tax sales.

Arnie was a speaker at the recent Lone Star Real Estate Expo in Texas and will be participating in future Realty 411 Expos in the near future.

For more information, contact Arnie Abramson or visit the website at www.txtaxsales.com.  His direct email is [email protected]

Tools of the Trade For Tax Lien Certificate and Tax Deed Investments

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By: Ted Thomas

Tax Lien Certificates are the perfect investment vehicle for everyone that wants a low risk and the safety of investing with the government. Tax Lien Certificate and Tax deeds don’t require years of study, and a person can start with less than $500. There are numerous tools; some are basic some are advanced, that a person needs to learn. It’s all very easy and can be accomplished in 3-4 weeks.

Basic Research Tools

The more you know, the better off you will be when it comes time to attend your first auction and start bidding on Tax Defaulted properties. As I’ve mentioned before, the essential information is knowing the who, what, when, and where.

When it comes to finding this information, you have several options. One is to refer to my course materials such as the Comprehensive Tax Lien Directory, Complete Tax Deed Directory, and my Platinum Tax Lien Certificate and Tax Deed Directory software on flash drive.

These days, using a computer is another great way of gathering information. Many counties now post the list of delinquent properties on a website along with the bidding requirements, the date and time of the auction, etc. online.

For the data you cannot find elsewhere, it’s helpful to give the appropriate agency or person a call, so obviously a phone is an important tool.

Transportation is another big one. Whenever possible, you will want to drive by any parcels you are considering purchasing. While you’re there, take pictures of the property and add them, along with your written notes, to a notebook (or other type of device/recordkeeping system, such as a iPhone, laptop or iPad) entry. Don’t rely on your memory to supply the details at a later date.

A final basic tool that everyone needs is time. Don’t rush into a deal without having completed the proper research. Take the time to delve deep into the specifics of a parcel before buying. Do your homework and determine if there might possibly be an environmental contaminant on the property, other liens that will compete against the property tax lien, zoning restrictions, etc.

To recap, the basic tools you need are:
– A directory of tax lien and tax deed offices
– Computer
– Phone
– Vehicle
– Camera
– Notebook or Software
– Time

Advanced Tools

In all cases, you will need to do research on the parcel going to the defaulted auction. Many times the list of properties you obtain includes little more than a tax ID number, perhaps a legal description, and the amount of taxes in arrears. For most of us, that’s not enough to determine if a parcel has any value. You need to get an address so either you or someone you are partnering with can do a drive by; the owner’s name is a big help, too.

In order to get that missing data, the best place to start is at the county office (usually either the Treasurer or Assessor). They may have a cross-reference tool you can use free or pay a small fee for.

There are sites online that aggregate this data. One is Bid4Assets.com.

Human Resource Tools

Not only do you need tools to help you with your tax lien certificates and tax deed investments, you need people, too. These people are your partners who function in a variety of ways to help you with the things you can’t do or can’t provide.

Knowing an attorney you trust can be a lifesaver. He or she will come in handy to advise you on various laws and possible action you can take to defend your assets against worst case scenarios.

A realtor is vitally important. A good real estate agent can give you comparable values, give you an assessment of future values in a particular area, and also easily dig up information on a property that you might have difficulty getting access to.

A home inspector and appraiser are two more human resources that are handy to have available when you need them. After you’ve brought your property, they can help you assess current condition and provide their estimate of value.

And finally a group of people who are willing to provide funds for your investments is always helpful, particularly if your capital stash is limited. Often the difference between getting a great deal or not depends on whether or not you’ve got the cash when you need it. At the Ted Thomas 3 Day Auction Preparation workshop we will show you how to get access to funds to do your Tax Lien Certificate And Tax Defaulted Property deals.

When it comes to being successful with tax lien certificate and tax deed investing, remember that old adage, “to be forewarned is to be forearmed.” There are many tools available and you would be wise to use each and every one.

Remember, too, that you are not going it alone. Join our coaching call every Wednesday night and learn from those who have been there, done that, and made great profits! Our Coaching calls are usually offered as a bonus with my many of my home study programs.

Ted Thomas

Ted Thomas is famous for showing newcomers and investors how to earn 6 figure incomes within 1 year of completing his training program. Conservative investors love tax lien certificates because they are predictable, certain and secure and sold by local government. Tax defaulted properties are sold at oral big auctions and online. Starting bid, only the back taxes…. More information at www.TedThomas.com