What is Real Estate Asset Protection?

What is Asset Protection and more importantly why do you need to worry about it? Let's define asset protection as implementing a strategy to limit losses from being sued, keeping taxes as low as possible and making sure your heirs receive your estate when you die.

The goals of an asset protection program are privacy, control and protection from liability.
Privacy relates to ownership information of your assets. You want this information to be as private as possible. If you are sued and a judgment is entered against you, you want to maintain control over your assets. Protection from liability allows you to shield your assets from claims against you no matter how large.

Attorney's will look at a defendants assets to make a decision about taking a case or not. If you don't have any assets (in your name) they may decide there's nothing to win so why bother. The key is to own assets in a way that allows you to keep control and profit from them while at the same time keeping them untouchable by others.

Liability insurance is an important element in protecting your assets. Insurance is not asset protection in itself but it provides risk management. A competent insurance broker can help you to decide how much and what type of insurance is appropriate for you.

Owning real estate with the correct entity is important for both protection and tax implications. I have used both corporations and LLC asset protection entities as well as land trusts. The specific circumstances and goals for ownership of each property will dictate how to set up ownership. In some cases you may want to separate ownership from management thus limiting liability to the owner by having the management company interact with the public.

Over the years I have gathered the information that allows me to make decisions about what entity to use for my businesses. Armed with that knowledge I often times use the LegalZoom to set up my corporations and LLC's quickly and inexpensively.

Taxes are also a factor when deciding on how to hold properties. You should spend the money for guidance from an attorney and CPA to ensure you meet your real estate investment protection goals.

The effort you put into your real estate asset protection plan will give you peace of mind that in the event of a lawsuit you have minimized your exposure

Why Investing in Preforeclosures May be Safer than Foreclosures

Pre-foreclosure Investing May be a Better choice than Investing in Foreclosures

The current state of the real estate market has everyone in a frenzy over how to invest in foreclosures. Opportunities to pick up a cheap property seem to be everywhere. A whole new generation of investors want to get involved in buying foreclosed homes. Time to slow down and take a look at investing in foreclosures and show you that preforeclosures may be the better way to go.

There are four different stages to the foreclosure process:(1)before the notice of default is filed-preforclosure(2)filing of the notice of default(3)Foreclosure sale(4)new owner which could include the bank-REO.

There are what I consider some distinct advantages to buying in the preforeclosure stage over the forclosure auction.

First and foremost is that in preforeclosure you know exactly what you are buying. You have worked with the distressed owners and have performed a thorough inspection of the property. You have completed your budget for repair costs and you know how much work is involved.

I hope you have the cash to purchase at the auction. They won't even let you bid until you show proof of the funds. In a pre-forclosure deal you line up financing and in certain circumstances the current lender will work with you.

Title insurance may be difficult to obtain on a foreclosure because the title companies are exposed to additional risk. For instance they can't be sure that the foreclosure process was followed according to the law. Often this is a risk they won't take.

As long as were talking insurance, you may find that you can't get property insurance if it turns out the property has had prior insurance claims filed. With preforeclosure you can find out if the home is insurable before you buy it.

At the auction you don't have any way to negotiate terms and the sale is final. In preforeclosure you have the ability to craft an agreement that meets everyones needs.

In a preforeclosure sale you can help the owners minimize further damage to their credit. That does not happen at the foreclosure auction.

When you buy an occupied property at auction you don't know what to expect from ex-owner. They could tear the house up, squat for months and cost you a significant amount of money that you hadn't planned on having to spend. In preforeclosure you have negotiated directly with the owner and have built their trust in you.

The next question you probably have is how do I find preforclosures to invest in? There are a few different sources for leads on properties but the one that have found to be useful is RealtyTrac. I hope this post has opened your eyes to a different way of looking at foreclosure investing.

Until Next time

Potential Pitfalls When Buying Homes for Sale in Foreclosure Auctions

You should be aware of these issues when Buying Homes for Sale in Foreclosure

Investing in foreclosures is the hot topic in todays real estate market. In fact there is a ton of hype about getting rich quick investing in foreclosures. Don't believe it, you aren't going to be an overnight millionaire. Their are certainly opportunities for investors but you need to be well informed. I want to talk about some of the problems that you may have to deal with when buying homes or other real estate at the foreclosure auction.

When attending an auction to bid on a property you are required to have cash or a cashiers check with you. You will be asked to show the person in charge of the auction in order prove your bidding limit. No cash , no bidding - simple as that. There are numerous ways to come up with the money and we will touch on that in another article. Suffice it to say that bidding at auctions takes a significant amount of cash up front.

When you buy at an auction in most cases you probably won't have the opportunity to inspect the house. Owners of homes that are being sold at auction are under a tremendous amount of stress. They have the banks hounding them, investors trying to contact them all while worrying about where they are going to live. It's highly unlikely that they are going to give you the grand tour. So if you prevail in the auction process you don't really know what you have purchased. I have seen houses that look ok from the outside but when you get in, it turns out the owners were cooking meth in the bathtub. Buyers beware, you could buy yourself the biggest nightmare ever.

Know whats on the title report. There could be tax liens, first or second mortgages and other items affecting the property that would either make the purchase lees than profitable or a downright money losing proposition. Know what you are bidding on. If you don't know how to research the title then contact a title company and see what products they offer to meet your needs. A few dollars spent up front could save you from making a very expensive mistake.

You need to have a plan in place detailing what you are going to do with the property before bidding on it. What's your exit strategy? Will you fix and flip or hold as long term rental. Are you ready to be a property manager? If not, then you will need to find one. Maybe you are buying it for your personal residence. Once you win the bid at the auction you may have a tenant living in it (the prior owner). This might require you to go through an eviction process to get them out. The point here is to have your plan of action figured out up front. The more organized you are the smoother this will go. There will be problems so spend time to prepare yourself.

If the property appears to be good deal, there will be competition bidding against you. Figure out the most you can pay and show up with that amount. Often times people get auction fever and end up paying too much. Don't get wrapped up in the excitement, this is business!

Thanks for coming to the Real Estate Investing for Beginners blog.

Until Next Time