Friday, March 31st, 2017

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What Investors Should Really Know About the New Stimulus Tax Credit

IRS Stimulus?So, as you likely know already, it was signed into law on Nov. 6 that not only extends the $8,000 stimulus tax credit for “first-time” home buyers until next spring, but also provides a $6,500 tax credit for some current homeowners who buy another home.

While a lot of folks are interested in taking advantage of this, the extension has also whipped up a good bit of confusion.

And frankly if you’re an active-market investor you should absolutely be on top if this, making sure good and well that you understand not only it’s implications, but how to make suitcases full of cash from it.

Here, Let Me Help Out…

First off, here’s two great articles you can skim to get the basic mechanics and nuts & bolts of this…

Read those and you’ll understand the tax credit extension about as good as any Realtor off the street. Now to go a step further and see this thing through a savvy investor’s eyes you’ll want to seriously consider…

Getting in Front of the “Feeding Frenzy” to Come…

In case you missed it, right before the tax credit extension was announced , we had kind of a little  mini “feeding frenzy” of buyers everywhere who decided to go ahead and buy a house — motivated of course in large part by their fear of missing out on that nice $8,000 check from the IRS.

And who the heck can blame them?!?  For most it’s tantamount to a refund for most or all their down payment shelled out!

Of course, shortly after the renewal was announced, things cooled down again.  Now folks realize they can relax a bit — at least until spring, when it’s set to expire again.  And it doesn’t take a rocket scientist to connect the dots that as the Spring buds start peeking out, buyers will have every reason to start getting all hot and heavy again…which will spell big money for savvy investors who acquire some solid inventory just ahead of it.

Getting an Extra $8,000 For Every House You Sell…

Realize the investor opportunity surrounding this isn’t just about jumping in front of the action.  I’ve also recently come across another tactic fellow investor Tony Severino just enlightened me to: Getting the IRS to send YOU the buyer’s $8,000 for every house you sell right now.

Here’s a short article he wrote that hints a what he’s doing.  But Thursday night I’m going to really pull the curtain back with him.  I hope you can join us…

Creative Investors and the Renewed First Time Home Buyers Tax Credit

Tony Severino

By Tony Severino

By now everyone has heard that the 1st Time Homebuyers Tax Credit has been extended. And while this is a great tool for traditional home buyers and Realtors, it’s an even better tool for the Creative Investor.

There are several reasons for this, and one of them is actually pretty ironic…

First Time Home Buyers (NOT!)

You see, as investors, we can use this program to sell our houses at full retail price in as fast as a few weeks. And the fact is, we can sell these houses to almost anyone.

Why? Because nowhere in the IRS code does it indicate that the buyer must have never owned a home! That’s right, buyers who currently own a home may even qualify for some of the cash that will come from the IRS.

Whether this was intentional or a big fat mistake, it is what it is.  And it really majorly opens up the playing field in terms of who can benefit from it.

Getting Your Own Stimulus…Over and Over Again…

Here’s another reason it’s such a great things for us: As creative investors, it is actually possible to even have the IRS send a check to YOU through your accountant to be used as a down payment on a house that you sell to someone who qualifies for the tax credit.

Let that really sink in for a moment…

You can have the IRS send an $8,000 check to your accountant that he or she can then deposit directly into your account as all or some portion of your buyer’s down payment.  I’ve done it well over a dozen times now and plan to continue right up until the time this thing expires.

An Example…

Let’s say you are selling a house through a creative technique — for this example, let’s use a Land Contract.

On July 2nd the IRS allowed creative sales like the Land Contract (a.k.a. Contract for Deed) to be included as a form of a sale for the 1st Time Homebuyers Tax Credit.  So yes, it definitely qualifies.

So we sell the property to our buyer using a land contract — easy enough.  Now using the 1st Time Homebuyers Tax Credit, we can then have the IRS send our accountant an additional check for up to $8,000 that we will use as an additional down payment.

What I mean by an “additional” check is that the buyer puts his/hercash down (this is not a no money down deal for them) and then we get a second check from the IRS that we all agree is to be used as a supplement to the down payment.

Now I am not an accountant — which is exactly why an key part of our team is an accountant who really “gets it”.  He creates and fills out all the paper work the IRS needs to be able to have my buyer’s nice 8,000 check get sent to him!

Now when he gets the check, he simply calls me up and says “Hey Tony, we got another check for you!”  and we proceed to deposit it into my account.

Any accountant could actually do this for you, but the fact is most don’t “get it” on their own.  They not only mistakenly assume that it is only for the buyer, but that it can only be done in 2010 when they file their 2009 tax return.  Not true!  Anyone ever heard of an amended 2008 return?  😉

Clearly this is not the kind of accountant we want on our team. This is a killer tactic, but you must have an accountant who “gets it” on your side.

My 4 Paydays…

Now when you sell under a land contract, the deed does not transfer to the buyer, but rather it says in your name. So, you have four paydays here:

  1. Buyers initial down payment contribution
  2. IRS stimulus contribution
  3. Monthly cash flow (income vs out going payment to my bank)
  4. Final cash out

And no, it is not a requirement that you own the property free and clear. As I said, I have sold over a dozen properties using a land contract that I bought “subject to” at this point. I just ensure that the underlying mortgage is paid, like normal.

What’s So Great About This?

Using Obama’s Tax credit, is perfect for us as creative investors, we get the best of both worlds!  Consider that we are selling the property…

  1. At full retail price…
  2. To good, qualified people…
  3. With down payment cash from the buyer…
  4. With up to $8,000 cash from the IRS…
  5. With monthly cashflow…
  6. And even a nice payday at the end!

And keep in mind, with the Land Contract example, I’m not a landlord.  No “tenants and toilets” for me!

The bottom line is this: Selling a house at full retail price and getting a nice bonus from the IRS is really pretty easy right now.

This is a unique opportunity for us in a unique time right now. You just need to employ a creative selling technique, a seasoned team who “gets it”, a few of the right clauses in place — and of course your buyer doesn’t even need to be a 1st Time Home Buyer!

Tony Severino
Chicago Real Estate Guy

Tony SeverinoAbout Tony…

Tony Severino is a 14 year real estate investor who, with his wife Lisa Severino, started their business from nothing and created one of the largest Real Estate Business in the Chicago area.  He’s had his hand in a number of different kinds of deals, but prefers making money through creative real estate transactions the most.

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About 

JP Moses is a roughly-hewn man-child who first got into REI after reading Rich Dad, Poor Dad back in Y2K and went full time in 2002. He's tinkered in everything from landlording to short sales to rehabs to Realtoring to REOs to notes to owner financing, blah, blah, blah...Till he finally stuck his flag deep into wholesaling and has since flipped somewhere north of a couple hundred deals.

JP's not a “guru” but also doesn't think it's a bad word. Among his core values are authenticity, creativity, big honkin' value, general fun-ness and being unshaven. He's super proud to be chief blogger guy at REItips.com and host of the free REIology podcast. He also thoroughly enjoys sharing his 53 best real estate investing forms with anyone who wants them. You should totally check that out. :-)

  • Michael

    Thanks for what you provide, great format and easy to follow info. Will there be a replay of the Severino webinar? preferably downloadable. Thanks again, Michael

  • Michael

    Thanks for what you provide, great format and easy to follow info. Will there be a replay of the Severino webinar? preferably downloadable. Thanks again, Michael

  • tim

    missed the webinar thursday can you replay

    jp?

  • tim

    missed the webinar thursday can you replay

    jp?

  • Real estate is great, isn’t it? So many ways to create value and make money as an investor. Keep in mind that the people who write our tax laws own massive amounts of what? Real estate!

  • Real estate is great, isn’t it? So many ways to create value and make money as an investor. Keep in mind that the people who write our tax laws own massive amounts of what? Real estate!

  • lisa

    Missed the webinar how can I get some info.

  • lisa

    Missed the webinar how can I get some info.

  • Josh

    just wondering, if I enter into a purchase agreement and then assighn(for a fee)the PA can the assinee get the FTHB tax credit?

    Not a legal expert or tax adviser here, Josh. But I’d think the tax credit would go to the end buyer.

    …jp

  • Josh

    just wondering, if I enter into a purchase agreement and then assighn(for a fee)the PA can the assinee get the FTHB tax credit?

    Not a legal expert or tax adviser here, Josh. But I’d think the tax credit would go to the end buyer.

    …jp

  • Does this still word as we get closer to the end of the First Time Buyer or does th author assume it will be renewed

    Mike
    .-= Mike Lautensack´s last blog ..Real Estate Investor Marketing Tips – How to Use Postcards to Laser Focus Your Marketing =-.

  • Does this still word as we get closer to the end of the First Time Buyer or does th author assume it will be renewed

    Mike
    .-= Mike Lautensack´s last blog ..Real Estate Investor Marketing Tips – How to Use Postcards to Laser Focus Your Marketing =-.