Real Estate Faux Pas That Real Estate Gurus Stay Away From

Investing in real estate can be really profitable however there are certain things that you should beware of. In fact even real estate gurus steer clear of these things so you should follow suit. So what exactly are these issues that you have to stay away from? Read on to know about them.

Do not get into any venture without practice or education.

Nothing can equal practice and education in this business. If you do not know all the trivialities in this line, then you will never be successful as a real estate investor. There is a lot of competition in this field and the only way you can stay ahead is by knowing more than your competitor. And you can get added knowledge only if you have done proper research of the market and have had a little bit of experience in turning deals around.

Time is of extreme importance, so stay away if you do not have it.

If you think a successful business can be built in a span of weeks then you are completely mistaken. You need to take out time for marketing and networking. How would anyone know about your ventures if you do not even take out time to market it accordingly? In this business time waits for no one and you have to make the best of any opportunity that you get. This is what real estate gurus do as well.

Rentals can be a headache.

If you thought that a rental was an easy way to make some money then you have to change the way you think and wake up to reality. You always have to be on your toes to look after some or the other thing that has gone wrong. You have to make rounds for inspection, to get something fixed or checked or simply listen to your tenants' complaints. You should know that in many states the laws meant for tenants or landlords give more leverage to tenants. The peace of mind that you lose by giving out a property on rent is much more than the profits you will make.

Stay away from contractors who want to be paid on an hourly basis

This is the best way for a contractor to take investors for a ride, so be wary of contactors who want payments by the hour. In fact you should get them to sign a clause where it should be clearly mentioned that their payments will be discounted if they do not complete a specified job by a specific date.

Be wary of buying homes sold on the courthouse steps or at sheriff sales.

It is true that you can make some good deals on these but the costs needed for repairs will definitely eat away most of your profits. Therefore it is always a good idea to check such property thoroughly.

If you want to be a successful real estate investor then you should definitely keep in mind the above points, since these have already been tried and tested by real estate gurus.

How to Issue Shares?

The Companies Act and its own constitution bind a company when it comes to matters related with managing its affairs. The power of issuing shares is vested in the company board of directors. However, these powers are restricted to the proviso of the Companies Act and the company's constitution. The board normally determines the amount of money that it is to raise through the issue of shares; the time and the person to whom the shares are to be issued are other related factors.

If you are keen to know more about how to issue shares, then it is pertinent to know that your company has to be registered under the Companies Act first. Thereafter, the persons, who have been specified in the registration application as shareholders, are issued the number of shares mentioned in the application. To acquire those shares, the shareholders pay money to the company at the rate per share agreed upon.
Notifying the Registrar of Companies
It is mandatory, as per law, to notify the Registrar of Companies the act of shares issued to the shareholders. The law requires a company to notify the concerned office, in the prescribed form, within ten working days of the issue of shares. The failure to comply with this legal requirement can attract penalty for each director of the erring company. The law is very firm on this.

Obtaining Shareholders' Approval
Another important point that may crop up on the how to issue shares subject is the presence of certain restrictive clauses in the company's constitution. The company could find itself in a bind on account of the restrictive clauses that prevent it from issuing shares. In that case, the board of directors can approach the shareholders and seek their approval to make the necessary amendments so that shares can be issued. A 75% percent shareholder majority is required to pass a special resolution to this effect.

Pre-emptive Rights of Current Shareholders
The current shareholders have pre-emptive rights. These rights give them priority over non-shareholders of exercising the option of purchasing newly issued shares. The shares can only be offered to non-shareholders when the current shareholders turn down the purchase offer. There might be instances where shares are offered to non-shareholders on favorable terms. In such cases, the shares have first to be offered to the existing shareholders on those favorable terms, though they had earlier declined the original offer.

Payment for Shares
The law does not require the existing shareholders to pay anything in return for the new shares, if the constitution of the company is silent on the matter. The shareholders will have to pay if the constitution says so. The payment of consideration (value of shares) can be in the shape of cash, future services, promissory notes, or other means as defined in the constitution. However, the board of directors determines the consideration before the shares are offered to the shareholders.

The various software that are available in the market provide the necessary documents related to share issue and acquisition. These software are reasonably priced and provide with all the information and help required. It does help to take the advantage of software, as you are dealing with a volatile product.

Benjamin Graham's Concept - Margin of Safety

Benjamin Graham was not only a widely respected author and expert on value investing; he is often credited with creating the foundation for modern fundamental analysis of stocks. Graham created many well known and widely used theories for investors, including the concept of the margin of safety.

Graham advocated value investing. For value investing to work, the investor must find companies that are trading at a market price that is a discount to the intrinsic, or real, value. The difference between the market price and the intrinsic value of a stock is known as the 'margin of safety'.

Because a guiding rule of value investing is first and foremost preservation of principal, the margin of safety is in important concept for making stock and bond choices. Benjamin Graham was aware that prices fluctuate based on emotions, interest rates, news, reports, and other outside forces. To protect the investor, an adequate margin of safety is necessary.

The margin of safety protects the investor from both poor decisions and downturns in the market. Because true value is very difficult to accurately compute, the margin of safety gives the investor room to make a mistake.

It is important to realize that market prices and intrinsic values of a share of stock are not always in synch. By choosing stocks that have a significant enough separation between the two values, a smart investor can snap up bargains with the comfort that a margin of safety can help protect them in the event of a downturn.

An essential element of Graham's concept of margin of safety is the size of the margin. A small margin gives little room for error, so the margin must be large enough to accommodate errors in calculating intrinsic value. In particular, purchasing a company that is trading at a discount to its asset value gives an adequate margin of safety. The theory is that, worst case scenario, if the company fails and is liquidated, the assets will at least be worth the price paid.

A second essential element of the margin of safety concept is the principal of diversification. Graham recognized that no investor is perfect in his or her decision making, and unforeseeable market forces can cause unfavorable market turns for an investment even with a margin of safety. Proper diversification of a portfolio offers additional protection against these events.

The margin of safety concept popularized by Benjamin Graham is the cornerstone of value investing. Buying investments that trade at a significant discount to their book value, in a diversified portfolio, is what the margin of safety theory is all about.

Top 10 Strategies To Amazing Profits From Portfolio Management

Portfolio management is an important part of your life. Maybe more important than you realize. You have an overall portfolio that is made up of everything you own. Within that portfolio is your investment assets that you need to manage in order to reach your financial goals and have a healthy and wealthy egg-nest to enjoy in your golden retirement years.

Managing your financial portfolio is a lot like juggling. A young person, perhaps fresh out of college, might start by juggling small, similar-sized balls (which include a small income and a small debt). Over time, different things happen (perhaps that person buys a house or some stock) and suddenly objects of different size and weight are added to the mix.

Then, as life goes on, objects of increasing risk and danger might be added as well: a credit card… a high risk stock… a personal tragedy. They're not all bad (from a financial perspective) but they can hurt a person's financial portfolio if not handled right.

Portfolio management is the ongoing process of balancing (or juggling!) your personal assets in order to meet your personal goals and expectations and, as much as possible, increase returns while minimizing risk.

Here are 10 simple tips to ensure that your overall portfolio is in good shape…

Strategy 1 : Understand your financial needs. Knowing Thy Self is the first step to creating and managing a portfolio that will do what you want it to do. This knowledge will help you set realistic future financial goals and decide how much risk to include in your investment strategy.

Strategy 2 : Have a financial plan. Adhere to it and your egg-nest will grow steadily and abundantly.

Strategy 3 : Pay down your non-income generating debts. This kind of debt is what we call "Bad Debt", which will not able to provide you with monetary returns. Some examples include your home mortgages, car financing etc

Strategy 4 : Build a good credit rating. A good credit reputation makes banks more willing to lend you money during raining days or when investment opportunities strike.

Strategy 5 : Work toward buying a home instead of renting. This is of course assuming that the cost of house ownership is lower than the overall rental cost.

Strategy 6 : Reduce your depreciating assets and increase your appreciating assets. Imagine your investment property is worth twice as compared to the time you bought it 5 years ago ? You can then ask your bank to increase your mortgage amount and use the additional funds to finance another investment property with no money down !

Strategy 7 : Make sure you have adequate insurance coverage for a variety of worst-case scenarios. Golden rule is "Always save for the rainy days"

Strategy 8 : Be aware of the risks and rewards of each type of investment. One great strategy is to diversify across and within your asset classes to minimize risk that is only specific to a particular asset

Strategy 9 : Be familiar with investments in general. Gaining knowledge makes you nimble to capitalize on good investment opportunities when they come by.

Strategy 10 : Maintain a budget… Stick to it and sleep soundly at night !

Simply keep in mind the above strategies in portfolio management. I trust you will find abundance of fulfillments and satisfaction in working towards building a profitable egg-nest full of well-balanced assets.

Don't Go to Jail! Here's What to Do If You Have Failed to File a Tax Return

Results of Failing to File Your IRS Returns. If you have late tax returns, you face several possible bad consequences:

• Penalties. If taxes are owed, a delay in filing may result in penalty and interest charges that could increase your tax bill by 25 percent or more.

• Lost Refund. In order to receive a refund, the return must be filed within 3 years of the due date. If you snooze, you lose…YOUR REFUND!

• Lost Earned Income Credit. Taxpayers who are entitled to the Earned Income Tax Credit must file a return to claim the credit even if they are not otherwise required to file. The return must be filed within 3 years of the due date in order to receive the credit.

• Lost Social Security Benefits. If you are self-employed, you must file returns reporting self-employment income within three years of the due date in order to receive Social Security credits toward your retirement.

• JAIL!!! Willful failure to file a tax return is a CRIME. Non-filers of tax returns need to act quickly to avoid criminal prosecution for failure to file a tax return. If you have late tax returns, do not delay another day; delaying can cost you your freedom. Even if you believe that you have paid all the taxes you owe through withholding, or by your employer, the willful failure to file a return is a criminal offense. The best way to avoid criminal prosecution relating to late tax returns is to remedy the situation voluntarily and submit all unfiled tax returns. The IRS is far less likely to pursue a criminal prosecution if you take the first steps in resolving the issue and get all delinquent tax returns filed.

Prosecution Statistics for Non-Filer Cases:

In FY 2006 the IRS obtained:

• Indictments in over half of the non-filer cases it criminally investigated!

• Convictions in approximately 88% of the cases that were indicted!

• Jail time in 80% of the cases convicted!

• Average jail sentences were 40 months long!

File All Tax Returns

You should file all tax returns that are due, regardless of whether or not full payment can be made with the return. Depending on your circumstances, nonfilers with late tax returns may qualify for a payment plan.

In short, delay does not help your situation. If you are a non-filer with delinquent tax returns, you need to file those late returns as quickly as possible.

Documents Required to Prepare a Return

In order to assist with preparing a tax return, taxpayers should bring any and all information related to income and deductions for the tax years for which a return is required to be filed. Some of the documents may include:

• Forms W-2 – Forms from employers showing wages for the year.

• Forms 1099 – Forms from banks and other financial institutions showing interest and dividends. Forms 1099 also report self-employment income.

• Information on expenses to claim on the return, such as itemized deductions, child care expenses, or employee business expenses.

• Social Security numbers for dependent children and any other person claimed as a dependent.

Copies of the last tax returns that you filed.

Can I File By Myself…or Do I Need a Lawyer?

Nothing requires you to hire an attorney to file late tax returns.

However, due to the fact that there is a possibility of criminal prosecution, you should STRONGLY consider hiring an attorney to help you file delinquent returns and protect your interests in the process.

Conclusion

Delinquent tax returns are a serious problem. Non-Filers should take immediate action to get late returns filed. Voluntary compliance can help reduce or eliminate exposure to penalties, interest, and possible criminal prosecution. Since willful failure to file a tax return is a crime, non filers should consider hiring an attorney to assist them with coming into compliance.

Investing - Exchanging Real Estate Tax Free

No one likes writing Uncle Sam large checks. Yet many people needlessly send Uncle 15% of their profit when they sell a rental house or land. There is a simple way to avoid it. It's called a 1031 exchange and it can keep you from losing tens or hundreds of thousands of dollars in unnecessary taxes and loss of growth.

The 1031 exchange is named after section 1031 of the IRS tax code. Basically, it allows you to exchange an existing investment property for a different investment property without having to pay capital gains taxes on the transaction. This applies to any investment property including rental houses, raw land, business property, commercial real estate, condos, apartments, etc.

You can roll the profit from the sale of an existing property into the purchase of the next. Not only does this save you from having to pay capital gains taxes in the short-term, it can also preserve the ability of appreciated property to receive a step-up in basis at death which can eliminate those taxes altogether.

For instance, I recently talked with a retiree who lives in Ohio and owns a rental house in Florida. The recent hurricanes have increased the management headaches. He's looking to simplify his life and wants to sell, but a sale would result in a large capital gains tax bill. With a 1031 exchange, he can sell the Florida rental house and reinvest the proceeds by purchasing a portion of a professionally-managed property. That way he can still earn the income without all the management headaches–and avoid paying capital gains taxes in the process.

As with all IRS tax code, there are a number of provisions and details that must be met exactly for the exchange to be valid. First of all, the exchange has to be a 'like-kind' exchange. For instance, you can't sell a rental house and reinvest the money into a U.S. Treasury bond. Investment real estate to investment real estate is considered a like-kind exchange even if it is a rental house for a potion of a shopping center.

Second, there are several important time periods that must be followed. From the time ownership of the first property is transferred, you have 45 days to identify the replacement property and 180 days to complete the replacement property's purchase. Since real estate closings are notorious for hiccups, I recommend you have two or three properties identified prior to the transfer of the property you are selling. Also, try to close on the purchased property well before the 180 days. If you miss these deadlines, you lose the 1031 exchange ability.

Another important provision is that you cannot take possession of the proceeds of the sale. A qualified intermediary is used to hold the funds, handle the paperwork and make sure the law's provisions are carefully followed. One of my clients worked with a local attorney and used escrow services at the local bank to fulfill these provisions.

Since all the proceeds of a sale are rolled into the new property, a 1031 exchange allows you to continue to get income and growth off the money otherwise sent to the IRS. The client above saved over $125,000 in immediate capital gains taxes. If they are getting a 10% return, that results in earning an additional $12,500 each year. Those extra earnings add up quickly and can help provide additional retirement income.

Lastly, you can add money to the purchase of the replacement property or even reinvest just a portion of the sales proceeds. The IRS rules regarding such situations are complex, but essentially, if you end up getting any proceeds of the sale they are subject to at least some capital gains tax.

A 1031 exchange is not for everyone but can make a tremendous difference in the right situation. If you own investment property and are considering selling it, I recommend exploring your options of doing a 1031 exchange. Talk with an advisor, CPA or attorney who is familiar with 1031 exchanges. Not all of them are, so make sure you are working with one who has handled this type of transaction.

How Do You Find a Reputable, Professional Note Buyer That Can Pay Top Dollar?

You have to know what to look for when it comes to a note buyer to ensure that you are getting the most for your debt instrument. A professional, experienced buyer can offer you a number of different options so you can be sure you are getting the best deal possible.

Although there are non-professional individuals who might be able to pay you for your note, only professional note buyers have the knowledge and flexibility to execute a fair and easy transaction. That's why it's always best to go to someone with years of experience in the industry when it comes time to sell your note.

Let's go over some important facts when it comes to finding a note buyer:

1. The buyer does not have to be local. You can work with someone anywhere in the country, as everything can be taken care of via phone, fax and email. This gives you access to a nationwide pool of note buyers, many of whom are the best in the business.

2. You can get a competitive quote usually within a day or two just by completing a form at one of the many online note buying/selling sites. With just a little information about you and the type of note you are selling, e.g. real estate, structured settlement, annuity, lottery winnings, etc., you can get a free one-on-one consultation with a top note buyer. He or she will outline all of your options.

3. You don't have to sell your note in its entirety. Let's say you hold a $50,000 note but you only need $20,000 now. You can tell your note buyers that you want to do a partial and keep the rest of the monthly payments intact. That way you are only getting the cash you need in the short term, while retaining the balance of the note.

4. Find someone with years of experience. You are always better off with a note buyer who has been in the business for many years. He or she will offer the highest rates and most options, and sometimes even offer you quotes from other investors so you can choose which one works best for you.

5. The most important thing when it comes to finding a good note buyer is to feel comfortable from start to finish. You can usually tell right away if this is someone you trust and someone you want to work with. Don't be afraid to ask questions or have them clarify something for you. Trust your instincts when it comes to selecting a note buyer.

If you are in need of a lump sum of cash, professional note buyers can help. Just make sure you find someone who is reputable, experienced and professional.

The Investment Philosophy of Warren Buffett - In 23 Quotes

Warren Buffett is the most successful investor of our time, perhaps of any time. He is famous for his pithy quotes, which often appear in his annual letter to shareholders.

Taken together, his quotes pretty well sum up his investment philosophy and approach. Here are his best sound bites of all time on being a sensible investor.

1. Rule No.1: Never lose money. Rule No.2: Never forget rule No.1.

2. Investing is laying out money now to get more money back in the future.

3. Never invest in a business you cannot understand.

4. I don't look to jump over 7-foot bars: I look around for 1-foot bars that I can step over.

5. I put heavy weight on certainty. It's not risky to buy securities at a fraction of what they're worth.

6. If a business does well, the stock eventually follows.

7. It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price.

8. Time is the friend of the wonderful company, the enemy of the mediocre.

9. For some reason people take their cues from price action rather than from values. Price is what you pay. Value is what you get.

10. In the short run, the market is a voting machine. In the long run, it's a weighing machine.

11. The most common cause of low prices is pessimism. We want to do business in such an environment, not because we like pessimism, but because we like the prices it produces. It's optimism that is the enemy of the rational buyer. None of this means, however, that a business or stock is an intelligent purchase simply because it is unpopular; a contrarian approach is just as foolish as a follow-the-crowd strategy. What's required is thinking rather than polling.

12. Risk comes from not knowing what you're doing.

13. It is better to be approximately right than precisely wrong.

14. All there is to investing is picking good stocks at good times and staying with them as long as they remain good companies.

15. Wide diversification is only required when investors do not understand what they are doing.

16. You do things when the opportunities come along. I have had periods in my life when I have had a bundle of ideas come along, and I've had long dry spells. If I get an idea next week, I'll do something. If not, I won't do a damn thing.

17. [On the dot-com bubble:] What we learn from history is that people don't learn from history.

18. You are neither right nor wrong because the crowd disagrees with you. You are right because your data and reasoning are right.

19. You don't need to be a rocket scientist. Investing is not a game where the guy with the 160 IQ beats the guy with 130 IQ.

20. You should invest in a business that even a fool can run, because someday a fool will.

21. When a management with a reputation for brilliance tackles a business with a reputation for bad economics, it is the reputation of the business that remains intact.

22. The best business returns are usually achieved by companies that are doing something quite similar today to what they were doing five or ten years ago.

23. Diversification may preserve wealth, but concentration builds wealth.

Annuities - Equity Indexed Annuities - The Next Big Scandal

I believe that Equity Indexed Annuities and the sales practices used to sell them may well be the Next Big Investment Scandal you will hear about. You need to understand why and to think twice before you purchase one of these products.

We have seen many scandals the last few years relating to mutual funds, variable annuities and more recently, to insurance companies. The common theme in all of these scandals has been the existence of hidden conflicts of interest.

There is an unspoken trust when someone purchases a financial product. When someone is uncomfortable making a purchase on their own, they seek out the advice of a financial advisor. They expect that advisor to make a recommendation that is in the client's best interest, not the advisor's.

Unfortunately, most financial advisors are compensated solely by the commission they receive from selling financial products. The more they sell, the more they make. If they don't sell, they don't eat. This alone creates a tremendous conflict of interest between them and the client.

Consumers understand that conflict of interest in other purchases they make. You wouldn't expect a car salesperson to recommend a vehicle that isn't offered by their dealership. So consumers view the salesperson's recommendation with a healthy dose of skepticism.

That same skepticism should be applied to the purchase of financial products as well. Those who purchase mutual funds or stocks are fully aware of the commission they're paying. However, few Equity Indexed Annuity consumers are aware of the commission their advisors are making off of their purchases. I'm not against an advisor making a living; what concerns me is when the client is not made aware of the powerful forces influencing what their advisor is recommending.

This is why I feel Equity Indexed Annuities may be the Next Big Investment Scandal. The hidden conflict of interest between an advisor and client is greatest when an Equity Indexed Annuity is being recommended. There are huge incentives designed to motivate an advisor to recommend an Equity Indexed Annuity over any other financial investment they offer–incentives that aren't disclosed to the client.

An advisor can make more commission from selling an Equity Indexed Annuity than they can from any other investment they offer. A lot more. In some cases, the amount of commission is three to four times greater than on an investment like a mutual fund.

Equity Indexed Annuities (EIAs) are not regulated at the federal level, but by each state's Insurance Commissioner. Even though Equity Indexed Annuities are technically an insurance product, they are being marketed as an investment. But all an agent has to do to be able to sell them is sit through a five-day course and pass a simple test on health and life insurance.

The structure and sales practices of almost every other commission-based investment product are regulated by the Securities and Exchange Commission. Mutual funds, stocks, bonds and variable annuities are all regulated at the federal level. Equity Indexed Annuities are not.

If an advisor were to place 100% of a client's investable assets into a variable annuity or a single stock or mutual fund, they would likely face fines and possible revocation of their license. At the very least, they would be opening up themselves and their firm to potential lawsuits. Yet, I often hear of advisors telling a client that they should put 100% of their money into Equity Indexed Annuities.

Under federal regulation, an advisor can't recommend a client pay a 7% penalty to get out of one annuity and move then move that money into another high commission product. That's just like a stockbroker getting you to constantly buy and sell stocks so they can earn a commission–it's called churning. Yet, I see advisors using the 'bonus' offered by some Equity Indexed Annuities to do just that.

I am an advocate for the individual investor, and apparently one of the few in the financial services industry willing to speak out against this popular product. But Equity Indexed Annuities are beginning to attract attention. I was interviewed by CBS MarketWatch just last week about the dangers associated with Equity Indexed Annuities. Those in Congress are recognizing the need for federal regulation of insurance products.

So think twice before buying an Equity Indexed Annuity. The agent may not have your best interests at heart.

To find out more about the dangers of Equity Indexed Annuities, give me a call, send me an email or read my other articles at www.guardingyourwealth.com. They will tell you what the agent isn't.

Mr. Voudrie is a Certified Financial Planner and the President of Legacy Planning Group, Inc., a Private Wealth Management firm in Johnson City, TN. For more information email jeff@guardingyourwealth.com.

The Badly Misnamed Earned Income Tax Credit

Yes the Earned Income Tax Credit is the name of it, but not one penny of it has ever been earned by recipients.

Although it puts lot of bucks in the pockets of recipients, it is an abomination to millions of struggling taxpayers who must pay for it.

To qualify for the Earned Income Tax Credit, one must have a job like most Americans.

If a worker's Adjusted Gross Income (AGI) is less than $36,348, and he/she meets citizenship and other qualifications, a small credit applies.

For those who receive the maximum credit, a most generous gift kicks in, compliments of fellow taxpayers. The amount of the credit is determined by income, deductions and dependents.

The maximum benefit for the tax year 2006 is $4576.

Recipients also can get an exemption from much withholding during the year in anticipation of the huge refund he/she will likely receive, by taking advantage of the Advanced Earned Income Tax Credit.

On the downside, millions of hard working taxpayers of modest means, who are not receiving the Earned Income Tax Credit get hit with a stiff tax bill.

Possible Ten Billion Paid Out Due To Fraud and Mistakes

A 2004 report from the Treasury reveals that billions should not have been paid, in the year of the study, 1999. The report reveals that possibly 32 percent of the amount "claimed" should not have been claimed stating:

An IRS compliance study of Tax Year (TY) 1999 returns estimated that between $8.5 and $9.9 billion (27 to 32 percent) of the $31 billion in EITC claimed for TY 1999 should not have been paid.

Also, certain types of income do not have to be counted as income and the EITC has no effect on welfare benefits.

IRS publication 17 says the following:

"The EITC has no effect on certain welfare benefits. In most cases, EITC payments will not be used to determine eligibility for Medicaid, Supplemental Security Income (SSI), food stamps, low-income housing or most Temporary Assistance for Needy Families (TANF) payments."

For recipients of this bonanza it's great, but it is a typical government program that started out small, now has a huge cost and a huge percentage of the cost is due to waste and fraud.

The fraud is mostly in the form of claiming phony dependents. Those victimology politicians who have large constituencies of EITC recipients will wage a ferocious fight to protect this program no matter how much of taxpayers' hard earned money goes to waste and fraud.

Will we continue to allow this?