I’m in Florida all this week, and I’ll be spending Halloween in Tampa (so, if I have too much fun and end up in jail or drowned in the ocean, you may not hear from me for a while…..especially if I drowned). By the way, I decided I’m going to be Uncle Sam for Halloween (I love this country, what can I say).

It’s been an interesting week so far. First, I got a call from one of my tenants that they think another of my tenants got murdered……basically, the one tenant disappeared a week ago and the homicide detectives are now involved. Also, I’m in the middle of my first eviction ever. I’d say after 5 years and dozens of tenants, doing my first eviction isn’t too bad…..it’s all part of the business.

Anyways, this week I want to tell you what Barack Obama can teach you about real estate investing (and yes, those of you who know me know that I’m a die hard Republican, but I respect all successful people). Many people wonder how Obama came out of nowhere, defeated Hillary Clinton and is now close to being President. Well, it’s because he has run a brilliant campaign, surrounded himself with brilliant strategists and is raking in millions of dollars in donations. In the last few weeks, I’ve had two Obama supporters knock on my door and zero McCain supporters.

When it comes to being successful it doesn’t matter if you’re the most qualified, have more experience, or are the smartest. What matters is if you know how to “play the game” and run the best systems/strategies. As Obama is getting millions in donations, how much private money are you lining up, or how much private money do you have access to? To be successful you have to have access to other people’s money (never use your own). Also, take a look at your power team. How smart and successful are the people that you’re surrounding yourself with? Do you have a top notch lawyer, accountant, handyman, and title company?

Most importantly, what does your marketing system look like? Obama’s marketing system is one of the main reasons he is almost President. The combination of TV commercials, direct mail, door knockers and radio ads allows him to “touch” millions of people and get his message across. I can pretty much guarantee that if you’ve had a bad year of investing, the majority of it is due to terrible marketing systems (probably a lack thereof).

Alright, I’m off to Clearwater beach. Have a fun and safe Halloween, get your marketing systems in place, and start getting some private money (5 years from now you’re going to shoot yourself if you don’t do everything you can to take advantage of this market). Also, for the new people or those who are struggling, next week I’ll show you the marketing systems you should have in place.

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Tags: barack obama, obama, planning, real estate investing, strategy, success

This is part 2 in the series on Structured sales. Once again, this series was written by Trevor Mauch, as a guest piece on the blog. We hope you have found it to be interesting and useful.

Note: We cannot speak for against this type of strategy, and we advise anyone to do their homework before conducting any type of real estate strategy. BiggerPockets does not necessarily advocate or agree with the beliefs, expressions or opinions of our writers.

The Advantages & Disadvantages of a Structured Sale

Some of the benefits and advantages:

• Large Fortune 100 life insurance company guarantees your payments rather than relying on your buyer
• Avoid depending on buyers ability to manage the property or business (even if the buyer runs the business or property into the ground the seller is protected and is guaranteed to receive each and every payment on time.)
• Defer capital gains to the year you receive payments - reducing your tax liability
• Provides guaranteed rate of return on the principal (which is compounded because you earn a return on the money that would have been Uncle Sam’s if you were to sell with an all cash sale).
• Provides payments for any term you desire ( from 3 years to your lifetime)
• Costs the buyer, seller, agent, etc. nothing at all. No additional fees or expenses above your normal sales expenses. A 1031 exchange often costs the seller a fee/commission from a 1031 facilitator.
• Avoid the requirement to purchase additional real estate immediately (however, can leverage the annuity to get financing for future projects)
• Buyer is able to get full title at closing
• Supplies a steady and safe stream of income for the time period you choose
• Can be leveraged to acquire financing to pursue other projects
• Lets you concentrate on living your life, rather than chasing payments
• No time restrictions like with a 1031 exchange

Some Disadvantages:

• Buyer must have all cash or financing to complete the transaction. (however, seller can carry back private note for part of the purchase price if they choose)
• Like most alternatives; If the seller has an emergency and needs to liquidate their equity in the annuity, they will need to sell it at a discounted rate to an annuity buyer. (Seller must sell at a discount in a traditional installment sale as well). Usually around 60-85% depending on the situation.
• Not all lenders will take an annuity as collateral for new project financing, but many will. (only effects those who want to use the annuity as collateral for new financing).

The Structured Sale isn’t a one size fits all sales method. However, it is perfect for sellers who:

• Want to retire and receive monthly/yearly payments to help fund their retirement
• Want to purchase a new property, but can’t find one in time to meet the 1031 exchange restrictions
• Want to sell their business and collect monthly/yearly payments for their equity
• Want to sell their investment property and use it as leverage to obtain commercial financing for a new project (that is maximum leverage!)
• Want to defer capital gains taxes but don’t want to be responsible for chasing after the payments from the buyer.
• Want to earn a return on their equity PRE-TAX much like a retirement plan that is taxed when money is taken out…not put in.
• Or many other situations.

Those who it isn’t perfect for:

• Sellers who need all of their equity in cash at closing
• Sellers who absolutely can’t find a cash or financed buyer (however, the seller can choose to carry back a note and place the rest in the annuity.)
• Sellers who want to 1031 exchange and have found a property in time to meet the deadline
  As you can see, the Ensured Installment Sale (Structured Sale) is an excellent product with many uses. It will be very useful for babyboomers who want to exit the business, real estate, or stock markets and receive a safe-guaranteed stream of income for the time period they choose.

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Settlement Professionals Inc. (SPI), a national company, was founded in 1987 and is based in West Linn, Oregon (a suburb of Portland). SPI’s founder, Jack Meligan, has been a top annuity specialist for over 19 years and is seen as one of the nations preeminent experts in the structured annuity field with many published articles in high profile publications. SPI’s main business is structured settlement planning for plaintiffs in injury cases around the U.S.; however, has began to focus on the Ensured Installment Sale (Structured Sale) since its development by Allstate Insurance in 2005.
SPI has teamed up with many of the nations top tax, financial, and real estate professionals to give sellers of appreciated assets a better solution for deferring capital gains taxes with less risk and greater benefits.
To contact SPI please call 1-888-666-5584, email: mauch@structuredsalespro.com, visit: http://www.structuredsalespro.com or http://www.settlepro.com

Tags: annuity, installment-sale, insurance, insured-installment-sale, real-estate-appreciation, strategy, structured-sale

We’re going to do a 2 part series on Structured sales, here on the BiggerPockets Blog. This is a subject that many people don’t know about and I thought was worth exploring. The series was written by Trevor Mauch, as a guest piece on the blog.

Note: We cannot speak for against this type of strategy, and we advise anyone to do their homework before conducting any type of real estate strategy. BiggerPockets does not necessarily advocate or agree with the beliefs, expressions or opinions of our writers.

What is an Ensured Installment Sale? (aka Structured Sale) - PART 1

An Ensured Installment Sale (Structured Sale) is a new twist on the traditional installment sale that enables both the seller and buyer of appreciated assets to take advantage of tax, safety, and/or financial benefits that traditional sales methods don’t offer. This method was developed by Allstate Insurance company in 2005 and is becoming a sought after method for tax deferral when selling a business or real estate.

As you may know, an Installment Sale is basically the sale of an appreciated asset where at least 1 payment is to be received in the year(s) after the year that the sale occurs. Installment Sales allow the seller to defer gain to the year that payment is received. This is a powerful tool that helps sellers to defer capital gains tax rather than having to pay the entire tax in the year of sale. One huge drawback to the traditional Installment Sale is that the seller takes on the risk that the buyer will not fulfill the payment agreement or the property value will decrease. If the buyer defaults the seller has to take back the property or business.

The Ensured Installment Sale, however, transfers the buyers obligation to pay to a third party assignment company (affiliated with Allstate Insurance or another Fortune 100 company) who in turn purchases an annuity from a Fortune 100 U.S. insurance company such as Allstate. I’ll explain where the 3rd party assignment company comes in later. The seller is the sole beneficiary of the Fortune 100 guaranteed annuity. This gives the seller the peace of mind that the payments will be made each and every time no matter what the buyer does.

In addition, the seller does not claim constructive receipt on the income in the year of sale, which enables them to defer their capital gains taxes to future years.

So basically, the Ensured Installment Sale (Structured Sale) is treated as an installment sale by the IRS for tax purposes. The buyer comes into the transaction with cash or financing, so from their side the transaction looks like an all cash sale. The buyer gets full title at closing, unlike with traditional installment sales where the seller often keeps title until they are paid off.

Now that you are confused… here is the flow of the transaction to help clear it up.

• Seller chooses to use a structured sale and consults with an annuity broker certified to perform structured sales (Settlement Professionals Inc.)
• Seller and buyer enter into an installment sale agreement.
• Buyer pays seller negotiated down payment.
• Buyer assigns their payment obligation to 3rd party assignment company and writes a check for the balance owed. (This is necessary in order to prevent constructive receipt of the income for the seller. The seller cannot take possession of the cash before the annuity is purchased or it will be taxed immediately)
• 3rd party assignment company (affiliated with Allstate Insurance) purchase the agreed upon annuity from Allstate.
• Seller is the sole beneficiary of the annuity (which can be passed on to heirs if seller dies) and receives principal and interest payments monthly or yearly for their desired term.
• Seller recognizes the gain at the time they receive it and are taxed accordingly, usually at a lower tax bracket than if they were to recognize the entire gain in the year of the sale.

All of the paperwork is done by the annuity broker (e.g. Settlement Professionals Inc.)

Read Part 2 of the Series

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Settlement Professionals Inc. (SPI), a national company, was founded in 1987 and is based in West Linn, Oregon (a suburb of Portland). SPI’s founder, Jack Meligan, has been a top annuity specialist for over 19 years and is seen as one of the nations preeminent experts in the structured annuity field with many published articles in high profile publications. SPI’s main business is structured settlement planning for plaintiffs in injury cases around the U.S.; however, has began to focus on the Ensured Installment Sale (Structured Sale) since its development by Allstate Insurance in 2005.
SPI has teamed up with many of the nations top tax, financial, and real estate professionals to give sellers of appreciated assets a better solution for deferring capital gains taxes with less risk and greater benefits.
To contact SPI please call 1-888-666-5584, email: mauch@structuredsalespro.com, visit: http://www.structuredsalespro.com or http://www.settlepro.com

Tags: annuity, installment-sale, insurance, insured-installment-sale, real-estate-appreciation, strategy, structured-sale