Use the following guidelines to help you determine whether or not the offer being made on your home is a worthwhile one.

When an offer is made, be sure to determine if the amount of the earnest money (or deposit) is a sufficient amount to indicate a serious offer. If not, what would be your ultimate figure?

Consider the total price offered. How does it compare to your asking price? Does it meet you private bottom line?

Be sure to look at the terms of the financing. Is it a new first loan? Are they requesting any seller financing or seller paid closing costs? How will the terms affect your profit?

Also, take into account the closing date (occupancy). What kind of timeline do you have to find a new home, pack your belongings and be out of your current home? Does it fit your family’s needs?

And finally, be sure to contemplate any contingencies listed in the offer. Do the prospective buyers have a home to sell before they can purchase yours? If so, you may want to be concerned about where their home is located and what their current housing market is like.

All of these criteria are very important points to consider when you receive an offer on your home. And remember, if the original offer doesn’t meet every one of your ideal wishes, you can always counteroffer and try to negotiate a deal that will satisfy all involved parties.

35 percent - Your Payment History
30 percent - Amounts You Owe
15 percent- Length of Your Credit History
10 percent- Types of Credit Used
10 percent - New Credit

If you pay your bills on time, pay down your debt and try to avoid applying for credit, you’ll spend less time correcting errors later.

Your FICO score is a three-digit number that will determine how high your interest rates will be on things like your credit cards, your car loan, a home mortgage or even whether or not your application for a cell phone or to rent an apartment will be accepted.

Fair Isaac works with three reporting credit bureaus to help calculate your scores. Those credit bureaus are: Equifax, Experian, and Transunion. All three major credit bureaus use the same formula for calculating your credit rating. Equifax calls it the Beacon credit score, TransUnion calls it Empirica and Experian calls it Experian/Fair Isaac Risk Model. Still, all three are the same formula developed by Fair Isaac.

Make sure you know your score before deciding to buy a home. It’s important that you get any mistakes or blemishes on your report cleared up, as you’ll want to have the highest score possible to help you negotiate a lower interest rate when shopping for mortgages.

It creates very stiff competition. Having so many homes for sale increase buyer’s options, which puts pricing pressure on sellers.

Vacant homes can generate a poor impression for the area. Some homes in a short sale situation and a majority of bank owned properties have been terribly neglected, abandoned and even boarded up. Having a few in a neighborhood brings down the perceived character of the neighborhood.

They are not good comparables when real estate professionals are conducting research to complete a comparative market analysis (CMA). Eventually these distressed properties sell and then become comparables for appraisers and future buyers. Though the condition may be terrible, that isn’t readily apparent in most MLS reports and therefore the appraiser, agent or buyer may believe the home was in better condition than it actually was, thus pulling down the value of homes it is compared against.

Take a good, hard look at your property as if you were seeing it for the first time. What is it that makes your home stand out? What can be done to improve your home’s curb appeal?

To increase the attractiveness of your property you may want to consider doing some landscaping. It doesn’t necessarily have to be an extensive, costly project. You could plant some shrubs on each side of the front entrance to make your home look more inviting. You could also plant some flowers to add color to your yard. Maybe you would prefer to do some landscaping with stone or brick. However, those types of projects will tend to cost a little more to complete, but bring a larger return at sales time.

Another option to add curb appeal to your property is to do some modifications on the home itself. Adding shutters to your windows may provide a more alluring effect to buyers. You may also want to add a small porch or deck to your home, as that will almost always be a great sales point for home buyers.

However you decide to increase the curb appeal of your home, just remember, buying a home is a very emotional experience and you want your home’s appearance to provide the prospective buyer’s with a great first impression.

Let’s start be getting motivated. Whether you are planning to loose weight, run a marathon, or invest in real estate, motivation is where it all starts. We all know the feeling of excitement especially when the outcome of our goals is so obtainable, such as in the case of real estate investing.

How many times have you seen or heard a story of real estate investors making huge profits from simple business models. As a matter of fact I just heard one. It involves wholesaling distressed properties. Basically, buying real estate in bulk and then selling off the individual properties. In this case, a group of investors joined together and purchased homes for pennies on the dollar. They found a large number of distressed home in a small area. They were able to purchase homes valued at $60,000 for around $12,000 each. Of course this dropped the overall value of the area, but this was no problem. After they purchased the homes they lowered the amount owed by the distressed owners. They dropped the amount owed price to $30,000. The sellers could either continue to live in the home and make payments based on the $30,000 value or sell the homes and actually walk away with money in their pockets. Many owners sold their homes for around $45,000, paid the investors $30,000 and walked away from the stress and hassles of their distressed property. This is a simple plan with little risk, and huge profits for the investors

The second principle is learning how to do it. There are many networks of investors out there that will help. You can buy books, go to seminars, or hire consultants to help you. In the example case above, the hardest part would be setting up the business structure to include multiple investing pooling their money together. Of course this has been done many times before and you can easily find out how to do it.

The third principle is to believe in yourself. Be determined to succeed. You are going to run across many people that will tell you the plan will not work, or that you do not have what it takes to reach your dreams. Worse yet, many times it comes from friends and family. You have to put that behind you. I’m not saying ignore everyone that does not see your vision, but you will find people that have never before invested in real estate, tell you how to do it. Bottom line, listen and learn from the experts and ignore the ignorance.

Lastly, get out their and do it. You might stumble along the way, but if you learn from your mistakes, it will never be a failure. I believe in the 80-20 rule…20% of your actions bring in 80% of the gains. In other words, don’t waste your time getting ready to get ready. Buy the books, go to the seminars, but at the same time get out there. Your actions, along with your motivation, education and determination will help you reach all your goals.

1. Do you guarantee your work? Your contractor should guarantee his work for at least one year from date of completion.

2. Will you provide me with written references? A good contractor will be happy to provide you with references. You should look for a well-established contractor who can give you several customer references from the last 6 months to one year. Ask for the name of the contractor’s accountant or banker. You want to ensure the contractor is financially sound and will not be declaring bankruptcy in the middle of your project.

1. Are you licensed? Make sure your contractor is properly licensed. In your state, all contractors MUST be certified, or registered with the State. Every state is different, but most will let you check licenses online.
   California’s contractor license database:
   http://www.cslb.ca.gov/

2. Do you carry general liability insurance? Make sure your contractor carries general liability insurance. This type of insurance protects your property in case of damage caused by the contractor and/or his employees. The insurance company will pay for the cost of replacing, and/or repairing any damage that occurs. Make them show you the certification of insurance

3. Do you carry workers’ compensation insurance? Make sure your contractor carries workers’ compensation insurance. It protects you from liability if a worker is injured while on your property. Be aware that if the contractor does not carry workers’ compensation coverage, you may be liable for any injuries suffered by the contractor, or any of his employees on your property.

4. Do you offer Financing? Many Contractors are lender approved contractors. They have been approved and investigated by lenders as being financially sound, maintaining satisfactory relationships with suppliers, satisfactory credit and no outstanding complaints at the Better Business Bureau.

5. Are you a member of NARI or NAHB? NARI stands for the National Association of the Remodeling Industry and NAHB stands for the National Association of Home Builders. It’s always a good idea to consider hiring a NARI or NAHB contractor. In most cases, both organizations only attract conscientious contractors interested in bettering the industry and in weeding out unprofessional contractors. In order to become a member, the contractor’s background and references are thoroughly investigated.

6. Will you pull all the required building permits? Make sure your contractor pulls all required permits. This is very important. When a contractor pulls the required building permits, you know things will be done to “code.” Also, many homeowners insurance policies require pulling a permit on any major remodeling to keep your home properly covered. Not all contractors will do this. Many prefer not to pull permits because of the time involved and the “hassle” with the inspectors. Some contractors may ask you to get the permits. This could be a warning sign that they are not able to pull the permit because they are unlicensed, or the work is outside of their license. A reputable contractor will permit every job where a permit is required.

7. Who will be in charge of the job? Make sure the contractor or his foreman is on the job whenever work is being performed-especially if sub-contractors will be used. The responsible party must be intimately familiar with every aspect of your project. If you will not be home during the construction and must leave the house unlocked, or leave a key with the contractor, you must feel comfortable. You cannot be worried about what is going on when you are not there.

8. How do you handle “dirty work”? Construction is dusty and dirty! It gets everywhere, especially if any sanding is being done. Make sure the contractor will make an honest effort to keep the dust contained, or notify you when the heavy dust generating operations will take place so you can place sheets over furniture or move sensitive belongings. Make sure the contractor agrees to sweep up and place all construction debris in a predetermined place or refuse container at the end of every day.

1. New Electrical Switch Plates
   This is such a minor, yet overlooked improvement. Most rental owners and rehabbers paint a unit and leave the old, ugly switch plates. Even worse, some even paint over them.

   New switch plates cost about 20 cents each. You can replace the entire house with new switch plates for about $20. if the outlets and switches are dirty you might spring to replace those too. Nice white faceplates with dirty brown outlets defeats the purpose

1. New or Improved Doors
   Another overlooked, yet cheap replacement item is doors. If you have ugly brown doors, replace them with nice white doors (you can paint them, but unless you have a spray gun it will take you three coats by hand).

   The basic hollow-core door is about $20. It comes pre-primed and pre-hung. For about $10 more, you can buy stylish six-panel doors. If you are doing a rehab, the extra $10 per door is well worth-it. For rentals, consider at least changing the downstairs doors.

1. New Door Handles
   If you don’t want to change the doors, you can also change the doorknobs. I would actually recommend this route to save money and connects the whole house together.

1. Paint
   By far the most important factor when selling a home. Get rid of the baby room colors, go for what is in style…mostly neutrals or light earth tones. The return on investment for a can a paint is the absolute smartest thing you can do.

1. New Front Door
   You only get one chance to make a first impression. A cheap front door makes a house look cheap. An old front door makes a house look old. If you have nice heavy door, paint it a bold color using a high-gloss paint. If your front door is old, consider replacing it with a new, stylish door. For about $125, you can buy a very nice door.

1. Tile the floors
   I know this sounds like a lot of work, but it is worth it. If you do not want to tile, and go with either a pergo flooring or linoleum that’s fine. Bottom line is, if the floor looks bad and worn you should replace it. If you replace it, you should tile it.

1. Refinish the kitchen cabinets
   Whether you are cleaning them up or repainting them, fresh kitchen cabinets will help the house move faster and for a higher price. We are lucky that now with stores like IKEA we can easily add new cabinets for relatively low prices and they look fabulous. If you paint them, make sure you do a good job, get good brushes or paint sprayers and take your time. Nothing looks worse then poorly painted kitchen cabinets.

1. Power wash the exterior
   Go rent a power washer from a tool rental company and give the outside of the house a good wash. Be careful not to get too aggressive because you can damage the siding. Once you get all the gunk out of the overhangs. If the home is in bad shape repaint it. Believe me it is worth it.

1. Update the landscape
   Most homeowners love a nice landscape, but most are not very good at maintaining the plants. Over the months and years the plants will grow out of control. You should get rid of them, plant some new fresh flowers and add some ground bark to make the landscape look great. Of course mow the lawns and remove all weeds. Keep the plants watered and if they start to die, return them and get a new one. Most home improvement centers will allow you to return the plants if they die.

1. Remove odors
   Pets, smoke, food all seep into the walls and carpet of homes. Fresh paint and a professionally cleaned carpet will remove most odors and leave the home smelling new. Yes, the smell of paint leaves the potential owners with a feeling of a new home, similar to the new car smell.

By deferring 100% of your capital gain tax liability you retain 100% of your net cash proceeds from the close of the transaction to reinvest in the next like kind replacement property and allows 100% of your cash to continue working for you instead of the Federal government.

Qualified Use Test

The investor/taxpayer/exchangor must have the intent to hold any property involved with a 1031 exchange for investment or business property in order to satisfy the Qualified Use Test.

If you actually intend to buy, fix-up and then flip a property you do not have the intent to hold and therefore do not satisfy the Qualified Use Test and technically do not qualify for 1031 exchange treatment.

Like Kind Replacement Property

Any type of real estate is considered to be like-kind to any other type of real estate for 1031 exchange purposes provided the taxpayer has held the properties for investment or use in their business and therefore satisfied the Qualified Use Test.

Examples

• Sell an Apartment complex and buy a commercial/industrial property

• Sell a couple of single family homes and acquire a retail center

• Sell vacant land and acquire multi-family property/apartment

• Sell one Single family residence and buy 3 more single family properties

Types of 1031 Exchanges

There are three basic types of 1031 Like Kind Exchange transactions: Forward (Delayed), Reverse or Build-To-Suit 1031 Exchanges.

The forward 1031 exchange allows the investor to sell his or her relinquished property first and then acquire the replacement property later.

The reverse 1031 exchange allows the investor to acquire his or her replacement property first and then sell the existing relinquished property. This structure eliminates the risk and stress involved with a forward 1031 exchange and the 45 day identification period.

The final structure is the build-to-suit 1031 exchange where the investor can use his or her exchange proceeds to purchase replacement property and construct improvements on the property as part of the 1031 exchange transaction.

Deadlines

You have two time frames to adhere to when you are structuring a 1031 exchange transaction. They both start running the day you close on your relinquished (sale) property or replacement (acquisition) property. So, if you closed your transaction and title has been conveyed today, then tomorrow would be day number one for both your 45 and 180 day deadlines.

45 Day Identification Period

You have 45 calendar days to identify what you intend to acquire (or sell in a reverse exchange). Most taxpayers will use the three (3) property rule, which means you identify up to but not more than three (3) properties as potential like kind replacement properties. You may acquire one, two or all three of the identified properties (the 1031 exchange is a great method for investors to diversify from one to many or to consolidate from many into one properties and restructure their portfolios accordingly with out paying any capital gain taxes).

180 Day Completion Deadline

You have a total of 180 calendar days in order to complete your 1031 exchange and receive title to your replacement propertiers (or transfer title to your relinquished property in a reverse exchange). It is not 45 plus 180 calendar days. It is a total of 180 calendar days from the close of your relinquished property. It is also straight calendar days…there is no time off for weekends

Qualified Intermediary (Accommodator)

The investor must make sure that he or she has retained the services of a professional Qualified Intermediary and the Qualified Intermediary must be assigned into the Purchase and Sale Agreement and Escrow Instructions before the transaction closes.

Exchange Fees

The majority of the major Qualified Intermediaries will charge about $750.00 for forward 1031 exchanges, $4,000 to $5,000 for a reverse or build-to-suit 1031 exchanges, and more if the transaction is exceptionally large.

I hope this is a good start if you are thinking about selling an investment property. I cannot cover all aspects of the exchange in this article but will be happy to assist if you have any questions

Now, if you are the type that loves bad news, mainly because you want to find deals, here is the most common real estate investment tool in today’s bad market. It involves finding distressed, undervalued, broken down properties fixing them up to hold, not to sell. The key is to get the money out up front, not when you sell it.

If you have tried to get a loan lately, you know what I’m talking about when I say it is nearly impossible, even with high credit scores. You need collateral in this market and this is where the real deal comes into plan. For this example I’m going to make the numbers round and simple.

The whole goal of this plan is to get 80% of the value from a home. The different from 80% to what you paid (roughly 60-70%) will be your cash out, and the rest will be paid from the bank. Yes that’s right, in these rough times you will make a living from the bank.

Your adventure begins on the steps of the county court house at a real estate foreclosure auction. You did you research and you have 4 properties that will fit into your plan. You play the game with the other investors and you are able to acquire a property for about 60% of its value. It does need work, but once the home is fixed up your will have a nice little gem on your hands. The house appraises at $200,000, you go it for $120,000. You plan to put $10,000 into fixing it up and then renting it out for a long term investment. Most banks will still lend 80% of the value of the home. In this case you will be able to get a loan for the property at $160,000. Quick math off the top of my head shows that you will cash out at $30,000 (purchase $120K + repair $10K – loan $160K). Your monthly payment on $160K will be $1,015. So, all you really want to do is rent the property out for your mortgage payment. Basically let some else pay off your mortgage.

Do you see how simple this is. The whole plans falls into finding properties that are below market value and holding them for long term. This plan will get you well on your way to a large bank roll padded with investment properties.

A self-directed IRA is like other IRAs in every respect, except that it allows account holders to direct their own investments. You can buy and sell investment real estate for yourself while deferring the tax consequences. And you can earn commissions helping investor clients buy and sell real estate through their self-directed IRA.

The IRS allows you to use retirement money to buy real estate in any form: raw land, condos, office buildings, and so on. For example, you can buy raw land, develop it and then sell each property, or sit on the land for years while it appreciates and then sell as raw land to developers.

Please note, that in most cases the money used to maintain or develop the property must also come from the IRA. For rentals, all maintenance and improvement costs, taxes, insurance, and property management fees must be paid from the IRA, and all rental income must go back to the IRA. For raw land, all development costs must come from the IRA.

Once you sell the property, all proceeds go back into your IRA, where the money continues to grow tax-deferred. You can even sell the investment property and offer seller financing in which you act as the bank, but again all proceeds have to go backing to the IRA.

If you are the investor, you cannot manage your own investments. You will need to obtain a custodian will require a qualified third-party manager. But there is nothing to say you cannot manage the properties of investor clients you’ve worked with. Custodians typically require that any real estate purchased through an IRA be bought outright with no debt financing. In addition, the property must be used for investment purposes only and can’t be used personally while maintained in the IRA.

If you are thinking about starting a self directed IRA, please contact a licensed financial planner before doing so. This article touches only on the general concepts and you will still need to complete all your due diligence.