It is likely that you think of a number of things when you hear the words real estate investing (like short sales). You might immediately leap to real estate investing being real estate portfolios and real estate retirement plans or you may think instead of short sales, bulk reo investing and virtual real estate investing. You may also consider what roles these things play in your life as a real estate investor in different economies.

There is a great deal to know about real estate investing. To get the most out of real estate investing education, be familiar with basic information ahead of time. Whether you are interested in short sales, bulk reo sales, virtual real estate or just improving your abilities as a real estate investor, you need to know some real estate investing basics in order to succeed. Review these three real estate investing basics that even some experts don’t yet know:

1. You will always get a positive yield with real estate investing education. Every good real estate deal represents thousands of dollars in potential wealth. Getting the wealth is the key to your success. When you know about real estate your odds of success increase with each real estate deal. Small investments yield big results when you invest in learning and then implement what you learn.

2. You can succeed in real estate investing in any economy. Many people are under the misconception that success is possible in real estate only when the economy is good. Actually a poor economy is not a bad economy for real estate investors. You will likely find properties that you can buy at deep discounts. You could also locate deals that would not exist in a booming economy. Real estate investing may also turn the tide for a poor economy. When the economy is not thriving, short sales, bulk reo sales and virtual real estate can all thrive. You will have the option of saving yourself and possibly others from serious financial difficulties if you know about these types of deals.

3. A lot of money is not vital to your success as a real estate investor. You can make a success of real estate investing no matter how much or little money you have. Many types of deals enable you to use other people’s money to do them. If you appear to be a solid investment you may be able to use a private lender’s money. An investor who is a good investment knows as much as they can when it comes to real estate investing. This will help you show people that you are a good investment if they have the money to help you with real estate investing but they do not know how to use it.

Real estate investing is a good way to generate a great deal of wealth. You can create a good income no matter what the state of the economy. You can create your own success using your knowledge of short sales, real estate investing, bulk reo sales and virtual real estate. You will be helped to succeed as a real estate investor by knowing real estate investing basics.

It is likely that you think of a number of things when you hear the words real estate investing. Depending on how familiar you are with real estate investing already, you might think of real estate portfolios and real estate retirement plans, or you might focus on short sales, bulk reo investing and virtual real estate investing. You may also wonder what type of role these things can play in your life as a real estate investor in different types of economy.

You will need to know a lot about real estate investing. To get the most out of real estate investing education, be familiar with basic information ahead of time. Whether your target is short sales, bulk reo sales, virtual real estate or improving real estate investor abilities, you need to know some real estate investing basics. Check out these three real estate investing tenets that many experts do not fully know:

1. Real estate investing education always yields positive. Every real estate deal has the potential to create thousands of dollars in potential wealth. Knowing about getting that wealth is the key in the end to your success. Learning about real estate increases your odds of success when you do a real estate deal. Small investments yield big results when you invest in learning and then implement what you learn.

2. Any economy allows for success in real estate investing. Often people think that you can only be a success in real estate when the economy is good. In fact a bad economy is not a bad economy for real estate investors. You will likely find properties that you can buy at deep discounts. Also, you might find deals that simply could not exist in a booming economy. Real estate investing may also turn the tide for a poor economy. Short sales, bulk reo sales and virtual real estate all thrive when the economy is less than thriving. You can save yourself from financial difficulty along with others by knowing how to do these deals.

3. You do not need to have a great deal of money if you want to be a successful real estate investor. You can succeed in real estate investing no matter how much money you have. There are many deals that will let you use other people’s money to do them. If you appear to be a solid investment you may be able to use a private lender’s money. A good investment will know as much as they can about real estate investing. Then you will represent a good investment to other people who have money for real estate investing but do not know how to use it.

You can generate lots of wealth by real estate investing. You can create income regardless of the economy. Using knowledge of real estate investing, short sales, bulk reo sales and virtual real estate you will be able to create success for yourself. Knowing real estate investing basics will help you succeed as a real estate investor.

No generation in American history has ever experienced the number of foreclosures and defaulted mortgages as is happening now.  But challenge always gives rise to opportunity, and opportunistic realestate.BryanEllis.comreal estate investors are rising to the challenge.

The real estate investing strategy du jour is called ‘Bulk REO Investing‘ and is a a real monster.

Consider with me, if you will, the fundamentals of the Bulk REO business.

Understanding of the foreclosure process is central to understanding Bulk REO investing.

A home owner who misses one or more mortgage payments is faced with an ever-increasing volume of threatening correspondence from their lender.  The official foreclosure proceedings begin subsequently, as directed by the lender.  ‘Pre foreclosure’ is the name given to the time between implementation of the foreclosure proceedings and the public auction.

To complete the foreclosure process, the property is auction to the public.  If there are no buyers for the property at auction, the property is returned to the lender.  The designation of ‘REO’ (Real Estate Owned) is then attached to the foreclosed property.

Lenders have no interest in owning property, and thus usually opt to list their REO properties with a local real estate broker in hopes of a retail sale.  However, REO properties are now frequently sold for far less than their ‘book value’.  But the price of receiving such great pricing is the need to purchase multiple REO properties (a ‘package’) rather than individual properties.

Qualified real estate investors are increasingly finding once-in-a-lifetime opportunities in these REO packages.  Bulk REO Investors are most successful when they have a well-established source of funding for their REO packages.  Some sources of funding for these transactions are:  personal funds, hard money lenders, commercial lenders and non-conventional sources such as private investors and hedge funds.  One excellent source of funding for Bulk REO Investment transactions can be found here:  Bulk REO Investment Training.

Done right, flipping fixer uppers is perhaps one of the easiest ways to get into real estate investing. Usually you want to get in and out of the property as quickly as possible, because every day you own a house has costs associated with it. Interest on loans, taxes, insurance, electricity, heating, water, and other ongoing expenses can add up.

However, there is another way to invest in a fixer upper. It is a strategy that let’s you take your time. In fact, it requires you to wait two years before you sell. It also requires that you live in the house.

Your Fixer Upper Home

Since the tax law changes of the 1990s, you can sell your home and pay no capital gains tax on your profit. Have your accountant review your case and verify that you have met the requirements, but essentially you get to sell tax free if you have lived in the home at least two of the past five years, and you are allowed to take such a tax-free profit every two years. The total gain you can have without paying taxes is limited to $250,000, or $500,000 for a married couple.

Some of you may recall that you used to be allowed this capital gains tax exemption just once in your life. What’s more, until you claimed it, you had to always roll your gain from selling a home into another home, always buying-up. Now you can take the money and run, buy a cheaper condo, or do whatever you want with it. This is a major change.

How do you take advantage of this tax law? If you could predict appreciation rates on homes in various cities (good luck), you could move from one quickly appreciating home to another each two years and pocket the profits tax free. What if you don’t want to gamble on your predictions and you don’t want to move to a new town every couple years? Then look for a fixer upper right where you live.

You see, most investors “flip” a fixer upper quickly, meaning they pay ordinary income tax rates on the profits. They don’t even own the property long enough to qualify for the lower long-term capital gains rate. Depending on whether they get classified as business or an investor, this means they can pay as much as 50% out in state and federal taxes. They lose half of their profit!

The alternative? Let’s suppose you find a home in a neighborhood where homes are selling for around $180,000. It’s dirty and in disrepair, so the owner is asking only $136,000. You negotiate and eventually get it for $126,000. You live in the home, spending about $8,000 to clean it up and bring it up to the standards (and value) of the surrounding homes.

After two years home values are up 10%. Your home is worth about $198,000 ($180,000 plus 10% or $18,000), and you sell it for that. After all the costs of buying and selling and repairing it, you have a profit of about $50,000. You buy the next home and repeat the process. Note: perhaps $32,000 is a more accurate estimate of profit, since the same appreciation that provided $18,000 of your gain means you’ll pay that much more for the next one. In any case, this profit is entirely tax-free!

You can see how powerful this fixer upper strategy is. It doesn’t prevent you from pursuing other real estate investing plans at the same time either. You need to live somewhere in any case, so why not take advantage of the law and make some money from your home?

If you are an investor in real estate, you’re probably aware of the benefits of using a 1031 exchange as appose to selling outright. An exchange defers your capital gains taxes, keeps your money working for you, and helps to build equity and maximize your returns. But 1031 exchanges are allowed not only for the good of the investor; by allowing investors to move their capital to the most advantageous investments, section 1031 stimulates the U.S. economy.

The fact that 1031 exchanges are intended to boost the U.S. economy raises the question of whether one can exchange a property for one located overseas. The short answer is no. The taxes you can save by using a 1031 exchange as appose to selling without one, is a deferment, which indicates that even though you are temporarily pardoned from having to pay federal capital gains taxes, the U.S. government will still want to collect the money if you sell your property at some point in the future. It is difficult and sometimes impossible for the IRS to collect taxes on the sale of foreign property.

If 1031 tax exchanges are limited to the U.S. so that the economy will benefit and the IRS will be able to collect capital gains taxes in the future, then you may be wondering what rules apply to U.S. areas like Guam, the U.S. Puerto Rico and Virgin Islands. In private letter rulings, the IRS has stated that a Virgin Islands property can only qualify as like-kind in an exchange with a U.S. property if it produces income, which is more restrictive than the typical requirements for a like-kind exchange, which state that the property has to be held for your trade or business or as an investment.

So if you are considering making an exchange outside of the fifty states (and Washington D.C.), make sure that the replacement property will be considered to be like-kind to the property that you are exchanging it for. To be completely sure about this, it might not be a bad idea to request a private letter ruling for your individual case.

U.S. investors can save a lot of money by utilizing 1031 tax exchanges to defer all of their capital gains tax on the sale of investment property. 1031 exchanges are like an interest free loan from Uncle Sam..