OOPS … got caught!! - Posted by Merle
Posted by Merle on December 06, 2000 at 14:18:16:
Well, I did it again. Tried to answer a question for which I did not have a good answer.
But fortunately ? and as often happens here ? people who do know their ?stuff? posted excellent responses.
When I read the posts of Jim Piper, Bud Branstetter, JohnBoy, Bill Bronchick, and many others, I realize how much they really know about investing in real estate. Our program is so simple. They use terms we never hear in our business operations ? ?1031 exchanges,? ?hard money loans,? ?sandwich leases,? ?flipping,? ?subject to,? ?earnest money,? ?section 8,? ?tax sales,? etc.
My answer to the question about option consideration compares to reading a sentence out of a complex manual and trying to understand the entire book. The answers posted by others offer so much more explanation.
After reading the requests to explain more about our business, the realization came ? I don?t know the answers you want! But, I know who does! Years ago, it became apparent that I would never know ?it all.? In fact, not too many people even come close to knowing it all (there might be a few exceptions here on CREO, however ? a few of them listed above).
Rather than accepting mediocre existence, Pat and I committed to two major decisions. First, we made a commitment to God to dedicate everything we had and would ever get to Him; second, we committed to always finding the ?expert? in every major area of our business operation ? paying their fees, getting the best possible advice. The commitment to God means that everything we have belongs to Him (and it did anyway, before we acknowledged it) ? so that means we are just managing it for Him. Just made sense that He would use the very best advisors in each area.
Every decision of any consequence then follows two steps: first, prayer ? continuing til we feel He has answered; second, getting advice from the ?human? expert.
You see, we had a plan back in 1985. Perhaps a ?wild idea? might better describe it. We wanted to continue our same (or better) standard of living without the long, hard hours of work we?d experienced in previous businesses. We wanted time for family, church, and recreation. Previously, we tried to learn ?it all.? That?s hard work ? long hours.
So, we looked for a special niche ? one that would afford us the income, the freedoms ? and, the opportunity to help others. We sifted thru piles of books, tapes, and real estate courses. So many different ways to do it!
Finally broke it down ? buy nice houses at reasonable prices, sell them at reasonable prices, and finance the sale. Eliminate as much of the work/work/work as we could.
We did all the work until we found the right experts. As we found them, we stopped doing that part of the business. Today, we even have an ?expert? answering machine. We return calls ? rarely ever answer them coming in.
Now, back to taxes and option considerations. Our CPA, reputed as one of the very best in our area, knows the answers to all our tax issues. Since we basically do the same thing year after year, we don?t have to spend a lot of time in consultation with him. That all happened years ago.
Today, he simply updates everything according to new codes and ?fills in the blanks.?
The $4,000 fee for our tax return last year seems rather insignificant compared to the very small (about 3% of all spendable cash) tax payment we had to pay. In our ignorance, we were prepared to pay considerably more (we had a very good year ? 25 payoffs). Seems we had some passive losses to carry forward ? please don?t ask what they were (I can give you his phone number). Had something to do with repair costs that exceeded what we could deduct in previous years.
Concerning all the questions about the securities issues and our private investors, we took those same two steps. Prayer ? then, hire the best securities attorneys available.
Why do we need to learn all the tax rules? Our telephone works great ? just a quick call and the answer is there! Same with securities questions. Some folks want to know all that ? and I congratulate them ? just not my thing anymore.
Am I saying that we are stupid ? don?t know what we are doing?
No, we learned a lot over the past 16 years. We learned that if you make every decision based on its being beneficial to everyone involved, it?s likely to be the best one you could have made. Yes, we?ve made many mistakes ? but answers always arrive ? many are surprises to us.
Let me share some recent ?surprises? with you. On October 15th, we had 6 houses ready to ?sell.? With a lot of church and family commitments over the holidays, we decided not buy anything until January ? concentrate on turning the 6 houses.
We prayed for the right buyers. The next night as we stood in one house discussing the repairs and possible updating that it needed, a knock came at the door. A woman from several blocks away, for some reason, decided to walk down this street (usually went a different route). She loved the house ? had remodeled a couple of houses before. Wrote the contract for the house (as is) the next day.
Truck driver called to see what we had in the country. We never buy in the country. But, we did a few years ago and got it back a few days before the call. Quick sale!
Single mother, with physically handicapped child and 3 foster children with disabilities, needed 4 bedrooms. Our buyer of the only 4 bed ranch we?ve ever bought moved out a couple of days before. Another quick one!
Last night, we were in a small town 60 miles away ? looking over another house. Simply hadn?t had time to go there until now. As we were leaving, we checked the answering machine. Guess what, a message from someone who knew the people who had moved out of this house. Could she possibly look at it tonight? Thank you, cellphones! Called her ? she was there in 10 minutes. Will write that contract on Friday.
All 6 houses sold ? and plenty of time for all the holiday happenings.
Lucky?? Coincidence?? I can almost see the responses and the possible explanations for all our good fortune ? but, please don?t. That?s not my purpose at all.
My purpose is twofold: first, to apologize for answering the questions too quickly; second, to try to explain why our business when almost everyone told us in the beginning that it couldn?t possibly succeed. If my explanation says what is intended, some will understand and some will not … yet.