A Tax foreclosure properties investment will have a much higher rate of return when compared to other types of investing. Many people are enticed because of this to invest their money in buying a foreclosed home. Buying Foreclosures through the tax system is considered as one of the safer investments as the investor has a great guarantee.

Many states in the country desire to increase the number of bidders for the tax liens by offering incentives. These incentives are likely to be almost 5% of minimum return for the investor in these properties in tax foreclosures, upon the redemption of the liens. The effort to lure investors in this way convinces many of them to go for these highly profitable deals. There are some drawbacks in tax foreclosures investments that an investor should be aware of, before getting into this kind of investment, which includes: continue reading>>.

Hans Anderson

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This article goes into some of the ground rules that need to be set up prior to starting your investment club. All members should be made clear of these rules before becoming a member and not have accumulated a large number of debt loans.

Starting your own investment club should not be anything which gives you worries. Since you’ll be working with your family and friends you should be at ease with those around you in your club. You can be assured of having a successful club if you follow a few general and commonsense rules from the beginning.

One of the biggest mistakes that a lot of new club founders make is that they do not tell the club members upfront that they may lose money with their real estate investments or trades that they make, in the beginning. Not every real estate investment or trade that the club will make will be a winner, and this is especially true during the first few months of the club. Since many of the investment clubs which are created do not have many members who are familiar with buying real estate or making stock trades, it is a learn as you go experience for the majority of the club members. You must inform potential members before they join that the money they put up for investment should be money that they can stand to lose, and not suffer any hardship because of the loss.

While we are discussing money, you need to make sure everyone agrees upon what the contribution will be for each member on a monthly basis. The amount of the monthly contribution should not be more than what any one member can afford to put in monthly. If all of your members but one can afford to put $100 into the club account, and the one can only put $75 into the club account monthly, then everyone should only put $75 into the club account. All monthly contributions must be equal to sustain the equality of the group and its integrity. The most common monthly contribution amount used for investment groups is $20 per month, but you and your group are not bound by this amount by any means.

Make the club official by partnership agreement and have everyone who wants to be a member of the club sign the agreement. It is crucial to the success of the club for everyone to know what is expected of each individual, and the group as a whole. By having a signed membership agreement and a copy given to each member, there can be no disagreements later about what the club was built upon.

Do not try to start a large investment group. Having too many members can cause many problems, such as a greater risk for arguments and fragmentation of the group. For your group to work as a team, you need to keep your team to a manageable level of no more than fifteen. Most investment clubs do not exceed 10 members.

Starting your own investment club should not be something which makes you nervous or causes undue concerns. Concentrate on starting with people you know and trust and create a group that can get together and have fun, and you will see that your club will be a huge success.

These rules are the basic rules that need to be implemented into the club. If you have any other rules that you deem necessary make them aware to other members before you begin your investment club.

Hans Anderson

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Your team of professionals becomes very important when evaluating deals in your area. Your real estate agent will be able to provide comparable properties for the investment property you are interested in.

The real estate agent will use the MLS listings to compare similar properties that have been sold in the last 6 to 12 months. Obviously the closer the comparable properties date is to the present time, it will show a more accurate reflection of current prices.

When doing a comparable lay the information out in front of you and then figure out what amenities one property has that the other properties don’t. You then add or subtract value of the amenity or lack of it.

As an example lets say we have two properties that are very similar. Both properties are the exact same in every way except one has a two car garage and the other has no garage.

The property with the garage sold 6 weeks earlier for $85,000. The other property without the garage has an asking price of $80,000. We now know that a two car garage would give the property an extra value of $5,000 and that the property without the garage is priced accurately.

Make sure you get a home inspection or a very reliable handyman to go over the property and get a preliminary title report as part of you property valuation.

Create a financial analysis of the property. Once you have established the fair market value of the property multiply that amount by 70%, then subtract your estimated costs for repairs. Your total would be the price that you would offer. Try to get a 20% profit (more is okay).

To calculate the offer price on the $80,000 property (fair market value).

$80,000 x 70% = $56,000

Now we will say that the repairs are $6000, subtract that amount from the $80,000.
For this property our offer would be $56,000-$6,000=$50,000. If you put in an offer of $50,000, your profit would be $30,000. A very nice profit.

Hans Anderson

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When you set up your investment group make sure that the appropriate paper work is done and your club is registered with the proper business registration.

Just about anything you want to do which includes mixing your cash with the cash of others include some type of paperwork to be done. This is also the case when you start an investment club. The good news is that your investment club does not require a lot of paperwork to be completed before you can begin making trades. Most of the paperwork to be handled after the club is established will be much more enjoyable because it will pertain to the purchase and sell of stocks.

Most individuals who begin an investment club will do so by forming it as a partnership. By making your club a partnership, it is a lot easier when dealing with the inevitable taxes. Your group will have to file the proper paperwork for this, which includes an SS4 form, which is for the group’s EIN, or Employee Identification Number. These forms can be downloaded directly from the Internal Revenue Service’s web site. Once you fill out the form and send it back in via fax, you can get your EIN almost immediately. At tax time, your group members will have to individually fill out and file a Schedule K for their tax returns.

You should also look into filing your group as a business within your community. Depending on where you live, the rules governing investment clubs may vary considerably, so do your homework by contacting the proper local offices. Usually it is just a quick form filled out with the name of your club being registered.

Your group will have need of a brokerage or bank account. This will need to be covered at the first meeting, and a decision reached by the members. Whether you decide on a brokerage or bank account, you will need to supply a copy of the group’s Articles of Incorporation or you Partnership Agreement. These forms can also be downloaded from online, and you need to take them already filled out with you to open the group account.

For the majority of investment clubs, the only kind of major legal issues which will need to be taken care of is the taxes. Each member of the group is responsible for filing any profits made within the year on their income tax return. If the group suffers a loss instead of a profit, then each individual would file the loss as a deductible expense on their income tax return. Any expenses the members have from the club can also be deducted, like the brokerage fees. Of course any tax issues should be dealt with by a professional tax preparer or an accountant.

When setting up your investment club with the appropriate licenses its not a bad idea to consult a Lawyer to help with the paper work. You want to set up the investment club in the safest and the most advantages way for the club and its members.

Hans Anderson

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if your in the Greater Toronto Area and you are looking for investment financing please contact me. There are lenders who are accepting applications for financing investment properties Click Here to Email Me

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Hans Anderson

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