The Commander and Chief recently stood and presented the State the Union... this coming Founder's Webinar our General will present the State of the 'Real' Nation! The 'Real' Estate nation has been in constant fluctuation. For years, Renatus Founder and CEO Bob 'The General' Snyder has been sharing the signs and indicators that we are headed to a housing shortage. Come take part as he presents what the indicators are showing now for real estate. Please click the following link to register for the Renatus CEO's Monday night webinar!
Just check out how many regular folks that work at home have become leaders in the Renatus Community. It's not hard to be successful in this business. All it takes is for you to be committed, consistent, & creative. Join us today!! We are soon having our 2014 Renatus National Conference near Salt Lake City Utah...you are welcome to join us!!
Renatus- Along with being a bestselling author, Sharon is a CPA, entrepreneur, international speaker, and proud Mother and Grandmother. She is also a national spokesperson for the AICPA for financial literacy and was a member of the first President's Advisory Council on Financial Literacy and founder of Pay Your Family First and YOUTHpreneur.
Sharon will be an honored guest speaker at the 2014 Renatus National Conference and is our Guest Trainer on the first Founder's Webinar of 2014! Passion is an essential key to a successful business. Love what you do and you'll never work a day in your life. Be sure that every member of your team and community is online. This Webinar is staged to change lives, create wealth and prosperity.
This training is reserved for those leaders willing to guide their teams to massive success.
In creating Renatus, Bob Snyder has developed the path of our success predicated on our motivation. Are you ready to create your massive success? Don't miss your chance to learn from the best.
To register for this webinar: http://goo.gl/Fh2Trc
If you can't make it for the monday night webinar, please watch the Fast Track to Freedom Webinar by our CEO, Bob Snyder, and if you decide to join our team, then you will have access to all of the Monday night webinars to watch at your leisure. Just register for the FREE Fast Track to Freedom Course by clicking here.
Dr. Gary was like many people looking to retire in America today. When his retirement day came, he realized that he could live very, very comfortably for the next few months, instead of years…
That is when Gary began to look for a better way to have a business in retirement. He knew the value of real estate investing, but did not have a clear road map to get his dream.
See his story here
By Larry Baldwin, Founder and Executive Director, Heritage Living Trust
The Land Trust has been around for ages but they aren't well known because most attorneys know very little about them. They are the neatest thing to ever come along for holding Real Estate and provide a myriad of protection benefits for property owners. Heritage does them and you should be telling your clients about them.
These simple title holding trusts were originally started in Illinois, so they are often called Illinois Land Trusts. The purpose of a Land Trust is to allow one to have the legal title to his property held by another person or trustee while retaining all of the rights and privileges of property ownership (the beneficial interest). The trustee acts only upon the beneficiaries’ direction. The property owner still retains all rights, such as the right to possession, to collect rent, mortgage the property, homestead exemption, and any other benefit he now has.
Avoid Probate, Save Taxes
Property held in a Land Trust can be designated for transfer of ownership whenever you desire. Your spouse, children or other successors can bypass costly and time consuming Probate proceedings and can sell or refinance the property without delay. Probates often take years to settle. With a Land Trust your heirs could sell immediately and avoid making payments on the property they inherit but don't wish to keep.
Protect Your Credit Report
Public recordings related to your property will show up on your personal credit report, thereby lowering your credit score and access to credit. If you hold title to property in a Land Trust, any liens relating to your property will not report to your personal credit report. This allows you time to work out the problem more favorably, since it does not appear on your reports.
Insulate Your Property From Liens & Judgments
Liens, judgments, lis pendens and claims by city and county government, usually attach to property held by a person in his or her name, or as a co-owner with others. This can make the property more difficult to sell or refinance. Where the same property is held in a Land Trust, legal matters affecting the beneficiaries do not pass through to the subject property.
About Partners and Tenants In Common
Properties with more than one owner, benefit greatly from a Land Trust. First, it isolates each owner from any liens, judgments or other public record filings from being attached to the property. It also allows for partners to readily and easily sell or transfer their interest to another investor. ! They can also gift the property to a family member whenever they wish without tax or reassessment. With Land Trust ownership, it is possible to sell property for cash and avoid the reporting of the sale to governmental agencies, thereby entirely postponing or avoiding tax consequences. By having only one trustee acting for all of the owners, there is no need for all of the owners to sign necessary papers, documents and contracts, which may become necessary from time to time. This saves time and confusion when there are several owners.
Many cities and counties charge hefty transfer taxes when someone sells property to another person. They often reassess the property taxes and those taxes may be increased considerably. In California, it is possible that the property taxes could increase by several times. In a Land Trust, it is possible to privately transfer the beneficial interest (the actual ownership) in the trust without so reporting to any governmental agency. This is because a person's interest as a beneficiary of a Land Trust is considered personal property under the law. This can be extremely beneficial when buying out a partner or spouses interest in a property, or if you wish to deed the property as a gift to children or grandchildren.
Legal ownership of all property is listed with the county recorder's office in all counties. That means your ownership information is available to anyone who wants it. That is why property owners are constantly solicited by mortgage brokers to apply for new loans. If you form a Land Trust, your interest in the property remains confidential. We believe that matters of real estate ownership should be private. You don't let everyone know your bank account number or balances. Why let the entire world know the equivalent of your real estate holdings? A Land Trust offers a way to maintain privacy regarding real estate ownership.
If you have an interest in knowing more about Land Trusts, contact us or give us a call at (877) 265-1856. We will be happy to connect you to an agent to discuss their advantages further.
Candie wore many hats in life. She was mother, provider, and friend to many. One this she was not was a real estate investor. Candie had a burning desire in her heart to find a way to create income where she could spend more time with her family and provide the lifestyle she desired for her children. At the time she began she was a single mom looking for a better way to work from home and invest in real estate.
She knew that wealthy people where involved in real estate, but she had no idea how she would fund real estate deals.
That’s when she discovered the systems and strategies at a local Renatus event. See her story here:
If you live in the Chicago-land area, and you want to learn how to invest in real estate and to meet Candy In Person (yea we said it), just click here.
By Mark J. Kohler, CPA, Attorney at law
U.S. real estate professionals and rental agents/property managers are encountering an increasing number of situations that involve foreign persons' acquiring U.S. real estate as a part-time residence, for investment or in some cases to conduct a U.S. business. The U.S. tax rules that apply to ownership and dispositions of U.S. real estate by foreign persons are different in some important respects from the rules that apply to U.S. persons.
Here are some basic rules and I highly recommend that any foreigner investing in the U.S. retain a U.S. Law and Accounting firm to structure their entity and file any necessary tax returns.
Legal Structuring. In a nutshell, a foreigner really has 3 options to choose from when it comes to ‘holding’ the real estate in the U.S. 1) C-Corporation, 2) Limited Liability Company (LLC), or 3) Limited Partnership (LP). Generally, the LLC is the best route to go in order to potentially save on taxes and even additional tax returns. HOWEVER, and I can’t emphasize this enough, any given foreign country could have a unique and/or odd Tax Treaty with the U.S. that makes the use of an LLC for the foreigner a nightmare.
For example, I would not recommend a Canadian Citizen use an LLC to hold U.S. investment property because of serious double or triple taxation issues. Also, it should at least be mentioned for the novice investor that an S-Corporation is NOT an option and cannot be owned by a foreigner.
Withholding Tax. Before we even talk about what tax returns a Foreigner may need to file in the U.S., there is the ‘Withholding Tax’ issue. Essentially, the IRS (U.S. Government) wants to make sure that certain (Withholding Agents- which could be simply a Realtor, Title Company or Seller of property), withhold taxes from rent or the sale of property to ensure that the U.S. gets its tax and doesn’t get ‘stiffed’. There are 3 issues to consider.
Sale of Property- This withholding ‘rule’ has its own set of guidelines and The Foreign Investment in Real Property Tax Act (FIRPTA) requires a FIRPTA withholding tax of 10% of the amount realized on the disposition of all U.S. real property interests by a foreign person. A buyer of U.S. real property interest from a foreign investor is considered the (transferee) and also the withholding agent. The transferee must find out if the transferor is a foreign person. If the transferor is a foreign person and the transferee fails to withhold, the buyer may be held liable for the tax. The seller must report that sale of the real property interests by filing a U.S. Federal Tax Form 1040-NR or Form 1120-F (which I’ll mention later in more detail).
Passive Investor- It may sound prudent to be a ‘passive’ investor in the U.S. and thus things could be simpler and withholding less, however that is generally not the case. First, a passive activity would be considered a typical rental property, and obviously a net lease in which the lessee pays rent, as well as all taxes, operating expenses, repairs, and interest in principal on existing mortgages and insurance in connection with the property. Such passive rental income is subject to a flat 30 percent withholding tax (unless reduced by an applicable income tax treaty) applied to the gross income rather than the "net rent" received.
Thus, the real estate taxes, operating expenses, ground rent, repairs, interest and principal on any existing mortgages, and insurance premiums paid by the lessee on behalf of the foreign owner-lessor, must be included in gross income subject to the 30 percent withholding tax. The gross income and withheld taxes must be reported on Form 1042-S, Foreign Persons U.S. Source Income Subject to Withholding to the IRS and the payee by March 15 of the following calendar year. The payor must also submit Form 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons, by March 15.
Foreigner engaged in a U.S. Trade or Business- Believe it or not, this is something the Foreigner may want to ‘Elect’ and be treated as such. First, a foreign investor is considered to be engaged in a U.S. trade or business such as the developing, managing and operating a major shopping center. If this is the case, the rental income will not be subject to withholding and will be taxed at ordinary progressive rates. Expenses such as mortgage interest, real property taxes, maintenance, repairs and depreciation (accelerated cost recovery) may then be deducted in determining net taxable income. The nonresident must make estimated tax payments for the tax due on the net rental income, if any. The only way these expenses can be deducted, however, is if an income tax return Form 1040NR for nonresident alien individuals and Form 1120-F for foreign corporations is timely filed by the foreign investor.
*Make the “Election”- Foreign individuals and foreign corporations may elect to have their passive rental income taxed as if it were effectively connected with the U.S. trade or business. Once such an election is made by attaching a declaration to a timely filed income tax return, there is no obligation to withhold even in a net-lease situation. Once made, the election may not be revoked without the consent of the IRS. This election is made with Forms W-8ECI, Certificate of Foreign Person’s Claim for Exemption From Withholding on Income Effectively Connected With the Conduct of a Trade or Business in the United States.
Income Tax Returns- Finally, annual tax returns will need to be filed by a foreigner holding U.S. property for rent or selling U.S. Property. The Form 1040NR is required for nonresident alien individuals and Form 1120-F for foreign corporations. I wish I could say that a single member LLC would only require a 1040NR in every instance, but again, it depends on the country we are dealing with. For example, Canadians even holding a single member LLC would need to file an 1120-F (as the Canadian Government doesn’t recognize the LLC as a ‘flow thru’ entity). Again, underscoring the point that support from a professional firm is absolutely critical.
A note to those selling too, buying from, or managing property for a Foreign Person. U.S. real estate professionals must know how to properly deal with foreign investors in U.S. real estate in order to be in compliance with the federal tax laws affecting real estate transactions. They must be familiar with the rules that determine whether an individual or entity is to be treated as a U.S. person or a foreign person. In addition, they must also be familiar with the fundamentals of U.S. federal income taxation of foreign investors with U.S. rental income. There are withholding rules and requirements for the real estate professional that may SHOCK YOU. Please take this seriously and get a consult and support with a tax professional that can guide you through this mine field.
In Summary, there are WONDERFUL opportunities for foreigners investing in the U.S. and sellers and real estate professionals working with these foreigners. However, all parties need to be familiar with the rules and have a professional firm supporting them here in the U.S. PLEASE know that we at K&E CPAs can help you through the process. Please call and speak with our administrative assistant, Merichia Merritt, in our office to schedule a call with one of our CPAs at435-865-5866 or visit us at www.ke-cpas.com.
Written by Mark J. Kohler, Renatus Instructor
As many of you know, I recommend to ALL of our clients to purchase at least one rental property a year for tax planning and wealth building benefits. It doesn't have to be big, but at least something. I have created these “10 Steps to Purchasing Your First Rental” as a guide for many of my clients that are new investors. I hope this may even help some of you that are seasoned investors.
HERE is my AMAZING, yet SIMPLE list:
With all of these risks and steps to take, I still feel strongly this can be one of the the secure paths to retirement. With the power of leverage and using the bank's or other people's money, you can increase your net-worth dramatically. Don't rush…take your time and realize it's not a sprint, but a marathon.
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