How to Maintain Canvas Awnings

Canvas awnings are popular not only because they provide durable protection from the elements, but also because they come in a variety of styles. Customers can choose from hundreds of looks and different materials. Here is some information that will help you make yours keep looking its best.

You can extend the life of your product by caring for it properly. While canvas awnings are built to repel water and withstand mildew, there are certain things that you should do - as well as should not do - in order to keep yours in top shape.

First, make sure you keep your product clean, which will help further protect it against the accumulation of mildew. Even though there are many mildew-resistant materials available, you'll still need to make sure it doesn't form on the top or bottom surface. Eventually, it will not only stain the fabric but also damage it. To keep this from happening, hose down your canvas awnings once a month. You should preferably do this on a hot, sunny day to make sure it dries completely. Wash with a mild soap solution and then rinse as soon as possible. You can also keep the underside clean by brushing it with a clean broom. If your product is clean, mildew will not be able to form.

It's also important to keep vegetation, such as vines and shrubbery, clear of your canvas awnings. Some bushes contain acid that can damage your product. Make sure the frame is in good condition as well, because rust can lead to staining as well as deterioration. To keep your frame in good shape, give it a new coat of paint every four or five years. Also, if your product is under any sort of tree that can cause sap to fall on it, you'll need to clean it twice as often.

There are some things that you should not do as well. Don't fold or roll the canvas when temperatures are either extremely hot or cold, and don't drag it across any sort of abrasive surface such as a driveway or sidewalk. Try not to spray for insects anywhere close to your product, because the spray can cause staining and also reduce its ability to repel water.

Clear your product of water when ever possible. This will reduce the risk of mildew accumulation as well the chances of stretching and pocketing. Don't overlook any small tears or rips that may arise. Have a professional repair them as soon as possible. Also, don't use abrasive cleaners or any sort of harsh solutions, and try to avoid using a charcoal grill underneath your canvas awnings. Clean any twigs or leaves as soon as possible to reduce the chance of staining.

seattlepropertynews

seattlepropertynews

Equity Crowdfunding

According to KPLU, Northwest entrepreneurs will soon have another way to raise money for small and new businesses. 

The Securities and Exchange Commission on Wednesday put out long-delayed draft rules for "equity crowdfunding." 

The Draft proposed new rules that would allow startup companies to sell stocks over the Internet to small-time investors. To address concerns about risk and possible fraud, the SEC's proposed rules require entrepreneurial companies to seek investors only through registered intermediaries called "funding portals." The online portals will be required to run background checks on stock issuers and enforce limits on the size of the investments by individual investors.

This is yet another avenue for creative financing open to real estate investors.

Happy investing!

Short Sale Alternative

What are the alternatives to doing a short sale? What if a homeowner does not want to take the hit to their credit rating that comes with doing a short sale?

One option is to keep paying the mortgage on a house that is worth less than what is owed on the mortgage.

Another option is simply to walk away, and let the bank foreclose.

A third option may be to rent the property out. But what if the market rent is less than the current mortgage payments, taxes and insurance?

I actually buy houses from homeowners who are underwater on their mortgages. The way I do that is by doing a long-term lease purchase, which allows the market value of the house to catch up over time to the balance owed on the mortgage.

A “lease purchase” means that I will rent the house from the homeowner for several years, before purchasing it. In a situation where the homeowner owes more than the house is worth, I may want a very long-term lease, perhaps a minimum of ten years. Or a yearly lease, with the option to renew at the same terms on an annual basis.

The rent that I will pay is equal to the monthly mortgage payment including taxes and insurance – and I make all day-to-day repairs during the term of the lease. This rent is typically higher than market rent, but it covers the homeowner’s out-of-pocket costs, and eliminates the hassle of dealing with tenant repair requests. 

The homeowner makes no profit on this arrangement, but they take no hit to their credit, pay no out-of-pocket costs for real estate commissions or transaction costs, and can apply the lease income towards qualifying for a new mortgage to buy another house they can afford. It allows an underwater homeowner to move on with their life, with no damage to their credit. 

Because the house is leased, not sold, it does not trigger the lender’s “due-on-sale” clause nor require immediate payment of state excise tax.

The house is purchased for the mortgage principal balance at the time of cash out. This allows the market to catch up to the loan value, and allows the tenant buyer to benefit from mortgage pay-down.

Typically, I will prescreen prospective tenant-buyers to place in the house; these tenants must also be approved by the homeowner. I am screening the tenant buyers for criminal background and credit worthiness, available cash to put down towards the purchase of the house, and income verification.

Why would a tenant-buyer be willing to pay more than market rent for a house that is underwater? Because this arrangement allows them to purchase without having to qualify for a bank loan immediately. This gives them time to qualify while living in a house that they have realistic prospects to own.

For Homeowners:

If you are facing a short sale, and would prefer another alternative, this option may be right for you.

For Buyers:

If you have some credit challenges, but would like to own a house, this option may be right for you.

For more information, please contact me at HomeLandInvestment@gmail.com or call 425-270-7292.

Happy Investing!

Different Fabrics Used to Design Free Standing Awnings

Free standing awnings are convenient when you want to be outside but you can't find a cool, shady spot. It acts in a similar fashion to a large umbrella, but it is stronger and sturdier. There are several different types of fabrics used to make these products, and customers have a variety of options.

Most of the differences in fabrics have to do with the way they are treated. One of the most popular fabrics, polyester, comes with a wide range of coatings, including acrylic, vinyl laminate, and even PVC in some cases. Free standing awnings are used in many different ways, but their main purpose is to provide shade from the sun. As a result, many homeowners want a fade-resistant fabric if they live in an area where the sun is typically bright for many days out of the year. On the other hand, someone who lives in a more tropical area may prefer a sturdier fabric that can withstand heavy rain and substantial wind.

Another popular fabric for free standing awnings is cotton canvas, which is friendlier to the environment than other options. However, it is not as durable as synthetic products when it comes to rain, so it will need to be sealed periodically with waterproof chemicals. Many people want a blend of cotton and polyester for a classic look that offers improved durability.

Polyester coated with acrylic is a fabric that will not easily stretch out of shape and typically does not leak. It also holds its color better than other materials and is also weatherproof. Vinyl-laminated polyester is good for areas that have high humidity because it is mildew resistant. For owners in humid areas that get a great deal of sun as well, vinyl-laminated polyester is also a good choice because it is easy to maintain and clean while providing a great deal of shade.

When people are looking for a fabric for their free standing awnings, it is very important that they look for materials that don't fade, stretch, or leak. The proper choice is vital because you don't want fabrics that need to be specially cleaned.

Free standing awnings are less susceptible to wind damage than umbrellas and can be operated remotely instead of manually. They offer not only added function to a home or business, but also added attractiveness as well. In addition, they typically last anywhere from 7 to 10 years and can be very easy to maintain. One important thing to remember is to not use a power washer to clean yours. This can result in shortened lifespan because it can weaken the fabric, regardless of the type you use. In many cases, it will also void your warranty.

What is a Short Sale?

No doubt you’ve heard this term before.

A "short sale" can help you out of bad investments, help eliminate debt, reduce expenses or could possibly even complete satisfaction on your mortgage debt. Since the economy’s downturn, terms in the Real Estate market like “short sale” and “alternate financing” are cropping up more and more. But what do they really mean, and is this benefiting you? We’ll explore that in this article.

A "Short Sale" is an alternative to foreclosure if loan modifications are not possible, and may be an option if: you are ineligible to refinance or modify your mortgage, are facing a long-term hardship, are behind on your mortgage payments, owe more on your home than it’s worth in today's market, have not been able to sell your home at a price that covers what you still owe on your mortgage, or can no longer afford your home and are ready or need to leave.

A short sale is an alternative to foreclosure pending lender approval and can be a real benefit to all parties involved. Relocation costs can even be covered in some cases.

What is the process for a Short Sale?

If you qualify for this option, the process is similar to a normal real estate sales transaction. You will work with a real estate agent to market and sell your home. However, your mortgage company will also be working with you and your real estate agent every step of the way to:

• set the sale price (based on current market value),

• collect financial information and negotiate with other lien holders (i.e., your second mortgage company) if applicable,

• review acceptable offers,

• agree to the terms of the sale once a buyer is in place, and

• work with the buyer’s real estate agent and mortgage lender to finalize the sale.

A Short Sale may take up to 120 days, however this process could be shorter or longer depending upon your specific situation. While each bank will have different requirements for short sale approval, typically a bank will want to see that the Homeowner is behind on payments, the property is underwater, and the homeowner is experiencing financial hard times and does not have significant assets.

Again, these are not hard and fast rules. Some short sales do not require the homeowner to be behind on payments or to be in significant financial trouble, but these do help qualify a home for a short sale.

A lender who agrees to a short sale is doing so to lessen the financial blow that a foreclosure may cost them. A seller who chooses to sell with a short sale can get out from an underwater mortgage, thus reducing their debt load. A buyer may be able to get a significant price reduction when buying a short sale. Additionally, because of the hassle, there may be less competitionfor a property listed as a short sale as well.

Short sales can be a rather lengthy process, and can affect a seller’s credit negatively. It’s important to understand your best options and get all the information you need from an informed source. If you have any questions or would like more information on this process please contact me at (425)270-7292 or by email at homelandinvestment@gmail.com.

In my next blog we will explore alternatives to doing a short sale.

Happy Investing!

Downtown Seattle Condo Rental

AVAILABLE December 1. Showings by appointment.
Exposed brick and 18-foot tall ceilings in this loft-style condominium provide a light-filled urban experience, just blocks from Seattle's Pike Place market.

Located in the historic red brick Austin A. Bell building in hip Belltown location, in the heart of downtown Seattle. Highly walkable! The location is the best. Next-door to Starbucks. Macrina Bakery, and numerous excellent eating places of every cuisine within a few blocks.

Garage parking is available for an additional $150. For car-less commuters, Enterprise rentals will pick you up at the door, and a car-share membership can be arranged for short term needs. Easy walking distance to all downtown amenities and access to public transportation.

In a Soho type atmosphere, the unit contains a small office space, Viking stove, queen-size wallbed with NASA mattress in the loft which has additional den like area for comfortable napping, reading or LCD TV viewing. More photos on request.

This historic building was completely restored a few years ago, and the rental unit remodeled to include a small office, additional closet and storage space.

Amenities: Ceiling fan, Full Kitchen, Microwave, Dishwasher, Refrigerator, Ice Maker, Washer, Dryer, Rooftop patio, additional patio on condo floor.


Activities (on site or nearby): Pike Place Market, Shopping, Restaurants, Cinemas, Museums, Symphony, Ballet, Swimming, Boating, Sailing,Hiking, Golf, Fishing, Downhill Skiing, as well as all other Seattle features. New sculpture park on the Puget Sound is walking distance.

Sorry, no pets.

Please contact Beverly.McDevitt@gmail.com for showings, or call 888-621-4999.

Happy investing!

Seattle Rental Inspections

I attended a presentation by commercial real estate broker Marcus & Millichap yesterday, highlighting upcoming changes required by the new City of Seattle legislation on rental housing inspections. Here are my notes from that presentation:

Marcus and Millichap Rental Housing Registration and Inspection

Joel Deis, Regional Manager for M&M, oversees operations, broker for 15 years, professional property manager, has experienced all property types

M&M is the largest investment sales force in the US; real time property marketing systems;

Sara Marckx Russell, commercial multifamily broker, discussed the Seattle Municipal Code 22.214 mandate, currently a complaint-based system. The 2010 census revealed that 10% of the Seattle area rental housing has "moderate to severe" physical problems.

Registration begins January 1, 2014. Units more than ten per property must be registered by July 1, 2014. January 1, 2015 5-9 units must be registered. 2015-2016 deadlines for 1-4 units based on zip codes.

Registration fee is $175 per property with one unit plus $2 for every additional unit. Significant fees (over $10K per month) if not registered in time.

Inspection takes place after registration, with at least one inspection every ten years. Vacation rentals and rooms rented out of your home are not included.

Private inspectors must register and train to inspect units. DPD will also do inspections for $130 per unit plus $25 for each additional inspection.

If a unit fails, DPD has the right to inspect all other units.

Minimum floor, sanitation, heating, ventilation, escape windows, smoke and CO detectors, all building code standards will be terms for inspection.

Implications:
Added expenses
Tenant disruption
Hassle

What will they find? How will you respond? What can be done now to be proactive about this process?

Mitigation
Refinance for capital improvements
Discover and address anticipated violations

Opportunities for investors to pick up substandard value-add properties

Monetize your equity or trade into another asset class, tax-deferred exchange

Central Element Apartments, bought 36 unit for $3.7M, invested $1M, doubled rents and sold last month for $7.7M

35 units on First Hill, Alderview Apartments, invested into three Dollar General Stores, increased cash flow by $270%

Matthew Tyler Rose, Commercial Loan Analyst
Financing is instrumental in any major investment approach; M&M has relationships with national and regional lenders; professional team of lenders

Special financing programs for repositioning properties, all available through M&M

Ray Allen, Associate Director for Capital Markets
Many government lenders already require inspections.

Repositioning program funding is based on pro forma NOI and 4.4% qualifier; 1st disbursement based on current NOI and 4.4% qualifier, with 2nd disbursement when projected NOI is reached, 12-month window to execute

Seller Financing

What is seller financing? Can you really get a house and a loan all in one-stop without bank approvals? It’s time to get your facts straight on this important financing tip.

In 2008, about 32 percent of all American homeowners owned their homes free and clear, according to a U.S. Census American Community Survey. 

In seller financing/owner financing/creative financing, the purchaser will still make some sort of initial or down payment to the seller; then will make regular installment payments over a specified time, at an agreed-upon interest rate, until the loan is fully repaid. This happens when the seller in a transaction offers/agrees to give the buyer a loan rather than the buyer obtaining one from a bank.


To a seller, this is an investment in which the return is guaranteed only by the buyer's credit-worthiness or ability and motivation to pay the mortgage. For a buyer it is often beneficial, because he/she may not be able to obtain a loan from a bank.

There are no universal requirements mandated for seller financing. In order to protect both the buyer's and seller's interests, a legally binding purchase agreement should be drawn up with the assistance of an attorney or a real estate broker, and then signed by both parties. This ensures that if any problems should arise in the financing or agreed upon terms both parties can be protected. Essentially the loan is secured by the property being sold.

In the event that the buyer defaults, the property is repossessed or foreclosed on exactly as it would be by a bank.

So why would a seller offer this kind of financing without the expertise of a bank?

In seller financing, the seller functions as a direct lender, with the buyer making monthly mortgage payments to the seller instead of a bank. Buyers who accept seller financing usually cannot qualify for a traditional mortgage loan, often because of credit score.

Because of this risk the sellers take in this particular financial transaction, they can determine the interest rates and contract terms to guarantee a better return than many other types of investments would.

Buyers without the ability to get a mortgage can even use the seller financing as a stop gap measure until refinancing can be secured by a bank to improve credit ratings.

If a property is in bad condition or the owner has a vacant home sitting on the market for a significant period of time, then he may consider owner financing. This kind of financing may ensure a quicker sale or the sale of a property which may otherwise be difficult to sell.

There are benefits and risks to seller financing, but for many people in the housing market this is the best option.

Benefits of Owner financing for both Buyer and Seller:

- First, the chances of making a quicker sale are higher.

- Closing may also be easier since one does not have to wait for the mortgage to be approved by a lender.

- Buyer can save money in the form of origination fees and other lender fees.

- Paperwork is comparatively less extensive.

- A large down payment may not be required and the appraisal may also be skipped.

- Buyer and Seller can work out the terms of the agreement together – there is a certain degree of flexibility involved.

- Seller may obtain a higher price if he meets the terms of the buyer.

- Seller may secure future income in the form of interest payments.

Contact me at HomeLandInvestment@gmail.com for more information on how seller financing can work for you.


Happy investing!

Real Estate Investors and Tax Audits

According to Linda Winslow, attorney with Kingman Winslow, LLC, real estate brokers and investors are being audited increasingly more often in this challenging economy. She spoke to the Independent Brokers Association about this last week and I have provided my notes from that presentation here:

80 new IRS auditors have been hired in the Seattle area. Audits are being conducted on real estate brokers, agents, and investors. Investors are being audited where they have shown big losses.

S corporations are being audited in force for the first time ever to collect on self-employment taxes. Owner/brokers have not been paying themselves a salary, and the IRS is looking at total revenue and how much is owner's compensation.

Most of Winslow's clients are netting over $100k; IRS is looking for profitable years and to collect self-employment taxes. The IRS is looking for a case to justify that agents should be taxed exactly the same as sole proprietors, which would eliminate one of the big advantages of an S corp.

One client who made $150K one year was audited by the IRS, who is now trying to collect $15-20K in back taxes. The reality is that it would cost even more to fight this in court (although an appeal will be filed).

Taxpayer is not required to talk with IRS if the taxpayer is represented by legal counsel.

Auditor looks at every deposit to make sure that it matches your gross receipts for your tax return. Reimbursements need to be counted as income, along with off-setting expenses. Try to keep your deposits as accurate as possible.

Be sure to send 1099s to owners and others who need to be sent one.

In an IRS audit, the IRS has the burden of proof to show that you owe tax revenue. They do this by looking at bank statements and matching to your records.

The taxpayer's burden of proof is to show that expenses are deductible. Car expenses are problematic if there is no mileage log for travel. Save receipts with odometer readings if you are not keeping a mileage log.

You need to keep a mileage log, even if this is a corporate vehicle.

Home office is a good deduction for small business owners. IRS no longer audits for this. Take a picture of the home office, so the IRS does not have to make a visit. All business mileage from a home office is tax-deductible.

When a couple is in business together, there is no dividing line between the two.

There is an automatic 20% penalty on adjustments (which can be appealed).

Out of town travel is also a red flag for the IRS. Meeting with brokers does not justify a travel deduction.

The IRS auditor will ask for a copy of your tax return first, as they are not given a complete copy. It is a huge secret about how the IRS picks people for audit.

A desk audit comes from the IRS via a letter on a specific issue. If you do not respond, they can put a lien on the property. These are typically for schedule A items: high mortgage interest, high charitable contributions, etc.

$250K exclusion for single person's primary residence, depending that they have lived there for two of the last five years. There may be ways to avoid additional 23% capital gains taxes (especially if older seller has a lot of investment income, over $250K income).

Pretty easy to be a 1031 tax exchange facilitator. No professional requirements for this. Good idea to make sure they have a bond for the money they hold.

B&O taxes are calculated on gross income, including client funds that come into the corporation. Rental Housing Association is fighting this method of taxation.

IRS considers rental income to be part of what a real estate professional does. So there is no real distinction between business and personal rental investments.

It is a grey area for the IRS when someone who flips houses becomes a "dealer."

An unusual income year can trigger an audit.

Mortgage interest over $1M may not be deductible, and can trigger an audit. This applies to personal residences only.

Gifts up to $14K per year to children is tax-free....step transactions may affect deductibility. There are issues around shifting income to children. IRS will look at this.

Do not give your clients tax advice if you are not a tax professional!

For a copy of Winslow's book "Real Estate Agents Tax Guide: Deductions, Deductions, Deductions," contact her at lwinslow@kingmanwinslow.com

Happy investing!