Lack of Experience & Knowledge of Laws Shows

[CashFlowDepot]

Investors who have been in business a long time ( 15 years or more) and done hundreds and hundreds of deals are thoroughly upset with the new proposed State and Federal government intervention in private property rights.

People like Peter Fortunato, Dyches Boddiford, Jack Miller, David Tilney, Jimmy Napier all saw what happened happened in the 80's when the government completely changed the tax code. They were forced to sell their entire rental portfolio in a few months or pay very high taxes.

Long term capital gains previously went from 15% to 30% in an effort to get more money coming in to the government. Currently capital gains at 15% again. What would happen to your profits if they went back to 30% again? How would you have to change your exit strategies? If you think a tax free exchange is the soluton, that may not work because the government is not proposing taxing exchanges too.

If they passed a law that capital gains would go to 30% next year, there would be a huge sell off of assets to avoid the extra 15% tax. We saw that happen just before the presidential election because Obama was talking about the need to increase the capital gains tax. TRILLIONS of dollars were lost because people sold short.

I remember in 1999 when Texas changed the rules on Contract for Deed. They said instead of a 30 day notice to cure, I had to give a 60 day notice to cure, plus a lot of other government induced changes to my personal property. To make matters worse they made it retroactive. I had 27 Contract for Deeds (plus a lot of other property) at the time and had to switch all of them to Warranty Deeds as fast as I could - paying thousands of dollars in attorney fees.

Yep, just a little extra paperwork.

Selling with a Contract for Deed was completley eliminated from my exit strategy.

Then a few years ago in Texas, they changed the laws so you can't do a lease option. Another exit strategy was completely eliminated. Well, you can do a lease option but no one in their right mind would do them because you cannot make the option consideration non-refundable, you risk a $250 per day fine if you forget to give annual accounting, and under certain circumstances the tenant/buyer can stay for 6 months, change their mind about buying and you have to give ALL their money back ( option and rent payments). The list of government imposed rules and regulations for lease options in Texas goes on and on and on....

In Florida, Maryland, Oregon and some other states it is now against the law to contact someone in preforeclosure. There could be a fine as high as $50,000 and up to 3 years in jail in some states.

I think Georgia now has restristions on doing Subject to Deals or you MUST use a real estate agent to buy that way.

Experienced investors are very concerned about any attempt for the government to take away personal property rights and to dictate what, where, when and how our investments are bought and sold. (ie. telling us how to run our businesses)

Experienced investors are also concerned about any kind of legislation that gives the government the authority to make the decision that a multi family owner is under capitalized so the government can TAKE OVER your property and sell to someone else - whether you want to sell or not.

Inexperienced investors (those who do not have much experience) see these changes as just a "little extra paperwork" or a "few extra steps" but fail to see the big picture or to read between the lines of proposed government legislation.

Inexperienced investors do not have decades and decades of experience and a thorough knowledge of federal and state laws and the tax code to base their information on. They will read one little sentence in the new law and say that's not so bad.

But they don't have the experience to know or see the big picture.

Reading proposed law changes is just like reading the Bible, you can't read one sentence and get a full understanding. You have to read the whole chapter ( or book) and very often you need a thorough understanding of other laws already on the books and how the new law will work with existing laws when combined and the tax implications.

It's been my experience that people who have only been in business a few years don't have a clue how the economy and the government can totally change their business. Often these people have had a few good years but have never had to deal with significant changes and therefore they don't thoroughly understand how changes can affect their business, their profits, and their cash flow. They tend to think there is an easy fix but fail to see the domino affect of how one fix can lead to a new problem, then a new problem, then a new problem and possibly increased taxes too. They can't see the BIG picture because they just don't know enough. They don't know what they don't know.

A little extra paperwork today can easily turn in to elimination of an entire exit strategy tomorrow. If we don't voice our opinions loudly to stop intervention in to personal property rights now, you may wake up one morning and find there are NO MORE personal property rights.

If you're an inexperienced investor and don't see the implications of more government intervention, or if you think it is just a little extra paperwork, then you need to find the most experienced investors in your town, take them out to a long dinner, and ask them how their lives and profits have been forever changed because of small little changes and extra paperwork the government required in their business over the years. I assure you you will get an earful.

The smart old investors created new ways to run their business - they were forced to change.

Many other investors have been forced out of business because of law changes which eliminated their entire exit strategy or a way of buying houses.

Anytime you are taking advice from someone be sure to know how experienced they "really" are. There are a lot of pretender investors out there - they have read a lot of books/courses and understand the theory of investing but have rarely actually done a lot of deals. You can often find pretender investors selling expensive courses and seminars.

[Russ H]

Investors who have been in business a long time ( 15 years or more) and done hundreds and hundreds of deals are thoroughly upset with the new proposed State and Federal government intervention in private property rights.

Anytime you are taking advice from someone be sure to know how experienced they "really" are. There are a lot of pretender investors out there - they have read a lot of books/courses and understand the theory of investing but have rarely actually done a lot of deals.

Jackie, while you haven't said it directly, both JScott and I fall into your category of "pretender investors" because we've been doing this less than 15 years. And each of us have done less than 30 deals.

While neither one of us would call ourselves "pretender" investors, we are honest about the fact that we have only been doing this a little while, and have much to learn.

I know we've both asked you to clarify very specific comments/assertions you've made in the HR 1728 thread, and I assume the comments above are your response, since you haven't answered our questions from that thread.

If I'm totally wrong about this, my bad. And my sincere apologies for misreading your non-response.

I'll pull all of my comments above if that's the case, as I'm not trying to pick a fight w/you-- I had just hoped you would help us understand the comments you made in that thread.

OK, that part's done.

On to the interesting points you make above.

It's been my experience that people who have only been in business a few years don't have a clue how the economy and the government can totally change their business. Often these people have had a few good years but have never had to deal with significant changes and therefore they don't thoroughly understand how changes can affect their business, their profits, and their cash flow. They tend to think there is an easy fix but fail to see the domino affect of how one fix can lead to a new problem, then a new problem, then a new problem and possibly increased taxes too. They can't see the BIG picture because they just don't know enough. They don't know what they don't know.

A little extra paperwork today can easily turn in to elimination of an entire exit strategy tomorrow. If we don't voice our opinions loudly to stop intervention in to personal property rights now, you may wake up one morning and find there are NO MORE personal property rights.

If you're an inexperienced investor and don't see the implications of more government intervention, or if you think it is just a little extra paperwork, then you need to find the most experienced investors in your town, take them out to a long dinner, and ask them how their lives and profits have been forever changed because of small little changes and extra paperwork the government required in their business over the years. I assure you you will get an earful.

For years, I've been fortunate to have around me very wealthy and successful folks-- I originally met them as my clients, for the S business I ran. The other one happened to own several shopping malls, including the one where I had a small office.

But now they're friends, or at least friendly acquaintances. I chat w/them every now and then.

And I have to say, they fall into 2 groups:

Group #1 complains about govt changes and how it's hurt them. Want a shock? These are what I'd call the "small time operators". They own a chain of successful businesses, worth say 10-30 mil. Or they have a successful investment career-- a "one trick pony" as SteveO says-- which has been built around the existing laws, and will implode or be significantly boo-fooed if the laws change. They are all very vulnerable to changes in the laws, and have the scars to prove it.

Group #2. These are the big guns. The 3rd generation multi-millionaires, and billiionaires. CEOs/CFOs of some of the largest media or financial outlets on the planet. Venture Capitalists who literally own, and trade, entire multi-media conglomerates (think companies worth billions).

The big guns laugh at this stuff. They research it, and they find ways around it. Or more accurately, their attys and business managers do it.

I rarely hear them whine about it.

They just shrug it off, "Part of the game", they say w/a grin.

The folks in this second group have been my role models.

No, I don't pretend to do even 1/1000th of the magnitude of deals they do.

But I work on having the same "let me at 'em!" attitude.

The hunger, the ferocity-- not a lack of fear-- but a fearlessness and confidence earned by years of making deals happen. Of reading the signs, making the right plans, and executing them.

Fear or feeling their lives/businesses were screwed over by the government? These things just don't seem to be part of their perspective, or world view.

I realize this runs in direct contradiction to the experiences you've outlined above.

Which is very cool.

It doesn't mean either one of us is right, or wrong.

It just means we have had different experiences.

And it makes the fastlane a much more interesting place.

I very much look forward to your contributions in the future.

Rep speed.

-Russ H.

[fanocks2003]

Big guns do shrug it of, Russ are spot on. But you don't need to be a big gun to shrug such things of (new laws that is). It's a mindset you have.

[hatterasguy]

I don't see this happening anytime soon, unless I missed a bill that was recently introduced. If so please supply a link to said bill so I can read it.

Anyway the RE market is about as soft as its been since the Great Depression right now. The government needs it to recover and isn't going to do anything to hinder that. I can see them raisng capital gains to 30% in the future, but not until the economy starts to turn around.

If that happens we will do what we have always done, deal with it. Sometimes the rules change on you.

[Bobo]

The government needs it to recover and isn't going to do anything to hinder that

Heck no, that would be like them passing cap and trade legislation that would put us at an even greater taxation disadvantage in the global marketplace in the middle of a recession.

Oh wait, crap.

[Russ H]

Bobo, we need to have some kind of laughing speed point system around here . . .

You'd be cruisin'

-Russ H.

[Russ H]

I don't see this happening anytime soon, unless I missed a bill that was recently introduced. If so please supply a link to said bill so I can read it.

Hatteras, c'mon, read the link in my post up above.

We've been talking about this legislation for weeks.

Big thanks to Bilge, Jackie, and JScott for their input on that thread.

-Russ H.

[CashFlowDepot]

Russ

I've answered the questions over and over again on HR 1728 but you still don't seem to get it.

Successful investors will always find a way to change their business and make money - I sure have.

But I think you're missing the point of the whole discussion -- there is an attempt to take away personal property rights - a little here and a little there. Eventually, you won't have any personal property rights left.

[Russ H]

Thank you for your reply, but you didn't address some of the more important issues that you brought up earlier, and that I questioned...

If you do more than 1 seller finance deal in 3 years, you will be classified as a "mortgage originator." In each state that carries certain rules and regulations. You may need to get a mortgage brokers license. You may have to pay big bucks to get it and do ongoing education to keep your license. You will need to be bonded and insured. You may need to work under another broker for several years before you can be on your own.

Again, my broker told me $200 and he'll do all the work, as he currently does for all my conventional, FHA, VA, and other traditional buyer financing. Why are you convinced that sellers would need to either get their broker license or jump through hoops to deal with this situation. That's just not the reality that I'm witnessing; perhaps my broker doesn't know what he's talking about, and if that's the case, I'd like to know now. Can you provide more information here?

When I buy houses I often have creative terms like zero interest for the 1st 5 years then 5 % interest or maybe zero interst for the full lenght of the note. Or I might split the notes so I;ll have 2 notes and the 2nd note payments don't kick in until the 1st note is paid off. This increases my cash flow and gets the seller the price they want.

Also, when I sell a house I can structure the note so it fits the needs of the buyer but also gets me what I need out of the house. I did a deal recently where I sold the house at a discount to keep the monthly payments low for my buyer but I kept an option to buy it back in 10 years for a little more than they paid. So they get a really nice house at way below market payments and I get a lot of the upside without having a tenant.

None of that can happen anymore!!!

You still haven't addressed this issue. Why can't these things happen anymore???

Now, if you want to sell with seller financing it has to be a 30 year amortizing fixed note...

Again, this has tremendous implications, if it's true. Where are you getting this info?

The license part is not the problem. The problem is that this bill is an attempt to eliminate any kind of creative financing.

How? Other than requiring you to spend some money having a licensed broker do the paperwork???

Jackie - I'm honestly trying to get a better grip on the implications of this new regulation, but find it difficult when there is a so much "excitement" and hyperbole surrounding discussion of this legislation.

Can you clarify in more detail the statements you make above so I can get a better understanding of how this may or may not affect my business?

Specifically, can you point to the specific sections of the bill that address the following claims you've made/implied:

- Requiring all loans to be a 30 year amortizing fixed note
- Outlawing "creative financing"
- Requiring sellers to become mortgage originators (as opposed to just paying one to do your loan, which should not be very expensive)

I've answered the questions over and over again on HR 1728 but you still don't seem to get it.

OK, Jackie.

I get it.

Both JScott and I have read the actual bill-- more than once.

And neither one of us can find any sections that say:

-All loans will be required to be a 30 year amortizing fixed note
-"Creative Financing" will be outlawed
-Sellers will be required to become mortgage originators (as opposed to just paying one to do your loan, which should not be very expensive)

So we asked you to clarify, or show us what we were missing.

You told us to read the bill.

So we did.

We re-read it.

I even posted all the relevant sections on the thread.

And your response?

I've answered the questions over and over again on HR 1728 but you still don't seem to get it.

Sorry if I seem dense here.

I hope you can appreciate my predicament:

You made assertions.

We asked for clarification.

You didn't clarify-- only sent us back to read a bill we'd already read.

You're a smart cookie, Jackie.

So put yourself in my place.

What would you conclude?

-Russ H.

[Russ H]

I think you're missing the point of the whole discussion -- there is an attempt to take away personal property rights - a little here and a little there. Eventually, you won't have any personal property rights left.

We have acknowledged that any new laws can limit personal freedoms.

That's a great topic for discussion-- been batted around here (and on the rich dad forum) for years.

I'm not an anarchist (= no laws)

I believe in the rule of law.

Means I can walk down the street tonight and not worry too much about getting gunned down.

I'm wiling to give up some of my freedom for being able to live without fear of others doing whatever the *** they want.

But that's just me.

I fully acknowledge-- and appreciate-- that other people may feel differently.

We all have varying degrees of how we feel about this.

That's what makes the world go 'round.

But just because I don't agree w/you, Jackie, doesn't mean I don't "get it".

-Russ H.

[hatterasguy]

Hatteras, c'mon, read the link in my post up above.

We've been talking about this legislation for weeks.

Big thanks to Bilge, Jackie, and JScott for their input on that thread.

-Russ H.

I have read that bill, and I have no problem with it.

[hatterasguy]

Heck no, that would be like them passing cap and trade legislation that would put us at an even greater taxation disadvantage in the global marketplace in the middle of a recession.

Oh wait, crap.

No coment since this is a non politcal forum. But lets just say I didn't vote for the morons in DC, this time around.

[unicon]

Had a response all written out on this thread and the attempt to post a quick reply would not allow! It stated to reload the window!

This has happened before and ---- me off, as I lost all my typing. I was already logged in and when re-logging still could not back track and pick up writing, kept trying different ways to pick up my reply and could not figure out - hit refresh then lost the writing.

What am I doing wrong and how can I pick up the writing when it says to reload window???

[Russ H]

What am I doing wrong and how can I pick up the writing when it says to reload window???

This could we be caused by your internet connection or browser.

Simple solution: Write your replies in MSWord (unformatted), and cut/paste them into the quick reply.

That way, if anything happens, you've got your backup.

If you keep word open on your deskto[, it takes about 10 seconds longer to do it this way.

-Russ H.

[kurtyordy]

Successful investors will always find a way to change their business and make money - I sure have.

was the change to start selling info? or is this on top of your real estate deals? How has your real estate biz changed in light of these law changes?

[Russ H]

Great Q's, Kurt.

I made lots of $$ by writing and teaching, back when I had an S biz.

Jackie-- how about you?

-Russ H.

[unicon]

In support of Cash Flow it seems the approach has been more from a conceptual and/or human skills approach as opposed to a strictly technical analysis (detail).

The buying and selling of property are the simple fundamental recording of a deed or option document in list order with the local county. In fact in its most basic form the deed may just be delivered and not recorded anywhere. I start all my deals with this basic premise. Approval of the other individual in the transaction is the only approval I seek. This will never change and the one constant with all the laws surrounding real estate and institutions potentially involved. The more layers of institutions and laws invited into the transaction between individuals the more costs and complexity are added. The motive here is control and power.

Given the above understanding, I believe Cash Flow's important point is that this lawmaking is a systematic problem that filters through every player who touches a transaction with their own interpretation, their own misplaced priorities, their own discretion, their own power, on their own time, etc. These laws are made from top down not from the bottom up. Institution to institution instead of individual to individual. For example I have had tax returns and financial statements structured totally different where few were qualified to understand let alone make a loan decision. I have had credit institutions who have recorded 6 figure judgements against myself when these judgements were against the other party, you have people plugging you into systems that do not know what they do. I have had people in escrow companies tell me "You can't do that" and my answer was "I just did." I could write a book.

The above does not just apply to real estate, the "story" is the other constant and all starts with you, not an institution. Every label is just an obstacle to get through, I know my credit better than a credit agency, they do nothing for me I own the story - this is for the benefit of institutions and packageing. My ideal loan is in my structuring not a package structuring, etc, etc. Maybe institutions will have to slow down in loan packageing and sell off, so individuals can go faster (more quality instead of volume).

Cash Flow obviously understands that this law making is misdirected and I agree, I am also an investor and know the human element that takes on a life of its own and is the greatest abuser of time, why wade through something one can see is misdirected on the surface? This is separate from digging out a technical and objective support (an incorrect detail). You can harm an individual without harming a hair on their head.

As an investor the human skills are necessary as well as technical to predict the future. The best authors and the most forthcoming are M Scott Peck on the human side and Robert Kiyosaki on the business and real estate side. These global perspectives make a book I started writing (years ago) look like childs play. Until one sees more character, courage, and clarity elsewhere these books are the standard.

Knowing wealthy people is diffent than knowing wealthy people you can respect. People who are giving of their knowledge like Peck, Kiyrosaki, etc have the common denominator of fighting great battles and that is precisely why they have so much to give, this was a product of individual courage not an institutional knighting. Kiyrosaki's books are an attack on the entire educational system as slowing people down, his latest book attacks the govenment in Conspiracy of the Rich. Who is looking out for you? Not this government legislation, it is an illusion while stripping one of property rights slowly and surely. The pattern has already taken on a life of its own before this legislation. Alot of time can be spent on writing a law that is useless (clutter) and it is done all the time. Its like digging ditch in the wrong place.

My own weakness could be criticized as fighting too many battles historially. Capacity is the first quesion of business. If one is highly, highly active in life you will attract friction, therefore you must understand organizational skills (to conquer time). The flaws in thinking become very transparent in law writing or any other interaction. You are not the norm because there is no norm with growth.

The uber rich can buy their way out of problems, their problems are not related to government, it is a different set of problems in decisions on how, what, when, where, and who, to give away their wealth, it is the natural evolution. True power is making the individual strong not suffocating them because what suffocates your neighbor also suffocates you.

Making more victims dependent is a true dead end.

[CashFlowDepot]

Russ, read my success story and you'll see how and why the internet side came in to being.

My real estate business throws off enough cash flow that I can retire from that alone. But that's no fun! So I still do real estate deals that enhance my cash flow and/or equity position.

I also do deals that will benefit my kids - like an oil and gas lease I recently got with 120 acres I traded for a house in Dallas.

Some of my best mentors, like Jack Miller, Peter Fortunato and Lonnie Scruggs, had no internet presence and I wanted to help get their information out to the masses. So I talked to them about a partnership where I build and run their web sites and help market their products in exchange for a percentage of the profits. It takes up very little of my time but serves a bigger purpose...

Too many people are paying for really bad and really expensive information from what I call "pretender investors" ( who are people who don't actually buy real estate but just sell information) My objective in getting Jack, Peter and Lonnie's information on the internet to teach people the "right" way to make money with real estate from REAL DEAL investors who made their living ( like me) in the trenches doing deals every week.

My #1 focus is my real estate business.

[Russ H]

Thanks, Jackie.

I read your intro back when you posted it, and learned a lot about you.

I guess my questions are:

1. How are you changing your RE strategies to accommodate the changes in law?, and

2. Do you plan to write about #1, and will you monetize it?

-Russ H.

[CashFlowDepot]

Russ

If they pass a law that I cannot sell with seller financing except every 3 years, i'll stop selling real estate and start selling "personal property" instead - for example, the beneficial interest of a land trust is not real estate.

I already use this strategy sometimes. And I've already worked with my attorney to create all the paperwork necessary to buy and sell this way.

Selling the beneficial interest of a trust it is an excellent way to sell in states with a long foreclosure process because you just reposses personal property - no need to foreclose

or, instead of selling, i'll just keep houses as rentals.

I rarely sell to retail buyers because I like cash flow.

There is always a way to solve the changes in the laws.

The problem is not the change, the problem is the attack on personal property rights.