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Well, it seems that with everything you do right, there's always someone else doing it wrong, do it badly, or doing it illegally. Enter Big Brother... the "well-intentioned" leglislator who wants to get re-elected by passing a law that protects the innocent from bad people or from their own stupidity. What am I talking about? Several states have passed or are about to pass a rash of laws that will make being a real estate investor a very difficult vocation. While I do understand the need for SOME guidelines and disclosures from the government to make sure that people are making informed choices and are protected from bad people, these laws are THROWING OUT THE BABY WITH THE BATH WATER and will likely cause financial harm to the real estate markets in those states. The following is a review of some recent laws and bills that are pending. IT IS IMPORTANT THAT YOU READ THIS EVEN IF YOU ARE NOT IN THESE STATES. When it comes to laws like these, it's "monkey see, money do", resulting in the domino effect. Your state can be next, so pay attention. Visit you state's website and review pending bills. Form a local political action committee. Be involved in the political process. If you are in one of these states, call, fax and email your representatives. Email all your friends and business associates. Picket in from of the state buildings. Contact your local news people. If you sit silent, you have no right to complain! "We Deserve the Government We Elect" Texas - Senate Bill 629 This bill is an amendment to an earlier law passed in 2001 that regulated installment land contracts. The current law calls these "executory contracts" and requires certain disclosures, most of which are not big deal. However, the penalties for non-compliance are SUBSTANTIAL and bear no relationship to the supposed harm the consumers would bear if the disclosures are not followed. It's basically a windfall for buyers who find a good lawyer to hammer a technicality that most investors are not aware of. SB 629 take it up a notch classifying lease/options as "executory contracts", the same as land contracts. This is DEADLY for investors who want to keep the tax benefits ownership when selling on lease/option and taking advantage of capital gains rates. If Texas calls a lease/option an executory contract, it makes it a SALE, thus having a negative tax impact on the seller who may want to defer his gains through a 1031 exchange when the tenant exercises his option to purchase. And, we're just getting started... The bill further disallows an investor from selling a property by lease/option OR land contract if the seller has an underlying loan on the property. Since few, if any, investors have free and clear properties, this would effective ELIMINATE the process of buying a property, financing it, then reselling on a lease/option or land contract. This is BAD because it hurts not just investors but ANYONE who has a house that they want to move. Builders often sell properties on a "rent-to-own" basis, and now will be prohibited from doing so if there is underlying financing on the property. What if you do a fix-and-flip, but are unable to resell the property for cash? Maybe the lease/option would be the solution so you can cover your mortgage payments while still getting a sale? It won't be possible in Texas if this bill passes.
Article Source: http://www.realestate-articles.info
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