Accounting News and Notes

Straight Talk: When there is not enough in your paycheck for your mortgage – what should you do?

Sell, Loan Modification, Short Sale or Foreclosure.

If you are dealing with financial distress and the inability to keep your mortgage payments up to date my advice is to quickly educate yourself on your options and decide the best course of action for your family. Don’t wait! If you do nothing, the choice is taken out of your hands. You can end up with a foreclosure from your lending institution that negativity impacts your credit and the ability to buy another house for a minimum of 2 years.

Your options are:

1) Sell the house outright for at least what you owe your current lender and you come out whole. The marked benefit is having no negative impact on your credit history. Unfortunately, if you purchased within the last 2-3 years with minimal to nothing down; or if you put minimal down and obtained an interest only loan you could find it difficult for your home to appraise and complete a sale in the current declining value environment. If that is the case, you have the following three options: Loan modification, short sale or foreclosure.

2) Apply for a loan modification from your existing lender. While this process can be tedious you can have favorable results, stay in your home and have time to get back on your feet. Unfortunately each lender has their own process and follows their own timeline so you need to play by their rules, complete all paperwork in a timely manner and give them the documentation they request so they can render a decision. Then follow up, follow up follow up!

3) Short sale: simply stated you can sell your home and request that the lender of your current mortgage accept less than the total amount due. This is done as soon as a contract/offer is submitted to you. If you have both a first and second mortgage; you must obtain approval from both lenders and this process is even more challenging. The lender does not have to accept a short sale which means – no sale! They will weigh the options of your equity position and estimated marketing time and costs to see if the short sale benefits their bottom line versus taking the house back through foreclosure proceedings and selling it themselves. Short sales usually take much longer than typical resale closings, i.e. 2-4 months but the benefit is you will not have a foreclosure on your credit standing for 7 years and you can move on without any baggage to your next housing opportunity.

4) Foreclosures: When the lender holding you loan takes action to foreclose upon your property, you are given legal notification and after due process, you can and likely will be evicted from your home. In the state of Georgia, foreclosure can occur as early as 30 days after your first delinquency. While this is not typical, it is legally possible. It is beneficial for the lender to find a way to keep the homeowners in the property, not incur legal and real estate expense of upkeep and marketing. However, after a certain time frame, usually 2-5 months, action will be taken.

ACT NOW. Your best defense is to investigate which of these opportunities to pursue before the decision is taken out of your hands. When you know you will have a shortfall in making your mortgage payment start the process immediately, not 2-3 months into a delinquency. Lenders usually do not accept partial payments; therefore making less than the required mortgage payment is still considered a delinquency. Knowledge is powerful. Make the most of your alternatives despite the difficult choices. Having a plan keeps you and your family on track for adjusting to the decisions that must be made in these troubling financial times.

Your CPA and Mortgage Planner can help negotiate through these tough times by arming you with key information. As a 30 year veteran of the mortgage industry, my goal is to assist my clients through all the cycles of their life by managing their best mortgage solutions. I am available to assist with any questions or strategies to help you and your families navigate the current market conditions.

To learn more contact Ms. Sandra Hill of Georgia Residential Licensee #12149 at Trellis Financial Services, Inc. via phone at (770) 814-0552 or by the Internet at sandyhill@trellisfinancial.com

Tips for Dealing with a Frozen or Reduced HELOC

One result of the credit crunch and the economic recession has been the freezing or reduction of home equity lines of credit (HELOC) by banks. A HELOC is a form of revolving credit in which the borrower’s home serves as collateral. And while this is not a surprising move by banks looking to be more conservative with their lending policies during tough times, many home owners counting on this credit will face some challenges if their HELOC is reduced or frozen.

To help you deal with these challenges, the US Treasury Department and the Federal Reserve each released some tips for homeowners in this situation. The following is a summary of these tips.

Read Everything to the Letter – Your HELOC lender must provide you with a written notice if it has frozen or reduced your HELOC no later than 3 business days after the freeze or reduction. Information about any other changes to your HELOC must be included as well, so read everything mailed to you from your lender.

Pick Up the Phone – Your lender has the right to freeze or reduce your HELOC, even if you have a good payment record. Some common reasons for the action are a decline in the value of your home, a negative change in your financial situation, or a negative change in your credit score. Contact your lender if you have questions or concerns about a freeze or reduction.

Communication is Key – The required notice to freeze or reduce your HELOC will likely contain specific reasons for the action. Find out the reason, and see if you can take any steps to reinstate your HELOC.  The bank might not know about home improvements you made that might affect the value of your home. It might not be aware that you or your spouse got a new job, took a second job, or made some substantial investments that affect your finances. If your credit took a hit, investigate ways to improve your credit and communicate your efforts to your bank.

Don’t Be Afraid to Ask – Your lender must reinstate your credit privileges when the conditions permitting the freeze or reduction no longer exist. You may need to request in writing to have your line of credit reinstated, so be sure to find out why your HELOC was frozen or reduced. Once your lender receives your written request, they must promptly investigate and determine whether your HELOC can be reinstated.

Be Prepared for Fees – There may be some fees involved to cover the costs for an appraisal and/or credit report when a bank considers your request for reinstating your HELOC. However, you cannot be charged a fee to reinstate your HELOC once the condition that caused the freeze or reduction no longer exists.

If you or someone you know has questions about HELOCs, credit repair, purchasing or refinancing a home, please don’t hesitate to give us a call.  To learn more contact Mr. Wayne Black,  New Home Finance LLC  770-844-7200

Unveiling the Mystery Behind Net Lease Commercial Real Estate Investing 

 As I speak with potential investors about the possibilities of investing in commercial real estate, one of the biggest misunderstandings is the net lease.  Net leases are commercial real estate investments in which the tenant takes more responsibility for the building, while giving the landlord less management responsibilities.  In this article, we will cover the three main types of net lease properties – modified net, triple net (NNN), and double net (NN) – and how each one can be beneficial to different types of investors and their investment criteria. 

Modified Net 

In a standard modified net lease, the tenant pays all utilities, maintenance on the building, repairs, and insurance.  However, the landlord is still responsible for property taxes and everything else. 

The benefit of this type of lease is that the tenant has a vested interest in the property and is more likely to take care of the property.  With the tenant paying their own maintenance, repairs, and insurance, they are sure to take care of the property for future usage.  In contrast to a property without a modified net lease, the tenant may only be responsible for basic liability insurance and utilities.  Therefore, a modified lease gives the landlord a tenant who cares more about the building and less management responsibilities. 

The down side of this type of lease is that there is still management responsibilities associated with this lease structure.  For example, the landlord still must ensure that property taxes are paid and is generally responsible for the roof and structure.  Therefore, if there is a leak in the roof, guess who the tenant is calling?   

The modified lease is better than a traditional commercial lease but is on the lower end of the spectrum when it comes to net leases.  Investors who may be interested in this type of lease are not as concerned with management responsibilities, but like the idea of having a tenant who pays for maintenance, repairs, and insurance.   

Triple Net (NNN) 

Triple net lease or NNN lease tends to be the industry norm and most sought out. In a standard triple net lease there are usually limitations on capital expenses.  However, the tenant is responsible for property expenses that include property taxes, property insurance, and maintenance. 

The benefit to this type of lease is that the landlord has virtually no responsibility as it relates to managing and taking care of the property.  Many times, triple net or NNN lease properties are guaranteed by corporate credit tenants such as Walgreen, CVS, Burger King, McDonalds, Borders Bookstore, etc., who guarantee the rent, including taxes, maintenance, and insurance, for the entire period of the lease. 

The downside to this type of lease is minimal, but can have a great impact on the purchase price of the asset (property) in question.  Essentially, if the tenant that is guaranteeing the lease is not a credit tenant, then they have a higher risk of defaulting on the lease. A credit tenant is usually a public or private entity that has a strong credit rating by the S&P.  In situations where there is no credit tenant, it is prudent for the investor to purchase the property with a higher cap rate, based upon market standards at that time.  Thereby, offsetting risk associated with buying a NNN property guaranteed by a non-credit tenant.  For example, if a franchisee is leasing the property, generally the corporation does not guarantee the lease.  If that franchisee has financial problems and must close, the likelihood of the investor being able to obtain the rents that are due for the remainder of the lease, drastically diminish.

The NNN lease or triple net lease investment is ideal for an out of state investor, or investor who does not want the hassles of property management.  Other than paying debt service, the investor can look forward to receiving a fixed rent check each month according to the lease that was signed. 

Net Net or Double Net (NN) 

Another net lease is the Net Net or Double Net lease (NN).  These leases are very similar to NNN leases; however, the landlord is generally responsible for structural damage such as the roof and/or bearing walls. 

The benefit to this type of lease is the same with a NNN lease.  Again, the management duties are drastically diminished in this type of lease situation.   

Except for the roof and structural damage issues, this type of lease shares the same downside as the NNN lease.  In addition, many double net leases are actually completed by franchisees of major brands that are able to pay for much of what a NNN tenant pays for, however, does not want the liability of roof and structural damage. 

A double net lease is also an ideal investment for an out of state investor, or investor who does not want the hassles of property management.  The investor will receive a fixed rent check each month according to the lease that was signed and pay all debt service associated with the lease.

Not All NNN Leases Are Created Equal 

I must mention that investors need to be fully aware of the type of investment they are looking into.  For example, many commercial brokers will market a property as a triple net or NNN lease property; however, the property may actually be a NN or double net lease.  Please be sure and read the fine print of the lease and have your attorney look it over. 

Finally, net lease investments are the safest and most risk-averse commercial real estate investment in the market place, due to their fixed rents, tenant responsibility, and mostly corporate guarantees.  However, be sure you contact a professional commercial real estate investment advisor, who can walk you through the entire process of acquisition and financing of your net lease investment.  In addition, remember that commercial brokers are professional sales people; therefore, it would be wise for potential net lease investors to retain the services of a professional commercial real estate investment advisor to work on their behalf.  Usually, there is no cost to the buyer to retain the services of a commercial real estate investment advisor who can act on their behalf with a fiduciary responsibility to their client, just like an attorney who would represent them in court.  Thereby, ensuring the investor gets the best deal possible utilizing the investment advisors strong negotiating skills, and decreasing the hassles associated with buying net lease commercial investment property.   

Mark Santiago is an Investment Advisor with RE/MAX Suburban Atlanta. He specializes in providing turnkey real estate investment portfolios for Doctors, Lawyers, Dentists, and other professionals who have accumulated wealth in their IRA or 401k, or other cash bearing accounts and would like to retire within the next 10-20 years. You can also read his blog at: http://AeonInvesting.wordpress.com Mr. Santiago can be reached at his office: 770-325-1847

As you approach retirement, several fears usually begin to pop-up in your mind.

1. What will I do when I retire?
2. What will my lifestyle be like?
3. Can I afford to retire?

If those questions are plaguing you as you get ready to retire, please know that you are not alone. I speak with individuals all of the time who are contemplating their retirement without knowing the answers to these questions.

As an investment advisor, I am often times able to help people formulate strategies to invest what they do have today, so they have a safe and secure tomorrow.

I specialize in a different type of asset. In fact, most people don’t really think of it as a retirement solution.

Let me give you an example. Let’s say that you had $500,000 in your IRA. Because it’s more than likely invested in the stock market, the IRA could be worth $500,000 today and worth $10,000 tomorrow. “Impossible”, you say.

Would You Put Your Retirement Money Into A Slot Machine?

I know of a gentleman who worked for a Fortune 1000 company. He had invested his IRA in that same company. About five years ago his IRA was worth around $400,000. When he got ready to retire recently, that same IRA was now worth $12,000.

It’s a shame that it happened to that man, but, what about you and your retirement? Do you have your money tied up in assets that fluctuate and make you no better off than gambling at a casino?

My specialty is Real Estate, specifically commercial cash-flowing real estate. I know what you’re thinking, “Real estate is risky business.” It can be, but not always.

NNN Lease = Turnkey Investing

I want to introduce you to a simple solution called the triple net lease or the NNN lease. This type of real estate investment product has been around for years. They are commercial properties backed by corporate leases by companies such as Walgreens, CVS, and Burger King.

Here’s how they work: Let’s say that a national drugstore chain has built a building for one of its stores. Instead of keeping all of their cash in the building, they complete what’s called a “sale-lease back.” Essentially, they will sell the building to an investor and then “lease back” the property from the investor. The drugstore chain will then guarantee the lease, usually for twenty-five years.

What makes this lease even better is that the drugstore chain will pay the property taxes, insurance, and all maintenance on the property. So each month, all you get is a check in the mail to pay your debt service (unless you paid cash).

Imagine How Powerful This Strategy Could Be For Your Retirement.

Another great point about these types of investments is that you can usually get a non-recourse loan on the property. A non-recourse loan is backed by the credit of the tenant, not the investor. Therefore, title is held in an LLC that the investor owns, but does not personally guarantee.

Now, to make this investment even better, let’s say that you are planning to retire in about ten years. If you have a investment advisor who is able to negotiate the purchase price down, then you can get a loan that is paid off in ten years. Although your cash flow will be minimal for the next ten years, your loan will be paid in full.

You Own The Building Free and Clear!

Imagine waking up in ten years and you now own a $4 million dollar building free and clear. Of course, you now have cash flows of around $300,000 per year that you can live on or reinvest. In addition, you have $4 million in equity from the building that you could either sell or hold onto.

This strategy is just one of many that investors use to secure their future. It’s really not that complicated, but I would recommend that you hire a professional investment advisor who could help you with the acquisition and negotiation of the building, as well as the financing to obtain it.

*********************

Mark Santiago is an Investment Advisor with RE/MAX Suburban Atlanta. He specializes in providing turnkey real estate investment portfolios for Doctors, Lawyers, Dentists, and other professionals who have accumulated wealth in their IRA or 401k, or other cash bearing accounts.

You can also read his blog at: http://AeonInvesting.wordpress.com Mr. Santiago can be reached at his office: 770-325-1847

$14,000 Georgia Dream NSP Down Payment Program

Homebuyers should begin planning now to take advantage of Georgia Dream NSP Down Payment Program included in the recently enacted Housing and Economic Recovery Act of 2008 (HERA). The program was created to encourage the purchase of foreclosed properties in Georgia from federal funds received by the Georgia Department of Community Affairs.

The NSP Purchase Program

• Applies to foreclosed homes purchased on or after April 1, 2009 and before June 30, 2010.

• $14,000 is available for eligible borrowers for required repairs and/or down payment assistance

• Funds are disbursed in the form of a second mortgage lien with no interest and no monthly payment

• The lien is released over a period of five years and six months.

• Available in conjunction with FHA and VA loan only.

Homebuyer Qualification

All homebuyers are eligible for the program who purchasing a home as a primary residence who meet the criteria. Buyers are required to complete eight hours of pre-purchase counseling from an approved HUD-approved housing counseling agency. This incentive is not limited to First Time Home Buyers like the $8,000 Tax Credit. If the borrower is a First Time Home Buyer, they can use both the $8,000 Tax Credit along with the $14,000 Purchase Program if they meet all requirements of both programs.

Eligible Counties

The Department of Community Affairs determined the areas of greatest need in Georgia based on requirements of the Section 2301(c)(2) of HERA. All of the counties in the Atlanta Metro areas are eligible. There are several counties not eligible for the program primarily located in south and east Georgia. For a map of all eligible counties, please contact The Bearland Group directly.

Income Limits

There are income limits for the program based on family size and location of the property. The limits are based on the FY 2008 Income Limits for 120% of HUD Median Income. An example of the income limits for a family of four purchasing a property in Fulton County, would be a total household income of $85,450. All household income is used to determine the eligibility even if the spouse or family member is not included on the mortgage. For income qualification of this requirement, please contact The Bearland Group directly.

Purchase Discount Requirements

To be eligible for the incentive, the purchase price must be discounted by 15% of the current market value of the home as determined by an appraisal. An appraisal for the purposes of determining this statutory purchase discount is required.

Recapture

If the property is sold, refinanced or is not occupied as the Borrower’s primary residence during the first five years and six months, a repayment is required based on a schedule ranging from 100% down to 20%. An example, if the property is sold in the 31st month, 60% of the $14,000 would have to be repaid. To read more visit http://www.dca.state.ga.us/housing/Homeownership/programs/gadreamnspdownpayment.asp

The Bearland Group is eligible to offer this program along with 203K FHA loans if repairs are required. For additional mortgage information including free pre-qualification, please feel free to call Stephen Gowen at 770-886-7786 ext 3, or by email at sgowen@thebearlandgroup.com. Their office is located at 407 East Maple Street, Suite 108, Cumming, GA 30040. Website: www.thebearlandgroup.com GA  Discover the

The Bearland Group, We are Distinctively Different!

Atlanta CPA on Using the First Time Home Buyer Credit

Beginning after April 8, 2008 and before December 1, 2009 taxpayers are eligible for the First-Time Homebuyer Credit. TO qualify you home must be purchased in the United States and you (and your spouse, if you are married) must not have owned  any other main home during the three years preceding the date of purchase.

The credit is determined as the lesser of:

-10% of the purchase price of the house.

-$7,500 ($8,000 if the home was purchased in 2009). If you file as married filing separately, then the credit would be half of this amount.

You cannot qualify for the credit if any of the below items are applicable:

-Your Adjusted Gross Income is over $95,000 or $170,000 if married filing jointly.

-You home was financed using tax exempt revenue bonds. This is not applicable to 2009 home purchases.

-You are/were eligible for the District of Columbia first time homebuyer credit.

-You are a nonresident alien or you is not located within the U.S.

-You sell the home, or it ceases to be your main home, before the end of 2008.

-You acquired your home from a related person, including family members, relatives, or a business you directly or indirectly own more than 50% of.

Homes Purchased in 2008. Generally the credit is to be repaid over a fifteen year period while making equal installments starting in the 2010 tax year. If you home ceases to be your main home before the fifteen year period lapses, the unpaid balance is then due as additional tax on the corresponding yeas income tax return. This is applicable whether the home is sold, destroyed, condemned or converted to rental or business property.

Homes Purchased in 2009. You must repay the credit only if the home ceases to be your main home within the thirty-six month period beginning on the purchase date. This is applicable whether the home is sold, destroyed, condemned or converted to rental or business property. If the home remains your main home for the thirty-six month period you do not have to repay any of the credit.

John Dillard is a Christian Speaker/Author and Certified Public Accountant (All Rights Reserved). To See how he takes Christ along with him to work visit http://www.hiscpa.com/ (An Atlanta  CPA firm) and for his latest book Overcoming Life’s 9/11’s: Job’s Journey and to learn about his ministry visit http://www.john-dillard.com/ To contact John Dillard CPA (Atlanta Christian Author/Speaker) today call 770. 814.9304 proudly serving Duluth, GA, Gwinnett County and Beyond.

“Dare to Attempt Something so Great for the Kingdom of God that it is doomed to failure, lest Christ be in it!” What, then, shall we say in response to this? If God is for us, who can be against us? Romans 8:31

Why are these verses here? Learn how HIS CPA became a Christian Accounting firm visit http://www.hiscpa.com/christian-CPA.html

Avoid Troublesome Mortgages…What You Don’t Know Will Hurt You Later

Everywhere you turn lately, you hear a story about someone who lost their home due to their inability to meet their mortgage payments.  Unfortunately, more and more of these horror stories are appearing everyday because of an overeager real estate surge that made it possible for almost anyone to purchase a home with creative financing.  However, once the creativity is taken out of the financing, you are usually left with a home you can’t afford and no good solution to getting rid of it.  HIS CPA P.C. works with potential homeowners in fulfilling their dream of owning a home or refinancing the home they’re in.  We take great care in evaluating a person’s ability to purchase a home and to afford the mortgage payments, not just today, but also 2, 10, and 20 years from now.  Some things that are crucial to consider when looking for a mortgage company and a home to purchase are:

-Don’t get caught in the hype.

-Under purchase – in other words, don’t purchase what you can afford or a little more, purchase less than you can afford and you allow yourself a cushion should something happen.

-Stay away from promises of creative financing.

-Allow for a cushion – you’ve always heard from every financial advisor around that you should always keep at least a few months rent or mortgage payments stashed away in case of emergency, in today’s volatile job market with downsizing and overseas competition, this has never been more critical.

-Expect Problems – this is where the cushion and the under purchase will really come in handy.

-Be careful in the type of mortgage you are agreeing too – a fixed loan is usually better and not subject to a volatile market where as interest only loans dramatically fluctuate and you should be able to maintain a reserve to pay off the balance in full.

John Dillard is an author and Certified Public Accountant (All Rights Reserved). To See how he takes Christ along with him to work visit http://www.hiscpa.com/ (a Christian CPA firm) and for his latest book Overcoming Life’s 9/11’s: Job’s Journey visit http://www.john-dillard.com/ 

“Dare to Attempt Something so Great for the Kingdom of God that it is doomed to failure, lest Christ be in it!”

Preparing the S Corporation Income Tax Return K-1 A Guide How to Guide to Prepare a K-1

We advise clients on: IRS representation, Offer in Compromise, Tax Problems, Incorporation in Georgia, Corporate and Personal Income Tax Returns, Part-time CFO, Virtual Controller, Business Planning, Payroll Administration, Bookkeeping.

Serving Barrow, Bartow, Carroll, Cherokee, Clayton, Coweta,  Douglas, Fayette, Forsyth, Fulton, Gwinnett, Henry, Newton, Paulding, Pickens, Rockdale, Walton, Barrow, Bartow, Carroll, Henry, Newton, Bartow, Walton, Rockdale, Barrow, Spalding, Coweta, Dawson, Douglas, Fayette, Newton, Paulding, Spalding, Walton, Henry, Paulding, Douglas, Coweta, Canton, Covington, Douglasville, Druid Hills, East Point, Forest Park, Griffin, Lithonia, Mableton, McDonough, Milton, Mountain Park, Newnan, Powder Springs, Stockbridge, Union City, Villa Rica, Winder, Woodstock,  Smyrna, Sandy Springs, Marietta, East Point, Gainesville, Snellville, Buckhead, Buford, Peachtree City, Dunwoody, Kennesaw, Decatur, Conyers, Stone Mountain, Gwinnett County, North Fulton County, DeKalb County, Hall County, Clayton County, Cobb County, Forsyth County, Hart County, Jefferson County, Duluth, Alpharetta, Johns Creek, Lawrenceville, Milton, Norcross, Snellville, Roswell, Buford, Cumming, Grayson, Lake Hartwell, Suwanee, Sugar Hill, Loganville, Lilburn, Dunwoody, Gainesville, Decatur, and Beyond

Looking ahead I would anticipate that the recent downturn in the housing/real estate market to continue on into 2008. Real estate has always been a lagging economic indicator and continues to be so for many years to come. Being well armed with information during this time is now more important than ever as you strive to make wise and judicial use of your housing dollar. For most all of us buying a home is the single largest financial decision we will ever make and the constant growing price of home ownership has no end in sight. Location still is the driving force in most of our buying decisions while striving to strike a balance between quality of life issues, proximity, and the strength of the local school system. To find the highest median home prices by zip code please visithttp://www.ajc.com/homefinder/content/homefinder/homesales/2007/06/22/prices.html

If however you are initially more concerned with the sales prices on your street or subdivision and as to what you present home might be worth you can locate recent sales information at

http://homesales.ajchomefinder.com/homesales/homesales_quicksearch/  On the AJC web-site you can also search for varying housing information regarding pricing by county, those areas with the most growth, and prices of starter homes by area.

Today’s housing market mandates that you be a wise and judicial steward of your family’s housing dollar and being aware of all the information available will greatly assist you in the buying and selling process. The listing price continues to be a key determinant in how long a house might be listed. Credit challenges as well are helping to contribute to a slow market and knowing your credit scores and financing options will be a key component to limiting both your exposure and cash outlay.