Creative Financing For Real Estate Investing – Using Options

Powerful Leverage

If you are new to real estate investing, and you have not yet learned about using options, you are missing out on an incredible tool. Learning how to use options will enable you to hold large amounts of property with very little money. In fact, options offer one of the best leverage situations in the business. Once you learn this technique, you will be well on your way to turning many more deals that you ever did in the past.

An option is a unilateral agreement. It involves a buyer and a seller. However, it is binding only on the seller. You as the buyer make an offer to purchase this property sometime in the future, but you are not bound to do so. You could walk away at any moment.

The seller on the other hand, promises to accept a certain amount for the property at a designated time in the future, and that seller is obligated to follow through and honor the contract.

The option agreement could be set for anywhere from 3 to 6 months, or several years. Meanwhile, you have the property tied up, and you now have plenty of time to find the right buyer. During this time, you need not keep up the property nor do you have to pay any taxes.

Creating the Agreement

The option agreement will spell out several stipulations:

o Price (consideration) to be paid for the option

o Time – when the option will begin and when will it expire

o Strike Price – the mutually agreed upon purchase price of property during the option period

o Other terms and conditions of the option agreement

If you, as the buyer, decide at the end of the option period not to buy, you lose your initial deposit and that is it. No legal problems ensue as they might with a broken contract. This means you are not unduly entangled in a legal agreement that could create complications down the road.

For the option to work well, you must be fully aware of the prices in the area of your bargain property. Especially if you plan to hold the option for a couple of years. Make sure this is in a location where the prices will be on the increase.
Use Options to Flip or Hold

Now that you see the basics of how an option works, you can see how it would be possible to use options to control a piece property for short time. During that time, you can be seeking out a buyer (this might be another investor – perhaps a rehabber) and sell it for a higher price than the option amount. With this process you’ve made a quick profit with no out-of-pocket investment other than the small amount you put down to bind the option agreement.

One other strategy that you might consider in conjunction with the option, is to include a clause allowing you to sub-lease the property. This will be done during the option period. If you can find a renter for the property, now the mortgage payments are taken care of. In this day and age of multiple foreclosures in every neighborhood, you can easily find a seller who is strapped with payments and who would rather allow you to lease than have to struggle to make those monthly mortgage payments. You will have stepped in and helped to ease this seller’s pain. In a year or two, the tenant may qualify for a conventional loan, at which time you will purchase and sell at the same time and make a good profit.

When you use options to hold property, you are using one of the most powerful creative financing methods available. Take the time to do a little research and learn all you can about options.

Taxes and Investing in Real Estate in Canada

The Canadian real estate market is robust and potentially very lucrative. Even during the worst economic times of the new millennium, real estate in Canada weathered the storm remarkably well. Plus, there are no citizenship or residency requirements for owning property in Canada. Indeed, you can live in a Canadian residence on a temporary basis, even without residency or citizenship; though there are immigration requirements for extended stays. Still, the market is open to investors around the world but to make the most of your investment, it is important to have a solid understanding of taxes in Canada.

Property Taxes

Property taxes in Canada will vary from province-to-province and even depending on the municipality. One of the first things you need to know is that when you buy property here, you’ll have to pay a provincial transfer tax. Again, this varies between provinces, but you should expect to pay between 1 and 2% of the value of the property. Sometimes, there are exemptions to this transfer tax; for example, the first property you purchase in Canada does not carry this transfer tax.

As I’ve already alluded, annual property taxes are mandatory and vary by municipality. Based on the assessed value of your property as determined by the market, property taxes include fees for schools, parks, and other community amenities.

Finally, you will also pay the federal Goods and Services Tax (GST) on new home purchases. If you plan to live in the home, and it is a new or builder-renovated home, you may be eligible for a partial rebate on the GST.

Rental Property Taxes

If you plan on purchasing an investment property in Canada with the intention of renting the property for income, you need to be aware of the Canadian Income Tax Act requirements. The Act stipulates that you pay 25% of the gross property rental income as tax. Non-residents can usually choose to pay 25% of the net rental income instead; this means you can deduct many of the expenses associated with running the property – you just need to submit an NR6 form. Certain expenses cannot be deducted, however; for example, operating and expenses and capital expenses can be deducted, while the cost of furniture or equipment for a rental property cannot. Moreover, property taxes as well as mortgage, bank loan, or line of credit interest payments are all tax deductible.

Selling your Property

Pay close attention, as selling your property in Canada has different costs for residents and non-residents. Residents who occupy a property as their principal place of residence can sell a property without paying capital gains tax. If you own multiple properties, you must designate only one property as your principal place of residence. Sale of properties that are not your principal place of residence are subject to capital gains tax.

Non-residents when selling a property are subject to a 50% withholding tax, and American residents must also report the profits to the Internal Revenue Service. As you can see, there are significant tax implications for purchasing and selling properties in Canada.

Mountain Creek & Crystal Springs – New Jersey’s Burgeoning Vacation and Real Estate Destination

Recreational activities

Tucked away in the Northwest corner of New Jersey lie two little known gems – Mountain Creek Resort & Crystal Springs Golf Resort (affiliated with the Minerals Resort). Far and away the top ski and snowboard destination in New Jersey, Mountain Creek offers not only fabulous skiing and snowboarding, but a top notch water park for those hot summer months. Being at elevation in quaint Vernon, NJ not only serves the skiers well but helps to keep the temperature an average of ten degrees warmer in summer.

The snow resort is home to classic beginner-through-expert terrain on Vernon and Granite Peaks. First-timers, families and all leisure skiers and snowboarders spend their time playing then choose where to relax for a break. Discount lift tickets are available for much less than the retail price. There are myriad places in nearby Vernon, Warwick NY, and other small towns which offer a tremendous selection of activities for both singles and families. More about this below.

Mountain Creek – formerly known as Vernon Valley or Great Gorge – has long been a fixture in the NJ Skylands region. In the 70’s Action Park was the summer attraction. It has long since been revamped and modernized and is now called the Mountain Creek Water Park, a truly unique park carved into the natural mountainside, and featuring over 26 rides and attractions.

When mountain biking became popular in the 80’s the designers sculpted out an internationally renowned mountain bike course. Diablo Freeride Park has risen to the top of every thrill-seeking mountain biker’s must ride list. Playing host to the U.S. Open of Mountain Biking, Diablo features challenging terrain serviced by the open air gondola used by skiers and snowboarders in winter.

If golf is your game, you can experience world class golfing just minutes from Mountain Creek. Choose from six award-winning golf courses, each with its own set of characteristics and challenges. From beginners to experts, the courses offer something for everyone. There are 6 distinct and challenging courses to choose from:
– Crystal Spring Golf Club in Hardyston, NJ
– Wild Turkey Golf Club – Hardyston, NJ
– Great Gorge Country Club – McAfee, NJ
– Minerals Golf Club – Vernon, NJ
– Ballyowen Golf Club – Hamburg, NJ (rated #1 public golf course in NJ)
– Black Bear Golf Club – Franklin, NJ

Real Estate
As urban and suburban areas get more and more congested, people are increasingly moving further and further from NYC and the more congested areas of NJ.

The Village at Crystal Springs is an exclusive, northern New Jersey real estate community in a comfortable resort setting. Nestled in the scenic Kittatinny Mountains, the collection of luxurious New Jersey homes are situated in the Northeast’s premier four-season residential resort.

This choice selection of prime real estate in New Jersey is complemented by Crystal Springs Resort’s 7 award-winning golf courses, 2 luxury spas, world-class dining and wine-cellar – and is just 47 miles from Manhattan.

Whether you’re looking to buy a primary residence, vacation getaway spot or investment property, you’ll find a variety of home styles and floor plans to meet every taste.

Spas

Elements Spa

The Elements Spa is located at Crystal Springs Resort (often called Minerals Resort) is ranked in the top 20 spas in America and #1 in NJ. This Northern New Jersey luxury spa was designed in such a way that the healing powers of the earth have been incorporated into breathtaking design and rejuvenating services.

Reflections Spa
The brand-new Reflections Spa is certain to challenge Elements for the honor of being the # 1 ranked spa in NJ Reflections’ Service Menu includes many themes and elements of the resort and local environment, such as “The Wine Cellar” featuring treatments using wine and grape seed extracts.

Other local attractions and activities in the NJ Skylands region:

There are a plethora of things to do year round in this area. Pumpkin and apple picking, hayrides, wineries, vineyards, and distillers. Experience how wine is made and life on the orchard.

Explore the Appalachian trail through the Kitatinny range in Northern, NJ. You’ll find amazing scenery and you only need a day to hike a portion of beautiful New Jersey. Hot air balloon rides are offered by http://www.abovethecloudsinc.com

They are located just over the border in Harriman, NY.

Warwick, New York

Located fifty-five miles from New York City, The Town of Warwick has a distinctly rural character with rolling hills and farmland dotted with red barns and gracious old farmhouses. The Town of Warwick spans 104 square miles and includes three villages (Florida, Greenwood Lake, and Warwick) and five hamlets (Amity, Bellvale, Edenville, New Milford and Pine Island). Warwick’s natural beauty extends beyond its farmland to mountains, streams and lakes. Greenwood Lake, the closest lake to New York City large enough to accommodate water sports, has long been a popular summer resort of such famous entertainment and sports figures as Babe Ruth. The ten-mile-long lake straddles the New York / New Jersey border.