In his book he said, it is time to stop buying when RE agents start flipping. I do not know any agents flipping right now....
"The Donald" ducks bankruptcy because he doesn't become "personally involved" in his losing corporations. So compare and contrast Trump with what's happening on the street today....what is their take-away from Trump's "Get Rich Quick in Real Estate" books?
What does Trump say in his book when RE agents are at the stage this guy is in:
During the height of Las Vegas's real-estate boom two years ago, property investor Rob Rozzen bought 16 homes, hoping that skyrocketing prices would pump up his retirement nest egg.
Now, Mr. Rozzen says he is considering filing for bankruptcy protection. As the housing market slowed, the 40-year-old was unable to sell the homes, and his full-time job as a real-estate agent was no longer able to support mortgage payments totaling $45,000 a month. So one by one, over the past 14 months, Mr. Rozzen has stopped making payments on his investment properties, for which he paid between $226,000 and $390,000, and lenders have foreclosed.
As a result, Mr. Rozzen's credit score plunged from 730 to the high 400s, he says. The Prada clothes, luxurious vacations, and full-time housekeeper and pool cleaner he once enjoyed are things of the past. Still, he says, walking away from his investment properties was his only option. "You get to a point where your hands are tied," he says.
A growing number of investors like Mr. Rozzen are making the drastic decision to walk away from their properties and ultimately send their homes into foreclosure, lenders and real-estate agents say. Many investors who were hoping to quickly flip their investments are now left with homes that can no longer be sold for more than the mortgage debt. In many cases, these investors can't even find tenants willing to pay enough rent to cover hefty mortgages.
Or when Air Conditioning Contractors are at this stage?
Tom Crossett is one investor on the verge of walking away from his properties. At the height of Florida's condominium boom two years ago, the 53-year-old air-conditioner contractor from Delray Beach, Fla., bought four units with the plan to flip them quickly. He paid between $143,000 and $173,000 for the units.
Mr. Crossett now says the developer of the complex that sold him the converted-from-apartment units reneged on many of the promises, including extensive renovations, making them a tough sell. To help make monthly mortgage payments totaling $4,000, he's been stuck renting the units to tenants who make sporadic payments. He says that next month, he plans to cut his losses and stop paying the mortgages. "The only way I can see for me is to just get out, stop the bleeding and let them go," Mr. Crossett sighs.
OR WHEN OWNERS OF LLCs ARE AT THIS STAGE:
Individual investors may even be on the hook if they borrowed through a limited liability company or a partnership. Principals of LLCs, or general partners of partnerships, can be personally liable if they act as guarantors; lenders often require personal guarantees as part of the loan agreement.
"Banks want the individuals on the hook," says New York lawyer Gideon Rothschild. Partnerships and LLCs are good to "protect you against slips and falls on your property," adds Jay Adkisson, a Newport Beach, Calif., lawyer, but they offer little protection if a lender requires you to sign a personal guarantee.
What's more, whether other assets, such as insurance policies and personal residences, are shielded from creditors varies widely by state. In Florida and Texas, for instance, your home, life-insurance policy, annuity or retirement plan are generally shielded from creditors. California, by contrast, offers much less protection for debtors.
Of course, investors can take steps to shield their assets from creditors. But setting up fancy structures, such as offshore trusts designed to keep property off limits from creditors, typically only works if done before creditors appear on the horizon, says Beachwood, Ohio, lawyer John E. Sullivan III. Similarly, assets in a 401(k) are generally protected from creditors if the plan was already in existence. "If you plan when the coast is clear, you should be OK," says Mr. Sullivan. "If you choose to wait, it could be too late."
Mr. Adkisson, the Newport Beach, Calif., lawyer, says he has received about 30 calls a week in recent months from real-estate investors seeking to shield their assets, just as lenders are beginning to chase after them. "There's just an absolute flood of people seeking asset protection, and it's all after the fact. It's like buying auto insurance after the car wreck."
There are a few things you can do to protect your money even as creditors are moving in. One idea: Move to Florida and buy a big house. (
SIDEBAR: Realtors on the board--take note of possible addition to sales pitch.) As long as you can stay out of bankruptcy and qualify for Florida residency, a creditor can't force the sale of your home under Florida law, says Mr. Rothschild, the New York lawyer, who adds that the tactic won't work under new bankruptcy rules if you're forced to file for bankruptcy protection.
Investors who face foreclosure may be left with a big federal tax hit, says Mr. Witt, of Deloitte. That's because, in a recourse loan, the amount of the loan forgiven by the lender, in excess of the property's fair market value, is typically taxed as ordinary income to the taxpayer, he says.
The tax code does offer some relief, but only if the loan is forgiven during bankruptcy proceedings or if the borrower was insolvent immediately before the loan was discharged. However, it's tough to prove insolvency, since the Internal Revenue Service considers many assets, such as 401(k) retirement plans, in determining whether a borrower is insolvent. "These assets are typically exempt from creditors, but not for tax purposes," says Mr. Witt.
One option to avoid, if possible: filing for bankruptcy protection. Laws passed in 2005 make it much tougher in some cases to protect certain assets, such as your primary residence, from creditors during bankruptcy.
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As I see it, "The Donald" is a very well-paid genius at throwing chit against the wall to see what sticks without getting any under his own fingernails...nothing more, nothing less. What he does would never work for the commoners who buy his books.
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