A.R.S. § 33-1902(C) provides that if a property is not registered, the tenant “shall deliver to the landlord … a written ten day notice to comply.   The notice shall be delivered by certified mail, return receipt requested or by hand delivery.  If the owner does not comply with this section within ten days after receipt of the notice, the tenant may terminate the rental agreement and the landlord shall return all prepaid rent to the tenant.  Security deposits shall be returned in accordance with section 33-1321(D).”

This statute is interesting because it deals with an issue (tax liability) which is between the owner and the city/state, but it gives the tenant a means to break their lease.  It’s also interesting because it does not fall within the Arizona Residential Landlord Tenant Act (A.R.S. § 33-1301) and therefore many landlords are unaware of it.  Not knowing the registration requirement, however, is no defense to a claim that the landlord failed to register a property.  A failure to register ten days after notification, is a per se violation of the statute, meaning the tenant can automatically terminate their lease, move out and request their deposits back.  It is irrelevant that the landlord was unaware of the statute.

There are certain tenant’s advocates that use this provision to permit tenants to legally break their lease.  For example, a tenant may send a list of problems with the rental and ask the landlord to fix the problems within 10 days.  Among the list of problems, the tenant may include the reference to A.R.S. § 33-1902, and require the landlord to register the property.  Even if the landlord fixes all of the problems with the unit itself, but fails to timely register the property, the tenant can terminate the lease and ask for their deposits back.  While the tenant is liable for any damage they caused to the unit, they are not liable for the rent through the remainder of the lease and they are entitled to any prepaid rent.

To register a property, a landlord should go to the County Assessor’s office, complete the registration form and pay the fee (currently $10 in Maricopa).  If a landlord simply mails in the registration, they are risking the possibility that it doesn’t get registered within the 10 days or that the county doesn’t receive the document.  I have seen a tenant win a lawsuit over a security deposit where the owner mailed the registration but it wasn’t received by the county within 10 days.  The landlord was held liable for not returning the tenant’s deposit.

Therefore, when an owner buys a new rental property, or a manager takes over management of a new property, the first thing they should do is properly register it.  Additionally, they should keep a copy of the registration that the county provides.  This document will show when the home was first registered to avoid any claims in the future.  Also, when ownership or management changes or moves, the registration must be updated.

According to an article in the Wall Street Journal, “home prices and mortgage rates have fallen so far that the monthly cost of owning a home is more affordable than at any point in the past 15 years and is less expensive than renting in a growing number of cities.”₂ Of those cities, Phoenix is definitely on that list which has sparked debating wars among investors looking for short sales, conventional listings or even trustee auctioned homes. In fact, the article sighted Phoenix being down 40% in inventory.

With this in mind more are investing in Phoenix real estate, but might pull an investor away? Here is a list of points that may dissuade some from jumping in.

Home maintenance- An AC repair alone could be thousands of dollars.

Appreciation is low currently (1% figuring inflation)₃

Managing Tenants and leases

Uncertainty in the market.

While uncertainty will always be present, investors can do many things to overcome the other points. Here are some suggestions

Have a home warranty for repairs, usually covers major things like an AC unit and service charges are usually around $50.00

Consult with local experts to find which areas will most likely retain or increase in value

Hire a professional property manager to help you generate income from your investment.

Although it is still advantageous to buy as it was a year ago, this will not last forever and may become even more difficult as inventory decreases and the number if interested investors increase. Now is the time to buy if one is able.

1-   Stratton, Nick. “Investing in Real Estate; Is It worth It?” The AZREIA Advantage (2011): 7. Print.

2-      Timiraos, Nick. “Own vs. Rent: A Growing Reason to Buy – WSJ.com.” Business News & Financial News – The Wall Street Journal – Wsj.com. 26 Nov. 2011. Web. 06 Dec. 2011. <http://online.wsj.com/article/SB10001424052970203764804577060502694077494.html>.

3-   Girsh-Boch, Mary. “Rent vs. Buy | PropertyManager.com.” Property Management News, Articles and Resources. Property Manager.com, 15 Nov. 2011. Web. 06 Dec. 2011. <http://www.propertymanager.com/2011/11/rent-vs-buy/>.

Form 8938 (Statement of Specified Foreign Financial Assets) will be filed by taxpayers with specific types and amounts of foreign financial assets or foreign accounts. It is important for taxpayers to determine whether they are subject to this new requirement because the law imposes significant penalties for failing to comply. The Form 8938 filing requirement was enacted in 2010 to improve tax compliance by U.S. taxpayers with offshore financial accounts. Individuals who may have to file Form 8938 are U.S. citizens and residents, nonresidents who elect to file a joint income tax return and certain nonresidents who live in a U.S. territory.

Form 8938 is required when the total value of specified foreign assets exceeds certain thresholds. For example, a married couple living in the U.S. and filing a joint tax return would not file Form 8938 unless their total specified foreign assets exceed $100,000 on the last day of the tax year or more than $150,000 at any time during the tax year. The thresholds for taxpayers who reside abroad are higher. For example in this case, a married couple residing abroad and filing a joint return would not file Form 8938 unless the value of specified foreign assets exceeds $400,000 on the last day of the tax year or more than $600,000 at any time during the year.

Instructions for Form 8938 explain the thresholds for reporting, what constitutes a specified foreign financial asset, how to determine the total value of relevant assets, what assets are exempted, and what information must be provided.

Form 8938 is not required of individuals who do not have an income tax return filing requirement. The new Form 8938 filing requirement does not replace or otherwise affect a taxpayer’s obligation to file an FBAR (Report of Foreign Bank and Financial Accounts).

All foreign source income is required to be reported to the Internal Revenue Service if you are a resident of the United States or Citizen. Failure to report any foreign source income can result in penalties and criminal fraud charges.

Failing to file Form 8938 when required could result in a $10,000 penalty, with an additional penalty up to $50,000 for continued failure to file after IRS notification. A 40 percent penalty on any understatement of tax attributable to non-disclosed assets can also be imposed.

If you have any foreign source income we urge you to contact our office to make sure you are reporting your income accurately to the U.S. government.

There is a Major Flaw in real estate investing that very few people want to admit, and fewer still have the answers for how to overcome it.

The major flaw with real estate investing is not the education. There are a tremendous amount of great educators out there, who provide really great content. It is also not that you didn’t study the courses and didn’t learn from them.  I know that many of you did genuinely go through the courses and then try to follow them, giving it your full effort.  I followed that path too.

I have been a real estate investor for 30 years and an educator for over 20 years. What I found by working with beginning real estate investors for that long is the problem that occurs is with all the fear that comes up, there is too much of a gap around lack of money to get through the fear about how you are going to invest in real estate. It is just too much to overcome.

This business that is so incredible, that provides so many benefits for so many people. It can provide and incredible living for your family based on your efforts.  It provides people with home ownership and incredible opportunities for themselves.  It is truly a business that all parties involved can benefit greatly from each business transaction.

Why is it that most investors are never able to overcome that fear?

They simply never had a plan that would put consistent money in their pocket fast enough for them to make it before they quit.  I have that plan and I am going to share it with you here.

The key to making it in real estate is getting paid up front on every deal that you do. I do that by raising private money and creating a business transaction with my investor.  I structure it so that I get paid up front on the deal, during the deal, and at the end. And you can too.

Here is how you do it.

When I am going through and showing others how to raise private money I have a simple 7 step process that I am going to share with you. Now, before we get started I am going to tell you that this process is fairly easy. But it is a process and all 7 steps must be followed.  Just like the fast food business and hamburgers. You can’t skip a step and still end up with the same finished product. This is no different. All 7 steps must be followed and in order to create the desired outcome – money in your pocket to invest in real estate.

Let me tell you what the 7 steps are and then I will go into each one in a more depth.

Decide and Commit

1. List
2. The Presentation
3. Acquisition
4. Preparation
5. Re-Marketing
6. Administration

Now lets dive into each one in a little more depth.

1. Decide and Commit – By far this is the most important step in the whole process. Deciding what to do and then committing, emotionally. This is what I want and this is what I am going to do. Most business owners quit right before the end. History is full of stories, with one of the most famous being told in the book – Three Feet from Gold .

Most people start, put some effort in and don’t generate any results and then just quit. To me, deciding and then committing to something means there is no other option but to move forward until I reach my goal. I would encourage you to do the same.

The List – You must put the horse in front of the cart. What I mean by that is go find the money before the real estate. You are spending your time and energy working hard to make sure you have the best deal possible. Lots of fear comes up for nearly everyone I know. You don’t want to be fighting that fear of the deal and fear of finding the money at the same time.

Presentation – This starts with an elevator talk. A 30 second talks where you describe exactly what you do in under 30 seconds. Completely, concisely, and confidently.  From there you move into the presentation focusing on the 6 things that are most important to every investor.  The most important thing to nearly every investor is Safety and Security, not Return on Investment (ROI).

If ROI was then every one would have all there money in the highest returning things all the time. There would be no reason to invest in Certificates of Deposit (CD’s) with banks paying 1%, would there?

Acquisition –  This is understanding your market. How to buy, what to buy and where to buy. Most real estate investors focus on this part of the system and it is the 4^th step for a reason. You are wasting your time learning the market and making offers on houses you don’t have the money to buy. I too have heard the saying that find a great deal and the money will show up. I am here to tell you that is false.  It again is all about the ROI equation and that is not why people put money with you for a deal.

Preparation – How to properly set up that property for re-marketing. I focus on the cash flow game. Getting today income and now income for every property that I acquire. I am looking for long term cash flow for each investment property, not short term income.  The way to do that is to know what you are doing to rehab the house with an eye towards the person moving into that home.  There is a lot that goes into the preparation and re-marketing that is simply overlooked while the investor chases down that next deal.

Remarketing the property – To remarket a property, the first thing you need to do is ignore what most other people are doing and what most businesses do. The best way to remarket a home is to focus on the 3 to 5 mile area around the investment house. That is where your tenant or new buyer is going to come from. In some cases they are friends/family of someone within 3 streets of the home.  Marketing is first about identifying the target market, in this case location, and then creating your message to match that market.

Administration – Every great system requires some paperwork and organization. It does not require a full time office person. What it does require is a basic system for keeping organized and on track while you continue to grow.

That is the 7 step process that I take every investor through as they get started investing in real estate. I have worked this same process for my 30 years of real estate investing and have taught it to hundreds of thousands of others over the last 20 years. Follow the 7 steps in order to achieve great success.

Answer: Among other obligations, the Arizona Residential Landlord Tenant Act (“Act”) requires a landlord to maintain the property in a fit and habitable manner and to ensure that electrical and plumbing facilities work.  This does not mean you have to make alterations to your property to please your tenant or to change the aesthetics.  If a tenant sends you a noncompliance notice addressing issues in the home, you should immediately go to the property, or send a contractor, and inspect the Premises to determine whether the issues exist or rise to the level requiring you to act.  Just because a tenant wants work done in a property, does necessarily mean that you have to pay to get it done.  A landlord only has to comply with the language of the Act or lease.  For example, a tenant recently complained to a client about a rental home simply because the tenant didn’t like the color of the paint.  Such complaints do not require you to have the house painted.  The issue for a landlord is to determine what issues need to be addressed, and which ones do not.

Information contained in this post is for informational purposes only and should not be considered legal advice. You should always contact an attorney for legal advice and not rely on information published here.

Looking back on the year it is clear that the savvy investor is a chameleon of sorts. If you were willing to have a fix and flip strategy one month and the next you are pushing through the auctions for the next best deal, then turn around and buy a multi unit building and maybe a have a rental or two you were pretty successful in 2011.  You have to keep your mind open to opportunity as it comes along in any shape or form. Although it is difficult for the fledgling investor to jump from strategy to strategy it is necessary in our current market.

It is more important than ever before to rely on your team of professionals to help you find balance in this ever changing market.  The Arizona Real Estate Investors Association (AZREIA) has all of the resources you need at your finger tips.  Using AZREIA and the sub-groups as a vehicle to help you learn, grow and network is such an important piece of your success.

Looking forward to 2012, we need to remember to learn from 2011’s market. The best lesson is to be flexible, a single strategy for investing is so 2005!  Venture out of your comfort zone and visit one of the sub-groups and network with your fellow investors.  One of my favorite groups is the Fix and Flip Group with U FIXEM Properties (run by Bob Gomez and Dave Jacobs).  This group meets the last Wednesday of every month.  Although I have been in the business for 22 years, I always learn something at these meetings and I always meet someone new. I met my painter and my plumber there too.  Remember this is your business and a big part of your business is networking.  I hope you are looking back on a fantastic 2011 and forward to a very prosperous 2012.  For everyone Chicago Title has had the pleasure of working with, we appreciate you and thank you for your continued support!  We are all in this together and without a great team, things would never get done!

Remember, Chicago Title is here to help with anything you need and we are just a phone call away!

Happy Holidays!

By: DiAnna Jackman

Branch Manager/ Senior Escrow Officer

Chicago Title Agency

Unless you just don’t agree with the analysis of the market over the last several months, then you know time is limited in the acquisition phase of our market. Sure there is some time left, but it may be a little as a few months. We told you in September that we would probably look back and realize that August was the second bottom of the pricing in the Greater Phoenix market. We now have data from September, October, November and part of December and that prediction remains accurate.

Don’t get me wrong. I wish the acquisition phase would last longer. This is the time to lock in good cash flow and highly probable future appreciation. However, you can’t get past a few facts.

• The window of opportunity has been slowing closing since December 2009. Yes, the number of foreclosure notices peaked over two years ago.
• The pace of inventory reduction accelerated significantly in 2011. At the current rate of reduction we could see most of the distressed inventory in any volume gone by the end of this year.
• Fewer and fewer properties are entering the front end of the funnel which will further reduce inventory.
• Lenders are accelerating their short sale decisions.
• REO inventory is rapidly going away and what is left is less attractive to investors.
• Virtually every indicator shows pricing will continue to rise for the next few months.

All of this points to now being the time to finish building your portfolio. I’ll say it again, urgency!

Okay, for all you “information purist” out there. Yes, there will always be good deals regardless of the market cycle, so no, I am not saying that you won’t continue to buy when the distress market is behind us. I am saying that you will have to work harder to find those deals and there won’t be as many of them and they won’t be priced as aggressively. I talking broad strokes here.

My New Year’s wish for all AZREIA members is to be able to tell your story in a few years about what you did during the great real estate crash. How you took the risk, invested in distress property, helped neighborhoods recover, provided housing to those that needed it, made good profits and set yourself and your family up for tremendous wealth accumulation. Or, said another way, never having to say woulda, coulda, shoulda.

I expect to see you at every AZREIA meeting and I commit to give you exceptional data, information and education to help you with your investing along with networking opportunities so you can make connections you need. I expect you to stay engaged through the end of the acquisition phase and be prepared for the next phase. I commit AZREIA will be talking about the next phase before and as it happens. We will help you be ready.

2012 will likely be like no other year. It is up to you what you do with it. Urgency!

Smarter investing,

Alan Langston

In any civil or criminal case, a party always has the right to appeal the trial court’s decision.  Contrary to what many people believe, an appeal normally does not allow a person to have a new trial and present all of their evidence to a new court.  Appeals are handled primarily upon legal briefs written by the parties. The party appealing (the appellant) bears the burden of convincing the higher court that the trial court made a factual or legal error based upon something that happened before or during trial.  The appellant is generally not permitted to introduce new evidence or new legal arguments on appeal.  The responding party (the appellee) submits their arguments in brief form as well, responding to the arguments raised by the appellant, and explaining how the trial court made the proper decision.  In cases being appealed from Superior Court to the Court of Appeals, the appellant is able to submit a final brief supporting their position.

In an eviction, the appeal procedures are set forth in A.R.S. § 12-1179 (for appeals from justice court to Superior Court) and in A.R.S. § 12-1182 (for appeals from Superior Court to the Court of Appeals).  As most non-payment of rent evictions are handled in justice court, that process will be the focus of this article.

Under A.R.S. § 12-1179(A), after rendition of judgment, a tenant has 5 days to file his Notice of Appeal.  This is a document informing the court and the landlord that the tenant is appealing.  The Notice does not contain any legal argument.  At the time the Notice is filed, the tenant is to pay a $250 cost bond to potentially cover some of the costs the landlord will incur on appeal.  Additionally, if the tenant wishes to stay in the property during the appeal, they have to pay a supersedeas bond, in an amount to be determined by the trial court.  This can often be hundreds or thousands of dollars, depending on how the bond is calculated by the court.  Both of these bonds are held by the court and are released to the prevailing party once the appeal is concluded.

If the supersedeas bond is paid, the tenant is then allowed to stay until the next rental period or until the first of the next month if no lease exists.  The tenant has to begin paying into the court the monthly rental value.  If the rent is timely paid, then the tenant is permitted to stay for that month.  Unlike the bonds, the monthly rent is usually disbursed, upon request, to the landlord during the appeal.

After the Notice has been filed, the tenant has 60 days to file his initial appellant memorandum outlining all of the factual and legal errors the trial court made.  This generally requires appellants to point out where during the proceeding an error was made, and include legal arguments regarding the alleged error.  From the date it is filed, the landlord has 30 days to file its response brief including factual and legal arguments.  After both briefs have been filed, the case is then transferred to the Superior Court, which will require both parties to pay the appeal fee.  After the fees have been paid, the case is assigned to a judge on appeal, who has sixty days to make a ruling.

While this process should be relatively fast, due the high volume of appeals, the process of transferring the case, sending out the demand for appeal fees, and then assigning the case now takes several months.  Where we used to tell clients that appeals would run six months before a decision was made, we now estimate 10-12 months.  This time period assumes that the tenant pursues the appeal through completion, follows all the proper steps and pays the required fees.  If any of the steps are done improperly, a landlord acting quickly can seek to get the appeal dismissed or to get the tenant out of the property.

Make sure you know the process, so that you can avoid it by negotiating judgments with tenants where they waive their appeal rights, and knowing when and how to petition the court to remove tenants who fail to follow the rules.  A little understanding of the process can put you in the driver’s seat, and help you protect your interests.

Many investors call each day asking what to look for in a rental home. In my experience I share with them 3 things that will help them make the decision as to whether or not they will purchase a particular home to rent out.

1-    Location- Everyone knows that location determines everything when it comes to purchase price. Location also dictates the rental price of a home as well as the future value of the home. Location is also important in leased homes because it can impact the number of times the property turns over (changes tenants). Investors will agree that one of the biggest costs in property management is when new tenants move in after old tenants have moved out.

2-    Condition of the home- A dirty home will not rent out as quickly (typically) as a clean home. Although this is common sense, one should make sure they factor in costs to clean a property if it is not already in this condition upon purchase. Remember, this includes not only cleaning up the trash, but also making sure every component of the home is functioning properly (i.e. doors, windows, blinds, appliances where applicable etc.). Make sure you know the costs associated to handle this. Where possible factor in costs for appliances, or possibly other requests that may increase a properties ability to rent out more quickly.

3-    Market value of the property- It is important to take into account the market rental value of the property being leased. I recommend being conservative when making this estimate. One swing the market values could have your home being rented out $100 less than planned for, or create a situation where the home sits vacant for over 30 days.

Considering these key points will help any investor in their decision making regarding residential rental properties.

On a double close (as the buyer), typically you would pay “acquisition costs” and then turn around and sell the property in the same or next day, paying the cost to sell as well. When I say you increase your liability I mean that whenever there is a chance you are not fully disclosing your intentions for profit, you put yourself in a position of increased risk that one of the parties to the transaction will feel slighted and sue you or your company or both.  The profit will be disclosed in public records by the affidavit of property value that is recorded with the special warranty deed.  Bottom line, full disclosure = limited liability!

In an assignment transaction there is complete and full disclosure to all parties.  Now, instead of ever being listed as an owner of record, you are merely assigning your interest in the contract.  Let’s use this scenario: You sign a contract with the owner of the property and show as buyer John Doe, LLC, and or assignee.  You now have the right to assign the contract. You will also disclose in your contract that you are an investor and plan to assign the contract/property for profit. If one or more of the members of your LLC holds their real estate license in the state of Arizona then that disclosure should also be made in the contract. Now you have full disclosure!  You find a buyer (assignee) to take over your interest in the contract for an “assignment fee” of $4,000.00.  You would supply the buyer (assignee) a copy of the contract and an assignment agreement.  The assignment agreement will dictate the terms of the assignment.  Don’t leave your earnest money on the table – remember to include the replacement or reimbursement of earnest money in your assignment agreement.  All parties will sign off on this agreement, you, (the assignor), the buyer (assignee), and the seller.  Again full disclosure on this gives you very limited liability.  The other selling point for you as assignor is that you pay no fees, you just collect your initial deposit back and whatever assignment fee is agreed upon.  Your title company will require a 1099-m form from you, the signed assignment forms and where to send your money.

It is not all sunshine and roses when assigning your contracts as most REO (bank owned) sellers and short sale lenders will not allow this method to be used in their transactions.  I know in investing there is supposed to be no such thing as easy money but the assignment contract is as close as you can get to it.

Remember, Chicago Title is here to help with anything you need and just a phone call away!

By: DiAnna Jackman

Senior Escrow Officer/Branch Manager

Chicago Title Insurance Company