Blog Post #2 (Fin 180)

Rights with Real Property

By Jose Cruz

Every single individual has public rights that exceed any private individual right. The rights that an individual has over real property include air, surface, and subsurface rights. Estates are also rights associated with real property. They are categorized as either freehold or leasehold estates. Real property refers to the land and its improvements. It includes all the physical aspects of real estate (Diaz and Hansz 172). This could be the walls, ceiling and anything that is attached to the land. “Land, in its general usage, includes not only the face of the earth but everything of a permanent nature over or under it. This includes structures and minerals” (Real Property). Individuals gain private rights by having ownership over real estate which is term real property.

"Cuius est solum, ejus est usque ad caelum et ad inferos":

"To whomever owns the land, shall own the earth to its center and up to the heavens."

This Latin phrase can be used to explain the air, surface, and subsurface rights related with real property (Duhaime). Air rights are the rights of the ownership and the use of the space above the land. Ideally they extend to outer space but it only extends to a “reasonable height”. This allows for air planes to fly over properties without the need to ask for permission. Subsurface rights are the rights of the ownership and the use of the space below the land. Just like air rights, they extend to center of the earth but really only extend to a “reasonable depth”. Modern technology does not allow us to reach the center of the earth to use that space. Surface rights are the rights of the ownership, use, and occupation of the surface land area in a real estate property (Diaz and Hansz 172-173). These rights are restricted by technology, mining, electricity distribution, sewer systems disposal and air travel. They create limits to the use of space and don’t provide the owner full ownership and usage of that space (Duhaime). According to U.S. Code Title 49 (a) Sovereignty and Public Right of Transit, the “U.S. Government has exclusive sovereignty of airspace of the United States and a citizen of the United States has a public right of transit through the navigable airspace”. According to U.S. Code Title 49 (b) Use of Airspace, the “Administrator of the Federal Aviation Administration shall develop plans and policy for the use of the navigable airspace and assign by regulation or order the use of the airspace necessary to ensure the safety of aircraft and the efficient use of airspace” (49 USC § 40103). However, the owner can be compensated by selling the right or leasing the right.

Freehold estates are ownership for an indefinite period of time. Most real estate bought are freehold estates. The freehold estates include fee simple absolute, qualified fee, life estates, and legal life estates. Fee simple absolute are inheritable and lasts as long as the individual and his heirs wants to keep it. Qualified fee is a qualification on the fees simple interest. Life estate is where the individual retains possession of the land for the duration of his or her life. Legal life estate is established by law rather than by owner of the land (Spaulding). Non-freehold estates are property interests with limited duration, also known as leasehold estate. They include tenancy for a stated period, tenancy at will, tenancy from period to period, and tenancy at sufferance (Diaz and Hansz 179). Concurrent estates exist when property is owned or possessed by two or more individuals simultaneously (Real Property).

The rights associated with real property are needed to protect the property and provide the owner with ownership and usage. The rights might have limitation but without them people would struggle to protect and use their land.

"49 USC § 40103 - Sovereignty and Use of Airspace." 49 USC § 40103. 30 Jan. 2012. Web. 12 Apr.      2012. <http://www.law.cornell.edu/uscode/text/49/40103>.

Diaz, Julian, and J. Andrew. Hansz. Real Estate Analysis: Environments and Activities.

Duhaime, Lloyd. "Air, Water and Subsurface Rights." Duhaime.org. Permalink, 04 June 2009. Web. 12 Apr. 2012. <http://www.duhaime.org/LegalResources/RealEstateTenancy/LawArticle-66/Air-Water- and-Subsurface-Rights.aspx>.

"Real Property." LII. 19 Aug. 2010. Web. 12 Apr. 2012. <http://www.law.cornell.edu/wex/real_property>.

Spaulding, WIlliam C. "Estates in Land." : The Fee Simple Estate and the Life Estate. Thismatter.com, 2011. Web. 12 Apr. 2012. <http://thismatter.com/money/real- estate/estates-in-land.htm>.

Tax Lien Investing

Nathan Nycum

California State University, Fresno

Tax Lien Investing

There are quite literally hundreds of ways to invest in real estate. Each method and strategy has its own advantages and disadvantages. In this depressed real estate market a unique type of investing has grown to a level that is not normally seen. Tax lien and tax deed investing can prove to be a very lucrative form of real estate investing with a relatively low level of risk for those who know how to do it. This paper will summarize what tax liens and deeds are and how they work, analyze some of the risks and benefits of investing, and discuss some current techniques and strategies that investors are using.

What are Tax Liens and Deeds?

http://www.youtube.com/watch?v=4yMrRMpNzDY

The use of tax liens and deeds varies widely from state to state and each state sets its own procedures and laws to handle their tax policy. A tax lien is a claim attached to a property that gives the lien holder the right to collect the money owed plus interest by foreclosure if necessary. A tax deed is very similar but differs in that it gives the party holding the tax deed the right to take ownership of the property immediately. Tax liens and deeds occur when a property owner fails to pay all or part of their property taxes. When this happens the county places a lien on the property and holds it until the annual public auction. Most of the liens are sold to investors at these auctions but those that aren’t get placed in the county’s inventory and held until the next year if still unpaid. Once an investor purchases a lien they own the right to collect the delinquent taxes owed plus all the penalties established by the county. If the delinquent taxes remain unpaid until the end of the period allowed (5 years in California) then the lien holder can foreclose and take ownership of the property. The other possibility is that the delinquent taxes are paid including all interest and the investor makes the return stated on the lien they purchased.

Benefits and risks of Investing

Even though there are numerous laws that usually ensure that the investor’s return is guaranteed, this type of investing is not riskless. Since a tax lien is a sign that someone is not paying their bills there is a strong likelihood that other liens exist on the property in question such as judgment liens or IRS liens. In most cases the tax lien takes priority over all other liens or encumbrances but some in states or counties this is not true. It is completely up to the investor to research the property thoroughly and often in order to mitigate their losses and avoid risk. In addition, many states and counties have payback periods that last for several years so most tax lien investments are long term investments. On the other hand there are several benefits to the tax lien investor. The returns are fairly high as most states charge around 18% which all goes to the investor if repaid. It is also a way that some investors build their portfolio through the foreclosure process to earn even higher returns by receiving the properties debt free.

Techniques and strategies

Within the area of tax lien investing there are many different techniques and strategies and since each state and county have different rules it works well for many different types of investors. The most common way to buy a lien is to physically go to an annual auction and purchase the liens available. This can be very difficult for a lot of people since there is a lot of competition at the auctions which means that the returns usually go down depending on the bidding system used. Additionally, it can be difficult for some people to travel to each of the counties they want to invest in. In order to avoid so much competition some investors choose to target specific properties that they have researched to be great investments. Others have found ways around the auction process entirely by going after over the counter (OTC) liens. An OTC lien is one that has been placed into the county’s inventory after the auction. Some counties allow investors to simply purchase the liens directly without having to wait for the annual auction. Some investors simply want the stated return and don’t want to bother with the foreclosure process and others invest strictly for that purpose. In order to increase the likelihood of a foreclosure and shorten the payback period these investors will target mature liens which are liens that are close to the end of their redemption period.

To the new investor; the concept of what a tax lien is and how it works can be quite complicated. But to the seasoned and knowledgeable investor tax liens provide a very unique type of investing that can produce high returns with fairly low risk. 

Informational Interview

Vue Her

Fin180 2-3:15pm

Dr. Hansz

           

For this information interview assignment, I interviewed a colleague majoring in construction management with 10 year real estate background and also working part time as a painter. He has retire from real estate before the market drop and now currently attending CSU Fresno trying to get his bachelor degree in construction management. While working as a Realtor he was located in Santa Cruz focusing on single residential housing and commercial. Through out this paper my colleague would like to be anonymous. The following are some questions I asked him during the interview:    

How did you get started in this field and what was your educational background?  

“I was always interested in business during high school. Once I got my high diploma I went into real estate right away by taking some private classes at Anthony’s School. That school has the highest success rate in the central valley or entire state with the rate of 95% passing. It was a 4 month program while working a part time job during the day and went to school during the night. It was really tough for someone right out of high school, but my passion in real estate help me through. As soon as I got my license, I start off working as an assistant for a real estate agent working under a broker. While working as an assistant I would takes calls when the Realtor would be away and also run and file papers for him.”  

What is the most rewarding aspect of your job, least rewarding?  What might you change?  Would you choose this career again?   "The most rewarding aspect for this job would be helping people to become homeowner, handing someone a key is what makes it rewarding for me. Not to mention the payment after a sell, since I was still young those two things were really the most important aspect for me in real estate. The least rewarding for me was telling a client they did not qualify for a house and have to be turn down. What might you change? I said the competition, but there is no way you can change that. That was the only reason why I left real estate. Would you choose this career again? Yes, I would if this economy wasn’t this poor because the reward in real estate is excellent. But right now I would like to try something in construction instead.”

What is a “typical” day like for you?

“A typical day for me when I was starting off was: show up at 9 am dressed up and ready to go, start off by delivering paper in the morning then come back and prepare for an open house until lunch, and then go back to office to finish the day off with more work. My time would usually go from 9am until 5pm.

What are some common entry-level positions in the field? What kind of salary range and benefits are typical of an entry-level position in this field?

“There is only two common entry level position that is offer in the field, Assistant or Secretary. When someone just got their license you can not really start out as a Realtor agent without any hands on experience first. This is why I start out as an assistant for a Realtor and try to get use to the work first.” 

 “When I was start off, I worked full time with a pay of 9 dollar an hour. 9 dollar seems low but at that time the minimum wage was much lower compared to now. So a month I would make close to 6000 – 7000.”

What kind of an individual (skills and personality) is best suited for these entry-level positions?  What are the most important factors used when hiring?

“I think the three most important skills and personality is best suited in this field is: someone that who like listening or enjoying talking to people, quick thinker and communication. Out of those three I think communication is the most important, because without good communication a Realtor would not survive in the real estate or business field. The most important factor used when hiring is a Realtor license, you can not do anything without it in real estate and the above personality.

What is the best educational preparation for a career in this filed?  Which classes and experiences would be most helpful to obtain while still in college?

“The best educational preparation in this field is a minor or major in business. Most important is having an interest in business; beside those take classes in real estate principal, Finance, and gets hands on experience.”

What have you found to be a major weakness in this field?

“Major weakness in this field is disclosure, because not all information will be disclosed to the buyer and not enough regulation to protect the buyer. Beside that is communication and reputation for a Realtor, without those two factors managing a business will be hard.”

What is the typical career path from entry to top management and how do people usually find out about full-time openings in this field?

“The typical career path in this field is nothing but major sells and reputation. Once you have enough experience and reputation that is when you can start your own business or move onto the next level. While doing this job the only way people usually find out about full time openings is through word of mouth or the newspaper, but today all those information can be obtain from the internet.”

What is the future outlook for this career?  

“Right now I see the market becoming more of an honest field/career since the bubble burst; is reflecting more on the honest price of real estate.”