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How to Keep Your Spouse Safe in Business

As a structuring adviser to investors and business owners we often come across a widespread mistake that many people make.

That is a spouse being offered as a guarantor to the financial institution, landlords or creditors of a business. Often their personal guarantee is even needed for the agreement to proceed yet it is given.

Why? Because the advisers do not defend you and point out that it’s not required.

The upshot is that if total business or investment collapse happens, both spouses are fully liable rather than just one. Sure, the creditor, bank or landlord asking for your spouses guarantee will explain it is necessary 100%.

This is because it is in their. Yet it is not in your interests. My advice is NEVER give your spouses guarantee in business or property transactions if you can keep away from it.

I have developed over 80 million dollars in property, and guaranteed a number of numerous business and banking obligations, purchased multiple investment properties, – and my wife has never signed a personal guarantee on the transactions. Why?

To protect her from the potential risk and obligation. How did I avoid her being liable? By saying ‘no’ to the banks and creditors when they asked. Did it interfere with her legal or matrimonial rights to recuperate the property if we separated?

No, — she still receives the assets because she jointly controls the Trusts and numerous borrowing. This is not about removing power away from your spouse and potentially wealth, it is simply to do with reducing your risk to your family.

Examples of this include:

1. Borrowing funds from a lender to buy an investment property or even your family home. If one spouse is a homemaker, has no income or their income is not required to meet debt servicing criteria of the bank, then why allow the bank to take their guarantee?

The only purpose of the guarantee will be to use more pressure to your household if you have difficulty, and both spouses go bankrupt rather than one (which may be viewed as malicious in this light).

2. Handling land-lords when it comes to commercial leases and guarantees. Ensure you attempt to divide leases out into separate ‘tenancy companies’ and make one spouse a director of this company.

Your opening position should be no personal guarantee, and if ‘no personal guarantee’ is a deal breaker with the landlord, then only the director/one spouse gives a guarantee.

Try not to give an unlimited guarantee, limit it to say XX months rent, or a fixed sum as a cap.

3. Dealing with creditors over personal guarantees. Creditors in business will normally ask for a personal guarantee.

Decline to give it if you can get away with it, and most of the time you can. Where you have to give one, just as with a landlord ‘limit the guarantee’.

In summary, protect your spouse from liability if you can help it. Personal guarantees and spouses should not go together. If you are negotiating with a landlord or creditor as a business owner and have to supply a guarantee, try not to give a guarantee at all, or limit the guarantee to a fixed sum

(Eg: 6 months rent. If your spouse has no income, you should be able to avoid their guarantee being given to a lender/bank)

Try using a mortgage broker to achieve this. Usually the banks (if dealing direct) will be very difficult to manage on this issue, especially in this recessionary climate.

Will the Election Impact Markets and Investments?

What drives the stock market? Quite often, it is fundamental factors such as the strength of the economy and its impact on corporate profits. At other times it is affected, at least in the short term, by external factors that can upend investor expectations and drive markets in a positive or negative direction.

One of the most obvious external factors that might come into play for markets this year is the upcoming presidential election. This is the kind of election year that has some built-in market uncertainty. It marks the end of the second term for President Barack Obama, which means that a new occupant will sit in the Oval Office in January 2017. Regardless of who wins, the leadership transition will likely result in some policy changes in the near future.

Dealing with uncertainty

This election season has been marked by unusual twists. In the Democratic Party, Hillary Clinton, a longtime party stalwart faced a surprisingly difficult challenge before earning the nomination for the chance to become the country’s first woman president. On the Republican side, Donald Trump, a celebrity newcomer to the party captured the nomination, overcoming a number of more experienced politicians.

Even without these twists, it isn’t uncommon for the stock market to exhibit a degree of volatility in the run-up to an election, at least until the likely outcome is clearer. One of the key issues that could affect markets is the possibility that control of the White House could change to a different party. According to an analysis by the Ameriprise Investment Research Group, the potential for such a change tends to increase stock market volatility. This can be particularly true in the final weeks leading up to the election. Investors should be prepared for circumstances where the “noise” generated by the campaign contributes to market fluctuations.

Is history a guide?

Other data may provide clues as to what to expect in the markets. According to Standard & Poor’s, since 1900, U.S. stocks have declined by an average of 1.2 percent in the eighth year of a presidential term. There are two points of caution with this statistic:

1. There are a limited number of times when this circumstance has occurred.

2. The last time it happened, in 2008, we were in the midst of the Great Recession. The markets were down 41 percent that year, which dramatically changed the average return for this specific measurement.

What may be a more important consideration for investors than who is the new president is whether we enter the election and post-election season with a great deal of uncertainty about policy direction.

The impact on specific market sectors

Although it’s speculative to try and predict the outcome of the election and all of the policy implications each party would impose, the result of the election is likely to influence key industries. Among the sectors of the market that could be affected in different ways are:

• Healthcare – what is the future of the Affordable Care Act and the general direction of health insurance coverage in the U.S.?

• Energy – will production of fossil fuels continue to be encouraged or will greater emphasis be put on alternative energy sources?

• Security – how will the defense budget be affected given the increased focus on global security?

It’s about more than the president

It’s true that our president has tremendous influence in the direction our country takes. However, it’s important to remember that there are many others who play a role in making policy that can affect the investment environment. These include members of Congress (many who are also up for election this year), local and state legislators, Federal regulators and other officials. For example, the Federal Reserve controls monetary policy, which includes monitoring inflation and the Federal interest rates. Politicians have limited to no influence over policy decisions made by the Fed.

Also keep in mind that the presidential election doesn’t have the same impact over U.S. markets as it once did. External events, many of which are overseas, increasingly affect the markets, and are often out of the control of elected officials. These events include natural disasters, terrorist attacks, financial crises and the financial results of publicly held companies.

What this means for your finances

While it’s natural to think about the impact of the election on your investments, it’s only one factor. Stay attuned to the bigger picture of your long-term goals. Review your portfolio diversification and risk tolerance with a financial advisor for an objective perspective on your financial situation.

How to Find Good Investment Property

The topic that will be explained in this article is the way to find good investment property. Owning rental real estate seems to be more and more popular as investor tire of the swoops and swoons of the stock market. As for our information, not everyone has what it takes to be a landlord. But those who do may find out that rental will be a good way to build wealth. After we have decided to buy rental property, our real work begins. To find a profitable rental property usually takes a long time, connections and plenty of research.

To find good investment property, we need to know our time horizon. As it is the same as any other investment, we must have a plan or idea on the period we want to own a rental property before we buy it.

The longer the period we plan to own the property, the more we’ll probably need to invest in maintenance, improvements and repairs. If we’re keeping it for 20 or 15 years, at some point, it means that we will be putting a new roof on that property. In addition, we will be putting in new appliances and doing some major repairs. If we are only planning to own a property for four or five years, by contrast, we will probably want to avoid making any major improvements unless we are confident that we can recoup the cost with a higher sale price.

There will also a greater risk that we will face within a shorter time horizon. Although our rental will almost certainly appreciate over 15 years, but it could easily lose all the value in the following next five, especially if we are buying in an overheated market. We will need a higher amount of potential annual return to make up for that risk.

As for small investors, they might prefer long-term ownership. We will have plenty of time to achieve great result in the market, and rental income can make a nice supplement to our day job. Find more rental properties, and being a landlord may become our daily job.

Lastly, we need to develop a network. Landlords that have greater experience might find their properties in a variety of ways. Some of them will hunt for foreclosures, making friends with bank employees and city hall clerks or who has information on which properties are about to be sold. Some of them run promotion in local newspapers. Meantime, others might work with real estate agents that keep their eyes peeled for possible buys. Some of the landlords might be joining a local landlord and property owner’s association to make contacts and good relationship. It is believed that when we begin to own rentals, all the other investors start coming out of the woodwork.