InvestorLoft Real Estate Investing Blog

Increasingly, Self-Directed IRA (SDIRA) owners are looking at alternatives to traditional stocks and bonds for their retirement accounts. Growing investor sophistication is driving many in the direction of Real Estate, Private Stock, non-public Hedge Funds and other investments traditionally excluded from their current retirement portfolios. Alternative investment transactions through a SDIRA, may provide greater transparency and control over retirement assets. Additionally, a Traditional SDIRA allows taxes on assets held inside the IRA account to be deferred or postponed until the money is withdrawn from the account, presumably after the age of 59 ½. Alternative investments may allow account owners to take a proactive approach to improving investment returns because they choose asset classes that are not correlated to their current portfolios.

When working with SDIRA’s, it is important to be familiar with the prohibited transaction and disqualified person sections of the Internal Revenue Code (IRC). Failing to understand Prohibited Transactions, or to find an advisor or professional that does, may lead to the disqualification of your SDIRA, resulting in possible taxes and penalties. This article will outline the importance of disqualified person(s), prohibited transaction(s), and common scenarios SDIRA owners should avoid with their SDIRA.

The prohibited transactions rules are intended to ensure that the assets of a plan are invested in a manner that benefits the SDIRA itself and not the SDIRA owner. This is intended to prevent a person, such as the IRA holder, from using the assets of their SDIRA for personal benefit. It is incredibly important that the IRA holder not engage in any ‘transaction’ with his or her IRA. Consequently, transactions involving the SDIRA must be “arms-length” and free from any direct exploitation by the SDIRA owner.

Disqualified Person(s)
An IRA owner may not invest in property that he/she, a relative, or his/her business, already owns. Prohibited transactions are transactions that occur between the SDIRA and disqualified person(s). The following are, generally, considered disqualified persons.

• The IRA holder
• The IRA holder’s spouse
• The IRA holder’s ancestors and lineal descendants
• Spouses of the IRA holder’s lineal descendants
• Investment managers and advisors
• Anyone providing services to the plan (IRA), e.g., the IRA trustee or custodian
• Any corporation, partnership, trust, or estate in which the IRA holder has a 50% or greater interest

Prohibited Transactions
Understanding what constitutes a prohibited transaction is very important when it comes to making investments within a SDIRA. A prohibited transaction can bring into question the tax-deferred status of the account, resulting in the disqualification of the SDIRA and severe tax and penalties. Prohibited transactions fall into two general categories: Prohibited Investments and Prohibited Transactions. The Internal Revenue Code (IRC) defines a prohibited transaction to include any direct or indirect:

• Sale or exchange, or leasing, of any property between a plan and a disqualified person;
• Lending of money or other extension of credit between a plan and a disqualified person;
• Furnishing of goods, services, or facilities between a plan and a disqualified person;
• Transfer to, or use by or for the benefit of, a disqualified person of the income or assets of a plan in his own interest or for his own account, or
• Act by a disqualified person who is a fiduciary whereby he deals with the income or assets of a plan in his own interest or for his own account; or
• Receipt of any consideration for his own personal account by any disqualified person who is a fiduciary from any party dealing with the plan in connection with a transaction involving income or assets of the plan.

Often, SDIRA custodians communicate to the SDIRA holders that they should consider their SDIRA separately from themselves as individuals. It is important to understand that for purposes of the IRS code you and your SDIRA are separate entities whose interests are not related. Understanding this nuance will reduce the number of potential issues that may arise when you make investments using your SDIRA.

Common Prohibited Transactions

• Borrowing money from an SDIRA
• Using the SDIRA as security for a loan
• Selling personal assets to the SDIRA
• Buying property in the SDIRA for personal use
• Purchasing property from a disqualified relative i.e. Spouse, Children, Parents of the SDIRA holder.
• Issuing a mortgage on a disqualified relative’s residence

Penalties
When an IRA is involved in a transaction that is considered ‘prohibited’, the IRA loses its tax-exempt status and the IRA holder is deemed to have received a distribution on the first day of the tax year in which the prohibited transaction occurred. The value of the IRA is treated as if was distributed to the IRA holder and must be included in the IRA holder’s income for that year. Unless the IRA holder has reached age 59½ or is disabled, this distribution is subject to the 10 percent penalty tax on early distributions. These are hefty penalties that can rapidly diminish the benefits of the self-directed IRA.

Conclusion
Individuals who consider making, or have made, alternative asset investments in their SDIRA must be vigilant and responsible for each action they take. Becoming aware of the prohibited transaction and disqualified person rules will help them avoid tax consequences by not tripping over these fundamental rules. Individuals should contact a knowledgeable self-directed IRA custodian, attorney, CPA, or financial advisor, with a track record of working with SDIRA’s, for more details.

TommyJoe A. Valenzuela (“TJ”) is VP of sales and marketing for TAS (Trust Administration Services) online at www.trustlynk.com and a division of First Regional Bank. He has 15+ years experience in the financial services industry, implementing marketing strategies to benefit real estate professionals, attorneys and others and speaking at industry conferences on taxable investment strategies, retirement plan investing, etc. Trust administers more than $1.3 billion in assets, including those invested in real estate, tax liens, and private equities.

The content in this blog is not affiliated with nor is it endorsed by InvestorLoft.com and contributors receive no compensation for submitted articles. All articles submitted to InvestorLoft are subject to editorial review. Please seek the advice of qualified real estate, tax and financial professionals before investing in any project or opportunity. InvestorLoft does not provide tax or legal advice and any and all content herein is provided for informational and educational purposes only.

As big believers in quantitative data, InvestorLoft consistently tracks the numbers behind our site’s listings. We want our members to have access to the most timely data possible to help with their investment property purchase decisions, so we’ll be publishing quarterly results like those in this blog. Forbes.com and Forbes Magazine recently utilized our data in their article The Landlord Game, and we’re now passing on an enhanced version of that data to you! The following numbers were derived by analyzing all of the listings on InvestorLoft and then crunching those numbers a few different ways and under different scenarios (varying down payment amounts, types of residence, etc.).

Note on Cap Rate calculations:
The following is the method by which our cap rate calculations have been derived:

CR = ((income – expNotMtg)/PP)*100)
Cap Rate = ((income less expenses not including mortgage)/Purchase Price)*100

All results were multiplied by 90% to account for the following variances and arrive at more conservative figures:

Rent:

• Seller entered rent as the first value. If there is none, then we used median rent derived from between 1-5 miles averages.

Expenses:

• Some listings do not have HOA or taxes – the system does not currently estimate these numbers, so the cap rate would be very high in that case. Thus, we estimate numbers for insurance fees, and property management (based on the rent val) in the expenses.

Top Cities Nationwide for Cap Rate – National Totals
(includes both single-family and condo/town homes – multifamily excluded)

Top Cities Nationwide for Cap Rate – Single Family

Top Cities Nationwide for Cap Rate – Condo/Town home

Top Cities Nationwide for Cash Flow – National Totals
(sorted assuming 30% down payment)

Top Cities Nationwide for Cash Flow - Single Family
(sorted assuming 30% down payment)

Top Cities Nationwide for Cash Flow - Condo/Town home
(sorted assuming 30% down payment)

Share this post with your clients and colleagues and look for our Q3 data to be released in October.

Looking for rental property?

So, you’re thinking about getting into investment property. If that’s the case, there are a few basic questions you need to ask yourself before you get started. The first one is simple: are you most interested in appreciation on the property or cash flow? If your answer is cash flow, read on.

The concept behind cash flow properties is simple: take in more in rent than you spend to own the property. There is no getting around the fact that, in order to purchase a property that is going to generate cash in your pocket every month, you’re going to have to look at a lot of places and do a lot of research. You could go take a seminar from a “guru” who will tell you that you can get property that generates tons of cash for no money down to make you rich. If this the case, don’t you think he would be running around buying properties instead of giving seminars? Save that money for your down payment.

First, you have to decide what kind of property you want to buy. If you want to enter the rental market game for as little money as possible, mobile homes are worth a look. However, you should keep in mind this isn’t going to yield the most stable pool of renters. Maybe you’ve found a house or condo that you want to rent for a few years then move into when your kids are all off to college. Do you want a single-family detached home, a few condos or town homes, or a multi-unit building? Once you’ve weighed the different options and decided, it’s time to get busy with your research.

Who’s going to manage the property? If you are going to use a property management service, the property can essentially be anywhere. This might be an option if you live in an area with a unstable renter base, for instance, such as if industry is leaving the area and taking jobs with it. If you are going to save money and manage the property yourself, your purchase should probably be local … and you have to be honest with yourself as to whether you can really handle it. If you are a busy executive that works long hours, you may be able to handle one or two properties, but if you add any more you may rethink it. If you’re buying several units and your research shows that you can make a living off the cash, you can do it full time. But don’t underestimate the rigors of property management. When a tenant’s toilet breaks, she’s going to want it fixed today, NOT when you get back from vacation. Weigh the cost benefits. Is the standard 8-10% property management fee worth you having both the benefit of monthly cash flow AND your freedom?

There is usually going to be a trade-off between appreciation and cash flow. An executive home in a nice neighborhood may appreciate rapidly but not generate as much money per month because of the higher mortgage. Conversely, multi-unit structures that generate a lot of rental income every month may not be in the nicest part of town, and therefore appreciate less. And remember the lessons learned from recent market cycles: appreciation is never guaranteed.

Once you’ve decided what you’re going to buy, partner with a real estate agent that specializes in rental and income property. Insist upon seeing the records for any property for at least the past two years before you buy. Look at capital expenditures, rental income, maintenance costs, association fees and any other expenses. A positive balance sheet should ideally be accompanied by reliable, existing tenants.

Investment property can be an excellent way to make money every month from rental income, but don’t kid yourself. There are a lot of factors to consider. Are you cut out to be a landlord? Are you in a position to weather inevitable vacancy rates? Are you able to financially handle major problems like a new HVAC unit or replacing a roof? If so, don’t skimp on the research: start building your rental property portfolio the right way. Patient research, due diligence, the assistance of an experienced local real estate professional are all key to your success. It’s more than just finding what looks like a great buy and closing the sale: it’s everything beyond the sale that determines the cash flow potential of a rental.

Here is the second part to How to Get Your Listings Noticed – Part 1 – more strategies to assist the real estate investor with setting their properties apart from the crowd and encourage a quicker sale.

3. Use Creative Financing: One of the best ways to offer the home improvements after the sale mentioned in #2 is through an FHA 203K Rehab loan or a USDA Rural Housing Rehab loan. Buyer can finance anywhere from $5,000 to $35,000 on top of the loan amount to pay for improvements. For energy improvement-type repairs, FHA offers an Energy Efficiency program for these repairs too. A good loan officer who knows the ins-and-outs of these programs can help you strategize listing offers that will appeal to buyers.

4. Sell the Payment – Not the Price: Again, your loan officer can be invaluable to you here. Buyers get intimidated by prices of homes. $150,000 sounds like a whole lot of money, whereas $1200 a month can seem much more manageable. Check out the temporary or permanent rate buy-down options available to you. “Seller will reduce your first year’s payment to only $1050 a month AND pay all your closing costs too!”

In your “call for more details” disclaimer – direct them to your loan officer with the questions and REQUIRE that the financing be done by him/her to get the special deal. As soon as you say “pay all your closing costs” and you allow ANY loan officer to do the loan – figure the costs will probably double or triple. If they want the special deal, they can use your loan officer (again, builders do this all the time) and you can retain control of the transaction.

Do These 4 Strategies Work?

It depends on what you mean by “Do they work?” If you try these strategies and the home doesn’t sell right away, does that mean the strategy failed? Not necessarily. Yes, it would be nice if the free bottle of wine or the offer to throw in a new fence was able to close the deal from the get-go, but that is not what the strategy is intended to do.

These four strategies can only help you get the home noticed by potential buyers. They cannot sell the home for you. Nobody is going to buy the home because you give them a bottle of wine or free tickets to a hot concert. But it’s possible that someone who likes wine or concerts will become interested in buying your home – and they maybe wouldn’t have ever considered your home unless you had offered the giveaway.

If you try using these strategies, the measure of its success or failure is: Did more people notice the home? If your open house was better attended because you offered free pony rides for the kids – then that was a success. Just because the home didn’t sell doesn’t make it less of a success.

Why Do People Buy?

Someone will buy your home when they believe your home offers them the best value for their money, based on their individual needs. You cannot dictate what their needs are – that is beyond your control. The only things you can control as a seller is making sure your home’s offering is competitive with other offerings in your area AND reaching out to as many potential buyers as possible.

Again, the more potential buyers you can get to consider your home, the better your chances are. And then it will be up to the buyer to determine if your home meets their needs. Your pricing and the condition of your home will play a big role in their decision, but they wouldn’t ever have that decision to make if they had never considered your home in the first place.

Get them to consider it – that’s the ONLY way to have a shot at selling them your home.

Glenn Leach is a mortgage loan officer in Puyallup, Washington. You can read more articles and ideas at www.credittothewise.com.

The content in this blog is not affiliated with nor is it endorsed by InvestorLoft.com and contributors receive no compensation for submitted articles. All articles submitted to InvestorLoft are subject to editorial review. Please seek the advice of qualified real estate, tax and financial professionals before investing in any project or opportunity. InvestorLoft does not provide tax or legal advice and any and all content herein is provided for informational and educational purposes only.

Real Estate IRAs - Save Smarter!

The self-directed or real estate IRA is a powerful tool and growing in its popularity. However, as with any other way of investing your retirement funds, it’s not to be taken lightly.

Rental and other income property can be excellent vehicles that provide long-term appreciation potential and a steady flow of income as you work towards retirement. We spoke with Jenn Dizmang, a national speaker and former securities professional who teaches investors and real estate professionals how to properly use a real estate IRA for some advice on common mistakes that people make in the process.

Jenn shared with us that the following are the most common AND the most easily avoidable mistakes she sees people making with their real estate IRAs:

1. They either live in or vacation to the property that their IRA owns
2. They try to let family members use or live in property that the IRA owns
3. They don’t realize that when an IRA takes a loan, an additional tax may be due called UDFI (Unrelated Debt Finance Income Tax)
4. They try to lease the property back to themselves from the IRA
5. They try to do rehab work themselves on a property that is owned by the IRA. (You have to hire a contractor that is an unaffiliated party to perform the work!)

U.S. News and World Report just named Fort Collins, Colorado in its story “Top Ten Housing Markets for the Next 10 Years.”

As a Colorado-based company, we have tons to say about this great state and definitely applaud Fort Collins’ inclusion on the list. Cities in Washington State, another recent addition to the InvestorLoft site, also made the list!

It seems timely to note that we just launched our state and city-specific search and information pages as well. Visit InvestorLoft’s Investment Property Portal and begin searching for real estate by state or in a specific city of your choosing. We have listings now in 18 states and 1,679 cities with new destinations being added each month!

Click here to review InvestorLoft’s available investment properties in Fort Collins, CO

Click here to review InvestorLoft’s available investment properties in Washington State (WA)

Good decisions outweigh bad markets with SDIRAs

All our lives we, as investors, have been told to put money away for those rainy days. Today, investors are on the seemingly neverending search for solid investment ideas that produce sound returns with balanced risk. Consequently, advisors are looking for council on a lesser-known and often misunderstood category:alternative assets.

Alternative assets include a wide-ranging group, such as partnerships and private equity. But the largest segment of alternative investments has been and continues to be real estate. In fact, almost 60 percent of alternative asset investments are in this category. Investors can invest in condos, rental properties, raw land, commercial buildings and other types of real estate from within a Self-Directed IRA (SDIRA).

Most Americans already have real estate investments, i.e., their home, and most (given the opportunity) may prefer to invest in asset-backed investments over paper-backed investments. Many investors are wondering if today’s retreating real estate market means that the good times are over for real estate, or whether new opportunities will emerge from the wreckage. I believe that it’s the latter. Real estate advisors, with whom my company works, suggest that falling real estate prices, combined with increasing inventory, may create new investment opportunities. As prices begin to fall back to earth, the pendulum may swing past center to create oversold conditions, providing opportunities to buy real estate at low prices. Some areas in the United States may already be starting to enter this situation. Consequently, many typical real estate investors are being squeezed out of the market due to the current credit crisis.

This has created a unique opportunity for cash-rich retirement plan investors who are in a position to purchase real estate outright. Who are these cash-rich investors? Baby boomers. 2007 marked the beginning of the wave of more than 78 million baby boomers that will begin to retire over the next two decades. This group controls more than $14 trillion in retirement plan assets, which will transition from employer-based plans to individual retirement accounts. Many baby boomers have already begun to shift away from traditional equity investments to those that generate income. When you add the factors noted above with the possibility of real estate appreciation, it is easy to see why retirement accounts that invest in real estate are growing in popularity.

Just because you can invest in real estate in your IRA does not automatically make it the best decision for all account holders. Opponents of using a self-directed IRA to invest in real estate suggest that there are specific tax implications foregone by choosing real estate as an investment. First, profits personally made in real estate, if long-term, are taxed at the capital gains rate of 15 percent. When a SDIRA sells a piece of real estate, there are no taxes due at the time of sale. However, depending on the type of SDIRA, when the owner takes a distribution from a retirement account, the proceeds will either be taxed at the person’s ordinary income rate (for a traditional SDIRA) or will, potentially, be tax-free under a Roth SDIRA.

This is an important issue because ordinary income tax rates are typically higher than long-term capital gains rates. SDIRA investors cannot depreciate property or write-off interest from their mortgage on their personal tax return.

In general, real estate investors experience increased return potential because of their use of leverage and its favorable tax treatment. Most real estate investment experts advocate the use of leverage to build wealth. Most SDIRAs do not use leverage to buy real estate, although it is permissible. Without the use of leverage, real estate begins to look more like income-producing bonds with equity upside. The lack of leverage may also reduce one component of risk for investors as well since the rental income is not being immediately used for debt service. If a property goes unrented the account holder owns the property outright and may not be subject to foreclosure proceedings, as with most current leveraged properties. Consequently, the methodology for buying real estate inside a tax-deferred retirement account may differ over time from real estate purchased outside the account.

Prohibited Transactions

Investing in real estate with an IRA requires that advisors and their clients be knowledgeable about prohibited transactions and what constitutes them. A prohibited transaction can jeopardize the tax-deferred status (and tax-free status if a ROTH) of the account, and can result in serious tax consequences. Another important issue for real estate concerns the access and use of property held inside the SDIRA. In such situations, neither the account holder nor their family members (ancestral & lineal) may have personal use of said property. To do so would result in an immediate prohibited transaction.

Partnerships

For an advisor who is seeking a niche, SDIRAs might be the answer. It takes time to develop expertise in this area and an advisor who invests time in understanding real estate investments with SDIRAs can create a competitive advantage.

Today, many advisors are partnering with those who have alternative products in which to invest, whether they are real estate-related or other private offerings. These partnerships provide the advisor with the ability to meet the changing demands of their clients. Advisors are learning to work more closely with clients who may have a property or real estate professional already in mind. As investors’ needs change, alternative assets and self-directed retirement accounts will become important tools for advisors to help clients diversify and grow their retirement wealth. Those advisors that are prepared for this change will be at the forefront of the financial services industry for years to come.

TJ Valenzuela is with TAS (Trust Administration Services), a leading personal management provider of self-directed IRA retirement accounts, retirement planning services, and custody accounts at www.trustlynk.com

The content in this blog is not affiliated with nor is it endorsed by InvestorLoft.com and contributors receive no compensation for submitted articles. All articles submitted to InvestorLoft are subject to editorial review. Please seek the advice of qualified real estate, tax and financial professionals before investing in any project or opportunity. InvestorLoft does not provide tax or legal advice and any and all content herein is provided for informational and educational purposes only.

First Time Home Buyer Savings Can Stack-Up with a Little Research

If you’re one of the few who hasn’t heard about the $8,000 first-time home buyer credit – listen up! That’s a fair share of dough for those who qualify, and this week’s blog will give you some tips on how to stretch your homebuying dollars even further. When looking for your first home, it’s hard to not think of that purchase as a significant investment. While InvestorLoft traditionally focuses on the needs of the investment buyer, we’re here to tell you that there are some handy tools (on both our site and others) that can help you make that $8,000 credit stretch even further.

So first-time home buyers: this list is for you!

Ways to Maximize Your First-Time Home Buyer Credit

1. Shop for Discounts – Everyone’s talking about the abundance of foreclosures on the market – so there MUST be deals to be had, right? Absolutely right. Using InvestorLoft’s PropScout search engine, you can actually search for properties by discount to market value and estimated equity! Not only that, but Forbes Real Estate frequently issues their Luxury Housing Index numbers weekly and MSNBC.com publishes up-to-date housing information (like cities with the highest foreclosure rates and info on the 10 priciest cities for owning a home). A little research lends to a keen eye for discounts!
   
2. Keep an eye on Craigslist! Real estate listings don’t just come in the classifieds of your local paper or online. While the risk runs high for potential scams, a trained eye will let you know if you’re looking at a potentially good deal. You can take the information from the listing you find and then research similar properties in the area or (preferably) just hand the info over to your chosen real estate professional and let them do the legwork for you. Think outside the MLS and let your Realtor help you!
   
3. Know Your Numbers - Sites like Bankrate.com are hugely useful for financial research. They’re a long-standing source of data for up-to-date mortgage rates AND the bank providing them. Pre-approval for a mortgage gives you eve more negotiating power when you need to act fast on a hot deal.
4. Set Up New Property Alerts – Searching every day for the home of your dreams can be cumbersome. On sites like InvestorLoft, you can save searches and have new results emailed when they post to the system! It’s kind of like a concierge for your home buying needs (but there’s no obligatory $20 tip required). Does the site you’re using to search email you targeted results or just random emails of new listings? Your time is valuable – make it count with targeted searching!
   
5. Leverage Professional Assistance – You might be the king or queen of finding aything you want online, but odds are, you’re going to use a Realtor to buy your home. There are thousands of experienced professionals ready and waiting to help you do the legwork for your new home search. Search for property is all they do, each and every day – chances are that they know a few inside tips about the area in which you’re looking to buy and may even hear about listings before you can find them online. Find a real estate pro you trust and let them help with the heavy lifting!

Professional Networking Done Right!

Social media and the resulting social networks have been invaluable for the world of real estate and investment. What used to require a lot of leg work has been simplified with sites like Twitter and Facebook, giving “instant gratification” with building professional relationships. But like cell phone etiquette in the mid to late 90′s, the social media rules governing these sites are hazy at best. When should I tweet? What should I say? Do the people around me really need to hear every detail of the day? The successful adopters of social media, especially Twitter, generally have a similar list of “Twitter Do’s and Twitter Don’ts.”

DO: Be personable. View your interactions online with the same courtesy and respect as contacts you have in person. Talk to people. Respond to something that particularly inspires you or was especially educational. If you’re introduced to someone, return the favor. We’re all here to help each other and competition should be tempered to facilitate the networking atmosphere. You never know when an act of kindness will be returned as closing on a huge deal or finding the property bargain of a lifetime.

DON’T: Try to sell something with your first interaction. No one likes the person at the party who shakes your hand with their right and holds out a business card with their left. Be considerate with your introduction. Ask questions. Make small talk. Remember details. When you send a message to initiate a business transaction, people will be more inclined to engage if they know you’re not just out for yourself. Setting up auto direct messages on Twitter? It’s like eating garlic before a first date: avoid the temptation.

DO: Fill out your profile. Add a picture of yourself and give a small description of who you are. While many people decry the loss of “privacy,” you want to give an accurate representation of yourself. You don’t need to reveal every detail of your life to be genuine. This will build trust with potential contacts and show that you have a personality. People like interesting people. Show them how interesting you can be! Include keywords like “real estate” and “investment” to help your profile come up when people are searching based on profession or expertise.

DON’T: Set up “ghost” accounts or multiple accounts. Unless you are familiar with how to create an alter-ego, it’s best to be yourself online when building professional relationships. Multiple accounts may discourage networking if word gets out that you have three other profiles – people may wonder what you have to hide.

DO: Build your network of followers/friends around your target demographic. Social media is all about laser-proficient target marketing. Look at the profile information of the people you’re following or adding as friends. The best networking is with people who are also passionate about real estate and investment. They’ll double your efforts by telling their networks about you.

DON’T: Aimlessly add friends and followers. Beginning on Facebook or Twitter is overwhelming, resembling the panic that set in when you were the new kid in school and didn’t know anyone. Resist the temptation to start adding as many friends and followers as you can in the first few weeks. It may feel like you’re getting somewhere if you’re following 2,000 people on Twitter or add 500 friends on Facebook, but the sheer number complicates getting to know people. Start small, build slowly.

DO: Be business appropriate. For the most part, you control what people read about you online. When your online presence is polished and professional, you’re regarded as polished and professional. Talk about what you’ve learned about real estate investment over the years and the helpful article you read this morning. Skip the conversation about the latest family drama. It’s your personal brand – treat it like it’s your own rendition of Coca-Cola.

DON’T: Keep your updates and profile private and protected. This may seem counter intuitive to business: “I don’t want my competitors or other investors to see who I’m talking to!” But this will discourage networking. If your main goal is to build business, open up for all to see and follow.

DO: Post with a purpose. Along with being business appropriate, it’s also smart to have a goal in mind when posting. With a 140 character limit, these small bits of information cannot be empty calories. Make every tweet/update/link/note/comment count, packed with highly nutritional food for thought. Think of your Twitter stream in a condensed form – so powerful that a little bit goes a long way.

DON’T: Be an attention-hog. Remember the guy we talked about earlier who hands you a business card when introduced? The other social media party pooper is determined to do whatever it takes to have the spotlight following their every move. You know the type – loud, typically obnoxious, and starts conversations with, “Enough about me. What do YOU think about me?” While it’s appropriate at times to talk about yourself, remember basic rules of conversation. Social media is not a monologue.