Hard Money Lending: A Valuable Financing Option
What is "Hard Money"? Most people have heard the term before and are not sure exactly what it means. Don't be confused by the term "Hard Money." The name doesn't mean that this money is difficult to obtain, because in reality hard money loans are some of the easiest funds to procure. Generally speaking, the industry defines "Hard Money" as unconventional asset based lending where the collateral of the loan is real estate. It is considered unconventional because these loans do not meet the traditional underwriting criteria of Institutional Lenders (ILs).
A Hard Money Lender (HML) is typically the ‘lender of last resort’ due to the loan’s unconventional characteristics; fast funding timeline, a borrower’s credit score, loan type, etc. Private--or "Hard Money"--lenders include real estate funds, pension funds, insurance companies and/or private individuals with money available for lending. Some have deep pockets while others have limited resources. Based upon their own criteria, HMLs lend money primarily on a short-term basis, to borrowers who use it for a variety of profitable purposes. These may include the following real estate loan types: bridge, refinance, development, acquisition, rehab, etc. Since Hard Money is more expensive than traditional sources (10%+ interest rate and 2 points+ in origination fees), borrowers should have a significant financial upside for using these sources. These benefits out way the loan cost.
Typical Terms for Hard Money Loans
Terms and requirements for these types of loans will vary from lender to lender. Lenders may charge an upfront application fee, due diligence fee and commitment fee. Make sure to understand these fees when selecting a Hard Money Lender because these fees maybe non-refundable. Generally, a HML will fund a loan for 50% LTV on raw land and up to 70% LTV on the finished product, at an interest rate of 10%+ and for a period of six months to three years. Lenders will also charge between 2 and 10 points as an origination fee, to be paid out of proceeds. Loans can be either interest only or amortized. Some lenders will fund interest, origination fees, rehab money, etc.; others will not. Ultimately, when selecting a HML, borrowers will need to understand how these options fit best into their plans.
Why Is Hard Money a Good Financing Option?
Institutional Lenders (ILs) (i.e. banks, credit unions, etc.) fill a need for cheap money. Everyone is glad they exist and fulfill their need. Borrowers would love to use them on all real estate deals. However, there is a market out there that ILs cannot fund. That is where Hard Money Lenders come in and why they exist. They fulfill a need that ILs cannot fill due to government regulations, stricter underwriting guidelines, lower risk profiles, longer funding timeline, etc.
When deciding whether to apply for a Hard Money loan, here are the top ten reasons to consider:
1. SPEED
Most Hard Money Lenders (HMLs) can fund in less than two weeks after receiving all the necessary documentation, while most Institutional Lenders (ILs) can take 60 days or greater, if at all.
2. LOW DOCUMENTATION REQUIREMENTS
HMLs documentation is often less than the paperwork required by ILs. HMLs still require some documentation but they fund based on the value of the property; it is the asset that is under consideration, not the borrower.
3. NO CREDIT ISSUE
HMLs typically do not require borrowers to have good credit. For example, one client was able to obtain funding even though the borrower had a recent bankruptcy, foreclosure and a FICO score under 500. ILs almost always require a decent credit history.
4. FLEXIBILITY
HMLs give maximum flexibility in structuring the loan (i.e. term, interest reserve, draw schedules, cash out, financing carry, etc.). ILs typically have much stricter terms.
5. GAP/BRIDGE FINANCING
HMLs are usually very experienced real estate lenders who understand that projects do not always follow the given plan. If a gap in funding exists and the loan and supporting documentation make sense, HMLs will typically fund. Whereas, IL’s guidelines are typically not flexible and they turn down gap loan requests if borrowers get off schedule.
6. LOANS TO FOREIGN NATIONALS
HMLs will loan to foreign nationals, as long as, they are secured in the property. Most ILs have difficulty lending to non-US citizens under the terms required.
7. HIGHER RISK PROFILE
HMLs will fund pre-development, church, non-profit and other riskier loans due totheir understanding of the process and value of the collateral. ILs typically will not fund predevelopment loans or make loans to institutions which impact their profile in the community. For example, no IL wants to foreclose on a church; the publicity is terrible.
8. NO PERSONAL GUARANTEE
HMLs do not always require personal guarantees since loans are made based on the value of the property. ILs almost always require personal guarantees.
9. FLEXIBLE LTVS
HMLs decide what Loan-to-Values (LTVs) they will accept based on their affinity for the project, cross collateralization, possible equity participation, etc. ILs have very strict underwriting criteria, which turn down loans from the beginning if the LTV is too high.
10. SUBORDINATE LIENS
HMLs will make loans in a first, second, third or lower position, as long as, the value of the property is there. ILs might do a second, and almost never a third. Typically, ILs want to be in a first position.
Hard Money Loan Expectations
So, you have a good deal with a great LTV and the loan can't go to an Institutional Lender because of bad credit, or need for funding in two weeks or faster. Armed with the knowledge of the value and concept of Hard Money lending, the loan is sent to a HML. The bottom line is that the finance cost will be more expensive than an IL, but the deal will close. Here is what to expect. Each deal is unique; deal terms vary and nothing is set in stone. Lender criteria adjust based on the specifics of each deal, so borrowers will need to be flexible. Here are a few of the expectations to keep in mind when applying for a Hard Money loan:
Title insurance is a must.
All delinquent taxes, judgments, etc. and other liens on the property will typically be taken out of the proceeds unless specifically excluded.
Insurance, typically, will add the lender as co-insured.
Fund control is always set up on construction, development and any loans which have budgets.
Borrower will pay all closing costs, fees, etc. out of proceeds.
Many lenders require the property be put into a single asset LLC, which the loan is made to.
Borrower should be prepared to assign rents.
Interest, in most cases, at least partly will be reserved or prepaid.
Some HMLs require an upfront application fee, due diligence fee and commitment fee. Make sure you understand these fees and how they will be used and if they are refundable.
Almost all lenders require borrowers to have money in the deal. Additional collateral may be required by cross collateralizing other properties to keep the LTV acceptable.
One final suggestion is to try every institutional and conventional lender--first. After understanding that the loan doesn’t fit into their underwriting criteria and the loan request keeps getting denied for various reasons, keep Hard Money Lenders in mind. HMLs are a valuable option for many types of real estate transactions.
Hard Money Lender Directory @ http://www.thenoteservice.com
Monday, February 11, 2008
Sunday, February 10, 2008
Guide to buying Foreclosure Auctions
Buying properties at foreclosure auctions can sometimes yield great buys, but you have to approach every auction with caution, because they can be disastrous if you don't do your homework well. Here are some tips for minimizing your chances of making a big mistake when looking at a property that's about to be auctioned off.
First, at least drive by the property to see what kind of condition the exterior of the house is in. Your chances of seeing the inside of the house are slim, unless it's vacant. The homeowners are going through a very trying time in their lives, so you can't expect them to be gracious if you ask to tour the home you are thinking of buying when they're forced to vacate. Assume that the house will need at least minimal maintenance, such as paint, carpet, and some upgrades, but know that they often need considerably more than that, because the owners have often been strapped for cash long enough to have put off maintenance for quite some time. If the house is vacant, don't be shy about peeking in the windows. You're a legitimate purchase prospect, and you're just doing a diligent inspection. Just remember: the less you get to see of the interior, the more careful you'll need to be when bidding at the auction.
Before you attend an auction, you'll need to be clear as to what you intend to do with the property if you're successful in winning it. Are you planning to live there yourself? Do you intend to fix it up and sell it retail or will you try to find another investor to buy it even before you've done any work to it? Will it become a rental property in your portfolio? Your ultimate goal for a property will be the sole factor in how much you'll be willing to bid for it. Regardless of your intention, you must exercise caution to make sure that you bid accordingly. If the price goes above what you think is a fair price, don't get caught up in the moment and bid higher. It's a mistake that can haunt you for a long time.
In most situations, you'll need to bring ten percent of the winning bid with you to the auction site. It can be cash or certified check, but most of the time you can't write a personal check for the down payment. You'll usually have thirty days to come up with the rest of the money, although some states require the entire amount to be paid on the day of the sale. Check with your local and state authorities to see what situation applies in your area.
Once you've decided to bid on a property, make sure you get to the auction site on time. Most auctions are over in an amazingly short time, often less than five minutes, so don't be late. If there are other people there, you'll find old-hands and you'll find folks who are only watching. This can be a great help to you if you're hoping to unload the property right away to another investor. Another investor may be willing to take over your interest on the spot, including a tidy profit, so don't be afraid to talk to other people at the auction.
Once the auction begins, keep your enthusiasm in check. If someone is bidding against you, bid up to the maximum amount you've determined ahead of time that you're willing to spend and then quit. If you don't, you could be making a big mistake, which could be devastating if you're a beginning investor. There'll be other auctions, and if you don't get the property this time, chalk it up to experience and begin your search for your next property.
First, at least drive by the property to see what kind of condition the exterior of the house is in. Your chances of seeing the inside of the house are slim, unless it's vacant. The homeowners are going through a very trying time in their lives, so you can't expect them to be gracious if you ask to tour the home you are thinking of buying when they're forced to vacate. Assume that the house will need at least minimal maintenance, such as paint, carpet, and some upgrades, but know that they often need considerably more than that, because the owners have often been strapped for cash long enough to have put off maintenance for quite some time. If the house is vacant, don't be shy about peeking in the windows. You're a legitimate purchase prospect, and you're just doing a diligent inspection. Just remember: the less you get to see of the interior, the more careful you'll need to be when bidding at the auction.
Before you attend an auction, you'll need to be clear as to what you intend to do with the property if you're successful in winning it. Are you planning to live there yourself? Do you intend to fix it up and sell it retail or will you try to find another investor to buy it even before you've done any work to it? Will it become a rental property in your portfolio? Your ultimate goal for a property will be the sole factor in how much you'll be willing to bid for it. Regardless of your intention, you must exercise caution to make sure that you bid accordingly. If the price goes above what you think is a fair price, don't get caught up in the moment and bid higher. It's a mistake that can haunt you for a long time.
In most situations, you'll need to bring ten percent of the winning bid with you to the auction site. It can be cash or certified check, but most of the time you can't write a personal check for the down payment. You'll usually have thirty days to come up with the rest of the money, although some states require the entire amount to be paid on the day of the sale. Check with your local and state authorities to see what situation applies in your area.
Once you've decided to bid on a property, make sure you get to the auction site on time. Most auctions are over in an amazingly short time, often less than five minutes, so don't be late. If there are other people there, you'll find old-hands and you'll find folks who are only watching. This can be a great help to you if you're hoping to unload the property right away to another investor. Another investor may be willing to take over your interest on the spot, including a tidy profit, so don't be afraid to talk to other people at the auction.
Once the auction begins, keep your enthusiasm in check. If someone is bidding against you, bid up to the maximum amount you've determined ahead of time that you're willing to spend and then quit. If you don't, you could be making a big mistake, which could be devastating if you're a beginning investor. There'll be other auctions, and if you don't get the property this time, chalk it up to experience and begin your search for your next property.
Friday, February 8, 2008
Congress Approves Economic Stimulus Package
Congress approves economic stimulus package
Washington (ABC News) _ Congress has approved the rebate checks meant to stimulate the economy and President Bush is on board.
Timely, targeted and temporary, the economic stimulus package has been approved and the checks will be in the mail for about 100-million Americans.
“We stand here at the precipice of a fairly severe economic turndown and we must do everything we can to make sure that the severe effects of that downturn are mitigated,” said Sen. Charles Schumer (D-NY).
Individuals earning up to $75,000 a year will get $600. Families making up to $150,000 a year will get $1,200 plus an additional $300 for each child under 17.
In addition, 21 million seniors will get checks for $300, as well as disabled veterans.
“I thank members of Congress for their efforts on this legislation. This bill reflects our principles. It is pro-growth. It is robust and it will get money into the hands of American consumers,” President Bush said.
The plan is intended to get people spending in an effort to rejuvenate the economy.
“We are making history. What has passed the Congress in record time is a gift to the middle class and it shows that the work of Congress understands the struggles they have,” said Nancy Pelosi (D-Speaker of the House).
The checks will start being sent out in May.
Washington (ABC News) _ Congress has approved the rebate checks meant to stimulate the economy and President Bush is on board.
Timely, targeted and temporary, the economic stimulus package has been approved and the checks will be in the mail for about 100-million Americans.
“We stand here at the precipice of a fairly severe economic turndown and we must do everything we can to make sure that the severe effects of that downturn are mitigated,” said Sen. Charles Schumer (D-NY).
Individuals earning up to $75,000 a year will get $600. Families making up to $150,000 a year will get $1,200 plus an additional $300 for each child under 17.
In addition, 21 million seniors will get checks for $300, as well as disabled veterans.
“I thank members of Congress for their efforts on this legislation. This bill reflects our principles. It is pro-growth. It is robust and it will get money into the hands of American consumers,” President Bush said.
The plan is intended to get people spending in an effort to rejuvenate the economy.
“We are making history. What has passed the Congress in record time is a gift to the middle class and it shows that the work of Congress understands the struggles they have,” said Nancy Pelosi (D-Speaker of the House).
The checks will start being sent out in May.
Wednesday, February 6, 2008
Real Estate Auctions Gain Popularity
Real Estate Auctions Gain Popularity
As many homes remain on the market for extended periods of time, many sellers are turning to the auction format to sell their properties. There are several reasons for this, especially in today’s market conditions.
Australia, New Zealand, the UK and other countries have used auctions to sell valuable assets such as real estate for many years and in the US auctions have long been used since the War of Independence and the Civil War. It was originally used after a battle to sell the spoils of war, thus the term Colonel. Years ago, some auctioneers referred to themselves as Colonels for this reason.
During the depression, the auction method was used to sell properties in foreclosure and still is today. When a property sells on the courthouse steps from the foreclosure process, the lender usually ends up buying the property back to eliminate any junior liens and the property becomes what is referred to as an REO (Real Estate Owned). Most lenders do not like this term however and may refer to the property as a Special Asset.
Buying a property at a true foreclosure sale can be complicated, risky and one is usually competing against the lender and possibly other professional investors. It is not recommended for the novice for several reasons.
It is understandable that auctions have been associated with distress and a means of last resort. For years, they have carried a negative connotation with them.
This is not the case any longer. When you consider that the high-end auction houses such as Sotheby’s, Christies and other auction companies that sell assets from fine art to collector cars for hundreds of thousands of dollars into the millions, it’s not a wonder that real estate was going to enter the fold of assets for sale using the auction method. It is no longer a last resort and since the 1990s to 2007, real estate at auction has tripled and is a multi-billion dollar industry.
Some reasons many sellers are using or considering the auction method for selling their properties are Time, Holding Costs, Stress, Relocation, Job Change and Better Exposure to the Market.
Savvy asset managers and business people have long known the Time Value of Money. They consider the use of the money (Equity) now may be better than the risk of waiting for a longer period of time.
Holding cost are associated with on-going mortgage payments, taxes, insurance, utilities, maintenance and repairs, and changing market conditions such as the mortgage money supply and/or declining values.
With more and more buyers looking to the Internet for their home searches and information, auctions make sense for buyers and sellers alike. Many real estate auctions are done on line or use a combination of live, on line and phone-in bids to approved, registered bidders.
Buyers can assume that the seller is realistic in their expectations while sellers have a better venue for exposing their property and closing in a more timely fashion. This allows the parties to avoid the sea of over-priced properties. Over-Priced properties are one of the reasons there is a 10.5-11 month supply of homes for sale in Charlotte County alone. A normal supply would be approximately a 3 month supply. This same factor holds true in Sarasota and Lee Counties as well, according to many analysts.
“When you consider the very definition of Current Market Value, auctions are a scientific approach to selling”, said Bill Hoyle of The According To Hoyle Group-Shells Realty with offices in Punta Gorda, Burnt Store, North Port and Sarasota.
Bill said “If a property is worth what a ready, willing and able buyer will pay, with the proper exposure to the market in a given time period; then an auction compliments and supports this very definition of Current Market Value”.
The According To Hoyle Group has been involved in selling real estate since 1986 and has sold over 2,500 properties. They originated from the OH/MI area when they arrived in Florida selling Special Assets at Absolute Auction one week out of every month. They have been involved in teaching, selling and consulting in several states and sold properties all over the state of Florida. They would fly from one sale to the next in a small Mooney Plane in the same day.
“We’ve sold every type of property from single family homes, multifamily residences, golf courses, marinas, businesses, land and lots, bars, restaurants, an island and even schools for municipalities” according to Terrie Hoyle. Terrie is a Licensed Broker-Associate, a Mortgage Broker and has been involved with high-end marketing and negotiations. She is Vice President of According To Hoyle, Inc.
According To Bill Hoyle, there are 3 commonly used types of auctions when selling real estate. They are Absolute, Public or Reserve Auctions and a third type, Minimum Bid where a reserve is publicized as a minimum and discloses the lowest dollar at which the seller will guarantee a sale or where the bidding becomes absolute. A Public or Reserve Auction does not disclose the reserve or minimum, while an Absolute Auction sells to the highest bidder, wherever the bidding stops.
Any seller wishing to explore the auction option should consult a professional and experienced auction group when considering a sale. There are several specifics determined in advance such as the deposit from the buyer, who pays for what closing costs, the best dates, the type of auction sale, the marketing budget-exposure campaign and if the sale should be held live on site and or on line along with other options.
“We’ve been involved in real estate and auctions as a group, including some family members like my daughter for years” Bill Hoyle stated. Heather Hoyle-Jones is a Mortgage Consultant and a Licensed Realtor.
Bill Hoyle possesses the AARE (Accredited Auctioneer Real Estate) and the CAI (Certified Auctioneers Institute) designations.
The designations are taught primarily at Indiana University and are considered the Doctorate Degree in Real Estate Auctions among the auction community.
“Auctions are somewhat different than conventional sales” according to Mr. Hoyle. “With an auction, the sellers control the days, dates and times for the sales” Hoyle went on to say. “Usually, the only thing that’s determined on sale day or in the case of an on-line sale, the ending date merely sets the price offered. The buyers need to pre-arrange their financing in advance since the sale is usually not subject to or contingent on financing and the ability for a buyer to get a loan. That’s one reason we offer financing options up front for the convenience of the buyer”, Bill Hoyle stated. “Most savvy buyers go through the pre-approval or pre-qualification process already.”
When asked How Much Does it Cost or what fees are involved? Terrie Hoyle said “The seller participates in the exposure and advertising budget and the buyer will most often be required to pay the selling fee in the form of a buyer’s premium.”
The buyer’s premium is usually a percentage that is added on to the final, high bid in order to determine the contract or sales agreement price. The fee, as it was explained pays for the auctioneers, staff and cooperating brokers. Brokers can register their buyers for the sales in most cases and may be compensated if they procure the buyer that closes on the property. Brokers can refer their sellers to an auction firm as well.
When asked how the property is advertised or exposed, Terrie Hoyle sad “The sales can be advertised based on what we call Buyer Profiling. It’s based on where the buyers are most likely to come from, where they live, what income bracket they’re in, recent migration patterns, age demographics and many variables for the best exposure.” Professional auction firms have access to in-house database lists, other list sources, newspapers and print media sources, websites and web- portals, MLS, IDX, Realtor.Com and also do direct mailings. The signs usually have the date, time and e-mail address for more information along with the phone numbers and Website Address.
Auctions gain attention in a market where the choices have been diluted and in some cases made buying complex and even overwhelming to some buyers.
Buyers are looking for good buys and have many choices currently. Auctions freeze the market around competing properties and give the buyers an answer much sooner than a long search and negotiation process.
“The buyers can have the property inspected and usually have a seller’s disclosure statement prior to the sale” Bill Hoyle affirmed. “Our sales offer clear, marketable title and customary closing procedures as with a conventional sale too Sellers are obligated to disclose any known defects to the buyers as well. So the myth that you may get burned is simply not true, at least at our sales.”
We learned that most sales begin with a consultation with the auctioneer, a marketing period of 6 to 8 weeks and then a contract which usually allows for a 30 day period to close. We also found out that the usual marketing fees or budgets vary from one auctioneer to another but run from 2% to 4% of the expected value of the property. Hoyle mentioned that one should be leery of a very low advertising budget since advertising and exposure are critically important in selling a property and can influence the results drastically.
Newspaper advertising can be expensive depending on which papers you use and how often it is run. For example, running one small ad in the New York Times is approximately $700 per run. Then consider Chicago Papers and of course Canadian Papers. When coupled with local print media exposure, the newspaper exposure can be costly. This does not take into account Websites, E-Mail Campaigns, Signs, Direct Mail, Portals and in some cases, TV and/or Radio. “Each sale is done on a case-by case basis” Terrie Hoyle said. “This is discussed in detail with each seller based on the project and is our forte. Keep in mind that there are no miracle cures for selling. When our market was very strong such as in 2004-2005, almost every sale resembled an auction. There were multiple offers on many properties and the bidding process was going on then. That was a good time to do an auction however now that the market has adjusted and slowed, the results will reflect that. I always look at the definition of Current Market Value. If you live and breathe the business daily like we do, you’ll see the appraisers have really pulled in the reins and tightened up. Some conventional sales are not appraising and the negotiation process resumes if the deal is to stay together. There is no such thing as a better time to do an auction but certainly now’s a good time. We had our own brokerage and were doing mostly auction sales until the market boom of 04-05. Then we associated with Robert Milligan, a bright ambitious broker out of Sarasota with Shells Realty. At the time there were only about 5 or 6 of us, all top producers and our only office was in Port Charlotte with the Corporate Office in Sarasota. Now Shells Realty has approximately 150 agents, multiple offices and our office is in Punta Gorda at 207 Cross St.”
So you decide; as Auctions Gain in Popularity, which option is for you. It appears to be a growing trend and not one likely to go away anytime soon.
As many homes remain on the market for extended periods of time, many sellers are turning to the auction format to sell their properties. There are several reasons for this, especially in today’s market conditions.
Australia, New Zealand, the UK and other countries have used auctions to sell valuable assets such as real estate for many years and in the US auctions have long been used since the War of Independence and the Civil War. It was originally used after a battle to sell the spoils of war, thus the term Colonel. Years ago, some auctioneers referred to themselves as Colonels for this reason.
During the depression, the auction method was used to sell properties in foreclosure and still is today. When a property sells on the courthouse steps from the foreclosure process, the lender usually ends up buying the property back to eliminate any junior liens and the property becomes what is referred to as an REO (Real Estate Owned). Most lenders do not like this term however and may refer to the property as a Special Asset.
Buying a property at a true foreclosure sale can be complicated, risky and one is usually competing against the lender and possibly other professional investors. It is not recommended for the novice for several reasons.
It is understandable that auctions have been associated with distress and a means of last resort. For years, they have carried a negative connotation with them.
This is not the case any longer. When you consider that the high-end auction houses such as Sotheby’s, Christies and other auction companies that sell assets from fine art to collector cars for hundreds of thousands of dollars into the millions, it’s not a wonder that real estate was going to enter the fold of assets for sale using the auction method. It is no longer a last resort and since the 1990s to 2007, real estate at auction has tripled and is a multi-billion dollar industry.
Some reasons many sellers are using or considering the auction method for selling their properties are Time, Holding Costs, Stress, Relocation, Job Change and Better Exposure to the Market.
Savvy asset managers and business people have long known the Time Value of Money. They consider the use of the money (Equity) now may be better than the risk of waiting for a longer period of time.
Holding cost are associated with on-going mortgage payments, taxes, insurance, utilities, maintenance and repairs, and changing market conditions such as the mortgage money supply and/or declining values.
With more and more buyers looking to the Internet for their home searches and information, auctions make sense for buyers and sellers alike. Many real estate auctions are done on line or use a combination of live, on line and phone-in bids to approved, registered bidders.
Buyers can assume that the seller is realistic in their expectations while sellers have a better venue for exposing their property and closing in a more timely fashion. This allows the parties to avoid the sea of over-priced properties. Over-Priced properties are one of the reasons there is a 10.5-11 month supply of homes for sale in Charlotte County alone. A normal supply would be approximately a 3 month supply. This same factor holds true in Sarasota and Lee Counties as well, according to many analysts.
“When you consider the very definition of Current Market Value, auctions are a scientific approach to selling”, said Bill Hoyle of The According To Hoyle Group-Shells Realty with offices in Punta Gorda, Burnt Store, North Port and Sarasota.
Bill said “If a property is worth what a ready, willing and able buyer will pay, with the proper exposure to the market in a given time period; then an auction compliments and supports this very definition of Current Market Value”.
The According To Hoyle Group has been involved in selling real estate since 1986 and has sold over 2,500 properties. They originated from the OH/MI area when they arrived in Florida selling Special Assets at Absolute Auction one week out of every month. They have been involved in teaching, selling and consulting in several states and sold properties all over the state of Florida. They would fly from one sale to the next in a small Mooney Plane in the same day.
“We’ve sold every type of property from single family homes, multifamily residences, golf courses, marinas, businesses, land and lots, bars, restaurants, an island and even schools for municipalities” according to Terrie Hoyle. Terrie is a Licensed Broker-Associate, a Mortgage Broker and has been involved with high-end marketing and negotiations. She is Vice President of According To Hoyle, Inc.
According To Bill Hoyle, there are 3 commonly used types of auctions when selling real estate. They are Absolute, Public or Reserve Auctions and a third type, Minimum Bid where a reserve is publicized as a minimum and discloses the lowest dollar at which the seller will guarantee a sale or where the bidding becomes absolute. A Public or Reserve Auction does not disclose the reserve or minimum, while an Absolute Auction sells to the highest bidder, wherever the bidding stops.
Any seller wishing to explore the auction option should consult a professional and experienced auction group when considering a sale. There are several specifics determined in advance such as the deposit from the buyer, who pays for what closing costs, the best dates, the type of auction sale, the marketing budget-exposure campaign and if the sale should be held live on site and or on line along with other options.
“We’ve been involved in real estate and auctions as a group, including some family members like my daughter for years” Bill Hoyle stated. Heather Hoyle-Jones is a Mortgage Consultant and a Licensed Realtor.
Bill Hoyle possesses the AARE (Accredited Auctioneer Real Estate) and the CAI (Certified Auctioneers Institute) designations.
The designations are taught primarily at Indiana University and are considered the Doctorate Degree in Real Estate Auctions among the auction community.
“Auctions are somewhat different than conventional sales” according to Mr. Hoyle. “With an auction, the sellers control the days, dates and times for the sales” Hoyle went on to say. “Usually, the only thing that’s determined on sale day or in the case of an on-line sale, the ending date merely sets the price offered. The buyers need to pre-arrange their financing in advance since the sale is usually not subject to or contingent on financing and the ability for a buyer to get a loan. That’s one reason we offer financing options up front for the convenience of the buyer”, Bill Hoyle stated. “Most savvy buyers go through the pre-approval or pre-qualification process already.”
When asked How Much Does it Cost or what fees are involved? Terrie Hoyle said “The seller participates in the exposure and advertising budget and the buyer will most often be required to pay the selling fee in the form of a buyer’s premium.”
The buyer’s premium is usually a percentage that is added on to the final, high bid in order to determine the contract or sales agreement price. The fee, as it was explained pays for the auctioneers, staff and cooperating brokers. Brokers can register their buyers for the sales in most cases and may be compensated if they procure the buyer that closes on the property. Brokers can refer their sellers to an auction firm as well.
When asked how the property is advertised or exposed, Terrie Hoyle sad “The sales can be advertised based on what we call Buyer Profiling. It’s based on where the buyers are most likely to come from, where they live, what income bracket they’re in, recent migration patterns, age demographics and many variables for the best exposure.” Professional auction firms have access to in-house database lists, other list sources, newspapers and print media sources, websites and web- portals, MLS, IDX, Realtor.Com and also do direct mailings. The signs usually have the date, time and e-mail address for more information along with the phone numbers and Website Address.
Auctions gain attention in a market where the choices have been diluted and in some cases made buying complex and even overwhelming to some buyers.
Buyers are looking for good buys and have many choices currently. Auctions freeze the market around competing properties and give the buyers an answer much sooner than a long search and negotiation process.
“The buyers can have the property inspected and usually have a seller’s disclosure statement prior to the sale” Bill Hoyle affirmed. “Our sales offer clear, marketable title and customary closing procedures as with a conventional sale too Sellers are obligated to disclose any known defects to the buyers as well. So the myth that you may get burned is simply not true, at least at our sales.”
We learned that most sales begin with a consultation with the auctioneer, a marketing period of 6 to 8 weeks and then a contract which usually allows for a 30 day period to close. We also found out that the usual marketing fees or budgets vary from one auctioneer to another but run from 2% to 4% of the expected value of the property. Hoyle mentioned that one should be leery of a very low advertising budget since advertising and exposure are critically important in selling a property and can influence the results drastically.
Newspaper advertising can be expensive depending on which papers you use and how often it is run. For example, running one small ad in the New York Times is approximately $700 per run. Then consider Chicago Papers and of course Canadian Papers. When coupled with local print media exposure, the newspaper exposure can be costly. This does not take into account Websites, E-Mail Campaigns, Signs, Direct Mail, Portals and in some cases, TV and/or Radio. “Each sale is done on a case-by case basis” Terrie Hoyle said. “This is discussed in detail with each seller based on the project and is our forte. Keep in mind that there are no miracle cures for selling. When our market was very strong such as in 2004-2005, almost every sale resembled an auction. There were multiple offers on many properties and the bidding process was going on then. That was a good time to do an auction however now that the market has adjusted and slowed, the results will reflect that. I always look at the definition of Current Market Value. If you live and breathe the business daily like we do, you’ll see the appraisers have really pulled in the reins and tightened up. Some conventional sales are not appraising and the negotiation process resumes if the deal is to stay together. There is no such thing as a better time to do an auction but certainly now’s a good time. We had our own brokerage and were doing mostly auction sales until the market boom of 04-05. Then we associated with Robert Milligan, a bright ambitious broker out of Sarasota with Shells Realty. At the time there were only about 5 or 6 of us, all top producers and our only office was in Port Charlotte with the Corporate Office in Sarasota. Now Shells Realty has approximately 150 agents, multiple offices and our office is in Punta Gorda at 207 Cross St.”
So you decide; as Auctions Gain in Popularity, which option is for you. It appears to be a growing trend and not one likely to go away anytime soon.
Real Estate Investors Share Keys to Success
A team of real estate investors have shared their keys to success in this real estate market.
1. Awareness. They were aware of the market shifting right
under their feet. They didn't go "bubble" crazy and spread
the fever. They were aware, not afraid.
2. Adaptabilty. These savvy investors who are still profiting
(some even MORE now) realize they have to adapt and overcome.
When the market shifted, they shifted with it.
3. Speedy Implementation. They spent very little time researching
and more time taking action. They did not wait; they acted.
4. They Take Their Real Estate and Marketing Education Seriously.
Yes, this includes the "gurus". You need to be 100% committed to
your education to stay ahead of the market.
5. Never Hesitate to Invest In Their Education. Real millionaire
methods come from being taught by the best.
6. Real World Testing and Tracking. Truly savvy investors know
what works and what doesn't through testing and tracking. They
have hard data and make results driven decisions to move their
businesses forward.
7. Automation and Business Systems. If you are ever going to
build true wealth and avoid stress you are going to have to
learn how to automate tasks and put confusing processes into
a simple system.
Want a Free Bank Owned Property Directory, Click Here!!!!!!!
1. Awareness. They were aware of the market shifting right
under their feet. They didn't go "bubble" crazy and spread
the fever. They were aware, not afraid.
2. Adaptabilty. These savvy investors who are still profiting
(some even MORE now) realize they have to adapt and overcome.
When the market shifted, they shifted with it.
3. Speedy Implementation. They spent very little time researching
and more time taking action. They did not wait; they acted.
4. They Take Their Real Estate and Marketing Education Seriously.
Yes, this includes the "gurus". You need to be 100% committed to
your education to stay ahead of the market.
5. Never Hesitate to Invest In Their Education. Real millionaire
methods come from being taught by the best.
6. Real World Testing and Tracking. Truly savvy investors know
what works and what doesn't through testing and tracking. They
have hard data and make results driven decisions to move their
businesses forward.
7. Automation and Business Systems. If you are ever going to
build true wealth and avoid stress you are going to have to
learn how to automate tasks and put confusing processes into
a simple system.
Want a Free Bank Owned Property Directory, Click Here!!!!!!!
Tuesday, January 29, 2008
Buying A Foreclosure Auction
Buying Foreclosures At A Public Foreclosure Sale Auction
Buying foreclosures at the auction is a great way to purchase a property under market value. Most properties are auctioned at the property address, some at the courthouse. The location will be listed in the foreclosure auction listing. The property is auctioned off to the public and the highest bidder walks away with the property. This can be very rewarding to those who are in a position to buy the property within a short amount of time and can be devastating to those who bid without proper financing in place.
Most auctions require a small deposit down of the purchase price on the spot and the remaining balance usually within 1-30 days. So make sure you have you deposit ready and your financing is in order before you bid. If you are unable to get financing within the allotted time, you will most likely lose your down payment, and they will auction the property off again.
Buying foreclosures at the auction is also the riskiest place to pick up a foreclosure. You are buying the property in "As Is" condition so it's very important to do your homework before you just go to an auction and bid on a property.
When buying foreclosures at the auction, we recommend you:
- first visit a local auction to get a feel for the bidding procedure, find out how much is required as a down payment and when the rest is due
- get proper financing in order (speak with a lender)
- research properties and do your homework prior to the auction date (get a title search)
- calculate potential profits
- determine the most you will bid for the property
- follow the property to the auction and participate
Buying Foreclosures that are Real Estate Owned (REO)
How to add foreclosure auction listings to your real estate buying watchlist:
When foreclosure auction listings are posted, you have about a two week window before the auction. This is where you can get in contact with the owner or foreclosing mortgage holder to purchase the property before the auction.
Another way to use foreclosure auction listings to your advantage comes when no one purchases these properties at the auction. These properties will then go into the reo - bank owned property listings. At this step, you will be able to get into contact with the bank and work out a deal. The banks are not interested in selling real estate, they want to lend money. The Reo process is a great opportunity to purchase foreclosures at tremendous savings.
Buying foreclosures at the auction is a great way to purchase a property under market value. Most properties are auctioned at the property address, some at the courthouse. The location will be listed in the foreclosure auction listing. The property is auctioned off to the public and the highest bidder walks away with the property. This can be very rewarding to those who are in a position to buy the property within a short amount of time and can be devastating to those who bid without proper financing in place.
Most auctions require a small deposit down of the purchase price on the spot and the remaining balance usually within 1-30 days. So make sure you have you deposit ready and your financing is in order before you bid. If you are unable to get financing within the allotted time, you will most likely lose your down payment, and they will auction the property off again.
Buying foreclosures at the auction is also the riskiest place to pick up a foreclosure. You are buying the property in "As Is" condition so it's very important to do your homework before you just go to an auction and bid on a property.
When buying foreclosures at the auction, we recommend you:
- first visit a local auction to get a feel for the bidding procedure, find out how much is required as a down payment and when the rest is due
- get proper financing in order (speak with a lender)
- research properties and do your homework prior to the auction date (get a title search)
- calculate potential profits
- determine the most you will bid for the property
- follow the property to the auction and participate
Buying Foreclosures that are Real Estate Owned (REO)
How to add foreclosure auction listings to your real estate buying watchlist:
When foreclosure auction listings are posted, you have about a two week window before the auction. This is where you can get in contact with the owner or foreclosing mortgage holder to purchase the property before the auction.
Another way to use foreclosure auction listings to your advantage comes when no one purchases these properties at the auction. These properties will then go into the reo - bank owned property listings. At this step, you will be able to get into contact with the bank and work out a deal. The banks are not interested in selling real estate, they want to lend money. The Reo process is a great opportunity to purchase foreclosures at tremendous savings.
Monday, January 28, 2008
Purchase Real Estate for Investments
Purchasing real estate is a good way to invest your money and provide yourself some increased financial security. It's a good way to increase cash flow and offers many profitable investment options. But, if you're new to real estate investing, you may ask, "What is real estate investing all about? What are the benefits to me and how can I get started?" We'll answer all those questions and help you get on your way to investing in real estate now.
What is Real Estate Investing?
Real estate is a tangible, cash-generating asset, much like gold or silver, and appreciates in values just like these precious metals. Being a tangible asset, however, it does not function like a bond or stock that can quickly lose value; it remains an excellent, long-term way to invest.
Real estate investors benefit from financial leverage, using a mortgage to build wealth in a way that other forms of investments do not. Real estate investment has proven to be a powerful method of creating wealth over time and there are three main forms of return-on-investment (ROI): cash flow, return on taxes and appreciation.
Cash Flow
Cash flow represents the most direct type of return, since it is money you can "put in your pocket" right away. Investing in real estate is a way to increase your cash flow. That, in turn, can provide the working capital you need to further expand your investment opportunities and obtain greater financial security.
Return on Taxes
Many investors in higher tax brackets are less concerned with cash return and more focused on the tax advantages of real estate investment. A great tax benefit for the new investor is a first-year, 100% tax deduction for up to $100,000 of business equipment purchased. This would include appliances.
Then there's also the tax benefits of being able to deduct mortgage insurance as well as points paid on a home loan. Click here to read more about Homeowner Tax Deductions.
Appreciation
The largest ROI is typically from home appreciation. Properties can have significant increases in value over time and if you have long-term goals, one option is to buy land without a structure on the property. If you buy property in the path of development, you may be able to sell at a profit in the future, perhaps when you're ready to retire and need more income.
What Are the Benefits to Real Estate Investing?
Renting
Real estate is such a smart investment option because you can maximize your ROI by finding excellent properties that can be purchased at a great price. Some properties may need more work that others, but with a little TLC, it can be turned into a nice rental property. Renting property allows for a steady and reliable stream of cash flow from the rental payments since there is a high occupancy demand for a well-kept and reasonably priced rental property.
Flipping
If renting is not for you, you can also purchase, repair and resell for attractive profit. This is referred to as "flipping" a property and is a popular real estate investment option. If you're handy and ambitious, this option may be a better alternative to renting the property out.
Start Investing in Real Estate Now
Some basic strategies can be used successfully in all real estate market conditions and get you started on becoming a real estate investor:
Do your research: Educate yourself about the differences between renting and "flipping" properties and which markets offer the best opportunity.
Select an area of interest: Choose an area where you think you could get a satisfactory return on your properties. Assess the true value of these properties based on when you expect to rent or sell the property. Keep in mind, the value of a particular house is not solely what it appraises for, but also what someone is willing to pay to rent or buy.
Learn about your market: This will help save you time by avoiding homes that are not worth the investment.
Enlist the aid of a real estate professional: A real estate professional can help you gain a more concise picture of where your interests should lie.
Contact a reputable mortgage lender: A good mortgage banker can help you determine which mortgage options are best for your situation and answer any questions you may have. Whether you decide to rent or flip your investment property, there are some excellent financing options available. Talk with a Quicken Loans home loan expert to determine which financing options are best for your particular investment interests.
Investing in real estate is among the best ways to develop income streams and offers many profitable investment options. Knowing your market and having a plan before you begin to invest is key in your success as a real estate investor. Determine your best interest and take the plunge; your pockets will thank you for it later! If you'd like to know more about financing an investment property, call a Quicken Loans home loan expert today at 800-710-4755.
What is Real Estate Investing?
Real estate is a tangible, cash-generating asset, much like gold or silver, and appreciates in values just like these precious metals. Being a tangible asset, however, it does not function like a bond or stock that can quickly lose value; it remains an excellent, long-term way to invest.
Real estate investors benefit from financial leverage, using a mortgage to build wealth in a way that other forms of investments do not. Real estate investment has proven to be a powerful method of creating wealth over time and there are three main forms of return-on-investment (ROI): cash flow, return on taxes and appreciation.
Cash Flow
Cash flow represents the most direct type of return, since it is money you can "put in your pocket" right away. Investing in real estate is a way to increase your cash flow. That, in turn, can provide the working capital you need to further expand your investment opportunities and obtain greater financial security.
Return on Taxes
Many investors in higher tax brackets are less concerned with cash return and more focused on the tax advantages of real estate investment. A great tax benefit for the new investor is a first-year, 100% tax deduction for up to $100,000 of business equipment purchased. This would include appliances.
Then there's also the tax benefits of being able to deduct mortgage insurance as well as points paid on a home loan. Click here to read more about Homeowner Tax Deductions.
Appreciation
The largest ROI is typically from home appreciation. Properties can have significant increases in value over time and if you have long-term goals, one option is to buy land without a structure on the property. If you buy property in the path of development, you may be able to sell at a profit in the future, perhaps when you're ready to retire and need more income.
What Are the Benefits to Real Estate Investing?
Renting
Real estate is such a smart investment option because you can maximize your ROI by finding excellent properties that can be purchased at a great price. Some properties may need more work that others, but with a little TLC, it can be turned into a nice rental property. Renting property allows for a steady and reliable stream of cash flow from the rental payments since there is a high occupancy demand for a well-kept and reasonably priced rental property.
Flipping
If renting is not for you, you can also purchase, repair and resell for attractive profit. This is referred to as "flipping" a property and is a popular real estate investment option. If you're handy and ambitious, this option may be a better alternative to renting the property out.
Start Investing in Real Estate Now
Some basic strategies can be used successfully in all real estate market conditions and get you started on becoming a real estate investor:
Do your research: Educate yourself about the differences between renting and "flipping" properties and which markets offer the best opportunity.
Select an area of interest: Choose an area where you think you could get a satisfactory return on your properties. Assess the true value of these properties based on when you expect to rent or sell the property. Keep in mind, the value of a particular house is not solely what it appraises for, but also what someone is willing to pay to rent or buy.
Learn about your market: This will help save you time by avoiding homes that are not worth the investment.
Enlist the aid of a real estate professional: A real estate professional can help you gain a more concise picture of where your interests should lie.
Contact a reputable mortgage lender: A good mortgage banker can help you determine which mortgage options are best for your situation and answer any questions you may have. Whether you decide to rent or flip your investment property, there are some excellent financing options available. Talk with a Quicken Loans home loan expert to determine which financing options are best for your particular investment interests.
Investing in real estate is among the best ways to develop income streams and offers many profitable investment options. Knowing your market and having a plan before you begin to invest is key in your success as a real estate investor. Determine your best interest and take the plunge; your pockets will thank you for it later! If you'd like to know more about financing an investment property, call a Quicken Loans home loan expert today at 800-710-4755.
Sunday, January 27, 2008
House of Cards: The Mortgage Mess
For the full story of House of Cards: The Mortgage Mess as shown on 60 Minutes on CBS go to http://www.cbsnews.com/stories/2008/01/25/60minutes/main3752515.shtml
Here are a few key points:
It sounds complicated, but it's really fairly simple. Banks lent hundreds of billions of dollars to homebuyers who can't pay them back. Wall Street took the risky debt, dressed it up as fancy securities, and sold it around the world as safe investments. It sounds like a shell game or Ponzi scheme; in some ways, it was a house of cards rife with corruption, greed, and negligence.....
Jim Grant calls it an invitation to fraud. "You apply to a bank, or a mortgage broker for a loan. And you would fill out a form. And you would say, 'I have an income of, oh, $400,000 a year.' They say, 'You do? Fine. Just sign right there.' And they would nod, and because they were being paid, not by the veracity of the information, but by the consummation of the deal. The lending office would say, 'Ah. You have verified this?' 'Why, yes, we have.' And the lending officer would say, 'Great. So do I,'" Grant says.
"And he got a cut, too?" Kroft asks.
"Yes, oh, yes. Everyone gets a cut," Grant says.
Almost all of the people involved in the transactions made huge amounts of money, then passed the risk onto someone else. Instead of keeping the dicey loans in their own portfolios, the big banks and giant mortgage companies that originally underwrote them, resold the mortgages to big New York investment houses....
But Matt and Stephanie Valdez say they knew exactly what they were doing when they bought a small two-bedroom for $355,000. They could afford the initial payments and planned to refinance the mortgage before the interest rate jumped to 11 percent. But they couldn't do it because the value of the house had fallen below what they owed on the mortgage. They say they can afford the higher payments, but see no point in making them.
"The house keeps going down, payments keep going up. Where's the logic in that? And how can we fix it? I mean, that's what this whole thing's about for us is how can we fix this? And if we can't fix it, then what do we do?" Matt Valdez asks.
"Why pay a $3,200 payment on a 1200-square-foot home? It makes no sense," Stephanie Valdez adds.
"That's what you agreed to do when you bought the house," Kroft points out.
"Fine. If the value is going up. But we're not going anywhere. The price or the value is going down. It makes no sense because we will never be able to refinance and get a lower payment. There's no way," Stephanie Valdez replies.
"You're saying, essentially, that you're going to stop making payments on it? You're just gonna let it go into foreclosure?" Kroft asks.
"You know, that's the only advice we've gotten so far is walk away from the home. We don't want to do that to our credit. Why can't our mortgage company work with us?" she says.
There is a certain cold logic to just walking away.
Friday, January 18, 2008
Real Estate Short Sale Strategy
Increase Your Income With Short Sale Strategy By Donna Robinson, TREA Director
In todays market, with foreclosures reaching record highs, and many sellers owing more money than their property is even worth, it is time for a strategic change in business strategy.
With a fundamental situation that presents us with literally thousands of properties being "dumped" on the market with each passing month, and most of those properties having little or no equity, it is getting more difficult to sell any properties for full value.
Listings are sitting on the market for months, and many of those listings on which we have spent valuable time and effort are going into foreclosure, leaving many agents with less income and no way to sell their listings for what the seller actually owes.
Anyone may negotiate a short sale. You do not have to be licensed to negotiate with a lender or bank. You merely need to follow the specific procedures necessary to complete a successful short sale.
But this situation is creating a need more than ever for agents and brokers to understand how to use short sales to help their sellers sell and their buyers buy. If you are an agent you can use short sale strategy to save your listing commissions and help homeowners avoid foreclosure.
Short Sale means getting the lender to sell a property for a discount below the amount the owner owes for the property. With the growing number of foreclosures, more and more lenders are having to resort to short sales in order to move inventory that cannot be sold for enough to cover the payoff.
We are seeing more short sales and hearing incredible stories from around the US about short sales in some areas where the lenders are discounting properties by as much as 30 to 70 percent! This results in a very profitable deal when done correctly.
Whether you have overpriced listings that aren't selling, investor clients who want the best possible deals, or you are representing aspiring home buyers who want a good buy in a personal residence, short sales could be your ticket to more production in a slowing market that still has a long way to fall before things start to improve.
But short sales require a certain amount of expertise, not to mention specific forms, letters and procedures. You have to know what you are doing. But if you do, you can create opportunities for your clients by getting discounts amounting to tens of thousands of dollars, that can turn "no sale" into a great opportunity for your clients.
If you are also an investor you need to know how to use short sales strategy to add bigger equity spreads to your own investments. Buying at a discount will help insure strong positive cash flow on rentals, with higher equity spreads. It's the "safe" way to go in an eroding market.
But the trick is, how to get this crucial information without spending $1000 or more on a seminar or course? They are out there - anywhere from $500 to more than $1500 for information on what will surely be the hottest buying / selling strategy of 2007-2008
But we at TREA have been working on a very cost effective solution for you. If you are serious about making money in real estate in 2007, you absolutely must know how to execute short sales in a professional manner.
I am currently using this same short sales process to help increase my personal production as an agent to help sell overpriced listings, as well as help my investor buyers find better deals and I am confident short sales can do the same for you too.
There is no need to languish in this market - you must adapt to the changing market conditions with strategies that take the fundamental market conditions into account.
I predict that this market will continue to worsen for months to come, making short sales even more necessary than they are now. By 2008 the banks may be desperate for any way out possible.
Because of the obvious need for this strategy, I am very happy to announce that The Real Estate Arena is recommending a new and timely course called "Short Sales Short & Sweet", written by Real Estate Broker, Marie Whitton. Marie is my personal real estate broker. Together we use short sales to increase production for both sellers and buyer clients.
The course is easy to read, and designed to help you get up and running with short sales as quickly as possible. And frankly the price is so low that it's a "no brainer" for those of us who want to adjust our strategy to take advantage of the market conditions.
If you are looking for ways to make more money in a tough real estate market, this could be your ticket.
Short sales help homeowners avoid foreclosure, and it may be the only way to make a particular deal work for an investor or home buyer. In todays market short sales are a timely and important strategy to have in your toolbox.
Advertisement: Football fans, get your Super Bowl Memorabilia @ http://www.sportstrail.com
In todays market, with foreclosures reaching record highs, and many sellers owing more money than their property is even worth, it is time for a strategic change in business strategy.
With a fundamental situation that presents us with literally thousands of properties being "dumped" on the market with each passing month, and most of those properties having little or no equity, it is getting more difficult to sell any properties for full value.
Listings are sitting on the market for months, and many of those listings on which we have spent valuable time and effort are going into foreclosure, leaving many agents with less income and no way to sell their listings for what the seller actually owes.
Anyone may negotiate a short sale. You do not have to be licensed to negotiate with a lender or bank. You merely need to follow the specific procedures necessary to complete a successful short sale.
But this situation is creating a need more than ever for agents and brokers to understand how to use short sales to help their sellers sell and their buyers buy. If you are an agent you can use short sale strategy to save your listing commissions and help homeowners avoid foreclosure.
Short Sale means getting the lender to sell a property for a discount below the amount the owner owes for the property. With the growing number of foreclosures, more and more lenders are having to resort to short sales in order to move inventory that cannot be sold for enough to cover the payoff.
We are seeing more short sales and hearing incredible stories from around the US about short sales in some areas where the lenders are discounting properties by as much as 30 to 70 percent! This results in a very profitable deal when done correctly.
Whether you have overpriced listings that aren't selling, investor clients who want the best possible deals, or you are representing aspiring home buyers who want a good buy in a personal residence, short sales could be your ticket to more production in a slowing market that still has a long way to fall before things start to improve.
But short sales require a certain amount of expertise, not to mention specific forms, letters and procedures. You have to know what you are doing. But if you do, you can create opportunities for your clients by getting discounts amounting to tens of thousands of dollars, that can turn "no sale" into a great opportunity for your clients.
If you are also an investor you need to know how to use short sales strategy to add bigger equity spreads to your own investments. Buying at a discount will help insure strong positive cash flow on rentals, with higher equity spreads. It's the "safe" way to go in an eroding market.
But the trick is, how to get this crucial information without spending $1000 or more on a seminar or course? They are out there - anywhere from $500 to more than $1500 for information on what will surely be the hottest buying / selling strategy of 2007-2008
But we at TREA have been working on a very cost effective solution for you. If you are serious about making money in real estate in 2007, you absolutely must know how to execute short sales in a professional manner.
I am currently using this same short sales process to help increase my personal production as an agent to help sell overpriced listings, as well as help my investor buyers find better deals and I am confident short sales can do the same for you too.
There is no need to languish in this market - you must adapt to the changing market conditions with strategies that take the fundamental market conditions into account.
I predict that this market will continue to worsen for months to come, making short sales even more necessary than they are now. By 2008 the banks may be desperate for any way out possible.
Because of the obvious need for this strategy, I am very happy to announce that The Real Estate Arena is recommending a new and timely course called "Short Sales Short & Sweet", written by Real Estate Broker, Marie Whitton. Marie is my personal real estate broker. Together we use short sales to increase production for both sellers and buyer clients.
The course is easy to read, and designed to help you get up and running with short sales as quickly as possible. And frankly the price is so low that it's a "no brainer" for those of us who want to adjust our strategy to take advantage of the market conditions.
If you are looking for ways to make more money in a tough real estate market, this could be your ticket.
Short sales help homeowners avoid foreclosure, and it may be the only way to make a particular deal work for an investor or home buyer. In todays market short sales are a timely and important strategy to have in your toolbox.
Advertisement: Football fans, get your Super Bowl Memorabilia @ http://www.sportstrail.com
Thursday, January 10, 2008
Recession aka Foreclosures Rising
More than two years into the housing downturn, unpleasant surprises and market rumors are continuing to wreak havoc in an industry that may be leading the economy into a recession.
The market received its first jolt yesterday from KB Home, a leading home builder that investors have viewed as well-positioned to ride out the downturn. KB posted a net loss of $772.7 million, or $9.99 a share, for its fourth quarter ended Nov. 30, more than nine times wider than the loss that analysts expected.
Much of the loss stemmed from a $514 million noncash charge due to changed accounting for tax purposes. Nonetheless, investors took flight, driving KB's shares down 9.2%.
Getting Worse
• The News: KB Home, which was seen as well-positioned for the housing downturn, reported a wider-than-expected loss.
• What it Means: The report signals housing remains in free fall with no bottom in sight.
• In Other News: Countrywide shares fell 28% amid investor anxiety.
The other home-related stock taking a battering yesterday was Countrywide Financial Corp., a leading provider of mortgages. Its shares dropped 28% amid growing anxiety among investors about falling house prices and the surge in foreclosures.
The housing news and worries about weaker consumer spending helped drive down the broader market. The Dow Jones Industrial Average fell 238.42, or 1.9%, to 12589.07. Banking stocks were broadly lower, with Citigroup Inc. off nearly 4%. The Dow has fallen 11% from its early-October high, a decline that fits the traditional definition of a correction.
"The state of American business this year will depend, I believe, on how we get through the toughest housing correction in our lifetimes," Daniel Mudd, chief executive officer of Fannie Mae, the government-sponsored mortgage investor, said in a speech to the U.S. Chamber of Commerce in Washington yesterday.
Rumors that Countrywide might be preparing a bankruptcy-court filing fueled its decline. The company vehemently denied such plans. "There is no substance to the rumor that Countrywide is planning to file for bankruptcy," a Countrywide spokesman said.
The weak earnings report by Los Angeles-based KB Home was a signal that housing remains in free fall with no bottom yet in sight. "As we enter 2008, we see no indication that markets are stabilizing," KB's chief executive, Jeff Mezger, told investors during a conference call yesterday.
Builders and mortgage companies have been grappling for months with falling home prices and the meltdown in the market for subprime mortgages to people with weak credit. In recent weeks, the outlook has darkened further for housing as unemployment rises and the broader economy treads closer to recession. Last week, the Labor Department reported the U.S. unemployment rate rose sharply in December to its highest level in more than two years.
"Job losses are the final piece," says Paul Puryear, a real-estate analyst at Raymond James & Associates. "If we are in a recession -- and we may well be there right now -- it's going to be hard to sell a house."
Driving KB's quarterly loss was a $514 million charge related to its deferred tax assets. The ability to save on future or past taxes can be entered on a company's balance sheet as an asset. But some auditors say it isn't clear when the home builders will be able to realize these tax savings because of their losses in recent years. So they are requiring some companies to effectively write down much of their deferred tax assets.
Analysts say other builders may face similar write-downs because of the industry's uncertain outlook, and that builders may not be profitable until 2009 or 2010. The deferred tax assets, although written down for now, will eventually produce a gain.
KB has been cutting prices to move homes. Its average selling price dropped 12% to $247,800 in the fourth quarter from a year earlier. But the supply of homes remains stubbornly high. Also, more of KB's buyers are canceling contracts for homes than some analysts had expected.
The write-downs are spooking investors and forcing some builders, including KB, to renegotiate the terms of their revolving credit lines with lenders. That's because the tax-asset charges, coupled with continued write down of land and home values, could cause many builders to fall below a minimum tangible net worth level required by their lenders.
KB said it expects to strike a new agreement with its banks by the end of its first quarter. Red Bank, N.J., builder Hovnanian Enterprises Inc., which reported a $216 million tax-asset-related charge last month, said it has received the necessary waivers from its lenders.
"It's a total headache for the builders,'' says Ivy Zelman, chief executive of Zelman & Associates, a housing research firm. "I don't think it's going to push any of them into bankruptcy. But it's another poker chip that the banks have in their favor."
Many analysts took comfort in KB's ability to generate cash and reduce its debt. The company increased its cash balance by $625 million from a year earlier, while its ratio of debt to total capital improved to 31% from 43% a year earlier.
As for Countrywide, investors are worried not only about its subprime exposure but also about its holdings of other types of risky loans including option adjustable-rate mortgages. Option ARMs allow borrowers to choose smaller monthly payments that increase their loan balance. If borrowers aren't careful, they can end up over their heads in debt.
Kenneth Posner, an analyst at Morgan Stanley, said he believes a bankruptcy filing by Countrywide is unlikely, at least in the short run. Mr. Posner said the company appears to have enough cash to meet its debt obligations in 2008, though there is a "thin margin for error."
The company plans to release fourth-quarter results Jan. 29. After reporting a loss of $1.2 billion for the third quarter, Countrywide forecast that it would return to profitability in the fourth quarter. Now, though, "very few people I talk to believe that's realistic," said Frederick Cannon, an analyst at Keefe, Bruyette & Woods in San Francisco.
The market received its first jolt yesterday from KB Home, a leading home builder that investors have viewed as well-positioned to ride out the downturn. KB posted a net loss of $772.7 million, or $9.99 a share, for its fourth quarter ended Nov. 30, more than nine times wider than the loss that analysts expected.
Much of the loss stemmed from a $514 million noncash charge due to changed accounting for tax purposes. Nonetheless, investors took flight, driving KB's shares down 9.2%.
Getting Worse
• The News: KB Home, which was seen as well-positioned for the housing downturn, reported a wider-than-expected loss.
• What it Means: The report signals housing remains in free fall with no bottom in sight.
• In Other News: Countrywide shares fell 28% amid investor anxiety.
The other home-related stock taking a battering yesterday was Countrywide Financial Corp., a leading provider of mortgages. Its shares dropped 28% amid growing anxiety among investors about falling house prices and the surge in foreclosures.
The housing news and worries about weaker consumer spending helped drive down the broader market. The Dow Jones Industrial Average fell 238.42, or 1.9%, to 12589.07. Banking stocks were broadly lower, with Citigroup Inc. off nearly 4%. The Dow has fallen 11% from its early-October high, a decline that fits the traditional definition of a correction.
"The state of American business this year will depend, I believe, on how we get through the toughest housing correction in our lifetimes," Daniel Mudd, chief executive officer of Fannie Mae, the government-sponsored mortgage investor, said in a speech to the U.S. Chamber of Commerce in Washington yesterday.
Rumors that Countrywide might be preparing a bankruptcy-court filing fueled its decline. The company vehemently denied such plans. "There is no substance to the rumor that Countrywide is planning to file for bankruptcy," a Countrywide spokesman said.
The weak earnings report by Los Angeles-based KB Home was a signal that housing remains in free fall with no bottom yet in sight. "As we enter 2008, we see no indication that markets are stabilizing," KB's chief executive, Jeff Mezger, told investors during a conference call yesterday.
Builders and mortgage companies have been grappling for months with falling home prices and the meltdown in the market for subprime mortgages to people with weak credit. In recent weeks, the outlook has darkened further for housing as unemployment rises and the broader economy treads closer to recession. Last week, the Labor Department reported the U.S. unemployment rate rose sharply in December to its highest level in more than two years.
"Job losses are the final piece," says Paul Puryear, a real-estate analyst at Raymond James & Associates. "If we are in a recession -- and we may well be there right now -- it's going to be hard to sell a house."
Driving KB's quarterly loss was a $514 million charge related to its deferred tax assets. The ability to save on future or past taxes can be entered on a company's balance sheet as an asset. But some auditors say it isn't clear when the home builders will be able to realize these tax savings because of their losses in recent years. So they are requiring some companies to effectively write down much of their deferred tax assets.
Analysts say other builders may face similar write-downs because of the industry's uncertain outlook, and that builders may not be profitable until 2009 or 2010. The deferred tax assets, although written down for now, will eventually produce a gain.
KB has been cutting prices to move homes. Its average selling price dropped 12% to $247,800 in the fourth quarter from a year earlier. But the supply of homes remains stubbornly high. Also, more of KB's buyers are canceling contracts for homes than some analysts had expected.
The write-downs are spooking investors and forcing some builders, including KB, to renegotiate the terms of their revolving credit lines with lenders. That's because the tax-asset charges, coupled with continued write down of land and home values, could cause many builders to fall below a minimum tangible net worth level required by their lenders.
KB said it expects to strike a new agreement with its banks by the end of its first quarter. Red Bank, N.J., builder Hovnanian Enterprises Inc., which reported a $216 million tax-asset-related charge last month, said it has received the necessary waivers from its lenders.
"It's a total headache for the builders,'' says Ivy Zelman, chief executive of Zelman & Associates, a housing research firm. "I don't think it's going to push any of them into bankruptcy. But it's another poker chip that the banks have in their favor."
Many analysts took comfort in KB's ability to generate cash and reduce its debt. The company increased its cash balance by $625 million from a year earlier, while its ratio of debt to total capital improved to 31% from 43% a year earlier.
As for Countrywide, investors are worried not only about its subprime exposure but also about its holdings of other types of risky loans including option adjustable-rate mortgages. Option ARMs allow borrowers to choose smaller monthly payments that increase their loan balance. If borrowers aren't careful, they can end up over their heads in debt.
Kenneth Posner, an analyst at Morgan Stanley, said he believes a bankruptcy filing by Countrywide is unlikely, at least in the short run. Mr. Posner said the company appears to have enough cash to meet its debt obligations in 2008, though there is a "thin margin for error."
The company plans to release fourth-quarter results Jan. 29. After reporting a loss of $1.2 billion for the third quarter, Countrywide forecast that it would return to profitability in the fourth quarter. Now, though, "very few people I talk to believe that's realistic," said Frederick Cannon, an analyst at Keefe, Bruyette & Woods in San Francisco.
Wednesday, January 9, 2008
Isn't there an easier way to do a property title search?
Isn't there an easier way to do a property title search?
In the modern environment of the internet, and "everything online", it is common to wonder why the process of running a title search is so complex. Property title records are recorded and stored as hard-copy paper documents. Information that is contained on hard-copy documents cannot be stored easily in an online database, as can most other types of records. Because of this, title searching involves searching through all of the recorded documents for a property. Property records are recorded the individual county, each of which has different procedures for the records office.
For example, to search for mortgages, the title examiner must first locate the copies of mortgage documents signed by the property owner. All of the papers for a property are not kept together in a group. These copies are kept in books, with each volume corresponding to a particular day and year. In order to locate all the open mortgages, the examiner must go through all the books over time, and find the documents that pertain to the subject property. The county normally keeps an index, which helps the examiner know which books to look in. The examiner must then look for documents that release any of these mortgages that were refinanced, or paid off. The same process is repeated for liens.
In some counties, there are multiple records rooms to go through. All of the information about the liens, and mortgages is contained in the wording of the documents, which must be retrieved and read individually. From this process, the title search abstract is created for a property.
For more info on how to do a title search or helpful title search links,
http://www.thenoteservice.com/title-search.html
In the modern environment of the internet, and "everything online", it is common to wonder why the process of running a title search is so complex. Property title records are recorded and stored as hard-copy paper documents. Information that is contained on hard-copy documents cannot be stored easily in an online database, as can most other types of records. Because of this, title searching involves searching through all of the recorded documents for a property. Property records are recorded the individual county, each of which has different procedures for the records office.
For example, to search for mortgages, the title examiner must first locate the copies of mortgage documents signed by the property owner. All of the papers for a property are not kept together in a group. These copies are kept in books, with each volume corresponding to a particular day and year. In order to locate all the open mortgages, the examiner must go through all the books over time, and find the documents that pertain to the subject property. The county normally keeps an index, which helps the examiner know which books to look in. The examiner must then look for documents that release any of these mortgages that were refinanced, or paid off. The same process is repeated for liens.
In some counties, there are multiple records rooms to go through. All of the information about the liens, and mortgages is contained in the wording of the documents, which must be retrieved and read individually. From this process, the title search abstract is created for a property.
For more info on how to do a title search or helpful title search links,
http://www.thenoteservice.com/title-search.html
Sunday, January 6, 2008
Buying A Bank Owned Home (REO)
Is Buying A Bank Owned Home (REO) Property a good move?
The real estate market is in its second year of decline and there are many buyers who are looking at buying a foreclosed or bank owned home. In fact, there are many bank owned properties on the market right now and it is projected that the number will increase through the summer of 2008.
For a free list of banks offering bank owned properties, also known as reo properties, go to http://www.thenoteservice.com/free-bank-owned-listings.html
Buying a foreclosed home is not right for everyone and it does not mean that you are going to get a home at a low price. It takes a lot of effort and time to find the right property. I know many investors who pursue properties in the bank owned market who claim they may have to look at 30 homes before finding one worth purchasing.
So this is not an approach that one should take on lightly. Great deals do not come in the bank owned market and it is one can end up with a property that requires a lot of repair and could cost more in the end. But there are some good buys on the market if you spend the time to find them.
There are two main ways of purchasing bank owned homes. The first is in the normal real estate market where properties are offered through real estate agents. The second is through the auction market where the home is sold to the highest bidder.
Auctions
The auction process is the riskier approach to buying a property I recommend that you only pursue auctions if:
1) You know how to properly research a property
2) You know about the building or remodeling trades so that you can assess the condition of a home
3) You have a lot of time to do proper investigation and you are not in a hurry to move
4) You can afford a potential loss of your deposit-sometimes you will win a bid only to later find out the property is not right for you
Why is the auction process riskier? When a property is purchased at auction the buyer does not have a traditional due diligence period to investigate the property. So before you go to the auction you need to so some research on the property. What you are looking for is:
• how much is owed on the mortgages
• if there are liens against the property
• if there are taxes due to the municipalities
An auctioned property is not going to deliver the title to you free and clear of encumbrances. So it is up to you to pay off any liens on the property. This, of course, adds to the total cost of the home.
You also may not have much time to inspect the property. In fact, you may not get to see the inside of it at all. So before the auction try to look at it if you can. Looking at the outside is usually easy, just drive or walk by the property, if it is vacant you may be able to peer in the windows. (I urge you to get permission before going on the property.) What you want to do is get an idea of the condition of the property so you can determine how much it will cost to repair, if repairs are needed. Some things to look at:
• the condition of the roof
• the condition of the exterior- does it need paint or repairs
• the condition of the interior -does it need kitchen or bath updating?
• the condition of the heating systems
• the condition of the plumbing
These are the major cost items with one exception. If the house is not on a public sewer system then it may have a private septic system.
Septic systems can be very expensive to replace and there is no easy way to determine the condition short of having an inspector check it out. It is unlikely that you will have the access or time to perform such an inspection.
Real Estate Markets
Banks often attempt to market properties in the normal real estate markets using real estate agents. To find these homes contact a local real estate agent or search through the local Multiple listing services at your favorite real estate web site.
Why is this a better way to shop for a bank owned home? First, there will often be more information about the home available. Real estate agents will often do some preliminary information gathering and will make it available to you. Second, you will have the opportunity to look at the house, both inside and out, to check its condition. Third, yo will be able to make an offer that has a due diligence period so that you can do proper inspections of the home to uncover defects. This way you know exactly what you are buying. In the event you find a major defect in the home during inspections you have the opportunity to back out of the purchase and get your deposit money back (make sure this contingency is included in your offer to purchase)
Buyers who want a bank owned property but may not have the skill to properly investigate on their own, this is a great approach. If you do find a bank owned home you love and decide to make an offer be prepared to wait for a response to your offer. Banks are not very responsive. It could take 1 week or more for a decision on your offer and 4 weeks is not uncommon.
The real estate market is in its second year of decline and there are many buyers who are looking at buying a foreclosed or bank owned home. In fact, there are many bank owned properties on the market right now and it is projected that the number will increase through the summer of 2008.
For a free list of banks offering bank owned properties, also known as reo properties, go to http://www.thenoteservice.com/free-bank-owned-listings.html
Buying a foreclosed home is not right for everyone and it does not mean that you are going to get a home at a low price. It takes a lot of effort and time to find the right property. I know many investors who pursue properties in the bank owned market who claim they may have to look at 30 homes before finding one worth purchasing.
So this is not an approach that one should take on lightly. Great deals do not come in the bank owned market and it is one can end up with a property that requires a lot of repair and could cost more in the end. But there are some good buys on the market if you spend the time to find them.
There are two main ways of purchasing bank owned homes. The first is in the normal real estate market where properties are offered through real estate agents. The second is through the auction market where the home is sold to the highest bidder.
Auctions
The auction process is the riskier approach to buying a property I recommend that you only pursue auctions if:
1) You know how to properly research a property
2) You know about the building or remodeling trades so that you can assess the condition of a home
3) You have a lot of time to do proper investigation and you are not in a hurry to move
4) You can afford a potential loss of your deposit-sometimes you will win a bid only to later find out the property is not right for you
Why is the auction process riskier? When a property is purchased at auction the buyer does not have a traditional due diligence period to investigate the property. So before you go to the auction you need to so some research on the property. What you are looking for is:
• how much is owed on the mortgages
• if there are liens against the property
• if there are taxes due to the municipalities
An auctioned property is not going to deliver the title to you free and clear of encumbrances. So it is up to you to pay off any liens on the property. This, of course, adds to the total cost of the home.
You also may not have much time to inspect the property. In fact, you may not get to see the inside of it at all. So before the auction try to look at it if you can. Looking at the outside is usually easy, just drive or walk by the property, if it is vacant you may be able to peer in the windows. (I urge you to get permission before going on the property.) What you want to do is get an idea of the condition of the property so you can determine how much it will cost to repair, if repairs are needed. Some things to look at:
• the condition of the roof
• the condition of the exterior- does it need paint or repairs
• the condition of the interior -does it need kitchen or bath updating?
• the condition of the heating systems
• the condition of the plumbing
These are the major cost items with one exception. If the house is not on a public sewer system then it may have a private septic system.
Septic systems can be very expensive to replace and there is no easy way to determine the condition short of having an inspector check it out. It is unlikely that you will have the access or time to perform such an inspection.
Real Estate Markets
Banks often attempt to market properties in the normal real estate markets using real estate agents. To find these homes contact a local real estate agent or search through the local Multiple listing services at your favorite real estate web site.
Why is this a better way to shop for a bank owned home? First, there will often be more information about the home available. Real estate agents will often do some preliminary information gathering and will make it available to you. Second, you will have the opportunity to look at the house, both inside and out, to check its condition. Third, yo will be able to make an offer that has a due diligence period so that you can do proper inspections of the home to uncover defects. This way you know exactly what you are buying. In the event you find a major defect in the home during inspections you have the opportunity to back out of the purchase and get your deposit money back (make sure this contingency is included in your offer to purchase)
Buyers who want a bank owned property but may not have the skill to properly investigate on their own, this is a great approach. If you do find a bank owned home you love and decide to make an offer be prepared to wait for a response to your offer. Banks are not very responsive. It could take 1 week or more for a decision on your offer and 4 weeks is not uncommon.
Friday, December 28, 2007
Spouse Objections to Rehabbing Real Estate
Spouse Objections to Rehabbing Real Estate
I’ve run across a lot of folks who tell me they’d love to do what I do, but their wife is just not comfortable with it. That’s a powerful objection, and sometimes it’s one that cannot be overcome. Most times, I think it can be, if you really want to. All too often, I get the impression the potential investor doesn’t want to jump into rehab real estate bad enough to work through the spouses objections. It’s the old “it’s easier NOT to” mentality!
The issue is usually not that your spouse doesn’t want the financial rewards that accompany the real estate rehab business. The reasons spouses object is usually good ol’ fear. For example:
fear of the unforeseen
fear of financial loss
fear that you don’t yet know what you’re doing (my favorite!)
The latter two are the big leaders. These fears may come from something they’ve heard, or they may be rooted in them not really understanding the transaction or what you’re trying to accomplish.
For my wife, her fears were that something would come up that I hadn’t thought of, or that a house may sit empty for several months thus depleting the bank account.
How to deal with the fears of your spouse regarding rehab real estate
Sit down and discuss their fears. Find out what they really are. You always want to deal with a known entity.
Be sure your spouse understands the importance of rehab real estate in your long term financial goals, and how it fits into your family’s security.
Always encourage your spouse to ask questions!
If your spouse expresses general fear of the whole thing, that may be because of a lack of understanding of the process or they are very intimidated by it.
Encourage questions!
Explain how the transactions will work
Explain how you are minimizing the risk to your family.
Yes, the numbers might be big, but if you aren’t putting a lot of your own money in it, then your risk of loss is minimal.
Go over the worst case scenarios. Explain that worst case, the property could be quickly sold for SOME profit.
Reveal to your spouse the folks you have working with you, such as your mortgage broker, your wholesaler (flipper), appraiser, and anyone else you’ve identified up to that point.
My wife was very distrustful of these folks in the beginning. I had to explain and show her that these folks had EVERYTHING to gain by my first deals going very well, if they wanted to continue making money with me.
If the fear seems to be of the unforeseen
Explain that while this seems complicated, you’ve done your homework and you’ve learned about all you can learn without actually doing a deal for experience. (You reach a point where this is true!)
Explain that you won’t own the property a minute without enough insurance to cover anything that could happen.
If the fear is financial loss
Depending on your personal financial situation, you should focus your spouse on how real estate can and does improve the lives of investors.
If you’ve already identified a property, reveal your worksheet and how much you stand to make off that property.
Agree with your spouse NOT to take on too much risk. Set your boundaries together. I assure you that you’ll easily revisit these the first time you bring home a large check.
Fear that you don’t have the knowledge
Be sure you are well studied! Remember, knowledge comes before the money! Spend the money on a good course, or book. Don’t rely on just one. Get several author’s take on the subject. There are inexpensive ways to do this!
Explain that you have studied this thoroughly. Heck, you’ve got a head full of knowledge that needs to be put into action in order to move forward.
Agree with your spouse. That’s why you are tapping into the knowledge of those real estate professionals around you! Explain who’s on your team, and what they have to gain from you. Remind your spouse that you are tapping into the knowledge of those around you, those that know your area very well.
When your spouse comes around and is resigned that you are going to do this, they may:
Sign on and dig in beside you for the deal and what follows (throw total support behind you).
Flatly say, they don’t agree, but if you must…
Something in between, like “Honey, you do whatever you think is best.”
This last possibility is what I predict will happen to most. This allows your spouse to give you the room you need, but at the same time not completely agree. That’s where my wife went. It was a safe position for her. And, it’s a safe position for you! You’ve got the go-ahead, so go ahead!
I was in that position myself. If was a good feeling to watch her fears fall away as I complete my first couple of projects. Her eyes got nice and big when I refinanced my first two properties at the same time and brought home more money in one day than I’d ever held in my hands before. I also watched her understand the benefits more completely while sitting in my CPA’s office and having him say to her “These properties are saving you big time on your taxes.” I dare not say, I told her so, but I told her so
Sure, there are challenges, but the paydays are great.
So, over time, my bride is my full partner taking on whole aspects of the business freeing me up to do the parts I do best.
Spouse objections can be show-stoppers, but these suggestions will hopefully help you deal carefully with them. It’s not enough to merely brush them aside and charge ahead. I recommend a loving, cautious approach because in good time and bad, your spouse is your greatest ally. Keep them close!
I’ve run across a lot of folks who tell me they’d love to do what I do, but their wife is just not comfortable with it. That’s a powerful objection, and sometimes it’s one that cannot be overcome. Most times, I think it can be, if you really want to. All too often, I get the impression the potential investor doesn’t want to jump into rehab real estate bad enough to work through the spouses objections. It’s the old “it’s easier NOT to” mentality!
The issue is usually not that your spouse doesn’t want the financial rewards that accompany the real estate rehab business. The reasons spouses object is usually good ol’ fear. For example:
fear of the unforeseen
fear of financial loss
fear that you don’t yet know what you’re doing (my favorite!)
The latter two are the big leaders. These fears may come from something they’ve heard, or they may be rooted in them not really understanding the transaction or what you’re trying to accomplish.
For my wife, her fears were that something would come up that I hadn’t thought of, or that a house may sit empty for several months thus depleting the bank account.
How to deal with the fears of your spouse regarding rehab real estate
Sit down and discuss their fears. Find out what they really are. You always want to deal with a known entity.
Be sure your spouse understands the importance of rehab real estate in your long term financial goals, and how it fits into your family’s security.
Always encourage your spouse to ask questions!
If your spouse expresses general fear of the whole thing, that may be because of a lack of understanding of the process or they are very intimidated by it.
Encourage questions!
Explain how the transactions will work
Explain how you are minimizing the risk to your family.
Yes, the numbers might be big, but if you aren’t putting a lot of your own money in it, then your risk of loss is minimal.
Go over the worst case scenarios. Explain that worst case, the property could be quickly sold for SOME profit.
Reveal to your spouse the folks you have working with you, such as your mortgage broker, your wholesaler (flipper), appraiser, and anyone else you’ve identified up to that point.
My wife was very distrustful of these folks in the beginning. I had to explain and show her that these folks had EVERYTHING to gain by my first deals going very well, if they wanted to continue making money with me.
If the fear seems to be of the unforeseen
Explain that while this seems complicated, you’ve done your homework and you’ve learned about all you can learn without actually doing a deal for experience. (You reach a point where this is true!)
Explain that you won’t own the property a minute without enough insurance to cover anything that could happen.
If the fear is financial loss
Depending on your personal financial situation, you should focus your spouse on how real estate can and does improve the lives of investors.
If you’ve already identified a property, reveal your worksheet and how much you stand to make off that property.
Agree with your spouse NOT to take on too much risk. Set your boundaries together. I assure you that you’ll easily revisit these the first time you bring home a large check.
Fear that you don’t have the knowledge
Be sure you are well studied! Remember, knowledge comes before the money! Spend the money on a good course, or book. Don’t rely on just one. Get several author’s take on the subject. There are inexpensive ways to do this!
Explain that you have studied this thoroughly. Heck, you’ve got a head full of knowledge that needs to be put into action in order to move forward.
Agree with your spouse. That’s why you are tapping into the knowledge of those real estate professionals around you! Explain who’s on your team, and what they have to gain from you. Remind your spouse that you are tapping into the knowledge of those around you, those that know your area very well.
When your spouse comes around and is resigned that you are going to do this, they may:
Sign on and dig in beside you for the deal and what follows (throw total support behind you).
Flatly say, they don’t agree, but if you must…
Something in between, like “Honey, you do whatever you think is best.”
This last possibility is what I predict will happen to most. This allows your spouse to give you the room you need, but at the same time not completely agree. That’s where my wife went. It was a safe position for her. And, it’s a safe position for you! You’ve got the go-ahead, so go ahead!
I was in that position myself. If was a good feeling to watch her fears fall away as I complete my first couple of projects. Her eyes got nice and big when I refinanced my first two properties at the same time and brought home more money in one day than I’d ever held in my hands before. I also watched her understand the benefits more completely while sitting in my CPA’s office and having him say to her “These properties are saving you big time on your taxes.” I dare not say, I told her so, but I told her so
Sure, there are challenges, but the paydays are great.
So, over time, my bride is my full partner taking on whole aspects of the business freeing me up to do the parts I do best.
Spouse objections can be show-stoppers, but these suggestions will hopefully help you deal carefully with them. It’s not enough to merely brush them aside and charge ahead. I recommend a loving, cautious approach because in good time and bad, your spouse is your greatest ally. Keep them close!
Saturday, December 8, 2007
Investor Apprentice Program
There is a famous old story about a company that had a
problem, and they called out a repairman to fix it.
The entire company was on the verge of shutting down production because
no one at the company had been able to identify this problem,
let alone fix it.
The repairman soon arrived, checked out the situation, went over
to one of the many miles of pipes running through the building,
and started banging on one particular pipe. He banged for about a minute.
He then ordered the crew chief to restart the machinery. Production
was restored and everyone was happy.
A few days later, the company received the bill for the repair.
The company manager was shocked to see that the amount due for the
repair was $10,000. The manager called the repairman and shouted
in the phone, "This repair bill is for ten thousand dollars! Where
do you get off charging me $10,000 for what amounted to banging on
a pipe for all of about 1 minute?!"
The repairman calmly replied "Oh, I only charged you $50 for banging
on the pipe. The other $9950 was for knowing precisely what pipe
to bang on."
And so the moral of this story is...experience is everything.
The fact is there are major investing opportunities all around you,
but can you see them? Do you know how to read the fundamentals of
your market to help you develop a strategic advantage? Do you worry
that your deals might not be profitable?
Are you an agent or broker who is wondering how to cope with a
down market, searching for ways to stabilize or increase income?
Would you like to discover how to go from killing yourself for a lousy
$5000 commission, to making a $100,000 commission for the same amount
of work with less hassle?
You may not know it, but there is a world of big opportunity out there
if you only know where to look and what to do when you find it.
You don't have to be licensed to break into high dollar real estate.
But if you are, it is even better. You can make a few thousand bucks
a year or you can make a few HUNDRED thousand bucks a year. It's all
in the choices you make.
Would you like to implement multiple income strategies that are
synergistic with your existing business model, and enable yourself
to make money all the time in any market?
If you are serious about your real estate career and your financial
future, and you have some resources for real estate investing and
business growth, you may be a candidate for our Investor Apprenticeship
Program.
If accepted, you'll be working one-on-one with Donna Robinson and
Peter Vekselman; two experienced real estate investors with more than
1000 transactions and years of on the street know-how and insight.
If you are wondering how to take advantage of the current housing
market, and drive your investing business or real estate brokerage
business to the next level, keep reading...
The fact is that todays housing market crisis is largely the result
of inexperienced investors who used bad loans to finance good properties
and today they are going down the financial drain by the thousands.
Many well meaning, honest investors are in financial ruins today
simply because they did not know what they were doing, and failed to get
advice from experienced experts who could have easily identified their
mistakes BEFORE they were made. This one simple step could have
saved them years of turmoil, financial hardship and bad credit.
It is a fact that some of our apprenticeship clients come to us
for damage control. They have already made severe, costly mistakes.
Mistakes that will affect their lives for years to come. Some went from
having perfect credit to credit that has been ruined, due to bad
investing decisions. If only they'd gotten professional advice from
us first.
The most common mistake new investors make is to try and
cut costs by neglecting things like professional advice that can insure
that they know what to do to be profitable and avoid life changing
mistakes.
This investor apprenticeship is a real bargain when compared to the
price thousands of investors are now paying for their failure to
get independent, professional advice from someone who has "been there
and done that".
Todays market is developing into some of the best buying opportunities
in 20 years. But there are also some of the worst opportunities in
20 years. Can you tell the difference? If you want to discover how
to really be profitable in any market while avoiding common and costly
mistakes, you need solid professional advice with over 20 collective
years of experience.
One of our current clients is learning how to take his brokerage
business to new levels by focusing on market opportunities in his
area that he thought were beyond his reach and expertise.
Another investor client is learning how to increase his volume from
struggling to do 1 or 2 deals a month, to building a business that
will allow him to double his volume with the same or even less work
than he is doing now. He was focusing on the wrong market. In just
one session we changed the way he looked at his business and corrected
several mistakes he was making but did not even realize.
Here's how you can find out if an Investor Apprenticeship is right
for you...
Donna Robinson and Peter Vekselman are planning a live teleconference
on Monday, December 10th, at 1 PM Eastern Time.
To register for the call please click the link below and a
confirmation will be emailed to you very quickly with complete
details on how to dial in.
http://www.reiuonline.com/coaching/freecoachingcall.htm
We will be discussing true stories of things that happen to real investors
and some actual case histories of Apprenticeship clients and how they
are using our strategies to increase income, build new income streams
and avoid big mistakes along the way.
If you are serious about growing your real estate business, this may be
just what you need to put the pieces all together and drive
your business into high gear.
problem, and they called out a repairman to fix it.
The entire company was on the verge of shutting down production because
no one at the company had been able to identify this problem,
let alone fix it.
The repairman soon arrived, checked out the situation, went over
to one of the many miles of pipes running through the building,
and started banging on one particular pipe. He banged for about a minute.
He then ordered the crew chief to restart the machinery. Production
was restored and everyone was happy.
A few days later, the company received the bill for the repair.
The company manager was shocked to see that the amount due for the
repair was $10,000. The manager called the repairman and shouted
in the phone, "This repair bill is for ten thousand dollars! Where
do you get off charging me $10,000 for what amounted to banging on
a pipe for all of about 1 minute?!"
The repairman calmly replied "Oh, I only charged you $50 for banging
on the pipe. The other $9950 was for knowing precisely what pipe
to bang on."
And so the moral of this story is...experience is everything.
The fact is there are major investing opportunities all around you,
but can you see them? Do you know how to read the fundamentals of
your market to help you develop a strategic advantage? Do you worry
that your deals might not be profitable?
Are you an agent or broker who is wondering how to cope with a
down market, searching for ways to stabilize or increase income?
Would you like to discover how to go from killing yourself for a lousy
$5000 commission, to making a $100,000 commission for the same amount
of work with less hassle?
You may not know it, but there is a world of big opportunity out there
if you only know where to look and what to do when you find it.
You don't have to be licensed to break into high dollar real estate.
But if you are, it is even better. You can make a few thousand bucks
a year or you can make a few HUNDRED thousand bucks a year. It's all
in the choices you make.
Would you like to implement multiple income strategies that are
synergistic with your existing business model, and enable yourself
to make money all the time in any market?
If you are serious about your real estate career and your financial
future, and you have some resources for real estate investing and
business growth, you may be a candidate for our Investor Apprenticeship
Program.
If accepted, you'll be working one-on-one with Donna Robinson and
Peter Vekselman; two experienced real estate investors with more than
1000 transactions and years of on the street know-how and insight.
If you are wondering how to take advantage of the current housing
market, and drive your investing business or real estate brokerage
business to the next level, keep reading...
The fact is that todays housing market crisis is largely the result
of inexperienced investors who used bad loans to finance good properties
and today they are going down the financial drain by the thousands.
Many well meaning, honest investors are in financial ruins today
simply because they did not know what they were doing, and failed to get
advice from experienced experts who could have easily identified their
mistakes BEFORE they were made. This one simple step could have
saved them years of turmoil, financial hardship and bad credit.
It is a fact that some of our apprenticeship clients come to us
for damage control. They have already made severe, costly mistakes.
Mistakes that will affect their lives for years to come. Some went from
having perfect credit to credit that has been ruined, due to bad
investing decisions. If only they'd gotten professional advice from
us first.
The most common mistake new investors make is to try and
cut costs by neglecting things like professional advice that can insure
that they know what to do to be profitable and avoid life changing
mistakes.
This investor apprenticeship is a real bargain when compared to the
price thousands of investors are now paying for their failure to
get independent, professional advice from someone who has "been there
and done that".
Todays market is developing into some of the best buying opportunities
in 20 years. But there are also some of the worst opportunities in
20 years. Can you tell the difference? If you want to discover how
to really be profitable in any market while avoiding common and costly
mistakes, you need solid professional advice with over 20 collective
years of experience.
One of our current clients is learning how to take his brokerage
business to new levels by focusing on market opportunities in his
area that he thought were beyond his reach and expertise.
Another investor client is learning how to increase his volume from
struggling to do 1 or 2 deals a month, to building a business that
will allow him to double his volume with the same or even less work
than he is doing now. He was focusing on the wrong market. In just
one session we changed the way he looked at his business and corrected
several mistakes he was making but did not even realize.
Here's how you can find out if an Investor Apprenticeship is right
for you...
Donna Robinson and Peter Vekselman are planning a live teleconference
on Monday, December 10th, at 1 PM Eastern Time.
To register for the call please click the link below and a
confirmation will be emailed to you very quickly with complete
details on how to dial in.
http://www.reiuonline.com/coaching/freecoachingcall.htm
We will be discussing true stories of things that happen to real investors
and some actual case histories of Apprenticeship clients and how they
are using our strategies to increase income, build new income streams
and avoid big mistakes along the way.
If you are serious about growing your real estate business, this may be
just what you need to put the pieces all together and drive
your business into high gear.
Monday, December 3, 2007
Do you need a Partner?
Business Partners
Donald Trump said that if not for a prenuptial agreement, his divorce would have buried him in the late 1980s.
A business divorce can also bury you. You are not necessarily going to have a prenup agreement for your business partner, but if you do take on partners, here’s what I recommend:
· Take on business partners only on a deal-by-deal basis.
· Use partners for money, credit or to acquire properties.
· Never give anyone authority over your money.
· Make decisions on a financial basis first.
· Make sure you, your partner and partner’s spouse share the same goals.
People ask me, “Should I have a partner in business?” And my answer is, “Should you get married?” Because both of those require a commitment.
No one really knows what a partner is going to be like until you hit tough times and you disagree. You have to create assurances that you are both going to be solvent and liquid.
Use money or credit partners, but only on a deal-by-deal basis. It’s easy enough to get out of one deal if you have to, but it is much more difficult to get out of 100 deals with a partner.
Make sure that you and your partner share the same goals and work ethics. (Here in the book I talk about one of my early partnership deals! I also address how to do business with family, spouses and spouses of partners.) Most importantly, I talk about how to protect yourself. This section will be available when the book is released!)
…if you go into business with family, the same rules apply.
If you are married to your business partner, make sure you define clear roles and boundaries in your business and marriage. In my business, I am the president and my wife is vice-president, so I have final say. She trusts my decisions based on my experience. But in our marriage, we are equal partners and consult each other on decisions and problem solving.
Donald Trump said that if not for a prenuptial agreement, his divorce would have buried him in the late 1980s.
A business divorce can also bury you. You are not necessarily going to have a prenup agreement for your business partner, but if you do take on partners, here’s what I recommend:
· Take on business partners only on a deal-by-deal basis.
· Use partners for money, credit or to acquire properties.
· Never give anyone authority over your money.
· Make decisions on a financial basis first.
· Make sure you, your partner and partner’s spouse share the same goals.
People ask me, “Should I have a partner in business?” And my answer is, “Should you get married?” Because both of those require a commitment.
No one really knows what a partner is going to be like until you hit tough times and you disagree. You have to create assurances that you are both going to be solvent and liquid.
Use money or credit partners, but only on a deal-by-deal basis. It’s easy enough to get out of one deal if you have to, but it is much more difficult to get out of 100 deals with a partner.
Make sure that you and your partner share the same goals and work ethics. (Here in the book I talk about one of my early partnership deals! I also address how to do business with family, spouses and spouses of partners.) Most importantly, I talk about how to protect yourself. This section will be available when the book is released!)
…if you go into business with family, the same rules apply.
If you are married to your business partner, make sure you define clear roles and boundaries in your business and marriage. In my business, I am the president and my wife is vice-president, so I have final say. She trusts my decisions based on my experience. But in our marriage, we are equal partners and consult each other on decisions and problem solving.
Do you need a Partner?
Business Partners
Donald Trump said that if not for a prenuptial agreement, his divorce would have buried him in the late 1980s.
A business divorce can also bury you. You are not necessarily going to have a prenup agreement for your business partner, but if you do take on partners, here’s what I recommend:
· Take on business partners only on a deal-by-deal basis.
· Use partners for money, credit or to acquire properties.
· Never give anyone authority over your money.
· Make decisions on a financial basis first.
· Make sure you, your partner and partner’s spouse share the same goals.
People ask me, “Should I have a partner in business?” And my answer is, “Should you get married?” Because both of those require a commitment.
No one really knows what a partner is going to be like until you hit tough times and you disagree. You have to create assurances that you are both going to be solvent and liquid.
Use money or credit partners, but only on a deal-by-deal basis. It’s easy enough to get out of one deal if you have to, but it is much more difficult to get out of 100 deals with a partner.
Make sure that you and your partner share the same goals and work ethics. (Here in the book I talk about one of my early partnership deals! I also address how to do business with family, spouses and spouses of partners.) Most importantly, I talk about how to protect yourself. This section will be available when the book is released!)
…if you go into business with family, the same rules apply.
If you are married to your business partner, make sure you define clear roles and boundaries in your business and marriage. In my business, I am the president and my wife is vice-president, so I have final say. She trusts my decisions based on my experience. But in our marriage, we are equal partners and consult each other on decisions and problem solving.
Donald Trump said that if not for a prenuptial agreement, his divorce would have buried him in the late 1980s.
A business divorce can also bury you. You are not necessarily going to have a prenup agreement for your business partner, but if you do take on partners, here’s what I recommend:
· Take on business partners only on a deal-by-deal basis.
· Use partners for money, credit or to acquire properties.
· Never give anyone authority over your money.
· Make decisions on a financial basis first.
· Make sure you, your partner and partner’s spouse share the same goals.
People ask me, “Should I have a partner in business?” And my answer is, “Should you get married?” Because both of those require a commitment.
No one really knows what a partner is going to be like until you hit tough times and you disagree. You have to create assurances that you are both going to be solvent and liquid.
Use money or credit partners, but only on a deal-by-deal basis. It’s easy enough to get out of one deal if you have to, but it is much more difficult to get out of 100 deals with a partner.
Make sure that you and your partner share the same goals and work ethics. (Here in the book I talk about one of my early partnership deals! I also address how to do business with family, spouses and spouses of partners.) Most importantly, I talk about how to protect yourself. This section will be available when the book is released!)
…if you go into business with family, the same rules apply.
If you are married to your business partner, make sure you define clear roles and boundaries in your business and marriage. In my business, I am the president and my wife is vice-president, so I have final say. She trusts my decisions based on my experience. But in our marriage, we are equal partners and consult each other on decisions and problem solving.
Wednesday, November 28, 2007
Real Estate Investing
Real Estate Investing
“Real estate investor seeks apprentice, 10k a month.” This might sound familiar to some- the token real estate investing advertisement feeding off the ideas of those wanting a piece of a lucrative industry. And it’s well-founded! Real estate investing is a very profitable business but only to a very lucky few does it come in the form of a simple phone call. Investing in real estate requires knowledge and fervor in order to make a serious return. The savvy investor will take advantage of the tools available and exercise every entrepreneurial bone in their body.
There are several avenues to take within the rather large realm of real estate investing. Whether you execute more traditional types of real estate investing such as buying low and flipping or investing in tax liens, there are several profitable routes to take. Another trend forecasted for the coming years is the rise of foreclosure investing. With all the resources available online, foreclosure investing is much easier than once considered. Some services contain listings for foreclosures and tax liens making them a one-stop real estate investment shop.
One truth is that real estate investing will always be a safe bet. With current savings rates as low as they are most investors are scurrying for other investment opportunities. Despite current rumors of the real estate market’s supposed down turn, real estate investing sill provides lucrative profits for those willing to do their homework. Sure, the real estate market may be slow but all these unfounded theories of a crash are better left on the prophesier’s tablet. Certain fluctuations in the real estate market are followed by subsequent market corrections. Whether the entire economy directs these fluctuations or they are triggered by some local cause, there are balances to come.
Look at Florida, for every 10,000 families that leave the sunshine state due to the battering of recent hurricanes there are 15,000 families willing to take their place and bask in the sun. Real estate like any other product of society is still subject to the basic laws of economics- supply and demand. As long as people are seeking to fulfill what Maslow considers one of the most basic and necessary needs then the housing market, and real estate investing, will certainly be a stable sanctuary for your money.
“Real estate investor seeks apprentice, 10k a month.” This might sound familiar to some- the token real estate investing advertisement feeding off the ideas of those wanting a piece of a lucrative industry. And it’s well-founded! Real estate investing is a very profitable business but only to a very lucky few does it come in the form of a simple phone call. Investing in real estate requires knowledge and fervor in order to make a serious return. The savvy investor will take advantage of the tools available and exercise every entrepreneurial bone in their body.
There are several avenues to take within the rather large realm of real estate investing. Whether you execute more traditional types of real estate investing such as buying low and flipping or investing in tax liens, there are several profitable routes to take. Another trend forecasted for the coming years is the rise of foreclosure investing. With all the resources available online, foreclosure investing is much easier than once considered. Some services contain listings for foreclosures and tax liens making them a one-stop real estate investment shop.
One truth is that real estate investing will always be a safe bet. With current savings rates as low as they are most investors are scurrying for other investment opportunities. Despite current rumors of the real estate market’s supposed down turn, real estate investing sill provides lucrative profits for those willing to do their homework. Sure, the real estate market may be slow but all these unfounded theories of a crash are better left on the prophesier’s tablet. Certain fluctuations in the real estate market are followed by subsequent market corrections. Whether the entire economy directs these fluctuations or they are triggered by some local cause, there are balances to come.
Look at Florida, for every 10,000 families that leave the sunshine state due to the battering of recent hurricanes there are 15,000 families willing to take their place and bask in the sun. Real estate like any other product of society is still subject to the basic laws of economics- supply and demand. As long as people are seeking to fulfill what Maslow considers one of the most basic and necessary needs then the housing market, and real estate investing, will certainly be a stable sanctuary for your money.
Friday, November 23, 2007
Black Friday Foreclosure Shopping
The foreclosure market continues to boom as no relief appears in sight for stretched subprime mortgage holders. As the economy shows more signs of a slowdown, this trend is likely to continue.
Although the real estate industry would prefer otherwise, foreclosures continue to make headlines. The latest data showed superficial relief, with September foreclosures down 8% from some 243,000 in August, but still more than double last year -- and still with more to come.
It may be a harsh analogy, but I often think of foreclosure buyers as the forest-floor ants consuming the dead wood to clean the forest.
That means three things. First, as I see it, the sooner we get through this credit mess, the better. Second, the faster properties get through the foreclosure process and find buyers, the sooner we'll get through the mess. So third, foreclosure buyers clean out the dead wood (I like) and get great bargains in the process (I also like).
I can save how much?
My recent column broadly covers the discount you can expect from market value if you buy a foreclosure. It varies by region, but using information published by real estate portal and foreclosure specialists RealtyTrac, I saw discounts ranging from 15% in Hawaii to 40% in Alabama, with 20% and 25% being a rule of thumb.
Not bad. So then the next question, incidentally raised by several readers, is "how do I find those bargains in my area?"
Finding the for sale signs
To locate specific foreclosures in your area, RealtyTrac is a good place to start. Visit the nations #1 site for foreclosures and find homes for half the price.
The site lists foreclosures by ZIP code and foreclosure stage, ranging from preforeclosure property to bank-owned real estate. It's a broad and fairly deep picture of foreclosure availability in your area.
Some have found RealtyTrac less than precise, as the task of keeping up with foreclosure listing activity across the company is large, to say the least. And to get specific information on the property, RealtyTrac requires a $49.95/month subscription after a seven-day free trial.
But realize that RealtyTrac sits behind other real estate sites, so sooner or later you'll probably run into RealtyTrac. If you're serious about foreclosure shopping, you might want to sign up.
Combining sources
If you aren't ready to make the financial commitment or "come out of the closet" as a registered foreclosure buyer, there are several other paths which work surprisingly well:
Bank sales. To their chagrin, banks and financial institutions are going into the real estate business in a big way. Too bad for them, but you can find a lot of bargains on their Web sites: Bank of America, Countrywide and U. S. Bank have good listings, to name a few. Countrywide, for example, has 300 listings in California alone priced under $170,000.
Agency sales. Banks sell their "REO" (Real Estate Owned) but often hire agencies to do the job. Such agencies include Keystone Asset Management, Lenders Asset Management Corporation and HomeEq Servicing. Some of these agencies may operate bank sites, so you may see a similarity.
Government and government-backed lender sales. Government agencies ranging from FHA and VA to HUD and the Department of Justice sell real estate, visible through a single portal. And government-backed Fannie Mae and Freddie Mac also operate sites. The variety of properties available is, shall we say, wide, but Fannie Mae in particular lists a lot of solid mainstream real estate values.
Auctions and auction houses. Local and regional auctions are becoming bigger as banks and others pile up inventory. A real estate auction specialist will announce an auction of dozens, maybe hundreds of properties in a large region or metro area. Auctioneers include Real Estate Disposal Corporation (REDC) and Williams & Williams. Experience helps in playing this game, although the auctioneer sites walk you through the process.
Local real estate specialists. A lot of agents know about action in a particular area and can hook you up with the sellers. Good agents have their eyes and ears to the ground at all times, and get tips and hear about stuff coming on the market. You can often Google "foreclosures (area)" to get local listings.
Don't forget: reward comes with risk
Remember that, while foreclosure properties often sell at a healthy discount, you may run into poorly maintained properties. There may be other foreclosures in the immediate area, hurting the quality and value of your investment. Double check other adjacent listings and visit the area if you can.
Remember: Good value investors buy assets at the right time in the right place at the right price. Real estate is no different.
Although the real estate industry would prefer otherwise, foreclosures continue to make headlines. The latest data showed superficial relief, with September foreclosures down 8% from some 243,000 in August, but still more than double last year -- and still with more to come.
It may be a harsh analogy, but I often think of foreclosure buyers as the forest-floor ants consuming the dead wood to clean the forest.
That means three things. First, as I see it, the sooner we get through this credit mess, the better. Second, the faster properties get through the foreclosure process and find buyers, the sooner we'll get through the mess. So third, foreclosure buyers clean out the dead wood (I like) and get great bargains in the process (I also like).
I can save how much?
My recent column broadly covers the discount you can expect from market value if you buy a foreclosure. It varies by region, but using information published by real estate portal and foreclosure specialists RealtyTrac, I saw discounts ranging from 15% in Hawaii to 40% in Alabama, with 20% and 25% being a rule of thumb.
Not bad. So then the next question, incidentally raised by several readers, is "how do I find those bargains in my area?"
Finding the for sale signs
To locate specific foreclosures in your area, RealtyTrac is a good place to start. Visit the nations #1 site for foreclosures and find homes for half the price.
The site lists foreclosures by ZIP code and foreclosure stage, ranging from preforeclosure property to bank-owned real estate. It's a broad and fairly deep picture of foreclosure availability in your area.Some have found RealtyTrac less than precise, as the task of keeping up with foreclosure listing activity across the company is large, to say the least. And to get specific information on the property, RealtyTrac requires a $49.95/month subscription after a seven-day free trial.
But realize that RealtyTrac sits behind other real estate sites, so sooner or later you'll probably run into RealtyTrac. If you're serious about foreclosure shopping, you might want to sign up.
Combining sources
If you aren't ready to make the financial commitment or "come out of the closet" as a registered foreclosure buyer, there are several other paths which work surprisingly well:
Bank sales. To their chagrin, banks and financial institutions are going into the real estate business in a big way. Too bad for them, but you can find a lot of bargains on their Web sites: Bank of America, Countrywide and U. S. Bank have good listings, to name a few. Countrywide, for example, has 300 listings in California alone priced under $170,000.
Agency sales. Banks sell their "REO" (Real Estate Owned) but often hire agencies to do the job. Such agencies include Keystone Asset Management, Lenders Asset Management Corporation and HomeEq Servicing. Some of these agencies may operate bank sites, so you may see a similarity.
Government and government-backed lender sales. Government agencies ranging from FHA and VA to HUD and the Department of Justice sell real estate, visible through a single portal. And government-backed Fannie Mae and Freddie Mac also operate sites. The variety of properties available is, shall we say, wide, but Fannie Mae in particular lists a lot of solid mainstream real estate values.
Auctions and auction houses. Local and regional auctions are becoming bigger as banks and others pile up inventory. A real estate auction specialist will announce an auction of dozens, maybe hundreds of properties in a large region or metro area. Auctioneers include Real Estate Disposal Corporation (REDC) and Williams & Williams. Experience helps in playing this game, although the auctioneer sites walk you through the process.
Local real estate specialists. A lot of agents know about action in a particular area and can hook you up with the sellers. Good agents have their eyes and ears to the ground at all times, and get tips and hear about stuff coming on the market. You can often Google "foreclosures (area)" to get local listings.
Don't forget: reward comes with risk
Remember that, while foreclosure properties often sell at a healthy discount, you may run into poorly maintained properties. There may be other foreclosures in the immediate area, hurting the quality and value of your investment. Double check other adjacent listings and visit the area if you can.
Remember: Good value investors buy assets at the right time in the right place at the right price. Real estate is no different.
Thursday, November 15, 2007
Is Flipping houses a lucrative investment?
Flipping houses is one of the most lucrative investment strategies you can make. I stress that statement with one caveat, though: You absolutely must do your due diligence and your homework before you invest. Contrary to conventional wisdom, the hardest part about flipping houses is not the financing. (That's actually the easy part, because you don't even need to use your own credit or your own money.) The hardest part is not even doing the actual rehab work to fix up the foreclosure property and getting it back on the market. The hardest part is not even the negotiation or the bidding process. If you've done your homework, negotiation is really a matter of having the interpersonal communications skills to convey to the seller that you want to help them out.
The hardest part about flipping houses is doing the research and making the determination whether or not a particular property is worth investing in. Once you make the decision to either pass on a particular house or to go forward with the negotiation process, it becomes a matter of statistical numbers, salesmanship, and a bit of luck.
Many a time have foreclosure real estate investors been burned by neglecting to do their homework before investing in a particular parcel of real estate. Novice investors have a tendency to get emotionally attached to particular deals for some reason. Perhaps they like the house. Perhaps they think this house is a guaranteed home run and will net them with a nice decent five- or even six-figure profit. But when they actually sign the paperwork and handover the money to do the deal, the nightmare begins.
The house may need far more repairs than originally anticipated, and the investor had not bothered to do a visual walk-through of the house, or did not buy the house with a low enough loan-to-value (LTV) margin to leave room for repairs before flipping it. Or, the house is in a neighborhood or market where homes are sitting for upwards of six months at a stretch before being sold, and the investor ends up making monthly payments on the house that eat into his or her profits, and ends up having to rent out the place for less than the monthly payments on the mortgage are.
The house may have had an encumbrance on it such as a judgment lien or a second or third mortgage, and the investor didn't bother to conduct a title search to ensure clean title.
Or quite simply, the homeowner just didn't do a CMA (comparative market analysis) properly and didn't buy the house at a low enough percentage below market value in order to make the deal profitable.
You may have heard the expression from various foreclosure gurus that you make your money on an investment when you buy it, not when you sell it. In other words, what that means is that you should only be buying assets that have equity that can be realized.
Research is one of the single most important aspects of the foreclosure investing business. When done properly, you will find riches beyond your wildest dreams. When done improperly, you are digging a deeper hole for yourself financially. I know from personal experience, having done foreclosure investing, the sad reality of this fact. As a rookie investor, my first couple of deals I barely made a few pennies on. I was lucky that I didn't end up losing my shirt. I walked away with a few bucks. This was because I hadn't done the math right in my calculations because more was owed on the house than I previously thought. On another deal, I ended up paying more in repairs than I had anticipated, because I had never been inside the house before the homeowner deeded the house over to me. But then on my next deals, because I had done my homework properly (having learned from my mistakes with my previous deals), I was able to get into deals with a much healthier profit margin. A healthy profit margin is very important to maintain when doing your calculations. You can almost always expect that, due to factors beyond your control, you have the potential to make less on a deal than the numbers tell you that you will on paper. If you think you will net $20,000 on a particular property, you might end up only making $10,000 or $15,000, or who knows, maybe even less.
That is why research is important. That is why it is important to use a reliable foreclosure listing service that provides reliable and accurate data. Yes I could go to the courthouse and research the deals myself, but rather than spend countless hours looking through files from 8am to 4pm on weekdays, I would rather use my valuable time to evaluate pre-researched deals, make go / no-go decisions on each deal based on the researched information, and then focus more of my time on the actual process of making offers. If you want to be a successful real estate investor, you will learn that if you want to do a volume of deals, you will need to outsource some of your tasks. The easiest one to outsource is the compilation of foreclosure listings and researching of the deals. (You don't have to train anyone to do it, because there are services out there that already do this for you.)
Learn more about foreclosures and get access to all the tools you need to get started investing today at http://www.thenoteservice.com
The hardest part about flipping houses is doing the research and making the determination whether or not a particular property is worth investing in. Once you make the decision to either pass on a particular house or to go forward with the negotiation process, it becomes a matter of statistical numbers, salesmanship, and a bit of luck.
Many a time have foreclosure real estate investors been burned by neglecting to do their homework before investing in a particular parcel of real estate. Novice investors have a tendency to get emotionally attached to particular deals for some reason. Perhaps they like the house. Perhaps they think this house is a guaranteed home run and will net them with a nice decent five- or even six-figure profit. But when they actually sign the paperwork and handover the money to do the deal, the nightmare begins.
The house may need far more repairs than originally anticipated, and the investor had not bothered to do a visual walk-through of the house, or did not buy the house with a low enough loan-to-value (LTV) margin to leave room for repairs before flipping it. Or, the house is in a neighborhood or market where homes are sitting for upwards of six months at a stretch before being sold, and the investor ends up making monthly payments on the house that eat into his or her profits, and ends up having to rent out the place for less than the monthly payments on the mortgage are.
The house may have had an encumbrance on it such as a judgment lien or a second or third mortgage, and the investor didn't bother to conduct a title search to ensure clean title.
Or quite simply, the homeowner just didn't do a CMA (comparative market analysis) properly and didn't buy the house at a low enough percentage below market value in order to make the deal profitable.
You may have heard the expression from various foreclosure gurus that you make your money on an investment when you buy it, not when you sell it. In other words, what that means is that you should only be buying assets that have equity that can be realized.
Research is one of the single most important aspects of the foreclosure investing business. When done properly, you will find riches beyond your wildest dreams. When done improperly, you are digging a deeper hole for yourself financially. I know from personal experience, having done foreclosure investing, the sad reality of this fact. As a rookie investor, my first couple of deals I barely made a few pennies on. I was lucky that I didn't end up losing my shirt. I walked away with a few bucks. This was because I hadn't done the math right in my calculations because more was owed on the house than I previously thought. On another deal, I ended up paying more in repairs than I had anticipated, because I had never been inside the house before the homeowner deeded the house over to me. But then on my next deals, because I had done my homework properly (having learned from my mistakes with my previous deals), I was able to get into deals with a much healthier profit margin. A healthy profit margin is very important to maintain when doing your calculations. You can almost always expect that, due to factors beyond your control, you have the potential to make less on a deal than the numbers tell you that you will on paper. If you think you will net $20,000 on a particular property, you might end up only making $10,000 or $15,000, or who knows, maybe even less.
That is why research is important. That is why it is important to use a reliable foreclosure listing service that provides reliable and accurate data. Yes I could go to the courthouse and research the deals myself, but rather than spend countless hours looking through files from 8am to 4pm on weekdays, I would rather use my valuable time to evaluate pre-researched deals, make go / no-go decisions on each deal based on the researched information, and then focus more of my time on the actual process of making offers. If you want to be a successful real estate investor, you will learn that if you want to do a volume of deals, you will need to outsource some of your tasks. The easiest one to outsource is the compilation of foreclosure listings and researching of the deals. (You don't have to train anyone to do it, because there are services out there that already do this for you.)
Learn more about foreclosures and get access to all the tools you need to get started investing today at http://www.thenoteservice.com
Monday, November 12, 2007
Secrets to Finding Foreclosure Deals
Secrets to Finding Foreclosure Deals
With experience comes knowledge. And Louis Butler certainly has the experience to give him ample knowledge about how to find foreclosure bargains. After purchasing more than 25 foreclosure properties in the Little Rock, Ark., area, Butler can spot a deal from more than a thousand miles away — literally.
“I don’t need a spreadsheet or software to spot a deal,” said the San Dimas, Calif., native who buys foreclosures in a town that is nearly 1,600 miles from where he lives and works. “I have a local real estate agent in Little Rock, and local title and loan people that help put together my foreclosure deals.”
Butler originally lived in the Little Rock area, so he knows the good locations and neighborhoods. He said he looks for properties with 30 to 40 percent equity. Then, he puts together wholesale deals that are 20 to 30 percent below market value in certain areas and zip codes that he is familiar with.
“I pencil it out, look at the comps, search for liens and rely on my local realtor to send me photographs,” he explained. “Then, I contact the owner and negotiate a price. A lot of my deals I don’t even inspect the property. I look at photographs sent to me from my realtor and study the comps.”
To accommodate his long-distance investing, Butler sometimes receives closing documents via overnight couriers and has to sign the documents and ship them back immediately. The mailing costs are a small price to pay for the benefits of investing in a market that produces so many good deals for him.
Targeting a less-expensive housing market across the country has helped Butler locate a plethora of bargain buys, but that’s not the only way to find great deals on foreclosures. There are as many strategies for finding great deals as there are foreclosure investors. Below are a few key strategy secrets from experienced investors across the country.
Handwritten letters stand out
While many investors use printed form letters to contact homeowners in default, investor Michelle Mangione relies on handwritten envelopes to drive her foreclosure business. Mangione’s letter-writing strategy got her the dream home she currently lives in four years ago when she first started investing in foreclosures. She purchased her Fallbrook, Calif., home in 2003 for $655,000. In March and April 2007, two homes down the street sold for more than $1.5 million.
“I target pre-foreclosures and send out handwritten envelopes with a form letter inside,” said Mangione, a licensed realtor who invests in foreclosures full-time. Mangione mails 500 to 1,000 letters at a time to homeowners in the early stages of default. Typically, she gets a response rate of about 1 to 3 percent per mailing. Many conversations with distressed homeowners go nowhere, she said. “When I get a telephone call back, then I check out the property and start the dialogue with the owner.”
Auction deals can amaze
Like Mangione, Michigan real estate investor Nancy Levin also purchased her dream home in foreclosure. Levin found a foreclosed home in an affluent Detroit community.
“The property was in pre-foreclosure when I first saw it online,” explained Levin. “I kept tracking it on the Internet. My agent didn’t even know the property was in foreclosure. Finally, it went to auction — and to my surprise — I was the only one who showed up at the auction. I paid cash at the auction and bought the house for $260,000.”
Levin said the 2,800 square foot Bloomfield Hills home, which appraised for $430,000, was totally remodeled and featured three baths and three bedrooms. She bought the redemption rights from the previous owner for another $20,000 and moved in.
“I got this place for a steal,” Levin said. “Right now, Michigan is foreclosure heaven. It’s raining foreclosures here. I’m looking to do another one soon. If I can find a deal like the one I’m living in, I’ll definitely buy it.”
Strike while the iron is hot
Glen Miller, a 39-year veteran of foreclosure investing, believes now is a great time to buy foreclosures.
“After I look at the properties on RealtyTrac, I then go the courthouse and look for properties that have low mortgage balances and I look for any outstanding liens,” said Miller, who currently owns 20 foreclosure properties in and around Vero Beach, Fla. Miller owns eight duplexes, four single family homes, a condo unit and has just flipped five foreclosures. Now, Miller is finishing rehabbing another foreclosure that he will sell soon.
“I’m putting on a new roof on this four-bedroom, two-bath home in Fort Pierce I bought for $60,000,” Miller said. “I’ll invest another $20,000 and put it on the market in the next three weeks and list it for $130,000. I should sell this one fast because the other homes on the market are listed for $160,000 and more.”
While there’s no one secret to buying foreclosure property at discounted prices, Miller and the other investors agree that it’s important that investors jump in and find out what works for their personality and target market. Once they find a strategy that works, investors should stick with it.
“You got to have common horse sense. This isn’t rocket science,” Miller said. “You just have get off your behind and go out and attack the market.”
With experience comes knowledge. And Louis Butler certainly has the experience to give him ample knowledge about how to find foreclosure bargains. After purchasing more than 25 foreclosure properties in the Little Rock, Ark., area, Butler can spot a deal from more than a thousand miles away — literally.
“I don’t need a spreadsheet or software to spot a deal,” said the San Dimas, Calif., native who buys foreclosures in a town that is nearly 1,600 miles from where he lives and works. “I have a local real estate agent in Little Rock, and local title and loan people that help put together my foreclosure deals.”
Butler originally lived in the Little Rock area, so he knows the good locations and neighborhoods. He said he looks for properties with 30 to 40 percent equity. Then, he puts together wholesale deals that are 20 to 30 percent below market value in certain areas and zip codes that he is familiar with.
“I pencil it out, look at the comps, search for liens and rely on my local realtor to send me photographs,” he explained. “Then, I contact the owner and negotiate a price. A lot of my deals I don’t even inspect the property. I look at photographs sent to me from my realtor and study the comps.”
To accommodate his long-distance investing, Butler sometimes receives closing documents via overnight couriers and has to sign the documents and ship them back immediately. The mailing costs are a small price to pay for the benefits of investing in a market that produces so many good deals for him.
Targeting a less-expensive housing market across the country has helped Butler locate a plethora of bargain buys, but that’s not the only way to find great deals on foreclosures. There are as many strategies for finding great deals as there are foreclosure investors. Below are a few key strategy secrets from experienced investors across the country.
Handwritten letters stand out
While many investors use printed form letters to contact homeowners in default, investor Michelle Mangione relies on handwritten envelopes to drive her foreclosure business. Mangione’s letter-writing strategy got her the dream home she currently lives in four years ago when she first started investing in foreclosures. She purchased her Fallbrook, Calif., home in 2003 for $655,000. In March and April 2007, two homes down the street sold for more than $1.5 million.
“I target pre-foreclosures and send out handwritten envelopes with a form letter inside,” said Mangione, a licensed realtor who invests in foreclosures full-time. Mangione mails 500 to 1,000 letters at a time to homeowners in the early stages of default. Typically, she gets a response rate of about 1 to 3 percent per mailing. Many conversations with distressed homeowners go nowhere, she said. “When I get a telephone call back, then I check out the property and start the dialogue with the owner.”
Auction deals can amaze
Like Mangione, Michigan real estate investor Nancy Levin also purchased her dream home in foreclosure. Levin found a foreclosed home in an affluent Detroit community.
“The property was in pre-foreclosure when I first saw it online,” explained Levin. “I kept tracking it on the Internet. My agent didn’t even know the property was in foreclosure. Finally, it went to auction — and to my surprise — I was the only one who showed up at the auction. I paid cash at the auction and bought the house for $260,000.”
Levin said the 2,800 square foot Bloomfield Hills home, which appraised for $430,000, was totally remodeled and featured three baths and three bedrooms. She bought the redemption rights from the previous owner for another $20,000 and moved in.
“I got this place for a steal,” Levin said. “Right now, Michigan is foreclosure heaven. It’s raining foreclosures here. I’m looking to do another one soon. If I can find a deal like the one I’m living in, I’ll definitely buy it.”
Strike while the iron is hot
Glen Miller, a 39-year veteran of foreclosure investing, believes now is a great time to buy foreclosures.
“After I look at the properties on RealtyTrac, I then go the courthouse and look for properties that have low mortgage balances and I look for any outstanding liens,” said Miller, who currently owns 20 foreclosure properties in and around Vero Beach, Fla. Miller owns eight duplexes, four single family homes, a condo unit and has just flipped five foreclosures. Now, Miller is finishing rehabbing another foreclosure that he will sell soon.
“I’m putting on a new roof on this four-bedroom, two-bath home in Fort Pierce I bought for $60,000,” Miller said. “I’ll invest another $20,000 and put it on the market in the next three weeks and list it for $130,000. I should sell this one fast because the other homes on the market are listed for $160,000 and more.”
While there’s no one secret to buying foreclosure property at discounted prices, Miller and the other investors agree that it’s important that investors jump in and find out what works for their personality and target market. Once they find a strategy that works, investors should stick with it.
“You got to have common horse sense. This isn’t rocket science,” Miller said. “You just have get off your behind and go out and attack the market.”
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