March 29, 2010
Real Estate Investing Strategies For Today’s Market
When you think of virtual real estate investing, a number of things may come to mind. Depending on how familiar you are with real estate investing already, you might think of real estate portfolios and real estate retirement plans, or you might focus on short sales, bulk reo investing and virtual real estate investing. You probably also wonder how these things play out in real estate investors life in the current economy.
There is a lot to learn about real estate investing. To get the most out of real estate investing education, be familiar with basic information ahead of time. Short sales, bulk reo sales, virtual real estate and general real estate investor abilities all are improved by knowing some basics of real estate investing. Here are three real estate investing basics that even some experts do not really know:
1. You always will get a positive result from investing in real estate investing education. Every good real estate deal represents thousands of dollars in potential wealth. Knowing how to get that wealth is the key to success. When you know about real estate your odds of success increase with each real estate deal. A small investment in your education can yield big results when you implement your learning.
2. You can succeed in real estate investing in any economy. Many people think that you can only succeed in real estate when the economy is booming. Actually a poor economy is not a bad economy for real estate investors. You can often buy properties at deep discounts. You might also find deals that simply would not exist in a booming economy. Real estate investing often is what turns the tide for poor economies. Short sales, bulk reo sales and virtual real estate all can thrive when the economy is not. You will have the option of saving yourself and possibly others from serious financial difficulties if you know about these types of deals.
3. You do not need a lot of money to be a successful real estate investor. You can make a success of real estate investing no matter how much or little money you have. Many types of deals enable you to use other people’s money to do them. If you look like a good investment a private lender may let you use their money. The best way to look like a solid investment is to have an in-depth knowledge of real estate investing. This will help you show people that you are a good investment if they have the money to help you with real estate investing but they do not know how to use it.
Real estate investing is a good way to generate a great deal of wealth. You will have the ability to create income in any economy. Using a knowledge base of real estate investing, short sales, bulk reo sales and virtual real estate you will be able to make success for yourself. Knowing the basics of real estate investing will help you succeed as a real estate investor. Knowing some real estate investing basics (beyond what older gurus like Robert Allen teach) and applying them will help you succeed as a real estate investor.
Great real estate investing resources are available at RealEstate.BryanEllis.com.
Filed under Uncategorized by Sam
June 9, 2009
U.S. Senate Seizing Control of Real Estate Investing
“PLEASE READ EVERY WORD ON THIS POST”
The U.S. Senate is considering a bill that would severely limit the way you do business as a creative real estate investor and, more importantly, is an inexcusable infringement of the property rights of all Americans.
HR 1728, which you can view in its entirety here, deals with a plethora of mortgage-related issues, mostly around limited terms and fees on residential loans.
But the heinous piece of the legislation is in section 101(3)(e), which defines the affected principals as:
(E) does not include, with respect to a residential mortgage loan, a person, estate, or trust that provides mortgage financing for the sale of 1 property in any 36-month period, provided that such loan -
(i) is fully amortizing;
(ii) is with respect to a sale for which the seller determines in good faith and documents that the buyer has a reasonable ability to repay the loan;
(iii) has a fixed rate or an adjustable rate that is adjustable after 5 or more years, subject to reasonable annual and lifetime limitations on interest rate increases; and
(iv) meets any other criteria the Federal banking agencies may prescribe;
Yeah, I know, confusing.
But here’s what it says:
You are NOT subject to the law as long as you DON’T sell more than 1 property with owner financing every 3 years!
Or, to put it another way, you ARE subject to the limitations of the law if you DO sell more than one property every 3 years via a land contract, owner-held mortgage or wrap-around mortgage… and who knows if they’ll define lease/options as owner financing, too?
So what does it mean to be “subject to the law”?
Well, at the very least, it means that you will have to comply with a long, confusing, and penalty-filled piece of national legislation.
Here are the types of transactions that you would be restricted from doing more than once every 36 months:
- Selling YOUR OWN HOME using a land contract or owner-held mortgage so that you can get a quicker sale, higher sale price, or better rate of interest than is available in other investments
- Carrying back owner-held second mortgages on investment properties that you sell
- Doing any kind of installment sale on residential properties including homes, condos, mobile homes, and even raw land that is zoned residential
Yes, there will undoubtedly by ways to “get around it” – some have suggested that getting a mortgage broker’s license and then learning and following the vast new set of regulations would circumvent the “problem”.
But the bottom line is, this law has to be stopped and it has to be stopped NOW.
Here’s why:
- Congress is trying to regulate the wrong thing.The deals we make are not “loans” – they don’t involve the transfer of money, or points or closing costs or adjustable rates or any of the other things that caused the mortgage crisis to begin with. They are INSTALLMENT SALES.
We don’t give money to the “borrower” and wait for it to be paid back: we give a property to the borrower and wait for it to be paid off. Regulating this will have no effect on the foreclosure crisis.
- It is a completely unacceptable infringement on private property rights.When I own a piece of property and I find a ready, willing, and able purchaser, I should be able to control the sale of that property within the existing laws of my state, which already regulate the interest rate that I am able to charge and some of the terms of the sale.
The government does not have the right to tell us that we need special licensing to sell our own properties; nor do they have the right to further regulate the terms under which we can sell or burden small investors with a new set of rules that we can’t comply with.
Not only will this new law, if passed as written, effectively choke off owner financing as an exit strategy for you, it will also take away housing choice for your buyers. The millions of Americans who’ve been through foreclosure in the last 3 years can’t buy a house in any way OTHER THAN to negotiate owner financing with a seller – and HR 1728 would greatly reduce the number of properties available in this way.
Millions of potential home owners who would otherwise be able to re-start the process of paying off a home, and get the tax advantages of ownership, will be reduced to renting until they are able to qualify for bank financing.
Here’s What to Do Right Now:
This bill has already passed the house and is waiting for Senate approval. Please contact your senator via email and snail mail to let him know that this law MUST NOT PASS in its current form. You can get your senator’s contact information here:
http://www.senate.gov/general/contact_information/senators_cfm.cfm
As always in cases like this, you have an automatic handicap to overcome… the fact that you are a real estate investor and are therefore viewed as part of the problem. So when you write, don’t emphasize the nature of your business, just that you and your buyers would be greatly aversely affected by the new law.
We need THOUSANDS of these communications to go out in the next few days to have a CHANCE of stopping this in its tracks. So whether you’re a new or experienced investor, PLEASE take the time right now to write your elected representative!
Here are some sample letters or emails…
IF YOU HAVE A REAL ESTATE LICENSE:Dear Senator [name];
My name is [insert name here] and I am a life-long resident of [insert city name here].
I am writing you to encourage you to vote NO on HR 1728, the “Mortgage Reform and Anti-Predatory Lending Act”.
While many of the provisions of the act are positive steps toward mortgage reform, the inclusion of private owners in the act (see section 101(3)(e)) will enormously reduce the housing choice of [Ohioans] and the ability of home owners to sell properties in this already-slow market.
As a real estate broker, I have seen several dozen cases in the past year of home sellers and buyers coming to an agreement for an installment sale on a property that the owner desperately needed to sell (often to avoid foreclosure) and the buyer desperately wanted to buy, but could not raise the downpayment needed for conventional financing.
In all cases, these sales turned out to be win-win deals for the buyer and seller; the seller was able to get rid of an unwanted property to a buyer who loved it, and the buyer was able to get his new home at an affordable payment and interest rates with none of the usual costs (points, application fees etc) inherent in more conventional mortgage transactions.
In [Ohio], these transactions are already regulated by state law: a low maximum interest rate is already in place, and both the buyer and seller are protected by other regulations at the state level.
In defense of private property rights, owners should be exempted from the burdensome and unnecessary rules that this law foists upon them. In its current form, it would all but shut off the “owner financing” market that is the only way that many sellers can sell and many buyers can buy right now.
PLEASE DO NOT LET THIS RESTRICTION ON PRIVATE PROPERTY RIGHTS PASS THE SENATE. It is unnecessary to stop private buyers and sellers from transacting business that is beneficial to both of them-they are not the problem that the bill seeks to solve. HR 1728 would be extremely harmful to thousands of your constituents.
It will exacerbate the problem OF foreclosure, as fewer sellers will be able to sell their homes to avoid it, and CAUSED BY foreclosure, as fewer buyers who have recently experienced foreclosure will be able to re-start the process of home ownership inexpensively and easily by negotiating owner financing.
Thank you for your consideration;
Insert Name
Licensed Real Estate Broker license #
Phone #
email
IF YOU SELL HOUSES WITH OWNER FINANCING:Dear Senator [name];
My name is [insert name here] and I am a life-long resident of [insert city name here].
I am writing you to encourage you to vote NO on HR 1728, the “Mortgage Reform and Anti-Predatory Lending Act”.
While many of the provisions of the act are positive steps toward mortgage reform, the inclusion of private owners in the act (see section 101(3)(e)) will enormously reduce the housing choice of [Ohioans] and the ability of home owners to sell properties in this already-slow market.
As a professional housing provider, I sell several houses each year to home buyers on installment sale [or, if you have not purchased a property, add here: "I had planned to sell several houses this year on installment sale]-a practice that would become impossible under this law in its current form.
I find that in today’s slow market, the best way for me to help buyers who desperately want to become homeowners, but who cannot raise the downpayment or meet the other terms needed for conventional financing, is to allow them to make payments directly to me.
These sales are win-win deals for both the buyer and myself; I am able to turn over homes that I’ve bought and rehabbed (often from foreclosures) to buyers who love and can afford them, and the buyer can get his new home at an affordable payment and interest rates with none of the usual costs (points, application fees etc) inherent in more conventional mortgage transactions.
In [Ohio], these transactions are already regulated by state law: a low maximum interest rate is already in place, and both the buyer and seller are protected by other regulations at the state level.
Without the ability to sell homes in this way, I will no longer be able to invest in and renovate any of the tens of thousands of vacant, ugly houses placed on the market by the foreclosure crisis, and my small-but-beneficial business will literally be in ruins. Perhaps more importantly, the homeowner-buyers that I serve will be forced to rent rather than moving toward the American dream of home ownership.
In defense of private property rights, owners should be exempted from the burdensome and unnecessary rules that this law foists upon them. In its current form, it would all but shut off the “owner financing” market that is the only way that many sellers can sell and many buyers can buy right now.
PLEASE DO NOT LET THIS RESTRICTION ON PRIVATE PROPERTY RIGHTS PASS THE SENATE. It is unnecessary to stop private buyers and sellers from transacting business that is beneficial to both of them-they are not the problem that the bill seeks to solve. HR 1728 would be extremely harmful to thousands of your constituents.
It will exacerbate the problem OF foreclosure, as fewer sellers will be able to sell their homes to avoid it, and CAUSED BY foreclosure, as fewer buyers who have recently experienced foreclosure will be able to re-start the process of home ownership inexpensively and easily by negotiating owner financing.
Thank you for your consideration;
Insert Name
Perfect Properties, inc.
Phone number
email
IF YOU BUY HOUSES WITH OWNER FINANCING:Dear Senator [name];
My name is [insert name here] and I am a life-long resident of [insert city name here].
I am writing you to encourage you to vote NO on HR 1728, the “Mortgage Reform and Anti-Predatory Lending Act”.
While many of the provisions of the act are positive steps toward mortgage reform, the inclusion of private owners in the act (see section 101(3)(e)) will enormously reduce the housing choice of [Ohioans] and the ability of home owners to sell properties in this already-slow market.
In the past year, I have purchased and renovated several homes-made possible only because the sellers of these homes were able to sell to me using owner financing in an unrestricted way.
For many of these property owners, seller financing was the only way to unburden themselves of an unwanted property that, in some cases, was headed toward foreclosure before I purchased it.
Without this ability, I can not continue to buy and renovate properties in the neighborhoods that so need me and my colleagues to invest our time, energy, and money in rehabbing properties. Bank financing is not an option for these properties because of the condition; only financing carried by the sellers will suffice.
Section 101(3)(e) would keep my sellers from utilizing this method of getting rid of unwanted properties in today’s market, should they have more than 1 to sell.
In defense of private property rights, owners should be exempted from the burdensome and unnecessary rules that this law foists upon them. In its current form, it would all but shut off the “owner financing” market that is the only way that many sellers can sell and many buyers can buy right now.
PLEASE DO NOT LET THIS RESTRICTION ON PRIVATE PROPERTY RIGHTS PASS THE SENATE. It is unnecessary to stop private buyers and sellers from transacting business that is beneficial to both of them-they are not the problem that the bill seeks to solve. HR 1728 would be extremely harmful to thousands of your constituents.
It will exacerbate the problem OF foreclosure, as fewer sellers will be able to sell their homes to avoid it, and CAUSED BY foreclosure, as fewer buyers who have recently experienced foreclosure will be able to re-start the process of home ownership inexpensively and easily by negotiating owner financing.
Thank you for your consideration;
Insert Name
Perfect Properties, inc.
Phone number
email
Thanks to Peter Conti for article content & for bringing this to my attention.
Filed under Real Estate Financing by Sam
In our last installment we discussed how to take advantage of the foreclosure market, how to find and analyze the deals to make sure they are profitable. However finding a deal, determining the value, and establishing a good exit strategy is just half the battle. Now depending where you are in your investing career you could just make money finding deals and selling the leads to investors, but making money that way is normally reserved for the beginning investors who may not have money or credit. Let’s assume for a minute that you are not the typical newbie investor looking for a quick buck, but a more sophisticated refined investor who wants to leverage O.P.M. (Others.People.Money) to start doing deals. Well where do you go for O.P.M.?
Good question and the short and sweet answer is simply hard money lenders. Now when I say hard money, I don’t mean your local neighborhood loan shark who might break your leg if the funds aren’t returned in a timely fashion. Nor am I referring to the hard money lender that forces you to borrow from them with exuberant interest rates, just so you can buy their protection. I’m talking about small companies or private individuals who have readily available liquid cash that they can lend for a short time period for the acquisition and rehab of a property.
One of the best places to locate these individuals or companies, is to go to your local R.E.I.A (Real Estate Investor Association) meeting and ask around. You want to ask specific questions when looking for a good hard money lender. Here is a good check list of what to ask when shopping for a good hard money person.
#1 What are the hard money lenders requirements for the borrower and the property?
Does the borrower have to have a certain middle score to get the loan, or is the loan based exclusively on the property and not the person, what is the maximum LTV, are there cash reserve requirements.
#2 What are the terms the hard money lender has to offer? Will the loan be for 6 months or 12 months, how many points have to be paid upfront at closing, what will the interest rate be, how is the draw schedule structured
#3 What type of relationship do the lenders have with their current clients? Are they a very personable small operation who works closely with their borrowers, are they a large firm who don’t know their borrowers on a first name basis. How flexible are they if something happens and you get into a jam, will they work with you; hopefully you won’t ever need them to work with you but this is not a perfect business and sometimes life happens.
Those are some core basic questions you should be asking when trying to select a hard money lender. At the end of the day as long as you are comfortable with the terms and the structure of the loan and the lender does not have a bad reputation you should be ready to move forward. Please make sure you take your time and go through this due- diligence process and do not cut any corners when it comes to selecting good money partners to work with. By the way I found a pretty good resource that will help you eliminate all the risk associated with hard money loans. Check it out and let me know what you think Click Here For Hard Money Resource . Until we meet again keep learnin & keep earnin.
Filed under Real Estate Financing by Sam
