Simple Strategies Real Estate Entrepreneurs Can Use to Improve Their Credit Score

Every real estate entrepreneur quickly learns that establishing good credit is essential for structuring sound and profitable real estate deals.  Whether you are searching for long-term financing for a new rental property or looking for short-term funds for a fix up, your success may very likely be tied to your ability to secure loans with lower interest rates and great terms.

Lenders will evaluate your ability to repay these loans based to a large degree on what is known as your “credit score”.  This credit score is also referred to as your FICO Score. This term has become common place in the finance community because the software used to calculate the credit score was developed by the Fair Isaac Corporation (FICO).  Since 90 percent of all commercial lenders use the FICO Score to determine an individual’s ability to repay a loan, it makes sense for the real estate entrepreneur to improve his or her credit score as much as possible.

Creditors make their decisions based on your credit score.  The credit score is determined based on five factors.  Payment history accounts for approximately 35% of the score; amounts owed for approximately 30%; length of credit history approximately 15%; total amount of credit approximately 10%; and types of credit approximately 10%.  You can’t hope to improve your FICO Score unless you know what that score is.  Start immediately by obtaining a copy of your credit report.  You can contact the major credit reporting bureaus, including: Equifax, Experian, and TransUnion.  There are also numerous resources for obtaining a free copy of your personal credit report.  Simply log on to one of the major search engines and search for “FREE CREDIT REPORT”.

 

Strategy #1 – Obtain and Review Your Credit Report

Once you have access to your credit report, you need to commit yourself to reviewing the information contained in the report.  It’s possible that some of the information provided by the banks, financial institutions, and contributing companies could be in error.  It’s also possible in today’s climate of identity theft that your identity could be used in fraudulent transactions.  If you identify any errors, you need to call and contact the contributors to correct any mistakes that you identify.  In some cases, a simple contact by phone might immediately improve your credit score.

When you contact these companies, you must be aware that you will need to provide evidence of who you are and why the item you dispute is incorrect or outright false.   One entrepreneur recently reviewed his credit report and found that his score was negatively impacted by failure to pay alimony and child support.  He was quite surprised because he had never been married or fathered any children.  In his case, he had been misidentified because there was another man with the same name and the social security numbers were mixed up.

This action of reviewing your credit report should be done on a regular basis as new entries on your credit report are constantly being added.

 

Strategy #2 – Immediately Improve Way You Pay Bills

Your credit score is determined by five major factors starting with the payment history.  Approximately 35% of a credit score is based upon the history of the payments made on past and present bills.  This being the case, you need to take preemptive steps to maintain good payment practices or improve slow or late payment practices.  When you review your credit report, you will notice immediately the impact of late payments.  If that’s the case, now is the time to turn that trend around.

Start by the simple act of making a schedule of when you pay your bills and then pay the bills on time.  It helps to make a list of all your bills and the due dates on regular bills.  An added benefit is that you see in real terms what how much of your income is going out on regular bills.

Consider signing up for automatic payments on regular occurring debt.  The advantage of this is that your bills are paid promptly, and in many cases, you will get better terms from the lender.  Make sure that you have the funds on hand in the accounts you use to fund these automatic payments.

There may be times when you as an entrepreneur find yourself in a financial situation where you can’t avoid a late payment.  Avoid these situations whenever possible, but if it happens, make sure that you never let the late payment go more than 30 days.  Some lenders don’t always report late payments up to 30 days, but all report late payments that are 60 days late.  Above all, don’t make a habit of being late even for a few days on bills that become due.

 

Strategy #3 – Manage Your Personal Credit

Approximately 30% of your FICO Score is based on the amount owed by an individual.  Your first objective is to avoid opening new credit accounts.  In today’s world, you are offered incentives to open new credit accounts on a constant basis.  Even if you don’t plan on using this credit, the newly opened credit account will have a negative impact on your credit score.  Despite the credit account being open, the lender may believe that you may have future problems in reducing or paying off the debt.

Next focus on paying off credit cards.  Credit card interest is usually the highest interest rate charged for a loan.  When you have credit cards, try and pay off the loan as rapidly as possible, and once you have past credit card amounts paid, attempt to pay off the balance entirely when it comes due each month.  This will help raise your credit score right away.

It’s entirely possible to get into the position of having high credit card balances, but doing so will create problems with your credit score, while having a negative impact on your ability to make good real estate deals.  If you do have a balance on your credit card, it’s been found that you want to keep your credit card balance at approximately 30% of the card’s available credit.  This means, in simple terms, that if you had a credit limit of $10,000, you would not want to have a balance of more than $3,000.

 

Strategy #4 – Start Eliminating Debt

Naturally we all want to get out of debt.  When we do so, we have a much more enjoyable life, but it also allows us to increase our credit score.  There is a difference between investment debt and personal debt.  Your credit score can actually increase when you are purchasing a home.  If you haven’t had credit in the past, you will want to establish credit by purchasing an automobile or some other asset on credit.  The key is to establish the credit and then to pay it off.  It has been shown that if you maintain the loan and make regular payments for at least 8 months, you can establish regular payments.  Once you have established credit, start getting rid of as much debt as possible.

The first debt you want to immediately eliminate is credit card balances.  You should now be aware that these unpaid balances on credit cards will reduce your credit score.  Some entrepreneurs want to cut up their credit cards, which will help if you are overspending, but credit cards you’ve had for a long period of time that are paid off or have zero balances help your credit score.

When you have a lot of unused credit available and not using it, your credit score will improve.

 

Strategy #5 – Establish and Maintain an Emergency Fund

Financial advisors have suggested for decades that it’s always wise to have an emergency fund that will pay for dry periods when you can’t meet a portion or all of your financial obligations.  The ideal amount seems to be six months of your annual income.  This may seem daunting at first, but if you learn to budget, it’s achievable over time.  In order to build up an emergency fund, you will need to learn to live on a budget.

Six months of emergency funds won’t happen immediately, but if you start with the goal of having one month and then two, it can take place.  Once you have the reserve to meet your regular budget needs, and especially your debt payments, live itself becomes much better.  Your credit score with naturally improve.

The different credit bureaus have different ranges, but they all seem to be fairly close.  Experian uses the following range to evaluate scores:

RATING SCORE
Very Poor 300-579
Fair 580-669
Good 670-739
Very Good 740-799
Exceptional 800-850

 

Improving your credit score takes work and time, but the rewards for the real estate entrepreneur can be amazing.  With a better and improved credit score you can qualify for better interest rates, get faster approval on loans, and open the door for bigger and better real estate deals. You can improve your credit score with discipline, and when you do, you will have access to better and better deals.

Negative Comments Should Never Define Your Financial Destiny!

Negative Comments Should Never Define Your Financial Destiny!

Life is difficult especially if you allow negativity to control your actions.  Far too often, we allow people’s opinions to define our expectations.  This is also true in the real estate investing world. As Response’s Director of Real Estate Education, I am constantly made aware of negative comments that can derail a blossoming real estate career.

In our world of high-speed Internet and with the growth of social media, it is easy to lose focus and get distracted from your personal financial goals.  This sometimes occurs when family, friends, or associates question your financial decisions.    If you allow these uninformed opinions to control your actions, you might soon doubt your decision to change your financial future using Response’s powerful training, tools, and resources.

Recently I had the opportunity of attending an NBA playoff game with several of my close friends.  While there, we talked about which Hall of Fame Players had influenced basketball the most.  Before the discussion ended, we had moved the conversation to the basketball players who had most impacted our lives.  After listening to my friends give their opinions, I said that Michael Jordan was the most influential player in my life.  When asked why, I responded with a quote from Michael Jordan himself.  He said, “If you accept the expectations of others, especially negative ones, then you never will change the outcome.”

This is especially true in the real estate field and establishing personal financial goals.  When your friends and associates offer ill-informed negative comments, they strike right at your emotional center.  Regardless of the fact that the negative comments are generally based on rumors and falsehoods, they can have an impact on your real estate decisions.  Perhaps you are ready to make that first offer, but your brother-in-law offers the comment that he read several negative comments online about investing in real estate education.  What do you do?

Let me give you a three-step process to keep you centered on real estate success.  First, and most important, you need to ignore mean-spirited feedback and responses based on false information.  Consider the comment of your “brother-in-law” about negative feedback he saw online.  Remember that comments found online are only opinions  and are often based on faulty or missing information.

The second step is to re-commit to working toward your personal goals.  You made the decision to pursue real estate education as a vehicle to achieve your financial objectives.  This education can change your life, but a specific action plan must be included with those goals.  So, step back and take concrete action to convert your education into a roadmap for financial success.

Step three Share your dreams with like-minded people.  It is critical that you associate with people who have a positive attitude.  These are the people who will rejoice in your success as you move forward.

Real estate investing is a key to wealth.  Andrew Carnegie said it best when he stated, “Ninety percent of all millionaires become so through owning real estate. More money has been made in real estate than in all industrial investments combined. The wise young man or wage earner of today invests his money in real estate.”  Unfortunately, there are many people who have not come to this same conclusion.  When they offer negative comments and try to influence you to abandon your real estate goals, they are not your friends.  They are not your supporters.  Take their advice for what it is worth – nothing.  Your financial future is in your hands.  Negative comments should never define your financial destiny.

 

The TLC Your Garage Deserves

The TLC Your Garage Deserves

The first part of your home you step foot in is most likely the one you give the least attention to. This first impression of your home can not only have a strong psychological effect on your personal mood and perspective, but it can also equate to more tangible damage, in the form of diminishing financial value. That is why 82% of 500 realtors surveyed stated that a disorganized and messy garage has a considerably negative impact on potential home buyers (Braun Research survey). Here, we examine a few of the most common long-term effects of a neglected garage and how we can begin to quickly address them while transforming your garage into a portion of your home you want to show off.

 

Cracks in flooring

One of the most common issues that arise in a garage are cracks in the flooring. We’ve almost accepted them as inevitable, but the truth is they don’t have to be. Cracks in the floor are most commonly caused by things like shrinkage, settlement and exposure to cold and frost. They also have real effects and are subject to regulation, as demonstrated in industry standards manuals everywhere. The real issue with cracks is the extra damage caused by water seeping into them followed by freezing occurring in the winter time, which can cause expansion and excess pressure against the garage slab. This can lead to excess cracking and heaving. Try to eliminate exacerbating these cracks by utilizing a garage floor mat in your garage.

 

Staying organized

The clutter overflows, spring time comes around, and we finally decide to spend a day solely devoted to cleaning out the garage. The only problem is, this is a band aid on a larger issue, as next spring we will be doing the same thing. Sound familiar? One way to help with this is installing garage organizers. Purchasing some storage shelves and cabinets go a surprisingly long way in keeping your garage clean and clutter free. Just having the ability to put items away in a specific place instead of stacking them on top of each other leads to a more habitual upkeep of your garage, ensuring it stays organized.

 

Outdated or broken garage door openers

As with all technology in the last two decades, developments have been consistent and continuous. A unique issue has risen with garage doors, as they aren’t as easily replaceable as an iPhone or a pair of headphones. They also aren’t anywhere near the top of our list – until they are. Having an updated and fully functional garage door system is a necessity in this market, and goes a long way as far as presentation. They are after all, one of the most frequently used doors in the home.

 

You’ll find it surprising how tending to just these three simple aspects of your garage can be completely transformative. Potential buyers will see your house as much more valuable, and you’ll also feel significantly better as you return home every day. You may even be able to make it to the door without having to avoid stepping on any old toys or furniture

5 Reasons Why Seeking Professional Help May Be the Key To Success in Real Estate

5 Reasons Why Seeking Professional Help May Be the Key To Success in Real Estate

As an eleven-year-old boy, I was acutely aware of the danger of being lost or stranded without help. My parents had taken the entire family to the Carlsbad Caverns National Park in New Mexico.  At that time there were no paved walkways in the caverns themselves and the lights were weak and far apart.  Our group of several hundred participants dropped into the cave immediately after several thousand bats flew out of the large opening.  The sights were amazing and our tour guide explained how the caves were discovered.  It wasn’t long before I left the group and started doing a little exploring on my own.  A short time later I was alone and scared.  Fortunately, a Park Ranger found me and guided me back to a common meeting place.  As we journeyed back to the elevators that would take us to the surface, the Ranger showed me where earlier explorers had perished while charting and mapping the caves.  After some three hours, I was reunited with my family.  I realized that if it weren’t for finding the professional help I could have experienced a very different outcome.

What does all this have to do with real estate investing?  The answer is simple.  Now, many years later, I can positively state that without experienced and qualified help, the real estate investor of today could be just as lost as I was at eleven years of age, and experience a very different and possibly much more dangerous outcome than anticipated.  In that light, let’s discuss five simple reasons why seeking professional help when starting in real estate may be the key to your future success.  There’s no reason to experience a dramatic and dangerous outcome when professional help and education is so available.

  1. Professional Help Can Overcome Personal Fear. It’s absolutely certain that almost all real estate investors experience fear of some degree or another.  Perhaps it’s the fear of losing money.  Maybe it’s the fear of interacting with people on a one-to-one basis, or it’s just the fear of acting without enough knowledge.  There are numerous different reasons why fear is such a burden for real estate investors, but regardless of the exact fear, professional help can help alleviate the pressure

Real estate professionals carry with them years of experience in confronting problems of many kinds. When you engage a qualified professional, they have the ability to share both potential problems as well as possible situation.  Take the time to access their knowledge and apply their advice to your personal solution.  When you do so, you will find that your fears diminish and sometimes vanish altogether.

  1. Professional Help Will Teach You the Do’s and Don’ts. It goes without saying that the professional’s primary job is to provide education that will guide you towards personal real estate success.  But there’s much more.  A good professional will be a complete guide that will escort you on the journey from start to finish.  During this time, you will learn new and different investment techniques.  Each of these strategies may have certain things you should do, and other things you definitely shouldn’t do.  We call them the “Do’s and Don’ts of Real Estate Investing.”  It is imperative that you learn and incorporate this information so that you don’t fall off the path leading you to your future success.

If you rely purely on your own experiences to develop your overall real estate strategies, you will be short-changing yourself.  Use the professional and learn from both the successes and failures of others, rather than falling off some unforeseen investment cliff.  A wisely chosen real estate professional can be the National Park Ranger that helps you complete your overall real estate investment journey without falling into some deep and dangerous cavern.

  1. Professional Help Can Be a Guide to Different Real Estate Strategies. There are multiple investment strategies that have been proven successful for real estate entrepreneurs across the globe, but there are never certain guarantees.  It’s a given that you must put forth effort and even invest financial resources.  A well-chosen professional can help you direct your efforts more wisely, as well as provide credible information that will assist you in deciding how to allocate your financial assets.

With such a wide variety of possible real estate strategies available today, it is critical that you get credible help in developing your own potential real estate strategy.  You may initially have an interest in simple renting and landlord strategies, but a wise professional can help you use your existing talents and resources in examining other new and profitable alternatives.

  1. Professional Help Provides Strength in Numbers. All real estate investors learn quickly that numbers don’t lie.  You can’t expect to have success in your real estate journey if you don’t collect accurate and true information.  A good real estate professional should provide the ability to gather and evaluate any numbers dealing with your specific real estate strategy.  When you have help in evaluating and analyzing the true numbers concerning your investment you won’t inadvertently slip off the cliff and experience a fall in value.

Another way that the professional provides strength in numbers is by ensuring that you are no longer all alone.  The real estate investor that relies wholly on himself or herself in evaluating a property or strategy is walking in the caverns without a Ranger to guide him.  There is a tremendous advantage in having someone to talk to and discuss possible investment options.  Allow your real estate professional to provide this strength.

  1. Professional Help Stops Real Estate Investor Paralysis. Paralysis in real estate investing can best be described as the state where you fail to take action.  As you gain knowledge and learn what to do, the one thing stopping you will almost always be the simple act of taking action.  The true real estate professional will help you avoid this state of paralysis.

When you have someone, who can listen to your ideas and provide feedback, you will be more inclined to move from the “knowledge” state to the “action” state.  This one quality of actually taking action will do more for your total success than anything else.  And a good professional will inspire you to move forward and actually do something.  Great ideas are nothing without actually acting upon them.

Seeking help from real estate professionals may improve your actual performance as well as add discipline to your real estate journey.  True professionals don’t magically appear out of nowhere.  You may have to spend time viewing web blogs, searching online, and attending seminars or training events, but the effort you put forth in identifying true real estate professionals is worth the effort.

When selecting someone to guide you on your real estate journey, make sure that the individual, company, or legal entity has the proven experience to help you form accurate decisions.  Never trust someone as a professional unless they can provide you with verifiable information as to their expertise or real estate success.  Take the time to investigate the prior success of the professional and don’t expect the true professional to work for free.  Even though there is generally a cost involved in securing professional help, you may find that the cost of seeking help is beneficial in gaining education and avoiding potential pitfalls down the road.

Having Confidence in Real Estate

Having Confidence in Real Estate

Investing in real estate is a risk. Like many other businesses, you cannot fully guarantee that you’ll get your money back as soon as you want. And, over the years, stories of recession and succeeding foreclosures affect the market. Stories of investors pulling out their shares from investment groups exist in the industry. When you invest in real estate, you invest a big portion of your assets into something uncertain. Thus, a lot of people hold back from investing in real estate.

Through the years, the industry has gone through a lot of forwards and backwards. Similar to other business industries, this is normal and painful, but true. There are some situations you can’t control. And, as a real estate investor, or any business owner for that matter, you need to learn to flow with the changes in the market. Or, better yet, navigate the changes and save your investments. Build confidence in your investments. Yes, it’s difficult to entrust your assets in properties and people. It’s hard to know if you’re making the right decision for your possessions and if you’re investing the right way. That’s why you need to be a well-informed investor. Be knowledgeable about the basics of real estate investing. Always allot time in studying your target market. Understand the difference in each market area and thoroughly review their economic and demographic status. Be very careful and meticulous in determining your goals for investing and the things you’ll have to do to attain those goals. Remember, you can never go wrong with the right amount of know-how.

If necessary, get yourself a mentor. It can be a consultant who’s already an experienced investor. Experienced investors have already been through a lot in the industry and already know how to play and, of course, win the game. Or, you might also want to join investment groups. Especially if you’re a beginner, groups like these can help you become the confident investor you’ve always wanted to be.

Partnerships

Partnerships

I get asked all the time, should I find a partner to work with in my real estate investing business? I say yes, if you can find good partner. There are many ways you can partner up with someone. Regardless of which direction you go, find a partner that will complement your personality and drive. Let’s talk about some key points I feel are important in identifying the right business partner for you.

Personality: It will be important that you spend time getting to know your possible business partner before you rush into doing any work together. Spending time outside of the real estate business is important to see how one behaves. Make sure you like the person you are going to be working with. More importantly, do you like their attitude, drive, focus? Are they kind, patient, result-oriented? Do your due diligence.

Time Management: You don’t want a partner that does things only when they feel like it. Find someone who is good at managing their time and is efficient at completing their tasks quickly. Real estate is a time-sensitive business — no room for laziness.

Relationships vs. Money: I have always lived by the creed, “Chase the relationships, don’t chase the money.” Basically, don’t be greedy. It is too easy for people to be worried about how much money they want to make in this business. That will hurt your relationships. Therefore, find a partner who wants to build lasting relations instead of getting rich quick.

Different Business Entities: I encourage you to have your own separate business entities working together. Don’t put everything under one company because, if things don’t work out, it will be easier to dissolve the partnership.

            Working with a partner can be a great thing. It will take you some time to find the right one. A qualified partner can help you reach your real estate goals a lot quicker. If partnering with someone is what you have been thinking about doing then get out to real estate clubs because they are a fantastic place to network and find like-minded investors.

Three Ways Real Estate Can Generate Wealth

Three Ways Real Estate Can Generate Wealth

Real Estate investors can generate millions of dollars through their real estate investments, but how exactly does it all work? Learn more about how real estate can transform into wealth.

For many, real estate is simply buying a home to live in. Real estate investors use properties to generate wealth in a variety of ways. Real estate can generate wealth for investors in the following three ways: appreciation, cash flow, and equity. Though there are many investment styles to choose from, real estate investors use a combination of these three ways to generate wealth from their real estate investments.

Appreciation

Over time real estate increases in value. This process is called appreciation. Though there have been some notable exceptions to this rule (2007/2008), real estate increases in value year over year. For example, home values in the US have gone up 6.7% according to Zillow.com[1]. They expect them to rise another 3.2% in the next year. So, if you bought a home for $200,000 a year ago, it could now be worth $213,400. Appreciation generated over $10,000 of wealth, in just a year.

Cash Flow

Cash flow is the term investors use to describe the amount of profit a rental property generates after revenue from rent and any expenses are accounted for. It’s most often expressed by this simple equation:

Rent – (Expenses + Mortgage Payment) = Monthly Cash Flow

Before purchasing a property, investors ensure that the final “Monthly Cash Flow” number is positive. For many buy and hold investments, this number can be modest; however, when you consider that investors generally have a portfolio of units, it adds up quickly.

Equity

Many investors take advantage of conventional financing to secure rental properties. For example, the $200,000 home they purchase, they put $40,000 down, and then take out a 30-year mortgage on the remaining $160,000. The rent the tenant pays goes towards that monthly mortgage payment. So the investor leveraged $40,000 to eventually build $200,000 of equity. Creating equity in a property is one of the ways investors generate wealth.

Generating Wealth Through Real Estate Investing

There is no simple formula for generating wealth through real estate investing; however, all investors use some combination of appreciation, cash flow and equity to create their personal wealth. Investment style, personal goals and market conditions affect what portion of the investor’s wealth comes from each element, but all work together to achieve the investor’s financial goals.

 

[1] https://www.zillow.com/home-values/

How a Real Estate Closing Works

How a Real Estate Closing Works

You’ve showed your client the property and he seems very interested in it, then he decides he’s going to buy it. Now you have reached closing, which is the final step in executing a real estate transaction. But you’ll have to go through a few processes before the transaction is actually over.

Several things happen during closing: the buyer and the lender deliver a check for the balance owed on the purchase price. Then the seller signs the deed over and gives it to the buyer. A recorder’s office, which will record the deed, will require the seller’s signature to be notarized. Commonly, the seller delivers possession to the buyer by giving them the keys to the property. Unless otherwise specified in the real estate contract, delivery of possession should be on the closing date, which is usually several weeks after the offer is formally accepted.

A title company, lawyer, notary, or the buyer will register the new deed with the local land registry office or recorder’s office. A declaration or statement by the buyer or seller regarding the purchase price may have to be filed with the government. Conveyancing taxes and recorder’s fees will typically have to be paid, which are part of the closing costs. The seller receives a check or bank transfer for the proceeds of the sale, minus the closing costs and mortgage payouts. Prepayments for real estate taxes and insurance may be taken from the funds allotted for closing costs, and fees charged by other parties are paid. Sometimes, closing in escrow, which is a neutral third party, may occur to prevent the two parties from getting ripped off.

At a closing, the basic idea is this: the buyer gives the seller their money and the seller gives the buyer the deed.

4 Tips for Time Management

4 Tips for Time Management

In this era, people tend to be busy with multiple things every single day. It may be work, studies, family, social life, workouts, projects and more – all these things fill our schedule every single day. We tend to give ourselves a big pile of work and find ourselves unsure of how to get it all done on time. It is indeed hard to manage time, especially if you’re a person with a lot of responsibilities. Here are four tips to help you better manage your time and get things done.

First, determine your schedule in a certain timeframe (it may be within the day, next three days, this week, this summer, and more) and identify the things you need to accomplish. It’s better if you list them in your phone or write them down so you don’t forget something. You can also use your list to check off tasks/appointments you accomplish. After making a list, divide each item into different categories – schedule, urgency, and more. These will help keep you on track.

Second, learn to say “No.” I know for a fact that it’s good to say “Yes” to task assignments, opportunities, promotions and more, but if this will jeopardize your time management and give you too many things to do, then it’s okay to say “No” sometimes. You, of all people, know yourself. You know your capacities and limitations. Don’t force yourself to do something you can’t at the moment.

Third, avoid distractions. As humans, we are easily distracted for many reasons. If you set a time to do something, focus on it. Most of the time, you get something done faster if you give it your total attention. And, you make less mistakes. Be committed to the list you set for yourself. Be persistent to finish the task at hand. Avoid backlogs and save time.

Last and most important by far, enjoy and love what you’re doing. If you don’t enjoy what you’re doing, you will just feel lazy and end up unfulfilled. Engage yourself in the schedule and the tasks you set. Be consistent.

These are only a few of the many tips you can follow to better manage your time. Whatever you decide to do to succeed in time management, remember to keep it balanced. There’s a time for everything – work, studies, family, spiritual growth, social life, yourself, and more.

Four Real Estate Myths

Four Real Estate Myths

  1. Set your home price higher than what you expect to get.

This may work at a car dealership, but real estate is a totally different animal. In real estate, if the buyer doesn’t see your home as a deal or a bargain, you don’t make it to the top of their “must see” list and are often forgotten about. If your home is presented or listed as a bargain, then the buyer is going to put it at the top of their “must see” list, even if, over all, it was a little less desirable. When a property looks like a good deal, buyers feel rushed to get their offer in quicker due to the possibility that several other offers are being submitted.

  1. You can get a better deal as a buyer if you don’t use a real estate agent.

If the house is listed with a real estate agent, the total commission is already built into the sales price. Even if you as the buyer don’t use an agent yourself, the seller will still pay the entire commission to the listing agent.

  1. All of the properties listed on the Multiple Listing Services (MLS) are listed online.

This is not always the case. Usually the agent or homeowner has to actually go in and manually post the property online. Realtor.com has claimed that they have everything the MLS does. Yes, they do have a lot of great properties shown from the MLS; however, it is not the full MLS. It is considered limited access.

  1. Open houses sell properties.

Buyers who visit an open house hardly ever purchase that home specifically. Open houses are really used to benefit the real estate agent, as they are a great opportunity for them to find other buyers.

First Flip Checklist

First Flip Checklist

So, This is Your First Flip? Where is Your Checklist?

Let’s talk about flipping. More specifically, let’s talk about what your checklist of items should include. Following the right process when buying a property will save you money and time after you have purchased the home. My list of the most important items that need to be addressed before and during the purchase of a property is below. Of course, there will be some flexibility to this — you decide where that will come in.

  1. Financing: Get your financing lined up. Find out what lender you will use and what their requirements will be for you to borrow funds from them. Also, find out their terms and repayment schedule so you can work that into your numbers.
  2. Insurance Agents: Talk to your insurance agent and find out what kind of coverage you will need while the renovation is taking place and how much it will cost.
  3. Contractors: Get some quotes on the rehab. Look for contractors that are licensed, bonded and insured. You don’t want to cut corners just to save a few bucks. Fix things right the first time around.
  4. Investor Friendly Agents: Make sure your agent has your best interest in mind throughout the entire process of purchasing the property. Never let your agent lead you astray. Make sure your agent is providing all the information you need to close the deal correctly.
  5. Interior Designer: Find one whose design aesthetics you like and one you can afford. A good designer will help you sell your properties quickly. They will work closely with your contractors to get things done right.

Before you start your search for the perfect property, find a financing lender, insurance agent, contractor, and interior designer with fees and requirements that fit your budget. Once you have your power team players in place, use your realtor to find the right deal. During your due diligence period, once you have a property under contract, you can have your contractor and interior designer walk through the property and give you bids. Contact your insurance agent and make sure the insurance will be in place and is affordable. Do all of this before your due diligence period ends, that way if something is not working you can cancel the deal.

There are some other minor things that need to be done during this process, but the items I’ve gone over are very important. Your list should look similar to mine. Remember to take things slow. Don’t rush into a deal, and never get into a flip if it feels like too much to handle. I suggest that first time flippers start off with a light or medium rehab. If you make a checklist before you start, you should have covered all of your bases to make money on your investment.

What is a Real Estate Absorption Rate and How Does It Apply to You?

What is a Real Estate Absorption Rate and How Does It Apply to You?

In real estate, absorption rate is basically the length of time it takes to sell a house that is listed on the market. The rate is mostly based off of the number of months it takes before the home is sold. Absorption rate is a concept that helps people in the real estate world determine prices and sales activities.

Let’s take a large, urban area for an example. In the past six months, there were 20,000 homes sold. Six months is the common baseline when it comes to home sales. The number of homes sold will now be divided by 6. The result will be 3,333. This number will then be used as a divisor to the number of homes listed on the market. If the number of homes listed for sale is 15,000, the outcome will now be 4.5. Therefore, there will be 4.5-month supply of homes for sale on the market.

It is easy mathematics but that does not make it less important. In order to anticipate home prices and market activities, the absorption rate history of a certain market will be necessary. Absorption rate is vital to real estate agents because agents regularly need to determine the value of the properties they are selling. It is also helpful for buyers to understand the state of demand and supply for properties that agents will be presenting to them. All in all, absorption rates aid in decision-making when it comes to buying a property.

Most potential property buyers are wise and do extensive research before going face-to-face with real estate agents. If you are a seller who cares less about the absorption rate of your market, you’re making a big mistake. To become a top producing realtor, you must be well-equipped with knowledge about absorption rates and market activities. Awareness of the absorption rate of a specific market will help your success.

How to Take Better Pictures of Your House for Sale

How to Take Better Pictures of Your House for Sale

The Internet has become a very useful tool in the today’s society. It has become a necessity for most of us because it has a variety of uses. Even sales and marketing is made easy with the Internet. Nowadays, people and establishments use the Internet to advertise the products and/or services they offer. One good example of this is real estate.

Yes, people come looking for houses, apartments, villas, or other properties online, too. So, if you’re planning to sell a property, expand your marketing horizon and attract buyers by having realistic and attractive photos of your house online. How are you going to do that? Well, if you are under the assistance of a real estate agent then you need to make sure they can provide a good photographer for you. If they can’t, get one yourself. But, if you’re selling your home without an agent and you’re on a budget, you can opt to take the pictures yourself. Here are some things to consider.

Before taking pictures, prepare and organize everything you need, like a good quality camera. Smartphones may work but, if you can, it might be good to invest in a digital camera. Nevertheless, either of the two will work. You’ll also want to have a tripod for taking sharp photos, and, of course, prepare your house by cleaning, removing unnecessary stuff, and redecorating the interior if needed.

When taking pictures, it’s better to have a tripod because the composition of your shots is important. Only frame what you want your viewers to pay close attention to. A good photo should lead the viewer’s eyes around the entire space. Good arrangement of elements in the photo – space, furnishings, colors, frame, lighting, positioning, angle — play a role in making your home inviting to buyers. Also, consider how high your camera is off the ground. Shoot from a lower angle, as this should create the illusion of a path that walks the viewer into the room. Take note that it’s better to use natural light streaming in from the windows. Avoid using your camera’s flash. Also, know the best time of day to capture perfect, natural light for both your interior and exterior shots. For outdoor photos, dusk might be a great time to catch the last bits of daylight to yield dramatic and soft shots. Plus, always pay attention to distortion that often happens when taking photos. Some lenses may cause this to occur.

After you photograph, choose your best photos and touch them up a bit. There are photo editing tools available on the Internet, or you may ask somebody skilled to do it for you. Adjust the lighting, if needed, crop, remove noise in the photo, correct colors and more. Remember that you should produce great and inviting photos. But, don’t make your house look like something it’s not; be realistic and truthful. Finally, think of an attractive description to go with your photographs.

Reality TV vs. Real Life Fix and Flips

Reality TV vs. Real Life Fix and Flips

I really love golf. I used to watch it on TV all the time. Then I decided to take it up. Wow, what a wake-up call. It is a lot harder than it looks, and I need to practice all the time. Why do I tell you this? Well, reality fix and flip shows are a lot like golf. It looks easy and fun on TV but in real life it is serious work! The popularity of these shows has brought a lot of newbies to the business that get frustrated quickly because things do not go as planned. The shows mislead people into thinking it is so easy. Although this business can be lucrative, you need to understand how things work. Let’s go over what I feel are the missing links for people getting started in this business.

  • It’s all about the numbers: The TV shows only show the basic numbers on a deal and make their profits look so big. What they fail to tell you is how much investors must pay back to their hard moneylenders. This cost is known as holding cost, which also includes insurance on the property while it’s being fixed up. So, the bottom line might be shown on TV as $60k in profit, but it might actually be $30k. That is still a good profit but maybe not to everyone.
  • It takes time: Trust me, finding deals takes time and a lot of searching. You don’t get every deal you make offers on. The shows make it look easy to find a deal, look at it, and get an offer accepted. Well, in real life, you will probably get 1 out of every 25 offers you make.
  • It’s scripted: Most importantly remember you are watching a show and it is scripted. The way they find the house, do the bidding, complete the rehab — it’s all for your enjoyment. Real life will have twist and turns that are more outrageous than what you see on TV.

If you are serious about getting into real estate investing, go to a local real estate club to talk to investors and visit with a local realtor who works with investors. Educate yourself on the industry and the processes. Prepare yourself for this business. If done right it can give you great results and even change your life.

It’s All About the Numbers

It’s All About the Numbers

One of the things I love about real estate investing is that it is all about the numbers. As long as I stick to my numbers, I make money. My wife and I have been investing in real estate for many years. We walk through several properties every week, and still, as we walk through a property my wife gets caught up in how nice this or that is, and I am behind her doing numbers and more often than not end up saying, “Well it’s not that nice, NEXT.”

Finding the right deal is a matter of numbers. It can take a lot of offers to get a deal. Many new investors will put an offer in and then wait and hope it gets accepted. But by doing that, it is keeping them from putting in more offers. Putting in offers is a numbers game. I have found that by developing a mindset of always focusing on the next offer, I am able to make the numbers work for me. All the information from each offer I submit is saved on my computer. This allows me to put an offer in, forget about it, and focus on the next offer. I continue to focus on the next offer until I get a counter offer from one of the previous offers I put in. I then go to the information I have saved on my computer and can refocus on getting that deal.

By always focusing on the next offer, I can keep frustration from sneaking in. When you put an offer in and then wait and hope for it to get accepted, it can easily lead to disappointment if someone else gets the deal. If you do this too many times, it can lead to frustration. But by understanding that this is a numbers game and that the more offers you put in, the sooner you will get a deal, you can stay focused and motivated.

How to Fix Your Credit Score

How to Fix Your Credit Score

Having good credit is an important part of investing in real estate. With good credit you can get financing easier and you can also get better interest rates. Now, if you have a poor credit score here are some steps you can take to improve your credit.

  • Pay all your bills on time. This is a no-brainer, but make sure all your bills are paid on time, even if it is the minimum payments.
  • Don’t open too many new accounts at once. One thing that credit agencies look at is the age of your accounts. By opening several new accounts at once, the average age of your accounts will be reduced.
  • Do not cancel any unused cards. Another aspect of credit is the amount of credit you have used compared to the amount of credit you have available. The lower the percentage used, the better. Ideally you want to keep the ratio of credit used to credit available below 30%.
  • Keep your credit balances low. This ties in with number 3 in that you should not max out your credit. Keeping your credit balances low will help keep your credit score high.
  • Have a variety of different credit types. Paying on a car loan, a credit card, and a mortgage will show you are able to juggle and maintain payments on different credit types.
  • Debts in collections needs to be paid off. If you have any accounts in collections they will need to be paid off. Until they are paid off, your credit will suffer.
  • Get a personal loan to pay off credit cards. This can be a very effective way to lower your interest rates and pay off your debt faster.

In real estate investing having good credit will increase your opportunities to invest. As mentioned, it will save you money, give you better interest rates and help you qualify for better loans. Keep these 7 tips in mind, as they are great ways to maintain and improve your credit score.

Mindset in a “Seller’s” Market

Mindset in a “Seller’s” Market

As seasoned real estate investors will tell you, we’ve seen a lot of ebbs and flows in the housing market throughout our years of investing. As you gain experience, you too will come to see that even in the toughest and hottest of housing markets, investors can still create great deals. In today’s “seller’s” market it’s time to start thinking outside the box. Below are some suggestions as we all move forward in this, and any market.

 

As you go about looking for properties to make into deals, have you asked yourself this question: Have I told everyone that I know — friends, relatives, co-workers etc. — that I’m looking to buy a home from someone that is behind on their mortgage, behind on their taxes, or has inherited a home they aren’t interested in maintaining or keeping?  If you haven’t, do it. The result may be a pleasant surprise. Another option is to focus on homes that have a listing that has expired.  An overpriced house typically won’t sell causing sellers to get frustrated, and in some cases, let the listing expire or terminate their contract with their realtor, thus becoming an expired listing. Don’t contact the sellers right after their listing expires, as this is when realtors are contacting them and trying to get them to relist. Give the sellers some time. Look at listings that have expired 2-3 weeks prior. As a general rule, your success rate will be higher. In a “seller’s” market, making a purchase must be handled carefully, with planning, and a sense of calm and calculated urgency. We want to move quickly, but also in a smart manner.

 

Stick to your numbers! Let them be your beacon, and do not deviate from them. Run your numbers. At the end of the day, the numbers in your analysis don’t lie. Also, remember to not get emotionally involved with any offer you make or let the market condition determine your success. The offer will work or it won’t. Don’t go chasing a bad deal because you “have to get into the market” or run around like Chicken Little proclaiming the sky is falling because you have to get creative. Run your numbers, make the offer and move on to the next; whatever that is. Success only comes by moving forward.

 

A “seller’s” market doesn’t mean there aren’t deals out there to be made. The strategy of buy-and-hold is a great one to look at in this market. As you negotiate a deal, remember the property will still likely go up in value. In this “seller’s” market, instead of focusing on large, “home run” deals, focus on what you can control: you. When you focus on volume, you spread your risk across multiple deals. Don’t shoot for 2 or 3 “home run” deals a year; hit singles every 2 or 3 months and when one doesn’t work out, you still have the rest of the deals to bring you up. And remember, every deal is a learning experience. The more you do, the less anxious and overwhelming the market and conditions become. Do your research on the market and know it. Don’t go off what someone is telling you.

 

In this market, even though there appears to be fewer listings and prices are higher, investing wisely based on ratios, profit margins, and market trends will still allow you to make money. No matter the market, people are always going to buy and sell houses. It may not always be smooth sailing for us real estate investors, but learning to ride the rollercoaster known as real estate is half the fun.

How to Surround Yourself with Positive People

How to Surround Yourself with Positive People

We are overwhelmed with life’s challenges every single day. When you are down, do not let negativity personify you. Think positively and surround yourself with people who can help you do that. There are already a lot of exhausting things life has to offer, so don’t allow negative people to weigh you down. But, how exactly do you do that?

First, be yourself and be positive. Optimism is a basic ingredient to your career and life’s success. To attract the right people into your life, you have to be yourself and let your personality shine. Make people see the real you; the real ones will be drawn to you. When you find them, find common ground between you two. Find the good in them that you want to absorb. It may be their attitude when things go wrong, their work ethic, their amazing time-management skills, their humor, or anything at all that makes them positive people. Make them influence you positively.

Then think. What really makes them positive people? Is it their outlook on life? Attitude? How they deal with people? Here are some of the traits that a positive person must possess to be considered good company.

  • People who give their best in everything they do because they treasure every opportunity as if it’s a one-shot chance
  • People who have big dreams and the drive to follow and achieve them
  • People who treat everyone they meet fairly, regardless of economic status, gender, age and the like
  • People who does not only listen but understand and give relevant advice; those who have empathy and compassion
  • People who can cope with frustration, anger, sadness and other emotions and life situations
  • People who can make time for work/school, spiritual life, family, and social life
  • People who value themselves like they value others, and vice versa

The list above is only a guide; it may differ, depending on your perspective. It is hard to draw people like this into your life because it requires you to attract positivity in your own life, and that does not happen overnight. It will require you to make an effort to change your mindset and find people who treat positivity as a vital ingredient of success. Whoever surrounds you, you must remember that positivity comes from within. Be positive, attract positive people in your life, and live a happier and more optimistic life.

Why You Should Promote Yourself from Landlord to Investor

Why You Should Promote Yourself from Landlord to Investor

There is a difference between being an investor and a landlord. Simply owning an investment property doesn’t make you an investor. If you are highly involved in the day-to-day operations of your property, you are a landlord. Investors treat their properties like any other investment: hiring professionals to manage the day-to-day operations and investing the profits from their property into their portfolio. Many real estate investors begin as landlord. Below are the three reasons why you should take the leap and promote yourself from landlord to real estate investor.

Get Out of the Daily Grind

Being a landlord is a fulltime job, if you do it right! From completing routine maintenance to answering emergency calls, keeping a rental in pristine condition is no easy task — not to mention all the work that comes with vacancy. Landlords are responsible for screening tenants, marketing the property and completing any other move-in related tasks. Real estate investors outsource all this work to a property management company. Not only does this get the work done, it ensures it’s being completed by a seasoned professional, and it can even decrease vacancy!

You Can Focus on Purchasing More Properties

Once you are out of the daily grind of being a landlord, you can focus on being a real estate investor. Finding deals and/or rehabbing properties requires focus. If you are wearing all the hats of your landlord responsibilities, it can be difficult to find the hours in the day to close more deals. You can also focus on making the most of your current investments. The better your current investment properties do, the more money you have in the bank for growing your portfolio.

Investors Are All About the Bottom Line

As an investor, your focus is simply on positive cash flow. You don’t have to worry about keeping tenants happy or your properties occupied. That is the responsibility of your property management company. Investors can enjoy the profits from their rental properties while also enjoying an additional check each month or even early retirement.

Many investors start their real estate investment journey as landlords. Successful investors, the ones enjoying financial independence and early retirement, take the risk and make the jump from landlord to investor.

The Importance of Zeroing in on Your Buyer’s Tolerance for Profit

The Importance of Zeroing in on Your Buyer’s Tolerance for Profit

The language of business is numbers. So it is with doing profitable real estate deals. There are three (3) very popular rules for calculating your offer. They are referred to as:

  1. “The 70% Rule:” (Offer equals the ARV (After Repair Value) times 70% less cost of repairs.)
  2. “The 75% Rule:” (Offer equals the ARV (After Repair Value) times 75% less cost of repairs.)
  3. “The 80% Rule:” (Offer equals the ARV (After Repair Value) times 80% less cost of repairs.)

The “80% Rule” offers the least profit. However, it offers much greater likelihood of getting the offer accepted than “the 70% Rule.” What’s exciting is that there are investors who use “the 80% rule” and still make more money on the deal than investors using “the 70% Rule.” You will want to find them.

Regardless of which rule is used, there are closing costs, holding costs, and selling costs. Generally, those costs total 15% and break down like this:

  1. Closing Costs: (3%) Paid to the title company to insure the deed is free of liens or encumbrances.
  2. Holding Costs: (6%) These costs are mostly the costs of borrowing the money to do the deal, but also include taxes, insurance and utilities etc.
  3. Sales Costs: (6%) Usually paid to the realtors who help close the deal.

As a wholesaler, it is critical to find the buyer who will pay the most for the property. Some buyers have their own money. This eliminates most of the holding costs. The same buyer may also have the property already sold or have an agent on board that eliminates their sales costs. The buyer who doesn’t have many holding or sales costs can use the 80% rule and make more profit than another buyer who has borrowing and sales costs but uses the 70% rule.

When we interview buyers, we want to find out their “tolerance for profit.” Do they have money? Are they an agent or do they partner with an agent? Going out to the job sites of successful bidders can help you find those buyers who do rehabs more efficiently and at a lower cost.

Asking this simple question can help you sort out the buyers who should be at the top of your list. “Suppose I have a property you know you can sell quickly for $300,000.00, but it is going to cost you $30,000.00 to rehab. Your ad says you buy houses, where would I have to be pricewise for you to buy this one?”

Simply put, the greater your buyer’s “tolerance for profit,” the more money you will make and the more deals you will do.

Staying Motivated

Staying Motivated

Staying motivated in your real estate business is critical to your success and can sometimes be hard, especially when you are first building your business. Here are some ways to help you get motivated and stay motivated.

Goals: Goals are the first step to motivation. Knowing why you are doing what you are doing allows you to create a road map that you can use to guide you. Make sure you have a long-term goal that really excites you. Work that goal backwards so you have some intermediate and short-term goals. You want to break it down to weekly goals and daily action steps. Be sure to have your goals written down and read them daily.

Vision: Create a vision of your long-term goal. Imagine (visualize) it as if it is already real. Imagine it in enough detail that you catch yourself smiling. The emotion you feel while imagining your vision is the power that will fuel your motivation. Spend a minute or so when you first wake up imagining your vision, and again as you are falling asleep at night. This is called, “Feeding Your Vision.”

Vision Board: A vision board is another tool you can use to bring your goal to life. You want to find images that represent your goal as completed. You can put these images on a poster board or a corkboard. Be creative and have fun. You want to put your vision board where you will see it often. The power in a vision board comes not from just looking at it, but from taking 20 to 30 seconds while looking at it to let it take your there, so you can feel motivated and catch yourself smiling.

One last tip: When you wake up in the morning, ask yourself, “What do I get to do today”?

 

 

How to Get More Out of a 24-Hour Day

How to Get More Out of a 24-Hour Day

There is one constant that we, as real estate investors, all have to deal with. That constant is time. There are only 24 hours in a day and that is something we are not able to change. If you manage your time wisely and work hard, you can get a lot done in a day, but you still only have 24 hours. In this article, we will talk about ways we can make that 24 hours grow. The key to this is leveraging members of your power team to work for you.

One of the best power team members you can get to add hours to your day is a real estate agent. Agents are experts at finding properties. If you take the time to train them on what you want them to do and the type of properties they send you, it can greatly increase your daily production. Training them may take a little time to do but the payoff will be big in the long run. To clarify this point, make sure your agent is sending you vacant, as-is properties. You do not want access to the MLS or them to send you every property that hits the market. This will detract from your time, as now you must sort through all the properties the agent should be sorting through. Also, have them create a template for your offer, as all your offers will be the same, just with a different property and a different price. Multiply that by 3-4 agents and you have added hours to your day by leveraging other people’s time.

Another thing you can do is get some bird doggers or property finders. You will have to give them specifics on the type of properties you want. Once they understand what you need, having them look for and send properties to you will help increase the amount of offers you are able to submit. You can always offer to compensate anyone sending properties to you, especially once you close on a property.

By leveraging out people’s time and resources, you can greatly increase your productivity and output. It may take a little time at first to train them on your needs, but the end results of adding time to your day is well worth it.

Foreclosure Process on Tax Liens in Florida

Foreclosure Process on Tax Liens in Florida

Tax liens can be a great way to supplement your income or your retirement nest egg.   In the United States, each of the states is either a tax lien state or a tax deed state. There are two hybrid states, Georgia and Florida. All of the other states are divided evenly along the line of being a deed or lien state. For our purposes with this article, we are going to consider tax liens in the state of Florida.

We are going to go through the steps that are needed to collect on a tax lien that was not paid in the redemption period. We are going to look at costs, court proceedings and auctions that lead up to us being paid as the tax certificate holder. By knowing what to do, you will be able to worry less about getting your money. Tax lien certificates in Florida are a great investment and you should never lose your money if you know what to do and when to do it. Let’s focus on the three following areas to understand the tax lien foreclosure process in Florida:

  1. Understand the redemption period.
  2. Working with the clerk of the court.
  3. Understand the auction process.

When you buy a tax lien certificate in Florida, you will be given a redemption period. This is the amount of time that the owner of the property will have to pay you your principle and interest. This period is usually two years. If you are not paid, you can continue to collect interest or you can begin the foreclosure. After your two-year redemption period, you can begin the foreclosure period any time you would like.

To begin the foreclosure process, you will need to contact the clerk of the court for the county where the property is located. The clerk will have the needed paperwork for you to file the foreclosure. There will be a fee charged, but you will receive that back when the foreclosure takes place.   Once the foreclosure is final, an auction date will be set.

At the auction, the starting bid will include everything that you are owed. All the money you paid for the tax certificate, the interest you are owed, fees you have paid and court costs will all be used to determine the starting bid. If someone bids at least the starting bid, you will get your money. If the starting bid is not met, then you will receive ownership of the property.

Foreclosing on a tax lien in Florida is simple. You do not need a lawyer nor do you need to worry about costs.   Follow the steps and get the help you need from the clerk of the court. You should never lose money in Florida liens. Take care of business and you will have reaped a very nice return of 18% from your Florida tax liens.

Best of luck in your investing! You can do it!

Understanding the Investor’s Mindset as a Realtor

Understanding the Investor’s Mindset as a Realtor

Most of your traditional buyer clients are probably very similar in what they’re looking for in a property.  They want a property that is within their budget (or below their budget), that has as many bells and whistles as possible, and that is in a prime location.  Most of your buyers want as much as they can get for a price they can afford.

When you work with buyers like this, who are looking for a residential property, you will likely discuss various finishes, square footage, and building features.  Many of these buyers will purchase based on whether or not a property feels like home to them.  Little research or thought may be put into figuring out whether their dream home is a good investment, even though their home purchase is often one of the largest investments that they will make.

Many homebuyers are accidental investors.  They’re looking for a home that appeals to their “American Dream” ideal, and they end up making one of their biggest investment decisions in the process.  Although the real estate investor is looking at the same market as Sue and Joe first-time homebuyers, the investor is looking at the market through a very different lens.  By understanding the differing mindset of the investor, you will be able to serve your investor clients more effectively.  While Sue and Joe first-time homebuyers want to know about school districts, landscaping, and kitchen layouts, your investor client is less emotional about the transaction and more focused on these particular questions in his/her decision:

  • What is the potential value in a property?
  • How much will it cost financially and in terms of resources to receive the property’s potential value?
  • What are the risks associated with this acquisition?

Typical buyers (accidental investors) may end up making profitable decisions and coming out ahead simply because their goal of finding an appealing property means that they acquired a hot property that will most likely appreciate at a steady pace.  This is the mindset of many buyers.

The strategy of real estate investors, however, is very different from this “ideal property” mindset that most of your buyer clients possess.  Investors are looking for deals.  They are looking for properties that will return more than the initial investment.  If investors lose sight of their wealth-building goal and purchase a property on a whim or because of its “bells and whistles,” they may end up making a dangerous, costly investment error that will take them a long way from their wealth-building goal.

Part 2 – Getting Started with Residential Land Development

Part 2 – Getting Started with Residential Land Development

Part 1 of this series discussed the initial steps to getting started with residential land development. We covered financing options, finding partners, and finding properties. Part 2 will pick up where we left off and teach you 3 more steps you need to take. Because we covered 3 steps in the first article, we will number the following steps 4, 5, and 6.

4. Preliminary Due Diligence

After identifying a potential property, you will need to explore the codes, zoning regulations, and development processes for the local municipality or jurisdiction. Although you can go through the process to change the zoning or use for the property, it is typically a long and painful process that doesn’t guarantee your proposed changes will be approved. It’s ideal to keep your development conforming with existing codes and regulations.

5. Obtain Estimates For The Development

You will likely need to talk to several different contractors to get bids on the work that needs to be done. It’s wise to use contractors that have done similar projects within the area. They will have more experience working with the local city. Their experience will help them understand the requirements and costs for the project in the area. In addition to getting bids from the contractors, make sure you talk with multiple city officials multiple times. You need to make sure all of the stages of the application and approval process are covered. This process can include, but is not limited to:

  • Filling out and submitting paperwork
  • Meeting with city officials
  • Various 3rd party tests and permits
  • Purchasing water rights
  • Application fees
  • Construction inspection fees

6. Negotiation

Now you should have a good estimate on the timeline and cost to execute the development. You are ready to run numbers and make an offer to the seller. One of the keys to making an offer and negotiating is understanding if there’s any part of the development process that the seller is willing to complete. If it’s a big enough project, the seller may be willing to seller finance or subordinate the property. With the amount of information needed for a development project, it’s usually a good idea to have at least one meeting with the seller to discuss as many details as possible. Then you should present an offer that contains multiple options to make the deal happen.

Three Questions to Ask Yourself Before You Start Investing

Three Questions to Ask Yourself Before You Start Investing

As you start investing in real estate, ask yourself these three questions:

First:

What are your real estate goals? Outlining what you want your investments to accomplish will help guide you in the right direction. When you first start, it is like planning a vacation or cross-country trip. Discuss with your spouse or partner the core reason you are investing. Is it for retirement, for your children or grandkids and/or for supplementary income? Different strategies are needed for different reasons. Some yield returns more quickly (such as wholesaling), while others are for longer-term investments (such as buy-and-hold rental properties).

Second:

What is your time commitment? How much time are you dedicating to your efforts? Is this more of a hobby or do you want it to replace your day job? You need to be honest in your assessment of timing and what you are willing to give-up or reschedule. There are limitations to your weekly obligations.

If you are already busy with a full-time job, school or the kids, then you should asses your schedule carefully. Experts and seasoned real estate investors say beginners should realistically evaluate how much time they will be able to carve out of an already full schedule.

Third:

What is your focus? Where do you want to start investing? If you need money in the short-term, then you should focus on wholesaling. If you have the time and the expertise (or the network), then you might undertake buying a fix and flip. If you want residual income, then a buy-and-hold property would be a good strategy for you.

Assessing where you are financially will also help you decide where to start. Wholesaling takes little to no money down, while doing a fix-and-flip or buy-and hold will take a significant amount of cash. Some investors do not understand that many lending institutions will only lend a portion of the funds for a purchase and will not lend additional money for repairs.

Summary:

Assessing your goals, time-commitment and financial focus will help you be more strategic in your efforts to be a successful real estate investor. Additionally, being clear on your objectives will help you focus your efforts and avoid wasting time.

How to Check and Repair Your Credit

How to Check and Repair Your Credit

People who never had to do anything with credit scores and then encounter them for the first time when applying for a loan can often be baffled by what they learn. A

or a school, car or mortgage loan, your credit score will help determine your approval.

Even insurance companies charge higher rates to people with poor credit history.

 

Where To Check Your Credit Score

 

It is important to know your credit score, particularly if you are planning to apply for a credit card or a loan. You can have more than one credit score and your credit score can vary when you check it. You are entitled to a free credit report from each of the three credit reporting agencies: Equifax, Experian, and TransUnion, once every 12 months. You can also review your credit score for free at www.AnnualCreditReport.com.

 

The Difference Between no Credit Score and a Bad Credit Score

 

Credit scores can be determined through factors like your payment history, amounts owed, length of credit history, total debts and recent inquiries. However, there are times when a person has no credit score. This happens when a person has never used a credit card or never had a loan payment to make.

 

There are also cases of people with bad credit scores. It is harder to improve a bad credit score than it is to build a credit score when you don’t initially have one. Bad credit is defined as a past failure to make your obligated credit payments on time, resulting in a credit score below 620.

record items, and too many inquiries.

 

Whether you have no credit or bad credit score, you need to work on improving your credit.

 

Ways To Fix Credit Scores

secured credit card is backed up by a savings account to be used as collateral on
secured credit card is backed up by a savings account to be used as collateral on
the credit available on your card and can help establish the credit rating of the

 

People who find themselves in a situation where they have no credit scores are usually advised to apply for a secured credit card to start their credit history. A

 

 

cardholder. The key to increase your credit score after obtaining a secured credit

another credit card.

 

People with bad credit scores can begin the “repairing” process by requesting free credit

company who listed the information on your credit report and wait for their response for at least 45 days. If you were successful, the bureau will make the necessary changes and alert other credit bureaus of the changes. You will be able to receive an updated copy of your credit report.

 

It is also wise to deal with past dues as it affects 35% of your credit score. There might be instances where some of your accounts are charged off but if you want to get approved for new credits and loans, settle your charged offs. Remember that you are still responsible for your charged off balance and they can make loan applications in the future hard or even impossible to get.

 

There are several free credit consultation companies who are willing to assist and advise you with ways to improve your credit history.

 

Applying for a secured credit card is also a good way to quickly rebuild your credit score, as these cards are designed to help people with a credit problem.

 

Repairing your credit scores cannot happen overnight and some negative marks can remain on your credit report for as long as seven years. That is why it is very important to maintain your credit score.

Getting Started with Residential Land Development

Getting Started with Residential Land Development

There are those of you who would like to pursue land development, but you lack the knowledge and courage to do so. I’ll try to help you learn a little more about it with 3 basic tips. The courage part is something you’ll have to work on yourself. Get some guts dude!

  1. Discuss Financing Options with Banks, Brokers, and Private Lenders

It’s common practice to have a discussion with a bank before buying a car or house. This helps you figure out what you can afford. It also helps you understand the shopping process and what you need to do to secure the loan. The same applies to pursuing a land development project. Find out how much money is needed for a down payment and what loan terms are available. This will help you understand what types of projects will work for you. You will also know if you need to bring on any partners. This takes us to tip number 2.

     2. Find Some Partners

Don’t let greed get in the way of bringing the right partner into your project. You’re likely to lose a lot more money with ‘rookie mistakes’ than you would lose by sharing the profit with a good partner. I use 3 different types of partners to do development projects.

  • Private money lenders will loan the money needed for the project and have some advice or resources that will help you.
  • Joint venture partners are also a great option. They invest their own money and can offer expertise and effort.
  • Other investors and developers are important if you want to pass on the project for a finder’s fee.

      3. Find Some Property

As with most real estate, a good real estate agent can be helpful in finding the right property. Search the MLS or websites like Redfin.com for properties that are oversized compared to the surrounding properties. These are the types of properties that can be subdivided into smaller lots. You can also drive around your local market and search Google Maps for oversized properties.


    Go through these 3 steps and start finding some development opportunities. You can learn and network while you go through the process. Peace be the journey.

Suggestions for First Time Flippers

Suggestions for First Time Flippers

Buying real estate properties for a bargain, fixing them up and then reselling them for a profit is a great way to make money as a real estate investor. This is often referred to as “house flipping” or doing a fix-and-flip.  You look for a home, buy it cheap, fix the home up, then sell it for more than what it costs you to buy and fix it up.  You can make a huge profit. There are a few ways to improve the experience or ensure you do not lose money.

Plenty of real estate savvy investors are making money with fix-and-flips, but while it looks and sounds easy to do, house flipping has some risks involved. If there are more repairs than estimated, the flipped property does not sell immediately and/or you encounter other unexpected issues, one might not break-even.

Here are several suggestions to help you be successful:

  • Get a Mentor:

Successful “flippers” educate themselves and know the ins-and-outs of the real estate market. If you are just getting started, one of the ways you can get off on a good foot is by finding a successful house flipper to mentor you. The things these seasoned investors have experienced or learned along the way are invaluable. Offer a percentage of your profit for advice if you need to. Then do your research on properties in your local area and find a house you want to make an offer on. 

  • Save Money On Materials

Buy the materials to fix up your house yourself.  Contractors do supply materials but they will mark up prices. If you buy the materials yourself, you will save money and only pay for labor. 

Because costs for materials vary, it’s best to get to know your local stores. Some stores who offer discounts to contractors will give you the same deal if they know you are an investor and plan to do more than one house. Don’t be afraid to ask for a discount.

Home Depot, Lowe’s and Costco offers great deals. Also watch for any clearance sales on materials. You can also go to second-hand stores to find great deals at a lesser price than buying new materials.

  • Save Money on Labor

Some investors buy a house during off-season. This way they can complete the job on time since contractors have less of a workload on their hands and can focus more on the job you have for them. Contractors are sometimes cheaper in the off-seasons.

Hire reputable sub-contractors instead of a contractor and run the job yourself. This will save you money because a contractor also marks up the price of the sub-contractor they hire. 

Doing some of the work yourself will also cut labor cost.

  • Save Money and Time by Using a Realtor

Once the home is fixed-up and you’re ready to sell the house (vs. keeping it as a buy-and-hold property), studies show if you use a reputable real estate agent, your property will sell quicker than selling without one. The longer you hold on to the property, the more holding cost you incur. Realtors know plenty of possible buyers and having them list your house on the MLS helps sell your property faster. While they are selling your house, you can spend your time looking for your next deal.

Overall, utilizing a few basics will help you in the process of doing a fix-and-flip. All it takes to be successful is having the right attitude and information. And getting out there and doing it.

Knowledge + Action = Results

4 Steps to Overcome Analysis Paralysis

4 Steps to Overcome Analysis Paralysis

Most beginning investors will deal with analysis paralysis or overthinking a situation so that action is never taken.  A couple of the biggest causes behind analysis paralysis are lack of confidence and fear of failure.  Beginning investors feel like they do not know enough to take action.   Here are some steps that can help one overcome analysis paralysis.

  1. Remember your goals and what you would like to accomplish with real estate.  Write you goals down somewhere you can look at them on a regular basis.  If you have not set goals, you need to.  Having goals in front of you will help give you the motivation to take action.
  2. No one is going to do it for you.  This is your business so don’t count on someone coming to help.  You need to take action because if you don’t, things won’t happen. 
  3. Find your fuel.  This is a key in getting moving.  This is also different for everyone.  Why do you want to invest in real estate?  What will investing in real estate help you achieve?  Lite that fire within you, start taking action, and never look back. 
  4. Are you willing to do what must be done?  Investing in real estate is not easy.  It takes perseverance.  You will be told no over and over again.  The investors that are successful figure out how to get through whatever obstacle is put in front of them.  They are willing to do what must be done to be successful. 

Taking action with investing is the most important thing we do.  Of course we need knowledge but if knowledge never turns into action we will never make money.  It is important to understand that we will not be perfect as we get started investing and we will make mistakes, but it is all part of the learning process.  As we continually take action, we will make money investing in real estate.   

Three Common Obstacles for New Investors

Three Common Obstacles for New Investors

The career of a real estate investor is riddled with obstacles. The very job of an investor is to find and fix problems and overcome obstacles. However, there are difficulties that can blindside new investors and stop them before they even start. This article will illustrate three common obstacles investors will face upon entering the business.

  1. First and foremost, new investors will be hit with the realization that real estate investing is not a get rich quick program. This job can be equated to running a marathon rather than a sprint. Although a person can make sizable sums of money rather quickly, a person will not get rich overnight. In order to make it long term, a person must be persistent and consistent. There must be discipline to complete the necessary tasks to be successful. Therefore, the first obstacle is to overcome the idea that you will be able to retire with little effort.
  2. The second obstacle is gathering the right people for your power team. A successful investor will need other industry professionals to help with their business. The right person for your power team is someone that will support you in what you are trying to accomplish. We need to surround ourselves with like-minded individuals and limit our interaction with negative people. There are many industry professionals that have a limiting mindset and will only serve to bring you down; therefore, these connections should be avoided at all costs. Work to bring positive and supportive people onto your power team.
  3. When a new investor jumps into the game they are usually anxious to gobble up all the information they can get. There are countless “experts” in the field that have a special way of making the business work. You can jump from video to video and article to article outlining all the “best” ways to make money in the real estate industry. This information overload should be avoided at all costs. A new investor should find one strategy and focus on it until they are comfortable enough to move forward without new information throwing them off track. It is easy to hear so much information that it places you in a state of inaction. Beware of this trap.

All new investors will encounter obstacles that are unknown until they pop up. All new investors should prepare themselves to overcome the three difficulties outlined in this article. Remember, stay focused and be consistent to meet with success.

The Importance of a Positive Attitude in Real Estate Investing

The Importance of a Positive Attitude in Real Estate Investing

Having a positive attitude is extremely important to becoming successful in real estate investing, as it is in any successful endeavor in life.  Negative speech and thoughts can be debilitating and keep a person from accomplishing their goals.  Learn to change the way you talk to yourself and others and you will change the outcome of your life’s journey. 

For example, let’s look at the subject of attempting to get into better and healthier physical shape.  If your thoughts and speech follow the lines of, “I can never lose weight,” or “I can’t stop eating sweets,” or “No matter how much a work out, I never get more muscular,” you will create a mind-set that causes you to lose faith in the fact that with proper eating and exercise you can lose weight, get stronger, be healthier and look better.  It is important to start have the right self-talk. Try changing the phrases you repeat over and over again to, “I know I can lose weight if I eat healthy foods and exercise regularly,” “I will gain muscle if I work out 3-4 times a week consistently,” and “I enjoy eating healthy protein, vegetables and fruit, and I feel better when I do.”

This same technique works when it comes to investing in real estate.  If you keep making statements to yourself and others such as, “I can’t ever find the time to do this business,” “There are no deals to be found in this area,” “There are too many other investors in my area to compete with,” or “People will know I’m not very knowledgeable in investing when I talk to them” then stop. Change your self-talk to, “If I use proper time management I will find the time to be successful at this business,” “The more offers I make, the more deals I will create for myself,” “By being persistent, I will be the one to find the deals in my area,” and “The more times I talk with people, the more confident and knowledgeable I will become.”

Every endeavor and business adventure is a learning experience. With faith and confidence in yourself, you can be successful at the things you work hard for.  Talking in a positive manner can help build confidence and faith with which you can succeed, especially as your experience starts to prove your statements true.  Whatever you say and think will become your reality. Change the way you talk to yourself and others and you will change the direction of your life.  Now, go out and make it happen!

Being a REALTOR and an Investor

Being a REALTOR and an Investor

When new investors discover that I am a licensed real estate agent AND an investor, the usual question that follows is: “What are the benefits to obtaining a real estate license?” I then explain that there are both pros and cons to being a licensed agent AND an investor. In this article I will review both.

Cons

  1. Question: What do you get when you cross a used car salesman and a lawyer?

Answer: A real estate agent.

The stereotype is that agents are usually salesmen that will do anything for a commission. Therefore, when potential sellers learn that I am an agent there is an emotional wall that is immediately built. This division sometimes makes it difficult to proceed with a conversation about their property. Because of this, I have a reply that I use every time to overcome their objection.

  1. Another downside of maintaining a real estate license are the annual dues and fees. Every state has fees to renew the license. Additionally, costs for required continuing education, an MLS subscription, and dues to the various real estate boards can be in the thousands of dollars. Real estate investors without a license don’t have any expenses outside of normal business costs.
  2. A licensed real estate agent must use a state-approved real estate purchase contract. Therefore, with a license I am unable to draw up a contract with my own terms contained therein.

Pros

  1. With a real estate license and an active MLS subscription, properties can be found without the assistance of a third party. I can scour the MLS database for properties without having to wait for an agent. Similarly, I can submit offers directly to sellers or seller’s agents, again, without having to wait for an agent.
  2. Another positive is that any property I buy from the MLS to rehab or add to my portfolio will pay me a commission. Therefore, adding another possible stream for income.
  3. If, for some reason, the seller and I cannot come to terms for me to purchase the property, I can list the property on the MLS for the seller, thus earning a commission when the property is sold.

I have outlined a few of the pros and cons for having a real estate license AND being an investor. In the end, the decision to get a license is up to the individual or partnership. Final thought, it is not requisite for a person to have a real estate license in order to be an investor or even to make money in the real estate industry.

Five Mistakes Investors Make When Building Their Business

Five Mistakes Investors Make When Building Their Business

Being in the real estate industry over the last 20 years has allowed me to see many forms of success and failure.  I have learned a lot from each of these categories.  You might think I’m going to tell you how to make sure you run your numbers correctly or not overbuild for the neighborhood.  You might think I’m going to suggest that mistakes are made by not seeing all the hidden costs in a fix and flip property.  Yes, these things are important and I’ve made my share of mistakes with these along the way but the biggest mistakes I’ve seen in my 20 years of experience is that real estate investors forget to PLAN for their success and they don’t realize the most important success habit is your mindset.  Investors seem to have a hazy idea of what they want to happen and then they just throw all their efforts at it to see if it sticks without really taking the time to create the success they want.  I’m going to share some of the top mistakes I have seen over the years and the success markers I’ve implemented in my business and have helped successful real estate investors implement in their business. 

The first mistake I see entrepreneurs make, especially real estate investors, is they are not clear about what they want.  They say “I want to be a successful real estate investor” but they really don’t know what that means nor have they taken the time to really find out what that means.  In order to be successful, you need to know what it’s going to take to be successful.  You need to know what education you are going to need, what foundation of your business you are going to need to build and how to create a power team around you to help you build your success.  For example, take some time today to ask yourself. 

  • “How much money do I want to make on each of my real estate deals?” 
  • “How many will I need to close each year to accomplish the dollar amount goals I have set for myself?”
  • “What needs to be done to make this happen?”

As you can see, there is some planning that needs to go into setting yourself up for success.  When you begin to ask these questions, then what needs to be done to make it to the next level of success in what want to accomplish will become clearer.

The second mistake I see entrepreneurs make is not prioritizing what needs to be done to create their own success.  Too many times I hear the excuse, “I don’t have enough time.”  My answer is a little blunt and not really easy to accept if you are committed to this excuse.  I gently say we all have the same 24 hours in a day.  The way that we use those 24 hours will determine our success.  My suggestion is to make a list at the beginning of each week of everything you NEED to get done for the week.  Then make a second list of all the things that you must do to be successful as a real estate investor.   Go through both of your lists and prioritize each activity with an A, B, or C for priority level.  Sometimes it also helps to put a time frame on each item.  Then grab your PAPER calendar (yep, we’re going old school for a minute) and put all the “A” activities on your calendar for the week, then add your “B” activities.  Your “C” activities will fill in any free time you find for yourself during the week so keep your list handy throughout the week.   This is going to be a work in progress and I will GUARANTEE…. Yes….. GUARANTEE you will fail the first week you put this in place so realize that this is going to be a work in progress and you are going to have to keep doing it to get better at it.  Remember that failure is just information.  It doesn’t mean you give up; it means you do it better the next time.  Your calendar is going to be somewhat flexible but you are also going to start becoming very responsible with your time and learn to manage it, so you can master it.  My favorite saying for time management is, “Either you run your day or your day runs you.” 

The third mistake I see investors make is giving up.  The commitment level is there when the hope is high and the excitement level is at its peak but when it comes to doing the hard work, putting in the hours, staying persistent, trying something new when one thing doesn’t work, I hear, “This doesn’t work”.  I want to say, “Does this not work or do you not work?”  Sometimes success is not found overnight.  In fact, I would say in most cases success is not found overnight.   If you interview any successful entrepreneur, they will tell you it was a long climb to the top and they fell down a few times.  They will also tell you that staying the course and being persistent with successful habits is the reason they found success.  Decide now that you are “in it to win it,” that “if it is to be, it’s up to me” …whatever silly mantra you need to come up with to remind yourself to stay the course and be consistent and persistent with your efforts.

The fourth mistake I run into over and over when working with new real estate investors is they are blown like a plastic bag in the wind with everything they read or are told.  They become consumed with what everyone else is saying instead of doing the research themselves and coming up with their own opinion.  They go to a real estate investment club and listen to everyone whine and complain about “how hard it is right now.”  They jump right on that band wagon and complain that this can’t be done.  I’ve got news for you.  It can be done but you have to do what others are not willing to do so that you can have what others will never have.  It’s really that simple.  What you focus on you will create.  If you are going to dwell on what someone else said and drag it along as your victim story, you are not focusing on the solution.  You are not creating something new. You are stuck, and I promise you are not going to go very far, and you will end up right back up in mistake number three —  giving up!  You must be aware of the people you are surrounding yourself with, the news you are allowing to come into your life, and you must determine that you will only “listen” to what is working.  The great thing about real estate is that when it’s good, it’s really-really good and when it’s bad, it’s even better but you have to know what strategies to employ.  You must become a problem solver. You must know that there is always a solution, and you must be determined to find it. 

A fifth mistake I see people make when building their real estate business is they forget to take a little time to evaluate what has worked in the past, what could be done better and what needs to be done completely different.  Taking a step back to evaluate every so often — maybe monthly, maybe quarterly or maybe even more often — helps you to build on the strengths and define where the weaknesses might be.  This isn’t a time to dwell on the problems and what’s not working, it’s a quick evaluation to see what needs to be tweaked.  When you can identify what is working and what is not, you can play to your strengths and put practices in place to build the weaknesses into strengths.  For example, if you are getting more properties than you know what to do with and you’re getting accepted offers but your cash buyers are not interested, then maybe you need to re-evaluate how you are running your numbers.  Take a little time to question what is working — and do more of that.  Then making sure if something is not working, you find a solution. You are learning equally from your failures as well as your successes, both have great information to share with us on our journey to success.  By evaluating what is not working and finding a solution to make it work, then evaluating what is working and doing more of that, you keep “building” a successful foundation for a thriving business. 

These are the top mindset mistakes I see real estate investors make.  There are other mistakes you will make along the way and that’s ok. As long as you have the right mindset, you will make it through the other slip-ups.  Remember to plan your way to success, make small and attainable goals.  Become friends with your calendar and make it work for you.  Make sure you are aware and conscious about what you are putting your focus on and commit to your success with consistent and persistent effort.  After putting all these success habits in place, stop from time to time to do an evaluation of your efforts and make them better.  Buying a house to flip in the wrong neighborhood is not as detrimental of a mistake as doing the same wrong thing over and over and over again.   You must have a plan for your success, so take some time today to make it happen.  Good luck and happy investing!

3 Ways to Keep Going When Things Get Tough

3 Ways to Keep Going When Things Get Tough

When you are an investor it can become really hard to press forward when things get tough. Some problems you may encounter might include: nobody answers their phone, nobody will reply to your messages, your offers are not being accepted, you can’t find any good comps and so on. But, when things get tough, that’s when it becomes worth it to press past your tough point and move forward. It’s similar to when exercising muscles; you will see progress for a period of time and then things will plateau and no progress will be seen.  This is the time that makes a difference between those who are going to succeed and those who are going to give up and amount to nothing. So how do we press forward?

  1. Set goals that are smart.

    Specific – We need to know not just that we want to make a lot of money but how we are going to make that money.

    Measurable – Is your goal something that you can measure? Can you keep tract of your progress?

    Action Oriented – Have you set a goal that will motivate you to get going?

    Realistic- Are your goals something you are actually able to reach?

    Time Oriented – We need to give ourselves deadlines to push us to get things done.

    Setting goals is important in all aspects of life, and when we don’t set goals, we won’t see success.

  2. Find a solution to the problem.

    We may come to a time when we feel things are just not going well and it’s not going to work out, but in these times we can stop, take a breath and find out how to solve the problem. If our agent is not sending us comps to look at after we ask them over and over to do so, we need to get a new agent. If our cash buyers are not interested in our properties, we can interview them again to better understand what they are looking for. If we don’t work at getting rid of our problems, we are just going to be digging ourselves into a deeper hole.

  3. Reward yourself.

    When you set a goal and reach it, its time to reward yourself. From going out to ice cream with the family to eating out with that special someone, reward yourself with something you enjoy. You may not have become a millionaire, but you are going to find satisfaction in reaching your small goals that are going to lead you to accomplishing your big ones.

All investors hit hard times and feel that there may not be a way to press forward. But the difference between the successful, wealthy investors and the poor, angry ones is that one complains about their problems and the other takes the bull by the horns and blasts threw them.

Appreciation Rates

Appreciation Rates

When investing in rental income properties, two sources of income come into play in determining an investor’s total ROI (return on investment).   One is the cash flow return on investment and the other is the appreciation rate of return.  The cash flow is determined by total income from rents minus all expenses and the appreciate is determined by how much the property increases in market value over time.  In many States throughout the Midwest and Central East a typical cash flow return might be 10-12% while the appreciation is only 2-3% creating a total ROI of 12-15%.  In other States, especially the west coast and sunbelt areas, the cash flow return may be much lower such as 6-8%, but the appreciation can be as high as 5-15% annually, creating a ROI of 11-23% depending on the state of the economy in those states.  These areas can also depreciate the same amount at times where the value of the properties drop dramatically.

Some investors are more interested in the cash flow return so that when house prices drop they still receive a good return on their investment.  Other investors speculate on house prices going up rapidly and aren’t as concerned with the amount of cash flow return on investment from rents because they are banking on making a great deal from appreciation.  This will be the case as long as prices are going up, but if the economy shifts and prices drop then those investors will not make out as well as investors who make sure the net rental income returns are healthy.

So, what effects appreciation rates in different areas.  The simply answer is supply and demand.  As more buyers move into a market place with the same amount of properties available, the prices will increase.  When people hold off on buying and lots of homes are being manufactured, the prices will start to come down.  Highly desirable areas, like sunbelt and coastal regions, attract more migration and higher demands when the economy in those areas is good and there are plenty of jobs.  Smaller towns, with harsher weather, have less growth and can even decrease in population as people move out to find more pleasant environments.  But these trends go in cycles with people moving to the fair weather States when prices are deflated and moving back out when prices become too expensive; opting for less pleasant weather as a trade-off for a lower cost of living.

Building trends also effect the economy.  When large builders stop developing new subdivisions because of a stagnant economy, supply lessens and demand eventual catches up with it.  Then as buyer’s confidence in the economy returns a buying frenzy can pursue driving the prices up rapidly in areas of high demand. The reverse also happens when builders start constructing massive subdivisions, adding a multitude of homes to the market, and the stock market drops or interest rate raise causing investors to become apprehensive of the future thus holding off on purchases.  Then prices can drop rapidly because supply out paces demand. 

So take appreciation into your financial scenario when determining the overall ROI of an investment, but remember that cash flow will continue pretty steadily in any area, whereas appreciate can fluctuate drastically in areas where it has a tendency to go way up or down.

Tips for Getting An Investment Property Ready To Sell

Tips for Getting An Investment Property Ready To Sell

Getting an investment property ready to sell does not need to be difficult or stressful but somehow many investors find it becoming just that. Some investors become emotionally attached to their property, some become nostalgic and find it painful to let their property go, and some have difficulty selling a tenant occupied property. Regardless of the reason, when selling a property, the key is to keep things simple. The minute you decide to sell, you need to stay firm on your decision and your emotions need to stay out of it. Here are a few tips that can help make the process of selling your property easier and more stress-free.

Deciding to Sell

When deciding to sell an investment property, think of your property as an investment and figure out how to make a profitable deal out of it.
For Landlords, it can be quite a dilemma when you want to sell a property with tenants in it. Most landlords will want to wait until the lease or contract is over before selling the property because, typically, the fewer the people involved, the fewer the complications. Although a vacant rental property could mean fewer complications, whether or not you have tenants, you can still sell your property. It’s just a matter of finding the right buyer. There are new investors out there that would like to start their investing career by becoming a landlord, and buying a tenant occupied property might be just what they’re looking for.

Hiring An Agent

Find a real estate agent that you can comfortably work with. After all, they should have your best interests in mind. Real estate agents are very knowledgeable and can give sound recommendations for those that are new to real estate investing. Agents will evaluate your property and provide a CMA or comparative market analysis for your property. Make sure to choose your agent carefully since they will handle the legal requirements of selling your house. Agents are also in charge of the advertising, marketing, and showing the property to perspective buyers.

Preparing The Property

Make your property appealing by understanding your selling audience. Are you planning to sell your house to an owner-occupier or an investor? Different buyers will likely have different ideas on what to look for in a property. Prospect owner-occupiers need to “fall in love” with the property. If you can afford it, staging your property can do wonders.

Declutter unnecessary items to make your property spacious. This does not necessarily mean that you have to remove everything inside and present your buyers with a cold and vacant property. Buyers need to experience the property in its “lived-in” state without having too many personal belongings in the way.

Paint the walls with neutral colors. Buyers are usually excited to have a fresh start to their new homes. Give the place a fresh coat of paint to make your property look new and clean.
Clean the property. If the property is clean, it will smell clean. Unpleasant odors inside the property are a big turn-off to buyers. Pay special attention to the bathroom. If you can afford it, make it look like a spa. Fix holes in the wall, broken windows or anything that needs to be mended. Buyers need to see that the property is well maintained and, of course, nothing makes a property more appealing than cleanliness. It’s cheap and shouldn’t cost a lot money.
Make sure the exterior of the property looks beautiful as well. Don’t become the property that buyers refuse to enter because of an unkempt landscape. Boost your curb appeal by trimming the shrubs, painting the door and keeping the walkway clear. First impressions matter.
Not only will these preparation tips help you sell your property faster, they will add value to it.

Pros of Using Trust Deeds

Pros of Using Trust Deeds

Buying and holding trust deeds is a great way to offset buying and holding a property. Trust deeds are also known as real estate notes, seller financed notes, and/or mortgage notes. Notes are usually created by the seller of the property to help finance all or part of the transaction. This service the seller provides usually attracts a lot more buyers for them. The terms, conditions, down payment, interest rate, due dates, payment amount, late charges (if any), length of the loan, and anything else associated with the note will already be negotiated between the buyer and seller of the property. Therefore, you do not have to renegotiate anything. As the investor buying the deed, you need to review the entirety of the note and decide if this is something you want to buy. Deeds are a great investment opportunity for investors. The pros of using trust deeds as an investment tool are as follows:

  • Usually a higher rate of return, meaning better cash flow for you.
  • Less risky than owning the property out right or investing in stocks.
  • No management of the property is needed.
  • No need to pay mortgages, taxes or insurance.
  • You are in first lien position on the property, meaning the trust deed is secured by the property.
  • You can possibly sell your note to other investors, usually at a higher profit than at what you acquired it.

Simply put, you are acting as the bank when you own a trust deed. Your investment is secured by the property, which means if the borrower is not able to make payments to you, you have the right to foreclose on the property, as long as you are in first lien position. Investing in deeds is a great investment strategy to add to your portfolio. I would suggest only getting notes that are first lien position notes. You can find other type of notes, but for now stick to these kinds and you will be in good shape.

Staging Investment Properties

Staging Investment Properties

In today’s market, property owners have found it worth their while to invest in staging their home when they plan to sell their property. Property staging is the art of decorating a property to help it sell faster. Statistics have also shown that staged properties are perceived to have a much stronger value meaning a higher selling price that would result in more money for the property owner.

Recent studies have shown that a beautifully staged property can draw in more potential buyers as it makes the property visually inviting to prospective new home owners. By creating an ambience of comfort and warmth, would-be buyers are given an example on how to plan out their own designs to use in the property rather than being presented with a large empty room.

You get one chance to make a first impression when trying to sell your home, therefore, it is really important that it is presented at its best. It is ok if you want to do the staging yourself but it does not necessarily mean that you can do it as well as a professional home stager would. Remember, staging can require a lot of time, skill, and energy so it would be wise to be realistic about whether you have the patience to take on this important task yourself or hire a professional. Here are some basic tips when staging a house:

  1. PAINT: Light neutral colors are recommended to help inspire prospective buyers in visualizing where to put their own household items in the house. Neutral colors are also the easiest colors to decorate with.
  2. CLEANLINESS: A clean, well-maintained property is always the first thing buyers will notice when entering your property. Scented candles will make the house smell good and clean.
  3. DE-CLUTTER: De-clutter and remove personal items. Home staging is beyond your normal redecoration. Do not forget that the house is now a commodity you are planning to sell and stop thinking of it as your home.
  4. FURNITURE: Buy or rent new furniture to replace anything old and shabby looking. Old, ugly, and outdated furniture can be an eyesore and could be the reason holding you from making a home sale.

Hiring a staging expert and how much it would cost would depend on the property and how much work is needed. Contact various home stagers and ask for estimates. A home stager will want to look in the property and make recommendations. It could mean stripping your house of all furniture and furnishing your property from top to bottom if needed to improve the appeal and marketability of your property. A professional home stager will showcase your property to make it stand out against its competitors. Although it sounds like it would cost you a lot of money, it is a wise investment. Staging your property will help you get the highest price for your property and help it sell faster.

Understanding the HUD-1 Settlement Statement

Understanding the HUD-1 Settlement Statement

Before being able to purchase or sell a property there are a lot of legal documents to prepare. One of the most important documents required by the government in securing a mortgage loan is the HUD-1 Settlement Statement. HUD is the acronym for Housing and Urban Development.  Housing and Urban Development is a department of the government that is responsible for any legal transactions concerning real estate ownership and property development. It is the branch of the government that develop and enforce fair housing laws.

According to the Real Estate Settlement Procedure Act (RESPA), the HUD-1 Statement is a standard form used by a settlement or closing agent to account for all of the charges and fees incurred for a real estate transaction.  The HUD-1 statement is given to both the borrower and the lender with a complete breakdown of all the costs and adjustments involved before a loan is approved. The HUD-1 is sometimes referred to as a “settlement form” or a “closing sheet”. The borrower has the right to view the Settlement Statement one business day before settlement.

The HUD-1 Settlement Statement comes in three pages and divided into sections that are required to be filled. The first page of the form is composed of three main sections.

  1. Sections A – is the title of the document and does not need
  2. Sections B-I – asks for the basic information aboutthe buyer, seller, Title Company, lender.
  3. Sections J and K – are the transaction summaries of the buyer and the seller. The borrower’s details will be found on the left side and seller’s details on the right.

The second page of the HUD-1 settlement is where the entries of the fees and settlement charges are shown. Again, the buyer’s charges are in the left column and the seller’s charges in the right column.  These fees and charges are then added together and totalled at the bottom of the page. The total costs are reflected at the first page and added to the appropriate columns of the buyer and the seller. Generally, it is an inquiry of who pays and the total costs incurred. Often there are missing and unanticipated charges but these are common mistakes and the HUD-1 statements are changed before the closing.

The third page of the HUD-1 is divided into two sections. The first section at the top is a side by side comparison of the Goof Faith Estimate and the charges for the borrower that is also listed on the second page of the HUD-1. The Good Faith Estimate or GFE is an estimate of all the costs the borrower expects and is similar to the actual cost of the settlement statement. It is just an “educated guess” but it does not guarantee the actual closing costs.

This section of the third page summarizes the key terms of your home loan, from interest rates to closing costs. There are certain charges that cannot increase at all; other charges that, in total, cannot increase more than 10%; and other charges that can change.

The second section of the third page specifies the Loan Terms in detail.  It include the question of how much is the loan amount, what are the loan terms, the interest rate, the monthly principal, the interest and the mortgage insurance payment. It asks whether or not the interest rate can rise, and if so, by how much and when. It also lists if there is a pre-payment penalty and the total monthly amount owed. Basically, it indicates by how much the final closing costs can legally change as compared to the estimated costs shown in the GFE.

It is very important to thoroughly check the HUD-1 settlement form for errors to be able to make adjustments before the final approval and not be ashamed to ask questions to the closing agent if there are discrepancies in the figures or something is unclear.

Section 8 Vouchers

Section 8 Vouchers

A Section 8 Voucher, also known as Housing Choice Voucher is a program set up by the federal government to assist low income, elderly and disabled Americans to rent properties at a reduced rate by subsidizing a portion of the monthly rental fee. This program is available in every major housing market within the country and is administered by local public housing agencies. Those who qualify for this assistance can find housing available almost anywhere in the city, not just in subsidized housing projects.

Pros

  • Landlords like the program because they don’t have to hassle with collecting monthly rent, following up on late payments or dealing with excuses about why tenants can’t pay.
  • Renters that have financial hardships, like a job loss or illness, that cause them to have unpaid absences from their work, don’t need to be evicted. Instead, the Section 8 Voucher program will pick up 100% of the monthly cost, until the tenant is able to work and pay again.
  • The Section 8 Voucher program matches prospective tenants with 1, 2 or 3 bedroom properties. The rent is pre-set by the local public housing agencies and tends to be higher than non-Section 8 rental properties.
  • In order to qualify for this program, tenants must consent to annual property inspections. These inspections are performed by a third party at no cost to the property owners. Although these inspections will turn up repairs that are needed, they also help spot damage done by tenants and will assist the landlord in getting rid of the abusive tenants.
  • With over 3 million low income households participating in this program, there is no shortage of possible renters. Many areas have huge waiting lists for Section 8 Housing, so vacancy time is virtually non-existent.
  • Some states provide websites that can be used to advertise properties at a substantially lower cost than other marketing methods.

Cons

  • Section 8 Voucher programs, like any other program managed by the government, has its share of regulations and paperwork.
  • Each property is required to be inspected before a tenant moves in and annually thereafter. The inspection criteria are stringent and sometimes can be costly.
  • Depending on the area that the rental property is located, the Section 8 housing rental caps may be less than the going rate for renting the same property in the normal market. In this case, it may not be financial feasible to go with Section 8.

The Section 8 Voucher program is a win-win situation for by landlords and tenants. It ensures the tenants are getting move-in ready properties and the landlord is guaranteed rent.

What is a Home Inspection Report?

What is a Home Inspection Report?

A home inspection report is a useful tool in the real estate market for both buyers and sellers. A home inspection is an examination of the conditions in a house. These conditions are those that affect the property values and include such items as structure and mechanicals. “The home inspection takes the uncertainty and emotional barriers out of buying a home.” (Gonzalez)

A home inspection is not an appraisal. An appraisal is a method of determining property value and takes into consideration items such as square footage and property value. The home inspection will take these factors into consideration but also accounts for the inside prospective of the home.

The home inspection report is unique to residential properties and is used to determine and diagnose the property characteristics.

We will explore the expectations of a buyer or seller when entering into a home inspection. During the home inspection, the condition and structure of the home will be documented by an inspector after taking a simple visual assessment of the property.

After the exterior is visually inspected, the heating, ventilation and air conditioning systems are examined and their performance recorded. The inspector will not disassemble the equipment but turn it off and on to see if it is in working condition. The inspection will report any observed material defects.

Plumbing is an important component of a home and the inspector will visually examine the operation of the plumbing system. The water flow is expected to be free of any obstruction so clear, clean flow of water should occur. The inspector is making sure that sewage and waste return is separate from the fresh water supply. Additionally, the inspector will visually check the water heater.

The electrical system is also visually inspected and lights and outlets randomly checked. The notation of the type of electrical box as to whether the service is fuse or switch triggered will be documented in your inspection. In conjunction with the electrical and heating review some inspectors will offer a thermal imaging inspection using an infrared camera to give the information on heat loss and any electrical problems that are not visible to the causal observance.

Choosing a home inspector can be a difficult process in some areas because of the large amount of inspectors available and their different levels of education and competency. When considering a home inspector, there are several approved education institutions, and although not national, they can be found on the individual state sites such as nachi.org or npiweb.com. These national home inspection schools add credibility to the training given to the inspector. These sites will also give a list of the inspectors in your area by zip code.

The average fee for this service is between $350 and $500 and varies according to location, size and type of inspection needed. The home inspector will ask several questions before quoting a price so it is best to call and discuss prices with a few inspectors in your home area. It is prudent when buying or selling a home to get a home inspection. This will save money on expenses later on after the purchase and in some cases help to firmly set the selling price.

What are Trust Deeds?

What are Trust Deeds?

A trust deed is a legally binding agreement between a person and his creditors. The agreement gives the trustee the mandate to manage the assets while repaying outstanding debts that the owner of the asset owes the creditors. With trust deeds, the agreement between the asset owner and the creditor is voluntary. As a result, creditors who opt not to sign the trust agreement can seek an alternative means of recovering the debt that the person owes them. On the contrary, creditors who sign the trust deed are bound by the terms of the agreement in that they can’t seek an alternative means of recovering their debt.

Types of Trust Deeds 

There are varied types of trust deeds, and they are outlines as follows:

  1. Asset free deed 

The asset free deed is taken by individuals who don’t have any assets. The agreement of this type of deed allows the trustee to get some portion of income from the affected individual and use that money in paying creditors. Taking an asset free deed helps the individual who doesn’t own any asset to avoid bankruptcy.

  1. General Trust Deed

Also referred to us a regular deed, the general trust deed is taken by creditors under a voluntary basis. The individual should appoint trustees who are well skilled as insolvency practitioners. He then goes on to transfer all the assets that he owns to the trustee. With the use of the general trust deed, the individual is protected from undergoing the bankruptcy process.

  1. Protect Trust Deeds 

These deeds are enforced by a court of law. The asset owner seeks the aid of the court to bind the creditors to the deed. A protected deed can also be used to protect the home equity of the individual. Once the deed is discharged as per the agreement, the asset owner becomes debt free.