Our story continued...

The last time we spoke about our experiences, we stopped at a house that we purchased in 2002. We still have that home and rent it for a couple hundred dollars cash flow per month.
We then decided to purchase another house with the same partner in the same city. A couple months went by, and we found a VA foreclosure with 5 bedrooms, bath and a half, off street parking, and in a great area for only $36K. Again, we put too much money into the home (we sent the same investor out again to repair the house(!?!), and rented the house out. We spent huge amounts of money finishing the hardwood floors in the living room, installing carpet in the bedrooms and the hallway, laying linoleum in the dining room and installing laminate in the kitchen. The whole house needed spackle and paint (there was paneling on all of the walls downstairs), all new lights and ceiling fans, remodeled kitchen and bathrooms, and then the outside needed work as well.
Would we do that again? No way! As in any endeavor that we as humans take on, we make mistakes. The key is: not to make the same mistakes twice! We made many mistakes on this particular home. First and foremost, is the partnership situation. Whenever you decide to run a business of any sort, you need to make certain that if you are going to have a partner, then both you and the partner needs to be compatible. You need to have the same goals, principles, and techniques. It is every investors' goal to make money on their investment. It is their method of achieving this goal sometimes that can be the deterrent for initiating a partnership with them . This was our situation. We, my husband and I, were very different from our partner. His ideas and experiences, we did not share. It is also very important to map out your expectations of one another from the very beginning. We did not do that.
Another mistake that we made, is buying a huge house that needed lots of work. Granted, most of it was cosmetic, but it was still lots of time and money. Some of the repairs were mechanical, and they had to come out of our pocket. Also, large houses have more liabilities from many view points. First and foremost, the larger it is, the more money that you spend. Secondly, if you rent out the house, it will be to large families. That means more wear and tear on your walls and flooring. Thirdly, if you sell the house, most people are looking for a three to four bedroom home, not a five or more bedroom. Because of the size and amenities, you will be listing the home for more money. This will throw those people who are looking for lesser payments, out of your market.
Speaking of repairs, this would be a third mistake. Always interview many contractors, get estimates, and do not hire them by the hour, unless they are trustworthy, and you have known them for a long period of time. Try to visit the project frequently, and keep them on track. Keep in mind that time is money! The more time they put into the project, the more money that you spend. That was the gist of our third mistake. The contractor who worked on that project, was constantly shopping at the big box stores (for the house), constantly taking breaks, smoking cigarettes, and finding someone to talk to.
We have built new criteria for houses that we look at in the future, based on the mistakes that we have learned from in the past. We now have a crew of contractors that we feel comfortable with, and we buy the materials needed for the house, not the contractor. We now buy houses by ourselves, without a partner. That is not to say that we would not have a partner, if the right situation arose. The numbers have to work for these houses before we buy them, and we never buy row homes.
Let's talk more about this again. See you later.

Buying investment real estate

Last time, we talked about whether real estate is an investment. This time, we are going to talk about how to start. If after reading all of the posts here, you have read about setting goals, finding a mentor, and building steps to achieve your goals, then you should be ready and excited to start looking for investments.
When you first look to invest in real estate, it is not an investment platform that you can just go to a stockbroker to shop for this investment. Of course, you could always find a realtor that has a property for sale. Usually these are not the kind of properties that you are looking to start with, unless that particular realtor specializes in distressed properties, commercial properties, and/or investment properties. The next step for you is to look at different kinds of properties.
Some of the things that we look for when we are looking for a property to purchase is: high un-mowed grass, boarded-up windows, chipping peeling paint, old vehicles or personal possessions sitting in weeds, a tarp on the roof, etc. Usually, if there is a tarp on the roof, boarded-up windows, and other remedies to keep the house in some sort of secure, weather-tight position, the lender who is in the process of foreclosing on the property has sent someone out to try and protect their investment.
Another good source of leads for properties is in the courthouse. In the sheriff's' department and the tax departments are a good place to look. The sheriffs' department will have the list of lender foreclosed homes that are coming up in the near future. The tax department will have the homes in that county of people that have not paid their real estate taxes. When you look into either of these sources, make certain that you find out if there are any additional leins or encumbrances on the home(s) that you are intending to purchase before you get to the scheduled sales. Also, if you have found a source of capital, many times you need to have 10-20% down in certified funds. Even if you have not found capital to work with, it would be a wonderful experience for you to attend one of these sales just so you have additional knowledge.
I have been to any number of sales, and have not purchased anything from them, but have had a wonderful time just learning and meeting other investors there. My personal preference, is to wait until after the sale. In that way, usually the foreclosing lender will have "bought" the property back, and will have it put on the market, free of liens and encumbrances, and I can get a wonderful deal then. All of the homes that we have purchased, have been foreclosed upon already, and the lender was the seller. That does not mean that you won't be able to find wonderful deals at the sales, or before the property goes into foreclosure. You just need to look closely at all of the deals. Don't jump at the first house that you can find that you can afford.
Remember, one man's trash, is another man's treasure. If you do not have a vision for that house that you are looking for, cannot see potential, or just don't like it for whatever reason; MOVE ON. The "deal of a decade" happens every day! Really. The more properties that you look at, the more deals that you will see and learn to recognize. Not every deal is a good one.
If you have any questions about anything that we have spoken about today, send me a comment. I will be happy to answer them.

Buying investment real estate

Are you in the market to buy an investment? Did you look at paper investments that most people look at; stocks, bonds, annuities, & mutual funds? How about commodities? Did you search through the commodities market for something that could increase your cash-flow, build equity, and not take a loss or plummet? In today's market, did you find anything? Now, real estate is a different market altogether! In the real estate market, you can buy a house for $50,000, using hardly any of your own money (depending on how you design the deal), and instead of paying $50,000(as in purchasing a paper investment), you might only pay $5,000, and have $30,000 in equity the minute you settle on the property! Now, how does that work? It's called "OPM" - other people's money. Now, why would other people want to give you money to buy an investment? You generally cannot buy into the stock market using other people's money. If you decide to buy gold bullion, you generally cannot borrow money to buy it. If you decide to buy any insurances, they won't finance the policies over time. Then, why can you buy real estate with only a small fraction of what the "investment" is worth instead of full face value?
Can you see a stock? No, not really. You are able to "see" the printed value (at that particular time) of the particular stock or fund that you are looking at "on paper". But you cannot "see" the stock itself. Can you meet the board of directors of the company that the stock is offered by? Would you be able to boost their sales in that company, so that your stock will eventually appreciate, or split? Not unless you are in the day-to-day operations of that company in a position of authority, and you are made a stockholder as part of the "perks" that you receive. If you would need money for something, would you be able to "borrow against" your stock? Even in a classic 401k, you would not borrow against stock, but against the money that you, your company, and the appreciation has put there.
Now, let's talk about real estate! Why would someone want to lend you money on real estate? Can you see real estate? Of course! It is a brick and mortar building of some kind, or a piece of property with no improvements would be called a piece of land. Land has always been , from the dawn of time, an investment that everyone wanted. Historically, the nations fought wars for land, built civilizations on land, utilized the land for all sorts of purposes, bartered with land, and much more. Even today, there are wars being fought for land.
So, now, you have an investment that the banks, lenders, and brokers, can see, lend against, and attach a lien to. There are many people that would need to buy this investment from you, so that they could use it instead of you. You could do all sorts of improvements to the property, so that it is worth 100% more to someone else to either rent it from you, or buy it from you. You could take money out of it to start a business, or anything else that you would want to do with the money.
Wow! Now we know that real estate is an investment, with many options of making money, using OPM with very little, if any, of our own money. What is the next step? Remember, in a previous post, we talked about knowledge? We still need to learn all that we can, so that we can make some very informed and intelligent decisions on what and where we are going to invest. Let's touch on that next time. Talk to you soon.

Your take on the market.

Are you one of the many people who currently is in a less than perfect financial situation here in America? Is your mortgage payment or rental payment too high, the cash flow too low, and the debt load out of sight? Are you currently wondering where to get your next payment for one or more bills? If you are one of these people, then you are looking for some concrete answers and hopefully some viable solutions to help you to remedy the situation.
If you have a mortgage that you are having difficulty paying, did you try to contact your lender? Most of the banks, and lending establishments are not excited to sell your house for you (foreclosure). They would much prefer if you contact them (talk to someone in a position of authority), and tell them of your situation before you come to a worse situation. If your rental payment is too high, then again, you need to talk to your landlord before you are late consistently and together you can probably come up with a good solution for both you and the landlord. Keep in mind, that your landlord or the rental agent (if he/she is ethical) is really expecting to hear from you if you have a hardship. He/She is also not very excited about hearing from you after you have been late for many months. Many times, they will work with you, and come up with some solution for you, especially if you come into their office with someone with good credit, job stability, and rental verifications, to take over your lease. If these options do not work, then keep in mind that when you first rented/bought your home, you signed a contract. Whether it was a lease, or your mortgage and note, you are still legally bound by the terms of the contract that you originally signed. Every time that you sign any document, you are acknowledging that you are committed to honor your part of the deal. If it is a lease, then you can wait out the time period of the lease (if you are not allowed to sublease), or you can move into another house now, and still pay for the remainder of the lease on the first one. If you cannot afford your rental payment now, this option would not be a wise financial decision. Another option for you would be to advertise for a roommate. This could also be a viable solution for homeowners as well. Homeowners are not bound by the rules made by landlords. They have the freedom to sell the house, rent it out and move, refinance, get a roommate, and many other options depending on the type of home that they own.
Now, what are the options for your consumer debt? You can always just not pay it. But this does not solve the problem. The goal is really to keep your credit clean so that you have more options open to you. Further more, by your signature, you are committed to paying for that debt. If you do not have lates on your credit report, you will have many more loans available to you to refinance your consumer debt. Refinancing your consumer debt, and not re-incurring it would be a wonderful way for you to free yourself from the high interest consumer debt that you now have. If you are past that option, then consider the credit repair programs that are out there. The key is to find a reputable credit repair program. There are some good programs out there, and if you contact your lender, chances are, they will know of a company that is reputable, ethical, and honest.
If you have a situation that you want to talk about on this blog, then send me a comment. I will look at it and respond. Hopefully, together, we can weather this storm, and come out of it unscathed financially.

financing programs

As I write this, I am thinking about all of the mortgage programs that we used to have. Just a year ago there used to be all sorts of stated income programs, 40 and 50 year term programs, buydown programs, adjustable rate mortgages, no PMI programs, you name it, it could be found! Just a couple of months ago, the real estate mortgage industry has tightened up to the point of conservatism! They were only looking for "vanilla" loans. Do you know what a "vanilla" loan is? An almost perfect loan...wonderful credit, high credit scores, plenty of down payment, plenty of income, many years of job history in the same industry, no credit glitches, not much debt, and the DTI ratio of less than 40%. Sound too good to be true? Yep! That is what the mortgage industry has found out as well. Now, they are relaxing their guidelines to accommodate people with less than perfect credit, not too much money, and especially in the refinance realm; not enough equity. Now, you are starting to see the lines of credit apps in the mail, the TV commercials touting debt consolidation by major lending institutions, and even advertising campaigns by the large lending institutions promoting "new" programs. It still isn't where it was last year at this time, but do we really want it to be? A good many of those programs were promoted to the wrong consumers by well-meaning mortgage originators. Some of these programs were negative amortization loans, which in the wrong hands could be detrimental to consumers. There were some very good negative amortization programs last year, but they were structured for a very specific, knowledgeable buyer/consumer. Are you looking to refinance now, out of a detrimental mortgage for your finances? I would strongly suggest shopping around. Do not give your credit information to the lenders, as every pull of credit ( unless in a 2 week time period for mortgages only) will drop your credit score. I would suggest pulling your own credit, making certain that you receive credit scores with your credit report. Take that into the different lenders and find out what sort of mortgage program they would suggest for your specific situation and needs. If that particular lender does not have the right program, then go to the next one until you find the right program for your needs. During this process, you will become more and more knowledgeable, ensuring a success for your project.
Before you go into the lenders, be sure that you look at your original mortgage documents to ensure that you do not have a pre-payment penalty on your loan. In many of the programs that the lending institutions have dissolved, there was a pre-payment penalty. In many of these pre-pays, you would not be able to even sell your property before you would owe up to 6 months of payments to your lender. If you do not feel comfortable interpreting your mortgage documents, take it either to your bank's loan officer, the title company or attorney that settled your property, a lender, or a realtor. Talk to you soon.

Voting for the proper deal

Last time we talked about finding a mentor, and developing a "board of directors". Today, we will talk about our local, state, and national government. For all of us to be profitable in the real estate, stock, bonds, REIT, etc., markets, we need to develop our government officials into what and who we want them to be. This is a not-so-subtle hint for voting for our officials, whether they are running for president of our country, or county prothonotary official. It is very important for us as U.S. citizens to individually analyze the situations facing our nation, and vote for the very best person based on their ability. In the investment ring, whether you know it or not, you are endorsing capitalism, which according to American Heritage Dictionary is an economic system in which the means and production and distribution are privately or corporately owned and developed. See dictionary link below.

Audio Help (kāp'ĭ-tl-ĭz'əm) Pronunciation Key n. An economic system in which the means of production and distribution are privately or corporately owned and development is proportionate to the accumulation and reinvestment of profits gained in a free market.

In laymen's terms, this means that our profit is our own. Not like in Socialism. Then the government dictates the terms, the profits, and everybody gets a share regardless of their knowledge, ability, or position. So, in a Capitalist society, we would have to make decisions for ourselves, develop ideas, gain knowledge, and overall, increase our marketability to the world. If we hire a public servant (vote), then that person needs to be working for us, and not the government as an entity. We would have to research that person's experience and history, and base our decision off of these facts. That person needs to be of good character, no hidden issues, experienced, and most of all teachable. Since the person running for public office is a servant for the general public, and we, as citizens, vote these people into office, then that person has to have a servant's heart, to write the best laws, research the issues facing the nation, and develop a team of trustworthy people that will be able to help him/her serve his/her constituents better and more efficiently.
I will now get off my soapbox, and let you get back to business. Just think about what our nation would be like without businesses. Talk to you soon.

Your situation.

Let's talk about your situation. I am certain that our family is not the only family in the U.S. to face financial stress, worry, and goal setbacks. Most of the time it takes a couple of people to come up with a viable solution to a problem. Why do you think major companies have boardrooms? So that their board of directors can come up with a plan of action, take the necessary steps to achieve this action, and move on! There is not usually one or two people who make the decision for the entire corporation, but many people! Just like our government! It works for our local, state, and national government, it works for business, and it works for us! If you did not read the earlier posts on mentors, it might be a good idea to read it, and then develop a mentor for yourself and/or your family. If you have a situation that you think is different from the norm, and need to discuss it in open forum, send me a comment. We will try and find a way for you to resolve these issues.

Our U.S. Economy

I think that we need to speak today about the economy. Our economy is in a state of recession, whether the "experts" tell us that or not. The costs of our government have caused huge increases in prices of all of the commodities except housing. It is getting harder and harder for middle class people to retain their style of living, and it is getting easier and easier to tell the wealthy from the poor. With the increase in retail cost of fossil fuels, and now, most every other commodity, we need to look closely at our savings plans, our investment strategies, and our retirement future. This should include our housing as well. Do we really need that extra bath, that granite countertop, and that $35,000 kitchen upgrade? Depending on the rate of your mortgage, that $35,000 kitchen will cost anywhere between $200.00 and $300.00 per month for the next 15-40 years!
Now, how easy is it if one of the major breadwinners in your family would lose their income for whatever reason? At this time, large fortune 500 companies are downsizing, and many people are losing (in some cases) their only source of income! Monthly cash flow is definitely an issue for many of these unfortunate people. So, what is the way out? If you are in this position, or possibly could be, and are trying to avoid foreclosure, bankruptcy, and/or late payments, then you need to start by making some decisions on what your options are. The first thing you need to do is to write down all of the many options that you do have. Is renting out your house an option? Is selling your house and buying a smaller, less expensive house an option? Is converting your house into a multi unit an option? Is an additional source of income an option? Are there any changes that you can make to your spending, that will enable you to make mortgage payments a little easier; ie: take the bus or carpool to work instead of paying the high gas prices for your car. Can you do without the exotic coffee in the morning? Call your insurance agent and see if there are any changes that you would be able to make to impact your insurance premiums. If you are a smoker, would you be able to reduce the packs that you buy in a week? How about going out to eat? Is it a possibility for your family to sacrifice just one of those trips per month? Depending on the number of people in your family, and the types of restaurants that you like to go to, just this alone could save you $30.00-$60.00 a month! I know that in most of these areas, our family is as guilty as most everyone else is in the U.S. We have enjoyed a time of prosperity in the U.S. that was almost unheard of in the rest of the world. Now, as our U.S. economy is forcing us to face hardships and sacrifices, we are facing difficult financial issues that we are all unaccustomed to, and the idea of sacrifice, while very necessary, is also a little repugnant.

Wow! What a relief it is to finally have all of our receipts logged in, and our taxes done!
I just wanted to talk today about buying your first house or investment in today's market.
In the county that we live in, the real estate market has slowed down considerably, as it has around the nation, and the numbers of homes sold has drastically dropped, which means that buyers have a great chance of getting an excellent deal on a house, an apartment building, or even a commercial property. The interest rate is almost at a historical low, and will enable buyers to have access to properties that in the recent past, they really could not afford. The only problem with this scenario, is that the mortgage process has been reduced to standard fare; few stated income programs, few 40-50 year mortgages, and few of the very creative programs that have been prevalent up to last summer (2007). The good news is that all of the government programs (FHA, VA, FMHA, etc. ) have strengthened, and have changed their criteria to enable less than perfect credit borrowers to buy their first home. These programs are not available for non-occupied investment buildings or houses, and are geared only for owner-occupied borrowers. The rates on these programs are competitive, and the down payments are very low, especially when you combine these programs with other programs for first-time homebuyers. Most all of the closing costs can be paid for by the seller, or a non-profit local program set up just for this purpose. The other option, is that you can receive gift money from a relative, close family friend, or even your employer. Your total payment for the house is exactly that, your total payment. It includes real estate taxes, home-owners' insurance, principle and interest, and sometimes other insurances that you can opt for to protect you in case of disasters. For these government programs, the house has to be in good shape, and cannot have any safety issues, or these same safety issues will have to be repaired prior to settlement by someone. Many times, it can be a negotiating factor, if you, as the buyer, will do the repairs at your own time and expense. But, keep in mind, that when you put an agreement on a property, and intend to take advantage of a government program for that property, then all of these issues will have to be decided in advance. Once the agreement is signed and ratified, then both buyer and seller are bound legally to the terms of the agreement of sale. So, it is very important to have a realtor and/or a lender, familiar with government programs that will help you to access the perfect program for your situation. Familiarize yourself with the mortgage program requirements and all of the explanatory paperwork that you will be given so that you are an informed buyer. Ask questions, and learn as much as you can about the process. Don't forget about the lead based paint addendums, the radon disclosures, the mold disclosures, the flood certifications, the wood-destroying insect reports, and all of the many disclosures and addendums, some regional, that you will be required to sign that you have received. This can be a frightening process if you don't have the knowledge. As we said before, knowledge builds confidence! Have fun looking for your first home, and don't forget to ask questions. You are welcome to send me a comment if you have any questions. See you next time.

Sorry to keep you waiting! Tax time is always the busiest time of the year for us. We usually have 2 huge bags of receipts, and have to log those in every year. Not to mention credit card statements, bank statements, bank ledgers, and rental ledgers. This year, I started in February, logging receipts onto ledgers. Even with all of the time that we had, it still took until April 15, to tally up the numbers and enter it onto the 1040! If you have multiple businesses, and/or multiple properties, tax time can be very time consuming and challenging. For us, in 2007, we had sold 2 properties, and will have 3 that we will have sold for 2008. We will talk about capital gains in a later post.
Let's talk about the real estate industry in general. There really is no industry that you can make money in so many ways as the real estate industry. Think about it... if you decide to sell real estate as a realtor, you make money, if you act in the capacity of mortgage originator, and find a loan for a buyer to buy real estate, you make money, if you settle real estate in the capacity of a settlement company or attorney, you make money, etc., etc. etc. This does not include real estate foreclosure purchases and "flips", commercial real estate rentals, residential real estate rentals, real estate foreclosure purchases and rentals, and many more areas that you can make money from. It all depends on you! What are you good at? If you are sales-oriented, like paperwork, and are detail oriented, then real estate sales are for you. If you would rather fix up a house either for rental or sale, then distressed properties are what you are looking for. Be aware though that this industry is highly knowledge driven. If you do not know what you are doing, or are just new in this industry, then go slowly, study, ask experienced people in the same part of the industry, and above all, find a mentor. Keep in mind that the people that you do NOT want to talk to are: friends and/or family that have never bought a house, customers that are new to real estate, people that do not have the drive required for real estate, or anyone else that have numerous stories about the horror stories they have heard about real estate. Over the last twenty-plus years, I have met many people who have numerous stories about the horrors of real estate. The one common thread that binds these people is: they have no investment real estate of their own. I have found that those people who own or who have owned multiple properties, have stories, but they are not horror stories. Usually, these people (investors) have nothing but good to say about real estate investments. These same investors will tell you that it is a very time-consuming industry, and that there is no "get rich quick" way to make money.
If you are ready to start making money in a wonderful money-making industry, then start studying and gaining knowledge, look at all of the different "fingers" of the real estate industry, find a mentor, and take a step! Real estate is where it's at! See you later!