Make Money Fast With No Investment-how Andrew Made $100,000 In 6 Months |
by: Martin Thomas
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Andrew Newberry is a distant family friend that knew about my business acumen. He knew how I had been in his position only 24 months previously and had heard about the new life I was leading with the wealth I had generated. I could hear the earnest desperation in his voice, when he asked me "how'd you do it Jack"? His question was open and sincere. In my eye's he was at a point where there was only one direction for his life to go...up.
Andrew needed to make money fast. His family were in danger of losing the roof over their heads and although Andrew worked a fulltime job, there were difficulties that created this current crisis.
He couldn't understand how I had done so much considering my humble beginings, while he had worked at his current job for over 10 years and was saddled with the difficulties he was currently experiencing. He told me he had no money to invest or anything like that, but could I advise him on what if anything was possible.
This was my response to him.
You see, what he was asking me specifically was, "how do I make money with little or no investment" My mind ignored his emotional pain and focused on the reality. That is the reality of what he needed answering.
Talking about Real Estate investment or anything that needed a capital injection was futile for Andrew, he needed to hear something different. This is what I told him to do, step by step. I told him that if he followed these two steps, he would have $100,000 within 12 months. He did it in 6!
Step one, get a little money. Not much needed, a few hundred dollars would do, but he has to find something as a seed capital account. I gave him the URL of a broker that does paid surveys online. These brokers represent companies that pay ordinary people for their opinions. They typically pay between $50-$300 per hour. He got his wife busy doing these through the day and evenings, they had $1000 within 2 weeks.
Step two, Go Shopping I explained to Andrew the mechanism behind my success. Compounding, intrinsic value, leverage, rapid capital gains, pyramiding profits. I then asked him to compound that thousand dollars by 30% 19 times. In other words, I told him to find 19 investment-objects that were for sale that he could buy, that had at least 30% or more spare intrinsic value.
Intrinsic value is everywhere. Whether you are buying New York sky scrapers of marble pool tables or Bertram boats, every market has a percentage of sellers offering their goods at well below market value.
Andrew started with old cars because he was a mechanic and now he had a game plan he was going to compound his money with his existing skill set. He traded up and up until he had $12,000 in six weeks.
Get your calculator out and see how he did it, how he evolved his money without a hitch. Start with 1000 then multiply by "1.3" which is the same as 30% Don't press equals, just hit "1.3" and multiply symbol again. Do that 19 times.
When Andrew sold his last auto deal, he was ready to get involved in Real Estate. With $12,000 it wasn't much but it was enough to start applying the same principles with Real Estate. This is where his compounding really escalated.
It escalated, because now he was using leverage....borrowed money. He called me on the day he was ready to start compounding with Real Estate with another problem. As I advised him "get into Real Estate Andrew as quickly as you can, around the $10,000 mark its time to get into that game"
He had a problem. The houses in his area were dear, he couldnt see how having $12,000 was enough to get involved.
I advised him that he should forget about houses until he had at least $40,000 He should focus on raw land. Raw blocks are cheap, and easily re-zoned into a higher purpose. With just a small investment at the local town planning department he could re-zone a residential into a commercial or the other way around where appropriate. Its called a "soft" or "paper" rennovation. No painting, no work, just a few simple forms and a fee to pay.
Creating a new use is just one way to add value to raw land, there are many others. Andrew researched and discovered them all. He stuck with land after all was said and done. He discovered buying a large block and subdividing it was very profitable. The second deal he did, he bought a block of over an acre, surrounded by established homes for $300,000 (with a bank loan) It was a corner block and he split it into three handsome sized blocks, tailored to the upper market. The first two blocks paid out his loan and put profits in his pocket, the last block he used as collateral for another bank loan where he built his own beautiful mansion on.
He sold it for a final profit of $354,000
That was about 8 months after our little chat on that cold evening.
To your health and rapid success.
About the author:
Jack Reynolds enjoys offering valuable insights about wealth creation. If you want to discover how to build your own money machine and you dont have much money to start with then follow this link http://www.opportunity-investor.com
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Flipping Houses for Gold:
How to Find the Perfect Fixer
by: Jeanette Joy Fisher
Many real estate investors enjoy "flipping houses," or buying and selling houses quickly for profit. Not all flips are fixers. However, rehabbers make millions turning ugly houses into dollhouses. On the other hand, some inexperienced investors lose money buying houses that just don't turn a profit.
If you're looking to get started investing in real estate by fixing and flipping houses, you'll want to know what type of property to buy.
HOW TO FIND THE PERFECT FIXER
1. Know Your Market
Your first task, exploring your market, helps you know a bargain house when you spot one. Look at many houses for sale in your area. Keep track of sales and how long the houses take to sell. Ask selling real estate agents about the terms of these sales because this helps you understand how sellers market their property (some of this information is public record). For instance, if a seller paid closing costs for the buyer, did the price rise from the listed price accordingly? Or, did the seller come down on the price and also pay the buyer's costs?
Examine the sales that sell quickly. What home features and financing options prompted the fast sale?
Also, look at model homes. Buyers often buy resale homes because they can't wait for a new home to be finished. However, these buyers like the distinctive features new homes offer. Visit model homes and take notes on how details like a water fountain or a new state-of-the-art appliance makes a house sell itself. When you remodel your fixer, you'll know what attracts buyers and you'll make smart redesign choices.
2. Know When "Ugly" Means "Gold"
When you first start out in your real estate "flipping fixers" business, you'll want to look for houses needing only cosmetic work. Look for houses that just need cleaning up, painting, and new flooring. Use your imagination when viewing these homes. Try to visualize the finished dollhouse as you look at structural features and the surrounding homes. Make offers on the ugliest houses in decent neighborhoods.
Don't be afraid of stinky houses that show horribly. Search for fixers with peeling paint, holes in the wall, stained carpeting, and trash in the yard. Remember, these houses won't look good to most buyers, but other real estate investors see them as gold mines.
3. Know When "Ugly" Means "No Thanks"
When you're new to real estate investing, always remember your limitations. Use caution when considering houses that need structural repairs. Some rehabbers replace walls, plumbing, structural beams, sub-flooring, and electrical systems. These experienced real estate investors acquired those skills after years of experience or they have the money to pay for professional help.
If you find a house with structural problems, get estimates from reliable contractors to do the work. If the walls have too many cracks and bumps, you may need to hang new sheet rock or hire a professional plaster refinisher. Check for signs of plumbing problems such as water stains under sinks and loose flooring, and get estimates for professional repair. Take professional estimates into account before deciding whether or not to purchase an investment property. Any big expense decreases your eventual profit.
Turn Yucks into Bucks
Why would anyone want to do this hard work? How much does the average rehabber make? In Ohio, real estate investors buy houses expecting a profit of about $30,000. In Southern California, many investors make $50,000 to $100,000 on each house.
When you find a garbage-filled, flea-infested house in a family neighborhood, take your bug spray, hold your nose, and get ready to make a difference, in the neighborhood and in your bank account.
You can make a fortune fixing nasty houses. Know your market. Know when "ugly" means profit in your pocket, and when to keep looking for the house with the hidden gold mine.
Copyright © 2005 Jeanette J. Fisher. All rights reserved.
About the author:
Jeanette Fisher teaches beginning real estate investors five easy steps to find, finance, and fix houses for profits. Free ebook on fixing houses using interior design strategies for top-dollar sales, http://www.doghousetodollhousefordollars.com/
Real estate appraisal – is that the real one?
Real estate appraisal or property valuation is the process of determining the value of the property on the basis of the highest and the best use of real property (which basically translates into determining the fair market value of the property). The person who performs this real estate appraisal exercise is called the real estate appraiser or property valuation surveyor. The value as determined by real estate appraisal is the fair market value. The real estate appraisal is done using various methods and the real estate appraisal values the property as different for difference purposes e.g. the real estate appraisal might assign 2 different values to the same property (Improved value and vacant value) and again the same/similar property might be assigned different values in a residential zone and a commercial zone. However, the value assigned as a result of real estate appraisal might not be the value that a real estate investor would consider when evaluating the property for investment. In fact, a real estate investor might completely ignore the value that comes out of real estate appraisal process.
A good real estate investor would evaluate the property on the basis of the developments going on in the region. So real estate appraisal as done by a real estate investor would come up with the value that the real estate investor can get out of the property by buying it at a low price and selling it at a much higher price (as in the present). Similarly, real estate investor could do his own real estate appraisal for the expected value of the property in, say 2 years time or in 5 years time. Again, a real estate investor might conduct his real estate appraisal based on what value he/she can create by investing some amount of money in the property i.e. a real estate investor might decide on buying a dirty/scary kind of property (which no one likes) and get some minor repairs, painting etc done in order to increase the value of the property (the value that the real estate investor would get by selling it in the market). So, here the meaning of real estate appraisal changes completely (and can be very different from the value that real estate appraiser would come out with if the real estate appraiser conducted a real estate appraisal exercise on the property).
A real estate investor will generally base his investment decision on this real estate appraisal that he does by himself (or gets done through someone). So, can we then term real estate appraisal as a really real ‘real estate appraisal’?
All about real estate agents
Real estate agents are professionals who help in connecting the buyer to the seller. A lot of real estate agents also do rentals wherein they connect tenants to landlords and even maintain the property on the behalf of the landlords. The real estate agents work by linking together the two interested parties and charging a commission for their services. For sales, they charge commission only to the seller but for rentals (i.e. agent managed rentals) the commission is charged to both parties involved in the transaction. Real estate agents generally calculate their fee as a percentage of the selling price (in case of sales) and as part of the rent (for rentals). People, who want to sell/let their property, leave the details of their property with the real estate agent (and in fact, even leave the keys of the house so that the real estate agent can arrange for viewings without them getting into any hassle). The other interested party (i.e. the buyer/tenant), gets access to this information by contacting the real estate agent. That’s how the real estate agents become a hub of information.
A lot of home seekers (including real estate investors) use the services of real estate agents not just for getting good deals but also getting them quick. Since real estate agents are probably most familiar with the market situation in their region of operation, it makes sense to approach them to get an idea of the going rate for properties in that region. Real estate agents would generally know the prices of various properties of different types and at various locations in the region.
A property seller can possibly get a few thousands more for his/her property by using the advice received from a good real estate agent. A good real estate agent will also analyse the needs of a home buyer/tenant and provide suggestions on what kind of home could be available to them within their budget. So a good real estate agent will not just throw a list of available properties to the buyer/ tenant but will actually discuss their needs and make a suggestion. This, in fact, works in the favour of real estate agent in two ways. Firstly, if the real estate agent is able to sell the house they get their commission and secondly, if they make the buyer happy too they earn a good reputation (and hence more business).
However, it is worth noting that real estate agents work on seller’s behalf. So, beware if they are trying too hard to sell a property.
A good real estate broker
Real estate is a popular investment avenue. A lot of people go for real estate investing. Some people follow real estate as their prime job. So you have real estate brokers, real estate investors, real estate attorneys and others who thrive mainly on the real estate industry. However, there are others who don’t follow real estate investing as a profession but still want to invest in real estate (as it is an attractive avenue for investment). For such people, getting a good real estate broker can make a big difference between a good deal and not-so-good one.
So how does one choose a good real estate broker?
The first thing to look for is the reputation of the real estate broker. A real estate broker who has good reputation would have earned it over a period of time by helping buyers get the property of their choice (and as per their needs), at the same time getting a good price for the property seller. In fact, experience is the second important thing to look for in a real estate broker. Bad real estate brokers can’t exist for long (since the bad news about anyone travels much faster than the good news). So experience is a good measure because then you know that the real estate broker hasn’t done anything so bad as to throw them out of business. A good real estate broker will not act just as the salesperson for the seller (from whom the real estate broker is due to receive commission/fee when the deal materializes) but will also pay heed to the needs of the buyer. Also, a good real estate broker will normally have a lot of properties available for sale at any point of time. Good real estate brokers will generally have a small team of people working in an organized way to get the deal closed between a buyer and a seller (making both parties happy at the same time). Good real estate brokers will group the properties in a way that is easy to understand e.g. group them on the basis of location, grouping them on the basis of price, grouping them on the basis of house types etc. for the buyer. A good real estate broker will also offer advice to the seller on small repairs or things that can get help them in getting an even better price for their property. And a good real estate broker will patiently listen to the requirements of the buyers and point them to the properties that best fit their requirements (instead of just showing them the list and asking to choose one).
Checking with friends/family that have previously used the services of a good real estate broker can sometimes help you in getting Real estate investing
5 tricks to make it big with real estate investing
Real estate investing is one of the most attractive ways of making good money (that is if you do it correct). Moreover, real estate investing is also a lot of fun. A lot of people practice real estate investing as their core profession and, in fact, make a lot of money that way.
Real estate investing is really an art and, like any art, it takes time to master the art of real estate investing. The key, of course, is to buy at a lower price and sell at higher price and make a profit even after paying all the costs involved in the two (buy/sell) transactions. Generally, people are of the opinion that real estate investing makes sense only when the rates are on the rise. However, real estate investing for profits is possible just about any time (and as I just said, real estate investing is an art). Here is a list of tricks that can make real estate investing profitable for you:
1) Look for public auctions, divorce settlements and foreclosures (bank/FHA/VA): Since quick settlement is the preference here (and not price), you might get a property at a price that is much lower than the prevailing market rate. You can then make arrangements to sell it at the market rate over a short period of time. However, make sure that the property is worth the price you are paying.
2) Looking for old listings: The old listings that are still unsold may provide you with good real estate investing opportunities. Just get hold of an old newspaper and call up the sellers. They might have given up hope of selling that property at all and with a bit of negotiation you can get the property for a real low price.
3) The hidden treasure: A really old (and dirty) looking house may scare off buyers. But this might be your chance for real estate investing that can yield good profits. So, explore such properties and check if spending a bit on them can make them shine. You can get these at very low prices and make a big profit in a short time.
4) Team up with attorneys: There are a number of attorneys who handle property sales on behalf of sellers or in special circumstances (like the death of the property owner). They might sometimes be looking to dispose off the property rather quickly and hence at a low price. Be the first one to grab such real estate investing opportunities and enjoy the profits.
5) Keep tab on the newspaper announcements: Property sell offs due to deaths, divorce settlements, immediate cash requirements and other reason are frequently announced in local papers. Keep track of such real estate investing avenues.
Real estate investment is about finding good deals
Real estate investments are often treated as one the best ways of investing money. However, what you are looking for is not just any real estate investment, but real estate investment that can give you good returns. By real estate investment we mean investing money into property i.e. buying property at a low price and selling it at a higher price so as to make a profit out of it. So the most important part of good real estate investment is to get hold of such properties which can give you good returns.
Now, how can you get these potential profit-making deals?
Your first avenue for finding good deals is the local newspaper (the property newspaper). Just search for properties that are listed directly by the owners who want to avoid paying commission to the real estate brokers. Since the owner is saving on the commission that they would otherwise have to pay to the broker, they would probably be able to offer a lower price to you and be more open to negotiations. You could also place your own ‘wanted’ ad in the local newspapers. On the same lines, you could use internet to search for the real estate investment avenues. In fact, you would be astonished by the number of real estate investment opportunities you are able to locate on the internet. Not only that, searching for real estate investment opportunities (i.e. property for sale) is much easier on internet than anywhere else.
Another good way to hunt for real estate investment opportunities is by using the services of real estate brokers. Some people use real estate agents as their first (and maybe the only) touch point for getting real estate investment opportunities. The real estate agents act as information hub for people looking to buy property. In fact, a lot of sellers find it much more convenient to sell their properties by listing it with real estate agents.
Multiple listings service is another good way to find real estate investment opportunities. Since the multiple listing book is provided only to the real estate agents and not to the general public (unless you are very lucky), all the cream (good real estate investment opportunities) would have already been taken before you get to see the book. The key here is to look for expired listings that didn’t get converted to a deal.
Another good way to get a property, that is a good real estate investment, is to look for foreclosures by banks/ VA/ FHA or to visit public auctions. You can generally get a good deal here. Divorce settlements are another good real estate investment opportunity.
So, real estate investment is really about finding good deals. And finding good deals does take some effort.
Uncovering real estate for sale
Real estate investments are often termed as low risk investments that can potentially yield good returns. A lot of people think that real estate is an easy business where you don’t really need to do anything. However, the truth is that real estate business does need you to put in some effort (if you really want to make profits out of it). The most important thing is to be able to uncover the real estate for sale that will yield profits. So how do you go looking for real estate for sale?
Generally, a lot of people start looking for ‘real estate for sale’ through the internet. And why not, internet is after all the hub of all information. So, you could look for real estate for sale using the search engines on the internet. You could also specify your requirements in search criteria on the real estate sites in order to get very specific results on real estate for sale. You can even view images and video of some of the properties thus reducing the need for personal visits for viewing. So, this is surely a good option for finding real estate for sale.
However, not everyone is tech-savvy and there are a lot of people who still take the approach of putting up an ad in the local newspapers. So look for real estate for sale in the local newspapers. In fact, there are some newspapers that are dedicated to just that i.e. real estate for sale. You could even go ahead and put up a ‘wanted’ ad in these newspapers. Sometimes, looking up for real estate for sale in old newspapers (like 1-2 months old) can help you get a good deal (in case the property owner has not been able to sale the property and has become a bit more ‘motivated’ to sell it).
MLS i.e. multiple listing service is often termed as one the best ways to look for real estate for sale. These are published by the real estate boards. If you can lay your hands on a MLS book as soon as it is out, you can really expect to get good deals. The key is to act fast.
Open houses are another good way of getting the best out of time. You can get to see dozens of ‘real estate for sale’ properties in a very short period of time. And you never know when you might come across a property that is real gold.
Investor groups are yet another rich source of real estate for sale information.
Of course, how can we forget the real estate brokers? Real estate brokers are one the most popular (and sometimes most effective) information resource for real estate for sale. Not only do they provide information about ‘real estate for sale’ but also assist in getting the deal finalized and closed.
Besides that, you can also get very good deals through public auctions, bank foreclosures, FHA and VA foreclosures and distress sales.
Real estate management firms – making life easier
Real estate investment can happen for various reasons. You could invest in real estate because you need a house for yourself (that house of your dreams that you so badly want). You could use real estate as a means for supplementing your income either by buying at a lower price and selling at a higher price or by letting it out. Sometimes you might buy a property for the purpose of resale but might want to wait for a few years before you actually sell it. In such a case, again it would make sense to rent out the property and earn some money till you actually decide to sell it off.
Whatever the reason, letting out real estate demands real estate management and real estate management is not an easy job for everyone. In fact, a lot of people find it so much of a hassle that they prefer keeping their property vacant instead of letting it. Real estate management demands time, which you will rarely have. Real estate management is not just about finding tenants and collecting rent from them. Real estate management is also about ensuring that you do all the duties that a landlord/landlady is required to do. Real estate management is about verifying the credentials of the tenants before you actually let out your property to them. Real estate management is about ensuring that all the paper work is complete and correct i.e. the tenancy agreement etc are properly done. Real estate management also requires you to do repairs as and when required. Real estate management activities also include maintenance, painting, polishing etc of the house when the tenants move out and before the new tenants get in. So, really, real estate management is not that easy a job for someone who is in a full time job. However, there is a solution to this and that is hiring a real estate management firm to do all these activities on your behalf. Yes, this will mean that what you receive as an income by letting your property will be reduced (due to the commission/ fee charged by the real estate management firm). But that is just a small price for the convenience that a real estate management firm brings to you. However, it’s important that you choose the real estate management firm carefully. There are all kinds of real estate management firms out there (good and bad). You must check the references of the real estate management firm before you actually hire them for the job. A good real estate management firm will not only keep your property occupied at all times but will also ensure that you always receive the rent in time and without any hassle.
Flipping Houses for Gold: How to Find the Perfect Fixer
by: Jeanette Joy Fisher
Many real estate investors enjoy "flipping houses," or buying and selling houses quickly for profit. Not all flips are fixers. However, rehabbers make millions turning ugly houses into dollhouses. On the other hand, some inexperienced investors lose money buying houses that just don't turn a profit.
If you're looking to get started investing in real estate by fixing and flipping houses, you'll want to know what type of property to buy.
HOW TO FIND THE PERFECT FIXER
1. Know Your Market
Your first task, exploring your market, helps you know a bargain house when you spot one. Look at many houses for sale in your area. Keep track of sales and how long the houses take to sell. Ask selling real estate agents about the terms of these sales because this helps you understand how sellers market their property (some of this information is public record). For instance, if a seller paid closing costs for the buyer, did the price rise from the listed price accordingly? Or, did the seller come down on the price and also pay the buyer's costs?
Examine the sales that sell quickly. What home features and financing options prompted the fast sale?
Also, look at model homes. Buyers often buy resale homes because they can't wait for a new home to be finished. However, these buyers like the distinctive features new homes offer. Visit model homes and take notes on how details like a water fountain or a new state-of-the-art appliance makes a house sell itself. When you remodel your fixer, you'll know what attracts buyers and you'll make smart redesign choices.
2. Know When "Ugly" Means "Gold"
When you first start out in your real estate "flipping fixers" business, you'll want to look for houses needing only cosmetic work. Look for houses that just need cleaning up, painting, and new flooring. Use your imagination when viewing these homes. Try to visualize the finished dollhouse as you look at structural features and the surrounding homes. Make offers on the ugliest houses in decent neighborhoods.
Don't be afraid of stinky houses that show horribly. Search for fixers with peeling paint, holes in the wall, stained carpeting, and trash in the yard. Remember, these houses won't look good to most buyers, but other real estate investors see them as gold mines.
3. Know When "Ugly" Means "No Thanks"
When you're new to real estate investing, always remember your limitations. Use caution when considering houses that need structural repairs. Some rehabbers replace walls, plumbing, structural beams, sub-flooring, and electrical systems. These experienced real estate investors acquired those skills after years of experience or they have the money to pay for professional help.
If you find a house with structural problems, get estimates from reliable contractors to do the work. If the walls have too many cracks and bumps, you may need to hang new sheet rock or hire a professional plaster refinisher. Check for signs of plumbing problems such as water stains under sinks and loose flooring, and get estimates for professional repair. Take professional estimates into account before deciding whether or not to purchase an investment property. Any big expense decreases your eventual profit.
Turn Yucks into Bucks
Why would anyone want to do this hard work? How much does the average rehabber make? In Ohio, real estate investors buy houses expecting a profit of about $30,000. In Southern California, many investors make $50,000 to $100,000 on each house.
When you find a garbage-filled, flea-infested house in a family neighborhood, take your bug spray, hold your nose, and get ready to make a difference, in the neighborhood and in your bank account.
You can make a fortune fixing nasty houses. Know your market. Know when "ugly" means profit in your pocket, and when to keep looking for the house with the hidden gold mine.
Copyright © 2005 Jeanette J. Fisher. All rights reserved.
About the author:
Jeanette Fisher teaches beginning real estate investors five easy steps to find, finance, and fix houses for profits. Free ebook on fixing houses using interior design strategies for top-dollar sales, http://www.doghousetodollhousefordollars.com/
15 Construction Loan "Inside Secrets" To Building Your New Home.
by: Rick Gomez
1. Which construction loans are available and which one should you apply for?
Home loan banking and the internet has changed the mortgage and construction loan industry forever. Today's construction loan choices include the 30 year fixed, 15 year fixed, 1 year ARM, 3/1 ARM, 5/1 ARM, 7/1 ARM, 10/1 ARM and don’t forget the popular interest only loans.
The construction loan of the past was a short term 1 year loan that the customer would have to refinance into a new loan once the construction was completed.
This two time process cost the customer two sets of closing costs and you would have to re-qualify for the new loan once the home was completed.
The most popular construction loan today is the "One Time Close" but not all are created equal. Just like any product there are the best loans, good loans and downright bad loans.
With today's technology you now have the ability to obtain a construction loan from the best banks in the country and sign your loan documents at your local title company or escrow office. This benefit allows you to have the most competitive construction loan available.
The loan that you should apply for is simple; ask for the lowest rate, one time close for a specific period of time that you think you'll be living there.
2. Which lenders/banks have the best construction loans and what do you need to apply?
There are plenty of banks willing to lend money for mortgages, refinancing, home equity loans and every other type of loan. But if you're planning on building a new home, where do you get the best construction loan with the most competitive pricing?
More importantly what is a good construction loan?
A typical construction loan nowadays is a construction to permanent loan that may or may not allow you to lock-in today's low interest rates until the home is completed. If you choose a loan that does not allow you to lock in upfront, the interest rate may end up higher along with your monthly payment.
The most important thing when searching for a good construction loan is to find an experienced construction loan specialist that knows which banks are the best.
The best banks can offer you a low rate now, upfront, before you start building your new home.
3. Should you go directly to your local bank or to a loan broker for your loan?
Most banks offer loans, and going to them is like shopping at a Ford dealer. The only thing you can get at the Ford dealer is a Ford. But what if you want choices?
One way to get different choices is to go shopping to every bank in town. Or you can call an experienced construction loan broker who has done all of the homework for you and has direct access to hundreds of banks nationwide.
A broker is a representative for hundreds of banks. Although the broker serves as middle-man, his or her services will not cost you anything extra. That's because brokers get loans at wholesale rates, and pass them along to their clients at retail prices, just like any other business.
The difference between wholesale and retail is how brokers make money. Therefore, you get the same rate from a broker as if you went directly to the lender yourself.
In Fact, because or their volume, many brokers are able to offer their clients better deals than you can get by talking to the banks on you own.
With an experienced construction loan broker you can shop dozens of the most competitive banks nationwide, work with wholesale pricing and can negotiate on rates and pricing.
4. Should you lock in your construction loan before you start building or let the interest rate float?
If the rates are heading upward, lock. If the rates are stable, relax. If the rates are headed downward, float.
Right now interest rates are at an all time low and can only go up in the near future so make sure your construction loan is locked into today's best interest rates with the ability to float downward.
Inexperienced loan officers will offer their customers an enticing low adjustable rate during construction without an upfront lock-in and the customer may end up having to lock into higher interest rates when the home is completed.
Or the customer is sold on a higher rate during construction with a float down option after the home is built. Again, the rate could be much higher when the home is completed.
Meanwhile the loan officer has been paid and has moved on to the next loan. The only time you want this type of loan is if it’s the only loan you qualify for.
Most loan officers do not explain this to their customers until it's too late (Closing).
Always ask. Is the construction loan rate locked upfront or floating during the construction loan period? Then ask, is the rate during the construction loan the same rate when the loan converts into the mortgage period.
5. What experience does your construction loan officer have and does it matter?
When it comes to money its amazing how fast any loan officer becomes an instant expert at construction loans. You must keep in mind that all loan officers are salespeople. Yes, I know they have fancy titles like loan officer or vice president but the title is nothing but a fancy name for loan salesperson.
Loan salespeople usually have one main goal in mind when helping you with your loan request and that is the commission. By the way, the fancy name for commission in the loan business is called a loan fee, points or yield spread premium (YSP).
Now don't get me wrong, there are a lot of good honest sales people (loan officers) that work very hard at providing you the best service and rates. What’s important is distinguishing the good from the bad.
The following questions allow you to quickly find out if your loan officer is experienced at construction loans.
1. How long have you been doing construction loans? 5 years or more is best.
2. What is the loan to cost (LTC) required for construction loans? This is cash equity such as down payment on land. This can range from 5 to 20%.
3. What is better? The voucher or draw disbursement system and why? Draw is now the most popular because the customer has the control of the money.
If the loan officer (sales person) can answer these questions with no problem then they have passed a pretty good litmus test.
If you really want to throw a curve at them, ask the loan officer if they have ever built a home themselves and what type of construction loan did they get.
If you find a loan officer that has gone through the experience of building a home themselves then the odds are you have found an experienced loan officer.
6. Qualifying for your construction loan, exactly how is it done?
The first thing your loan officer wants to see is your completed loan application. The loan application called the (1003) will tell a story of your financial picture.
The completed loan application will tell the loan officer many things including,
1. What type of loan you want.
2. How much money you need.
3. Your social security number.
4. Your current employers.
5. A list of all you assets (money) and liabilities (bills).
6. How much money you make.
7. How much real estate you own.
Once the loan officer has your loan application in hand they can determine whether you can qualify for a loan.
One of the first items pulled is your credit report. The credit report is going to tell 3 main important things.
1. Show your current credit score. The credit score can range from 500 to 800.
2. Show a complete list of all your monthly liabilities (bills).
3. Show all past credit problems including bankruptcies, foreclosures and late payments.
With this information the loan officer will do an analysis to determine if you can qualify for the loan amount that you’re looking for.
This analysis determines a ratio called the (income to debt ratio) and depending on the banks underwriting guidelines this ratio will usually range from 36% to 45%.
The income to debt ratio is the percentage of monthly debt payments (including your new mortgage payment, taxes and insurance). This ratio should not exceed 36% to 45% of your monthly income.
Some banks will allow you to exceed this ratio if you have an excellent credit history and excellent credit score.
The current and the most popular method of qualifying for a loan today is the stated income loan.
Stated income allows you to qualify without verifying your income on your tax returns, W 2's or pay stubs. The only thing the bank verifies when applying for a stated income loan is your credit score, liquid assets and that you're employed.
7. How not to be taken by the oldest trick in the book "Bait and Switch"?
The mortgage lending business is notorious for baiting and switching.
Baiting and Switching is when a loan officer or advertisement offers you one thing and then tries to sells you something else.
Typical signs of baiting and switching are obvious, some basic examples are:
1. Over the phone, you are offered a much lower rate than any other quote and once you've sent in your application the rate you were quoted has all of a sudden vanished.
2. You are offered a construction loan with no points and no loan fee's. What you are not told is that you are paying for it with a higher interest rate and the costs are built into the loan.
3. You are told that you will not have any payments while you're building. What you're not told is that all construction loans have this option and it's called "interest reserves" and the payments are added to the loan amount.
Remember three important facts and you will always be in good shape.
1. If it sounds too good to be true there's usually a reason.
2. Always get your quote in writing, (ask for a good faith estimate).
3. If you are satisfied with the rate and construction loan program that you are quoted, ask to lock it in upfront.
On the flipside, it is very important to realize that most loan products typically go hand in hand with banking guidelines. These guidelines are provided to loan officers to coincide with the customer's qualifications.
For example, if you have a very high (FICO) credit score with land free and clear, you have more loan options than the person with a very low (FICO) score and no land equity.
8. Now for the biggest secret of all, ready? All banks have access to the same rates and the only reason everyone ends up with a different rate is directly related to how much your loan officer and bank is going to profit from you.
You should probably read that one again.
Your loan officer gets paid like all sales people either by:
1. Salary plus commission
2. Commission only.
It doesn't matter if you walk directly into a bank or work with a broker, basically everyone gets paid the same.
If you walk directly into a bank the loan officer most likely gets a basic salary and a percentage of the loan origination fee (points and yield spread premiums). If you work with a broker the broker usually works on a straight commission (points and yield spread premiums).
Becoming a broker allows the loan officer the ability to offer their customers the best loans with the most options.
It always amazes me when I see TV commercials or hear radio commercials advertising $395, zero closing costs. I always wonder if people understand how they can do that.
Ok, here is how it is done.
The inside secret is that in exchange for these low or zero closing costs the lenders will make their profits and cover the costs of the loan by charging you a higher interest rate.
This higher interest rate pays what they call in our industry a (YSP) yield spread premium.
By charging you a higher interest rate over the life of the loan the bank can easily afford the commercials, commissions, payroll, and cover the costs of the loan while still making a profit. Also the service is usually very poor and impersonal.
So the next time you see advertising with no closing costs you will know exactly how they are doing it.
So please remember that there is no such thing as a free lunch in any business. Business wouldn't be business if there were no profits. The most important thing is that you want the best loan available at a fair price with an experienced loan officer.
9. What are interest reserves and contingency funds doing in your closing costs?
The two things most customers do not factor into the cost of the building their new home are interest reserves and contingency funds.
Interest reserves are added to your loan amount to make the monthly payment on your loan. Yes, you read that correctly, you will not have to make a monthly construction loan payment while your home is being built.
The payments are made from this interest reserve account and no, it’s not free. This reserve is added to your construction loan amount.
Interest reserves were designed for the benefit of the customer. Most people building a new home are either paying rent or have an existing mortgage payment while their home is being built.
The last thing a customer needs is another monthly payment while building. So, banks created the interest reserve account by adding up the estimated interest payments over a 12 month period and add this to the loan amount.
If you do not want interest reserves added to your construction loan amount you can ask to make your own monthly construction loan payment.
Contingency funds are added to the loan amount just in case you need more money to build your new home.
With all good intentions construction loans tend to have cost over runs. The bank adds 5% to 10% of the cost breakdown and adds this amount to the loan amount just in case you have cost over runs or need better appliances.
If you don’t need or use this extra contingency fund then it will not be added to your mortgage upon completion of your new home.
So when you apply for a construction loan ask your loan officer to provide you a copy of the estimated construction loan budget.
The budget is created from your costs and includes every cost within the loan including land balances, closing costs, interest reserves, contingency and bank fees.
10. What is loan to value (LTV) and loan to cost (LTC)? Why it’s probably the most important factor in getting approved for a construction loan besides your income and credit.
Initially most banks are concerned with loan to appraised value (LTV) but banks are really more concerned with how much cash you have in the project (LTC).
If you were buying a home instead of building you would normally have to put 20% of the purchase price as a down payment.
Since you’re building a home your cash equity usually comes in the form of how much cash you put down on your land.
Cash equity is king when applying for a construction loan.
For example, if you bought a $200,000 piece of land and the land is owned free and clear you have a lot of cash equity.
With this much cash equity you will most likely not have to bring in any additional cash.
Or if you bought a piece of land over 12 months ago for $100,000 and its now worth $200,000 the bank will use the current value because you bought it over 12 months ago.
In both cases you have brought $200,000 cash equity to the table.
Now if you just bought a piece of land for $200,000 and you only put down $20,000 most banks will want to see 10% to 20% cash into the total project.
Other qualifying cash equity that can be counted are any pre-paid’s such as plans, grading, permits etc. These pre-paid's can be used for cash equity or you can be reimbursed from the construction loan at closing.
11. Should you hire a builder or be an owner builder?
Do you really want to be an owner-builder? The goal of being an owner builder is mainly to save money. Some people can save quite a bit of money if done correctly.
Some people are not meant to be owner builder.
Possible problems when acting as owner builder are:
1. Construction cost over runs.
2. The best banks with the best rates require a builder or supervisor.
3. Managing contractors to finish on time or to show up for work.
4. Depleting your personal savings.
5. The need to borrow more money.
6. Loan extension penalties.
7. Being taken by unscrupulous contractors.
8. The need to refinance your construction loan.
9. Foreclosure.
I could go on and on about the horror stories I hear from Owner Builders that did not get a construction loan and acted as their owner builder.
If you have never built a home before and absolutely need to act as owner builder please take my advice and hire a reputable builder to supervise you and the building of your new home, for a much smaller fee than their normal fee.
The builder/supervisor will help you with the cost breakdown and manage the subcontracting on an as needed basis. If one of your contractors gets out of hand or you need help of any kind, you can call the supervisor for assistance.
Your job is to make sure you are hiring the right people to complete your home. It can make the difference between happiness and misery.
For those of you that have experience at building homes but do not have a license ask about our owner builder program. To qualify you will need a resume showing your experience.
If you decide on hiring a builder to do everything make sure you hire a reputable builder or supervisor with a good reputation and plenty of references.
Ask your friends if they know a good builder and when you start to hear the same name over and over you know you've found a good one. Ask the building inspector for a list of reputable builders.
The most important point is shop around until you find a builder with the most reputable and honest background.
If you pay a little more for an honest and reputable builder or supervisor you will be very thankful before, during and after your home is completed
12. How does your builder determine how much your home will cost to build?
The Estimated Cost Breakdown of your home is probably one of the most important forms in the construction loan package. This is the breakdown of each particular cost of construction of the home. The foundation, lumber, framing, plumbing, heating, electrical, painting, and builder's profit, etc.
The builder usually completes this form to show you exactly what it will cost to build your new home. The most important thing to remember here is that you do not want to underbid any line item and you do not want to overbid any line item. You want accurate numbers from real bids (not guesses) and a 5% contingency for cost overruns.
Good builders will send out the house plans to their contractors for specific bidding on each main item or can estimate the home themselves. The builder will send one set of plans to the foundation contractor, one set of plans to the framer, one set of plans to the plumber, etc, etc.
When all the numbers come in, the builder will fill out the cost breakdown and come up with a total cost to build your new home.
Bad builders will use the WAG method of estimating the cost of building your new home. The WAG method stands for "Wild Ass Guesses". This method is the most dangerous since it can lead to under and over bidding.
The last method of bidding is simply to over inflate every single line item on the cost breakdown. This is the most profitable method for the builder and the most expensive to the customer.
This is why you want to find an honest, reputable builder with a good reputation in your community. Once the cost breakdown is completed and you plan on hiring this builder to build you new home you will need to type up a contract. The contract needs to equal the added total of the cost breakdown.
Most builders will provide the contract but make sure you read it carefully and that you add your requirements as well. There are two types of contracts
1. Fixed Contract: This contract is simple and straightforward. Take the total of the cost breakdown and put that fixed number into the contract. The builder will provide a list of responsibilities.
2. Cost plus Contract. This type of contract is usually for large construction loan projects.
A. The customer wants to make a lot of changes to their home as its being built.
B. The construction loan period to build the home is 18 months so construction costs can change drastically. The builder prefers this contract to protect the costs and profits.
13. How does your builder get paid while your home is being built?
There are two methods that banks use to make sure your builder gets paid while building your home.
The Voucher Reimbursement system has been around for quite a while. As usual you'll have some builders that are very familiar with this method of payment and do not like change.
Most builders are really only concerned with how fast they can be paid and how often they can be paid.
Most banks find that the voucher system is simply too much paperwork to deal with anymore. The builder is given a big book of vouchers that looks like a check book and when they want to get paid or need to pay a contractor they need to fill out a voucher form. This voucher form is a request for payment and as long as the contractor has signed the lien release the bank will pay the amount requested.
The bank will also request an inspection throughout the construction loan to make sure that the work is completed.
The Draw Reimbursement system is becoming the standard for construction loan funding for most banks.
The main difference is that the bank puts the accounting responsibility on you or your contractor. The bank uses your cost breakdown as the guide for the draws. Some banks use specific schedules of 4 to 7 draws based on completed construction milestones, such as foundation or framing.
The draw systems also allow the choice of taking draws on a monthly basis, collecting partial payment for work and material items that have been completed.
I personally prefer the draw reimbursement system because:
1. It requires less work.
2. Provides more control for both the customer and the builder.
3. The funds are wired directly into your bank account.
3. It's easier to use than the voucher system.
4. Some banks now have online draw requests.
14. What type of construction loan insurance is required and who is required to get it?
The reality of construction loan insurance. There are three types of insurance needed to build. All banks require the first two insurances, course of construction and general liability. Workman's compensation is only required if your builder has employees.
1. Course of Construction Insurance. This policy is an all risk policy to include, fire, extended coverage, builder's risk, replacement cost, vandalism and malicious mischief insurance coverage.
2. General Liability Insurance. You or your builder can provide this policy. This policy is a comprehensive general policy or a broad form liability endorsement. The minimum amount of $300,000 for each occurrence is required. If the builder provides the insurance a general policy of $1,000,000 or a broad form liability endorsement is required.
3. Workman's Compensation Insurance. If your builder owns his own company and has employees that are helping to build your home, workman's compensation is required.
If the builder simply subcontracts out the work and does not have employees per se, they will need to write a letter acknowledging that they do not have employees and are not required to have WCI.
15. Has your loan officer structured your construction loan properly and why it's so important?
I get loans all the time from customers that went to another lender or broker and were either turned down or were offered a below average construction loan.
The reason was because the loan was not structured properly before it was sent into the bank. Structuring a loan properly is simply making sure that you match the customer’s loan request to the banks underwriting guidelines.
Recently I received a construction loan request from a customer that was turned down by a large national bank. The loan officer had calculated the income incorrectly and submitted the loan as full documentation.
The customer owned his own business and had a lot of tax deductions on his tax returns. The way banks qualify customers as full documentation is very conservative and the loan was turned down.
We took the loan, found the problems upfront and submitted the loan as stated income.
The customer was approved and built a beautiful home in Rancho Santa Fe CA.
Structuring construction loans for approval is vitally important and is the last thing on most customers’ minds. Each and every time I receive a loan from a customer with a bad loan experience it is always because the loan officer did not specialize in construction loans and did not structure the loan accordingly.
Other common mis-structured loan scenarios include:
1. Low cash equity.
2. Improperly completed appraisal.
3. Unexplained credit derogatory.
4. Income incorrectly calculated.
5. Mismatch of customer loan request to the correct lender.
6. Plain and simple incompetence
The old saying “you get what you pay for” is especially true when obtaining financing in building your new home.
About the author:
Rick Gomez specializes in construction loans in the state of California. You can download a complete construction loan application package and a list of the best banks at http://www.californiaconstructionloans.com
Investing the Profits from Your Home Based Business |
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Having made the bold and glorious decision to sack the boss and go it alone you are one of the few who have what it takes to succeed. You have an entrepreneurial spirit and a strong will and these are rare and valuable attributes that will guide you throughout your professional and personal life.
Now that your business is up and running and you’re profiting from your efforts, it’s time to turn your attentions to investing the profits from your home based business wisely and for maximum gain.
One of the most consistently returning asset classes over the long term and the one that the majority of us can profit from is real estate.
Understanding market cycles
Now, you’re most likely aware that property markets are cyclical – this is because there is a direct correlation between the underlying price of real estate in relation to individual buying power. Simply explained: when property prices rise above what first time buyers can afford to pay the market slows down, stagnates and sometimes readjusts – but as soon as purchasing power increases again, either with a drop in interest rates or an increase in GDP, so property prices begin rising again.
And there are even ways to make money from real estate during a market downturn!
Investing in real estate for income
Depending on the nature of your home based business your monthly income may be slightly erratic – some months being better than others! If you invest in property assets in a buy-to-let or even jet-to-let capacity you can secure yourself a consistent monthly income which may afford you an added degree of financial security.
Buy-to-let is when you purchase property for rental purposes – this make be an apartment you corporate let, it could be a house you student let or even a family home you rent out long term.
Jet-to-let is similar but it involves purchasing overseas property for short term weekly or fortnightly rental to tourists. This type of letting is usually very lucrative indeed during peak holiday periods but may mean you have a property that is empty for a few months out of season.
Both types of property investment return you a regular income and at the same time the physical real estate asset will grow in value over the long term and if ever you wish to release the profits from your investment you can sell on the property and take the gains you have accrued.
Investing in real estate for profit
The alternative to building up a property portfolio for income generation purposes is purchasing property and selling it on relatively quickly to realize the gains the asset has accrued.
You can do this in a number of ways…firstly you can purchase run down property in need of renovation, tidy up the property and turn it into a home before selling it on at a higher price and reaping the profits gained.
Alternatively you could seek to beat the curve by buying into up and coming areas, waiting for prices to boom and then selling on for profit. This is quite a risky strategy for a first time investor as timing the market is hard!
An alternative to this is looking overseas for the latest emerging property markets worldwide and buying properties to renovate or properties off plan and then flipping them on for maximum gains in the short term.
Financing your investment
As a self-employed individual it can be tricky to get a mortgage unless you have audited accounts, bank references etc., etc. If you don’t have all of these requisite documents there are other options available to you.
The main options are re-mortgaging your primary residence and releasing the equity that you have accrued already for reinvestment in another property project or taking out a self-certification mortgage where you make a large down payment and basically tell the lender how much you can afford to borrow!
A winning attitude
You’ve already proved you have what it takes to succeed against the odds by establishing a profitable home based business, now apply the same steely determination to your real estate investments and you will succeed in making the maximum gains. Start small, begin gently, test the market and your understanding of it and slowly build up a profitable real estate portfolio from the profits of your home based business for maximum financial gain.
Good luck in achieving your goals.
About the author:
Rhiannon Williamson is a freelance writer whose articles about property investing and emerging real estate markets have appeared in publications around the world. She is currently working on a brand new property investment resource http://www.amberlamb.com/
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Mortgage vs. Real Estate Lead Generation - |
by: Jimmy Sturo
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It is fairly common for real estate companies and mortgage brokers to use leads. There is a difference between mortgage lead generation and real estate generation. Mortgage lead generation deals with people who need to refinance their homes or apply for loans, while real estate lead generation is a service that connects potential buyers with real estate agents.
Mortgage leads are generated in a number of different ways. One way to create the leads is for the lender, that is the mortgage broker, to appear in a paper or online directory. This lets potential customers make the first contact. The lenders give information about themselves, like the interest rates they charge and types of lending programs they offer, along with their contact information. This allows potential borrowers to search out the lender that is best for them.
Real Estate lead generation is somewhat different. It involves connecting prospective buyers to real estate agents. It is usually a good idea to use a real estate lead generation service that uses only inbound leads, meaning that the buyer contacts the lead generator looking for a real estate agent. This way, the lead generator can get the most information possible from the buyer in order to find the most appropriate real estate agent. Many lead generation services use tricks to lure prospective buyers.
Mortgage lead generation helps lenders and borrowers find each other. This service benefits everyone involved. Some of the most successful businesses on the Internet are lead generation agencies.
About the author:
Lead Generation Info provides detailed information about sales, mortage, MLM, business-to-business, internet, and insurance lead generation, lead generation telemarketing, and more. Lead Generation Info is the sister site of MLM Leads Web.
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How Your Intuition Can Make You As Rich As Conrad Hilton |
by: Saleem Rana
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Conrad Hilton relied on his hunches to make his fortune. His intuition was so finely-honed that it was uncanny. Although he denied any psychic talent, he was often baffled by the accuracy of his intuitions.
“Most of the time I can reconstruct the circumstances of these hunches,” he confessed, “and I can figure out in a general way where it came from. I mean I can explain it—not completely but enough to make it less strange. There have been times, though, when I couldn’t come up with a good explanation.”
Once his remarkable intuition helped him buy a prestigious old hotel in Chicago. The sale was based on sealed bids. All the bids were to be opened on a select day and the hotel would go to the highest bidder.
Some days prior to the deadline, Hilton offered a bid of $165,000, but that night he went to bed feeling restless and did not sleep well. The next morning he changed his mind. “It just didn’t feel right,” he said afterward. He increased his bid to $180,000. This was just right—he outbid his close rival by a mere $200.
The Success Principle
Conrad Hilton had a strong desire to win the bid. Although he made a calculated guess at what to bid, it did not feel right and he tossed and turned all night long. In the morning, he upped his bid. His new figure was arbitrary, but it was perfect.
His hunch arose from the wealth of knowledge stored in his subconscious. He had been in the hotel business ever since his purchase of a hotel in Texas as a young man. He had spent many years learning about the field and must have gathered a staggering number of facts.
In bidding for the Chicago hotel, he was consciously aware of the value of the real estate, the owner’s estimate of its value, and his competitor’s ideas about how much to stake. Based on this understanding, he placed his first bid. However, while he slept, his brain probably ruminated over numerous subtle pieces of information—perhaps the personalities of the owner and the other bidders, perhaps a remark heard, perhaps the memory of a offer on another similar property, and so on. This nonspecific and unconscious information forced him to raise his bid by an additional $15,000 when he woke up the next day.
Thus while he made a rational decision based on his conscious knowledge, his subconscious went through its own files during the night, and, upon awakening, prompted him to increase his offer.
About the author:
Saleem Rana got his masters in psychotherapy from California Lutheran University. His articles on the internet have inspired over ten thousand people from around the world. Discover how to create a remarkable life. Free information.
http://theempoweredsoul.com/enter.html
Copyright 2005 Saleem Rana. Please feel free to pass this
article on to your friends, or use it in your ezine or
newsletter. It's a shareware article.
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Are You Wealthy Yet?
by: Al Walker
Here's a real simple way to become wealthy.
Marty and his wife live at home with their 2 children. They own
a 3 bedroom house in a middle class neighborhood and try to live
within their means. Marty works full time in the Printing
Industry, while his wife is in charge of the home and looking
after the children.
They've accumulated some credit card debt and have 2 years left
on a car loan. They try to stay out of debt as much as possible
and together they've managed to contribute a total of $32,000 to
their own Retirement Fund. It is kept in term deposits receiving
5% interest annually.
Two years prior, the couple bought an older house that they
fixed-up and rent out for $850 a month. After paying the
mortgage and taxes $300 is left over each month. This goes into
their savings account each month.
At Christmas, the family bought themselves a new computer and
decided to start a home-based business. Things started out
fairly slowly but after 8 months they were receiving a steady
check of $400 a month which also goes into their savings
account. This part-time business will continue to grow with the
effort they dedicate to it.
This business also offers them some very lucrative tax savings.
By taking advantage of these Tax Strategies they are able to
save an additional $300 a month on tax that was normally
deducted from Marty's paycheck at work. This monthly income is
also added to the couple's savings.
Marty has just begun writing an E-book about his "production
expertise" at work. His plan is to market this book on the
internet for profit
Every Sunday the couple takes a drive to stay familiar with the
Real Estate market in their area. They're looking for another
property, a "handyman's special" to fix-up and rent out. They
have saved enough for a down payment and their credit with the
bank is well established.
The family's total monthly expenses are $2000. Now, here's the
question:
Does Marty's family have Wealth yet?
To answer this question properly you first have to understand
exactly what "wealth" means.You achieve wealth when: *Your
Passive Income is the same or greater than your Expenses.* So
what does this mean?
First, what is Passive Income?
Passive Income is money that you are paid over and over again
for work that you only do once. (This excludes using a gun or
finding cash on the street) Some examples of this would be
royalties for writing a book or a song, commissions that you
receive for sales that others make and interest from bank
savings or dividends on stocks/options that you own.
Second, what Expenses are we talking about? This one's a little
easier to understand. Expenses are the total amount it takes to
run your household and your life. This includes, rent, mortgage
payments, car insurance, food, credit card and loan payments,
etc………
Let's look at Marty's family a little closer…………. Does Marty
have any Passive Income? Yes he does. Marty's salary is not
considered Passive Income. That's because he has to work 40
hours a week just to get the basic amount. If Marty doesn't go
to work then he doesn't get paid. His overtime also doesn't
count as Passive Income.
The interest from their Retirement Fund does though. It's paid
to him month after month as long as it's left in that account.
So, $32,000 at 5% is $1600 a year. Divided by 12 months equals
$133 a month in interest. Ok…..what else?
After the mortgage and expenses are paid with the rent money
they receive on their rental property they are left with $300
every month. This is Passive Income. Just as long as the tenant
stays and pays his monthly rent.
How bout that $400 from the home-based business and the Tax
savings. Is this Passive Income? Well, Marty's wife made sure
that she chose a company where she could sign new business
accounts and get paid commissions on those accounts over and
over again. They've made a 5 year commitment to build this
business part-time. So yes, both the $400 and the $300 in Tax
Savings would apply as Passive Income. Let's add up Marty's
total Passive Income.
Interest $166.00 Rental Income $300.00 Home Based
Business$400.00 Tax Savings $300.00 Total $1166.00
Not including Marty's salary from work, his family's Passive
Income is $1166.00. Not bad. Every month this amount flows into
the family's bank account, regardless of anything else they do.
We said that Marty's monthly expenses total $2000.00 a month.
And we also said………… You have Wealth when: *Your Passive Income
is the same or greater than your Expenses.*
$2000 Expenses subtract $1166 Passive Income = $834 monthly
balance needed to have Wealth.
Marty's Expenses are still more than their Passive Income so
they're not wealthy just yet. But they're well over half-way
there. With this kind of knowledge a family can know exactly
where to focus their financial attention.
Maybe when Marty writes that ebook he could get some sales and
royalties from it. Also the new Real Estate and more work on
their Home-based business would certainly help them to attain
more Passive Income. Once Marty's Passive Income is more than
the family's Expenses then Marty could start to have much more
freedom. He may even choose to quit his job and continue
developing his Passive Income streams.
Take a look at your own finances. What are your monthly
expenses? Do you have more Passive Income than your Expenses? If
you do Congratulations. You're Wealthy!!! If you don't. It's
time to get started and start adding Passive Income from other
areas as soon as possible.
When you truly understand this principle, you'll be well on your
way to becoming wealthy
About the author:
Al Walker, makes it easy to launch a successful online business and rapidly build your wealth to a six-figure income. Learn the 5 essential keys to online success. To receive your free 4-part mini-course visit: http://www.businessprogramreviews.com
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Building Wealth: Don't Waste Your Money on Real Estate Investment Schemes |
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You've seen the real estate guru advertisements for books, DVDs, programs, seminars, and mentoring coaches promoting no-money-down deals. Perhaps you've watched the infomercial on TV with the people telling their stories of how they made millions investing in real estate with no-money-down and cash back to the buyers.
Maybe you, like me and many others, have purchased books or expensive systems based on these no-money-down and lease-option investing schemes. Here's the rest of the story.
Perhaps you've seen an ad in your local newspaper offering a home with 100% financing from the seller or a lease option. You should know that the investor offering these types of deals makes money by purchasing the property at a discount and selling the property for an inflated price.
Lease-option real estate investors play the odds. They bet that most people won't be in a position to purchase the lease-option home in a year. So the investor seeks a hopeful tenant to make higher than average rental payments, pay more move-in cash, and make the investor's mortgage payment. Those tenants who do eventually purchase the home paid much more for the home than the investor. Many tenants never come up with a new mortgage loan to purchase the property when the time runs out. Either way, the real estate investor makes money.
First-Time Home Buyers
If you need to buy your first home to live in, these home-purchase methods may help you if you have terrible credit and can clean it up in time to finalize the purchase in a year. Just understand that you're paying too much for the property and may not make any money on appreciation. On the other hand, if you have strong credit, you can purchase a bargain house with no money down legitimately.
Tips for Beginning Real Estate Investors
Don't buy overpriced property! Avoid 100% investor-financed "deals." You will have to wait too long to make any money. Plus, the rental income most likely won't come close to making the mortgage payment for you.
Don't waste your money buying real estate guru books, DVDs, programs, seminars and mentor-coach promoting no-money-down deals. Would you buy a book on how to make a fortune on the Internet that was written in 1995?
These out-of-date, no-money down schemes, tell you to look for home sellers in distress who will let you buy their home for no-money down with the seller financing the property for you. This system worked last century. Today's home sellers know that they can get a buyer who can get their own financing.
Plus, today's home sellers know that other sellers have lost money selling with no-money down. They've heard the stories where home sellers didn't get paid and had to foreclose on a property. They've heard the stories where the investor-buyer rented the house to tenants who trashed the property. They've heard the stories where the investor-buyer collected the rent and didn't pay the home seller.
To get started building wealth in real estate today:
1. Get your credit ready for mortgage financing. (Mortgage credit differs from consumer credit.)
2. Buy right. Don't overpay for deals that sound too good to be true. These schemes are too good to be true!
3. Guard your money. Don't get yourself in over your head with high mortgages on rental properties that cause you negative cash flow and jeopardize your financial well-being. The best way to do this is to make sure you get the best mortgage rates on a bargain-priced property.
You can buy investment property for little -- or even no-money down. Get started by buying your home or a second home. Real estate investing offers you the most tried and true way to build wealth when you avoid investing schemes.
About the author:
Jeanette Fisher teaches beginning real estate investors five easy steps to find, finance and fix houses for profits. Free ebook on fixing houses using interior design strategies for top-dollar sales, http://www.doghousetodollhouse.com/
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5 Hot Tips for Successful Real Estate Investment |
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The last downturn of the global stock market saw millions of ‘every day’ investors having their fingers badly burned. Overnight life savings were eaten away, retirement funds went into decline and the economic forecast for all of us who had any money invested in stocks and shares was gloomy to say the very least.
As a direct result investors in their thousands turned their backs on the rollercoaster stock markets and sought alternative asset classes in which to invest their hard earned money. This has led to a global boom in real estate markets and property prices, and it has spawned a generation of budding real estate investors.
For those of you wondering whether it’s too late to venture into real estate investing or considering how best to make the most significant returns from property investment, here are 5 hot tips for successful real estate investment to set you on the path to potential profits!
1) Consider Investment Property Abroad
There are many relatively untapped property markets in countries around the world that offer the real estate investor greater return on investment in the form of rental yields or short to medium term capital growth.
While major markets in the USA, UK, Australia and Europe are slowing down, there are emerging property markets globally that are hungry for investment and are proving to be highly profitable.
For example, in 2007 a number of countries are already aligned for accession into the European Union and as a result property markets in these countries are likely to benefit from greater numbers of visitors, more trade, increased investment into infrastructure and more stable economies. The likes of Hungary, Slovakia, Bulgaria, Croatia, Turkey and even Northern Cyprus are just a few examples of overseas destinations with emerging real estate markets that may be worthy of your consideration.
2) Make Sure Your Plans Are Profitable
This sounds ridiculously simple right? Well, you’d be surprised how few people actually make sure their plans are actually sustainable and as profitable as they hope.
Examine any real estate market that you’re about to enter by firstly comparing property values across the city, state or region and making sure you know what your money will buy you. Then ensure that the rental yield you intend to obtain from your property is actually realistic or that the asking price you intend to set once you’ve renovated the property will be offered.
3) Never Assume Anything
This goes from assuming a house is structurally sound to accepting that tax laws won’t change – from believing your tenants when they tell you that they are house proud and honest to accepting the first builder’s quotation!
Do your due diligence on every single aspect of the process from ensuring the asking price for a property is fair to checking your tax returns before your accountant submits them for you. This is your investment, your future, your potential profit and therefore it is ultimately your responsibility.
4) Employ An Expert When In Doubt
Few people are a master of all trades therefore be prepared to acknowledge areas where you are far from being an expert and at least consider courting a second opinion. Again, this goes from checking out the structural soundness of a property to understanding the legal ramifications of letting out your property. If in doubt always double check – and if this means you have to call in an expert, make sure you call in an expert!
5) Set A Realistic Budget And Stick To It
Whether you’re purchasing property to let out or buying real estate to renovate you need to sit down and add up every single area of projected expenditure to enable you to set a realistic budget with which to work.
Make sure you add in everything from having searches and surveys conducted, legal fees, accountancy fees, insurance costs, likely interest payments on any finance required, taxation, connection of utilities, marketing for tenants or buyers, real estate agency fees, and of course don’t forget to add on the cost of the property and the price of any renovation and refurnishing and decorating work required.
Spend time considering every single area where a cost will be incurred and detail every likely payment that will have to be made and you will arm yourself with a bullet proof budget and do all you can to ensure you encounter no nasty surprises along the way.
About the author:
Rhiannon Williamson is an offshore investment, overseas living and international property expert and publisher of http://www.shelteroffshore.com/
For investment property abroad news and property buying guides visit www.ShelterOffshore.com
Find Investment Properties - 10 Ways |
by: Steve Gillman |
If you really want the best deals in investment properties, you have to increase your odds by finding more deals. Who is more likely to get a cheap apartment building, an investor that looks through the MLS listings and calls it a day, or the one that uses ten resources? Here are the ten:
1. Talk. Let people know you are looking and sometimes the properties will come to you. There are a lot of owners out there who want to sell, but haven't yet listed their property.
2. Use the internet. Go to a search engine and enter the type of real estate you are looking for, along with the city you want to invest in. You never know what you might find.
3. Drive around looking for "For Sale By Owner" signs. Owners often don't want to pay to keep the ad in the paper every week, so you won't see all properties there.
4. Find abandoned properties. That's a pretty clear sign that the owner doesn't want to deal with the property. He might sell cheap.
5. Find old "For Rent" ads. Call if they are a few weeks old. Landlords are often ready to sell, especially if the haven't yet rented the units out.
6. Talk to bankers. You might get a foreclosed-on investment property cheaper if you buy it before they list it with a real estate agent.
7. Offer someone a finder's fee. There are people that always seem to hear about the good deals. Have such people coming to you.
8. Eviction notices. If your local papers publish eviction notices, or if you can get the information at the courthouse, it can be useful. A landlord who just went through the procees of evicting tenants is a likely seller.
9. Old FSBO ads. If you call on two-month-old "For sale By Owner" ads, and they haven't sold, they may be ready to deal. Owners often give up the effort, but still would love to sell. Help them out!
10. Put an ad in the paper. "Looking for investment properties to buy," might be sufficient to generate a few calls.
About the author:
Steve Gillman has invested in real estate for years. To learn more, and to see a photo of a beautiful house he and his wife bought for $17,500, visit http://www.HousesUnderFiftyThousand.com
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Residential Income Property Financing:
Part 2 of 3 |
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Welcome to the second segment of a three-part series about income property. In this second segment we will be discussing financing options for residential income properties as well as the upside (and downside) of owning this type of property.
Financial Concerns
Financing options for residential income property vary widely from commercial or industrial properties. For one thing, most private lenders place size requirements on the apartment complexes they are willing to finance, usually five units or more. Smaller complexes just don’t have the revenue generation potential required to make your loan officer feel comfortable.
The good news is that residential income property loans usually carry a higher LTV ratio than other property types. If you recall from the first segment of this series, LTV (loan-to-value) ratio indicates the percentage of money your lender will lend you to the property’s market value. An 80% LTV is the maximum most lenders will provide for residential income property.
Loan terms usually range from 25 to 30 years with a maximum loan amount of up to $3 million. Current competitive interest rates can range from 4.70% up to 6.625% depending on several factors including your credit rating and the size of your down payment.
Most loans for residential income property are termed as ‘recourse loans’. This means that the lender has ‘recourse’ to your personal assets in the event you default on the loan. Needless to say, you need to make sure you are ready to assume the financial responsibility of making your payments in a timely fashion.
Managerial Challenges
Besides financial responsibility, residential income property management brings with it other unique challenges. Likewise, it demands certain skills above and beyond investment savvy and experience. To successfully manage your residential income property, you’ll need a good combination of street smarts, interpersonal, and handyman skills.
More than any other income property type, residential property will bring you into close contact with those renting or leasing your property. Possibly the most important part is screening those you rent to. Background checks, calls to previous landlords, and searching interviews can save you a lot of headache and money down the road.
It’s likely that at some point in the tenancy something will break or malfunction. If you have the ability to replace windows or wiring, know how to fix an A/C or refrigerator, or have rudimentary plumbing skills, chances are you will save some money by performing these tasks yourself.
Sometimes dealing with tenants can be the hardest part of owning residential income property. How well can you deal with angry, demanding people? Do you stay cool, calm, and collected in tense interpersonal situations? If so, you’ll be prepared to deal with some of the issues likely to crop up during your management experience.
Conclusion
It’s important to keep your goals in sight when managing a residential income property. Sometimes it’s easy to get bogged down in the day-to-day duties of running the property that you lose sight of making a profit. Know your rights as a landlord; know your bottom line as an investor. As with any investment, having an accurate idea of your time horizon will, to a large extent, dictate the amount of effort and money you should put into your income property.
About the author:
Cameron Brown is an internet marketer specializing in investment property. For more information about residential income property, please visit Security National Capital.
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Mortgage Refinance: 4 Ways To Know Its Time to Refinance Your House. |
by: Nathan Dawson |
You may want to refinance your home for several reasons.
1)Mortgage Rates might be lower now. The biggest reason that people refinance their mortgages is to save money. No matter what has happened to you, there is always a good reason to start saving money. A lower rate on your mortgage can help you stretch out the payments so that every month you are paying less to live in your house than the previous month. When interest rates are low and you had previously locked your mortgage into a higher price, it might be a good idea to shop your rate around to see how low you can get it. The early 2000's have been an environment of very low mortgage rates which make it a good idea to shop around to see if you can refinance your mortgage.
2)You need money and need to stretch out your payments. Maybe you've recently filed for bankruptcy and therefore need more money to get back on your feet. Maybe you've switched jobs and therefore need to refinance your mortgage in order to make your monthly payments lower. No matter what people say, it's always a good idea to have more money in your pocket than less, isn't it? Refinancing your mortgage might be a good idea in this situation.
3)There may be better deals out there than you think there are. Finding a new mortgage company or bank to refinance your mortgage might be a good idea just to kick the tires of the industry and see if you could get a better deal. If you've been spending a lot of money and paying off the balances on your credit card on a monthly basis there is a significant chance that your credit score has increase recently. An overall better credit score is better for everyone including your lenders. If a new lender sees that your credit score has increased recently, she might be in a much better position to give you a better deal on your mortgage than you think. She could refinance your mortgage by shopping the deal around at more banks and finding the best one for you. Shop your refinancing around, it can't hurt.
4)Mortgage refinancing as a sound business decision. If you own a small business of any sort and need a capital infusion, then investigating mortgage refinancing might be a very smart thing to do. If your business is truly small and you run it out of your house, then the line between your personal and business expenses might be thinner than you are reasonably comfortable with. Clearing up a little extra capital, through refinancing your home, every month might be the difference between investing in some new small equipment and not investing. Everything that is an expense should be lowered if possible. Refinancing a mortgage might be a fantastic idea to increase capital reserves and to plan for future investments. Many business owners who work out of their homes constantly try to decrease their monthly payments so that when it comes time to pay their business bills, they have a little extra capital. Always check with a CPA or attorney to determine what is deductible and what isn't. But, more money is more money, even if you are lending it from yourself to your business
About the author:
Find more great articles at http://www.marriedfinances.coma great online source for finance information.
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