Draw Me Self

Unlike the offerings from Wall Street, investment real estate is not limited to future appreciation or dividend pay out (rental income can be construed as the same as a stock dividend for comparative purposes) for its value/profit creation, nor is real estate investing as speculative and/or volatile as the stock market (if done properly).

Here are the 10 ways a real estate investor can profit from investment real estate:

1). Rental Income. The cash flow or rental income derived from investment real estate is a dependable source of income, with the potential for future growth and has an effective safeguard against the profit eroding natures of inflation. When comparing investment real estate to other investment options remember this---an investment that fails to deliver sufficient income (whether it be stock dividends or rental income) will in time suffer in value---conversely, investments that yield higher cash flows will show higher rates of appreciation. Don’t buy an asset, buy the current and future cash flow.

2.) Accelerated Mortgage Payoff. Anytime you pay off the mortgage on an investment property early, you create an equal amount of appreciation/equity. Success in this regard is particular sweet, when you are afforded this luxury as a result of your tenants.

3.) Property Improvements/Enhancements. Property Improvement can be loosely defined as anything that increases the current market value of the property---activities like expansion/build outs, rehabilitation and reconfigurations are examples of property improvement that can affect cash flow and profits.

4). Purchase Profits (buying at a discount). Making a profit on the front end of the transaction serves to mitigate your overall risks and increases your chances for greater profits/ROI (return on your investment) during the holding & selling phases of the investment real estate ownership life cycle.

5). Government Benefits (tax credits, tax deductions, rent vouchers, etc.). Real estate is the only investment that offers tax benefit/deductibility when you buy, hold and eventually sell the investment.

Here are a few of the tax benefits:

- Mortgage Interest Paid

- Property Tax Deduction

- Prepaid interest paid at settlement (for the tax year after purchase)

- The cost of discount points (same as above)

- Certain selling expenses (when you sell the property)

- Any seller concessions (same as above)

- Capital gains deferment (1031)

- Proceeds from cash out refinance in some cases are tax free

6). Strategic Property Management. Examples of strategic property management would be:

- Activities that would allow you to increase rent roll. - Activities that would allow you to decrease tenant turnover/vacancies. - Activities that would allow you to reduce operating expenses and increase net operating income.

7). Property Appreciation. Historically speaking, real estate has proven to be offer good appreciation rates over time---compounded this with the concept of leveraged capital & equity, makes real estate the clear winner in the long run.

8). Inflation. rent is subject to inflation (inflation is nothing more then the tendency for expenses [the price of goods & services] to rise over time). For example, a current rent roll of 800 with a 5% rate of inflation would be worth 1,303 in 10 years.

9). Leveraged Capital & Equity. To learn more about the power of leverage in investment real estate, see my article on “Real Estate Vs. Stocks - The Other Side Of The Story Every Real Estate Investor Needs To Know”.

10). The Law of Supply & Demand. Land is constantly being diminished (due to development and expansion) without being replaced---this fuels the “supply side” of the equation. Shelter is a necessary evil (everybody needs a place to live)---this fuels the “demand side” of the equation.

Investment real estate thrives in times of higher interest rates and or when affordability is an issue---when people can’t afford to “own”, they MUST therefore “rent”.

An In Depth Look At Real Estate Transactions

I don't know what percentage of American financial portfolio's contain real estate, but my guess is many. Properties will likely range from principal residences, to second homes and rental properties. There can also be the instance where multiple properties are owned in a given portfolio giving rise to what is known as the qualified real estate professional. Please take the time to review this article carefully, ponder its message, and incorporate it into the most valued and sacred set of financial plans, past, current, and future; your own.

Let's begin with the principal residence. Ask any American walking about what advantages exist through home ownership and they will respond with; "it is a great investment", and "it will provide income tax breaks". Yes indeed, the principal residence is an asset in anyone's estate and it will provide income tax breaks through mortgage interest deductions and real estate taxes. Believe it or not, the knowledge necessary for home ownership does not end with these two basic considerations. Selling the principal residence has income tax consequences. What if there is a home office taking up part of the space within the principal residence? What happens with improvements made over time? What happens when the homeowner passes to the next life? As is always the case in our culture, there's more to a situation than meets the eye. Knowing the rules of the game and keeping careful records will lead to significant financial gain through tax savings.

The basics of home ownership mean that we will get a home mortgage interest tax deduction. There will also be a deduction for real estate taxes paid. The limit for deductibility of home mortgage interest expense is $1,000,000 of original acquisition. There is also allowed a home equity line of up to $100,000. In addition to the principal residence, a taxpayer can deduct mortgage interest expense on a second home of his choice. The $1,000,000 acquisition limit includes both the principal residence and the second home. An example would be that a given taxpayer purchases a principal residence and takes out a mortgage of $500,000. This same taxpayer purchases a second home with a mortgage of $400,000. Because the sum of the mortgages is less than a million dollars, this taxpayer will be able to deduct the mortgage interest expense on both properties as qualified home mortgage interest.

If the mortgages had totaled $1,100,000, the taxpayer would still be able to take interest on both properties in full by using the original acquisition limit plus the home equity loan limitation of $100,000. If the sum of these to mortgages happened to sum to $2,200,000, the taxpayer would be limited to deducting 50% of mortgage interest paid based on the following ratio: $1,100,000/$2,200,000. My guess is that many of you are thinking so what. My mortgage or mortgages are far under the appropriate thresholds. Let's review for a moment what happens when one decides to refinance the principal residence. What if a home was purchased in 2001? In 2006, the homeowner refinances and takes money out of the property for assorted reasons. If the home purchase was for $200,000 with a $150,000 mortgage back in 2001, let's assume that the refinance amount was for $400,000 in 2006, where the original mortgage amount was paid down to $140,000. The taxpayer's new mortgage is now $400,000. Will there be a tax deduction under qualified mortgage interest rules for the entire mortgage amount? A taxpayer is limited to the original acquisition mortgage plus the $100,000 home equity loan.

In our example, the taxpayer would be able to deduct mortgage interest up to $250,000 of mortgage. The ratio for mortgage interest deductibility would be $250,000/$400,000. The remaining balance of mortgage interest expense could be deductible under other areas of the tax return subject to the interest tracing rules. If some of the loan proceed were invested in the stock market, this would give rise to investment interest deductions subject to that set of limitations. If loan proceeds were used to start a new business, the mortgage interest expense would be deductible as trade or business expense. To the extent the home owner makes improvements to his principal residence, the original mortgage acquisition amount is increased. In this example, if the taxpayer made home improvements totaling $150,000 or more, the entire mortgage of $400,000 would yield mortgage interest expense that would be totally deductible as qualified home mortgage interest expense. I don't know about everyone else, but his fascinates the life right out of me. It should shine a new light on mortgage interest expense and it related deductibility.

In so far as thinking of one's home as an investment, there will be many school's of thought dealing with the principal residence. One thought is that if one sells a home, there will be need to acquire another one. The idea here is that proceeds from the sale of the residence will not be used in any other way aside from a new home acquisition. The home is an asset regardless of its view as an investment, but keep in mind that there are taxpayers who actually by down in a new residence. They may even change its location to an entirely new environment such as a different location in the country where the standard of living is less expensive. Why is this important? Remember the old rules for dealing with gain on the sale of one's principal residence? There once was a time when a taxpayer had to purchase a new home that was greater or equal to the value of the one sold. This was old code section 1034. The gain would be rolled into the cost basis of the new home acquired.

When a taxpayer reached the age of 55, he could make a once in a lifetime election to permanently exclude gain not exceeding $125,000 from income tax. The current rules are entirely different. There is no longer a requirement to purchase a new principal residence. In addition, the gain exclusion increases to $250,000 for individuals and $500,000 for married couples filing a joint income tax return. The once in a lifetime requirement of old code section 121 has also been eliminated. Now the aforementioned exclusions will apply in unlimited fashion as long as the following requirements are met. The home must be a principal residence for 2 years out of a 5 year period. The 2 years need not be consecutive. There can be only one sale of a principal residence in a 2 year period. There is more opportunity to have the principal residence be counted under the investment column of one's portfolio thanks to the new tax law regarding this area.

With the advent of new code section 121 and the permanent repealing of code section 1034, it still becomes necessary to track one's basis in a principal over time. The original cost of the home is easy. To this original cost, the taxpayer should keep record of all improvements made to the dwelling. This will include roof repairs, swimming pools, new windows, landscaping, and much more. In addition to tracking improvements, there may also be the need to track fair market value step-ups. Suppose that husband and wife purchase a home in 1990 for $200,000. For a ten year period, husband and wife made $100,000 in improvements. In 2005, wife passes away when the home's fair market value is $800,000. During 2006, husband meets a hot young woman and decides to take up residence at the beach (I thought this might add some spice to the story).

He is going to sell the residence in 2007 or 2008. What is his exposure to gain? Well, the original cost basis of the home plus improvements is $300,000 of which husband will get half or $150,000. He then gets a step-up of $400,000 from wife's share of the residence. Husband's total basis in the principal residence is then $550,000. If he sells the residence in 2007 for $800,000, he will have no taxable gain as the selling price less his basis and $250,000 exclusion (for being a single homeowner) equals zero. Knowing the rules is essential. As an aside, if husband sells the home if 2005, in the year of wife's death, he will not only get a step-up in his basis for wife's one half basis, he will also get the full $500,000 gain exclusion under code section 121. After the year of death, a surviving spouse will only get $250,000 in gain exclusion.

Rental Properties

Real estate also takes form of rental or investment property in a portfolio. If a taxpayer is gainfully employed in another line of work, the rental properties will take on an investment role. Let's have a quick review of the rules governing rental real estate in the world of income tax. Rental activity is defined as being passive. For income tax purposes, passive income is netted with passive losses. If passive losses exceed passive income, this loss is suspended and carried over either to be offset with other future sources of passive income or to be realized when the activity generating the losses is sold or terminated. There is a special rule for those owning rental properties where they maintain active participation in the activity. Active participation is defined as having the obligation or right to make decisions regarding the activity. This qualification is easily met as the property owner must make decisions regarding property repairs, rent levels or increases, and the like.

When the taxpayer meets the active participation requirement, he then will receive benefit of losses from the property so long as they do not exceed $25,000. In addition, the taxpayer will lose benefits of these losses as adjusted gross income exceeds $100,000. The $25,000 loss limit is phased out 50 cents for each dollar that adjusted gross income exceeds $100,000. If a taxpayer has adjusted gross income of $125,000 before rental activities, the loss limit is reduced to $12,500. If losses from rental activities are $15,000, the taxpayer will get to deduct $12,500 currently and will carry over the remaining $2,500. If adjusted gross income is $150,000 or more, losses will not be currently deductible unless there is income from passive activities. Here is another point where knowing the rules will be a huge benefit. Adjusted gross income in excess of the $150,000 limit does not have to eliminate the ability to gain income tax benefits. Earlier, there was mention that passive income will net with passive losses. If a taxpayer could receive passive income from other sources, he could use passive losses to offset it regardless of his adjusted gross income level. Passive income can be generated by investing funds in real estate ventures that pay returns on the investment. An example would be an organization like AEI that puts together real estate deals that are economically sound and will generate, and pay out, this passive activity income. This could make for a sound development of one's portfolio while taking advantage of income tax attributes at the same time. Passive losses suspended from previous years, as well as those generated currently and in the future, can offer income tax advantages when netted against passive income.

What about the qualified real estate professional? They are not subject to passive activity limitations nor are they subject to the rules of active participation. If a taxpayer is able to demonstrate that he spends as much time performing real estate functions as he does other activities, he has met level one of the test. He must also demonstrate that he spends at least 750 hours a year on real estate related functions. This is roughly equivalent to 15 hours per week and must be met by either the taxpayer or his spouse, but not combined. When the classification of qualified real estate professional is reached, a mountain of other issues and considerations will arise. This will be beyond the scope of this article but as always, there is a standing invitation to be in attendance for the "most complete business program on radio".

It was a real estate boom like no other. Interest rates were dropping incredibly, homes were garnishing appreciation by the week, the stock market wasn't moving and first time home buyers were getting their piece of the American dream. Mortgage brokers, Real Estate Agents and New Home builders were raking in the cash. It seemed like it would never end. Month after month, year after year the sales of new and existing homes climbed. Investors threw their money into the housing market and then as fast as it came it went thud.

The thud started around November of 2006. It started incrementally with a slower than expected August, a quiet November and the news articles started to reflect which was inevitably going to commence. In January of 2007 the Real Estate Taxes were due and crash it went. What seems to be happening now is a rush to unload. From the outside looking in you can see the stock market rise as the housing market falls. New home builders with still a glimmer of hope increase the price of new homes yet offering larger than expected home incentives. Upgrades galore, creative financing, buyers agents bonuses and yet they continue to build on the land they have allocated for future expansion. If it seems familiar, it is. It has an uncanny sense of 1983 all over again.

How did this happen and what makes this housing thud different from the last? There are some minor differences that make this more unique than the last housing crash. Back in the 80's interest rates were at sometimes 16%. At that point it made sense to try to assume a mortgage that was a lower interest rate and throw your cash into their equity. But it wasn't realized equity. It was an inflated sense of a market share. As prices dropped home owners found they were in an over valued situation and as the job market suffered they could no longer pull their money out of their house to move on with their lives. It caused a ripple affect of people walking away from thousands of dollars just to save what they had left. Real estate was sold at auction in a manner that you would buy livestock or sheriff's sales and the late night infomercials were non-stop. "No Money Down" was the catch phrase. You can still find those publications that cite 20% interest rates and how finding a home with a 10% interest rate was a real steal.

So what happened in the last decade? Feeding on that premise that no money down is something of a desired situation and interest rates dropping most people would assume the best investment was their home. Out the window went the premise of paying down your note and having a secure position in your most valued asset. For some time it was just a matter of the educated investor refinancing a higher note and gaining equity in their home just by dropping their interest rate. It was a normal progression of an intelligent move. Refinancing could shorten the length of your home loan in some instances by 15 years and also lower your monthly payment. And then arose the hungry new home builder, the starving loan officer competing in a new market and the incredible increase of Real Estate Agents flooding the market.

Here's how it worked. In most instances this was a first time home buyer. They were to purchase a house no money down. There would be two loans. The 80% back loan that was a fixed rate of sometimes as low as 5% and then the front loan. The front loan represented the 20% down that was typically the homeowner's down payment. That 20% loan was an adjustable rate mortgage that was incrementally to increase over 5 years and then a balloon was to sit waiting at the end. The buyer confused by all this new jargon would ask, and then what? It was explained with the advent of interest rates dropping it was standard practice at that point to refinance that loan with another fixed rate loan or refinance the entire note at one fixed rate. It became such a standard practice that the next step made even less sense. Why not just incorporate your closing costs as well? And they did. Up to 6% of your closing costs could be rolled back into your loan. The buyer would ask what their monthly payment was and assumed that was an affordable note and there you have it. It was a disaster waiting to happen.

The second victim was the investor. The investor that in most instances was watching their money sit either in CD's that showed a dropping interest rate or a stock market that refused to move. The investor would buy these new homes with incredible incentives and it was explained that the home had these upgrades to the standard built home, the home would ofcourse appreciate to where they could sell in 5 years and realize the equity of a moving home market, and then reinvest. They even came with appliances so that they could rent them immediately. Could there be a catch?

So here's where it all plays out now. The new home buyer is in the home of their dreams. And the interest rates instead of dropping are now increasing. So incrementally their payment increases. Then to add insult to injury the home they purchased had an estimated tax base of an empty lot. So the taxes figured at closing were estimated on a fraction of the value of completed construction. Here comes the new appraisal on completed construction and your tax base increases by 150%. These new home buyers revisit that 20% loan and notice that the note is coming due. Struggling to understand the increase in their monthly mortgage payment, coming up with the added cash for their balloon, compounded with the increase in gas and consumable goods is overwhelming. So, as suggested by their loan officer they search to refinance.

What was not explained to them is with the rush of foreclosures on the market and millions of people in the same situation, you must have equity to refinance. You must show the ability to be able to support your note. And they are turned away.

The investor finds themselves in a new subdivision competing with new home sales and no equity. The builder has built in their contract that they can not erect a sign in their yard advertising the property for sale until the subdivision is completed. There are not to hang a lock box on the door. So basically they must rely on the local MLS to market their property. To add insult to injury now the new homes are selling the exact same house they purchased 2 to 5 years earlier for less than they purchased it and adding more upgrades and incentives to new home buyers.

This created a flood of foreclosures on the market. People frustrated are electing to walk away from the home and their good credit rating. Lenders are found at the court house steps now purchasing these homes, fixing them up and reselling them. In some instances the homes are not even rehabbed but placed back on the market sold "as-is, where-is". That would be the new catch phrase.

In order to circumvent the costs of the foreclosure the lending market created an alternative for a homeowner to stop their foreclosure. This system has now been name a "short sale" or a "pre-foreclosure". The short sale is handled this way. The homeowner without any equity in their home approaches the mortgage company and requests a short sale. They are to fill out financial information substantiating that they are no longer able to pay the note. Upon acceptable of the package the home is then listed by a real estate agent on the local MLS and marketing as a "short-sale" or "pre-foreclosure". The offers are then submitted directly to the lender and the lender will make the decisive move as to whether to accept the offer or renegotiate. The homeowner at this point is nothing more than a signature on the listing agreement or the closing statement.

Once the lender comes to an agreement with a prospective buyer the closing date is set and the house changes hands. In most instances the loan is reported as being satisfied and the homeowner now can relax and move to a more comfortable situation. There are floods of new seminars on purchasing property in this type of distressed situation and even though it is a reliable way to purchase property the best case scenario is ofcourse an end user. This is a particularly good way for a home buyer to purchase a property in relatively good condition for a discounted price.

As a real estate agent in the Houston area I have found it difficult to find documentation to send my sellers to to educate them in the process. Most websites are about buying real estate in a short sale situation but I have been limited in finding documentation to support how you would sell such home. Henceforth the publication of this article.

A Home Mortgage and a Retiree do not make a good fit, do they? A person nearing retirement would definitely prefer a hassle-free post-employment phase in his life, but more often than not, most retirees are still faced with the burdens of mortgage on a real estate investment and the scythe of foreclosure looming just above their heads.

Two options are available in this situation: 1) pay it off, or 2) refinance it.

It is a sad plight for a 65-year old to be still worrying where the next mortgage payment would come from at a time that he should be spending his retirement fund on pleasant surprises that life can still offer him, like travels and vacations, golf trips, or a day at the beach. On a sadder note, there are those worrying over mortgage payments, while stacks of hospital bills to pay pile up on their side trays. In both situations, paying up for the loan PRIOR to retirement is the best option. However, when one is left with no choice, but to carry his mortgage over to his retirement, he can decide either to pay it off or refinance it.

The million-dollar question: which is the best way to take?

First, determine the remaining balance on your mortgage. Can you manage to fully pay it off? When resources are available, why not? Nothing beats the peace of mind derived from being debt-free. When this is the option you will take, you can make temporary "trade offs" or bargaining agreements with yourself and with those who will be directly affected by your decision. Wanting to pay off a major account entails sacrifice - you may consider taking on another job even after you have retired, or you may opt to forego some wants, and focus on your immediate needs.

Second, consider refinancing when the outstanding balance on your mortgage is still way too high for you to fully pay off at a time. Consult a trustworthy mortgage investor nearest you. He can offer you advices akin to his expertise, and could assist you in coming up with an informed and intelligent choice.

Third, do the math. How much is the interest rate of your mortgage? If you invest your money elsewhere, can you generate interest that can surpass or compensate the cost of your money gone on interest payments of your mortgage? If this is possible, then by all means, opt for refinancing, which usually provides lower interest rates; otherwise, pay the balance in full.

Ideally, retirement should not be weighed down by concerns that should have been addressed during one's productive years. But life is far from being ideal to most, and that they have to face up to the rigors of saving up payments to their mortgage even during retirement.

It is advisable to consult a reliable mortgage investors companyfor sound advice whenever necessary. Its expertise and competence in handling mortgages can redirect your path to the best option you can take, while on retirement. When you do, you can look forward to really blissful "sunset" years ahead of you.

If you requested both: a mortgage loan and a home equity loan, you can refinance both loans and get only one loan together with a single monthly payment but with the same or better terms than the average of both outstanding mortgage loans. This can be done by applying for a refinance mortgage loan!

Home equity loans (also so called 2nd mortgages), are secured with the same asset as the main mortgage loan. With other words: when refinancing the home loan, you can include also your 2nd mortgage or home equity loan. This can have many advantages like:

Fewer monthly payments;

Saving lots of money on interests;

Receiving lower installments;

Less overall debt exposure.

Refinancing can save you thousands of dollars on interests! Home equity loans normally come with higher interest loan rates than mortgage loans. By obtaining a lower rate refinance home loan, you will be saving money on your mortgage loan but also saving (even more money) on your home equity loan.

In case of refinancing you will unify both loans and therefore get a longer repayment program & lower monthly payments. The loan installments will be definitely lower than the combination of mortgage loan payments and the home equity loan payments when they are separately. This will improve and ease your financial situation and income!

Another benefit of Mortgage loans is that there are a variety of ways in which you can repay a mortgage loan. The repayments may depend on locality, tax laws and prevailaing culture. The most common way to repay a loan is to make regular payments of the capital, also called principal and interest over a set term. This is commonly referred to as (self) amortization in the U.S. and as a repayment mortgage in the UK. A mortgage is a form of annuity and the calculation of the periodic payments is based on the time value of money formulas. Certain details may be specific to different locations: interest may be calculated on the basis of a 360-day year.

LendAdvisors.com - Blog that helps you with Real Estate, Mortgages & Refinance.

Are you in the place of "what happened" when it comes to your home, its value and equity? Have you recently applied for a simple re-finance or buyers loan and been refused, even though you have no troubles financially? If so, you're not alone. While value is always relative, understanding the current market valuation process and how the lenders and the government work in today's real estate market can help you decipher what's going on.

Banks

Follow the money and it will always lead you to the culprit. In this case the banking industry. They literally overextended themselves through high risk loan practices and then packaged the loans as products and sold them to other institutions - essentially spreading the infection. While overall loan rates remained low over the preceding 3 years with the dramatic rise of fuel costs in early 2008, credit became tighter and these higher non-market based loan rates jumped as their entry level adjustable period ended. The confluence of increased loan costs, higher personal expenses and tight credit toppled the house of cards in 4Q08.

The banks couldn't refinance everybody because they had no real money or solvency when compared with the debt of the loans. No money = no credit. No credit meant everything that used revolving credit to finance itself such as credit cards, small business, large retail businesses and home owners/buyers found themselves high and dry. The core of the economic engine literally fell off its wheels and the cascading effects created the worst economic environment in nearly 80 years.

The government decided that the best way to deal with this was to flood the banks that created the problem with money. Illogically they assumed that institutions that had not acted in their shareholders best interest would now suddenly change, even former Chairman Greenspan was amazed at the bank's duplicity. The Bank's did exactly as you would expect anyone in a tough financial place that got bailed out - they covered themselves. First with "performance" bonuses and salary increases to celebrate their good luck; then asset reshuffling/sales and finally hoarding the remaining cash.

That is why credit remains so tight and most financial institutions remain in a precarious position. They are not actively putting the money back in circulation to drive the economic engine. Less credit = fewer loans - it does not mean the banks don't have the money.

Foreclosures

A number of high risk loans that have adjusted have gone into foreclosure. The other shoe, are the ones that will adjust over the next 24 months. As foreclosures escalate, home sales will increase - this does not indicate market conditions are improving, just that some buyers are picking up properties that banks and individuals are dumping on the market. Home values will not begin to recover until this inventory is absorbed and credit becomes more available.

HVCC and the Law of Good Intentions

To help us all the government saw the problem as the appraised value of the properties not loan practices as the next big piece of the problem. They adopted New York Attorney General's Andrew Cuomo's "Housing Valuation Code of Conduct" (HVCC). This altered appraisal practices with the intent of improving the current housing market. Specifically, the HVCC prohibits mortgage brokers and real estate agents, from choosing the appraiser in a real estate transaction. The code is meant to ensure fair and neutral appraisals, but it actually reduces the quality of appraisals and drives up costs to homebuyers by creating additional middlemen known as Appraisal Management Companies (AMCs) and more red tape. The HVCC also allows the Fannie Mae, Freddie Mac and FHA to stop purchasing mortgages from lenders that do not adopt the code with respect to single-family mortgages. No pressure.

Essentially, the top of the food chain (banks) got billions for bailouts and bonuses and at the bottom end, small business, fee based independent appraisers got higher costs, reduced fees bewildering regulations and reduced business. It is estimated that tens of thousands of consumers have already been denied their opportunity to enjoy historically low rates. This is a classic example of the Law of Good Intentions - something done in the right spirit that sadly backfires.

Appraisers

Real estate appraisers are traditionally licensed by the state they operate in and appraise within a given geography so they develop over time an excellent "feel" for market value. They are usually independent business people who do appraisals on a fee basis - no appraisals = no money. Appraisal fees for regular homes can run from a $200 - $400 depending on the area and amount of work. Sounds OK until you figure in business costs - insurance, MLS, etc. then you need 12 - 20 appraisals a month to make any money.

With the advent of Cuomo's legislation, the "impartial" AMC's are taking up to 50% of the total appraisal fee. Unlicensed or inexperienced individuals are performing property inspections and their appraisals are then being "signed-off" by 3rd parties that have never physically seen/inspected the property. This also means that instead of 12 - 20 appraisals to make any money - now you need 24 - 40. Doing exactly the same thing you were doing 60 days ago and since it takes around 2 days in a perfect world (live appointment, comparison, research, paperwork, etc.) to do an appraisal - it is more likely you will now start to lose money in your business.

By law, no one involved in the transaction can communicate any issues directly to the appraiser. So real estate transactions that could have closed are now failing, because values are being determined in the dark and the one person that might be able to support a local circumstance, the appraiser can't help. The result - continued property devaluation.

With mortgage loans being denied due to inaccurate appraisals, borrowers are being forced to apply with other lenders who in turn have to charge the consumer ANOTHER APPRAISAL FEE to proceed with the transaction. Benefit - AMC - Loser - consumer and the appraiser.

Until the confluence of the credit freeze, over aggressive government regulation and consumer confidence can get unraveled - valuations and loans will continue to have issues. First step - remove new government regulation so more loans flow through the system raising consumer confidence. No reason good things can't come from the bottom up instead of bad things from the top down.

Securing a mortgage is seen to be the best alternative in buying a new home without the need to pay the full value immediately. Many homeowners purchased their home using a mortgage, and it is normal in most countries, especially in the United States. The average cost of owning a modest home is estimated at $300,000- $400,000. The cost alone of the home itself (minus real property tax and other clearances) is too heavy for an ordinary individual to shoulder. Thus, these mortgages provide a way for ordinary individuals to own a new home.

However, there are instances when you think of refinancing your mortgage, especially if the mortgage you secured cost you more (higher monthly payments, higher interest payments, unstable interest rate). In the United States alone, an average American homeowner refinances his home mortgage every 4 years. Their finances are changing every 4 years, and such changes comes into the form of higher salary, better credit, or having more equity in their present home. Once such changes happened, many homeowners refinance their mortgages so that they will be able to take the advantage of their new financial situation. Their new financial situation often provides several advantages for homeowners in refinancing their present mortgages. These include the following:

1) Better interest rate If your financial picture has changed over the recent years (higher or improved credit score, larger salary), you may qualify for better interest rate on your present mortgage. It is advantageous for those homeowners who are suffering from high interest rate. It will save you money through lowered monthly payments, thus paying less to the lender over the term of your mortgage.

2) Adjustable monthly payment amounts in mortgage refinance, you will be given an opportunity to either lower or raise the amount of your monthly payments. Raising your monthly payments may result to lower interest payments whereas lowering your monthly payments may result to shorter mortgage repayment term. In most cases, homeowners prefer the former so that they can build equity in their home at a faster rate (that is, cashing out a 30-year mortgage term to just a 15-year term).

3) Qualifying for a fixed rate mortgage (FRM) if you financed your home with an adjustable rate mortgage (ARM), you can refinance it to a fixed rate mortgage. By refinancing it through FRM, you will no longer worry about your monthly payments going up when the lender adjusts the rate.

4) Cashing out equity in your home there are many homeowners who want to cash out equity in their homes for several reasons. If you will consider this, keep in mind that while you own the equity, the money is still the principal loan amount that you need to repay. In this case, you need to consider your budget and how much you can afford to pay before securing a home equity loan.

If you are now within good financial condition, it is best that you consider refinancing your mortgage. This will help you save substantial amount of money from excessive payments you have made from your previous mortgage. You do not only save money, but you have that peace of mind that you will be able to finance your home with ease and without doubt. Mortgage refinance? Ask yourself; maybe, this is now the right time that you consider one.

Whenever, I turn on the television, I see it again.

"Real Estate is going down!"

"Interest rates are going up!"

"Sell! Sell! Sell!"

In fact, there are many homes today that are up for sale! The question is: Is it going to be sold fast enough before
they lose it due to foreclosure.

Just a few years ago, we lived in an over-hyped, over-priced, and over-mortgaged real estate market where some
regions around the nation saw 100%, 200% and even 400% increases just within a few years. People everywhere
were getting rich left and right. The mail-man, who use to deliver your mail or the garbage collector, who use to
pick up your trash, were all in the real estate investing business! And also it seems like everyone, even my 16
year-old sister got a real estate mortgage refinance application.

"Apply now!"

"You are PRE-APPROVED for a 1% mortgage!"

Wow! It is quite amazing to see all this in action. To see all of the late night infomercials hyping their products
trying to entice you, the insomniac viewer, to buy their products! The question is: What do you know about these
so-called real estate authors? Do they really make their money on real estate or by selling their products? Why the
heck, do they always have an often energized, well-dressed, beautiful woman (or man) hawking on all of the great
benefits of the real estate author's products? Are they that excited about their stuff that they are literally jumping up
and down, screaming at the television for you to BUY! BUY! BUY!???

One of my favorite investor and TV personalities of all-time is James Cramer. He has a knack for television, and I
really enjoy watching his show. He has a saying, "Bulls, Bears Make Money. Pigs Get Slaughtered!" There are
some truths to this statement. It can be applied directly to those real estate investor newbie, who got into the
market too late. Now they are getting slaughtered (like pigs) from the high mortgage payments because they took
out an ARM loan and now they are seeing their mortgage payments going up and up every month or so. They are
trying to sale, but no takers. Hence, they have to lower their prices. Depreciate the market! Lower it every more!
If they can't sell, they'll just let the lender take it. This is why you are seeing so many foreclosures these days.

It is a broken system. Some lenders were too lenient in lending and now are seeing the repercussions. As of this
writing, hundreds of mortgage banks had already declared bankruptcy or have been bought out. Hundreds more
will follow suit in the years to come. I believe that we are living in the beginning of a real estate mess that will have
ill effects that can last up to 10 years!

So make sure, you know what you are doing in the field of real estate. Don't be a buffoon and aimlessly start
buying real estate because you BELIEVE that prices will continue to go up. Be careful and invest wisely! Learn
how to invest in abandoned, code violated and condemned properties, today. I believe that they are much safer
than just buying and waiting for the prices to go up and also great for the real estate newbie, who wants to start to
invest but have little or no money down!

Charlie Tha

Commercial Real Estate Investing

There are many income producing commercial real estate properties that are being offered below market that are great investment opportunities. The problem or barrier for most real estate investors buying these properties is the down payment required to acquire them. As a rule general rule to purchase income generating apartment buildings and mixed use multifamily properties one should be prepared to spend 25% to 35% of the purchase price for the down payment. Plus the investor must have closing costs and reserves of 6 months or more. This is a substantial investment that eliminates many potential buyers. This can often be overcome by these creative financing strategies for commercial real estate investors.

Creative Financing

This is a highly misunderstood concept in real estate. My simple definition has two parts. Creative Financing requires a property with substantial equity and a willing and motivated seller. If the seller is motivated yet there is no equity there is no opportunity to utilize creative strategies to acquire the properties. By the same token if the property has enough equity and the seller is neither willing nor motivated no strategy will work.

3 Creative Strategies to Purchase Commercial Real Estate

1. Seller Financing and / or Carry Back: There are many ways to structure a deal  where the seller can finance the property or hold a second mortgage for a short time and then the buyer can refinance the loan. Many lenders requires the loan to be seasoned one or two years. Yet there are lenders that we work with that will refinance immediately requiring no seasoning. These deals close within 3 to 6 months from the initial seller financing contract.
2. Transaction Funding Programs: These are programs where a private lender will finance the loan from One to forty - five days. The key is to have a buyer ready to close immediately or to be able to refinance at once. This only works when the end lender is aware of the transactional financing and they require no seasoning. As in point #1 above most lenders require one to two years of ownership seasoning so having the proper end lender is important.
3. Down Payment Assistance Program: If the property has equity and the seller is willing to use it to help the buyer acquire the home, then a down payment assistance program similar to Ameri-Dream or Nehemiah (programs used to purchase residential properties financed by FHA loans) may be a great option for you. Ultimately the Down Payment Assistance Company (DPA) gives the down payment and the seller reimburses the company at closing. This can only happen if there is substantial equity in the building.

As previously stated creative financing requires substantial equity in the commercial income producing property that the seller is willing and motivated to use to strategically sell there property as soon as possible. Lower the price simply is not the answer because the main problem still exist. Commercial Real Estate Investors do not have 25% to 35% for down payment plus closing costs and reserves. Let a professional help you structure your deals to make them close.

If you are considering a new home loan anytime soon, and you do not want to get an adjustable rate mortgage (remember, ARMs are very strong loans), you should consider a 2/1 buydown.

This is a great mortgage program for people who require a smaller payment now, knowing that they will have more money in the following years.

Here's how it works.

You pay an additional premium on your loan amount to get a 2 percent improvement on the rate. So, if the 30-year fixed rate mortgage is 6 percent, you will get a rate of 4 percent in the first year of your loan. In the second year, your rate will go up one percent to 5 percent, and in the third year, your rate will increase to the rate it was when you locked in your loan, the 6 percent in this example.

Then, it will remain fixed at that rate, until you pay it off, sell or refinance.

For people afraid of adjustable rate mortgages, this is a very powerful loan. It's also great for people buying their first home or for newlyweds, who think they have to rent, before buying. Remember, there are many ways to get into a home. This program is one of them.

One good thing about owning real estate is with real estate you have the option to consolidate debt. When you consolidate debt you take the bills you have and use the equity in your home to pay them off. Equity is the money you built up in your house over the years. Before consolidating debt you must refinance your house. When you refinance most of the time it changes the monthly payments and the interest on your mortgage. This is one draw back when you refinance and consolidate debt.

When consolidating debt it is important to know if it is to your benefit. If you consolidate your debt you should be paying less in a monthly basis. It is recommended to do your homework. One thing you should know before consolidating your debt is what the interest rates will be. If the interest rates are too high it will be better not to refinance. Another thing you should know before consolidating your debt is what the monthly payments will be. If the monthly payments are more than the bills you are going to consolidate, it is recommended that you do not refinance.

One last thing you should know before consolidating your debt is the new terms of the mortgage when you refinance. If it is not a fixed rate, you can end up paying more monthly over time. Consolidating debt can be a difficult thing to do but if you use some of the information you read here it can make things a bit easier.

Inflation or generally rising prices reduces the value of money over time. Simply stated, you can buy less with each paycheck. Assets like real estate, gold, oil, and other commodities are classic inflation hedges because their values increase with general price levels. However, real estate offers many other ways than just buying commodities to protect and diversify your assets.

Use Fixed Rate Loans - You should refinance all adjustable rate and balloon loans to long-term fixed rate loans. Another option, assuming you can make the payment even if your financial situation should worsen, is a cash-out refinance for investment or debt consolidation.

Residential real estate financing may be the best inflation hedge. You can borrow at very low rates, for long loan terms, and the interest is usually tax deductible. Fixed rate loans eliminate the risk of balloon payments and adjustable rates. Therefore, you only refinance to lower your rate. 

When you borrow, you pay back the loan with money that is worth less than what you borrowed. You can also invest money conservatively, even in bonds, at rates that are higher than what you pay on your loan. Higher inflation creates a greater difference and an even larger benefit to borrowers. 

Buy Now - If you plan to buy a new, upgrade, second, or retirement home in the next 2-5 years, buy now! Don't wait until rates and home prices are higher. Small changes will cost you more in the long run...

Consider a $200,000 home today with 20% down on a 30 year fixed loan at 5.0% compared to the same house in 2 years for $210,000 with the same loan at 6.5%. Only 5% more in price and 1.5% higher rate results in a payment that is 23.6% higher ($858.91- $1061.87). In 12 years, you will have paid $15,993 more interest, even though you waited 2 years to buy. You would also owe $20,252 more on your home. Buying now saves you $36,245, which is far more than the taxes, insurance, etc for the first two years.

Own Investment Property - Residential rental property combines appreciation and rising rent rates with the benefits of fixed rate loans to create an inflation resistant long-term investment. Just make sure the rent covers the monthly expenses. You should also save 12 months worth of payments for any vacancies. 

If you don't want to be a landlord, buy raw land. However, land financing is very different from home loans. Expect a much shorter loan term and have savings to pay off any balloon payment, or just pay cash.

Inflation is the biggest threat to your financial future because it robs you blind without ever taking a single dollar. Real estate provides flexibility that you can use to protect your wealth and diversify away from volatile commodities. The most surprising is how buying now can save you so much later.

Real estate market conditions are the topic of daily conversation. From real estate bloggers to Bloomberg News, everyone is throwing out predictions of how low housing prices will go if a double-dip recession occurs.

There is no doubt the real estate market has been dealt severely harsh blows. From bank failures to staggering unemployment and history-making foreclosure rates to exploding property taxes, no one knows how much more the industry can endure.

Conflicting reports are provided on an hourly basis. A recent article published at Bloomberg News reports homes are priced nearly 30-percent below market value with approximately one-third of homes for sale involved in "some state of mortgage distress."

The National Association of Realtors reported home sales increased during the months of April and May, but declined nearly 16-percent in June. NYU Stern School of Business claims increased home sales occurred from Obama's federal housing tax credit and predicts housing sales will continue to plummet throughout the remainder of 2010.

Presently, more than six million homeowners have lost their property to foreclosure. As unemployment continues to rise and unemployment benefits disappear, mortgage lenders predict an additional two million foreclosures will occur by the end of 2010. If these predictions are correct, more than 8 million properties will fall into the category of bank owned real estate.

With an overabundance of foreclosed inventory, there is no doubt housing prices will continue to decline. In order to compete with discounted prices of bank owned houses, property owners will be forced to further reduce their asking price. Many will walk away without making any profit on property they have owned for years.

Another factor affecting the real estate market is property values drop when multiple foreclosed homes are present within a community. Remaining homeowners lose accrued home equity which can prevent them from refinancing mortgages to obtain reduced interest rates or lower monthly payment installments.

After the banking meltdown, mortgage lenders tightened lending criteria; making it considerably more difficult for borrowers to qualify for home loans or mortgage refinance. Lenders cannot afford to take on additional non-performing loans which could potentially lead to foreclosure.

While there is plenty of prophetic speculation regarding the future of the real estate market, there are still opportunities to buy a house with poor credit; find great deals as a first time home buyer; or locate discounted investment properties. The abundance of bank owned realty has opened the door for buyers to purchase houses well below current market value.

Home Path Mortgage offers a wide variety of Fannie Mae bank owned properties. Prices range from below $5000 to over $5 million and consist of residential and commercial realty, as well as vacant land.

Special financing terms are offered through various lenders participating in the Fannie Mae Home Path program. Buyers can obtain low down payment requirements; down payment assistance; flexible mortgage terms; and bad credit financing options not offered through conventional home financing service providers.

The Department of Housing and Urban Development offers home buyers the opportunity to obtain grant money when purchasing homes in areas hit hard by foreclosure. The Neighborhood Stabilization Program offers financial grants to individuals and real estate investors interested in buying houses to revitalize communities.

It is important to stay abreast of real estate market trends and home buying finance options. Track housing prices through organizations such as Realtor.com or Zillow.com. Join real estate clubs or participate in investment forums to network with realtors, mortgage brokers and investors.

Paying attention to market trends can help individual buyers and investors locate distressed properties at discounted prices and stay informed of government tax credits and home buying programs.

It's a buyers' market in Florida housing. That's a fact that no one denies. Sales are slow. Prices are stagnant. The projections, if you believe people like Wayne Archer of the University of Florida's Bergstrom Center for Real Estate Studies, are gloomy. The question, of course, is "Gloomy for whom?"

The fact is that when you step back from the housing sales figures and take a look at the big picture, what you see is far different. A healthy and growing job market, recent drops in mortgage interest rates and property tax reform combine to make Florida an excellent place to buy a home - note that word. HOME, not a house, not an investment property, not a speculative deal, but a HOME.

Florida's real estate boom of the last five to ten years has been driven in large part by two things - land speculation and sub-prime lending. Anyone can tell you that those are a shaky foundation for long-term growth. The recent slowdown in the real estate market is, likewise, due to the breakdown of those two factors - and it should come as no big surprise.

What Happened to the Bubble?

Real estate prices were driven higher and higher by investors who bought into the dream of flipping new construction and making a quick buck. They bought pre-construction and early construction properties with the intent of selling them at high profit when they were finished. According to some real estate analysts, close to 70% of real estate sales during the "boom years" were to investors.

At the same time, home buyers were seduced by the "creative financing" offered by many lenders. Promised fast gains in real estate value, many home buyers jumped at mortgage deals that were affordable in the short term. The first of those adjustable rate mortgages have hit the wall as they come up for interest adjustment, and those buyers who are unable to refinance are suddenly faced with mortgages that they can't afford.

During the boom years, the real estate market favored investors. With prices rising as fast as you could record them, it made sense to buy with the intent to sell. Now that housing prices have stabilized and are even starting to drop slightly in some markets, the investment attraction has dropped. Those investors who bought with an eye to high profits from resales are ready to sell before prices drop. At the same time, many home buyers are faced with the prospect of a quick sale or foreclosure. The two market streams - investors unloading their properties to preserve as much profit as possible and homeowners who need to sell or lose their investment entirely - are creating a glut on the market.

Fewer investors and more houses on the market add up to a slow market. Buyers have been holding back, understandably. High property taxes and high interest rates had persuaded many buyers to wait for a better time to buy. For those home buyers who wanted to buy now, there is plenty of choice, and no urgency to close on a house before another buyer snaps up their dream home. In a soft market, a buyer who is in no hurry can afford to wait out a home seller in the hope that the price will drop, or try to negotiate better terms.

Florida is More than the Sum of Its Real Estate Market

Before we start mourning the death of the Florida real estate market, though, let's take a look at the bigger picture. Overall, Florida's economy is flourishing. The Florida unemployment rate continues at more than 1.3% below the national unemployment rate. Major companies - both national and international - are moving their headquarters and opening new offices in Florida cities, and account for nearly 150,000 new jobs in Florida since January 2006. In fact, the February issue of Forbes named six Florida cities in their top 25 "Best Cities for Jobs".

Florida's A+ Plan for Education is being touted as a model program for school improvement. Every school in the state is given a letter grade, so that it's easy for parents to decide on options for their children's education. The school choice program allows parents to move their children out of schools with bad grades, or provides incentives for them to work with those schools to improve them. Schools with poor grades are eligible for financial and technical aid to help them improve. Schools with good grades are eligible for monetary incentives as reward for doing well. In short, Florida has made providing excellence in education a priority.

Property taxes, which have been a major negative for many prospective buyers, are in the process of undergoing reform. Florida Governor Crist has committed not only to immediate tax cuts and savings, but to long term overhaul of the state's property tax structure to make it more fair and equitable. In the meantime, there are several initiatives and methods to cut property taxes on the table.

Finally, for the first time in years, interest rates on Florida mortgages dropped for three consecutive weeks early this summer, and all indicators are that this trend will continue. Lower interest rates and lower home prices, combined with good schools, lower taxes and a strong economy - you can add up the numbers yourself.

Bad News for Speculators is Good News for Home Buyers

The doom and gloom sayers concentrate on falling home prices and the effect that those prices will have on investment value of housing. The fact is that most people are not buying real estate for speculation. Most people who buy houses are buying homes, not property. They are buying with the intent of settling in, raising a family, living in a community and creating a home.

Now is a perfect time for doing that in the Florida market. Today's Florida home buyer will find a wealth of choices on the market, prices that reflect the value of their home, an excellent school system with a commitment to improving, a government that is committed to lowering property taxes while maintaining services and an economy that is attracting the biggest players in the world's business market. Put all those together and shake it up with Florida's stunning beauty, gorgeous beaches and balmy weather, and how can you lose?

Last year many Americans took advantage of low interest rates and refinanced their mortgages. This way saving thousands of dollars over the term of the mortgage loan. Many people wondering if they missed the boat on the refinancing boom. Rates are at near-historically low levels! Therefore it's still a great time to consider locking in today's rates for a 15/20/30 year term. Especially when consumers facing an increase in rates from an adjustable rate mortgage (= ARM).Whether a refinance is right for you depends on several factors. Asking yourself a few questions can help you decide whether it's a good time to contact a mortgage lender.

Some questions are:

How does the interest rate you are paying compare to today's market rates? Many consumers never think about refinancing, even though they may be able to save a nice amount of money every month or shorten time from the length of their mortgage by refinancing.

Do I have any equity? As long as you have equity in your home, you might be able to refinance or go from an adjustable rate mortgage (ARM) to a fixed-rate mortgage.

Is it possible to move to a more attractive ARM? If you have (almost) no equity or you are locked into an ARM that financially doesn't give you much space, you might be able to get some breathing room through a longer term ARM, such as a 5 year ARM (which locks in a rate for five years and automatically adjusts after that).

What are the fees I will have to pay? Refinancing can save you money, but if the savings are not that big, the costs in fees for originating a new mortgage loan may eat up all your savings. Make sure you ask in advance what all the charges, costs, and legal fees will be before you start.

How can I be sure that I am getting the best rates? In order to ensure you're making the best refinancing decision possible, it's good to shop around, by using rate comparison sites like Bankrate.com or Motleyfool.com. One of the easiest ways is to ask for a best-rate guarantee. Some mortgage lenders guarantee that their rate is the lowest in the market at closing date & even agree to pay you a certain amount if they are not the lowest on that particular date.

If I have extra equity, should I take a bigger mortgage loan? If you are comfortable with a little bit larger payment, you can think ahead: do you plan a new kitchen, bath remodel, or extra room in the coming years? You might avoid the cost and hassle of a home equity loan in the coming years, as well as the risk that rates can rise rise, by taking out a little bit larger mortgage loan & using the additional amount to invest in home improvements.

In order to look at the future with confidence, consider financing your loans with lenders that fit your lifestyle and back up their promises. Not all mortgage lenders are the same and the consumer should take a good look at the rate the lender can provide. Also the reputation of that company is very important. There are companies that will provide you with a different attractive perks like a best price guarantee, a fast & easy application process, a speedy loan decision and a guaranteed closing date. But don't forget that you always should evaluate the refinance offer in relation to your personal circumstances!

LendAdvisors.com - Blog that helps you with Real Estate, Mortgages & Refinance.

There are three types of possible commissions during a real estate transaction:

The seller's real estate agent commission

The buyer's real estate agent commission

The mortgage broker or lenders commission

All of these can change from deal to deal.

Real estate agents

The seller's real estate agent is the "listing broker". If another real estate agent brings a buyer to the table, then typically the commission is split between the buyer's and seller's agents.

These commissions are usually around 6% or lower, and are negotiable.

Mortgage broker (or lender)

The mortgage broker, if you use one, essentially charges fees two different ways. One may be "flat fees" such as processing fees or admin fees. The other types of fees are variable such as the "points" you may pay. A "point" is 1% of the loan size. If the loan size is $400,000 and you are charged two points, you are being charged $8,000 (2% of the $400,000 loan).

A lender will either charge you upfront the way a mortgage broker does, or offer you a higher interest rate to increase their profits.

A lender is not necessarily cheaper than a mortgage broker. If they always were, no one would be in the mortgage brokering business.

For more information visit www.archerpacific.com
Loan Library.

What do I mean by overcoming real estate fears?

Calling home sellers can be a scary idea--or it can be a lot of fun.

I have a question for you...

When you have got a prospective seller's phone number and you're picking up the phone to call and "test the waters" for a first contact or to present a verbal offer, does it sometimes bother you?

Do you get freaked out?

Do you start thinking about exactly what you're going to say, how you're going to say it, how to deal with any and every possible contingency, how to "convince" or "sell" the seller on doing a creative real estate deal with you... etc.?

Do you ever get NERVOUS when you're dialing the phone?

You know that feeling when you just start getting anxious for no logical reason, and you just CAN'T control it?

Have you ever had to actually HANG UP because you were so darn freaked out... and you just couldn't follow through with it?

OK, now another set of interesting questions...

Have you ever called a seller back after a first chat/offer, and started talking to the person, only to realize that he/she was in a COMPLETELY different mood from the last time?

Have you ever had a seller "turn cold" on you all of a sudden and be "not interested" in your creative real estate offer?

It's almost like you're talking to a different person from the person you built rapport with-- hopefully ;)-- and it makes no sense to you... right?

And finally...

Despite some weird feelings, have you ever worked up the nerve to call a difficult prospective seller, gotten the seller on the phone, had a great conversation full of all kinds of possibilities...but when it came time to get some agreement over something hammered out, you froze up because you didn't know what to say?

Or even worse, have you ever gotten to the end of a conversation on the phone or at the house, after a long time investment of exploring the seller's needs and the house itself... only to have him/her answer with:

"Well, maybe... call me Friday afternoon... OK?"

or...

"That really doesn't sound like what I want to do,

but thanks for asking... (silence)"...?

Have you ever had one of those conversations where you could just TELL that something wasn't right... and that, even though the SELLER had a problem you were offering to help SOLVE, he/she wasn't going to be taking you up on your creative real estate offer, or calling you back at all anytime soon?

Me too.

So why all the problems?

What is it about these particular few minutes just getting the information and finding out the motivation of the seller that constantly ends in problems for beginning real estate investors?

I mean, you are calling someone who wants to sell their house about SELLING their house! Hello, where does all this anxiety come from?

I personally think that this issue comes down to a few key DEEPER ISSUES.

And I think that if you don't have these other issues "handled", you're going to keep running into problems... and NEVER even know WHY...

...which sucks.

I mean, it's bad enough to keep having a particular problem and not figure out how to solve it... but the idea that the solution is in doing something you would never think of is a little bit maddening.

In other words, I think that this is all about understanding the problem, and actually PREVENTING it from coming up... rather than trying to "solve
it" in the moment.

Let me put it this way...

If you're dialing the phone, and you're starting to feel nervous, then it's already too late to solve the problem.

No quick fix will help you.

Or if you're on the phone with him/her and you have just fired across the bow with something like, "Well, Susie...I understand all that you're saying, but if I were to pay cash and close quickly what is your bottom line to sell this house?"

OR

"Well, Susie, now that you understand what an Option Agreement is and we've established that you no longer want to be a landlord but ALSO want to get full retail value selling your house, and want to do it yesterday with no headaches and no real estate commissions...I think I can help-- do you now feel ready to make a deal with me?

and she says "Um, well Mr. Investor, I do need to sell the house BUT...X,Y,Z...let me call you back in a few days/weeks/next Christmas and tell you my answer then"...

And you start to get that sinking feeling that what should be a GREAT deal because you KNOW you can help her out and get this thing done, is dead in the WATER because you know she's blowing you off.

You confused the seller or worse you sounded so "slick" she was ready to run for the hills.

At this point IT'S TOO LATE.

There's no "magic pill" now.

The answer is PREVENTION.

Let's get this handled.

So, let's take a few minutes and talk about the issues and what CAUSES them.

Here are some of the "root causes", and how I see them...

1) Having no other options.

If you're sitting at the phone with ONE seller's phone number in your hand, and you haven't ever bought an investment home (or it's been a long time; or you really are trying to buy quickly so you can gain momentum and go full-time into the "real estate investor lifestyle"), and you are feeling DESPERATE, you're probably going to get VERY nervous.

When you have no other options, the solitary one in front of you becomes VERY valuable.

Translation: You want it TOO badly.

This AUTOMATICALLY triggers your emotional system, because at some level you realize that if you screw this up, it's all over. And we both know that there truly are TONS of ways to KILL a real estate deal-- even IF you truly CAN structure a win-win agreement with the seller.

The pressure is too much! Without options, your judgment could become clouded and your neediness communicated to the seller will turn them off.

In this world, the hungry fish does not get fed. Such is true in real estate investing as well.

2) Putting too much importance on a single deal.

Now, if you have a deal that you've been working for three months, and you've decided that it's one heckuva rare find with a GREAT spread, a motivated seller and a CLEAR exit strategy, really a one in a
thousand scenario, it makes sense to put a lot of importance on your completion of this deal.

After all, you've invested a LOT of your time and sure there might have been obstacles but now you are running with the ball and you can see blue sky and five-figure checks.

But, if you don't have other things going on, other deals in the works, other proverbial "irons" getting hot then you are only setting yourself up for major disappointment by putting too much importance on ANY one deal.

3) Thinking you need to IMPRESS the seller.

This is a HUGE issue.

If you're like many investors, you might "subconsciously" behave and communicate like you're trying to IMPRESS the seller of a house you're considering buying.

With me, when you think about this, it only makes sense... of course you'd want to impress the seller in a "creative real estate" deal that has everything
going for it... so he/she'll think you're a professional, can do what you say you can do and want to work with you.

But have you ever thought for a moment how a desperate, motivated seller sees it when an investor is TRYING to IMPRESS him/her?

Well, here's the INSTANT and SUBCONSCIOUS response that sellers often have:

"He's trying too hard. There's something wrong.

This guy must have something he's trying to

hide...better keep my mouth shut."

In other words, the INSTANT you do something or say something that is an obvious attempt at impressing a seller, his/her radar system screams:

"Con man!"

Can you blame them? With the world we live in today? When doing creative real estate deals, when you KNOW you can help the seller, it is 100% more effective in the long run to use a strategy of EDUCATING people and not trying to "sell" them.

Remember, as a real estate investor, people often want to do what you do for a living. It seems glamorous and fun and highly lucrative, all of which it can be. But in the real world most of what works to build wealth in real estate is JUST PLAIN NOT UNDERSTOOD by "average Joe" Johnny LunchBucket types. This is where you must EDUCATE your sellers and you can only do that by actually caring about them, building trust and comfort and not coming off as a smooth-talking con man.

4) Being attached to your expectations of a deal.

You might think of this one as a variation of "wanting it too much"... only slightly different.

When you start getting your hopes and expectations up, you begin to get ATTACHED to them.

Then you run the risk of HOLDING ON TOO TIGHT to your little "get rich quick" fantasy.

Bad idea.

Of course, you should run your numbers and do your due diligence and throw some projections around to see what you could be making if a deal goes through.

Nothing wrong with that. In fact, it's essential! Many a new investor has jumped straight into "investing" by buying a property in a stupid deal and ended up a glorified housebuyer with a house that they come out of pocket every month to own.

Except in some instances, this is just not sound investing!

Remember, as professional real estate investors:

We buy properties that PAY us to own them!

Back to the being attached to the deal thing.

I want to elaborate on this concept because it is SO important in SO MANY WAYS for those of us who want to enjoy success in real estate investing and be Good Stewards.

Of course, when dealing with a seller or any kind of deal issue you want to be PERSISTENT. Persistence is a key to success in ANYTHING. But you don't want to be ANNOYING!

Sellers don't don't often want to work with investors who come across as arrogant, are obviously only motivated by a lust for dollars, who assume too much, act too comfortable with them, or blow smoke up their chimney.

Remember, motivated sellers have investors often literally pounding down their door (well, once their reason for motivation is in the public forum anyway). They are getting daily calls and letters from people who, in effect are saying "I want to steal your house!"

In fact, with few options they almost EXPECT to get a short-handed stick at closing but what can they do... they gotta sell, right?

I mean, they're "motivated" sellers right?

It says right there in BLACK and WHITE that Johnny's mortgage is in arrears and Johnny told you right out of his mouth that he just got laid off at
the factory and you KNOW none of Johnny's friends/relatives/boss can or will bail him out. His inability to pay the mortgage is temporary until he finds work but he just can't catch up the rears.

Logically, you know that he can't refinance either. Plus he actually TOLD you all his troubles trying to refinance and how the banks are ignoring him in his time of need.

Logically...you KNOW he HAS to sell-- doesn't he?

Logically, yes it makes sense to do whatever it takes to avoid foreclosure and avoid a potential bankruptcy.

Logically, you KNOW these things.

But REMEMBER three things, please, dear investor.

1) You have SPECIALIZED KNOWLEDGE:

Chances are, what makes sense to you as a seasoned -- or even just well-read ;)-- real estate investor, might be highly CONFUSING to others who are
not real estate insiders. Examples? Try the Lease-Option Purchase or Seller Financing or Taking over Payments or any one of a hundred other techniques investors know and use but most people have no idea about.

Hint: Like, for instance the SELLER you're trying to help.

2) This is not a LOGICAL situation:

Oftentimes when talking to a motivated seller it is an EMOTIONAL situation. Even if the person is just a FSBO this is often their home, a place of all kinds of emotional references and attachments.

Regardless of how LOGICAL it is for a distressed seller to take you up on your win-win creative real estate offer, they are not likely to deal with a person they DO NOT LIKE, they CAN NOT TRUST and who does not make them FEEL GOOD.

Period.

But, you keep thinking...they gotta sell, right?

Maybe, maybe not.

One thing's for sure--they don't HAVE to sell to YOU!

In fact, here's number three to keep in mind...

3) They don't HAVE to do ANYTHING:

Believe it. I've seen people FORECLOSED on because no one who came to "help" them took the TIME to explain what their options were and clearly articulated what each party's responsibilities and rewards would be for selling the house by using creative real estate strategies.

They were determined to hope and pray for a miracle because they could feel the sharks circling out there waiting for the feeding frenzy--all those so-called "investors" who low-ball offered to buy their house and insulted them and told them to, basically, "take it or leave it dummy."

These people lose their house and their equity because no one was there to give them a hand and treat them like a human being. No one was there to point to the pile of unopened mail and bills on the kitchen table and, with love, say:

"I can see you're in a tough spot,

but honestly folks ignoring the problems

like an ostrich with your head stuck in

the sand isn't going to save your house

or your credit. It's time for you now to

do something about it. I'm here to help!"

Just like appearing desperate can destroy your chances of structuring a creative deal with a seller, liking a deal's profit potential too much and creating an expectation leads to crazy, stupid mistakes as well.

Like forgetting the #1 Rule of building wealth through good stewardship:

"Wealth is the accumulation of problems

solved and people helped."

Now, think over what I just said...

The Refinance/Renovation Effect

In 1998-2003, low interest rates ignited record home refinancing, many homeowners pulled "cash out" to reinvest in their homes:

A $100,000 home in 2000, with $60,000 in debt may have been refinanced to $75,000 (75%), with $15,000 cash out going right back into the home in capital improvements. This home then sold for $120,000 in 2001, wealth was created, but less than the statistics assume. Did it rise by 20% in "appreciative" value? Or did the improvements and borrowing just increase the value? National statistics measure this as a 20% rise. You decide, then multiply by your neighbors who added additions to their 1940's bungalows between 1999-2005. If the national appreciation rate was recalculated to account for home renovation expenses, real gain in value would be determined and would be a much more calming and useful statistic to determine if housing is 'overheated'.

The Redevelopment Effect

America's housing stock in 2000 was on average 47 years old. The rise in Home Depot stock should be a market indicator of what Americans are shopping for - home improvement. Dollars invested in improving the family home is a form of savings and investment that doesn't show up in the savings statistics.

At the same time urban areas are seeing unprecedented re-gentrification. When a blighted area is improved, and made habitable again, values go up from zero. The calculated appreciation rate is spectacular. The tax base comes back and since many of these areas are in city center cores, travel commutes are shortened for the new residents. The value to society of redevelopment is significant. Boomers are looking to the old neighborhoods for value and projects with heart. Loft housing will be a popular trend for 50-somethings just as it has attracted 20-somethings, and is another form of Besting.

from the new book: "Besting - better nesting" http://www.betternesting.com

Mounting credit card debts with their high interest rates places the borrower in a financial mess. If you have an existing mortgage, get a mortgage refinance to pay all your debts and have more money left over for your monthly bills and other home expenses. But how do you know if you are getting the best deal?

What is Mortgage Refinance?

Mortgage refinance is replacing an existing loan with a new loan using the same assets as security. In most cases, this kind of loan is secured with a real estate property, like your home or other properties that will be approved by the creditor. Generally, this type of refinancing is specifically for home mortgages.

Does It Make Sense to Refinance?

Here are three questions you can answer to determine if you need another loan:

1. Are you seeking to loosen your monthly cash flow?

2. Are you trying to reduce your loan term?

3. Do you need to get cash from the equity of your home?

Taking out cash from the equity of home can be a sensible move to pay off your debt and improve cash flow. But be aware that it is more expensive to take the cash-out, compared to getting a mortgage refinancing. Agents will be pushing for a cash-out instead of refinancing your asset because they'll be getting more commissions.

Mortgage Refinance to Pay Off Debts

The average American household will have 9 credit cards and it is not surprising that many credit card holders have exceeded their borrowing limits. The different credit cards have different interest rates and the payments are demanded monthly like clockwork. Should a payment be delayed or neglected, interest rates will soar.

The consolidation of these credit card loans into one loan is seen as a practical solution. There are advantages from a mortgage refinance when you want to lower your monthly bills and pay off your debts at the same time. To make sure that you pay your debts, you can do the following:

1. Get all your credit cards and review the outstanding balances of each credit card.

2. List the total balances and arrange them according to amounts, from the lowest to the highest balance amount.

3. Start paying the smaller balances and working your way up to the top of the list.

4. Debit other credit card balances when you pay off the loans.

5. Stick to your budget.

Are You Getting the Best Deal?

As a rule, your mortgage refinance should be able to save you money. If you have a 30-year loan and have been paying it for 10 years, you have the option to refinance. You can shorten the payment period to 10 or 20 years. This move will save money in the thousands in interests alone.

You can still have the same monthly payment because your refinance rate is now lower and your payment period shorter. You are also building your home equity faster. Before you take out a mortgage refinance program, shop for the best deal by comparing interest rates.

Many daily newspapers are asking a question I have asked for a long time before the residential real estate bubble finally burst, and foreclosures, not sales, became the norm.

The question is "Who was to blame for the rapid increase in real estate prices and most of the obvious fraud that followed, resulting in the worst foreclosure crisis in American history?" The answer is long and complex, hence the lawyers have jumped on board to sift out the blame and figure out who deserves to be compensated for losses. The main players in the home real estate and mortgage foreclosure fiasco are all suing each other. Home owners are suing realtors, mortgage companies are suing fraudulent buyers, local governments are suing lending companies and appraisers, and some mortgage brokers and lenders are being sued by everyone.

When I saw so many unqualified buyers buying expensive real estate so fast during the so-called real estate boom, I warned people I knew that the worst real estate bust in history will soon visit upon us. My reasoning for the "dismal real estate bust prediction",
was that it is not possible for real estate values to go up so high, so fast when people are losing their jobs, losing health care benefits, gas is skyrocketing, and American salaries are being decreased, not increased. The reason brokers gave to justify selling subprime adjustable rate loans was that homebuyers were told, "you don't make much now, but when your monthly rate increases your income will also increase. But, of course, any level-minded sensible person would understand that most employees don't get 30% salary increases in three years as the adjustable rate subprime theorist suggested.

The reasoning many potential subprime homebuyers made for buying a home with an adjustable rate subprime loan was, "if it was not possible for me to pay for this house, the
mortgage company would not have allowed me to purchase it." One such person this statement actually came from was an educated retired school teacher I spoke with who purchased a new home at retirement with a subprime loan. I attempted to counsel
her to understand that because her home price was huge and her payment was tiny, her
loan was an adjustable rate subprime loan. Sadly, she did not understand what a subprime loan was, she had a high credit score, and she would not listen when I tried to tell her she was qualified for a much better product and the broker she was dealing with was fraudulent.

Well, now she understands that too late, and found that she qualifies to be a part of a lawsuit her city is filing against her broker and other mortgage companies who gave adjustable rate subprime loans to people with high credit scores, based on higher commissions for the broker. At the time she accepted the loan, I told her that her income
qualifies her for a conventional $200,000 loan, but the fact that she was purchasing a $600,000 home was a screaming clue that she was getting a subprime loan her broker did not explain to her, but she refused to see the reasoning.

The retired school teacher was forced to refinance in just 12 months due to a
drastic increase in her monthly payment coming due at adjustment. She was a part of
the highly qualified home buyer who:

1. Did not understand what an adjustable rate subprime loan was,

2. Was not told she was being sold an adjustable rate subprime loan,

3. Was fraudulently sold an adjustable rate subprime loan, when she qualified for a low interest fixed rate 30 year loan.

This behavior was a part of the dishonest mortgage brokers who sold subprime loans based on higher commissions instead of qualifications and understanding on behalf of the buyer.

Who is to blame for the foreclosure explosion that followed the subprime mortgage fiascoes? In my opinion the mortgage industry has been loosely regulated and monitored by government agencies, as a result mortgage brokers and lenders have had little consequence for their actions. Many Americans are against government regulation, but to me this is a major reason why the government should closely regulate industries such as this. Blame should start with the federal government, then state governments, the cities, the lending industry, the mortgage brokerage industry, and the real estate industry. All of these entities should get together rewrite rules, regulations, and enforcement. Each homeowner who lost their homes to adjustable rate subprime mortgage loans or were sold homes they could not afford, should be paid for pain and suffering. All of these agencies knew that the home prices were increasing at an alarmingly false rate, and they also had many clues that fraud artist were artificially assisting in increasing home prices. The agencies allowed it to persist until finally the federal government and lenders pulled the plug on abusive lending when foreclosures started to skyrocket far beyond historical rates.

Help for real estate investing has arrived with the news from Fannie Mae changing the number of financed properties allowed. Previously, the maximum was 4 properties with mortgage financing allowed per borrower, and as of March 1st 2009, the maximum can be up to 10 properties with mortgages. The updated policy applies to individual or joint ownership of one to four unit residential properties.

Real estate investors could play a key part in the housing recovery. The new opportunity to buy investment homes using conventional financing should help expedite the sale of foreclosure inventory that has been stymied by the requirement for investors to pay cash.

This new source of mortgage financing removes a large barrier to real estate investing, however, it does come with some conservative qualifying guidelines. Fannie Mae is primarily looking for experienced investors with high quality credit, and cash reserves.

Investing guideline requirements include the following:

o Purchase of a one unit investment property requires a 25% minimum down payment.
o Buying a two to four unit property requires a minimum down payment of 30%.
o A real estate investor must have a minimum credit score of 720 in order to qualify.
o The investor cannot have any mortgage delinquencies within the last 12 months.
o There cannot be any history of bankruptcy or foreclosure within the last seven years.
o Rental income documentation with two years of tax returns showing all rental property.
o 6 months reserves of principle, interest, taxes, insurance is needed for each property.
o A limited cash out refinance is available with a maximum of 70% loan to value.

Investors must complete and sign a 4506 form granting the mortgage lender permission to request copies of federal tax returns directly from the IRS. Prior to the loan closing, the lender must obtain the IRS copies of the tax returns or the transcript and validate the accuracy.

The policy change creates a positive move for the economy, although, stringent guidelines will narrow the field of qualified real estate investors, and leave many potential investors on the sideline. However, this situation may lead to a growth opportunity of real estate investing partnerships, groups, and clubs, which are designed to pool financial and credit resources to leverage the buying power of individual investors.

Potential investors with good credit and stable income could partner with others who have the necessary funds available. The details can be worked out to specify the level of involvement for each partner, distribution of money, and the process of handling the real estate transactions.

This year, Americans are expected to borrow $1.33 trillion in acquiring 7.4 million houses, condominiums and co-ops. Before you do any real estate financing, if you have bad credit because of consumer debt like credit cards or personal loans, you'll want to try to eliminate or reduce this debt since it will affect your ability to qualify for a commercial or home mortgage and make the estimated monthly payment. If you have monthly obligations like car payments, credit card payments, personal loan payments, student loan payments, etc., be sure to take these into account when you are determining your bottom-line affordability figure.

If rates in the current market are high, you'll probably get a better price with an adjustable-rate loan. A fixed-rate mortgage means that the interest rate and principal payments remain the same for the life of the loan but the taxes may change. Loan programs for down payments of 20% or less require that you purchase Private Mortgage Insurance (PMI).

Interest rates may go up if a rosy picture is painted that the economy is flourishing - like more jobs being available; this can lead to inflation which will send the rates up. You'll also need to consider closing costs and the escrow account for your taxes and insurance. Also keep in mind when you're financing or refinancing that most people move or refinance within seven years.

Most of all you'll need to decide what you can afford to buy. And if a loan application isn't approved for the first time, it can always be resubmitted after modifying it, for example, like raising the amount of the down payment. If you're a first-time home-buyer it is possible that you may qualify for a lower down payment or lower interest rate; check with mortgage brokers, online mortgage companies, your county housing department or your employer to see if they know of any programs like this available.

Revealing a FICO credit score is not a requirement for most conventional or government loans like FHA loans or VA loans. Thirty-year fixed-rate mortgages offer consistent monthly payments for all of the 30 years you have the mortgage; if the market is good, you can benefit from locking in a lower rate for the full term of the loan. 15-year mortgages are an ideal option if you can handle the higher payments and if you'd like to have the loan paid off in a shorter period of time, for example, if you plan to retire.

A 20-year fixed rate mortgage term will mean higher payments, when compared to the 30-year fixed-rate mortgage. If you've applied to other lenders, when you finally do select a good lender you may have to explain why there are other inquiries from lending institutions on your credit report. Check with your CPA or accounting professional; you may be able to deduct the interest you pay on the mortgage loan and some of the financing costs of the home, like points, on your income tax return.

Be careful when working on your real estate financing; if you make too many loan inquiries, with applications, it may look like you're shopping for credit; this can be a red flag for many lenders. Keep in mind that adjustable rate mortgages are best for homeowners who aren't planning on staying with a property for a very long period of time.

Collect a few of the local home guides you see stacked up at the local grocery stores or supermarkets and look at a few of the ads in the real estate section of your Sunday newspaper for houses you might consider buying. Get lots of advice about real estate financing, mortgages, interest rates, mortgage rates, mortgage refinance, bad credit mortgages, etc., from many different sources, don't rely on one source, and think about what makes sense to you. And thinking positive about real estate financing is important but so is being realistic.

I was a landlord for a decade, and I believe I probably lost a year of life for each year I tried to maintain 26 properties. I learned the hard way that the most efficient way to make money in investment real estate is to create a mortgage note and be the bank - not the landlord.

In other words, you become a private bank, financing the entire sale or part of the sale for the buyer. When you finance a sale of property, be sure to get a high rate of interest - generally 9% to 15%, depending on all of the other terms. For this article, let's assume you sell to someone who can't come up with all of a $20,000 down payment, so you finance $15,000 of the loan. The note should be due in five to 10 years, meaning the buyer will likely sell or refinance his mortgage within that period, and you'll be paid in full.

Here's how financing a portion of a mortgage can be extremely profitable and far less work than being a landlord, who is responsible for property maintenance. Let's assume you charge 11% on your $15,000 loan, amortized over 30 years (this makes for an easier payment and a more attractive deal for the buyer, even though you're receiving a very high rate of interest on the loan). The payment is $142.85, which includes principal and interest.
Now, you could make it even more attractive for you by writing the note with monthly payments of interest-only at 11%.

This saves the buyer even more, as his payment becomes $137.50, but this does not amortize, or reduce, the $15,000 he owes you. Let's assume the note is due in 60 months. You get $8,250 during this five-year period, and in the 61st month, you get the entire $15,000 that you originally loaned. As you can see, this is a very powerful investment, as you loaned $15,000 but you received a total of $23,250.

One final point. Maybe you are three years into receiving your $137.50 (meaning you've collected $4,950 in payments). Now, you decide you need a large sum of money for something - say, a vacation, home improvement, college tuition, or some other investment. You are still owed two years worth of payments at $137.50, or $3,300, and the balloon payment of $15,000. You have several great options, because you have the power of controlling a lot of money.

You can actually sell your entire note at a discount to a note investor. That's right, there are people and companies all over the world that purchase mortgage notes (the actual payments that are due on a real estate transaction). The note you have, even though there are only two years left, would be highly attractive to an investor, because the payments are interest-only and because there is a $15,000 balloon payment due in 24 months.

Now, remember, note investors are out to make money, so they won't offer you full price. They will either buy your remaining payments, probably for a discount of 10% to 20%, or they might purchase just the balloon payment, at the same discount, leaving you the remaining payments, or they might buy both the payments and the balloon.

So, assume you need $11,000. If you could get an investor to purchase your remaining payments and your $15,000 balloon for $12,500, I would think you'd be extremely satisfied. Remember, you've already made nearly $5,000 on your loan, so you'd wind up making nearly $17,000, and you don't have to worry about collecting the payments any longer. Plus, you will get the "hot" cash that you require immediately. As you can see, financing part of the sale of a piece of property is an extremely solid investment.

These examples are just a few of the many ways to own mortgages, not property, and get rich without the headache of being a landlord. If investing in real estate notes is something you would like to try, you might want to consider starting small, like with a mobile home note. These can be very inexpensive to buy but are extremely profitable.