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Articles: 1, 2, 3, 4, 5, 6, 7

Is America Going Broke?
2008-03-27 01:33:00
Is the United States going broke? Many would roll their eyes at this notion; they would tell you that the country has never defaulted on its debt that its long-term interest rates are historically low; that the dollar is the world?s reserve currency; and that China, Japan, and other countries have an insatiable demand for U.S. Treasuries. Others would argue that the official debt reflects taxonomy, not fiscal essentials; that the total of official and unofficial liabilities is enormous (The costs of hurricanes Katrina and Rita alone could easily total $200 billion over the next few years); that federal spending and medical expenditures are exploding, and that the United States has a history of defaulting on its official debt by means of inflation. On the other side of the coin is China; China is saving and growing at such astonishingly high rates that it can potentially provide the United States, the European Union, and Japan with huge quantities of capital. Some would suggest that...
More About: America , Economy , Commentary , Foreclosures , Housing Bubble

Consumers Worried; Home Prices Down; Trillions in Losses; Any Good News? We
2008-03-26 12:56:00
How about some good news for a change about real estate, mortgages, credit, jobs, consumer confidence, Wall Street stability, the future of civilization as we know it? Sorry, not gonna get it here. Evidence is evidence and though some may like to engage in wishful thinking, the evidence is not good at all. Goldman Sachs is actually forecasting that credit losses around the world caused by the current near panic in financial markets will hit some $1.2 TRILLION!!!!! The same report predicts that U.S. banks, brokers,hedge funds, etc., stand to lose around $460 BILLION in credit losses. SCARED CONSUMERS Very scared, in fact. Consumer confidence has hit a five year low; people are nervous about their jobs, their homes, their credit, their lives. But one example of why the worry: From January 2007 to January 2008, the price of existing single-family homes dropped some 11 percent. And then, there’s Bear Stearns Yeah, JPMorgan Chase upped its bid increasing the value of Bear Stearns...
More About: News , Economy , Housing Bubble , Home , Good News

Investment Team - A Real Investment Team
2008-03-25 14:59:00
This week I’d like to be both practical and a little futuristic. On Bloodhound Blog, my blog, Bonzai, and several other blogs, such as, A Life That POPS, lately, there has been talk about changes in the real estate field, and one of those changes, the team approach, is a topic I’d like to relate to investing — not just “team” as in professionals you use for guidance or as vendors to make individual deals, but a partnership “team”, a small, local investment company. I was going to write about Economic Conversion, but I’ll save that. Investment groups are nothing new, just as real estate teams are nothing new, but how these teams/groups function in a biz 2.0 world will, no doubt, be changing quickly. It’s difficult for one person with a notebook to keep up with all the information inundating us in the information age. The concept of a local diverse, super investment team using some of the practices of Business 2.0 is an appealing i...
More About: Real Estate Investing , Team , Real

The Not So "Lucky" Wanna-Be Tycoon
2008-03-24 12:00:00
Last week I wrote an article about “Lucky ”, the wanna-be real estate tycoon (article). The article was meant to be a tongue-in-cheek story, yet many people took it seriously. The fictional character “Lucky” was a composite of many people that I have met over the years. He was portrayed as someone who wanted to get rich quick, yet was too lazy to work for it. He kept looking for short cuts and was certain that getting rich in real estate was easy if only he could get someone to reveal the secret formula. There are many companies out there that prey on these people. They offer a free seminar that is nothing more than a sales pitch. They look to sell books, tapes, sales courses, boot camps and mentoring programs. They hold themselves out to be experts in the field of real estate investing. What they really are is experts in marketing. When someone buys a program the company is generally looking to upsell them, or get them to buy additional programs. While there...
More About: Foreclosures , Housing Bubble , Tycoon

Real Estate Investment Economics
2008-03-22 15:29:00
Real Estate Investment Economics When considering the economic viability of an investment, present income and future income should be evaluated carefully along with changes and predictions of demographics. A fully rented strip mall may look attractive to start with but an evaluation is in order to determine economic viability. Is the area growing at a rate where future increases in rent will be realistic? Or, is the property at its maximum for rent in the area? If ongoing maintenance is needed and improvements are necessary to help the tenants remain competitive, is there room for rental increases to offset these costs? Perhaps if the mall is in a growing area and all improvements would enhance the tenant?s business and there is room for incremental increases in rent, then it?s safe to say it?s a good investment, however, if the property is in an area that?s flat or declining and all improvements to make it more attractive are unlikely to be recovered through rental increases, then ...
More About: Real Estate , Real Estate Investment

Meet the Investor: Interview with Real Estate Investor and Landlord, Tom Sm
2008-03-21 12:37:00
We certainly have not been focusing on our investor interviews lately and we’re making a concerted effort to change that. We’ll start with an interview with one of our active BiggerPockets contributors, Tom Smith. Tom has given much of his time to help fellow BP’ers through our forums and has become a staple in the community. He focuses on extremely affordable properties in Ohio that he rehabs and rents out (typically costing much less than 1/10 the price someone could buy for even the cheapest home in Southern California, for example). We’re excited to have the opportunity to learn more about this relatively new, but successful, investor. Meet Real Estate Investor Tom Smith How long have you been investing in real estate? I have been investing for a little over one year. What attracted you to becoming a real estate investor? I believe the main attraction was that I had found something that would allow me to use the construction skills that I obtained as a ...
More About: Real Estate , Real Estate Investing , Interview

How to Be a Successful Real Estate Investor. The Story of One Valuable Pre
2008-03-20 23:27:00
How Valuable is One Lead? People often ask me what the average response rate is when mail marketing to homeowners in pre-foreclosure. There are two answers depending on what the content of the letter is. If the purpose of the letter is to see if the homeowner is willing to sell, then the average response rate is one half of one percent (.005%). If the letter is offering to allow the homeowner to remain in their house, then the average response rate jumps up between 1% and 4%. So if 100 letters are sent, you could expect 1 call every other month. The point is, every response is extremely valuable and it is even more important to answer the call and not let it go to voice mail. My opinion is, if they took the time to call you? They will take the time to call the next person in line as well. What extreme are you willing to take that to in order to get a deal? I recall a phone call I got on Christmas Eve, 2001. My Fiancee at the time and I were all dressed up and were walking out th...
More About: Estate , Story , Real Estate , Investor , Real

Why Chain of Title is important to your investment property purchase
2008-03-20 18:31:00
Banks require a preliminary title report on all real estate transactions. The preliminary title report serves many functions, but one that could cause you to loose a great deal on your next investment is the Chain of Title . Most lenders require a title company to give them a 24 month chain of title. This simply is an overview of all individuals or entities that have owned the property in the last 24 months. Investors should pay careful attention to the property they are buying and who has owned them previous to the sale. Some lenders and loan programs only allow one other individual to own the property in the last year. Banks look at the flipping of properties very closely. If a property is flipped too many times they may decline the loan. They could also ask their borrower or loan officer to provide documentation that the transaction is at arms length (the transaction is between unrelated parties). The reason Banks pay careful attention to the 24 month chain of title is f...
More About: Foreclosures , Property , Investment , Investment Property

California "Mortgage Fraud Scam" May Be Tip Of The Iceberg, Says State Atto
2008-03-19 16:04:00
First came the subprime mortgage crisis; now comes the cases of alleged fraud. An amazing story Tuesday out of Southern California where the state attorney general has busted an alleged mortgage scam that may have bilked thousands of SOCAL homeowners out of millions of dollars. And, California Attorney General Jerry Brown told me, in some cases, signatures of homeowners were actually forged on the mortgage documents! How it worked According to the attorney general’s office, at least six companies operated by one family enagaged in “predatory lending” by pushing the alleged victims into “illegal and unconscionable loans.” Brown blames this scheme on the worsening mortgage crisis, which, he says, is creating a number of “fly-by-night” operations. Brown told me he has never seen anything like this–and the man was even once governor of California, so he’s been around a bit. The alleged victims were often targeted because they lacke...
More About: Commentary , Fraud , Mortgage Fraud , Housing Bubble

Fed Rate Cut ? The Good, The Bad & The Ugly
2008-03-18 21:53:00
There is a law in physics that says: For every action, there is an equal and opposite reaction. The same is true is a rate cut by the Federal Reserve. Many people get excited when the Federal Reserve cuts a key interest rate. They somehow see this as a magic bullet that is going to fix what ails the economy. They are often surprised when they don?t see an instant economic turnaround. The idea behind a rate cut is to stimulate the economy by encouraging businesses to borrow and expand. However, people have a tendency to focus on the impact that the rate cut has in their world. They don?t see the ramifications of the Fed action to the economy as a whole. If all that was necessary to promote economic growth was to lower interest rates, why not keep them at 0%? The Good The good part of a rate cut is fairly obvious to most. Indeed, for many, that is all that they see. The cost of borrowing is lowered. Adjustable Rate Mortgages that are tied to short-term Treasury Bills are lowered. Ho...
More About: Economy , Credit , Interest Rates , Ugly

FHA Flexibility May Not Be Worth the Time!!!
2008-03-18 16:14:00
You have to love the amount of flexibility there is when running a deal FHA but more often than not, there are too many things left undone that cause major hiccups in the final stages of any transaction. Technically, many of these hiccups are because of the lack of attention to detail on the part of the mortgage broker handling the file. But for the sake of this post, we will say that it isn’t anyone’s fault why so many FHA processed files couldn’t beat a broken bottle of molasses running uphill to the closing table. I have an associate who wants to purchase a 3-unit apartment building in Washington, DC but he has had no success getting the deal to the table. Let’s call him Investeron. You would “think” that anyone with 3 bureau scores over 720 and a $100,000/year income is a shoe-in for financing for anything under $500,000. Mais, ce n’est pas vrai. Problem #1 - If this property is going to be 100% investment than Investoron would h...
More About: Credit , Real Estate Investing , Time , Worth , Flexibility

Apartment Building Forced Appreciation - Commercial Real Estate Investors:
2008-03-17 21:34:00
Apartment buildings are the most profitable of all commercial real estate investments partially because they give the owner and investor so many ways to increase the bottom line. The bottom line or profit margin as it is known in other industries is called the net operating in commercial real estate investing. The NOI is devised by subtracting all expenses, including financing, from the gross monthly income. Therefore, in order to increase the NOI of an apartment building investment the investor/owner can chose to either reduce expenses or increase income. Ownership of an apartment building exposes the investor to numerous costs on a monthly basis. By reducing monthly costs by incremental and seemingly small amounts, the apartment building investor can increase the net monthly cash flow and simultaneously increase the overall value of the real estate. Some of the areas where it can be easy to cut costs are: 1) Taxes 2) Insurance 3) Management 4) Utilities 5) Maint...
More About: Building , Commercial , Estate , Real Estate , Forced

"Lucky" The Wanna-Be Tycoon
2008-03-17 12:00:00
This is the saga of “Lucky ” the newbie investor. Lucky has big dreams of being an ultra successful real estate mogul. He is addicted to all of the flip-and-grow-rich TV shows, he just can?t get enough. He sits in front of the TV night after night watching property escalator, real estate jocks, flip this flophouse and various other fantasy shows. He gets so excited that he can?t sleep, so he stays up watching the late-night infomercials featuring the latest real estate gurus. His mind is racing a mile a minute. “This is so easy,” Lucky thinks to himself. He?s just trying to figure out how to get started. There has to be a really easy way to do this. The Morning Paper The next morning Lucky is sitting at the kitchen table having coffee and reading the daily newspaper. As he?s perusing the disappointing results from the racetrack pages, he sees a full-page ad on the page opposite the one he?s reading. The headline screams at him Do You Want To Be Rich? ? “...
More About: Tycoon , Flipping Houses

Fighting Foreclosure: How One Homeowner Fought the Trustee For Time and Won
2008-03-15 20:34:00
Caught up in Foreclosure and In Need of Help A homeowner in Dallas contacted me in December and told me their lender had just filed to foreclose on their house and wanted to know if I could help them. I met with them soon after and read the notice to foreclose. It was scheduled to go to the auction on February 6th, 2008. I asked the owners what they wanted to do and they told me they had wanted to stay but could not keep up with the payments. They had decided to sell the house but even though the house had over 20% equity, the chances of listing the house, finding a buyer and have it close before February 5th was remote. They needed time to sell and the lender had said, ?Enough.? I gathered their paperwork together and told them I would see what I could do to help them and told them they should contact a Realtor and list the house as soon as they could. Once I was home, I got on the Internet and looked the property up on the Central Appraisal District (Tax records). The legal notice...
More About: Time , Fighting , Homeowner

Are They Serious? Fed Takes Mortgage Debt as Collateral, Bear Stearns Gets
2008-03-14 19:34:00
This week has been an extremely volatile one in the world of real estate and the economy. We’ve seen Gold at $1,000 an ounce, a collapsing dollar, oil skyrocketing, an much more. Of everything that has happened, probably the most shocking is what came out of the Fed this week . . . According to the The Daily Telegraph, “The US Federal Reserve has taken the boldest action since the 1930s, accepting $200bn of housing debt as collateral to prevent an implosion of the mortgage finance industry and head off a full-blown economic crisis.” Tim Bond, a strategist at Barclays Capital remarked, “The market was starting to question the solvency of bodies that stand at the top of the credit pile. These agencies together wrap or insure $6 trillion of mortgages. They cannot be allowed to fail because it would cause a financial disaster. The fact that this sector has blown up has caught everybody’s attention in Washington” At Least President Bush is Confident...
More About: Economy , Commentary , Credit , Housing Bubble , Mortgage

3 Years and Counting: Celebrating 3 Years of Real Estate Blogging
2008-03-13 21:36:00
The Launch of the BiggerPockets Blog It all started 3 years ago today with a post titled “Real Estate Is Very Hot Investment” On March 13, 2005 I launched this blog about real estate, as an experiment to see if it would interest our BiggerPockets users. 3 Years Later, our BiggerPockets Blog known as Real Estate Investing for Real is often mentioned as one of the top real estate blogs online. In that time we’ve posted 622 articles and have had 2,873 comments (many thousands more if you include the spam we’ve had to delete). I wanted to thank all of the people who have supported our blog over the years, all of our contributors, all of our subscribers, and finally, everyone who took the time to share their thoughts by commenting here on the site. This blog has undergone many different “phases,” and we’re still feeling our way around today, but we’re confident that we’ve done one thing throughout, and that is serve our readers wit...
More About: Blogging

Financing a Fourplex Real Estate Investment Property
2008-03-13 13:12:00
I am asked for advice all the time about financing, and particularly financing for multi-unit investment properties. As I give advice, I outline specific goals of the individual investor and the intent of the property. The multi-unit properties I would like to address are fourplexes, triplexes, and duplexes. These multi-unit properties can be financed as residential properties under the same guidelines as single family homes. Many of these units fall within the Freddie Mac and Fannie Mae conforming guidelines. This translates to more options, lower costs, and better interest rates. With multi-unit investment properties your goal should be very clear?..CASH FLOW. Why is cash flow so important? Properties that can cash flow can survive all market cycles. Even in a down market, your strategies can shift to a ?hold rather than sell? property, and because you can cash flow you can wait until the market turns. In a real estate market that is peaking you maybe able to leverage equity to b...
More About: Estate , Real Estate , Real Estate Investment , Property , Investment

The Farce of Foreclosure Rescue (scams)
2008-03-12 20:15:00
It?s become commonplace to see advertisements of all type promoting some new foreclosure rescue company that is the savior of those in distress and about to lose their home. These companies appear to have all the answers to the distressed homeowners mortgage issues, and for absolutely free, they will save you and get those nasty banks off your back! Last week I had the great displeasure of learning a bit about the inner workings of such operations, and believe me, they’re not helping anyone but themselves. A client of mine noticed a short sale listing in his neighborhood boasting a price of 130k under the homes tax assessed value, which is pretty incredible. I found it hard to believe the lender had approved that price, since they?re almost certain to do better than that at auction. The home had sold for over one million three years ago and is on the water; it carried 1.3 million in debt, and was listed at just 878k. My client was very interested in making an offer on this hom...
More About: Foreclosures , Foreclosure , Scams , Rescue , Farce

Real Estate Crisis Worsens and Takes the Rest of the Economy Down with it!
2008-03-12 10:28:00
If someone were to have said, say a year ago, that there would be a crisis in the subprime mortgage market that would lead to world-wide economic chaos, that person would no doubt have been laughed at. Sadly, though, that is exactly what has happened and the evidence just this week is overwhelming. But, before the depressing news, how about a little uplifting news? You know you want it! The Fed To The Rescue: Too Little Too Late? The Federal Reserve has come up with a “rescue” plan that, as the ">Associated Press put it, “would pour as much as $200 billion into banks and investment houses and allow them to put up risky home-loan packages as collateral.” Why does this matter? Because the mortgage crisis induced credit collapse has made banks and other lending institutions not want to lend money to one another. And, in the end, that means they don’t want to lend money to you. Under this plan, financial institutions can borrow from the Fed, and, in effect...
More About: Economy , Estate , Real Estate , Foreclosures , Interest Rates

The Importance of Real Estate Inspections: Be A Detective when Buying Prope
2008-03-11 15:51:00
The other day I went to a listing appointment and gradually asked enough pointed questions and did enough research that I passed on listing the property. Upon first glance the lot seemed simple, but I noticed some odd layout to the side of it that made it unclear where the property lines ran. After doing research I found that the lines were absolutely crazy. This is an old section of town and the agreements through the years with neighbors left the property legally with no ownership to the side of the house and half the front yard. It was the oddest example I?d seen. The property had all kinds of gentlemen agreements about who could use what piece, and the house is owned by someone who?s had it 25 years. I could see someone buying it and all the agreements not known, then the buyer having to face litigation problems in the future if anyone came to claim their piece of the property. Perhaps the attorneys would discover it doing a title search, perhaps it could be missed because of a...
More About: Commentary , Buying , Estate , Real Estate , Real

Apartment Building Investments ? Understanding Debt Service Coverage Ratio
2008-03-10 23:10:00
As a commercial finance consultant I speak with new apartment building investors on a daily basis whom respond to one of my fliers or visit my website. Typically, here is how the conversation unfolds: Investor: Hello Ted, my name is ?first time apartment building investor? and I am calling because I was visiting your website and was interested in the loan program you are offering for multi-family properties. Me: Great, tell me about the apartment building you are purchasing. Investor: Well, I found this great 38 unit apartment building in Austin, Texas. My realtor told me that the gross income from the property is around $500,000.00 and the taxes are about $15,000.00. The asking price is $5,000,000.00. I am willing to put down 20% of my own money and I need a loan right away because the realtor said there are other serious buyers looking at the property. What do I need to get a loan on this building? Me: Have you figured out what the DSCR for the property? Investor: The wh...
More About: Building , Service , Debt , Investments , Coverage

You Found A Great Rehab Deal. Now, How Do You Fund It?
2008-03-10 12:00:00
You?ve been hunting for that perfect rehab deal like a Neanderthal stalking a mighty Mastodon. You?re sure you?ve found it. The after repair value and renovation costs will allow for a hefty profit. You should even be able to set a price that will result in a quick sale when the rehab is complete. There is only one teensy-weenie thing left to do ? find the money to make the purchase of the property. Back in the ancient, olden times (early 2007) it was fairly easy. You would seek out a hard-money rehab lender. Sure, the terms were steep, but the financing cost was built into the equation. As long as the numbers penciled out you could get funded. It was even pretty common to include the cost of purchase and repairs and have the interest financed right into the deal. If you did it right you didn?t need much, if any, of your own money. Things Ain?t What They Used To Be Here we are a short time later and the easy money is gone. Rehab loans can still be had, but things sure are different...
More About: Real Estate Investing , Great , Deal , Fund

Real Estate Investors: Go From Short Sale to "Subject to" All in a Phone Ca
2008-03-09 23:04:00
A few weeks ago I mentioned some pretty good tips on how to choose whether or not to move forward negotiating a short sale. Coincidentally, last week I made mention of buying real estate “subject to” the existing financing. With the market in its current condition, real estate investors can have the best of both worlds with a simple phone call. Everyone would agree that short sales are very difficult to wholesale because of the lack of flexibility of purchase terms and of course because title companies refuse to put your wholesale fee on the HUD. I mentioned that you should never pursue a short sale on a property that doesn’t have a large 2nd, but I never really mentioned why. If a seller finds themselves in a pre-foreclosure situation and they have agreed to sell their home for what they owe and there is little or no equity, you just hit the jackpot my friend. Assume that the house you are looking at is worth $275,000 based on past sales and a mortgage bal...
More About: Phone , Estate , Real Estate , Sale , Real

Economy Continues To Take A Beating From Housing Crisis Fallout
2008-03-08 01:22:00
The economy is sinking faster than a mafia hitman wearing cement shoes in water; and, the mortgage/housing crisis is clearly to blame. Wall Street was apparently totally shocked today when the Labor Department reported that 63, 000 nonfarm jobs were lost last month….As Reuters points out, the problem is that Wall Street experts had expected that 25,000 positions would actually be added. So much for experts! Stocks Down This news helped send stocks into a tailspin, closing at their lowest level in 19 months. Reuters points out that this bad news came at the same time that “jumbo” mortgage lender Thornburg Mortgage was unable to meet demands from creditors for upfront cash. Not good. More and more experts are now saying the U.S. is in a recession, official or not. And, the worst is yet to come. There will be still more foreclosures this year…many more. The credit markets are getting tighter despite Fed action. And, consumer confidence continues to go down. I...
More About: Economy , Housing , Crisis , Fallout , Beating

Landlords: What to do When Your Rental Property is Used as a Meth Lab
2008-03-06 23:13:00
In the winter of 2003, I was out driving by properties that I was managing in Minnesota, checking to make sure the tenants were maintaining the exteriors. One of the properties was a four-plex building and the day I drove by was the trash pick up day. Ordinarily, there is nothing noteworthy about trash bags and trash bins at the end of the driveway on pick up days. That day, I noticed there were dozens and dozens of boxes scattered about the end of the driveway. I decided to get out and gather the boxes and pile them together so the trash collectors would take them. I was a little surprised to find that just about all of them were empty and all of them were the same size. I flipped one around to read the text on one of the boxes and that is when I began to panic. I thought I was facing what no landlord ever wants to encounter . . . A tenant manufacturing drugs in the house. All of the boxes were marked to have contained 24 pint size bottles of Isopropyl Alcohol. Someone had tol...
More About: Rental , Property , Landlords

The Transformation of Stated Income Loans
2008-03-06 19:32:00
Stated income loans have been a touchy subject for many regulators trying to blame some one for the mortgage meltdown. Some individuals go as far a calling these loans “liar loans” because in a number of instance the income was inflated. Right or wrong there is a need for stated income loan. Self-employed individuals see the biggest benefit from stated income loans, but as lending guidelines have tightened up over the last year, so has the language of the stated income loans. Stated Income Loans have now transformed into Asset Based Stated Income Loans. With these loans underwriters are now paying careful attention to assets, employment history, and reason ability of stated income. For investors this will become very important because individual now will need to have legitimate companies with web sites, yellow page ads, and internet presence. They will also need to create cash reserves to help substantiate and protect their stated income amount. The other alternat...
More About: Interest Rates , Housing Bubble , Transformation

It?s The Principal, Stupid! Fed Chair Bernanke Wants Lenders To Slash Their
2008-03-05 22:51:00
Want to know just how bad the mortgage / housing / credit / banking / securities / oil / crisis has become? Okay. When was the last time you heard a high ranking government official actually call for lenders to slash the amount of their loans…NOT the interest, the principal! That is exactly what Federal Reserve ...
More About: Economy , Commentary , Stupid , Slash , Chair

Investing in America, as The American Dream Crumbles.
2008-03-05 18:35:00
As we see the mortgage and real estate industries go through tough times (with thousands of homes falling into foreclosure) we can only hope that any money made from this disaster will at least stay in this country. Many investors are pouring millions into buying these foreclosures, often at fifty cents on the dollar. One ...
More About: America , Economy , The American Dream , Foreclosures , Investing

Real Estate Investment: Knowledge Sharing
2008-03-05 00:23:00
“An investment in knowledge always pays the best interest” Benjamin Franklin As discussed before, information gathering, processing and analyzing is the investing foundation. Knowing as much as possible about land use changes, zoning, transportation and such will put the investor in a position of making an informed decision. Becoming an expert in the area you?ve chosen ...
More About: Estate , Real Estate , Real Estate Investment , Investment , Knowledge

Understanding the Keys to Commercial Leases
2008-03-04 17:08:00
If you are a starting a new business that requires you to either lease office space or open a physical store where you can visit with customers, chances are you will be signing a commercial lease. Before you engage in the process of selecting a viable location that meets your needs, it is a ...
More About: Commercial , Keys , Understanding