Some Financing Options for Your Property Investment

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03/19/2007
Topic: Rental Property Investment Strategies

As a property investor, you will find you are faced with several choices when it comes to your financing strategy. You can apply for a mortgage from a bank, a savings and loan, a credit union or a mortgage company. Each lending institution will offer its own terms for a loan and will offer a fluctuating interest rates. The most efficient way to shop for a mortgage - and the surest way to get the best terms – is to work with mortgage brokers.

Brokers are independent agents who make money finding a lender for a buyer. They will look at dozens of lenders to find you the right deal. If you have bad credit, a mortgage broker may be able to find a lender who will accept you.

Ask you real estate agent or another trusted source to recommend a broker – but try to find two or three. That way you are guaranteed to find the best deal for you. You can find a mortgage broker in you local Yellow Pages or through an online search.
Once a broker finds a good mortgage for you, with a low interest rate and not or few points, start negotiating. Nothing is set in stone, so ask the broker if that interest rate is the lowest it can be. Ask to reduce any points they propose.

Select more that one possible lender from the choices your brokers bring you and play them against each other: Tell them the lowest rate you were offered and ask them if they can do better than that. Use your good credit history, longevity at you job or sizable assets as leverage in negotiating. Talk to whatever your strongest selling point is. In the end, they want your business, and they will make a profit. The key is to ensure you do not over-pay for your mortgage. You will know when they cannot go any lower.

if you are looking for a loan broker call me. i have a few for you to contact.

Herm. 949 742 0915

Home Improvements to Increase Your Bottom Line

For Sale By Owner (FSBO) is an excellent way to maximize the money you make selling your home while also minimizing the costs to sell. One method to improve the overall profit on your home is to enhance, enlarge or renovate rooms or areas within the structure. Today’s buyers will often pay top dollar for a larger-than-average master bathroom or a playroom for the children. In addition, today’s homebuyers frequently expect even starter homes to have at least two bathrooms.
However, not every addition will net you more profit. In fact, some additions do not add to the value of your house at all. Following are types of additions you might consider adding to your home along with the potential return on investment (ROI) you can expect to get at sale time.
Points to Ponder
Before you undertake any improvements to your property, take time to consider the following points:
Resist improvements that buyers may see as extravagant. A larger master bathroom is nice, but maybe you do not need to add his and hers Jacuzzis.
Opt for flexibility. You may want to build a huge library with built-in bookshelves across all the walls. Unfortunately, the next owner of the house may want to make the library into a child’s bedroom. Add things that can be used in a variety of ways, and stay away from built-ins that change the way the room can be used.
Make the additions fit with your home. Even if you are adding a new room or deck, make sure that the new pieces fit in seamlessly with the rest of the house. Homebuyers may not like a porch, deck or bedroom that looks tacked on to the rest of the property.
Look around the neighborhood. Do not improve your home so that it is the nicest one on the block. You will not be able to get your money out of it at sale time. Most realtors suggest that you improve your home so that it is only about 20 percent better than the surrounding properties.
The Best ROI
You want to make the improvements to your home that buyers will happily pay for. At the same time, you do not want to spend so much to improve your house that you cannot recoup the money when you sell.
The best return on investment comes from the following: a large kitchen remodeling project, adding another bedroom or adding a master suite.
ROI 90-125 percent
Replacing all the windows in the house (average cost = $5,000 to $10,000)
Major remodeling of kitchen (average cost = $20,000 to $30,000)
Adding an extra bedroom in the basement or attic (average cost = $20,000 to $30,000)
Creating a master suite (average cost = $30,000 to $45,000)
ROI 70 to 89 percent
Minor remodeling of kitchen (average cost = $7,000 to $10,000)
Remodeling the bathroom (average cost = $8,000 to $12,000)
Adding a bathroom (average cost = $10,000 to $15,000)
Adding a family room (average cost = $25,000 to $35,000)
Adding a second story to the house (average cost = $70,000 to $100,000)
ROI 50 to 69 percent
Adding a home office (average cost = $7,000 to $10,000)
Adding a deck (average cost = $7,000 to $15,000)
Bad ROI
Some projects are lifestyle improvements for the homeowner and do not translate well into extra money when selling the house. In general, these projects are either extravagant or very personal.
For example, expensive outdoor ranges and kitchens do not often recoup their costs when the house is sold. Wine cellars, saunas and green houses usually enjoy a similar fate. A swimming pool may be more of a necessity in warm climates. However, in colder climates, a pool can only be used during the summer months. Many homebuyers will not want to pay for the upkeep and security for such an item.

Don’t panic about the NEW Century news this week.

This was a case of what I have been talking to you about for some time. All those easy to get mortgages just coming due and a lot of those people not being able to make their now doubled payments. This is why I keep on stressing to you to read ALL your paperwork BEFORE you sign.

New Century was/is one of the larger privately owned what we call sub-prime lenders, and their investors( other bankers, private pension plans, people like you with cash to invest) got scared because they were not getting their payments from the bank. So….. They all called their loans at the same time and New Century had to admit that they did not have the necessary money on hand.

Not good. 1st, they are required by law to have a certain level in cash on hand; 2nd, they had not been able to collect their payments in more timely manner from their borrowers who are now shocked that their payments went for example form $1500 to $3000. Who knew that we would not be able to sustain 100% appreciation 3 years in a row? Oh, the shock and surprise. Now the feds step in mainly because of reserve requirements and secondly because this was a publicly traded company. Oooooopps. Don’t worry, all will not collapse. Just most banks will now go back and re-look at some of those loans they recently made with “no documentation” and more shakey appraisals.

Also, this is going to be a great time when I call/email you about investment opportunities, to take advantage of them.

The great news: We will all Live and Prosper


So, now that you have a slightly better understanding of this week’s latest “headline” news give someone you pass and extra smile.

Herm.

Flipping Property: Do You Have What It Takes to Invest in Real Estate?

Flipping property is the process by which an investor buys real estate and then resells it very quickly. This process has received a bad reputation through the fraudulent practices of some investors, but, if it is done properly, it is ethical and legal. Flipping property is, in a sense, investing in property, but there are some specific aspects you should consider if you decide to try to make money from this activity.
1. Look for undervalued property
The real estate market is softening up, but it can still be difficult to find undervalued property. Quite often you can find this property by knowing if someone is selling for a specific reason, such as a divorce or death in the family. You can look through real estate listings and look for phrases like “must sell” or “motivated seller.” If you are dedicated to the flipping process, you can also run ads for home sellers who are trying to sell quickly.
2. Watch for property foreclosures
A foreclosure due to missed mortgage payments or non-payment of taxes may present an opportunity to acquire properties at a reasonable cost and flip them for a profit. You can scan the newspaper for notices of foreclosure. You can also visit several Websites such as www.hud.com, www.fannimae.com, www.freddiemac.com and www.homesdirect.com
3. Be aware of costs
You will probably have to pay a real estate agent at least a six percent commission to sell the property. You will also have to factor in the costs of necessary repairs and improvements to the home. These improvements can be costly (such as repairing a roof, fixing a foundation or replacing a heating system). You have to factor in these costs to what you can reasonably expect to make on the property. Do not make the mistake of overdoing the renovation. The more work you can do yourself, the more you will make on the sale of the property.
4. Location, location, location
Flipping a property is another reason to evaluate the neighborhood and what possible changes it is going through. If you know a neighborhood is starting to gentrify, you have a much better chance of making money from the property.
5. Price the property to sell
Your ultimate goal in flipping property is to sell it. That means you have to offer a price that is consistent with the prices in the area and with the condition of the property. Leave your emotions out of this process, and carefully evaluate what you can reasonably expect to earn from the property.
6. It is a difficult process
You have probably seen or heard many advertisements for get-rich-quick schemes that teach you how to flip property. No matter what the ads says this is not an easy process. You need to do your research, consider the costs and plan how to sell the property. If you do everything right, you can often make money, but profit is not a certainty. You have to hold the property just long enough and sell it at exactly the right time.
7. Rely on experts
Your most valuable asset in acquiring property that can make you money is your home inspector. He or she needs to be able to judge the condition of the property and what it will take to make it attractive to potential buyers. AND of course ME, Your Realtor, Hermia Craft (949) 742-0915
8. Take a class
You may be able to take a tutorial on flipping property by someone with established credentials in the process. This expert can help you find out how to locate property, what costs to anticipate and what price you could sell the property.
9. Find property auctions
Besides must-sell scenarios and foreclosures, you may also be able to take advantage of property auctions, usually based on the lending institution trying to sell the property as quickly as possible. Sometimes, going through the auction process will let you purchase a property for a less expensive price.
10. Try to sell quickly
You will not make money on a flipped property if you cannot sell it quickly. If a property stays on the market too long, it becomes harder and harder to sell. The longer you own it, the less you will make. Use every possible avenue to sell your property including Your Realtor, Hermia Craft (949) 742 0915, advertising, signage, and old-fashioned curb appeal.

Before You Buy Investment Property

Topic: Rental Property Investment Strategies
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• You have been looking to buy a rental property and have found a perfect property.
• Next, sometime between the time your offer is accepted and the time you officially close on the building, gather as much information as possible on the tenants, their rental agreements and how the property will be turned over at closing.
• Write a letter to the seller letting them know what specific information you need before you close. They will need time to gather documents, so give them advance notice. If possible, set an appointment to sit down in person to ask questions and get additional information. The following are great to ask about:
• Copies of all rental records for their current tenants. You can check these for the rent amount, the length of the rental agreement and any past problems with late payments.
• A list of security deposits you will inherit, and an outline of last month’s rent and other deposits the seller is holding for the tenants.
• A list of everything to be included in the sale: appliances, lawn maintenance equipment, window treatments, etc. You must know what your purchase price includes since you are buying the rental property.
• Copies of all service contracts, licenses and warranties regarding the property and its contents.
• Tax statements for the property.
• Any current insurance policies.
• Copies of the latest bill for each utility. This will help you estimate expenses and make it easier to switch the utilities to your name.
• After reviewing the documents, talk to the tenants. Ask the seller to let them know you will be calling. Try to reach each one by phone in the evening when they are likely to be home. Introduce yourself as the buyer of the rental property and ask if they have time to talk to you. If they do not have time, then reschedule. You want to find out:
• If the information you received is accurate regarding the security deposit, last month’s rent and other deposits. Review their lease terms as well.
• If they have any maintenance or repair issues needing to be addressed. Remember, you are going to pay for them if the current owner does not fix them first!
• What, if anything, they would change about their home or their agreement. Do not make any promises, but find out how you might entice them to stay when you implement your own lease.
• Try to interview tenants in every unit. Note how willing they are to talk to you. It is not essential that you reach everyone, but you will want to know if you have a tenant who is uncooperative. As the buyer of the rental property you will want keep an eye on uncooperative tenants once you take ownership.

Creating a House Rules Policy for your Tenants

Creating a House Rules Policy for your Tenants
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One important addendum to any lease or rental agreement is a House Rules or Tenant Behavior Policy. Landlords create House Rules so tenants will understand what behavior is expected of them on a day-to-day basis. Present the House Rules along with the lease or rental agreement, and ask your tenants to sign a copy acknowledging they understand your expectations in regard to parties, quiet hours, parking, garbage, pets, painting or repairs.
You can include any of the following House Rules in your lease or rental agreement:

• Tenants may not store trash in hallways, on decks or porches.
• Tenants should use hallways for entry and exit to their apartments only.
• Tenants should use only non-glass containers near the pool (if you have
one).
• Tenants should not cook or use barbecue grills on balconies or patios.
• Tenants should not behave in a loud or obnoxious fashion, especially after dusk and before dawn.
• Tenants may not disturb or threaten other tenants or their guests.
• Tenants may not own or show a weapon in any common area.
• Tenants may not change or otherwise tamper with any electrical connections including cable wiring.
• Tenants may not use windows for exit or entry to their own or another tenant’s apartment.
• Tenants may not use, buy or sell drugs or other illegal substances in the rental property.
• Tenants may not heat an apartment with a portable cooking stove or portable unit heater.
• Tenants may not store any gas appliances in closets.
• Tenants may not change the locks or paint without permission from the landlord.

THE DAFFODIL PRINCIPLE

i could not help myself. i hope you enjoy this email as much as i have. - Herm.

THE DAFFODIL PRINCIPLE

Several times my daughter had telephoned to say, "Mother, you must come to see the daffodils before they are over." I wanted to go, but it was a two-hour drive from Laguna to Lake Arrowhead "I will come next Tuesday", I promised a little reluctantly on her third call.

Next Tuesday dawned cold and rainy. Still, I had promised, and reluctantly I drove there. When I finally walked into Carolyn's house I was welcomed by the joyful sounds of happy children. I delightedly hugged and greeted my grandchildren.

"Forget the daffodils, Carolyn! The road is invisible in these clouds and fog, and there is nothing in the world except you and these children that I want to see badly enough to drive another inch!" My daughter smiled calmly and said, "We drive in this all the time, Mother." "Well, you won't get me back on the road until it clears, and then I'm heading for home!" I assured her.

"But first we're going to see the daffodils. It's just a few blocks," Carolyn said. "I'll drive. I'm used to this."

"Carolyn," I said sternly, "please turn around." "It's all right, Mother, I promise. You will never forgive yourself if you miss this experience."

After about twenty minutes, we turned onto a small gravel road and I saw a small church. On the far side of the church, I saw a hand lettered sign with an arrow that read, "Daffodil Garden." We got out of the car, each took a child's hand, and I followed Carolyn down the path. Then, as we turned a corner, I looked up and gasped. Before me lay the most glorious sight.


It looked as though someone had taken a great vat of gold and poured it over the mountain peak and its surrounding slopes. The flowers were planted in majestic, swirling patterns, great ribbons and swaths of deep orange, creamy white, lemon yellow, salmon pink, and saffron and butter yellow. Each different-colored variety was planted in large groups so that it swirled and flowed like its own river with its own unique hue. There were five acres of flowers.

"Who did this?" I asked Carolyn. "Just one woman," Carolyn answered. "She lives on the property. That's her home." Carolyn pointed to a well-kept A-frame house, small and modestly sitting in the midst of all that glory. We walked up to the house.

On the patio, we saw a poster. "Answers to the Questions I Know You Are Asking", was the headline. The first answer was a simple one. "50,000 bulbs," it read. The second answer was, "One at a time, by one woman. Two hands, two feet, and one brain." The third answer was, "Began in 1958."

For me, that moment was a life-changing experience. I thought of this woman whom I had never met, who, more than forty years before, had begun, one bulb at a time, to bring her vision of beauty and joy to an obscure mountaintop. Planting one bulb at a time, year after year, this unknown woman had forever changed the world in which she lived. One day at a time, she had created something of extraordinary magnificence, beauty, and inspiration. The principle her daffodil garden taught is one of the greatest principles of celebration.

That is, learning to move toward our goals and desires one step at a time--often just one baby-step at time--and learning to love the doing, learning to use the accumulation of time. When we multiply tiny pieces of time with small increments of daily effort, we too will find we can accomplish magnificent things. We can change the world ...

"It makes me sad in a way," I admitted to Carolyn. "What might I have accomplished if I had thought of a wonderful goal thirty-five or forty years ago and had worked away at it 'one bulb at a time' through all those years? Just think what I might have been able to achieve!"

My daughter summed up the message of the day in her usual direct way. "Start tomorrow," she said.

She was right. It's so pointless to think of the lost hours of yesterdays. The way to make learning a lesson of celebration instead of a cause for regret is to only ask, "How can I put this to use today?"

Use the Daffodil Principle. Stop waiting.....

Until your car or home is paid off
Until you get a new car or home
Until your kids leave the house
Until you go back to school
Until you finish school
Until you clean the house
Until you organize the garage
Until you clean off your desk
Until you lose 10 lbs.
Until you gain 10 lbs.
Until you get married
Until you get a divorce
Until you have kids
Until the kids go to school
Until you retire
Until summer
Until spring
Until winter
Until fall
Until you die...

There is no better time than right now to be happy.

Happiness is a journey, not a destination.

So work like you don't need money.

Love like you've never been hurt, and, Dance like no one's watching.

Wishing you a beautiful, daffodil day!


Don't be afraid that your life will end, be afraid that it will never begin.