Real Estate Blog

Many see the lavish lifestyles of pioneers of our greatest industries and assume that it is impossible to follow in their footsteps.  Bill Gates popularized the graphical user interface to allow people to visualize computers, Henry Ford revolutionized the way we travel, and Donald Trump changed the the way we do real estate. What most don’t realize is that they used a basic and rudimentary technique to get where they are today. 

The direction that an economy takes is established by providing what the public wants.  What it needs is good too, but what it wants is the driving factor that causes buzz, induces a buying extravaganza that fulfills the public needs and drives demand.  The key is to know what the public wants, before it even knows it. 

If we all knew that iPods were going to become one of the greatest electronic devices ever invented, we would all have tried to invest in it when Apple unveiled it in October of 2001.  Since then, Apple has had not only a resurgence, but an awakening.

When a company fills a void that has little or no market, there is always the ability to turn into a super performer.  Look at the example of Vonage — this company was able to take the unknown realm of Internet telecommunications and turn it into a billion dollar venture.  They saw the capacity for the Internet to support high quality communications by using the a customers pre-existing Internet connect as the conduit for this medium.  They tapped into an area that had not been explored on a mainstream basis, packaged it, and sold it to the masses.

When there is a need, fill it.  When one is filled, recognize it and invest in it.

I had a busy day today - 5 houses I had to go check on in a certain part of town and 1 to do a move-out walk-through.  A section 8 home I own happened to be my walk-through and boy was I sad to lose this tenant.  Not only did I not have to worry about the rent always coming in, but believe it or not, she was one of the best tenants I have.  Not everyone that is section 8 is bad, and in fact, I have as many bad high rent paying tenants as I do low rent ones!

The carpets were not in the greatest shape, but I could not fault them because it was about time for a new carpeting anyways.  Then come the walls and fixtures, this is what I usually see the most problems with, aside from the carpets of course.  When I get to the home, the tenants are still busily running around getting the house ready - I knew it wasn’t quite done because of the moving truck still sitting in front of the house.  What to do, I thought.  Well, sometimes you just have to take the lemon and make lemonade, so I did just that.  I offered to give them the rest of this weekend to get the house ready, and they were very happy. 

The reason I wanted to mention this story is because by me going into what appeared to be a bad situation, I was able to turn it around and make both parties happy.  I will be getting a home back that is in rent ready condition on Sunday and I gave my current tenants a opportunity to take their time on getting the house cleaned up.  Both of us were happy.

I typically do not do my own walk-through, but I am actually glad that I did on this one.  Sometimes and often so, we become hardened by the day to day operations of landlording, but once in a while we need to step back and put ourselves in the shoes of our tenants - we may learn something valuable about ourselves.

Happy Landlording!

Carleton Sheets, Robert Kiyosaki, Bob Bruss - these guys have one thing in common, they teach about no money down deals in real estate.  Is this possible and are people doing it?  Yes it is possible but not completely likely.  The typical new investor will study a guru course and think that all there is to buying investment properties is to get a discount and they will be able to make a profit.  This is not only not true, but often what gets new investors in the most trouble. 

No money down deals are done by using creative financing and terms to purchase a property with no money out of pocket.  I have had experience in the past with this and know it can be done, however, the stars usually have to line up perfect for this to happen and it certainly does not work on every purchase.  If a investor is hoping to buy properties with no money down every time they get a house under contract, they will be either extremely lucky or about to learn failure first hand.

Typically, if a property is for sale in a slow or distressed market, it is more likely that you may be able to purchase the home with no money down, but in a strong market with a lot of buyers bidding for the property, it is less likely.  The reason is this - sellers are more apt to allow a buyer to roll the closing costs and maybe even their down payment right into the loan.  For example:  Seller A has a house for sale at a list price of $100,000 and Buyer A offers the seller $90,000 for the home and asks the seller to roll the closing costs of $5,000 and give the Buyer A $5,000 toward the down payment as cash at closing - the buyer can essentially go to closing with no out of pocket expenses. 

This could be an example in a distressed market where the home may have been sitting on the market for a few months, which might entice the seller to allow these concessions.  But with this in mind, being able to get a seller to agree to these terms is not usually going to happen in a good market.

Another example is a deal I did many years ago where I found a HUD home that was in pretty good shape and was able to allow me positive cash flow after closing and getting the house rented.  I found a little 3 bedroom, 2 bath house that needed a bit of work, but was great as a rental for the area.  The home was worth about $85,000 and I won the bid for $70,000.  I was working with a realtor at the time that paid back 1% to the buyer at closing, so I negotiated for HUD to pay all my closing costs and I got a 80/20 loan between 2 mortgage companies.

I went to closing with $300.00 out of pocket, but here is the good part - after we closed on the house, my realtor cut a check to me for $700.00, which was the 1% I got back at closing.  I used this to buy the refrigerator, clean up the yard, and pay for advertising.  I was able to get a renter in the home in less than a month.

Not all deals are done this way, but this is just a example of how you can do no money down deals.  Just keep in mind that although many people may teach you that it is common place, this is not the case and is actually an exception.  Happy Hunting!

If you are in the market for a new home or are working on your 5th, you may have already started the financing process.  If your a bit green or have some crazy sense of LOYALTY, you may have went down to your local bank that you have been working with for 10 years or met with the bank that your mom has banked at before.  If your lucky, your getting a OK rate by doing this, but if your not, your basically taking the first offer and sticking with it.

When you go to a specific bank, your getting the best rate that bank will offer you, but if you are working with a Mortgage Broker, they will help you get the best rate that hundreds of banks, finance institutions, credit unions will offer you.  Which is better?  Of course, its the rates that the mortgage broker is getting you.  Not only do they have access to a large network of lenders, but you are able to find a lender more likely to work with your terms for the loan. 

A Mortgage Brokers commission is paid by the lender from your funding fees; this is usually from the fees that the lender charges the client in the form of points or a funding fee.  They usually will split this fee between the lender and the Broker.  Most lending institutions charge a funding fee and/or points, so if you happen to find one that doesn’t, they are probably offering a higher interest rate to offset this.  Also, there is the spread, which is the difference between what the lender offers the broker and the broker in turn offers you as the client.  This can be be anywhere from a tenth of a point to as high as 1 percent in some cases.  Ask your broker what his commission spread on your interest rate is going to be.

There are some occasions when a Mortgage Broker may not be able to compete with a specific institution such as prefered lending by a bank or a incentive offering for using a specific institution, but this is not typical and sometimes hard to find.  I would suggest you try both using a Mortgage Broker and also scouring the internet for lenders that may offer you low rates and little or no point/funding fees such as www.lendingtree.com, www.ditech.com, www.eloan.com, www.quickenloans.com.

The one thing I find important to mention is to try and find two Brokers to work with, if you can find them.  I say this because I have seen on occasion that I would lock in a interest rate and the rates would start to come down.  With the economy the way it is right now in early 2008, interest rates are low and seem to be going down almost monthly.  Make sure you have a Broker that will change your locked in interest rate if it goes down.  Some will say that they will not do this unless it is more than .5 percent or more — stay away from these Brokers.  They may be ok overall, but they are not looking out for your best interest, which is your interest rate.  :O)

Ya better start studying!

Being an investor takes dedication, hard work, and most of all… patience!  When I first started investing, I spent over a year learning about market conditions, researching the different types of mortgages and finance tools and even read more than 30 real estate books.  If you want to be an investor, I hope you like to read — you might want to start with looking at books by “credible” gurus that actually know what they are talking about, such as John T. Reed for great information on getting started and Leigh Robinson if you THINK you are a landlord and already know it all.

Repair you, then repair the houses!

I seem to get a lot of emails from people that ask me about how to by houses without a lender.  I in turn usually write them back and get more specific on what it is they are trying to do and usually they have credit problems and want to try out real estate, thinking its a get rich quick deal.  Truth be told, if you can’t get a mortgage, you probably need to concentrate on fixing you credit before you try buying real estate.  That doesn’t mean you can’t still read about investing, it just means you should probably concentrate your time on repairing your credit first.