All Posts in Tag

How many times have you heard – Buying Real Estate with Nothing Down is risky? Let us examine the risk factor in nothing down deals:

Few Words About Insurance

I often write about the duality – the proverbial ying & yang that exists in life. Well, let me tell you – nothing is more of a duality than the concept insurance. I’ve never met an investor who likes insurance or likes paying the bill for that insurance, and yet everyone does. Now, how is that…?

Let us understand the premise behind insurance. In most basic terms, the function of insurance is to protect you from a catastrophic loss – a loss of such magnitude that expense associated with it would send you into bankruptcy. For instance, you don’t need auto insurance most of the time, but on a day when you have an accident you really do because you’ve caused $200,000 worth of damage and have no means with which to pay up. Same goes for health insurance, fire insurance, flood insurance, etc.

So – all that we are doing by purchasing any given insurance policy is we are transferring the risk of an over-seized expense some time in future away from ourselves and onto an insurer. The more the actuarial risk of such an event, the more we can expect to pay in premiums. That’s the name of the game – transfer the risk…

It seems to me that real estate is no different from any other circumstance in life in that if we can, as much as we can, it is desirable to transfer the risk of a future loss away from ourselves. Let’s agree to define the ultimate loss in real estate as ..

I have an extraordinary hatred for puzzles.

Now, you are probably thinking “that’s a strange thing to have a hatred toward.”

Well who asked you? I can explain…

Where was I?

Oh yeah – puzzles. Ugh.

You know the kind – where you open the box and there are 1000 little pieces staring up at you with hatred.

Where do I start? The corners? Then what? Do I really have to try 999 pieces to see what’s going to fit best with that corner piece? Why is this piece purple? Does this piece look “dirty” to you? I don’t like this … I’m going to take a nap.

Whether you like puzzles or not, there is one simple task that nearly every person does before beginning… they look at the box.

That’s right- the big photo on the front of the box that shows what the final puzzle should look like when it’s completed. If you are like me, you probably lean the box up against something so you can see the “whole picture” the whole time while you work.

You might be wondering why I’m talking about puzzle pieces in an article about flipping houses. Here’s the truth: flipping houses is often like a puzzle, and it helps to see the whole picture.

Ah… see what I’m getting at?

The internet is full of “puzzle pieces” about flipping houses.

• ARV
• Staging
• Hard Money
• Contractors

These are all pieces to the house flipping puzzle – and very important pieces at that. However, if you are new to house flipping, these little nuggets of information can look just like those 1000 little puzzle pieces on the table. It can be overwhelming.

I don’t want you to look at flipping houses with hatred, the way I look at puzzles.

So consider this post to be “the box cover.” This post is designed to be the whole picture, so ..

Courtesy of The Dawn Thomas Team

We have another great article from Gino Blefari, the Founder and President of Intero Real Estate. This one is entitled, Keeping Mortgages Accessible. Most people know that access to mortgages became infinitely harder after the crash as it was the result of many borrowers getting way more then they could pay. Now that we’re moving out of it and the market is on the upswing, what’s happening with mortgages? If you’re thinking about buying a home, reach out to The Dawn Thomas Team today.

“Access to mortgages has been a hot-button issue ever since the days of the housing boom. Back then, the issue essentially was loose underwriting that swayed so far in one direction that we ended up with a slew of borrowers who were in over their heads.

Then, as the housing recession set in and regulators started coming down on lenders, we saw a reverse in the opposite direction. For many months, lending became so tight that a lot of people no longer qualified to borrow money for a home.

A couple of interesting news items cropped up this past week on this story thread:

1.) Federal officials came out and said they will delay any reduction in the maximum size of mortgage loans eligible for backing by Fannie Mae and Freddie Mac until next spring at the earliest.

This is significant because it enables more borrowers to qualify for loans that tend to have better terms. Loans within the limits (called “conventional”) typically carry slightly lower interest rates and easier qualification standards than so-called “jumbo” loans that are above the limits. It can be ..

Sit back and watch the show. That is what I do every year about this time.

You see, while successful people are just going about their daily routine, a bunch of other people come out of the woodwork and create these “New Year’s resolutions”. Then for the next few weeks or months they are gung-ho, 100% focused on achieving these resolutions. At some point they fizzle out, give up, stop and go back to how things were the previous year. But don’t worry, there will be a new year next year and they can repeat the process.

Does this sound like you? Someone you know? Did you feel offended while reading that previous paragraph? If so, maybe it is time for you to STOP making New Year’s resolutions and start being successful.

The Problems With New Year’s Resolutions

They Get Made on a Whim

When people make resolutions for the new year, they typically make them close to the new year and it is based on whatever they are thinking at that time. After people fatten up on holiday meals, or look at their bank account/credit card statement, it is no wonder that some of the most popular resolutions revolve around losing weight or making/saving more money. These resolutions are not tied to long and short term goals.

They Are Not Part of the Larger Context

Speaking or goals, it is important to derive our actions from our goals so that the actions will drive us towards achieving our goals. When resolutions are made without looking at the larger goals, they may not align and therefore not work towards achieving the bigger goals.

They Are Often Vague

As mentioned, top resolutions are often “lose ..

A few weeks ago I wrote a post on real estate titles and deeds. I wanted to follow up on that post with a bit more detail on a couple of widely used deed types. I know, this can seem like this is simple stuff, but in reality it can be a bit complex. It can be especially complex to the newbies out there who are perhaps hearing these terms for the first time.

First, let’s look again at exactly what a deed is. A deed is a conveyance of real estate. It is signed by a grantor (typically a seller) and is the instrument that commonly transfers the title to real estate from one person to another. A deed is how one “sells” real estate.

There are two common types of deeds that are used between what are often referred to as “normal” buyers and sellers. Those two types are warranty deeds and quitclaim deeds. While both of these documents are deeds, what they convey and how they convey it are quite different and every real estate investor should understand that difference.

There are of course other types of deeds such as tax deeds, special warranty deeds, etc. But these are usually used in special situations between “non-normal buyers” such as when a bank forecloses on a property. I will cover those in another post.

Warranty Deed

A warranty deed is a deed in which the grantor warrants that they have a good, clear and marketable title. You can think of this type of deed just as you would with any other product in which you get a warranty. The maker or seller of the product provides you with ..

With 2014 having finally come around, we’re poised at the start of what could be another healthy year for the housing market.

While many of us were naturally attuned to questions of a slowdown, or dangerous escalation in prices, it seems that the housing market has weathered its recovery with stability for the time being.

That being said, it remains to determine how the recovery will manifest through the next twelve months. Assuming the housing market continues to grow until the close of 2014, there are certain potential trends that could unfold. A recent article published by USA Today lays out a series of predictions for this year’s housing market, with some of them a continuation of prior trends, while others are potentially new developments.

Continuing Trends

In tandem with what I’d noted in a prior post, the USA Today piece predicts that new home construction will continue with relative strength throughout this year. The story rightfully notes that new home construction has lagged behind other areas of the property sector, but lays out that home starts could strengthen to the point where they become a driving factor in the recovery. The USA Today post goes as far as to predict that new construction may be main driving force of recovery, especially considering price gains may shrink.

As an inverse, it seems that home sales have started to slow and may continue to do so throughout the rest of this year. As the USA Today report notes, they were down for the first time year-over-year last November, which was the first time this had occurred in 29 months. This trend could continue well through this New Year, with elevated interest rates set to encourage a pattern of more cautious buying. All in all, homebuying levels will likely normalize, with purchase ..

As a beginning real estate investor, and even now, I realize the WORST mistakes that I suffered through occurred because of emotion-based decisions. I’m an emotional temperament, which means I can get caught up in the fervor more so than most. However, as I learn from my previous mistakes and lessons, I see that even though I remain emotional in my private life, I have become more and more emotionless in my real estate investing, and its been all for the better.

Check out the Video

Its Not YOUR Home

The biggest area that I was sucked into, as well as other new investors, is trying to buy in the place we want to live.

Now, on the surface that’s not an automatic disclaimer, but a deeper look shows that the hottest place to live in town doesn’t always translate into a good real estate investment.

Yes, you can picture yourself nesting and inviting friends over, and walking to the local bar scene, but that doesn’t translate into a sound investment all the time. Always keep looking at the numbers, and choose strategically. The numbers should tell the story, and you have to put the nice shining house behind the one with the dirty carpets that need to be replaced, if the former gives you negative a cash flow and the latter positive.

Putting In The Wrong Tenants

Boy, have I made this mistake many times before before I wised up. Seriously, tenants I am a little embarrassed to tell other people I use, just because I was desperate for money. I mean, I had spent all this time and money, and I had to prove to myself and everyone else i could rent it out.

Big mistake!!

I put in tenants with shaky work history, and some tenants I didn’t really like, just ..

The single most important factor in house flipping success is not what you probably think it would be.

It’s not finding the right property…nor is it negotiating the sales price…nor is it controlling your renovation costs, nor is it avoiding the really bad deals…

Although all of those are important, none are the most important.

Far and away, the most important factor to house flipping success is the right mindset. Or as I like to refer to it, “the house flipping mindset”.

The House Flipping Mindset “Secret”

We talked about “house flipping secrets” last week…but this is not about any of that.

This is THE Secret – the movie from a few years back that was a huge sensation around the world which popularized “the law of attraction” and other concepts about the power of the mind. Thanks to this movie, millions of people became aware of this power, introducing them for the first time many of these concepts which have been around for some time.

Although the movie hits on many important aspects of success – and does work quite well in assisting any would be house flipper to achieve unprecedented success – it was not the first book of its kind to discuss the importance of mindset when achieving success.

“The Secret” borrowed most of its content from many philosophers and self-help books, including Wallace Wattles “The Science of Getting Rich” and my personal favorite, “Think and Grow Rich” by Napoleon Hill.

This one book hugely influenced my career and its one I refer back to often – especially at the beginning of a New Year to reinforce the house flipping mindset and to remind me exactly how to flip and grow rich.

The basic idea is that ..

The following is a guest post from Mike from RentingOutRooms.com. In this post, Mike shares with us the strategy he used to pay his way through college using creative real estate investing. While this path may not fit for everyone, it’s another tool to add to your investor toolbox that may come in handy for you or a friend/family member in the future. Don’t forget to leave a comment below the post and share this on your Facebook wall!

Renting Out Rooms to Create Unlimited Possibilities

I didn’t have the intention of renting out rooms when I first bought my house.

I simply bought it because I thought it would be a better alternative to renting. The idea of renting out a room first materialized when I decided to attend graduate school and was faced with the choice of taking on additional student debt or trying to make more money to pay for tuition.

Because I already had a decent chunk from my undergraduate studies, taking out more loans was at way in the back of my head. Although, it would have been the easiest (just simply sign a bunch of papers), but in the long run it would have been the more expensive option.

The Extra Room

I was living by myself in a two-bedroom house. Needless the say, the other room wasn’t being utilized. With an extra room going empty, I thought about the prospect of renting it out to a roommate to make more money.

After sleeping on it for a few days, the decision boiled down to either: get a roommate and make more money or take on student loan debt and dig myself out.

The decision was simple. I needed to get a roommate.

I first thought about having a friend rent a room from me, but then I thought about ..

I’d say one of the most famous debates that comes up on this website is the one about paying all cash for a property versus leveraging a property.

And by famous I mean, it gets ugly.

The heart of the debate seems to center around the difference in risk in buying a property using all cash or buying a property using leveraging. Those who leverage their properties boast that the benefit of doing so allows the investor to buy more properties with the same amount of money. Those who pay cash come back against that argument saying how risky leveraging is and that the risk isn’t worth it, even if it does get you more properties. From what I can tell, this point in the debate seems to always be the point of impasse between the sides. Being able to buy more properties by using leverage is an indisputable fact. Leveraging inducing more risk seems indisputable. So then, everyone stops debating at that point and goes about their merry ways.

I think this is the wrong place for the impasse. Being able to buy more properties using leverage, yes, that is correct. But leveraging being riskier?

Is it?

For any newbies out there, “leveraging” refers to using ‘someone else’s money’ to buy something. That can include loans from a bank, loans from an individual, financing on a credit card, borrowing money, etc.

For the purpose of what we are talking about here, I’m going to stick with referring mostly to mortgages. A mortgage isn’t the only way to finance a property but it’s the primary one and a lot easier and more common than other methods. For the purpose of this article, I’m thinking mostly about mortgages because I want to look at long-term loans rather ..