http://www.articletrader.com/ Articles at ArticleTrader en-us http://www.articletrader.com/finance/real-estate/using-a-home-equity-line-of-credit-to-buy-properties.html http://www.articletrader.com/finance/real-estate/using-a-home-equity-line-of-credit-to-buy-properties.html Thu, 29 Nov 2007 00:00:00 -0600
HELOCs are being advertised on television as a way to consolidate debt, but can be used much more effectively by investors. When you need cash in a hurry for a short period of time, a HELOC can be very useful. For example, if a seller tells you, “give me $75,000 cash on Friday and I’ll sell you my house for a song,” you need to act in a hurry. Another example of cash in a hurry is a foreclosure auction, which, in many states, requires payment at the end of the day of the auction. When you need cash in a hurry, there’s no time to go to the bank.

While the HELOC may be a high interest rate loan, it is a temporary financing source, which can be repaid when you refinance the property. Do not use your HELOC as a down payment or any other long–term financing source – it will generally get you into financial trouble. If you don’t pay the HELOC, you can lose your home!

Some institutional lenders will not lend you the balance if you borrowed the funds for the down payment. However, smaller commercial banks that “portfolio” loans have more flexibility and may allow you to use HELOC money as a down payment. Once again, I must caution you about using borrowed money in this manner – only do it if the deal is a steal and you can pay off the HELOC money within a few months.
DEDUCTING HELOC INTEREST

There are limits on the deductions you can take on your personal tax return for interest paid on your HELOC. Generally speaking, you can only deduct that portion of interest on debt that does not exceed the value of your home and is less than $100,000. But, if you do your real estate investments as a corporate entity, you can always loan the money to that entity and have the entity take the deduction as a business interest expense. This transaction must, of course, be reported on your personal return, and must be an “arms–length” transaction (i.e., documented in writing and within the realm of a normal business transaction). Consult with your tax advisor before proceeding with this strategy.
USING CREDIT CARDS

You may already have more available credit than you realize. Credit cards and other existing revolving debt accounts can be quite useful in real estate investing. Most major credit cards allow you to take cash advances or write checks to borrow on the account. The transaction fees and interest rates are fairly high, but you can access this money on 24 hours notice. Also, since credit card loans are unsecured, there are no other loan costs normally associated with a real estate transaction, such as title insurance, appraisals, pest inspections, surveys, etc.

Often, you will be better off paying 18% interest or more on a credit line for three to six months than paying 9% interest on institutional loans, which have up front costs that would take you years to recoup. Again, use credit cards carefully and only as a temporary solution if the deal calls for it.

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Written exclusively for Legalwiz.com by Attorney William Bronchick, Certified Registered Nationally-known attorney, Author, Entrepreneur and Speaker.

Source: http://www.articletrader.com ]]> http://www.articletrader.com/finance/real-estate/understanding-the-mortgage-loan-market.html http://www.articletrader.com/finance/real-estate/understanding-the-mortgage-loan-market.html Fri, 23 Nov 2007 00:00:00 -0600
Institutional Lenders

The first broad category of distinction is institutional versus private. Institutional lenders include commercial banks, savings and loans, credit unions, mortgage banking companies, pension funds, and insurance companies. These lenders generally make loans based on the income and credit of the borrower, and they generally follow standard lending guidelines. Private lenders are individuals or small companies that do not have insured depositors and are generally not regulated by the federal government.

Primary Versus Secondary Market

First, these markets should not be confused with first and second mortgages. Primary mortgage lenders deal directly with the public. They “originate” loans, that is, they lend money directly to the borrower. Often referred to as the “retail” side of the business, lenders make a profit from loan processing fees, not the interest paid on the loan.

Primary mortgage lenders generally lend money to consumers, then sell the mortgage notes (in large packages, not one at a time) to investors on the secondary mortgage market to replenish their cash reserves.

The largest buyers on the secondary market are the Federal National Mortgage Association (FNMA or “Fannie Mae”), the Government National Mortgage Association (GNMA or “Ginnie Mae”) and the Federal Home Loan Mortgage Corporation (FHLMC or “Freddie Mac”). Private financial institutions such as banks, life insurance companies, private investors, and thrift associations also buy notes.

Mortgage Brokers Versus Mortgage Bankers

Many consumers assume that “mortgage companies” are banks that lend their own money. In fact, a company that you deal with may be either a mortgage banker or a mortgage broker.

A mortgage banker is a direct lender; it lends you its own money, although it often sells the loan to the secondary market. Mortgage bankers (also known as “direct lenders”) sometimes retain servicing rights as well.

A mortgage broker is a middleman; he does the loan shopping and analysis for the borrower and puts the lender and borrower together. Many of the lenders through which the broker finds loans do not deal directly with the public (hence the expression, “wholesale lender”).

Conventional Vs. Non-Conventional

“Conventional” financing, by definition, is not insured or guaranteed by the federal government. Conventional loans are generally broken into two categories: “conforming” and “non-conforming.” A conforming loan is one that conforms or adheres to strict Fannie Mae/Freddie Mac loan underwriting guidelines.

Conforming loans are a low risk to the lender, so they offer the lowest interest rates. Conforming loans also have the strictest underwriting guidelines.

Conforming loans have three basic requirements:

1. Borrower Must Have a Minimum of Debt: Lenders look at the ratio of your monthly debt to income. Your regular monthly expenses (including mortgage payments, property taxes, insurance) should total no more than 25 to 28% of gross monthly income (called “front end ratio”). Furthermore, your monthly expenses, plus other long-term debt payments (e.g., student loan, automobile, alimony, child support) should total no more than 36% of your gross monthly income (called “back end ratio”). These ratios can sometimes be increased if the borrower has excellent credit or puts more money down.
2. Good Credit Rating: You must be current on payments. Lenders will also require a certain minimum credit score called a “FICO” (http://www.myfico.com/).
3. Funds to Close: You must have the requisite down payment (generally 20% of the purchase price, although lenders often bend this rule), proof of where it came from, and a few months of cash reserves in the bank.

Non-Conforming Loans

Non-conforming loans have no set guidelines and vary widely from lender to lender. In fact, lenders often change their own non-conforming guidelines from month to month.

Non-conforming loans are also known as “sub-prime” loans, because the target customer (borrower) has credit and/or income verification that is less-than-perfect. The sub-prime loans are often rated according to the creditworthiness of the borrower – “A,” “B”, “C” and “D.”

The sub-prime loan business has grown enormously over the past ten years, particularly in the refinance business and with investor loans. Every lender has its own criteria for sub-prime loans, so it is impossible to list every loan program available on the market. Suffice it to say, the guidelines for sub-prime loans are much more lax than they are for conforming loans.

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Written exclusively for Legalwiz.com by Attorney William Bronchick, Certified Registered Nationally-known attorney, Author, Entrepreneur and Speaker.

Source: http://www.articletrader.com ]]> http://www.articletrader.com/finance/real-estate/real-estate-investing-is-just-like-weight-loss.html http://www.articletrader.com/finance/real-estate/real-estate-investing-is-just-like-weight-loss.html Fri, 23 Nov 2007 00:00:00 -0600
Weight loss isn’t easy... ask anyone who has tried it. However, the concept of weight loss is very basic - burn more calories than you ingest and your body will react accordingly. Unless you have a medical disorder, this formula works for just about anyone. Simple as it may be, the formula is HARD, meaning it takes a lot of DISCIPLINE AND HARD WORK. So, the weight loss industry has offered us thousands of ways to make it easier. Many of these solutions do work, but they only work if you put forth effort.

Now, let’s start with the premise you don’t need any of these “solutions” to make real estate OR weight loss work for you. You can eat less calories, go walking or jogging every day and you will lose weight. But, having knowledge of the caloric content of different foods is relevant. Also, for many people, knowing the carbohydrate content is relevant. Having the advice of a physician, dietician and personal trainer will help you prevent injuries and maximum your effort.

Same principle applies to real estate - you can go out and make hundreds of offers to motivated sellers and find a good deal. However, having information about how to solve the seller’s needs and construct an offer will help. Having an attorney, real estate agent or “guru” to assist you with constructing the offer and the paperwork will make it easier. Having advice from other people who have already done hundreds of deals will also make it easier for you to learn from other people’s success (and failures). However, whether it’s weight loss or real estate, the bottom line is not just knowing, but DOING. You can’t blame the diet if you don’t stick to it. Many people have successfully lost weight using the ZONE, WEIGHT WATCHERS, ATKINS and other similar plans. Many people have succeeded with the famous “guru” plans, but many have failed, likely because they didn’t give the required effort, NOT because the plan isn’t effective.

Both real estate investing business and weight loss are simple, but neither is easy. It takes a lot of work. Having a proven “system” or plan helps, but only if you stick to it. If the diet plan says, “exercise 3x times per week”, you can’t be sloppy about it and expect results. It’s like the people reading a book on the treadmill at the gym - if you can read a book, you’re not working HARD ENOUGH. Likewise, people call newspaper ads and say “hey, you wouldn’t want to sell me your house cheap, would you?” This is not DOING it is TRYING. You have to give 100% to a particular plan or formula before you say, “this stuff doesn’t work.”

Many people who are interested in weight loss join a gym or hire a personal trainer. From personal experience, I can say that both are great for weight loss. But, the weeks I didn’t show up, it was a BIG WASTE OF MONEY! The same thing goes for a real estate training system or mentor program - if you don’t put forth any effort, it won’t work! And, of course, you’ll likely get bitter about all the money you spent and blame the guru. After all, it can’t be YOUR fault!

That brings us to another topic - the “scam” side of the real estate and weight loss business. Sure, the “magic pills” that melt off fat are probably a scam. These snake oil salesman are offering the lazy and desperate people a solution - no work and results. Hah! If you bought into this scam you deserve to be parted from your money. Likewise, any real estate guru who promises riches with no work is also a scam. My favorite promise is “no selling involved” - that’s the biggest lie ever told. No business can be successful without a certain amount of selling of their product or service to customers - period! So, while there is a dark side to the weight loss and real estate investing information businesses, I assert that most people fail at both because of their own lack of action, not the fault of the “systems.” If you aren’t willing to work, another weight loss program or real estate seminar won’t get you any more results than you are currently getting - save your money and take MORE CONSISTENT ACTION with what you are currently doing.

However, if you are willing to work hard and take a lot of consistent action, a guru or program will likely give you more results. If you bought a book, course or program and already have results, another program, course or book will likely give you tools to get MORE RESULTS. I often hear about successes people have with my real estate programs, but a lot of them are not FIRST TIME successes. They are most often people who have already been successful, and, using my tools, became MORE successful. If someone asks me whether my program will make them successful, I ask, “what other programs have you bought?” If they have already spend thousands on other programs and have done NOTHING, I discourage them from buying mine. These people are looking for the elusive “holy grail” that all the other programs left out. More than likely, the missing element is lack of action on their part.

If you aren’t willing to take action on a massive scale, you won’t get more results by buying more products. If you have the discipline to work hard and take consistent action, then products and services will help you get there faster. Whether you are looking to get rich or lose weight, the bottom line is YOU!

Click Here for more info for Real Estate Investing is Just Like Weight Loss

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Written exclusively for Legalwiz.com by Attorney William Bronchick, Certified Registered Nationally-known attorney, Author, Entrepreneur and Speaker.

Source: http://www.articletrader.com ]]> http://www.articletrader.com/finance/real-estate/equity-sharing-arrangements.html http://www.articletrader.com/finance/real-estate/equity-sharing-arrangements.html Fri, 23 Nov 2007 00:00:00 -0600
Partnership arrangements work in a variety of circumstances. The most common scenario involves one party living in the property while the other does not. Another scenario may involve all of the parties live in the property. These arrangements are common among family members. Parents often lend their children money for a down payment on a house, with a promise of repayment at a later date. If the repayment of the debt is with interest and/or relates to the future appreciation of the property, we have a basic equity–sharing arrangement.

Another common financing arrangement between multiple parties is a partnership wherein none of the parties live in the property. This article will discuss the basic partnership investment. Larger investments through limited partnerships and other corporate entities in a “pool” of money are known as “syndications.” These investments are generally classified as securities, so compliance with state and federal regulations is complex. Thus, syndications are generally not recommended for financing smaller projects, since the legal fees for compliance with securities law will far exceed the benefit of raising capital through multiple investors.

BASIC EQUITY SHARING ARRANGEMENT

The common equity sharing arrangement involves one party living in the property and the other putting up cash and/or financing. Both the occupant and the non–occupant enjoy tax benefits and share the profit, as described later in this chapter. First time homebuyers make the best resident partners while family members, sellers and real estate investors fill the non–resident partner role.

1: Buyer with credit, no cash

A lot of potential homebuyers have the income to qualify for a mortgage loan, but only with a substantial down payment. With a small down payment, the monthly loan payments may be too high. A potential homebuyer could borrow the money for the down payment, but nobody but a fool (or a parent) would lend $25,000 or more unsecured. Furthermore, loan regulations generally do not permit the use of borrowed money as a down payment.

An equity–sharing partner could put up the money in exchange for an interest in the property. The resident partner would obtain the loan, live in the property, make the monthly loan payments, and maintain the property. The non–resident partner that puts up the down–payment money is free from management headaches and negative cash flow. After a number of years (typically five to seven), the property is sold, the mortgage loan balance is paid in full, and the profits are split between the parties. Obviously, the strategy works best in a rising real estate market.

2: Buyer with cash, no credit

The second equity–sharing scenario would be a buyer with cash, but an inability to qualify for institutional financing. The resident partner would put up the down payment, the non–resident partner would obtain the loan. After a number of years, the property is sold, the mortgage loan balance is paid in full, and the profits are split between the parties.

If you are low on cash or have cash and are low on time, a partnership or equity–sharing arrangement may be for you. Using partners to finance real estate transaction is the classic form of using “OPM” (other people’s money). Experienced investors are always willing to put up money to be a partner in a profitable real estate transaction. As with many businesses, talent is more important than cash; if you can find a good real estate deal, the money will find its way to you!

PITFALLS

A joint ownership arrangement can be problematic if the resident does not maintain the property or make the mortgage, insurance or property taxes payments. Furthermore, the property may not go up in value, so the non–resident party who put up his credit or cash may not realize any profits. Like any real estate investment, the shared equity arrangement should be approached with profit, not just financing in mind. In other words, make sure you buy the property at a good price and/or in the right neighborhood at the right time.

ALTERNATIVES

For the non–resident investor, there are several alternatives to the equity sharing arrangement. The first is the lease/option, an arrangement by which the non–resident owner is on title and the resident owner is a tenant. This arrangement does not allow the tenant to reap the tax deduction, but does allow him to share in future appreciation by having a fixed option price. The second is a contract for deed, which does allow the resident to claim the interest payments, but does not allow the non–resident to share in future appreciation.

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Written exclusively for Legalwiz.com by Attorney William Bronchick, Certified Registered Nationally-known attorney, Author, Entrepreneur and Speaker.

Source: http://www.articletrader.com ]]> http://www.articletrader.com/finance/real-estate/personal-property-trusts.html http://www.articletrader.com/finance/real-estate/personal-property-trusts.html Thu, 22 Nov 2007 00:00:00 -0600
The “Personal Property Trust” agreement is basically the same as a land trust in that the trustee is essentially a nominee title–holder acting at your direction. Like the land trust, the paper trust is a revocable, living trust. The same rules for tax reporting apply — there is no gift tax or income tax consequence of placing title to your paper in the paper trust.You still retain full control of your trustee, so no fiduciary tax return is required.

Like the land trust, the primary purpose of using the personal property trust is to keep your name off the public records. Let’s examine a few documents that are generally recorded and how we can use them with the personal property trust:
Purchase Option

A purchase option is often recorded in the public records to give notice to the world that you have first crack at the property. Again, using a trust as the named “optionee” will protect your anonymity. Furthermore, it may be an excellent tool for confusing potential creditors; you record options a gainst your property in favor of the name of a trust. To the outside world, your property looks less valuable, because, after all, who would purchase a property subject to the recorded options (nobody but you has to know that your are the beneficiary of the trust and thus the “true” option holder!)
Mortgage or Deed of Trust

One of the most practical uses of a trust is for holding a mortgage or deed of trust. A mortgage is an asset, like any other, that can be found by searching the public records. Using separate trusts for each mortgage will help you keep a low profile. As in the above example, you could record mortgages against your properties in the name of a trust to make your property appear encumber-ed. Make certain that there is at least some consideration for the mortgage or you may be found guilty of filing a fraudulent document.
Auto or Mobile Home

Essentially any asset that is recorded in public records can he held in the name of a nominee–type trust. Department of Motor Vehicle records are often public information and will let everyone know where you live. Holding your car or mobile title in the name of a trust with a post office box or business address will help protect your privacy.
LLC Interest

The names of the members of a limited liability company are public record for everyone to see. Consider forming your LLC using a personal property trust as the member (you being the beneficiary of the trust).
Trust “Stacking”

You can combine a personal property trust with a land trust for greater privacy. Since the beneficial interest in a land trust is personal property, it can be held in the name of a personal property trust. Thus, you could form a self-settled personal property trust of which you would be the grantor and beneficiary. The personal property trust would then create a self–settled land trust of which it would be the grantor and beneficiary. This “stacking” of trusts might be appropriate in states which require the public disclosure of the grantor (HI, MS and AZ) or in situations which an uncooperative lender or title company insists on such disclosure in writing.

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Written exclusively for Legalwiz.com by Attorney William Bronchick, Certified Registered Nationally-known attorney, Author, Entrepreneur and Speaker.

Source: http://www.articletrader.com ]]> http://www.articletrader.com/finance/real-estate/sixty-days-to-your-first-bargain-purchase.html http://www.articletrader.com/finance/real-estate/sixty-days-to-your-first-bargain-purchase.html Fri, 16 Nov 2007 00:00:00 -0600
Nothing happens and nothing matters in real estate until you find a deal. You cannot put together a deal without a motivated seller and you can only convince a motivated seller to do something creative or that involves a discounted price. A motivated seller is one with a very good and pressing reason to sell below market.

The most common problem new investors face is finding bargain properties. Many who start out in real estate investing quit without ever buying their first property. They go through the motions of looking for deals for a few weeks or months and then decide it doesn’t work. They forget that finding motivated sellers is similar to the salesman finding his first customer... it takes persistence and hard work.
Find the Motivated Seller

At the cost of sounding redundant, the concept is simple: find motivated sellers that are willing to sell their properties at a discounted price or “soft” terms. Currently, the real estate market in some parts of the country is hot, hot, hot! Many people are complaining that the strength of the market precludes investors from finding deals on properties. The popular misconception is that in a rising market, even the most motivated seller can find a buyer for his property at full market price.

The truth is, you can find deals in ANY market. Real estate legend A.D. Kessler once said, “There are no problem properties, just problem ownerships.” The definition of a motivated seller fits squarely within Kessler’s idea. A logical person knows that time, money and effort can solve virtually any real estate problem. However, some people are too emotional about their real estate problems or have other motivating issues to deal with.

Some of these issues include:

* Divorce
* Lack of concern
* Inexperience with real estate repairs
* Time constraints
* Death of a loved one
* Job transfer
* Landlording headaches
* Impending foreclosure & other financial problem.

Farming Neighborhoods

Successful real estate agents utilize a technique called “farming” to increase their business activity. They pick a neighborhood or two and focus their marketing efforts within that area. You should try the same technique. Start with a neighborhood that is relatively convenient for you.

1. Drive the Area

Spend a few weekends driving around the area. The goal for you at first is to learn about the area, the style of houses and the average prices. Over time, you may expand your farm area, but stick with areas that contain the type of homes you plan to purchase. It is not necessary to begin your investment career by learning every square mile of a large metropolitan area; it is important to learn the value of “typical” homes in your target areas. This knowledge will enable you to make quick decisions about whether a particular prospect is a bargain.

2. Attend Open Houses

Visit open houses and “for sale by owner” (FSBO) properties on weekends. Speak directly with owners and their agents. Pass out your business cards. Make friends. Word of mouth and referrals are a big part of any business.

Part of the process of finding a deal is to know how to recognize one.Take a good look at the property and its physical features. After viewing a couple of dozen open houses in the neighborhood, you will get to know the value of the properties and the different styles of houses. When someone calls you about a house in that area, you will know the value by its description.

3. Look for Ugly & Vacant Propertiees

While you are driving around neighborhoods, look for vacant, ugly houses.How can you tell if a house is vacant? Look in the window! Of course, this practice may get you shot, bitten by a dog or arrested. First look for the obvious signs of vacancy – overgrown grass, no window shades, boarded windows, newspapers, garbage, mail piled up, etc. If you are not certain whether the property is vacant, knock on the door. If the owner answers, be polite, respectful and ask if he is interested in selling. In many cases, it may be a rental property, so ask the occupants for the name and telephone number of the owner.

If the property is vacant, ask the neighbors if they know the owner. Most neighbors are helpful, as they know “ugly” houses hurt their own property values. In addition, ask the mailman — they know all of the empty houses on the block. Leave a business card and write down the address of the ugly or vacant properties. When you get home, look up the name and address of the owner. Finding the owner of a vacant house can be difficult, which is why the persistent people who find the information make the most money. The name of the owner can be found by calling your local tax assessor’s office or by looking up the deed recorded with the County land records.

If you want to contact the owner, it takes a little more digging. Try speaking with the neighbors or asking the post office for a copy of a change–of–address form on file for the property. Online services, such as www.infousa.com, will search public databases, such as the Driver’s License Bureau and the Department of Motor Vehicles.

Some cities, towns and counties will “tag” a house with code violations. This is often a sign of a neglected or vacant property. Ask your city if you can obtain a list of such properties or find where this information is publicly recorded.

Click Here for more info for Sixty Days to Your First Bargain Purchase

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Written exclusively for Legalwiz.com by Attorney William Bronchick, Certified Registered Nationally-known attorney, Author, Entrepreneur and Speaker.

Source: http://www.articletrader.com ]]> http://www.articletrader.com/finance/real-estate/a-review-of-the-carleton-sheets-no-down-payment-course.html http://www.articletrader.com/finance/real-estate/a-review-of-the-carleton-sheets-no-down-payment-course.html Fri, 16 Nov 2007 00:00:00 -0600 Generally, I don’t do reviews of other authors, since it would hardly be unbiased. Frankly, how could you take the advice of someone reviewing a product when they sell a competing product? But, since Carleton Sheets is the most prolific figure on the airways, I thought I would give my general impressions, since people ask me all the time, “what do you think of Carleton Sheets?”

First, keep in mind that I do offer information on the topic of real estate investing. My review is based on my personal experiences in real estate, both as an author/teacher and as an investor. Second, understand that given my own biases, I will try to be as fair as possible, given that I have little to gain or lose by this review.

I purchased Carleton Sheets’ course brand new from his website. The first thing I noticed was that the price of the course was not readily apparent. It’s advertised as $9.95 on a “trial” basis. Of course, I immediately assumed it was much more, and that I need only pay $9.95 right now, and that my credit card would be charged later for the balance. I’ve sold a few of own programs on this basis, so I am familiar with how it works. The problem is, not everyone is familiar with this “pay later” program, so it would help to know NOW what the full price of the program is up front. The fact is, I wanted to pay it in full now, but the website didn’t give me any choices (or, if it did, at least it wasn’t very clear). After some poking around, I learned it was four additional monthly payments of $74.99. So, all in all, it’s about $310, plus shipping.

Let’s start with price... $310 is a lot of money to some people, just a drop in the bucket for others. Spreading out the payments into four months makes it a LOT easier to swallow for the “financially challenged,” who would rather pay $10 now and $75/month for four months than $200 or so all at once. My feeling is that if you buy the course and buy just ONE house as a result, the cost of the course is inconsequential. On the other hand, if you paid $10 for a paperback book and did nothing as a result, you’ve wasted your money. My point is that there is no “magic bullet” — you’ve got to apply some hard work to anything you learn. If you have very little extra cash and the willingness to hustle, then Carleton’s offer is a good one for you.

I received my package in less than a week, which is good customer service. The packaging is professional and well–organized. The target customer for Carleton’s course is the rank beginner, so there’s plenty of beginner information. I particularly liked the way the package is organized, including a “cheat sheet” — first do this, then do that. I’m thinking of including something similar in my materials, too. But, since I am like most people, I ignored the instructions and started reading through the manuals and listening to the audio CDs in my own way.

The manuals are audio CDs are color–coded, so you can easily cross–reference the topics. The audio CDs follow the written materials closely, but not word for word. This is a good and bad thing... if you don’t like (or don’t have time) to read, the audio CDs are very handy for your commuting time in the car. But... the audio CDs are not from “live” seminars, so it is — how do I put this politely — BORING! Carleton Sheets isn’t exactly Tony Robbins, so it’s pretty tough to stay awake while listening (very dangerous while driving). Most of the materials I offer are recorded from live seminars, which means it is more DYNAMIC and thus easier to listen to. Also, a live seminar gives you a different angle than printed material — anecdotes, differing explanations, more comments and thoughts, responses to audience questions, and so forth. These types of things add a lot to the learning process.

I like the fact that Sheets starts with some very basic tips and thoughts on real estate investing — setting goals, improving your credit, setting up shop, etc. He also adds a LOT of other topics, such as keeping a positive attitude, mobile homes and tax liens. In fact, Sheets adds so many topics to the material that I often find myself thinking, “is this just filler, or is all this stuff really necessary to buying a home with no down payment?” I’m one of those guys who would rather see LESS VOLUME, but since Carleton doesn’t use the ancillary topics as a substitute for the main ones, we’ll let him slide on this. In short, don’t let the shear volume of topics overwhelm you — go over the basic core material two or three times, then come back to the other stuff if you choose at a later time.

The core of the program is buying houses with “no down payment.” Carleton goes into dozens of techniques for buying with little or no cash down. Personally, I thought many of them were just “filler” techniques, that is, ideas that would work 1 on 100 times. All you really need is a half dozen ways that work consistently, which he did provide. But, Carleton kept saying “offer the seller a higher than market interest rate to convince him to take your owner financing offer.” I’ve got a better idea — focus your offers on more motivated sellers who would take ZERO interest on a seller carryback. There was a large section devoted to lease/options, too, and Carleton had a few points in there that even enlightened a seasoned pro like me!

So, at this point, you’re probably getting the hint that I liked Carleton Sheets’ materials. In short, I did! For $310 paid over four months, I think there’s a lot of info there for the money. If you are have already purchased a few of my courses or have been investing for a while, you won’t find much in the materials that are useful — this is a VERY BEGINNER course. So, if you’ve never been to a real estate seminar or read any books and are looking for a wide variety of information you can listen to in your car, this would be a good bet. Also, if you could combine Carleton’s course with my “Intro to Real Estate” audio download.

But, I did have a few basic problems with Sheets’ course. First, the legal forms included are not on CD. My courses all include a legal forms CD so you can edit the forms. I’m often told by my customers that the forms CD alone is worth the price of the course. Frankly, Carleton’s forms are pretty generic anyway, although I did like the fact that he included at least ONE version of seller–slanted and buyer–slanted forms — the purchase contract. In fact, I was very impressed at the way he called the PRO–buyer contract a “purchase” agreement and the PRO–seller contract a “sales” agreement to make it easier to remember. I did that in my courses several years ago because I found that people often got the forms backwards. Great minds think alike!

My second complaint is that Carleton spent too much time focusing on the techniques rather than the context of how “nothing down” concept applies in your overall investing — when it’s useful and when it’s not, and when it’s DANGEROUS. I recently did a teleseminar in which I discussed this very topic. CLICK HERE TO LISTEN TO THE REPLAY
Related Information
Intro to Real Estate Download

In summary, I think Carleton Sheets is doing some very good things, which explains why he’s been in business so long. He offers a very reasonably price product that is a good start into the real estate investing business. While it doesn’t offer every detail of how to implement every technique, it will definitely set your mind in the right direction, which is JUST as important. I’ve met MANY people who got their start from Carleton Sheets, and while it doesn’t have all the details that my program does, it certainly is reasonably priced enough to get you started.

Click Here for more info for A Review of the Carleton Sheets No Down Payment Course

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Written exclusively for Legalwiz.com by Attorney William Bronchick, Certified Registered Nationally-known attorney, Author, Entrepreneur and Speaker.

Source: http://www.articletrader.com ]]> http://www.articletrader.com/finance/real-estate/big-brother-is-watching-you-new-bad-legislation-coming-your-way.html http://www.articletrader.com/finance/real-estate/big-brother-is-watching-you-new-bad-legislation-coming-your-way.html Fri, 16 Nov 2007 00:00:00 -0600
What am I talking about? Several states have passed or are about to pass a rash of laws that will make being a real estate investor a very difficult vocation. While I do understand the need for SOME guidelines and disclosures from the government to make sure that people are making informed choices and are protected from bad people, these laws are THROWING OUT THE BABY WITH THE BATH WATER and will likely cause financial harm to the real estate markets in those states.

The following is a review of some recent laws and bills that are pending or have passed.

IT IS IMPORTANT THAT YOU READ THIS EVEN IF YOU ARE NOT IN THESE STATES. When it comes to laws like these, it’s "monkey see, money do", resulting in the domino effect. Your state can be next, so pay attention. Visit you state’s website and review pending bills. Form a local political action committee. Be involved in the political process. If you are in one of these states, call, fax and email your representatives. Email all your friends and business associates. Picket in from of the state buildings. Contact your local news people. If you sit silent, you have no right to complain!
Texas – Senate Bill 629 – PASSED

This bill is an amendment to an earlier law passed in 2001 that regulated installment land contracts. The current law calls these "executory contracts" and requires certain disclosures, most of which are not big deal. However, the penalties for non–compliance are SUBSTANTIAL and bear no relationship to the supposed harm the consumers would bear if the disclosures are not followed. It’s basically a windfall for buyers who find a good lawyer to hammer a technicality that most investors are not aware of.

SB 629 takes it up a notch classifying lease/options as "executory contracts", the same as land contracts. This is DEADLY for investors who want to keep the tax benefits ownership when selling on lease/option and taking advantage of capital gains rates. If Texas calls a lease/option an executory contract, it makes it a SALE, thus having a negative tax impact on the seller who may want to defer his gains through a 1031 exchange when the tenant exercises his option to purchase.
And, we’re just getting started...

The bill further disallows an investor from selling a property by lease/option OR land contract if the seller has an underlying loan on the property without that lender’s written permission. Since few, if any, investors have free and clear properties, this would effective ELIMINATE the process of buying a property, financing it, then reselling on a lease/option or land contract.

This is BAD because it hurts not just investors but ANYONE who has a house that they want to move. Builders often sell properties on a "rent–to–own" basis, and now will be prohibited from doing so if there is underlying financing on the property. What if you do a fix–and–flip, but are unable to resell the property for cash? Maybe the lease/option would be the solution so you can cover your mortgage payments while still getting a sale? It won’t be possible in Texas if this bill passes.

And, it gets WORSE!

SB 629 states that you cannot sell a property under an executory contract unless you have title to the property. That means you cannot do a sandwich lease/option in Texas – PERIOD.

The bill also has a bunch of disclosures and regulations on lease/options, none of which are objectionable.

NORTH CAROLINA – HOUSE BILL 725 – (STILL PENDING)

House Bill 725 is a push from the North Carolina Attorney General’s office, which has been on the rampage against investors for some time. The AG’s office claims to have "hundreds of complaints" from people who were hurt by investors who bought properties "subject to" existing mortgage loans, then defaulted. I find it very hard to believe that more than a few complaints were ever filed. From the way the bill is written it’s clear they just don’t understand how these transactions work.

This bill is targeted against the investor who buys a property subject to an existing loan, the resells the property by lease/option or land contract to a consumer. The bill requires a number of disclosures to all parties involved, some of which are fine and some of which are absurd and irrelevant.

The proposed bill requires the seller to get express written permission from his lender before transferring a property subject to an existing deed of trust, which will never likely happen. And, even if it were possible, the time frame it takes for a seller to get his lender’s permission while he is in foreclosure is wholly impractical. This will hurt the seller who is in foreclosure and seeking to simply "dump" his property for whatever he can get. If the investor can cure the seller’s back payments and/or negotiate a short sale with the lender, everyone walks away happy. If a seller has no options, he is going to walk away from the property and the bank will have another REO. Everyone loses.

Now, admittedly, some dumb or unscrupulous investors have taken deeds from sellers, promised to pay, then defaulted, leaving the seller with the short end of the stick. The right thing to do is require disclosures so that the seller enters into the deal KNOWING THE RISK. Adjustable rate mortgages are very dangerous, too, which is why R.E.S.P.A. requires disclosures. The government didn’t go off the deed end and outlaw ARM loans.

Curiously, the bill exempts real estate agents from the law, which means a licensed agent could theoretically buy a property subject to an existing deed of trust without lender permission and without the same disclosures as a non–licensed investor would be required to give. The suspicious side of me thinks that the real estate agents are also behind this bill, trying to corner the market on investing or requiring an agent’s assistance on these deals so they can profit.

And, the most laughable portion of the bill addressed people like me, requiring all educational seminars to include a copy of the new law in our materials. I suppose the drafters of this bill failed to examine the first amendment, which prohibits the government from restricting the content of free speech.

Read the bill here: House Bill 725
MARYLAND – HOUSE BILL 1288 – (PASSED)

House Bill 1288 is aimed at foreclosure investors dealing with sellers in foreclosure.

The bill targets two types of activities, "Foreclosure Consulting" and "Foreclosure Purchasing". A "consultant" is someone who apparently charges a fee to give advice to the homeowner and/or help him to negotiate with his lender or get a new loan. A consultant must disclose his services in writing and offer a right to cancel that agreement at any time. The consultant cannot buy the property from the homeowner, nor can one of his "associates" (not clearly defined). The foreclosure purchaser must also give certain disclosures in writing, including a ten–day right to cancel the contract. This means you cannot get a deed without giving a homeowner a 10 day "cooling off" period. This is not necessarily a bad idea, but it may prevent a homeowner who is fighting a deadline from doing a last–minute sale. No matter how long the foreclosure process, most homeowners wait until the last week before taking action.

The final part of the bill deals with a foreclosure "reconveyance", that is, a deal wherein the homeowner stays in the property under a lease, reserving the option to repurchase the property from the buyer at a later date. I don’t particularly like these kinds of transactions, because they generally fail and they can sometimes be reclassified by the courts as disguised loans. On the other hand, many homeowners facing foreclosure have no other means to save their property, and in a free market should have the opportunity to engage in a transaction which allows them to try to save their home based on intelligent, informed decisions. This law would require the investor to give the homeowner 82% of the proceeds of the sale if the homeowner cannot repurchase the property, which makes it unfeasible for any investor to even bother trying to help the homeowner. In short, such a law would hurt more homeowners than it purports to protect.

The 22 pages of requirements are very technical, so you should review it in detail with a local attorney. House Bill 1288 – Full Text in PDF Format
COLORADO – SENATE BILL 06-071 – (PASSED)

The Colorado bill is being pushed by the Attorney General and the Colorado Public Trustee’s Association (Colorado’s foreclosure process involves a public official, the county Public Trustee). This bill is a watered–down version of the Maryland Bill, which will also regulate "foreclosure consultants" and "equity purchasers."

Through lobbying efforts, we have gotten the ear of the AG’s office to get some good amendments to the bill that should result in a sensible piece of legislation. Like the Maryland bill, the Colorado bill prohibits a "consultant" or one of his associates from buying a property in foreclosure from the homeowner. The bill, as amended, better defines a "consultant" so as not to confuse such a person with a "purchaser" who will be buying the property, not offering the homeowner "advice for money". The bill is still in discussion and we are hoping to further refine some of the "reconveyance" provisions to make it fair for investors and protect homeowners from predators.

The bill also adds criminal penalties for violation of the law, which is certainly scary for the average investor who does not understand how to comply. If you are in Colorado expect a seminar this Summer to explain all of the nuances!
ILLINOIS – SENATE BILL 2349 – (STILL IN COMMITTEE)

The Illinois law is similar to the Maryland Bill, but takes it up a notch. The proposed bill would also apply to properties "in distress", that is, homeowners who are 90 days late, but no foreclosure has been filed. This is extremely dangerous because there’s no public filing until the foreclosure action has started, thus no way to know who is in default! Also, the Illinois bill would require an investor to pay off the seller’s liens before doing a foreclosure reconveyance, that is, you can’t take a property subject–to the existing loan and sell it back on a lease/option. However, you are not prohibited from taking subject–to and selling it to a third party.

The Illinois bill also contains the "82% of proceeds to the seller" provision, which effectively kills any intelligent investor from getting involved. Why would you want to buy a property and risk the homeowner defaulting, filing bankruptcy and hauling you into court over 18% gross profit? On the other hand, I can see the argument why it is patently unfair for a homeowner to lose a property with 50% equity for non–payment of one month’s rent, but these cases are rare. In any event, a court always has the equitable power to call a contract "unconscionable" where it sees fit. Using an arbitrary number like 82% may not be feasible when the local real estate economy is in the toilet and banks are selling properties at 60% of value or less.

In short, the government should leave the free market open for people to make deals that they wish to make, punish those who take unfair advantage, and require mandatory disclosures so people can make informed choices.
CONCLUSION

I have mixed feelings about these new bills... on the one hand, they are rash responses the side effects of a strong real estate market, discouraging investors from getting involved in deals and resulting in more properties going to the bank.

On the other hand, some of these bills provide "safe harbors" for investors that follow the letter of the law. Since there are really few laws that relate to "creative" real estate investing, providing detailed rules make litigation by a disgruntled seller or tenant/buyer more difficult. It’s hard to say, "you didn’t disclose X, Y & Z" when in fact the law only requires "A, B & C".

If investors in these states MAKE SOME NOISE by contacting their state representatives right away, a modified version of these bills may get passed, making everyone happy. And, if something comes up in your own state, get involved in the process before a bad piece of legislation puts you out of business.

I highly recommend doing the following:

1. Get involved early in the process. Find out who is pushing the bill in your state and why. Contact these groups and offer to assist in the legislative process by discussing practical effects of these laws and other alternatives.

2. Get other groups involved in the process. Community leaders, such as real estate investor associations, mortgage brokers associations, title companies, boards of realtors, etc. Remember, the banks do not want these foreclosure properties in their inventory, so they need investors bailing out properties before they go to sale.

3. Speak to your local representatives. State legislators are generally accessible, to call, fax, and even visit their offices. Let them know you are a voter in their district that has concerns.

4. Speak to the Press. The media is pushing stories about how people in foreclosure are losing their homes, but there’s two sides to every story. Talk with local newspaper, radio and television personalities. Write letters to the editor of your paper (click here for a good example).

5. Hire a lobbyist. The best way to get access to legislators is the good old fashioned way – MONEY. Lobbyists (also known as "Public Relations Experts") have connections with different law makers and can get you an audience to hear your issues. They can find out who is for and against particular issues, and who can either amend or "kill" a particular bill being presented. On the national level, the National Association of Responsible Home Rebuilders and Investors (www.NARHRI.org) has been active in about 8 states.

Click Here for more info for Big Brother is Watching You New BAD Legislation Coming Your Way

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Written exclusively for Legalwiz.com by Attorney William Bronchick, Certified Registered Nationally-known attorney, Author, Entrepreneur and Speaker.

Source: http://www.articletrader.com ]]> http://www.articletrader.com/finance/real-estate/are-real-estate-seminars-worth-the-money.html http://www.articletrader.com/finance/real-estate/are-real-estate-seminars-worth-the-money.html Fri, 16 Nov 2007 00:00:00 -0600 So, how do you tell the good from the bad? Well, first let me comment that I believe there is very little truly “bad” info out there. The difference is mainly price and quality of information.
Here’s some things you should consider when determining whether to invest in a real estate seminar:
1. PRICE — Be leery of very cheap or very expensive seminars. If the seminar is free, it’s because the promoter wants to sell you something. It costs the promoter thousands of dollars to get people into a room, so expect a hard sales pitch. If the event is more than $1,000/day, you should also be concerned, unless the admission price includes follow–up training or substantial materials. I’m not saying that $5,000 boot camps are all bad, just make sure you’re getting what you are paying for.
2. CLASS SIZE — If you are paying $5,000 for a boot camp, you should expect a small class size. If not, you are likely overpaying, since you won’t be able to ask questions in a large group format.
3. TEACHING ABILITY — Some gurus are knowledgeable, but are bad teachers. Make sure you have heard the speaker before or ask other people who have attended. There’s nothing worse than paying to listen to a boring speaker or one that can’t convey a topic in “plain English.”
4. VALUE — Let’s face it, some products are expensive because you believe they are worth more. Good marketing makes you believe “Bayer” is better than generic aspirin. Before you pay thousands of dollars for the “brand name” seminar, look into a cheaper version that isn’t being marketed on T.V.
5. THE “PITCH” — Although as a rule, the cheaper the seminar, the greater the pitch for other products, some promoters do nothing but pitch, even at $5,000 boot camps. Ask other people who have attended the seminar to determine the teaching to–product–to pitch ratio. There’s nothing wrong with a promoter offering products and services at the less expensive seminars, but it’s borderline insulting to have a non–stop sales pitch when you are paying $1,000 a day or more.
6. REFUND POLICY — Is there an open refund policy? This is VERY important. Ask up front. You should be VERY suspicious of any seminar that does not offer a refund policy.
7. ARE YOU SERIOUS ABOUT IT? — No matter how much or little you pay for a seminar, it’s all up to you. No diet works without exercise and discipline and no real estate investing technique works without your hard work. If you are just beginning, stay away from the expensive seminars until you are sure it is for you. Start with the $500 or less variety, let it sink in, then consider more advanced seminars when you have done a few deals. Once you start making money, you should continue investing in your education, since your return will be well worth it. If you are the type who has been to seventeen seminars and haven’t done a deal, consider this:
“The Fault Lies Not Within the Stars But Within Ourselves”
Real estate investing will make you a lot of money if you learn the techniques and apply yourself. The bottom line is that education will help you avoid mistakes and learn new ideas. Read books, go to seminars and learn from other investors. Your best investment is in yourself.

Click Here for more info for Are Real Estate Seminars Worth the Money

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Written exclusively for Legalwiz.com by Attorney William Bronchick, Certified Registered Nationally-known attorney, Author, Entrepreneur and Speaker.

Source: http://www.articletrader.com ]]> http://www.articletrader.com/finance/real-estate/lease-options-and-the-equitable-interest.html http://www.articletrader.com/finance/real-estate/lease-options-and-the-equitable-interest.html Wed, 07 Nov 2007 00:00:00 -0600
Before we discuss the equitable interest, we need to discuss the basic owner–financed sale. When you sell a property, you give the buyer a deed to transfer ownership. If you owned the property free and clear before you sold it, you would take back a note for part of the purchase price, secured by a lien on the property (in some states a “mortgage”, in others a “deed of trust”). So, after the closing the buyer would have title (deed) and you would have a recorded lien against the property (“mortgage” or “deed of trust”). If the buyer stopped paying, you’d have to initiate foreclosure proceedings as specified by the mortgage or deed of trust. In mortgage states, the process is generally a lawsuit (judicial foreclosure), while deed of trust states the process is a “power of sale” (non-judicial) process.

Before we move on to the lease/option, let’s discuss the installment land contract. The installment land contract is an agreement by which the buyer makes payments under an agreement of sale in installment payments. The transaction is also known by the expressions, “contract for deed,” and “agreement for deed.” The seller holds title as security until the balance is paid. In many respects, the land contract is identical to a mortgage, in that the buyer takes possession of the property, maintains it and pays taxes and insurance. However, title remains in the seller’s name until the balance of the debt is paid. In many states, the installment land contract is considered the equivalent of a mortgage, in that the seller must commence foreclosure proceedings to remove the defaulting buyer.

If you sell the property by lease with option to purchase, it’s not really a “sale” at all. The lease creates a landlord–tenant relationship. The option gives the buyer the right to purchase the property during the lease term at a specified price. If the tenant/buyer defaults, you evict him like any other tenant. However, once you go into court, the tenant/buyer may raise the “equitable interest” argument. In essence, the tenant/buyer is arguing that the lease/option agreement is essentially the equivalent of a sale, similar to an installment land contract. The tenant is asking the judge to rule that the buyer “owns” the property (even though title has not passed) and that the landlord is the equivalent of a lender. If true, the landlord must now proceed with a judicial foreclosure process instead of an eviction, which takes several extra months.

Logistically, the proceedings follow a certain path through the courts. In most parts of the country, the local civil courts have three levels – small claims, limited jurisdiction, general jurisdiction. The small claims court are like the “People’s Court” shows on T.V. – nobody can bring a lawyer and the maximum you can sue for is limited to about $5,000, give or take. The general jurisdiction courts can hear any kind of claim from a divorce to a foreclosure to a slip and fall case for $10,000,000. The limited jurisdiction court is in between the two; you can use a lawyer and bring certain types of claims, including an eviction proceeding. The different courts have different names, depending on which state you live in. In my state (Colorado), the limited jurisdiction court is called “County Court” and the general jurisdiction court is called “District Court”. In New York, where I used to practice law, there were called “City” courts (limited jurisdiction) and “Supreme Courts” (general jurisdiction).

The limited jurisdiction court cannot hear foreclosure cases or property ownership disputes. Since the eviction proceeding is brought in the limited jurisdiction court, there is the risk that the tenant may raise the “equitable interest” argument. If this happens, the judge cannot decide the dispute because he lacks jurisdiction. The judge will have to transfer the case to the general jurisdiction court for a hearing. This may cause a delay of a few weeks to a few months. Since time is money, this is not good for the landlord, which is why some lawyers will start the eviction in the general jurisdiction court if they believe the tenant plans to fight the eviction (this may cost more in attorney fees than bringing an eviction in the lower courts, but will be faster if there needs to be a hearing on the equitable interest).

Either way, in most cases the general jurisdiction court will reject the tenant/buyer’s argument and permit the landlord’s eviction. Why? Well, the tenant/buyer is asking the court to use it’s “equitable” powers to rule that a lease/option is not a lease/option, but a sale. The court is being asked to turn a document into something it isn’t in the matter of “fairness” (equity). Obviously, it’s a judgment call for a judge, but in my experience this rarely happens. Here are some of the factors the judge will consider:

* How long has the tenant been in the property?
* How substantial was the default?
* How were the documents drafted (i.e., does the lease/option look more like a contract for deed?)
* Has the tenant done improvements, and are those improvements valuable?
* How much money did the buyer put down?
* What’s the difference between the tenant’s option price and the current market value of the property?

The last two factors are extremely relevant, since they will determine how big of a piece of the pie the parties are fighting for. If the option price was $200,000, the tenant put up $5,000 and defaulted a year later and the market value is now $210,000, it is doubtful a judge would rule in the tenant’s favor. It’s not “equitable”. On the other hand, if the tenant put up $20,000, lived in the property three years and the market value was now $250,000, the judge might rule in favor of the tenant’s equitable argument. In this case, there’s $70,000 of equity worth fighting over, so it’s not that big a deal if you have to pay a lawyer $5,000 to foreclose.

In short, don’t believe the urban myth that all lease/options end up requiring a foreclosure. Most of the time the “fairness” doctrine works just fine – the tenant/buyers without equity end up being evicted and the tenant/buyers with substantial equity get to keep it (or get foreclosed). And, of course, you should have a well–drafted lease/option agreement with your tenant/buyer, as set forth in my Lease/Options Home Study Program.

Click Here for more info for Lease Options & the Equitable Interest

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Written exclusively for Legalwiz.com by Attorney William Bronchick, Certified Registered Nationally-known attorney, Author, Entrepreneur and Speaker.

Source: http://www.articletrader.com ]]>