Hard Money Lenders -- "No Money Down" The Easy Way
By David Whisnant, JD
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Would it help you as a real estate investor to be able to"Close For Cash in Days," even if you're tapped outfinancially?
Hard money lenders are perhaps the best way to get 100% financing with easy qualifying, money for fix- up, and fast closings.
So what can hard money lenders do for you? Hard money lenders make relatively short term (12-24 month) loans to real estate investors for the purposes of acquiring theproperty and rehabbing the property.
These loans are often funded by pools of private investors that have been grouped together into a pool of capital by a lender.
The hard money lender is looking for maximum return, and is willing to take more risk for this return in the form of easier lending standards.
If you strike the right purchase deal, you can even borrow 100% of the purchase price plus some or all of your repair money by using hard money lenders. Here's how it works.
Hard money lenders typically loan 65% of the ARV or After Repair Value of the property when it is repaired or ready for resale.
That 65% loaned by the hard money lender is calculated based on the value of the property AFTER REPAIRS, not as it currently sits, and not based on the price is being paid for the property.
For example, Say that the owner is willing to sell me his house for $60,000. The hard money lender's appraiser agreedwith my assessment that the home could be sold for $100,000 once it was fixed up. That appraisal would allow me toborrow 65% of the $100,000, or $65,000. I'm only paying $60,000 for the property, so guess where that extra $5,000 goes?
Unfortunately, not into my vacation fund!
The extra loan proceeds go into an escrow account held by the hard money lender, and I can draw it out as I do repairs.
Remember, hard money lenders are not concerned with your personal credit to the level that traditional lenders are.They're concerned with the property. They know that theirloan is fairly secure if you default.
What's bad about hard money loans?
The fees are higher than conventional financing.
Hard moneylenders in my area charge 15% interest, and 5% of the value of the loan in closing costs ("five points").
Thus, on a hundred thousand dollar loan, there would be$5,000 in fees to the lender to close the loan, plus attorney's fees and other charges.
Secondly, the loans usually are only good for 12-24 months.After that time, you have to refinance. If you haven't sold it by then, you have to get a new loan, pay more fees, etc.These are not loans to buy rentals with.
Another disadvantage is the fact that most hard money lenders don't figure the payments on a 30-year basis. Thelonger the payments stretch out, the cheaper the payment.They figure these loans on 15 or even 10-year terms. Thus,the monthly payment that you must pay is much higher than it would be on a conventional 30 year amortization schedule.
Also, hard money lenders are often more difficult to find than traditional funding sources. As a gift, I have compiled a national list of hard money lenders at my site to solve this problem for you.
Finally, most hard money lenders require a pre-payment penalty that must be paid if you refinance or pay off the mortgage before a given amount of time. Fortunately, this time period is often fairly short. For example, the hardmoney lender that I use has a two month pre-payment penalty period. Even if I am not going to do much work on the property, and have a contract on it quickly, I can just setup the closing for after the pre-payment penalty expires.
In conclusion, hard money lenders present an attractive option for investors to succeed without having to resort to the late night TV creative hype that we've probably all been exposed to. If you can qualify for traditional financing, and your seller is comfortable with a longer closing window, you may want to stay with conventional financing.
However, if down payment money is tight and your credit is not perfect, or you need to close very quickly, hard money lenders may be a viable solution since they will allowalmost anyone who can find a good deal to purchase a property extremely quickly, with less red tape, get money for rehab, and have virtually unlimited access to cash.
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Download Dave Whisnant's FREE 50 state hard money lender list and forever banish the problem of where to find the cash for your deals! Go to http://www.realestateinvestingbrain.com/freehmlist.html
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Am I liable for the loan when property titled in S corp?
By and Copyright David Whisnant, JD 2005
(Feel free to post this article anywhere, so long as credit of authorship is given and the article is reprinted in its entirety!)
I received a question recently from someone who held title to a property in their corporate name, but they had purchased and financed the property under their individual name.
Q: "Hi, if my property is titled in my s corp (business) name, and the loan is in my name, am I still liable? Are there any other drawbacks?"
A: Hello,
I assume on this transaction that you closed on it in your name and then did a quit-claim to your corporation.
You would be liable personally and have your credit impacted if you defaulted on the loan since you are on the mortgage.
Transferring to your S corp may also be contrary to your due on sale clause as your corporation is a separate entity from yourself. (That is less of an issue, however, as you can always deed it back to yourself from your corp if your lender ever became alarmed.)
Other details:
You should also contact your insurance agent and make sure that your transfer to the S corp does not violate any provisions of your hazard insurance, and that you are still covered.
You should also check with your closing attorney to make sure that any title insurance you bought in your personal name before moving it to your S corp is still valid after the transfer.
I hope this helps!
Sincerely,
Dave Whisnant, JD
PS I invite you to check out my full real estate course and free package of valuable real estate investing information at:
http://www.4-real-estate-investing.com
What you must know about real estate inspectors
By and (C) David Whisnant, JD
Feel free to post this real estate investing article anywhere, so long as this is posted in its entirety, and all links are included.
Question: Can an inspector tell me how much my repairs will be on a property I am looking at?
You should be extraordinarily careful if you ever rely on anything that an inspector tells you regarding repair costs.
In Georgia, where I invest, I have found that inspectors typically do not know that much about actual repair costs.The smart ones will tell you that they can't comment on what it will cost to fix. Some will gladly talk about repair costs, even though they have little basis to know what they should be.
I have also found, through the inspectors my buyers hire, that many inspectors really do not know that much about inspecting properties well. You should be wary of any inspector recommended to you by a real estate agent, as the inspectors agents like are often those that DON'T find problems.
Early in my career, an inspector missed a $2,000 repair, but the way the inspection agreement was written left us high and dry. Choose wisely!The best inspectors to choose are those that are also structural engineers. You'll pay a little more, but the money is well worth it.
Follow them through the inspection process so that you can learn yourself how to inspect properties. You'll be able to do this yourself after a few deals.As far as estimating costs, you'll want to start with those properties that require minor fix-up. You can then begin to assemble your team and progress to more complicated rehabs.
Once you have your carpenter in place, you can walk him through the property to get a good basic estimate of what repairs will cost.In my course, I give the actual repair costs that I pay in Atlanta for tons of different repairs, the colors I use on rehabs and more specific details.The key is to start on those properties that need minor cosmetic work, and move up after that. Wholesale the properties that need extensive work if you are new.
How do you find subs? Go onto the job sites of other rehabbers and get business cards. Everyone does this here, and it is the fastest way to find good fair people. (Stay away from the yellow pages also--anyone advertising there is going to be way too expensive!) Tip: The local service guide in the newspaper has given me many great subs as well. Look for people with 20+ years of experience.
Start with small projects to see how they work, and you can grow together into more complicated jobs moving forward.Tip: On my first job that required pretty heavy work, I hired 4 different carpenters to handle different aspects of the repairs. I chose the best moving forward after that job.
All the best!
Dave Whisnant, JD
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Get your free real estate investing package today from David Whisnant:
http://www.4-real-estate-investing.com/real_estate_investing_secrets.html
Who do you contact on probate properties?
By and (C) David Whisnant
Feel free to post this anywhere -- just use it in its entirety, and give credit or authorship, leaving any links active. Thanks!
When someone dies, their estate, if they have one, is probated with the assistance of an attorney.
While the attorney is typically "in charge" of the legal aspect of this process, you always want to contact the heirs directly if they own a piece of property that you'd like to buy.
The reason is that the getting the attorney involved in the process puts the entire deal at risk. Even though I am an attorney, I know that the term "deal breaker" is fairly applied to many attorneys who will want to draft and redraft your offer.
If you make an offer through the attorney, the attorney WILL tell the heirs to get tons of real estate agents out to give a fair appraisal of market value.
Compare this to doing it my way.
If you make the offer directly to the heirs, and they tell the attorney they want to accept it, the attorney will usually go along and do whatever must be done legally in your state to make that happen.
Again, this is real world stuff, not what COULD happen. It is what DOES happen, which is all that we are concerned with! We all know that the attorney COULD still urge them to get it appraised, but that is not likely in my real world experience.
Tactical Tip: I like the offer to come directly from me. I can write a nice letter to them, and know that they are getting everything in writing.
Tactical Tip: I write to all of the heirs of the deceased listed on the probate petition. If you only write to the heir who is being appointed (or has already been appointed) as the executor, he or she may not take action, but you can bet that one of the other heirs wants cash as soon as possible. That heir may be able to pressure the others to act on your offer.
Tactical Tip: As I detail in my real estate course, the names and addresses of the heirs appear in the probate petition.
All the best!
Dave Whisnant
Bankruptcy and Your Foreclosure Sellers
By and Copyright David Whisnant, JD
http://www.4-real-estate-investing.com
Feel free to post this blog entry, or any others in this blog, in it's entirety, if you include all links and statement of authorship. :o)
I had someone write to me yesterday asking about getting your foreclosure sellers to declare bankruptcy so that there would be additional time to get the closing done.
They learned about this from a popular TV guru, who shall remain nameless.
I think this is really pretty bad advice and strategy.
In the real world, most of my foreclosure sellers do NOT want to declare bankruptcy. Or, they may have already done so recently, so declaring bankruptcy again is not an option for them. Otherwise, they would already have done it and would not be speaking with an investor.
Believe me, as much as we real estate investors solicit foreclosure sellers with cards and letters, the bankruptcy lawyers do the same.
When you are investing in real estate, the market is very competitive.
Thus, you would NOT want to do anything that might hurt your chances of landing the deal. Talking sellers into declaring bankruptcy AND moving from their home is not easy to do, so why create an additional level of resistance to doing the deal? You'll lose out to the investor who just says, "Sure, I'll buy it from you before the sale -- no need to declare bankruptcy and REALLY kill your credit."
A better sales tactic is to assume the loan for a few months and make the payments on time for your sellers. That will help rehab their credit somewhat, and keep you from having to get financing in a rush. I close deals in a day like this. Just get the deed, pay any cash to them that they are to receive, and you're done. (You will, of course, have had a title search done!)
All the best!
Dave Whisnant
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For information on Dave's course, just visit:
http://www.4-real-estate-investing.com/course.html
Something Free To Benefit You
From David Whisnant
I have a great real estate gift for everyone on my list, and all of the people who visit this blog.
These are specific case studies, tactics and strategies that will help any real estate investor earn SIGNIFICANTLY more money than without them.
Check it out right now at:
http://www.4-real-estate-investing.com/2005_update.html
If you are interested in marketing, which is a critical skill for every real estate investor who wants a perpetual supply of eager sellers calling (and that's all of us!), just click here!
Double Your Deals The Easy Way
By David Whisnant, JD
http://www.4-real-estate-investing.com
Just a quick little technique that should result in at least an extra $100,000 per year for those who target landlords.
I have bought many properties from landlords. What I have found is that the property I am buying is usually not the only property that they own.
If they are willing to sell me one property under market value, which is of course what I like to pay, why wouldn't they sell me more than one under market value?
They will never bring up on their own that they have other property that they might want to sell.
All you need to do at the closing is ask them the following question:
"I am looking for a few more rentals right now. I didn't know if you owned any other properties?"
That will open the door up to find out what they have.
Also, I use this same technique where I lose a deal to another investor. I look up the owner in the tax records to see what other property the landlord owns, if any.
If you find a landlord with other properties, odds are that they will sell for a cheap price. Even though I didn't get the one property, they may have others that I can scoop up.
Simple and powerful, many small tactics like this together will make your real estate business unstoppable in 2005.
For more information on my full course, go to:
http://www.4-real-estate-investing.com/course.html
Short Sale Timing
By David Whisnant, JD
Do you have my free real estate investing package?
One of the biggest buzz words in real estate investing over the last year has been short sales.
I want to alert everyone as to how some investors are getting burned on these. I have seen it alot recently, and I want to make sure that you don't make the same error.
A Brief Review:
Short sales are used primarily on foreclosures, and are promoted as a means of buying a fully encumbered property for a discount.
Essentially, what a real estate investor is doing in a short sale is asking the bank to take less than the mortgage balance on a property they are foreclosing.
Thus, if a homeowner had a home worth $100,000 with a $100,000 mortgage that was in default, without a short sale there is not much that can be done to help this person. You don't want to pay $100,000 for a home worth $100,000.
Short sales change the rules here because if the bank agrees to take a 25% discount on the mortgage, you can suddenly purchase this home with a $25,000 profit. Most other investors will not be hot on your heels because they will be chasing older mortgages where the seller has equity.
The Problem
I have seen numerous investors agree to purchase a property from a seller in foreclosure and either assume that they can get the bank to reduce the balance, or actually get told by someone at the bank that "it won't be a problem."
The investor goes out and pays off the back payments for thousands of dollars.
The lender either refuses to discount the mortgage at that point, OR the person who gave assurances was not entitled to do so or denies making that statement.
The investor is then stuck with a home that is not worth a cent more than he paid, and unloading it might actually result in a loss.
PLEASE--If you are going to do short sales--have it in writing from the lender what they will accept as the payoff before paying any money to stop a foreclosure, or giving any money to a seller where the deal only makes sense if the lender is willing to do a shortsale with you.
You may say, "Well of course." However, I have seen many people get burned on these recently, and I wanted to pass this along.
They're Teaching THAT? How to NOT shoot yourself in the foot in real estate investing...
By David Whisnant, JD
real estate investing news you can use.
I flew out to LA this past weekend and started chatting with a the person across the aisle from my seat. His name is Don.
We eventually started talking about what we did, and he confessed that he had been trying for years to become successful as a real estate investor.
Don told me that he had a hard time finding leads, and that when he did, he really did not get a "warm and fuzzy vibe" when he talked to people about selling their home to him.
He wondered if that was typical, or potentially something that he did.
I asked Don to pretend that I was a seller and go through his standard presentation.
Don did fine until he did the one thing that will get you thrown out of seller's homes more than anything else.
He did the one thing that every guru seems to want to teach people to do, but that results in tension, sometimes anger, and fewer closed deals than Don or anyone should have.
What did he do?
He walked through the house with a clipboard muttering about how bad the house was, and how it would take a great deal of work to make it livable.
From this real estate investing blog, please remember this:
People do not want to hear about how their home is:
1) A dump,
2) Run down
3) In need to complete renovation to make it habitable
4) A hazard
5) Filthy
When people live in a dump, they know it is a dump. They can even call it a dump and laugh, but YOU can't.
Never make people feel bad about themselves by criticizing the way they have maintained their home if at all possible. If you have a seller who will not move on price, you can engage in this tactic, but only as a means of last resort.
They want to sell, and you want to buy. The issue is whether the price they need to get to meet their goal (moving somewhere else, buying a business, paying off debt) is low enough to allow you to buy it and profit.
My closing rate increased GREATLY when I abandoned this technique.
Remember, you don't need to insult someone to land a deal.
Real estate investors who do not have much time in the field who also try to be gurus don't learn things like this the way I have.
I hope that you can use and profit from this real estate investing news, and invite you to get my free 100 page real estate investing package if you have not already.
Referrals -- Your BEST Source For Real Estate Investing Leads
By David Whisnant, JD
The end goal for your real estate investing business should be to have deals generate other deals, and to have a system that allows deals to come to you without much effort on your part.
Creating a referral network takes a little time and effort, but once you've done it you're set.
I cover referral systems and my blueprint for how to create one in my advanced real estate investing course. However, here is a really easy way to leverage a deal off of each deal you do.
Simply send out a letter to the 30 closest houses to any house that you buy. Let the homeowners know that:
1) You bought the house at address x.
2) You are looking for fixer-uppers in the area, or homes that people need to sell quickly.
3) You pay $500 to $1,000 for referrals from neighbors.
I started doing this years ago, and found that I would find a homeowner here or there that could send my multiple deals. It sounds very simply, but it really works, doesn't cost much to implement, and will keep you from having to spend so much time prospecting.
Negotiating Yourself Out Of A Deal
By David Whisnant, JD
Real Estate Investor/Attorney
One of the biggest problems that I see in real estate investing is when investors shoot themselves in the foot when they are inches away from landing a profitable deal.
The most common way to do this is by trying negotiate endlessly to get the very lowest price that they can from the seller.
Doesn't that sound like what investors are supposed to do? Shouldn't you always try to get the lowest price?
The answer, surprisingly, is no.
If you and your seller are not at a price that will allow you to make a minimal profit ($25,000 in my book), then by all means, keep negotiating.
However, if they come out of the gates offering a price that you know can make you a $40,000 profit, why negotiate more? If someone had told that investor earlier that day that they could get the property for $X, he or she probably would have jumped for joy.
If it is a great deal, lock it up and don't drag out negotiations. There is always someone else in the wings that will be happy to pay what the seller is asking. There is always a Realtor who may tell the seller that he is crazy to sell for the figure that he quoted you. There is always the chance that a property may go on the market near the house you are trying to buy for more money, and the seller will realize what he has.
I lost deals in my early investing career because I tried to hold out for the extra $5,000 price reduction from my sellers. I did get some of those reductions, but I probably lost well over a hundred thousand in profits to save probably $20,000 in purchase price.
When you ask the seller what he can sell it for, and they name a price you can live with, go ahead and take it. They'll be happy, and you'll be really happy when you sell that property and collect your $25,000+ in profit.
I hope this helps, and invite you to get my free 100 page real estate investing package.
Doubling Your Foreclosure Business With No Competition
By David Whisnant, JD
Let’s face it. There is a great deal of competition from other investors who are looking for foreclosures. If you are in a competitive market you will need a whole tool chest of different foreclosure techniques to beat your competition to the punch.
Active foreclosure investors will notice that most good foreclosures with equity do not make it to the actual sale on the courthouse steps. Some are sold before the foreclosure. That is where I like to buy. Some people come up with the money themselves from friends or family to stop the foreclosure, and some properties are saved from foreclosure when their owners declare bankruptcy.
I am going to give you a way to double your business with a simple to apply tactic. To find out more, click here.
Why I Don't Buy Foreclosures On The Courthouse Steps
By David Whisnant, JD
I often receive questions regarding my thoughts on buying foreclosures at the actual auction, or buying before the auction.
There is no question in my mind that pre-foreclosures are the smart choice for most real estate investors. The only exception would be for those investors who are working in areas without competition. However, I know that most people are in competitive markets, and they don't have that luxury.
To learn why I do not buy on the courthouse steps anymore, and why you probably shouldn't either, check out the following link for an article that I wrote on this exact subject:
http://www.4-real-estate-investing.com/foreclosures/foreclosures-4.html
Using Your Homes Equity To Buy Real Estate--Tax Deductible?
By David Whisnant
Using the equity in your personal home is a great way to get the cash to purchase real estate, and to get going in real estate investing.
Please check the following with your accountant, but here is my understanding of what is, and what is not deductible on a refi.
When you refinance your home to pull money out for buying real estate, or any other purpose, you can only deduct interest on the portion of the loan that is equal to the remaining balance on the loan that you had plus $100,000.
This means that if you took out a $400,000 loan years ago and paid it down to $200,000, that only a loan up to $300,000 (the remaining balance plus $100,000 ) would be considered deductible. Any cash above and beyond that limit would not be deductible so far as the interest payments that you owed on those funds.
At present interest rates, it is worth it to consider pulling out more if you think that you can earn more with the money than the interest cost. Just be aware that all the money you take out may not qualify you for a big tax break at the end of the year.
Real Estate Investing With Hard Money Loans #1
By David Whisnant, JD
Hard money loans are a great way to finance real estate purchases for investors.
Hard money loans can give a real estate investor all of the money that he or she needs to buy and fix the property with nothing out of pocket. Furthermore, these hard money real estate loans are often easy to qualify for, as the lender looks more to the property for security than the borrower's qualifications. The lenders are typically private individuals, or pools of cash assembled by a mortgage broker from private individuals.
Getting these loans is going to cost you a bit more than you are probably used to seeing in this day and age of ultra-low rates. Interest rates are typically around 15%, and you typically pay 5 points (5% of the loan value) in fees to close one of these loans. The points are typically rolled into the financing.
The loans are typically made for 65% of the value of the property after repairs, or what it would retail for. Thus, if you found a property that needed repairs for $60,000 that was worth $100,000 once repaired, the lender would loan $65,000 on the property to you. Any amount over the purchase price could be used for repairs. It is thus possible to get into a property with little if any qualification and no money down.
Because hard money lenders make their own rules, they are often able to close very quickly. When you see real estate investors advertising that they can buy for cash and close in 4 days, you can bet that they are using hard money lenders.
I have more information on these loans in my real estate course, but remember that hard money loans are cheaper than having a partner, and are easier to qualify for than conventional loans (in fact, no qualification at all may be necessary since all of these lenders are private).
I am going to give you some ways to find these loans through my posts on this blog. The first way to find them is to join your local real estate club. Once you sign up for the club, you can count on getting mailings from these lenders. The real estate club will also have a location for lenders to leave flyers. Many of these will be hard money lenders.
Foreclosure Hunting Without competition
By David Whisnant, JD
http://www.4-real-estate-investing.com
Home buyers and real estate investors alike know that good deals can be found in foreclosures.
However, because there is so much more competition now than in the past, getting a good foreclosure deal can be tough. While I detail how to make money in foreclosures in my real estate investing course, there is a quick tip that could help experienced investors double the number of deals they do each year, and new investors move into six figures in their first year of foreclosure investing.
This tactic is something that I figured out while practicing law, and something that will give you a decided advantage.
In my experience, getting a good deal at the actual court house sale is difficult. There are too many bidders with too much money to "steal" a property for pennies on the dollar. Remember, the easier it is to find a real estate deal, the more you will pay. Everyone can find the foreclosure auction at the courthouse, so the chances of finding a good deal are slim.
I like pre-foreclosures, where the lender is starting the foreclosure process, but the actual auction has not taken place yet. Again, however, the competiton is tough. Depending on your jurisdiction, there are different ways of finding out about which properties are in foreclosure. Space in this article does not permit me to get into those, but this step is fairly easy for even the newest investor.
A brief refresher. After foreclosure proceedings are instituted by a lender against a homeowner, several things can happen. Some owners will decide to sell their properties to investors and stop the foreclosure. Some owners will go into bankruptcy, which halts the foreclosure proceedings. Some of the owners will come up with the funds to stop the foreclosure by themselves, and a few owners will do nothing. Their properties will go to auction.
Most investors diligently work to land one of the properties that is sold by the owner prior to the sale. If they get a property, they have succeeded. If not, they will wait until the following month and start again. They are literally throwing away six figures in profit when they do that.
Most of the properties actually go into bankruptcy. The owners declare bankruptcy to stop the foreclosure. Interestingly however, most of the owners who declare bankruptcy don't stay in bankruptcy. They may not be able to make court ordered payments, or comply with the terms of the bankruptcy. The court dismisses their case, and the lender is able to start foreclosure proceedings all over again.
Thus, there are properties that are going to be foreclosed that no one knows about, and that no one is marketing to. The new notices of foreclosure have not been placed by the lender yet. The owner knows the foreclosure is coming, and they can't declare bankruptcy again. Their options are to find the money somehow or sell.
For this reason, it is critical that you continue to follow up with any good properties that the owner takes out of foreclosure by declaring bankruptcy. I like to mail a brief note to the owner every two weeks to let them know that if they should ever require my services in the future, to please contact me. The bankruptcy case may be dismissed, and that property may be available again. Why not get it when no other investors are chasing it? There may be a gap of several weeks between the time that the bankruptcy is dismissed and the refiling of foreclosure notices by the lender. That period gives you a window to buy these properties with little competition.
I hope that this helps you earn more this year. My experience as a real estate attorney gives me insights like these that help me and my students earn more with less risk by avoiding competition. My real estate investing materials do cover this idea and others like it more deeply.
Financing For "Wrecked" Properties
By David Whisnant, JD
http://4-real-estate-investing.com
Most real estate investors know that they can get a better deal on a property that is in rough shape. Broken windows, missing doors, holes in the walls and other problems all indicate a property that can be bought at a substantial discount.
However, what most people don't know is that properties like this can be tough to get financed. The reason is that most lenders will insist upon the appraisal indicating that a property is in "average" or better condition. Find out more about this critical issue HERE.
If this article was helpful, find out more information on our real estate training at http://www.4-real-estate-investing.com
Real Estate Investing -- A Numbers Game
http://www.4-real-estate-investing.com
Assuming Financing? The Real Issue Revealed...
By David Whisnant, JD
http://www.4-real-estate-investing.com
I am a little concerned when I read the advice of other "real estate gurus" to their students.
Because of my background as a real estate attorney prior to becoming a full time real estate investor, I understand how to identify and deal with the truly critical issues on different types of real estate transactions.
As you probably know, newer mortgages typically have a "due on sale clause." The due on sale clause prohibits the person who took out the loan from selling or transferring title to another individual or entity without permission from the lender. If such a transfer is made, the lender has the contractual right to foreclose on the mortgage and declare all sums due and payable.
As someone who has assumed many loans, I have never had a problem with any lender being upset that I was violating this clause. I typically try to either sell or refinance such properties within a few months, but the lender is typically happy to get paid. While this is something to consider, a more important issue exists.
The real issue is that most title insurance companies will not write title insurance for you, the new owner of the property, when you have assumed a loan. This has more risk, in my opinion, than violating the due on sale clause because it does not protect you from the most common title claims -- liens or loans that were missed when the title was run.
For example, if a title examiner missed a $10,000 lien from a contractor on the property you bought, there would be no title insurance to jump in and take care of that. The law firm or company that ran the title might be liable in a court of law to you, but your legal fees will quickly make such an action a break-even deal at best if they are not inclined to write a check to you for the claim. The prior owner may also be liable, but again it will be expensive to get them to pay if they are dishonest.
Or, a lien may be misindexed by the clerk so that the examiner could not see it, but because it was filed, the law may allow the lien holder to still recover against the property. (The examiner was thus not at fault, so you would probably owe this sum or have to file suit against the prior owner.)
Note that the lender will have a lender's title insurance policy, but that title insurance company may not be so willing to step in to handle this claim.
How do I protect myself? I used to run all of the titles personally where I was assuming a loan, but now I have the closing attorney run the title AND another firm run the title. One examiner may miss something, but the odds are better that two will not. While there is always the risk of something that was misindexed, the odds are low that this person will contact me or make a claim against the property if I only own the property for a short time.
Thus, if you are investing in real estate always get title insurance, and if you are assuming a loan, take steps to protect yourself!
There is always some risk in violating a due on sale clause, but the risk of buying property with no title insurance is greater, and that is the story that is never told by other "gurus."
Real Estate Investing -- Beats Stocks Every Time
By David Whisnant, JD
http://www.4-real-estate-investing.com
I have a friend who is an attorney who recently settled a big case, and he asked me if I had a stock broker that I could recommend. He wanted to park part of his income from that case for long term retirement savings.
I replied that real estate really is a better rate of return, and that I keep almost all of my investment money in real estate for that reason. I like to teach methods to find properties at large discounts and immediately turn them for a cash profit, but for those with less time to look for properties who want to outgain the stock market, here is a great way to do it with minimal effort.
When you look for real estate the way that most people do not, you can routinely find deals that will allow you to buy for 65-90% of value. Let's take the worst case scenario 90% number, which means that you would buy a $100,000 home for $90,000. To acquire this home, let's assume that you took out a 10% down payment investor loan, with your seller paying closing costs.
That means that you put $10,000 down into the property. If you rent this property out for a couple of years, it should easily be able to be sold for $110,000 net sales price after commissions to you with some fresh paint and cheap landscaping repair. (Note that if you are buying a home this close to retail value, it will be in good enough shape to rent. If extensive repairs are required, you will purchase this real estate for considerably less).
Thus, your initial investment of $10,000 turned into a $20,000 profit in a couple of years. That is a 36% annualized rate of return. This was not a complicated deal, or even a great deal on the buying end, but it still returned a 36% annualized rate of return on your initial investment. This was for a clean property that was purchased close to retail. Plenty of examples of properties are available everywhere like this. Of course, if you buy the way that I teach, and buy at a higher discount than this, you can see what that would do for your rate of return. This is a secure investment that is easily understood, requires some (but minimal effort), and will almost always outgain stocks. This is why that I would urge everyone to have at least some real estate in their investment portfolio.
In Real Estate, It's About Your Seller, Not You...
By David Whisnant, JD
http://www.4-real-estate-investing.com
I did an interview recently on the phone with a real estate investing club. They asked me to give a single powerful pointer to help their members increase their success in getting potential sellers to agree to sell them a home.
I cover this topic in depth in my real estate investing materials. This single idea has made more money for me and gotten sellers to agree to sell me their homes for less money. Here it is in a nutshell.
When buying a home, price is only one factor. The other factor is how easy, convenient, and turn-key that you can make the sales experience for your sellers. If you can offer more service than your competitors, you will beat them almost every time. This holds true even if they are offering a seller more money than you are.
While many investors turn the real estate investing business into a commodity where the seller's only way to decide which offer to take is based on price alone, I offer a reasonable price and tack on some great extras that are worth a great deal to my sellers, but are cheap for me to provide.
Examples from my personal deals:
1) A single mother with three kids had a house that was a wreck. She worked long hours and didn't have any free time. Part of our offer included taking the house "as is," so that she wouldn't have to make any repairs. It also included moving boxes of various sizes, and we agreed to mow the grass for her until the closing date so that she would have more time to work on the move.
2) A seller in foreclosure was more worried about what would happen to him than the money he would make from the sale. We paid him a fair price AND paid for his rent in a really nice duplex that I owned. I also agreed to handle the move for him. I supplied the labor and the trucks for his move. That meant more to him than another $20,000 in the sales price that a competitor was offering, and we got the deal.
3) An elderly seller that was moving into a retirement home needed to sell, but was totally frustrated by what Realtors had told her. They urged her to make repairs on the property, move all of the extra belongings out that she could into storage, and repaint the interior and exterior. I told her that I would buy for $X. She would not have to do anything to the house in terms of repairs or further work, and she could leave any items in the house that she did not want and we would dispose of them for her. Her daughter later thanked me for this. We paid a fair price for the home, but addressed her needs so closely with our offer that accepting it was easy for her.
Thus, instead of talking about yourself and how wonderful you are as an investor, spend time listening to what your sellers need. If they don't tell you, just ask them. Offer services instead of money. You'll make more profit and the peace of mind to them makes it well worth it from their perspective.
Thus, to have more success as a real estate investor when meeting sellers across from their kitchen table, put their needs first and listen to what they want to get out of the transaction first.
Until next time, take care, and good luck in your real estate investing endeavors.
Welcome!
By David Whisnant, JD
http://www.4-real-estate-investing.com
Hello, and welcome to my blog!
For those who are not familiar with me or my site, I'd like to tell you a little about myself and why you should expect top quality real estate investing information from this blog.
First of all, while I am a real estate investor, homeowners or anyone who is interested in becoming a homeowner will benefit greatly from this blog. Who doesn't want to buy their personal home for less, and live in a better house than their budget would ordinarily allow?
I want to help everyone realize that the real estate investing game has changed significantly since the "No Money Down Guys" days, and that those old tired 1970's approaches just do not hold the same traction that they did several decades ago.
I am a licensed real estate attorney. After seeing how much money my clients were making in real estate, I decided that I was on the wrong side of the table and eventually moved into real estate investing full time. I sold my half of my practice to my law partner and (against everyone's advice!) went into real estate full time.
I hope that this information benefits you greatly, and invite you to visit me at my real estate investing website http://www.4-real-estate-investing.com.
I have a free 100 page real estate investing package that might be of benefit to you on the site.
Thanks so much for checking out my new blog. I plan to contribute to this on an ongoing basis, and thank you for visiting.
Sincerely,
Dave Whisnant, JD
Http://www.4-real-estate-investing.com
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