Personal Finance Resources

Today, I want to do a follow up on an article I posted awhile back covering Residential Lease Options. If you have been following this blog for any length of time, you will understand that I work in real estate, and have a passion for investing. If you don’t already know the secret to real estate investing, I suggest catching up on those two articles before continuing this one. As a real estate investor, I would consider the following strategy to utilizing a Lease Option to Buy:

1. I would locate a property that is undervalued, or that I can negotiate to well below the market value.
2. I would buy the property using a traditional mortgage or cash out for the seller. I have found that cash or the equivalent to the seller is far more likely to persuade them to sell the property at a lower price. Also, a quick tip, if you are sure of the area a property is located in, then offering more than typical earnest money is a great way to persuade a seller. They know that you are serious and get the impression that you can close the deal, and not get rejected for a loan at the last minute. And it doesn’t hurt you to offer more earnest money, if you are getting a loan that requires money down, you can apply the earnest money toward your loan down payment.
3. Then I would make any necessary repairs.
4. Then I would market the property using the MLS, local paper, real estate flyers, and signs around town (and of course, in front of the house itself). You must get the message out. Use language like bad credit no problem, rent to own, financing help available, etc. This will open up the market to people that would not otherwise consider your property. Many good people these days have black marks on their credit because of a bad divorce, etc. and just cannot get traditional financing. Trust me, I have met many of these kinds of people.
5. Ink a deal. Get a substantial cash option payment before you sign anything. Make the buyer commit to the property. They will take care of it a lot better if they have a significant amount of cash invested.
6. Manage the property until you get to the end of the lease. This can be good or bad. You will have to deal with leaky toilets and electrical outlets not working, but if that is too much for you, hire a property management company.
7. At the end of the lease, finalize the deal. If they are ready to buy, you must sell. If they can’t buy, then you get to keep the option payment and re-sell the property (you can repeat the process, and get another option payment, ). In some circumstances, the buyer may negotiate for more time. This is ok, however it opens up the entire contract for renegotiation, allowing you to reassess the property’s value, and get better terms on the deal.

This is a simple version of how I would invest in a property using the Lease Option to Buy strategy to sell the investment. If you have questions/comments, please leave them at the bottom of the page. And sign up for my RSS feed to stay up to date on all the latest information and tips automatically, and free of charge.

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In this edition of Personal Finance Resources, I am going to show you one of the flyers I put together for a piece of property I am managing. I am using this flyer in an advertising campaign right now, so this a real live example. I used Microsoft’s Publisher to put the flyer together, and was able to create something very professional, in only about 30 minutes to an hour. Some key points to remember when composing a real estate flyer:

• Your key product/service/benefit to the client should be at the top of the page.
  In this particular example, I am wanting to rent a nice house near a lake. So I just simply put “House for Rent!” at the top. The reader is very aware of what the ad is about just by glancing at the title.
• Directly after the key action item, you need to have something that really draws the attention.
  In this example, I am playing on people’s love for the water in telling them just how close to the lake this property is located.
• Pictures
  Any quality flyer has to have some pictures. In my flyer, I choose a exterior elevation picture, to show how nice the house is, and then a picture of the over sized bathtub, that gives the reader a sense of the upgrades of this particular piece of property.
• The Description
  Some people want the details. But as I did in this real estate flyer, it is in small text, and gives some good supporting details on upgrades, location, and then the all important price. But this is a more expensive property for the area I deal in real estate, and therefore I minimized the size of text where I show the price. I want the focus of the advertisement to be around the location and the features of the property, not the price. If you are marketing something where you are near the bottom of the market for price, then you might make the focal point of your message the price, instead of the features.
• Contact Information
  For this real estate flyer, I put the phone number at the bottom of the page, increased the text size, and made the phone number itself red text, to really set it off the page. This is the key thing that I want the reader to do is to call me. In glancing at this flyer, you really see that there is a house for rent, it looks nice, and the phone number pops out at you. If someone wants the details, they can look more closely at it, but those are the main areas their eyes will be drawn to.

So as you can see, with Microsoft Publisher and a few marketing tactics, you can come up with a quality real estate flyer that can really grab the attention of someone in the market to rent a house (or whatever you are trying to sell). Now all you have to do is get as many of them out to the public as possible, and get them in front of some people. ‘Til next time…

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While getting mastercard payment, one can enjoy the free benefits as well. There are home mortgage packages as well as other options for loans. These services can be availed through online banking as well. Such deals help debt relief in effective way and do not let debt pile up.

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Working on potential real estate investments is totally fascinating, and finding deals that fit a profitable formula is both extremely challenging, and extremely rewarding. Currently, I am working on a deal with a local realtor who is also a real estate investor here in Belton/Temple TX. He is trying to get out of the property management business, and owns a number of properties in the area (maybe about a dozen properties).

These properties are single and multi-family homes, and are in different areas throughout town. He has a few problem properties in the Temple market, which are a risk to me and my investors, remembering that location is the most important factor in real estate. But overall, he has a good spread of properties, and I am interested in about 3 of those properties. One is a duplex located just across the street from a property I already own, and therefore I am totally convinced of the neighborhood and the ability for this property to produce.

All in all, I am looking to put two properties (which includes 5 rental units) under contract, with the attempt to achieve a total payment of around $1,100-1,200. These properties gross around $2,200-2,300 per month, which is really good money for the risk. So this is just as word of encouragement to y’all out there, as you can get into good deals, you just have to keep looking.

One point I will make, I found this guy just by checking the MLS for some multi-family properties for another potential client. I saw a good price on a duplex, good location, and knew it would cash flow. If you have a little time, drive the neighborhoods you want to do business in, and just look for some “For Sale” signs. Farm those markets, and find those deals. To make it big, you are going to have to do a little more than the next guy.

‘Til next time, sign up for my RSS feed, and get the updates as they happen on this project and more to come in the future.

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Buying into mobile homes have made real estate investors millions of dollars. Just because it may seem that the class of renters/buyers you would be working with are lower class and thus more trouble, you may be wrong. Most of the folks that would rent or buy a mobile home do not make a lot of money, however often they are less demanding than a middle class savvy home buyer. The mobile home buyer/renter is looking almost exclusively at price, and thus, if you can fit their budget, it becomes an easy sale.

For example, I purchased a double wide mobile home with the land in an outlying area of the town I live in. It was a HUD repossessed mobile home, and I purchased it for $26,500. It is a 2002 Palm Harbor 3 bedroom, 2 bathroom home about 1,150 square feet. I found the property on bidselect.com, and made my offer. We lived in the home for close to a year, and bought into another property in town. My total PITI on the property is roughly $350 per month.

After moving out, I was able to rent the property for $600 per month. Not a bad deal at all, considering that the mortgage is only for 10 years, and I only had to put up about $6,000-7,000 up front to close the property, and to build a nice shed for storage. So in a nutshell, buying into mobile homes, especially repossessed mobile homes, can be very profitable, with a limited amount of risk.

But let me give you a couple of websites you can use to find deals on repossessed mobile homes:

1. bidselect.com (my favorite for all residential types of properties)
2. vmfrepos.com
3. 21strepos.com

These are just three sources to browse available mobile homes in your area. But not only for real estate investing, but just for finding a low priced dwelling in your area.

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by guest author Nicholas

I have recently moved to a mid-size Arizona market. This market is rapidly starting to feel the down-turn in the housing market that Jeffry mentioned in his latest post on Smaller Texas Real Estate Markets Doing Well. The houses that are for sale are staying on the market longer and longer. I am planning on being in this area for 6-9 months before moving out of Arizona, so I will discuss two options that are available to me.

Renting

This is the easy choice. No money down, no homeowners insurance, and very few worries (other than making the monthly rent payment). Those are the benefits. You already know the downfall, throwing that cash away every month without gaining any equity. You also have to abide by any rules that the owner of the house decides to impose.

Buying

So I mention to most people that I am considering buying even though I am only going to be here for 6 months, and they are appalled. Why would you do that, especially in a slowing market for such a short time? The answer: Property Management Firms. So the situation would go like this, I would buy a house, live in it for the six months I am here, move out of state, and establish a contract with a property management firm.

These firms will show your house to perspective renters, do credit checks, ensure employment, conduct minor maintenance on the house, and collect the rent money each month. They typically charge 9% to 12% of the monthly check to manage your property. Most times, you as the owner even get to approve potential renters. Hold the property until the market goes back up and sell or just keep it as another potential source of income. This is just another possible way to invest in a buyer’s real estate market. Good luck!

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I am in a small Texas real estate market, the cities of Belton and Temple. While some of the larger markets like Dallas, Houston, Austin and San Antonio are feeling the pain of the sub-prime mortgage market collapsing, here in Belton/Temple, it is still a seller’s market. Just last week, I wrote a lease on a small 3 bedroom, 2 bath doublewide mobile home on my terms. As I am a real estate investor though, I am being faced with difficult buy opportunities. There is only one house listed on HUD’s Bid Select website for Belton, TX. Unbelievable!

Large Real Estate Market Situation

So if you are looking to get into real estate investing, and you are in a larger market, now is the time to start buying. But I don’t recommend trying to flip properties, as these larger markets are just too much in favor of the buyer right now. Look for opportunities to buy and hold. Rent out the properties for a while and sell them later when the market gets better for the seller.

Small Real Estate Market Situation

If you are in a small market where the sub prime market hasn’t affected you much yet, be careful. This is a shaky time for selling, as I really see the next couple of years being great for buying and renting, but there just won’t be a lot of selling going on. The smaller markets will feel the effects of the sub prime collapse, we just haven’t felt them yet. If you are thinking of selling within the next couple of years, I would probably try to sell right now, before its gets bad.

Overall we have seen a shift in the market. People who really had no business buying a few years back are now on the street, trying to rent. So we have seen a sharp decline in the number of qualified buyers, with an increase in the number of renters available. When that happens, it becomes harder to sell properties and easier to buy, so the most profitable plan from a real estate investor’s point of view is going to be buy and hold. Just my humble opinion.

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Many emerging and veteran real estate investors are looking for ways of financing real estate investments with little or no money down. The traditional cash down payment of 20% just doesn’t work for most buyers anymore, and sometimes (especially with banks shutting down the sub-prime loan market) a more creative method must be deduced to facilitate the transfer of real property. Further, even if real estate investors have the necessary cash, it is more beneficial for them to finance most of the balance than to fork over the cash, because it will allow them to buy into other properties with the left over monies. But let’s visit a few of the financing strategies used in some of today’s real estate investments:

• Seller Carry Back
  This method incorporates a mortgage, typically 80% of the home’s value, and the seller takes back a second lien for anywhere from 5-20% of the balance, thus enabling the real estate investor to escape the death grip of PMI (private mortgage insurance) with the added bonus of not having to come up with a lot of money down.
• Lease Option Agreement
  A lease option agreement allows a buyer to come up with a cash down payment, with a fixed term lease, and the option to buy at the end of the lease. The down payment would then be credited to the buyer at closing. If the buyer passes on the option to buy at the end of the lease agreement, they would forfeit the down payment.
• Lease Purchase Agreement
  A lease purchase agreement is a more traditional “rent to own” concept. In this scenario, the lessee is allowed to credit a portion of the rent toward the down payment on the house. The lease has a fixed term, and at the end of the lease, the buyer has the option to buy at the agreed price. If the buyer passes, ownership and all rent is retained by the owner.
• Loan Assumption
  This typically only works for FHA and VA loans. In today’s world, FHA and VA loan assumptions must be approved by the respective agencies. Loans that were issued before the cutoff date are still assumable without FHA or VA approval. This is a great way to get into a property with little or no money down.
• Low Down Payment Mortgages
  With good to excellent credit, many mortgage lenders will still offer a loan for little or no money down, especially if you intend to live in the premises for awhile. If you go FHA or VA, this is a chance you can get into the property for 0-3% down. Most conventional mortgages will still require at least 5% down, but do some homework, you might find a no money down deal out there.
• Home Equity Loan from Another House
  I was in this situation recently. There was a mobile home on a small piece of land that I was wanting to buy, and no lender was prepared to lend money on it unless I intended to occupy the property as my primary residence. I had enough equity in my current house to cover my bid amount, but alas, the seller did not agree to my price. Don’t let it discourage you though! Sometimes, it takes many offers before you land on a seller that will agree to your price (or close to it, anyways). Keep plugging!

There are other options out there for financing real estate investments. If you have any questions, feel free to leave them in the comments area below. Sign up for my RSS feed to get instant updates.

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What is probate, and what does it mean to investors? Many real estate investors use the probate process to find, acquire at a discount, and sell / lease properties for a significant gain. With a little bit of money and time, you could even make this a full time career. Most investors, when they look at probate, think that it is too difficult to complete, with a low success rate. My question is, how many offers have you submitted to typical owners that have been rejected? Personally, I have submitted many, many offers, and have only acquired a handful of houses at the proper price for significant gains. But let’s get into the meat of the probate process…

Probate Defined

When a property owner dies, the property owned must go through the probate process, or the process of distributing the assets according to a will, or at the discretion of a probate court in the event that there is no will. Now, here in Texas, if a married person dies intestate (without a will), then their spouse automatically inherits the assets, except for specific cases such as children that don’t belong to the surviving spouse, etc. There are ways to avoid probate, but that is for another edition…let’s move on to the required probate steps.

Probate Process

If the deceased had a will, an executor would be named to manage the probate process after death. If the deceased did not have a will, an administrator from the court would be named to handle the distribution of the property. The executor or administrator would then have to follow these basic steps to complete the probate process:

• Inventory and collect all property owned by the deceased.
• Pay off any debt or taxes owed by the deceased. Often, an ad is run in the local paper to call any lien holders of the deceased to make claim against the estate, so the personal representative can handle all debt issues appropriately.
• Once all debt is settled, then the personal representative will carry out the transfer of property to the descendants as described in the will, or per the state’s intestacy laws.

The personal representative must be careful to observe the fiduciary responsibility they are under. They must keep funds in interest bearing accounts, treat all descendants equally, and get the probate process completed in a timely manner. Failure to do so opens the door for descendants to remove the personal representative and further delay the probate process.

So What Does Probate Mean to Investors?

Often, when a deceased person leaves property behind, descendants are not interested in inheriting the property, due to having to pay taxes, and the general grief of owning a property you do not inhabit. They simply want to get cash from the property. So this opens up an opportunity for someone to come in with a low offer, and end the frustration surrounding the beneficiaries of probate process. Especially if there is more than one beneficiary, your offer might be just want they need to stop the quarrels among themselves and end the probate process quickly. Stay tuned as I will delve into how to find and acquire probate properties…

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Building up real estate investment cash flow is one of the cornerstones of the business model I am working to achieve my financial goals. The basic premise of what I am trying to do is income replacement, or building up enough side income to detach myself from my J-O-B (just over broke) and focus entirely on my own business. Now, as some of you know, I live in Texas, and right now, the smaller towns such as Belton/Temple/Killeen/Fort Hood where I live and operate are still fairly strong seller’s markets. Some of the larger cities like Houston and Dallas are experiencing downturns in the market due to the sub-prime mortgage loan industry going belly up. But, as far as the buyer’s side of the equation here in Belton/Temple, it is hard to find houses at prices that will make money. However, the nice thing is, if you can find a good deal on the buy side, you can quickly turn it around and make money.

I own a house that was purchased a couple of years ago at discount, that I put up on the market for rent, ran one ad in the paper for 2 days, and put a sign in the yard. That was 2-3 weeks ago, and I am still getting a steady stream of calls coming in for people wanting to rent the house. I also have one couple that is looking to buy the house and put their Mom in it, which I will see tomorrow if we can work out a deal.

So, to get to the point, working and investing in real estate simply comes down to one thing, and one thing only. Buy Right! The one key to real estate investing is buying properties below market price, and selling or renting them at market price. Now, if you are really looking long term at holding property, you could buy at market price, and rent to try and cover your expenses until the property appreciates enough and rental rates increase enough for you to make money, but typically only people with lots of loose cash on their hands can afford to do this.

So how does one find properties at a discount, and how much of a discount do they need to be purchased at in order to produce positive cash flow? Well let’s first discuss finding the properties.

Finding Discount Properties

There are many ways to find and acquire investment properties at a discount. Probing for houses such as tax sale properties, HUD foreclosures, Bank foreclosures, probate properties, and otherwise distressed properties are the best types of properties to go after. Seller’s must be motivated, or you will not be able to get the property at a discount. My main focus has been on HUD properties, and at www.bidselect.com, you can find the current list of available properties for sale. In a later edition, I will define and give you some quick pointers on the other types of distressed properties. But HUD properties are the simplest to acquire; you just have your realtor submit a bid, and the day after the bid deadline, you get an answer. Read the full detail of how I buy HUD homes.

Investor Pricing on Properties

The typical percentage that most investors will feel comfortable with is about 75-80% of the value of the home. If they can purchase and rehab properties for about that much, they should be able to make enough from selling or renting the house, to justify the time, money and risk involved with doing the deal. In the market I’m in, I focus on houses from about $40,000 to $100,000 to invest in, and try to make somewhere around 20k for selling the property, or about $150-200 / month renting it out. The main goal is the latter, getting the monthly real estate cash flow going to help me cover enough of my expenses to justify leaving my job.

So, to sum up, acquiring cash flow properties is one of the main things I will be doing to replace my J-O-B income, so I can leave and pursue my own business. I figure it will take about 10 of these properties to allow me to quit my job. How many properties would it take you to be able to quit your job, and focus only on your investments / other enterprises? What methods do you know of to acquire properties at discount prices? Please leave some feedback, as I have only skimmed the surface as to the strategies available for building up income streams.

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Part of my plan for generating Passive Income in Real Estate includes property management. But what kind of a property management business plan works? Well, I am going to give you the approach that could be utilized, as well as inform you of how I am going to proceed. I would love to get some feedback on this one guys, as I am still some what new to property management marketing. I am only managing 3 houses currently. The houses that I am managing currently are owned by friends of mine, which I guess is as good a reason as any to get going in a business. Here are the steps that I am taking / considering:

• Continuing to Work Established Contacts
  A couple of friends from Church moved away, and recognized my abilities in real estate through the investments that I have currently made in the area. And with the added bonus of having a realtor license, they felt comfortable enough to use me as their property manager. Already, one has referred me to a friend of his to manage his house. Referrals are fantastic. Also, my real estate broker knows that I am going in to managing property, and she referred to someone who was considering selling his property management company. Unfortunately, he retracted the offer before I was able to act on it. Hopefully he will reconsider in the near future.
• Putting Up a Property Management Website
  This is something I am considering, I may be able rank in the search engines for real estate queries in my specific local. Most of the realtors in my area do not know much (if anything) about the Internet. Many have websites, but I doubt they have much knowledge of Internet marketing. The Internet is very powerful, but here in a small town, I am just not sure how much people utilize the Internet in their search for rental / for sale properties.
• Placing Some Signs Around Town
  This is a cheap and easy way to promote myself. I figure a few small signs around some of the major intersections may attract some attention. Who knows? Again, it is a small town, but maybe that is a good thing.
• Utilizing Craig’s List
  Craig’s List is an unbelievable high traffic, free online classifieds anyone can use to push their business. Very easy, and you can upload 4 images per article. Craig’s List is localized, and thus, you can target your specific market, very good for a property management realtor.

These are just a few steps I know of that are available to me. But again, I haven’t been in this business long. If you have any suggestions, I would sure like to know what they are. Feel free to leave your comments at the bottom of the page, and stay tuned via my RSS feed for more great information on personal finance and real estate investing.

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