Mortgage Free Real Estate

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Matthew Pillmore

Disclaimer: I am not a lawyer or an accountant. Nothing here should be construed as professional advice. I suggest that you always retain the services of a competent professional to provide advice on your transactions.

If you have a loan on your primary residence and/or rentals, you may have considered whether it would be worthwhile to pay it off ahead of schedule. And if so, you’re not alone.

The debate over whether to prepay your mortgage is perpetual in the personal finance world.

Pay Off Your Mortgage or Invest? The Math Says…

On one side, some experts argue you should NOT prepay your mortgage if you are locked in at a low interest rate. Their reasoning: You would be better off INVESTING your money where a reasonably diversified stock portfolio can expect to earn at a higher rate of return on average over the long run.

Add in the home mortgage interest deduction you can take on your federal taxes and, they say, you would be silly to prepay your mortgage and miss out on those perks.

To this group, the question is just about math. After all, why would you prepay a loan at 3% or 4% and lose out on part of a valuable tax deduction when you could invest that money instead and earn considerably more?

But There’s a VERY Important Side to Prepaying Your Mortgage, Too

Still, there are plenty of experts who forge ahead with their mortgage prepayment plans. My parents (including a CPA father) fell squarely in that category. Instead of taking the standard 30 years to pay off their mortgage, they paid it off in well under 10 years.

Ask him if he cares about the tax deduction they missed out on, and he’ll probably look at you like a crazy person. Why? Because the decision to prepay was never JUST about the math to them; it was about their financial freedom. And math aside, they have never regretted their decision to pay off their home and become entirely debt-free.

Most people agree with that sentiment, eventually. Most, just don’t like debt. It’s as simple as that.

But others prefer a deeper analysis.

Analyzing the Pros and Cons

For starters, let’s take a look at what the home mortgage interest deduction really means.

The easiest way to figure out your home mortgage interest deduction is to look at your effective tax rate. Say your overall tax rate is 22%, for example. On average, the home mortgage interest deduction reduces your taxes by $22 for every $100 you pay in mortgage interest.

That’s a nice perk, but there’s a caveat. Your home mortgage interest deduction is only valid for the amount you deduct over and above the standard deduction, which is available to taxpayers who don’t itemize their returns. The standard deduction for married spouses filing jointly was $12,400 in 2014.

So what does that mean? Simply put, if you don’t itemize your taxes, your home mortgage interest deduction is worth nothing. And even if you do, it’s only worth what it helps you save over the standard deduction that anyone can take. In many cases, this drastically reduces the value of the home mortgage interest deduction to the point where it’s barely worth considering.

But what about those lost investing returns? When you ask people whether or not they prepay their mortgage and why, you’ll find plenty of skeptics who balk at the idea of carrying long-term debt in favor of investing their extra dollars in the stock market. And when it comes to who is “wrong” or “right,” there are several ways to look at it.

The interest you save by prepaying your mortgage is a “sure thing.” Many people are happy prepaying and banking the extra money they save on interest, even if it’s less than they may have earned by investing their extra dollars instead.

A Balanced Approach

As someone who loves leverage but despises (ALL) debt, I see both sides of the issue. And that’s why I personally take (and teach) others to consider a balanced approach.

My only debt includes what is used to advance the assets and income growth of my plan, but is paid back strategically to $0 as quickly and safely as possible. I don’t see the reason to choose between investing extra money OR prepaying my mortgages, so I rely on Debt Weapons™ to do both faster.

What About Debt Weapons™??

Debt Weapons™ are tools that allow any consumer to achieve 1 or more of 7 highly financially beneficial purposes.

1) Maximize Cash Flow
2) Compress Amortization Schedules
3) Replace Inadequate Bank Accounts
4) Invest More Quickly & Safely
5) Minimize Total Interest Costs
6) Enhance & Protect FICO® Credit Scores
7) Quickly Increase Financial Safety and Emergency Reserves

To be clear, VIP Financial Education does not provide or offer Debt Weapons™.

We do the research for our Coaching Members in order to help them decide where to go to get the right Debt Weapons™, at the right time, to accelerate their unique goals.

Just like exercise equipment can injure you when used incorrectly, Debt Weapons™ can also be quite harmful if you access the wrong one or use the right one the wrong way.

Applying for any Debt Weapon™ without knowing the proper questions to ask, can lead to several negative consequences. For example, credit scores can rapidly decline, you could access the wrong Debt Weapon™ for your intended purpose leading to unforeseeable costs and terms, possibly delaying your goals even further.

That seems like a good compromise to me. Still, there is nothing wrong with taking sides on this issue.

When you hate debt, you want to put it behind you once and for all, and that’s understandable. But it’s also understandable for someone to make their decision based solely on the numbers. After all, it’s hard to argue with math. At the end of the day, we all have to do what is best for our families – and what helps us sleep best at night.

So, should you pay off your mortgage quickly? It is, and always has been, up to you, yet by joining us at the upcoming event with Realty 411 you will learn how YOU too can rely on Debt Weapons™ to take a more advanced approach and achieve BOTH simultaneously, far more quickly.   

 

Matthew Pillmore
President
VIP Financial Education

Assign or Double Close: The $9,000 Question

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By Jeffery S. Watson

In a conversation I had with a real estate investor regarding the differences between assignments and double closings, we talked about the cost associated with double closing a transaction. When you close two separate real estate transactions involving the same property within a short period of time, say 30-45 days apart, there are certain inescapable costs incurred twice. The title and escrow company or closing attorney is doing almost twice the amount of work.

The general rule of thumb I have given investors has been that if the assignment fee is $9,000 or less, then go ahead and assign the contract so there is only one closing and the assignee (the new buyer stepping into the shoes of the first buyer) completes the transaction with the title company or closing attorney. If, however, the assignment fee is greater than $9,000, then it’s time to examine if a double closing should occur.

In certain jurisdictions, that $9,000 number would change. For example, in Cook County, Illinois, I would recommend it be $15,000 or higher because of the extraordinarily high cost of closing a real estate transaction in that jurisdiction. In some states, many of my clients wisely choose to double close on all transactions due to the large spread between what they are buying it for and what they are ultimately able to resell it for.

In your market, the best thing to do to determine whether to assign or double close is to have conversations with various title and escrow companies or closing attorneys. Do some cost comparison as to the usual and customary fees and whether those fees can be negotiated down. Find out the basic, unavoidable costs of closing a real estate transaction.

Until you have that information readily known to you, you cannot make an intelligent decision as to whether you should assign or double close on a particular transaction. With that extra information, you become more effective in managing your real estate business.

Jeffery S. Watson

Attorney

Jeffery S. Watson is an attorney who has had an active trial and hearing practice for more than 27 years. As a trial lawyer, he has a unique perspective on real estate investing, wealth building and asset protection. He has tried over 20 civil jury trials and has handled thousands of contested hearings. Jeff has changed the law in Ohio 5 times via litigation or legislation:

Smith v. Rudler – 70 Ohio St.3d 397
In re Hugley – 629 N.E.2d 1136
Bahr v. Progressive Insurance – 2009-Ohio-6641
Snyder v. Snyder – 865 N.E.2d 944
H.B. 463 amending the Ohio Civil Rights Act

Jeff has also been a real estate investor since 1994, investing in both residential and commercial properties. He currently represents established real estate investors in commercial and residential matters when the transactions involve self-directed retirement accounts. As a frequent and popular guest speaker and teacher on stages and webinars, he is a recognized thought leader and innovator in the field of real estate investing, wealth building and self-directed retirement account transactions.

He is a nationally-recognized authority regarding regulatory concerns with wholesaling. He was the co-creator of the Option Contract method that revolutionized the short-sale flipping process. Thousands of investors have used documents created by Jeff to flip properties.

Jeff is general counsel to the National Real Estate Investors Association. Jeff is general counsel to and a cofounder of Realeflow, LLC, which made the Inc 500 list in 2011. He currently advises six different national organizations with a combined membership of over 250,000 investors.

From 2010 to present, Jeff has led lobbying efforts in Washington, DC on behalf of real estate investors which has brought about several changes in both government regulation and policy on distressed property purchases and resales. In 2014 and 2015, his efforts on Capitol Hill helped bring about change in the U.S. tax code and helped reinstate the Mortgage Debt Forgiveness Act. Since 2015, Jeff has worked to secure passage of the Seller Finance Enhancement Act.

Jeff’s efforts to secure reform in the real estate arena aren’t just on Capitol Hill. In his home state of Ohio, he has worked with the Ohio Division of Real Estate teaching on the legality of wholesaling.

He is a part owner of Venture Land Title II, LLC, and his law firm prepares deeds and other documents for two title companies. He is also legal counsel to a number of other organizations including Eagleville Bible Church, Inc.

Jeff is the author or co-author of 6 digital books:

  • “Understanding Self-directed Individual Retirement Accounts”
  • “A Guide to Private Lending”
  • “Short Sales Done Right – How to Profitably and Legally Navigate the Short Sale Jungle”
  • “Death of the Land Trust … in Short Sales”
  • “How to Hire Your ‘Dream Team’ ”
  • “Understanding the Foreclosure Process”

In addition to his digital books, Jeff authors an email newsletter twice a week and maintains a blog at WatsonInvested.com on investing, business and entrepreneurship which are read by thousands of successful investors.

Why Invest In Costa Rica Real Estate?

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By Jimmy V. Reed

Why all the Fuss about Costa Rica Real Estate Investments?

Have you heard all the buzz in the last few years about investing in Costa Rica? If not, you may be missing some of the best opportunities to make money in real estate right NOW!

Why Costa Rica?

Costa Rica affords a stable, growing economy in an outstanding environment. Only a few hours from the U.S., the “secret” of Costa Rica’s allure is becoming common knowledge, which is increasing tourism and development. Property values, once renowned for their incredibly low prices, are now rising with the increased housing demand. In short, the window of opportunity for major profit is right now!

About Costa Rica:

Costa Rica is flanked by the Pacific Ocean and Caribbean Sea. With a distance of approximately 155 miles between coasts, Costa Rica is well known for the premium it places on peace, education and democracy. In 1949 the government abolished the Army, allocating all would be military expenses to education and health care. As a direct result the literacy rate rose to 95% and continues to be one of the highest rates in the Americas. International ports on coasts, air and freight transportation services, and a well developed infrastructure and a strategic location at the crossroads of two continents make Costa Rica a contender in world markets. The government’s receptiveness toward new business ventures and excellent incentive plans have lured a growing number of multinational corporations to the country.

Spectacular natural beauty and peaceful atmosphere attract residents and tourists year after year. Nine active volcanoes, diverse forest environments, hot springs, wetlands, lakes, island reserves and 600 miles of beaches on two coasts account for the dramatic increase of tourism and residency in the last decade. Costa Rica’s varied terrain provides endless possibilities for activities ranging from hiking and white water rafting through national parks to snorkeling, scuba diving, and surfing off of the Pacific and Caribbean shores. Whether your interest is business or pleasure you will find Costa Rica a country of unequalled beauty.

Last year some statistics showed that there were 89,000 ex patriots living in Costa Rica. They find that the price points and cost of living put them way ahead in living standards and allow for the purchase of houses priced way below that of the United States. These properties are in gated communities with ocean, mountain, and rain forest views. This coupled with very favorable tax situations make it the idea place to invest. I see this first-hand as a developer there myself, because we are able to put our investors around the world into projects that will earn them double and triple returns of  those they may find in the States.

Why You Should Invest in Costa Rica:

There are several projects currently in process in Costa Rica and due to the recent US economy; there is an influx of investors now wanting to participate. As Investors, you should always keep in mind that your goal is to make the safest investment possible with the greatest return to you, in the shortest time period. You should analyze the investment, use your intelligence and make a calculated estimate based on the information you have available. That’s Investing 101! Costa Rica is now one of those investments that make a lot of sense for both the novice and seasoned investor.

Investors I know that have been involved in several development projects in Costa Rica from as small as 100 acres to as large as 1,650 acres. All said they needed expertise help when closing on these projects; they needed a team to help them with everything from writing contracts to title companies. Now there are two to three different American companies in Costa Rica that provide title guarantees. Those corporations provide foreigners with a title land guarantee.  Therefore, if there is a problem with fraud or problems in the title, they can be identified and the buyer can be paid back.

We also want to stress a crucial point to overseas investing and that is taking a little trip to the property you intend to buy or invest in. Now many investors we know have invested in Costa Rica and did not visit the properties firsthand. However some have visited since their purchases and found that they really enjoyed going to Costa Rica and seeing first hand where they have invested their money. One of our goals this last year was to inform investors of the opportunities in Costa Rica by encouraging them to take a FAM trip. A FAM trip is known in the travel industry as Familiarization and Marketing: it’s a trip you take to learn about the area and have a vacation at the same time. I would encourage investors who invest in these countries to hook up with a group that can show you the area, understand the investment, and at the same time give you a little cultural immersion while having fun at the same time.

In the future these types of trips will help the investor who never thought they would invest in another market become more comfortable and familiar with the market they have an interest in.  It’s true that with the help of the internet you can gather plenty of information on markets like Costa Rica fairly easy. Fact is for the first few years of International investing I did all my research on different markets via the internet.  But we also know the value of seeing an investment with our own eyes. Some Investors I know finally took a little trip down to Costa Rica to learn more about the projects. At the same time they had a blast riding around the projects on ATV’s and later on boat trips through the rivers and ocean of one of the most beautiful countries they had ever been to. Now that’s Cultural Immersion!

In closing, the returns are looking incredible. The market and demand are there. All you need to do is fill the demand just as many other investors are doing. Keep this in mind; investing should be, and can be fun. If you find yourself not comfortable with the investment then walk away. But don’t be like some investors who find something wrong with every investment and so end up never investing in anything. A true investor analyzes the project for what it is and then with all the facts he has moves forward or backs away. Moving forward though may sometimes require a little Leap of Faith.

 

Jimmy V. Reed         

Jimmy V. Reed of Fort Worth, Texas has been investing in real estate since 1987.  In 1991, he started conducting full-day training sessions on Wholesaling.  He then began teaching and mentoring others throughout the country. He is currently the founder of the Fort Worth R.E. club www.1REclub.com and has his own real estate training company that includes Wholesale, Probate, Mentoring & a Biblically based Debt Free training course and more!

More info available at www.JimmyReed.net

 

Is Credit Card Stacking Really Going to Help You Fund Your Real Estate Deals?

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By Jessica Guisinger and Merrill Chandler

If you are a new or seasoned real estate investor and you have been looking for capital to fund your real estate deals, there is a good chance you have heard of credit card stacking.

Credit card stacking is the practice that credit brokers use to help individuals acquire credit by applying for multiple personal credit cards at the same time. The idea is that once you are approved for multiple credit cards, you can use the newly extended credit to fund your real estate deals. While getting multiple credit cards at the same time may initially sound like a great idea, doing so can create serious problems—especially if you attempt this strategy without fully understanding the consequences.

“I think just about the worst mistake I’ve ever seen an investor make is funding a deal by employing a credit card stacking strategy,” said Jessica Guisinger, the referral partner liaison with CreditSense, a firm that specializes in improving both personal and business fundability for real estate investors and small businesses. A cursory review of their website reveals they are nothing like a credit repair agency, but rather a Fundability Optimization firm, that gives its real estate investor students and clients a great deal of specialized insight into the inner workings of credit underwriting in general, and credit approvals in particular.

“We see a lot of offer there that offer investors “funding” to do deals, but in reality they are just managing credit card stacking [for the investor],” Jessica explained. “These companies do not disclose—and investors rarely know until it’s too late— that getting the funding they need by maxing out these new credit cards will absolutely ruin the investor’s chance of obtaining future funding, and it inevitably tanks that person’s personal credit profile and score as well. And to add insult to injury, the 0% offer that was so attractive almost always disappears when they try to liquidate their credit card limit for cash.”

What credit card stacking participants don’t know is that even if they pay on-time for the next 24 months, they will be flagged as high risk borrowers because lenders view this practice as an extremely high risk behavior. The investor will also be flagged as high risk because of the sudden spike in utilization (balance to limit ratio), and a demonstration of poor credit management.

“A far better solution is to use true business lines of credit as your funding source. When you have the right credit profile these lines of credit offer the lowest rates available and you can get these business lines of credit with full check-writing capability at 3% to 6% to fund your deals,” recommended Jessica. “This type of funding is not only check-accessible, but it is unsecured as well. This feature offers a huge advantage for real estate investors because it helps make them MORE fundable while improving their personal credit rather than destroying it.”

Many real estate investors assume they cannot qualify for unsecured business lines of credit, or that they will need to pay high interest rates in order to obtain them without ever discovering the truth. Jessica noted that with the right borrowing strategies, this is patently untrue. “A lot of real estate investors need help becoming fundable because they have been playing the funding game without knowing the rules. And, not knowing the rules is made even worse because real estate investing is considered a high risk business by lenders—they don’t want to even talk to you much less give you money,” she said.

Jessica continued, “Thankfully there is hope. There’s a way for real estate investors to get inexpensive money from top tier lenders. They simply need to learn the rules of the funding game and then play that game at a professional level. In fact, if you know what you are doing, you can obtain these unsecured business lines of credit and then strategically grow them to $1 million or more in real estate funding,” she said.

“Experts who help others acquire this type of funding do not just jump in without exploring the current fundability of an interested investor,” Jessica concluded. “If someone does not do a little bit of fact-finding and a comprehensive fundability analysis before they lay out a plan for you, be on alert,” she said.

 

Stop Dissin’ the Housing Market—Set it Free!

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By Christopher Thornberg, PhD

Editors Note: This posting was originally published on the Opinion Page of the Los Angeles Daily News.

High housing costs continue to be at the center of policy debates in Los Angeles—and across much of the state. This intensifying focus is warranted now more than ever given how the crisis has moved from simply eating up the disposable income of residents to slowing overall employment growth in coastal economies – something driven by a lack of available workers, which in turn is driven by the housing shortage.

Sadly, the many proffered solutions to the problem remain wildly off base and are not likely to accomplish much of anything.

Take the City of Los Angeles’s proposed linkage fee, a fee to be paid by developers of market-rate properties to fund more affordable housing – and something that has been endorsed by many prominent voices in the community in recent weeks. That support has been motivated in part by the results of a recent homeless count done in Los Angeles County, which suggested that there was a 20% increase in the County’s homeless population over the last year. This is a total red herring when it comes to addressing the lack of new housing supply.

The recent homeless census count indicates that the total number of homeless in Los Angeles County is 53,000—a minuscule fraction of the 10 million plus people who call the County home. Moreover, a clear majority of these folks are homeless not because of the high cost of housing but because of mental and/or substance abuse problems, serious issues that would leave them homeless regardless of the current market price of housing. These people desperately need help—but a different kind of help than the linkage fee would provide.

And the few who are helped represent the proverbial tip of the iceberg—for every family that receives support there are another thousand that continue to struggle as rising rents eat into their incomes. Conservatively, the County would need close to one-quarter of a million new units to catch up with current need.

The linkage fee and similar policy proposals being rolled out at the city and county level reveal a deeper problem: Many localities and policymakers simply believe that the free market is not willing or able to create an adequate supply of housing in the region so they pursue punitive measures to make up for these perceived inadequacies.

Such a claim is akin to chaining a mighty eagle to the ground and then accusing it of not being able to fly. The lack of housing in Los Angeles is not due to the market’s failure but rather to the actions and choices of the City’s citizenry and its policymakers who have systematically intervened over many years to slow new development.

Research conducted at UCLA (UCLA Dissertation, The Homeowner Revolution: Democracy, Land Use and the Los Angeles Slow-Growth Movement, 1965-1992, Morrow, Gregory D.) shows how the City has energetically downzoned over the years, shrinking housing capacity from 10 million people to just slightly over 4 million—roughly the same as the current population. Add to that sky high permitting costs imposed by the City, non-stop California Environmental Quality Act (CEQA) lawsuits, as documented by the lawyers at Holland and Knight (In the Name of the Environment: Litigation Abuse Under CEQA, Jennifer Hernandez, David Friedman, and Stephanie DeHerrera, August 2015), and other rules and taxes including inclusionary housing and prevailing wage requirements, and it becomes obvious why the market is responding so slowly to current price signals.

It is true that what does get built in this town tends to be for higher income households. But this is a natural outcome of the barriers to entry that afflict the system. When supply is artificially limited, what does get produced is going to be concentrated in the highest margin portions of the market. If supply were less restricted and fixed costs reduced, there would be a natural movement towards lower income families. Would costs ever go so low as to entice developers to build ‘affordable housing’ using the public regulatory world definition? Probably not. But in Los Angeles the overall lack of supply keeps middle income families in housing that would otherwise be available for lower income families.

The market should not be blamed for problems created by public policies that have constrained them. Addressing these critical policy issues is the place to start. A few small changes have occurred at the state level, but so far, Sacramento has looked more towards punishing local jurisdictions for not allowing housing, rather than attempting to deal with the true root causes. Everyone is treating the symptoms, not the disease.

Take for example inclusionary housing, the new buzz word in many communities. Past studies conducted by neutral researchers have shown that these policies have very little overall impact on housing affordability in a community. This is because the gains enjoyed by the lucky few families who receive inclusionary housing subsidies are offset by the higher cost of housing for the rest of the population. And ultimately such efforts are tiny compared to the scale of the problem. The $90 million raised per year would support less than 1000 new units. This is less than the annual increase in the housing shortage.

A few places with similar problems are starting to look at more realistic options. Oregon has started to move in the right direction with Oregon HB 2007, a proposal that goes to the next level—it seeks to prohibit local efforts and activities that restricted housing development in the first place. As the old ditty goes when you’re in deep the first thing to do is stop digging. But Oregon’s proposal is controversial, there are many loopholes, and even if it passes it will only prevent new restrictions from being put into place. Until California, Oregon and other development-unfriendly places roll back current market restrictions and fill in the hole, the housing crisis will only get worse.

Christopher Thornberg

Christopher Thornberg founded Beacon Economics LLC in 2006. Under his leadership the firm has become one of the most respected research organizations in California serving public and private sector clients across the United States. In 2015, Dr. Thornberg also became Director of the UC Riverside School of Business Center for Economic Forecasting and Development and an Adjunct Professor at the School.

Are You Destined for Greatness?

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By Sam Sadat

The most common nemesis of both new and seasoned real estate investors is inaction! Many use the excuse of no money as their number one reason for procrastination. In fact, the number one reason for failure in life is the FEAR OF ACTION. Many people are simply too afraid to try. Think of this, anyone who has never made a mistake has never tried anything new. STEP UP! Unless you try, you won’t make mistakes, and until make mistakes, you will never grow and prosper. Nothing great has ever been accomplished with contemplation alone.

The greatest source of unhappiness in life is unproductivity. Playing it safe in your comfort zone will bring you nothing but mediocrity. I know it’s scary to step into the unknown, but that’s where all your opportunities are. Make a commitment to explore and embrace the unknown is 2020 and I can guarantee that you will be more successful and a lot happier by 2021.

The mistake most people make is thinking that they can solve their problems with the same mind that created them. The only way to overcome your challenges in life is by changing your mind. You must learn new things and look at your problems from a different perspective. In other words, you need to tackle your difficulties with a new level of consciousness, which is the only way to produce sensible solutions.

To maintain your sanity and joy in life, accept life as it is and not as what you think it should be. Insisting that the world owes you a favor or people must change to accommodate your needs is a hallmark of folly, immaturity, and ignorance. Until you are happy with who you are and what you have, you will not soar to great heights. By acknowledging and taking responsibility for your conditions in life, you will remove a massive burden off your shoulders and pave the way for a bright future.

Learning to accept things as they are requires your trust in the process of life. Let events unfold as they may while you observe them with a sense of awe. Your job is to say yes to whatever life gives you, to celebrate happy times, and to learn from adversity. So, never regret yesterday, live for today, and hope for tomorrow. Here’s a good tip: never stop questioning, exploring, and growing. That’s all you need to enhance the quality of your life. Like a river, life flows……..so stay in the middle of the current to gain proper balance and perspective. All the action is in middle of the stream, not the riverbanks.

Knowledge may be power, but its application will bring you joy and prosperity. If you want to know whether you know a subject well, try to explain it to a child. If you can’t do that, then you don’t understand it well enough. Until you learn and assimilate a subject well, you’ll never be able to apply it successfully and until you can apply your knowledge, you will not achieve greatness.

Never fear to act, as life rewards the brave.

Best regards,
Sam Sadat

Sam Sadat

Over the past 28 years, Sam Sadat has been involved in more than 2,000 real estate transactions as a principal, partner, lender or broker. During this time, he’s helped thousands of aspiring investors learn the real estate business the right way and apply their knowledge confidently to prosper greatly. He started his own company, Aim Financial, which in a few short years, became a top producing brokerage firm in Los Angeles. He also started Global Financial Network, LLC which is an NMLS licensed private lending firm specializing in financing of “fix and flip” or “buy and hold” investment properties in Southern California. Also, he hosts his own radio show, The Free and Clear Hour, on KHOW in Denver, CO and created the VIP Mentorship Programs that are affordable, practical and powerful.

Wife’s Life of a Real Estate Investor

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By Rachell Reed

So, your husband wants to be a real estate investor?…. well, I understand.

True Story…

My husband Jimmy Reed decided he needed a change. We were not yet married but had been together a long time…a long time! I knew him well enough that when he needed a change, he would get one. If one didn’t come his way He would make his own way.  He’s a go-getter and he does not settle.  Low and behold an infomercial… a Real estate infomercial… “Looks easy enough”. The most famous words ever spoken by anyone whoever thought about real estate investing.

It did look easy I thought “sure why not” we can do this! Well, I soon learned that I didn’t have the temperament to talk to people.  Sometimes they can be quite nasty.  If they yelled at me over an offer I would yell back. That’s just not good business no matter how ya look at it…

Jimmy jumped all in.  Right up his alley so to speak. So his new part time career began. He went to a seminar. He was hooked!

It took a year for him to do his first deal.  A whole year.  Lesser men would’ve quit but not him. It took off from there. He started “buying” properties and flipping them. Back in the day flipping had nothing to do with rehabbing. It was contracting a property and selling it before you had to go to closing (buying it).  So where does my life come into play in all of this??…

The busier he got the busier I got. He couldn’t do all of it on his own. I was working in retail clothing. Remember, those days shopping actually meant going out and trying clothes on not just ordering online and having your clothes delivered by FedEx…

I needed a change too at this time.  I was tired of working that hard and seeing others benefit from all my hard work. So, Him needing help came at a good time for me.

So where did he need my help? Organization!  I’m a bit obsessive about being organized. It makes life so much easier. It definitely makes business a lot easier, especially if you are self-employed. I didn’t like the interaction with the sellers but I am very good with paperwork and getting organized.  Seeing what needs to be done and doing it.

These days I handle all of the paperwork.  The computer work. The accounting. Dealing with all the monies. From rent to invoices to mortgages… and everything in between.  What I do not handle are tenants because quite frankly tenants can be big babies and I gave up my babysitting job when I was a teenager!

Our business relationship works very well. We try not to step on each other toes but sometimes that does happen. We are very clear on whom does what and we try not to cross each other boundaries but it does happen ever so often. We gently remind the other that’s a no-no.  Ok that’s not always true…sometimes there’s a lot of very loud talking and then we calm down and act like adults and work it out. Things are much easier that way.  It’s been a lot of fun these 30 plus years. It’s a lot of hard work. It can be a lot of fun too. Real estate enabled us to do things we never would’ve been able to do.  We’ve traveled and traveled and traveled some more… we’ve been able to help others and give back which is a whole lotta fun. 

Real estate has been good to us. It will be good to you too as long as you understand it’s a part time job or even a full time career. It is not a get rich quick program but a real life hard working job that you need to work at to be successful. If you get to work with someone you love…even better.

 

Rachell Reed

Rachell Reed has been involved in many aspects of business, church ministry, design and motherhood.

She is a wife, mother of two, and is Self-employed with her husband Jimmy in their Real Estate companies which cover areas such as a Rental business, a Buy & Sell company, Real Estate Club, Real Estate Training Company, International real estate projects, and much more.

After 30 years of rehabbing Flips & Rentals, a lot of her creativity became more about taking old things and giving them new life, which birthed her refurbish & design company.

She has a love of all things outdoors… from hiking to scuba diving.

In her down time she likes to read and write. She also has a blog. Rachell has been involved in ministry for 20+ years, as a Speaker/Teacher and Leader of women’s ministries. She has written bible studies and encouragements.

Today you will find her working on her latest project, a book of daily devotionals. Her absolute passion is creating something beautiful from something ugly and that is why she loves sharing…    “My Beautifully Messy Life”.

 

7 Personal Finance Questions to Ask Yourself Before Getting a Mortgage

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By Dr. Teresa R. Martin, Esq.

Are you ready for a mortgage? It’s a big step that requires careful planning. A mortgage will affect your financial future for years to come.

Before you sign that mortgage, consider these finance questions:

  1. What is your credit score? Credit scores affect mortgage rates.
  • Before buying a house, check your credit score. Should you raise your score to get a better interest rate? In general, high scores with no late payments during the last three years are enough to get good rates.
  1. Are you capable of handling maintenance costs? It’s important to consider the cost of maintenance before buying a house.
  • The mortgage is only one part of the total cost of owning a house. Maintenance is another important piece. Will you be able to pay for a new roof or air conditioning system when the current ones wear out?
  • Does your monthly budget include enough savings for maintenance?
  • It’s also important to consider DIY projects and hiring others to complete tasks. House maintenance can involve expensive and ongoing projects. Are you ready to pay for these costs?
  1. How secure is your job? Before signing a loan, evaluate your job security. Will the work last? How will you handle changes?

  • Evaluating your job future is part of planning for a home purchase.
  • Consider emergency funds and savings in your plan. If your job situation changes, will you be able to continue making monthly mortgage payments?
  1. Do you have the necessary financial paperwork? Mortgage applications require a great amount of paperwork. Lenders can ask for old tax statements, check stubs, savings account statements, and other information.
  • If you have a high credit score, you may get a no documentation loan.
  • It’s rare to get a no documentation loan, so it’s better to be prepared by checking your files and collecting the financial papers you may need.
  1. Did you calculate the hidden expenses of owning a home? Home ownership comes with multiple expenses that go beyond appraisal fees, property taxes, mortgage closing costs, and insurance.

  • One of the hidden expenses of moving to a home is more bills. If you’re used to renting, then home ownership can change your monthly bills by adding new ones. You’ll add trash collection, water, recycling and sewage in most locations to the expense list.
  • Home insurance is higher than renter’s insurance. In addition, older homes cost more.
  • Homeowners’ association fees are becoming more common in neighborhoods. You may be aware of condominium association fees, but are you ready to pay homeowners’ fees?
  1. Do you have an emergency fund? Emergencies can vary from broken dryers to flooded patios, so you need to be ready for anything. Is your emergency fund big enough to handle common, unplanned expenses?
  • Emergency funds are a better option than credit cards or loans. Putting enough money aside can help you avoid new debt.

  1. Are you applying for other credit? Mortgage lenders can see applications for other types of loans on your credit report.
  • Applying for other types of credit while trying to get a mortgage can hurt your loan. Mortgage companies view these applications as risks, so it’s better to wait before trying to get another credit card.
  • Applications for new credit lower your credit score and affect interest rates.

A mortgage is a responsibility that affects multiple areas of your financial life. Before you buy a house, consider how your current financial situation will be affected and plan for emergencies.

Dr. Teresa R. Martin, Esq.

Dr. Teresa R. Martin, Esq. is the founder of Real Estate Investors Association of NYC (REIA NYC). REIA NYC (www.reianyc.org) is a premier real estate investment association serving the New York City marketplace. Its primary focus and mission is “helping our members build, preserve, and harvest multi-generational wealth” in the areas of real estate investments, business ownership and personal development.

 

Does it Make Sense to Buy a New House Before Selling the Old One?

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By Edward Brown

You’re interested in moving. You need to sell your old house first before buying a new one, right? After all, you don’t have enough of a down payment for the new house without selling the old one, and you are pretty certain your bank will not qualify you for two mortgages.

You are in a dilemma; houses in your area are currently receiving multiple offers. Inventory is low. Sure, you can sell your house under the same circumstances, but will you be able to identify a new house so that you can simultaneously move from the old house to the new one? Unlikely. Do you sell the current house, move to a rental [or hotel] while you identify and try and close on the new house? Is the extra hassle of moving twice and the added stress of the inability to simultaneously close on the sale and purchase the new worth it? IF you could purchase a new house while still living in the old house worth the added costs involved with having a second mortgage until you sell the old house? How much is “peace of mind” worth in not having the pressure of having to purchase a new house [because you sold the old house too soon]?

These questions are a reality in today’s world in many parts of the country, specifically, the San Francisco Bay Area, because of the real estate rebound after the Great Recession. According to Jeff Stricker, a real estate professional with Alain Pinel Realtors specializing in the Silicon Valley in California, his clients are faced with these exact situations much of the time, as property is swooped up almost as soon as it hits the market, and, many times, with multiple, over asking prices. Jeff states that, although it is great for his clients as sellers, those same clients face challenging hurdles when buying a replacement property; competing against other buyers, some with cash only offers, who are willing to bid up a property far beyond the asking price in many circumstances. Some buyers are just so frustrated with the process of competing and getting outbid that they act in ways that they normally would never have thought. Overbidding. Settling for a house that they may not have originally envisioned. The list goes on.

Jeff, however, decided to think outside the box. What would happen if another house was purchased [without the added pressure of “living out of a suitcase”, if you will] prior to the sale of the old house? Is it even possible with the banking regulations that were placed upon financial institutions as well as homeowners over the past decade due to the “mortgage meltdown” that happened in 2008 and on? Dodd Frank rules that placed inordinate restrictions on the ability of homeowners to obtain financing left many people unable to get loans in which they previously were easily able to qualify.

Jeff decided to come up with a spreadsheet wherein, if he plugged in some assumptions, he could figure out if it would make economic sense to acquire a new house before selling an old house. The other part of the equation was to find a lender who would allow for a homeowner to purchase a new home without first selling the old home; thus, carrying two mortgages at the same time. Since most conventional lenders would not touch this, Jeff had to look to alternative sources. He found a company called Pacific Private Money, in Novato, CA that specializes in such a product.

Pacific Private Money can lend enough to the borrower to purchase the new home if there is enough equity in the old home to justify a combined Loan to Value [LTV] of 70% or less. Sometimes, if there is not enough equity in the old home, the borrower needs to add cash to bring the LTV to 70%, but, the ability to purchase a new home without having to sell the old one first can solve many issues for the homeowner. First, the a new home can be identified without adding pressure since the homeowner is still living in the old house until the new house closes escrow. Second, the stress of moving twice is eliminated. Third, and probably the best [and possibly most surprising] is that this solution may actually cost LESS in terms of increasing net equity to the household than selling the old house and buying a new house with the proceeds from the old house [and new mortgage] in most circumstances wherein the new house is more expensive house than the old house.

In a rising market, the earlier the purchase of the more expensive new house and the delay of the sale of the old will increase the net equity to the homeowner more than the costs associated with carrying two mortgages.

For example, let’s assume the old house is worth $1,000,000 and there is currently a 1st mortgage of $200,000. The homeowner desires to purchase a new home for $1,400,000 and has $100,000 in the bank that can be used for a down payment. We will look at two scenarios; the first is where the homeowner sells the current house, rents for a period of time, and then purchases a new home. The second scenario is where the homeowner borrows the money in order to secure the new home while owning the old home.

Obviously, there are many moving targets with the both scenarios, such as how much it will cost to rent a place [in the event of selling the old house first] as well as how long it takes to identify and close on the new house, storage costs for belongings, the cost of obtaining a private loan, and the appreciation assumptions for both houses, just to name a few.

Below, is a calculation making the following assumptions; it takes nine months to close on a new house after selling the old house; houses in the area [both old and new houses] are appreciating at 1% per month; interest earned on bank deposits are at 1% per annum; storage costs are $1,000 per month, a conventional bank loan is not available because the homeowner does not qualify and has to use a private loan company; the costs for the private loan are 9% plus 2 points; the interest rate on the old house is 3% per annum.

 

As you can see, in a rising market, where the new house is worth more than the old house, there is a significant benefit to using a private loan to purchase the new home and sell the old home at a later date. Waiting 9 months to eventually acquire the new house has tremendous opportunity costs, as compared to a net benefit of purchasing the new house right away and eventually selling the old house.

Although assuming a 1% per month appreciation of real estate may seem aggressive, the San Francisco Bay Area, and specifically the Silicon Valley, has experienced such growth. However, even if we lower the appreciation to ½% per month [insert spreadsheet showing .5% per month appreciation], we still see a fairly significant benefit to purchasing the new house now rather than waiting to first sell the old house and then buy the new house.

Aside from the economic benefit, other factors need to be considered; the lack of stress of moving twice should the homeowner decide to sell the old house first and then purchase the new house; what if the homeowner finds the house of his/her dreams now and does not want to let the house slip away? In today’s market, sellers are not willing to take contingent offers. Can the homeowner budget for both houses at the same time while waiting for the old house to sell? Is the market rising? Is the new house more expensive than the old house? How long will it take to sell the old house? These are just some of the issues to consider before deciding one way or the other; however, and this can’t be stressed enough – when a homeowner finds a house they like, they do not want to lose the opportunity of buying it. This means that they can start looking at new houses before putting their old house on the market. This also allows them time to make any repairs or fix up their old house so as to maximize its value prior to putting it on the market.

Once homeowners know that there is a potential to purchase a new house before selling their old house, they can be proactive in obtaining a commitment letter from the lender. Of course, homeowners should see if they qualify for a conventional loan for buying the new house [owning two houses at once], but they should keep their minds open to procuring a private loan should the bank turn them down. Pacific Private Money is such a private loan company.

Edward Brown

Edward Brown currently hosts two radio shows, The Best of Investing and Sports Econ 101. He is also in the Investor Relations department for Pacific Private Money, a private real estate lending company. Edward has published many articles in various financial magazines as well as been an expert on CNN, in addition to appearing as an expert witness and consultant in cases involving investments and analysis of financial statements and tax returns.

Top 5 Reasons Why Real Estate Investors have their Eye on Kumamoto

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By Priti Donnelly

If there is one city in Japan to watch for, it is Kumamoto, the capital city of Kumamoto Prefecture on the Kyushu landmass. Here you will find a property market in which opportunities are rare and sell almost as soon as they hit the market. Most investors familiar with the Japanese property market focus on high yields and affordable prices.  A city such as this, in its growth phase also has the potential for increased land value. Hence, Kumamoto is one of those markets with the potential for the best of both worlds.

Population

Kumamoto has experienced remarkable growth. Notable for one of the largest solar farms in Japan and positioned as a hub with a port for people and import/export of cargo. In this satellite city, population has grown from 670,348 in 2008 to 734,917 in 2015. That’s 9.63%! Compare that to 3.91% growth in Fukuoka, 1.31% in Kobe and 1.13% in Sapporo during the same timeframe. The location continues to draw tourists to its natural hot spring resorts and to the impregnable, defensive designs of the historical Kumamoto Castle dating back to 1467.

Affordable High-Yield Properties

Where there is a surge of population in a developing area, investors can find affordable, high yield properties. It’s first come first serve for the rare availability of one room apartment units (“mansion” in Japan) on the market in Kumamoto. Prices can be as low as 2.4 million to 2.8 million JPY (USD $21K to $25K) at between 7.5% to 9% yield net pre-tax, approximately USD $150 to $240 net income per month.

Secure Returns

Governance in Kumamoto supports subsidized employment and volunteer opportunities as well as rehabilitation and housing services for first offence ex-cons, the destitute and homeless. Therefore, along with great price and high yield, unlike other parts of Japan, the government pays rent directly to the landlord. In fact, some realtors and property manager offices specialize in buying vacant buildings to rent entirely to welfare recipients because of the high and secure returns.

Occupancy

From our experience we have never had a vacancy longer than two months in this city. Part of the reason is that properties are generally within ten minutes walking distance to the nearest train station. By comparison, Sapporo has five to six month vacancies, despite its size, high returns and white collar industries, and similar vacancies in Nagoya, the industrial powerhouse city.

Construction Standards

Investors often ask us about the effect of earthquakes in the area. Again, from our personal experience, on the 14 properties under our management, approximately only USD$500 in damages and that was to one window frame and some flooding under it. Even if there had been more damage, investors would have been protected under insurance.

One of the reasons that Kumamoto does not tend to disappoint is that many of the properties were built after 1981when the building standards act was revised for earthquake resistant construction methods. While 1981 is a turning point for some investors, some older buildings built prior to 1981 can be retrofitted to bring them up to code by renovating, repairing and re-strengthening exterior walls.  In assisting buyers with their due diligence, we look to see if the building has sufficient accumulated funds for repairs to cover the cost for work, or alternatively we look for completed work to justify depleted funds. Either of these cases tells us that the building is well managed, common in Kumamoto.

For these reasons, investors say Kumamoto is one of the best high return locations in Japan. if you see an opportunity don’t ponder over it too long. Properties there don’t come up often enough and when they do they most certainly don’t last.

Priti Donnelly – Manager, Sales and Marketing

Nippon Tradings International (NTI)

Priti Donnelly is the sales and marketing manager at Nippon Tradings International, a proxy and buyers’ agency representing foreign investors with purchasing, selling and managing real estate in Japan. She helps real estate investors, new to the Japan property market understand both the value of the cash flow property market, the challenges, as well as assisting with individual needs in growing cash flow portfolios.

http://www.nippontradings.com