Real Estate

Real estate agents must not be members of NAR to be able to sell real estate (07/04/2010)
(...) Every real estate agent I know has a lot of initials after his or her name. What do all those initials mean? There is a wide variety of designations offered by many different real estate–related organizations. There is no consistency among them regarding educational or testing requirements to obtain the designation, nor continuing education requirements to keep them. (...)

Find the best real estate agent and be sure that your information is kept private (07/04/2010)
(...) Does the agent listen to you and give appropriate responses, or does he or she seem intent on selling him- or herself and obtaining a contract? Is he or she confident, dressed in a manner appropriate to his or her specialty, and organized? Is he or she clear and straightforward regarding services and fees? Ask what makes him or her better than the competition. Does he or she immediately give you solid reasons, fumble for an answer, or resort to trashing his or her competitors? Does he or she interact in a professional manner, or does he or she seem flippant, vulgar, or too personal? By the end of the interviews, you should be in a position to hire an agent. Will my agent keep my information and plans confidential? Your agent is obligated to keep all your information and plans confidential. (...)

Terms and types of buyer real estate agency agreements (07/04/2010)
(...) Disputes arise over questions regarding whose efforts turned up the buyer. Did your coworker learn about the property from you or from the half-page ad the agent placed in the Sunday paper? An Open Listing is really an offer you make to all real estate agents. You offer to pay them a certain commission if they bring you a buyer and you sell to that person. (...)

How to talk to sellers when you do not have a real estate agent (07/04/2010)
(...) The listing broker may be willing to reduce his or her commission to only 3% if he or she does not have to split it with anyone else. Your offer could then say, "I offer to pay US Dollars 97,000 purchase price, with the listing agent to receive US Dollars 3,000 and no selling agent involved." The listing agent receives the same fee he or she would if you had an agent. (...)

Why do you need a contingencies clause if you have a diligence clause (07/04/2010)
(...) If a seller leases some or all of the property to someone else before closing, then you might be saddled for many years with a tenant you do not want, at below-market prices. You should require in your offer that the seller disclose to you all leases - including billboard, mineral, air rights, and premises - currently on the property or under negotiation. Easements should also be disclosed - these are rights to do something on the property (right of way, parking) or to avoid doing something (scenic view easement. (...)

Who can help you to save money on a commercial property (07/04/2010)
(...) A local engineer or the construction-permitting department of your community might be able to offer you guidance and some names. I am not building bridges. Why do I need an engineer? A building with evidence of settling - cracks in the exterior or interior walls or gaps between the building and sidewalks or steps - should be checked out by a structural engineer. (...)

A skilled appraiser can help you in a number of things (07/04/2010)
(...) The appraiser makes a series of adjustments, some upward and some downward, until he or she is comfortable with placing a value on your home. The glaring problem for you is, how do you know how much that garage is worth? How do you know how much to adjust the sales price? If an appraiser will share that general information with you, do not be bashful about asking. That is easier if you are trying to buy something because he or she knows you must obtain a real appraisal in order to obtain a loan. (...)

When to use a discounted cash flow method to vaue properties (07/04/2010)
(...) What interest rate do I want to earn in order to be willing to do that?" If you have good credit, you will receive a lower interest rate. If you have terrible credit, you will be charged a higher interest rate. Short-term loans usually have lower interest rates than longterm loans. (...)

All you must know about the due diligence clause in a purchase contract (07/04/2010)
(...) Waiting until the day before closing, when you obtain a copy of the final title policy, is no time to start solving those problems. Also, the title commitment will let you know if all owners have signed your real estate contract. If the seller's spouse must sign any deed, did not sign the sales contract, and has no intention of signing any deed, it is best to find that out earlier rather than later. (...)

Useful information to help you improve you credit score (07/04/2010)
(...) Making large, but regular, reductions over time will result in dramatic increases. Credit scores test how well you pay your bills each month, not whether you do the right thing when you come into a large piece of cash. Do not obtain any new credit cards unless your low score is a result of insufficient credit. (...)

What does a lender require and what interest rate to expect from a mortgage (07/04/2010)
(...) If it will be used for residential rental, include a statement regarding all school zones for the property. That way, the lender can easily evaluate that the property is in a good area and will hold its value. If you plan to manage the property yourself, say so in your documents and explain any relevant experience. (...)

What does personal liability on a loan mean (07/04/2010)
(...) One kind, called origination points, is a lender fee to cover certain expenses and additional profit for the lender. On a typical commercial loan, the origination points will be 0.5%–1% of the loan. (...)

What types of seller financing are there around (07/04/2010)
(...) They say that a technical reading of the documents shows that no one has any obligation to tell the lender when property is sold. Some say that if you disguise the transaction as a lease or a lease-option, you can avoid the due on sale clause. Others disagree, saying that if the substance of the transaction is a sale, then the first mortgage must be paid in full at the time of the sale. (...)

Closing companies and how to deal with them (07/04/2010)
(...) That way you can read them and ask questions instead of feeling pressured to simply sign your name without reading anything. Loan documents usually arrive only a day or two before closing. Your lender will have a checklist of its requirements and some standard forms. (...)

All about closing costs and title insurance (07/04/2010)
(...) Can other expenses be reduced if we use existing work? Often, a surveyor will charge a small fee to update a survey previously prepared by him or her. Surveys prepared by others do not normally enjoy the same courtesy. Appraisals are always prepared fresh, for each transaction, as are any required engineering reports. (...)

How much to charge monthly for a residential property (07/04/2010)
(...) If you meet price resistance, say something like this: "I am a new investor, and perhaps I did not do a very good job researching what other landlords of similar properties charge. Do you mind sharing with me some information regarding who is charging the amount you say is fair for my property?" This either calls their bluff, or gives you additional information with which to do a reality check on your rates. Sometimes, your asking rent is fair but you are afraid of losing a prospective tenant. (...)

When to start looking for insurance and what type of property insurance fits you best (07/04/2010)
(...) U.E. report, which is the insurance claims report for the property for the past five years. (...)

Avoid time wasting sightseers but continue to call them (07/04/2010)
(...) I do not think you are going to sell anything over the phone. That first phone call is to weed out the obvious tourists and obtain contact information for the possibly qualified buyers. When someone asks the price, I first ask his or her name and phone number, in case we are disconnected. (...)

Diligence and lease aspects you must understand (07/03/2010)
(...) There is no history of any potential hazardous waste discharge. Many investors buy raw land when they come into a cash windfall. As a result, they do not need any financing, so there is no lender around to require a Phase I Environmental Report - the report that alerts you to the possibility of hazardous waste on the property. (...)

Avoid surprise expenses when investing in a condo (07/02/2010)
(...) Ask for the monthly profit and loss statements for the last two years. Is the association running at a deficit every month? Are there large expenses for legal fees? Are the actual repair expenses fairly close to the budgeted numbers or not? All of these things can tip you off to potential trouble. Someone told me their condo association charges an "impact fee" for all units with tenants and a separate move-in and move-out fee. (...)

When to hire a resident manager instead of a management company (07/02/2010)
(...) Employees often become lax about some forms and procedures over time, especially if nothing bad happens as a result. A management company can keep your resident manager happy and fulfilled in his or her job, and focused and consistent regarding all policies and procedures. The resident manager becomes part of a management team. (...)

How to find office buildings and how much to pay for one (07/02/2010)
(...) The current tenants might be able to give you contact information for the owner or the management company. If that does not work, the local tax assessor's office can tell you the name of the legal owner and the address where the tax bills are sent. Bear in mind that a management company is not motivated to pass along information about potential buyers. (...)

Where to find convenience stores for sale and how much to pay for them (07/02/2010)
(...) The value of the underlying real estate and the condition of the building, tanks, and pumps does not add or subtract from that number, it simply determines if the sales price is closer to 3 x EBITDA or 7 x EBITDA. Convenience stores sold strictly as real estate, with a tenant in place who owns and operates the actual store, are sold based on the NOI and cap rate evaluation method. What due diligence will I need for a convenience store? I am assuming that you will buy a convenience store as a real estate investment, not as an operating business. (...)

How to know if my city is good for real estate investment (07/02/2010)
(...) How many households are in the area? Is it growing, stable, or going into decline? Most retail and dining establishments do better on the goinghome side of the road than the going-to-work side of the road. Exceptions are coffee- and breakfast-related businesses, which naturally want the morning traffic. When choosing among corners, the one just past the traffic light is better. (...)

Best price to pay for a rental home (07/01/2010)
(...) Our job would be so much easier if we could pay too much for a property and have everything turn out okay. It is preposterous, though! If you have negative cash flow, or you must take personal income from your job or other sources to supplement the rental income from the home, how many of those deals can you do? Try to make it up on volume, and you will invest yourself right into bankruptcy! If you enter the monthly payment you can afford, the spreadsheet will tell you how much money you can borrow to make that monthly payment. Research rental rates in the area for the type of house you want to buy. (...)

Tax savings can help with negative cash flow (07/01/2010)
(...) Suppose you want to pay a higher price for a rental house, or have a smaller down payment. Suppose your mortgage payments are now US Dollars 1,341 per month. That additional US Dollars 300 per month will take away all your tax savings. (...)

The best type of flip and how to do this safely (06/29/2010)
(...) Normally, property owners willing to grant options do not want you putting “For Sale” signs on their properties or doing any advertising at all. You will have to track down potential buyers and approach them about their interest in buying. If you are shy, afraid of rejection, or not very good at meeting new people, then option flips are probably not for you. (...)

Explanations for options and predetermined prices (06/29/2010)
(...) It just has to be an amount the owner finds acceptable. The fee pays only for the option. It does not pay for the property, nor is it earnest money or a down payment. (...)

What you have to pay for a real estate option (06/29/2010)
(...) If you even suggest such a thing in the option contract, the whole arrangement could be unenforceable. How much should I pay for an option? How much you pay for an option will depend on (1) the lowest amount the owner will accept, and (2) the largest amount you can afford to gamble if you cannot find a lender or another buyer. Remember, the money is not refundable. (...)

Government incentives for fixer uppers and buying from HUD (06/28/2010)
(...) In addition, the U.S. Department of Housing and Urban Development (HUD) offers substantial incentives for investors willing to rehabilitate affordable housing. (...)

What to expect from fixer uppers (06/28/2010)
(...) You must paint before you lay carpet. If your schedule calls for the plumber in Week 1, drywall in Week 2, painters in Week 3, and carpeting in Week 4, you will be dead in the water if the plumber shows up one week late. You will lose your slot for all the workers, who will be working on other jobs during the reassigned week you need them. (...)

Invest in distressed properties only if you have enough time (06/28/2010)
(...) If you are often overcome with doubt, especially when other people contradict you, you might not be emotionally suited to this strategy. How do I find properties with owners in crisis? Here is the trick about these properties: Most people who know about looming crises - lawyers, doctors, counselors, and religious leaders - are not allowed to tell anyone. Even if you found out, would you really feel comfortable intruding on someone's problems and offering to buy their property cheaply? Most people cannot do this. (...)

Buy real estate at creditor auctions (06/28/2010)
(...) Someone at the courthouse can give you guidance. What are the dangers of buying property at creditor auctions? You have all the typical risks associated with buying any property. We will not go into those here, because they vary so much depending on the type of property. (...)

What to know about stigma properties and demolition orders (06/28/2010)
(...) In other words, if you buy at a low price will you be faced with selling at a low price in the future? Or, will the stigma disappear over time? The truth was revealed by a structural engineer's report I ordered before the purchase. That same report also served to erase the stigma when I wanted to resell. What are demolition orders? When a structure falls into serious disrepair, it becomes dangerous. (...)

What are property tax sales and redemption rights (06/28/2010)
(...) None of them are terribly complicated, but it is hard to find out what the rules are so you can follow them. They are different from state to state. I suggest that if you want to follow this strategy, you identify a title insurance company with which you would like to do business. (...)

How can former owners recover their foreclosed property (06/28/2010)
(...) Those investors are very large companies with huge bureaucracies. It can be very difficult to find the right person in charge of foreclosed property and then be lucky enough to discover that person has the authority to negotiate a sale. Usually, foreclosed property is listed with a local real estate agent for sale. (...)

Influence of credit score on real estate investments (06/27/2010)
(...) In fact, if the loan goes into default, the lender can choose which party he or she wants to sue for the remaining payments as both the borrower and cosigner will be considered to be in default. The payment history for the loan will be shared with the credit reporting agencies for all cosigners as each payment is made. A guarantor, on the other hand, is someone who signs a separate agreement saying that he or she will pay if you default on your obligations. (...)

Real estate investing often requires a partner (06/27/2010)
(...) If the two or more of you can make something better than you can by yourselves, then by all means join forces. If you are just looking for a partnership for the sake of companionship, then things will probably fall apart fairly quickly. Typically, partners bring at least one of the following to the table: money; access to money (borrowing); knowledge; influence; or, time. (...)

What to discuss with your future real estate investment partner (06/27/2010)
(...) It is also common for a partner's departure to trigger huge accounting and legal fees as everyone squabbles over what the partnership interest was worth. If one partner wants out after investments are made, do we have to sell everything and split up the cash, even if that means we all lose money? With some preplanning, you will not have to liquidate your investments simply because one partner wants or needs to exit. That preplanning consists of a buy-sell agreement. (...)

Facts about real estate partnerships limited liability companies and corporations (06/27/2010)
(...) Usually, if a partner dies, the partnership automatically terminates. A general partnership enjoys ease of setup and maximum flexibility. It is also the format most likely to cause problems, misunderstandings, and possible financial ruin. (...)