The Real Estate Investor’s Resource

Today on Real Estate Reality Radio, I had guest, Mike Jechorek, investor and agent, who discussed investor opportunities in today’s market.  For more information listen here…  http://www.blogtalkradio.com/RealEstateRealityRadio/2008/04/03/RE-Investment-Opportunities-in-2008 .

Today’s real estate market is offering better deals than we’ve seen in a long, long time.  Banks are offering properties at 70-75% of the market value. You make your money when you buy; and the time to buy is when prices are low -now!

The reality is that there is a lot of inventory on the market right now.  That makes it a buyers market, creating greater and more deals.  Take advantage of the deals out there while they are available. 

Don’t be fooled by what you hear! There are still funds available -even for investors. Granted the requirements are more stringent than they were before with traditional lenders, but loans are still available.  If you are unable to obtain a loan, seek partners and don’t miss out on these great deals that are available in the market today.

The important part about doing deals in any market is to do your due diligence. Factor in all the costs and ensure that you make an offer that will result in a strong profit for you out of every deal.   For more information on how to analyze deals step by step, order my Deals or Duds? Home Study course at www.dealsorduds.com.   In celebration of my 40th birthday, there’s a very special discount for Real Estate Reality Radio listeners -listen to today’s show for the discount code!

Traci Ellis, my wonderful real estate attorney friend in Atlanta,  was the guest of my teleclass today on Estate Planning for real estate investors.  Among other things, Traci shared , “Although our mortality may not be our favorite subject, it is an important subject to address because what we leave behind is our legacy.”   By doing a little estate planning now, it can save those you love so much grief in the future.  Without that planning, the state ends up choosing how your assets are handled.  You are not working this hard for the state, are you?

At a minimum, we should all have the following:

1) Will  2)Power of Attorney 3)Living Will or Advanced Directive

If you have children, choose a guardian to raise your children should something happen to you. 

The important information regarding your estate and your wishes should be documented.  A family member or other person you choose should have a copy of the documentation and your attorney may also hold a copy.  There are also online services now to upload these types of documents so that they can be retrieved from anywhere.

Don’t miss our next teleclass with Traci when we discuss the use of Trusts for real estate investors.  Visit www.tranformit.net/eventscalendar to register.

Also, Traci offers an information packed blog of her own -visit it at www.traciellis.com.

Don’t believe everything you hear.  I’ve heard all kinds of stories from people and the media over the past few weeks about how there is no more money for funding deals; and it’ s just simply not true.   One ezine that came out this week stated that there are no more stated income loans.   Fortunately, on today’s Real Estate Reality Radio Show, Michael Gross of Dividend America Mortgage set the record straight on the lending market for real estate investors.

As for stated income loans, they are still available.  It’s just that you’ll need a 680 credit score or better and you’ll need to verify assets.  What has gone away in regards to stated income loans is the old stated income/stated assets.  It’s now stated income/verified assets.

Construction lenders are a great way to get into deals.  Using this strategy potentially allows you to refinance with a conventional lender and walk away from the deal with some cash in your pocket from the construction loan. 

What are conventional lenders looking for in a borrower these days? 

Safety:  They want to see equity in the property rather than investors trying to pull all of the money out of the property. Michael says leave 30% equity in the property.  If you don’t find a deal with that kind of equity -keep looking ! It’s a numbers game; and there are plenty of deals out there.   If you need to learn how to analyze deals and what to offer to make your deals work, check out www.dealsorduds.com -I developed this home study course to help you do just that.

Long Term Holds:  Lenders want to lend on deals that you are planning to hold.  Producing a signed lease goes a long way. It’s even better to have an appraisal that shows the property as rented or leased.  This strategy works well if you started with the construction loan, fixed the property up and then put a tenant in the property prior to closing on your long term convential loan. 

If you’re sitting back saying, I don’t have good credit, there’s still hope!  The fact that money is available to those with good credit just means that you need to get a partner.  You can partner on deals and apply for loans as a co-borrower with someone who already has good credit.   Finding partners is not that hard -people are all around you that have money and/or credit -start looking for them! 

We talked today about all this and more on the show, you can listen to the show  for more information. 

Property Taxes Too High?

Property Tax Assessment Appeals to the Rescue

Are you watching your property taxes go up while your property value goes down?  Somehow it seems that even though property values are dropping, the taxes on property are still going up.  If this is the case for you, then exercise your right to the appeals process; it’s a fairly simple process.

First, you want to compare the tax assessed value of your property to the fair market real estate value.  Carefully check your property tax bill for the tax assessed value.  Then find the fair market value for your property by looking at recent comparable sales.  Real estate agents and websites such as www.homegain.com are good for performing a real estate fair market value analysis.

Let’s say that your property is 3 bedrooms and 2 bathrooms and is assessed at $155,000.00.  You want to look for recent sales in your area of other 3 bedroom/2 bath properties.   An example of the comparables sales in your area might be:

3/2   $138K

3/2   $140K

3/2   $157K

3/2   $165K

How would you make sense of these numbers?  If you just took the average of the numbers it would equal $150K.  

So, what do you do now?  Further define the differences in your property and the other comparable sales.  One way to do this is to use data from a real estate agent and website like www.homegain.com.   Another way is to simply drive by the address of each comparable property (this shouldn’t take much time since they are right in your neighborhood).   When you view the comparable properties, look to see how similar or different they are from your property.   You might find that the properties selling for the higher end prices of $157K and $165K are brick, while your home and those sold at $138K and $140K have siding.  Or you might find that the more expensive properties are larger than yours or have other differences that would make them worth more.  Whatever the situation, it is a good idea to take a picture while you are there to show the differences.

If you’ve found some substantial differences, it’s time to submit your real estate tax appeal.  There is a deadline for the appeals process so pay attention to the deadline dates on your tax bill.  Simply write a letter including your parcel identification number explaining why you are appealing the tax assessed value.  Include your comparable sales documentation, pictures and other documentation. 

You will receive one of two responses to your appeal letter.   Your tax assessed value may be adjusted based on your appeal letter.   However, you won’t always win the real estate tax appeal process that easily; your response letter may be a notice that you are required to go before the board of equalization to further dispute the tax assessed value.  At this point, you have to decide if it is worth your time based on the potential savings.

Don’t forget that the tax assessed value not only affects your bottom line, but if you get ready to sell your house, the buyer will have to consider the tax bill as part of their expense.  The tax amount on the property will impact their monthly mortgage payment, which impacts the amount they can pay for a house.  The simple fact that you have appealed your tax value and that it is in line with the fair market real estate value for your property can save you money now and be a help when you are ready sell. 

To learn more about real estate fair market value analysis, visit http://dealsorduds.com .

Erica Whitney, real estate investor and agent joined me today on Real Estate Reality Radio to talk about today’s real estate market. 

Erica’s best tip for selling your house in a tight real estate market: Give them the Wow Factor.  The ”Wow Factor” includes making the house look top notch & pricing it right. 

To make the home look top notch, clean it up, give it a fresh coat of paint, clean or replace carpets and add some new light fixtures if necessary.   Stage the home with furnishings and accessories to make it look inviting.  Give the buyer a reason to think, “Wow -right features, right price!”

Price the home at or below the most recent comparable sales.  Erica shared some interesting information on pricing.  She said, “If you’ve had 10-12 showings and no offers -You’re 5-10% over priced.”  “If you have no showings you’re 10% over priced.”

Other topics discussed:  where to invest, cash flow, tenant management, the new GA Purchase and Sale contract, short sales, and more!  Here’s what one listener had to say about the show, “

“I very much enjoyed listening to your broadcast. You helped me better understand the options around management of properties after the purchase is complete.” 

Thanks, 

Giulio

Listen to the show.   

What do you know about the regional planning of the area where you invest?  I recently attended a meeting where there was a regional planning representative speaking about various plans for our region, from transportation to housing to parks and recreation and more.  This meeting provided much insight into my own personal investing choices and decisions for the coming months and years. 

A great way to be strategic with your real estate investing plans is to know and understand the regional plans for your area.  These plans can provide great insights for you around your real estate investing strategy and  contribute  greatly to the success of your investing plans.

Speaking of being strategic, do you have a strategic plan for your real estate investing?  Taking information like regional planning into account is what a strategic plan is all about.  Every business needs a strategy, a long term plan of action that leads to winning!

If you and/or your company do not have a strong strategic plan, I strongly encourage you to take the time to work on your business and do the planning.   In working with numerous clients and real estate investing companies, I find that the those who take the time to create and consistently work their strategic plans are by far the most successful. I absolutely love  working with clients on their strategic plans and seeing the results it produces.  If you are ready for a strong strategy for success - call me - 770-377-1847 - I’d love to help!

There have been a lot of recent changes when it comes to property value trends.  Do you worry about making a bad investment decision? Analyzing deals and the value of property can be tricky -especially in this market.  

I am excited to announce that  Foreclosure.com   has invited me to be there guest on Thursday, February 7th at 4 PM, in presenting a webinar where we will be discussing How to Determine the Value of Real Estate.  In this webinar,  I’ll be providing a lot of information that you won’t want to miss when it comes to figuring out value and making good investment decisions! 

Investors are often interested in the real estate professional status for tax purposes because having that status allows one to write off greater losses against their income.  Whether or not you qualify for the status depends upon how much time you spend on real estate activities. 

Any time you have a question regarding tax code, you should consult a CPA that is knowledgeable specifically about real estate investing.  Not all CPAs are up to speed on the specific codes that benefit investors, if you are investing in real estate, find a CPA that is. 

It is also important to remember that tax codes are always changing and your tax situation, income and other factors are most likely changing from year to year.  This is all the more reason to have a good CPA that understands real estate investing (and your situation) so that they can solve the good old tax code for you!

Choose where you want to specialize and spend your time.  In other words, don’ try to know and be an expert at everything in your real estate investing business.   Unless you have a true knack for studying and understanding tax code, this is one area that is best left to the professionals.

Allow me to introduce you to the latest in the mortgage business for 2008 - Risk Based Pricing or Loan Level Price Adjustments. Basically, the concept is that additional points are being added to loans based on how risky the borrower is. These are not the discount points used to buy down the interest rate, these are additional points making the loan cost more. The lower the credit score of the borrower, the more points and cost.

Yesterday I was chatting with a lender at First Horizon about a potential “refi” on an investment property. Here’s the scoop or an example on what the points are looking like now based on the offerings from First Horizon:

Full Doc
680 & Above - no points
679-660 - 1 point
659-640 - 1.5 points
639-620 -1.75 points
under 620 - 2.5 points

Stated Income Loans -Must have a minimum of 680 score
720 Score - .5 point added for stated income
680-720 - 1 point added for stated income

This is a far cry from the old days when as long as the borrower had over a 620 credit score, loan costs were basically the same.

Thankfully, real estate investing provides creative ways to invest even without having great credit. However, when you are ready to refinance those deals that didn’t require credit to purchase them, credit becomes very important. If your credit is not the best and even if you are successfully investing without credit, begin working towards improving your credit score. There’s tons of great information at www.myfico.com.