How to Convince a Home Owner to Agree to a Short Sale

You’ve found a great property you’d like to invest in, the owner is motivated because he is in financial trouble, he’s ready to deal. Sounds like the perfect situation for you, but what if the seller is stuck on a price that you know is too high for the market, because that is what he owes on the house?

That’s when you need to come armed with knowledge about a short sale, and can clearly explain why a short sale might be to his advantage.

Most home owners that are trying to unload property, because they are behind on payments, or other financial distress, have probably never heard of a short sale. Explain to your homeowner that he has an option, that you can only offer him this much money, but maybe his bank will take the offer and relieve his entire debt, if he applies for a short sale.

Of course this is where the questions will start. How do I request a short sale? Why would my mortgage company agree to that? How does this help me? Why should I sell to you for such a low price?

The first question is going to be slightly different for each mortgage company or bank, but your best advice is to ask him to call his lender and request a short sale packet from their loan mitigation department. If he’s uncomfortable doing this, you may want to offer sitting in with him on the phone call, to make sure he asks for the right thing.

Explain to your home owner that in these financial times, most mortgage companies are overwhelmed with foreclosure property they cannot sell fast enough, and that they are willing to work with the home owner to keep the home out of foreclosure, which also saves them the cost of legal fees and paperwork involved in a foreclosure. Make sure the home owner understands this is not a guarantee that they will agree, but it may be his best option, and may be his lenders best option. Offer to assist him with any paperwork, he’ll probably be relieved to have some help.

The home owner needs to understand that by agreeing to a short sale, he may be able to have the balance of his mortgage forgiven, and he will be free of the burden of the mortgage payments, and not have to endure the foreclosure process. Most people really want to pay off their debts, and if he is like most people this will make him feel much better than foreclosure. Don’t hide the fact that this could have detrimental affects on his credit score.

Why should he sell to you for such a low price? You know this one. That is all the house is currently worth on the market. If he’s not convinced, you may need to get a broker’s price opinion to share with him, or show him prices of recent sales in his neighborhood.

While a short sale may not be for every distressed home owner, if you educate them, they will be more accepting of trying a short sale.



Original article by Jennifer Bland

How Scenario Analysis Helps Measure Risk When Real Estate Investing

Scenario analysis is used by real estate investors and investment property specialists because it provides a good way to measure risk when evaluating real estate investments.

What is scenario analysis? It involves estimating a range of variables that will have the greatest impact upon the likelihood of an investment performing according to an investor’s minimum expectations. Rental income, for instance, is subjected to scenario analysis when the analyst wants to gauge investment property performance based on various rent scenarios. In other words, how well does the property perform in the event rents decline or increase?

Scenario analysis typically considers three scenarios. In this case, we will assume that our scenario analysis is intended to explore what influence changes to rents would have on property performance.

  1. Worst-case – if rents decline or do not change at all
  2. Most-likely case – the most realistic rents that can be obtained
  3. Best-case – rents beyond our wildest dreams

Assume, for example, you are evaluating a rental property consisting of five units rented at $900, producing $54,000 annual rental income, and resulting in a cap rate of 6.23%. Though you are interested, you feel that the cap rate is too low (you prefer a cap rate of 7.0%). The seller will not drop the price (which would raise the cap rate), so you are faced with a dilemma to either pay the price (against your better judgment) or walk away.

This is where a rent scenario analysis can help. Rather then making a decision blindly, you can explore the influence that various changes in rent would have upon performance. In other words, at the very least, you can see what rents would have to be collected to achieve your cap rate, and whether they are likely or pie-in-the-sky.

In this case, you would consider all three scenarios: worst-case, most likely case, and best case. If your desired cap rate were attainable within the first two scenarios, it would indicate that the property’s current rents are low and it does provide some “upside potential.” So you might want to pay the asking price confident that you can increase rents and thus improve the property’s performance. Otherwise, if rents would have to be raised beyond your wildest dreams to attain your cap rate, you might want to walk.

How do you construct a rent scenario analysis? You can use a spreadsheet or purchase a real estate investment software program. Just remember what it is you want to achieve. You want to see the outcome on essentials like cash flow and rates of return based upon a range of rent scenarios. You might be amazed what you uncover about the property.



Original article by James Kobzeff

Real Estate Investing: Find Out How To Succeed In The Online Real Estate Market

When it comes to real estate investing, one avenue sometimes overlooked is the online real estate market which can provide a simpler and easier way to buy and sell properties.  Online real estate marketing, for starters, revolves around online listings and advertising properties through various outlets on the internet to help obtain exposure.  Online real estate is often a much more convenient method of doing business, and it is often much quicker than traditional methods of real estate investing  To top it off, online real estate means you typically won’t be dealing with real estate brokers meaning you can save on not having to pay commissions.

Below are some tips to help you get started.

reiWhat is the value of your property?

Before you begin, whether you are working your way into traditional real estate investing or you are tackling the online real estate market, you need to evaluate and understand the value of your property.  There are several methods to find the value of your property, but the two easiest would be to find a listing of your property online or request a real estate agent to perform the evaluation for you.

How do you market your property?

Once you have a solid idea of the value of your property, your next step should be deciding on methods of advertising.  One particular method employed by many agents is to utilize video.  With so many video hosting platforms out there (YouTube, Vimeo, etc.), getting a video online for potential investors or purchasers is easier than ever.  These videos should offer information on the property as well as a guided tour.  This allows people to view the property from the comfort of their own home or office.

Another option is to blog your property listings.  If you are savvier when it comes to writing, you can write an article about the property and provide some photos to go along with it.

There are many other ways to market your property online.  You can test out classified sites (craigslist) or even post your listing on standard real estate sites (Zillow).

Regardless of your choice, having your listing online opens your property up to a wider audience.  The more places your listing is posted, the more potential buyers will find it.  As such, you should be prepared to receive more calls and inquiries.

Are there risks?

There is little doubt that you can make a lot of money through online real estate investing; however, you should also make sure that you are completely comfortable with everything involved in the deal.  Spending time online will make your investing, purchasing, and selling easier and quicker, but without attention to the details, you could cost yourself a lot of money and time.

Of course, these risks are no different than if you are dealing with traditional marketing methods, but it is important to state the obvious to ensure that you are covering yourself no matter the means you choose.

You should be careful in regards to each and every aspect of the deal when it comes to online real estate.  You need to be fluent and comfortable with financing, property “rehab”, and when and if you need to consider hiring a property manager.  Of course, there are options available for you online that can handle these aspects for you or allow you to discuss with others what they are doing and their own best practices.

It also does not hurt to expand your knowledge whenever possible.  Subscribing to blogs or newsletters from the big real estate sites will keep you in the know about trends, tips, and topics to keep you on your toes and help mitigate any risks you may encounter.

In summary…

While online real estate investing can help you buy, sell, and rent more properties quicker, there are certainly some possible risks.  Make sure you take your time and complete the deal properly.  You’ll feed better and see better results.

Good luck!

Buying Investment Real Estate Incognito

An oft promoted “secret” of buying investment real estate with the intent of “flipping” the property is, as usual, no secret at all. It is however well worth reviewing here so you don’t end up in a relationship that you don’t want. Many real estate investment aficionados promote the concept of buying real estate under the name of an organized legal entity instead of their own name. One purpose behind this structure is to facilitate easy re-selling of the property. This goal is reportedly accomplished by selling the ownership entity (LLC, Corporation, or Trust) and thus transferring the property it owns as well without the traditional process of title searches, title insurance, filings, etc. It sounds good, but is it really? I understand well the desire to make life easy for a buyer. However, there are elements involved in a typical “entity sale” that may make it problematic at best.

The first issue is the probable sale of the entity. Unless this is done correctly, the seller may in fact be selling a security. Securities law is what governs people who sell securities. Stocks, bonds, and shares in a LLC are all generally considered securities. In a case like we are discussing, the seller must comply with securities law. The penalties for breach of these laws are far more punitive than for breaking most real estate laws. In addition to the securities ramifications, there are liability issues.

For all available real estate ownership benefits to be enjoyed by (passed through to) the owners they must have personal liability for the debt. This means that the new owners will of necessity need to sign on any underlying debt, assuming that the current lenders will allow it, which is no way a given. In addition, it will be difficult for the sellers to get a release from the lenders. It is important to note that this type of a sale may well still trigger a “due-on-sale” clause in the mortgage. This would allow the lender to call 100% of the loan balance due and payable. Read these clauses carefully.

There is also the issue of entity operating liabilities. Simply put, if you buy an operating entity, you will inherit all of its operating liabilities. If the entity owes a debt when you buy it, you owe the debt. That is true even if the debt doesn’t pertain directly to the property you want to own. This may be the case for loans like lines of credit, credit cards and open accounts with vendors. In most cases it is difficult to learn of all the debts owed by an entity, and therefore, if you buy an operating company, be careful to identify and document all the debts you assume and have the sellers indemnify you against any others.

As with many things in real estate, this concept is presented as a safe, secure and easily used tactic to facilitate the business. In the real world, it typically is not. But, it is used with some degree of frequency. The reason you don’t hear more about it is that the parties involved usually never get to the point of litigating any of the issues. In most cases things just go along according to Hoyle. If money is made then everybody is happy. If money is lost then most people take the hit and get on with life. The fact that you may never be caught however does not make it all right to use this concept with impunity.

As with all elements in real estate, you have an obligation to yourself and to those you do business with to be honest, open and upfront. You need to understand everything possible about a transaction and make your decisions wisely. If you’re thinking about buying or selling an entity, and thereby a property, be careful. The more you know the better. This tool is not as safe as some would have you believe, for either the buyer or seller. If we can help, we’d be glad to. Good luck.



Original article by Roger Beattie

How to Become a Loan Shark – Investing Wisely

There are many people, some right next door to you, who need money but cannot get a traditional loan. And, you, may have just what they need – money. If you are one of the few people who have learned how to manage your money and have saved throughout your life. You might be a good candidate to learn how to become a loan shark. This is a person or even a group of people who allow individuals to acquire high interest rate loans. Loan sharks tend to have a bad connotation. However, if you are fair and do not threat or blackmail your customers, then you are more than likely going to be very successful as a lending shark.

When learning how to become this type of lender, you will need to know a bit about marketing. This is because people will not know you have money unless you get the word out there that you do and that you want to make it useful. While you are getting out the word that you have money to loan do not disclose the interest rate. This piece of information could potentially scare off future clients as well as prevent them from even seeing the services that you are willing to offer.

As the current economy is declining, it is not easy for many people to receive traditional loans due to bad credit. Many times people need money for emergencies. This is the reason you need to be fully aware when learning how to become this type of lender. You want to know how to correctly read people and find if their need is real or not. Of course, if they are deeply in debt to other lenders, you will more than likely never seen your money again and you have not made a good deal.

There are successful lenders out there who can help you learn how to become a loan shark. However, every situation is different and you need to determine who the right borrower for your money is. This is because you worked hard for the money that you have and would not like to lose it to a scam. This can be a great investment and can truly bring you a hefty return if you do it right. As a lender you can truly make a difference in someone’s life that may have to help you sometime in the future.For more information on investing in investment opportunities usually or normally not found in the marketplace, click here!



Original article by Sean L Johnson

4 Tips To Invest In Real Estate & Keep Your Day Job

 4-tips-to-invest-in-real-estateInterested in the real estate world, but too afraid to leave your current position? You may not have to.

It’s a myth that one must work in the industry on a full-time basis in order to be a great real estate investor. The truth is that you have plenty of opportunities available to you, even if you already have a job that you are comfortable with.

Earning extra income is one of the top reasons that people choose to get into real estate investing. With the right skills and work ethic, you can make these two careers work in harmony. Though it’s not for everyone, here are some tips to making an investment career work with your day job.

Start Slow & Gain Experience

One of the many advantages to sticking with your current employer is getting to “try out” real estate investing before going all-in. Your steady income will allow you to take more risks early on, or may help you qualify for different kinds of credit that will help you along the way. Who knows? You may be able to have more fun investing if you start small and work your way up. Learn to experiment and take risks early, and watch how your career develops.

Manage Your Time Wisely

As you juggle real estate investing alongside your career, you’ll need to become an expert in time management. Any smart investor will have a system for everything that comes their way. From the time you wake up each morning, to your processes for lead generation and marketing, take on the mindset of a business person when you do your real estate work, just like you do with your job.

Take Saving Seriously

In order to create the kind of income that you desire, you’ll have to ensure you have liquidity, or plenty of funds to move around. Having a regular source of income will put you at an advantage by allowing you to amass savings, whether you’re planning to leave your job or just plan to invest a little on the side. Develop a frugal lifestyle plan for yourself, and save your way to a lucrative side career in real estate investing.

Plan Your Exit

On this blog, we talk a lot about planning your exit strategy, whether it’s from a specific deal, or in this case, from your full-time job. Whether you plan to retire early, or fully transition from your current job to a real estate investing career, you have some thinking to do. How aggressive will your investment strategy be, and how long will it take to reach your goals? Even if you’ve just begun, it’s never too early to plan for the day you’ll hang it all up. Revise as needed!

Remember that real estate investing may be a higher-risk career path than what you’re used to, but there are options for all ability levels. Try investing in some REITs or flipping some easy properties to gauge your interest and skill in this field. Always remember to study up prior to launching any new investment plan, and you’ll be an informed and successful investor in no time.

 

Original Article by Marko Rubel

Stock Market 101 – What is the S&P 500 and What Does it Represent?

The S&P 500 is a stock market index that consists of 500 large-cap companies from a diverse range of industries. The index is owned and maintained by Standard & Poor’s (S&P), which is a division of McGraw-Hill. S&P 500 is part of two larger indices, S&P 1200 and S&P Global 1500.

All of the corporations included in the S&P 500 are traded in the two largest US stock markets – the New York Stock Exchange and the Nasdaq. The 500 corporations in the S&P are seen as leaders in their industries and therefore are among the most commonly watched stocks in the US stock exchange. Some companies included are Exxon Mobile, AT&T, Microsoft and Procter & Gamble.

It was created on March 4, 1957 as an expansion of the pre-existing S&P 90. Advancements in computer technology at the time made the index possible by calculating and disseminating the index in real time. Since its creation, the S&P 500 index is often used as a benchmark to indicate the future of the market and the US economy. At one time, the Dow Jones Industrial Average (DJIA) was the most notorious index for U.S. stocks, but because the DJIA contains only 30 companies, most people agree that the S&P 500 is a better representation of the U.S. market.

The companies that are included in the S&P 500 are selected by the S&P Index Committee. The majority of companies that are included in the index are American based, but there is a small number of international companies that are widely traded in the U.S. In the future, the Index Committee has announced that only U.S.-based companies will be added though. The S&P 500 is a market value weighted index – each stock’s weight in the index is proportionate to its market value.

There are two ways that you can invest in the S&P 500. The first is by buying individual shares. The second is by buying shares of an exchange-traded fund (ETF). One form of an ETF is known as SPDRs or Standard & Poor’s Depositary Receipts. The average daily volume of trading of SPDRs is the highest of any US stock at over 200 million shares each day. Another form of ETF are iShares S&P 500, which are similar to SPDRs but they include equal shares of all members of the index.

Widely regarded as the best single gauge of the U.S. equities market, this world-renowned index should be watched if you invest. Although the S&P focuses just on the large cap segment of the stock market, it is also an ideal understudy for the total market. The indicies can be used as building blocks for your portfolio creation.



Original article by Christine Abbate

Most Oil Sellers and Brokers Fail – Crude Oil Selling Procedures That Sell in Today’s Internet Era

Most Crude Oil And Petroleum Product Sellers, Brokers and Agents, in the International “Secondary” Oil Market, Do Not Make Any Sales Or Income. Do You Ever Wonder Why?

A MAJOR “HIDDEN SECRET” OF OIL SELLERS & BROKERS: MOST DO NOT MAKE ANY SALES or INCOME

Crude oil and petroleum products sellers, and their brokers and agents, who operate in the so-called “secondary market” of the international oil market today, do not usually speak about this, or like to do so. Or like the fact about this to be known. In deed, many of them would rather that it be kept obscured, or simply misrepresented. But, the fact is that one distinctive part of their business “reality” is this: as a group, they frequently close no deals nor make any sales for the oil product they purport to have available to sell, and, in fact, the vast majority of them often go for months, even years, or perhaps for ever, without ever landing even a single sales contract or deal. It is probably what might simply be called “the open secret” of the oil selling industry!

C. Keila Nakasaka, a California attorney and real estate investor and entrepreneur, who conducted extensive market research and investigations into the D2 diesel oil trade to see if he could prudently recommend taking up the commission broker’s job to his clients, says he came away from his research greatly disillusioned and disappointed. According to him, the “stories that these brokers concoct are that the seller has some direct connection with a refinery. Some even claim that the seller is, in fact, one of the leading energy companies in Russia… [but] what bothered me [the most] is that almost every one of these brokers failed to be forthcoming. They often misrepresented themselves as mandates, direct representatives, and even buyer and sellers.”

Probably the principal and most sensitive thing about which most such sellers and intermediaries (the agents, facilitators, mandates, brokers, etc.) are least “forthcoming” and “misrepresenting” about, is concerning the number and volume of sales deals they have ever closed, if any, or the income they have earned in the trade, if any. Simply put, almost all of these operatives generally close no deals, and earn almost nothing. Most of them go for months, even years – or forever – without successfully closing any sales deals, not to speak of earning even a dime in commission income!

As Nakasaka put it, describing his findings: “Another factor which I thought was odd was that most of the brokers I spoke with never closed a D2 deal despite their months and sometimes years in this business. There was one broker who claimed that he had pending deals, and two who stated that they did in fact close these deals. However, I did not find them credible.”

MAJOR REASONS FOR THIS, WHICH ACCOUNT FOR WHY MOST “SECONDARY MARKET” SELLERS & THEIR INTERMEDIARIES NEVER CLOSE ANY DEALS

Why is this so – that they make no sales or income? Many factors account for it. They could roughly be summed up as follows:

1. MOST SELLERS (and their intermediaries) ARE FAKE, ANY WAY, WITH NO CRUDE OR OIL PRODUCT TO SELL

A fact that is by now well-established and not subject to any disputation whatsoever among credible experts in the industry, is that the overwhelming majority of selling offers peddled by crude oil and petroleum product “sellers” in the so-called “secondary” oil markets, and their brokers, agents, and other intermediaries, are fake and bogus. In deed, some objective studies and research have put its extent at a whopping level of some 99.999999 percent of all offers presented for sale. Probably the only thing of much redeeming value that could be stated about this, is that with particular respect to those who act as foreign brokers and intermediaries in the business, some of them may often be engaged fraudulently in the business but innocently and unwittingly, mistakenly believing that the deal or selling operation is authentic and legitimate, when it actually is not.

2.LACK OF PROPER TRAINING, SKILLS OR KNOWLEDGE IN THE FUNDAMENTALS OF THE BUSINESS

Put very simply, perhaps nowhere is the saying that “we live in a wide interconnected world” more applicable today than in the world of the international buying and selling of crude oil and petroleum products. For the most part, virtually all that one needs in order to become a “seller” of crude oil or petroleum product, or his agent, legitimate or not, who are operating out of any part of the world, is simply to have an access to a computer and an Internet connection. That’s just about all! Unfortunately, however, one dire negative effect of this so-called “revolution of the Internet” (among many others), has been that many who now claim to be, or operate as, “sellers” or the sellers’ “brokers” or “agents,” are largely uneducated or semi-illiterate, untrained and unskilled, and are lacking in any knowledge of the proper fundamentals of international oil trading.

Kamal J. Southall, one of the foremost experts on the subject, whose book, “Trade Fraud, Financial Fraud, and the Joker Broker,” is one of the most authoritative texts on the phenomenon, puts it this way:

“Have you noticed that as you’ve searched Google and libraries, and looked high and low, finding bits of information here and there, you encounter interesting phenomena: very little practical information on the art and science of dealing in International trade as an independent trader exists in any comprehensive way. Certain practices, documents, and procedures; mysterious acronyms such as “NCND” or “MPA,” are thrown back and forth, badly corrupted model documents and forms may filter your way, but the reality is that most attempted home based traders, brokers – or, more properly, intermediaries – learn through highly expensive ‘trial and error,’… often re-inventing the wheel each time, in that ever-elusive search for a deal and knowledge on how to close that deal.”

Southall estimates, citing another expert’s calculation, that out of some one million individuals currently trying to make it as brokers or trade intermediaries in the world, “perhaps no more than 1% has the training and skill needed to ever close a deal… [meaning that] the overwhelming majority, are trading blindly, [hence] deals are collapsing… and more to the point, [oil dealers are] being defrauded – sometimes massive..”

Mr. R. Ambardar, a broker of over 10 years of wide experience in international market development and advisory services, calls “lack of experience and knowledge” one of the principal reasons why many brokers and facilitators fail in crude oil endeavors. “Many people are attracted into this business because of [the tales they hear about the] kind of money one can earn on account of successful deals. Many agents fail, [however], to understand that requirements to succeed in this business are very demanding, [and that] Only those who have years of hands-on experience and thorough knowledge of the industry can strive to do well as middle-men.”

A great many number of brokers, Ambardar adds, forget that “To become a ‘Facilitator’ in oil business,… what you actually need is right knowledge and expertise [since this is what will help] you hook up genuine buyers and sellers. One should be in the industry for long to have acquired knowledge related to the dynamics of this business.”

Consequently, one fundamental way in which this general lack of competence or knowledge about the basics of the oil trade manifests itself, is in the inability of the average person among the string of brokers and agents and intermediaries that operate in the trade, to craft good deals and successfully close sales deals even after several months or years in the business.

3. BYE AND LARGE, MOST BROKERS AND AGENTS LEARN THEIR CRAFT FROM THE INTERNET, AND THIS HAS SOME SERIOUS DRAWBACKS

There is, for the average contemporary seller’s agent or broker, one other serious shortcoming and negative consequence that emanates directly out of the fact that the primary source of their education and training by which they learn the workings of the oil trading business, is essentially the Internet. Again, Kamal J. Southall sums up these negative consequences this way:

“The expertise in recognizing a questionable trade lead or tender request from a strong one, is generally lacking through the Internet, [and] there is no critical filtering of the leads you end up reading. Anything that can be put out there, is put out there, from the genuine to the questionable, to the fraudulent. Moreover, the nature of the “broker network” is such that information is often passed about with little critical filtering, lack of knowledge of proper trading procedures and the general tendency of information to become corrupted as it trades hands, [and this] leads to dangerous results.”

4.LONG STRING OF BROKERS, AGENTS AND MIDDLEMEN, MOST OF WHOM UNDERCUT EACH OTHER.

Partly as a result of the virtual lack of any objective requirements for qualification as an agent or middleman in the trade, and the ease of entry into it, these operators generally tend to function in a climate of little or no rules or standards, and of loose or no ethics, in which the “dog eat dog” mentality seem to prevail – a climate in which each broker, agent, or mandate, being only selfishly concerned with just his own personal gains and self-interest, is constantly trying to undercut and circumvent the other in deals. Thus, often leading to the ultimate detriment of ALL the parties involved in an offer, as ALL of them, as a whole, and not just one party or the other, invariably wind up the losers since NO deal at all is had with any buyer.

“[One] reason why it’s difficult to ascertain the truth [concerning the oil product market],” reported C. Keila Nakasaka, the California attorney and entrepreneur who investigated the industry in 2010 for possible recommendation of the trade to his clients, “is that there are multiple brokers involved in any given transaction; and they’re all afraid of circumvention. Hence, it’s almost impossible to know the end buyer or seller. Now, I understand that sometimes it requires teamwork to put a large transaction together, but what bothered me is that almost every one of these brokers failed to be forthcoming. They often misrepresented themselves as mandates, direct representatives, and even buyer and sellers.”

THE “JOKER BROKER” CHARACTER

Sure, admittedly, there’s no question that the phenomenon of having a lengthy string of players, including brokers, agents and intermediaries, in a business transaction, is a necessary aspect of international business. Even more so, especially, in today’s Internet world in which we are all so interconnected globally. Certainly, in oil sales transactions, it should come as no surprise or anything unusual to anyone that such operations, because they often tend to involve huge sums of money and elaborate logistics, would sometimes require teamwork to put the transactions together. And hence, should sometimes involve a multiple number of parties – traders, agents, intermediaries, brokers, mandates, buyers, distributors, etc – to conclude a deal. However, what is different here, is not so much the fact that in the Internet crude oil dealings one encounters a string of too many brokers and middlemen. Rather, it is the fact that most of these brokers and middlemen or intermediaries that get involved in it, typically act and behave in the detrimental manner of what is known as the so-called “Joker Brokers.”

As Kamal J. Southall put it, “But the experience of the underground string of international brokers trading meaningless offers and circumventing each other, left and right, illustrates well the term “Joker Broker” and resembles, often, a Zoo full of monkeys.”

Adding that “the character, [which is] often scorned as ‘the Joker Broker,’ is one thing most people encounter very quickly in their forays into the world of trading,” Southall, the author of a classic on the “Joker Broker” character, gives a definition and explanation of the essence of this “Joker Broker” behavior, this way:

“Defined in the first instance as a bit of a time waster, the joker broker is an individual who knowingly or unknowingly peddles and plies deals and products that, in the vast majority of instances, are non-existent, or badly defined. Characterized by a tendency to bluff his way through transactions, the Joker Broker is one… [who goes about] plying deals often involving a string of brokers from one end of the planet to another, and yet not a single one has verified the very existence of the goods at hand.”

.One significant result of this?

With a multiplicity of brokers and chain of agents often involved in a trade, and each party operating selfishly and undercutting and sabotaging each other in a working environment in which each party is untrusting of the other in a transaction, and is scared of being circumvented by the other; most deals which the “secondary” market sellers and their brokers and agents undertake, are automatically doomed to failure, even from the very beginning. And often do fail.

5. PERVASIVENESS OF “The Joker Broker” MENTALITY AMONG THE INTERNET BROKERS, AGENTS & OTHER INTERMEDIARES

However, probably the most fundamental and central factor which accounts for why most intermediaries involved in the “secondary” oil market are generally not able to, and do not, close any sales deals or earn any income or commission as brokers and agents even after several months or years of peddling their oil product, could simply be condensed into one broad term: namely, the powerful pervasive grip that the “The Joker Broker” mentality has come to have on the brokers and agents, most of whom today are merely Internet-based brokers and agents.

What Is meant by this?

Put very simply, many brokers and agents, driven and limited by the fact that they generally lack much training or knowledge in the fundamentals of international trading, and by the fact, in today’s Internet era, that their only “qualification” for assuming the mantle of being a “broker” or “agent” in the oil business, is simply that they have an access to the Internet and a computer, often behave in their conduct of the oil selling operation, in a manner that “resembles, often, a Zoo full of monkeys” – in the words of Kamal J. Southall, the author of a classic on “‘the Joker Broker” character. A common characteristic of these brokers and agents, is that they peddle, knowingly or unknowingly, crude oil deals and products that on the face of it, are in most instances seemingly non-existent or questionable, or at least badly defined, while yet acting as though all is well with the product they offer, and that there’s absolutely nothing for the prospective buyer to worry about concerning it. They are mostly blinded by greed and false belief that they “are going to be super rich next week or next month” by doing nothing, other than, just shoving around a few copied documents on the Internet usually passed down to them from other jokers, none of which any of them has usually verified as to the very existence of the goods they purport to be selling.

Apart from the fact that a good many of them would, whether they do it knowingly or not, frequently try to push fake deals on the Internet, they generally act out of many misconceptions and beliefs which are simply not true, usually passed down to them from other jokers. Many times, mainly concerned with “making a quick, fast buck,” they are innocently and naively trying to close a deal for someone who they believe or merely hope to be real, but who is, in fact really not. But oftentimes, they are too proud or conceited to simply accept or concede that their own beliefs and procedures are simply incorrect, refuse to change their ways, and continue to waste their time and others’ time for months and years still trying to push deals – until, perhaps, it finally begins to dawn on them that for so long no deals have been closed, or are likely to be closed, and not a dime of income has been, or would be, earned!

But above all else, perhaps the most detrimental factor that results in the lack of business or income for most “Internet” crude oil brokers and agents, is the fact that, lacking much experience or real understanding of the true workings of international business or the way it actually works, they are often totally unrealistic and impractical about the conditions and requirements they demand of, or expect that, prospective buyers would accept in order to buy the products they purport to have for sale. That is, they often present sales offers and proposals that are so impracticable, unworkable and outrageously unreal, and are totally contrary to the way normal and legitimate business has traditionally been done in the real world.

As one analyst put it, “Some of them [the “Internet” brokers or joker brokers] are quite entertaining [in the notions about business workings they present], and remind us of the Nigerian scam artists. The world simply does not work like that.”

EXAMPLE OF JOKER BROKER OFFER THAT CAN’T WORK

The following is a good example of the Joker Broker-type of offer that the oil sellers and their brokers and agents, most of whom operate mostly online today, typically demand of intending buyers. It is presented in the form of the transactions PROCEDURES they demand that the would-be oil buyer should meet and follow, such as these:

TRANSACTIONS PROCEDURES:

1) The Buyer submits ICPO (Irrevocable Corporate Purchase Order) & banking details

2) Seller issues FCO (Full Corporate Offer) on his letterhead with full contact details.

3) Buyer returns the FCO duly signed and stamped.

4) Seller and buyer sign contract.

5) Seller and buyer exchange the Proof of Product (POP) and Proof of Funds (POF) in the following sequence/order:

6). First: Seller issues POP to the buyer. Second: After buyer verification and within 7 banking days, buyer’s bank issues POF to seller’s bank.

7) Buyers bank opens non-operative Letter of Credit (L/C) to seller’s bank/or Bank Guarantee (at seller’s choice).

8) Seller issues 2% Performance Bond (PB) to activate L/C.

9) Shipment commences as per the agreed contract.

TO TODAY’S BUYERS, THIS IS WHAT THESE PROCEDURES ARE SAYING TO THEM

In point of fact, actually the procedures such as the above-outlined, are “standard” and should, in NORMAL and proper circumstances, ordinarily be a workable and acceptable set of terms and conditions or requirements for a credible prospective buyer to do business by. However, here’s what brings about the big difference here: there is one very serious and fundamental factor that is grossly missing here. And that is this: typically, such offer requiring the intending buyer to comply with these procedures, is made, NOT by or from by a known or established or even readily identifiable person or entity, or necessarily by an AUTHENTIC crude seller or supplier. But merely by an Internet “seller.” It is typically presented by someone who merely writes (or phones) and claims, usually via some Internet connection or communication (a portal, email or website), that he is a crude “seller,” or the broker or agent of one, who supposedly has some oil available to sell. And it is typically presented by someone who, invariably, would present virtually no tangible evidence or proof whatsoever establishing his (or her) bona fides and credentials as an authentic seller, or an intermediary of one, nor shows any real track record of having previously performed in the crude oil selling business, or any other products.

Thus, in effect, what is essentially happening here, is that a set of well-meaning procedures which have legitimately been designed by the industry professionals to be used by LEGITIMATE crude sellers, and have traditionally been used by RELIABLE and respectable crude sellers and buyers alike to do business, have suddenly been hijacked by a new breed of “Internet” brokers and agents – Joker Brokers – who now demand that prudent crude buyers are to adopt precisely those same procedures in transacting business with them! To put it another way, were these Internet brokers and crude “sellers” to have been some of the so-called oil Majors – such as Chevron, Valero, Shell Oil, Exxon Mobile, British Petroleum, Total Oil, etc. – meaning companies and business entities that are well-known, already established, readily recognizable, reputable and trustworthy, there would have been absolutely no problem or question about the crude buyers using those “standard” procedures and conditions set forth above in doing business with the Internet sellers and brokers. However, that is not the case all, here. Rather, quite to the contrary, these Internet-type brokers and agents (and the purported sellers whose offers they peddle), are largely Internet-based; and are generally obscure operations, or even non-existent, with no known identity, no recognized base of operations, or established record or history of past performance as crude sellers.

WHY THE INTERNET BROKERS’ PROCEDURES LARGELY DON’T & CAN’T WORK WITH BUYERS

Yet, this is, in the vast majority of instances, the kind of supposed crude “sellers” who want and ask that would-be buyers should be submitting to those same procedures and conditions in dealing with them. Clearly, that’s a ridiculous “Joker Broker” type of day-dreaming – virtually no credible crude oil buyer anywhere in the world would accept to submit an ICPO (Irrevocable Corporate Purchase Order) to a mere unknown, unproven, dubious Internet “seller” of crude oil to solicit business with such an entity. And certainly, no credible crude oil buyer anywhere in the world would accept to submit its Proof of Funds or financial and banking details to such an entity, or to even sign a contract with it – an entity about whom it knows practically nothing, and whose bona fides, credentials or existence as a supposed crude oil supplier, is largely dubious and unestablished.

A major, well-known, recognizable, or reputable entity or crude dealer, yes. But NOT an obscure, dubious, unknown entity, largely existing merely on the Internet.

Analysts at the JokerBroker.com website, which is a site devoted to extensive compilation of a database of the most notorious “Joker Brokers” persons and companies, sums it up this way, describing why most credible crude buyers would generally reject accepting such procedures and conditions often demanded of them by Internet brokers, outright:

“When a deal starts off with “send ICPO with BCL or Soft Probe, [POF], NCND and IMFPA,” this is “broker language.” Those that know broker language know what this means: “I’m a joker broker. I don’t have any real product for sale, and I don’t know anyone who has any, so I want you to give me an Irrevocable Purchase Order with your full financial details disclosed, so I can run around with your order and your money in my hands looking for product, and the next thing you see will be your company and banking details exposed to the whole world, running around unsecured on the Internet between thousands of other joker brokers.”… That is what this language means. I suggest you learn the language, and please do not send me even one “deal” which starts off with this procedure. Please just put them straight into the rubbish bin, which is exactly where I put them whenever anyone sends them to me.”

Kamal J. Southall, author of “Trade Fraud, and the Joker Broker,” describes the following as “some of the most notorious Joker Broker Documents”:

“The Irrevocable Purchase Order/IPO ICPO: Sometimes known as the Irrevocable Corporate Purchase Order, such a document simply does not exist. Or to put things more rudely, the ICPO is crap. There, we have said it, let the chips fall.”

SUMMARY

Here’s what might probably be called “the open secret” of the so-called secondary market oil industry: as a group, the crude oil and petroleum products sellers, and their long string of brokers, agents and intermediaries, generally close no deals nor make any sales or income out of the oil product they purport to sell, frequently after several months, even years, or perhaps for ever, of doing the business. There are several reasons which account for this. They range from the fact that most oil sellers and their brokers and other intermediaries, are fake operatives with no crude or petroleum product to sell, in the first, to lack of proper training and knowledge by these operatives in the fundamentals of the business, to the existence of certain serious drawbacks and shortcomings inherent in the fact that, bye and large, the principal source by which most brokers and agents today learn their craft today as oil dealers, is merely the Internet.

However, probably the most fundamental and most central factor of all which accounts for the above reality, could simply be condensed into one broad term: namely, the powerful pervasive grip that the “The Joker Broker” mentality has come to have on the brokers and agents, most of whom today are merely Internet-based brokers and agents. Typically lacking much experience or real understanding of international business or the way it actually works, and frequently blinded by greed and false belief that they “are going to be super rich next week or next month” by doing nothing, other than, perhaps, simply shoving around a few copied documents on the Internet, the conditions, requirements, and procedures often proposed by the “Internet” brokers and agents for prospective buyers to buy from a seller, are usually unrealistic, impracticable, outrageously unreal, even laughable and ludicrous atimes. They are unworkable conditions and requirements that are completely contrary to the way normal and legitimate business has traditionally been done in the real world. And consequently, credible buyers generally reject outright the sales offers coming from such Internet sales operatives, thus resulting in common lack of sales or commission income for such operatives, month after month, and even year after year.

For example, most of the selling offers one gets today for the sale of oil, are usually from Internet “sellers” – persons who merely claim, via an Internet communication, that they are “sellers” of crude or petroleum products with some product to sell, but typically have NO known identity, show no credible record or history of past performance as an AUTHENTIC crude seller or supplier, nor present any solid evidence that the supposed seller even exists. Yet, these mere “Internet” sellers would typically demand and expect a serious buyer of oil, to simply sign an “ICPO,” and enter into a binding contract with them committing itself to obligations valued in the several hundreds of millions of dollars with such a yet unproven and dubious Internet “sellers” (or brokers and agents), or to submit its most sensitive financial and banking details to them, etc! Demands which, clearly, virtually no credible crude oil buyer anywhere in the world would accept or submit to with merely a dubious, unknown, yet-to-be-established entity! On top of all that, add to that the reality that those harsh conditions are being demanded of intending buyers by the sellers and brokers in an oil industry that is, by all credible accounts, full of too many fakes and fraud in the contemporary oil selling industry!

And so, here you have it: why most supposed “secondary” market Internet oil sellers and their brokers and agents typically make no sales or income in their stint into crude oil and petroleum product selling business today in this Internet era, for months and years.

FOR A FOLLOW UP

WISH TO FOLLOW UP ON GETTING A CRUDE OIL OR PETROLEUM PRODUCTS SELLER OR BROKER WITH WORKABLE, REALISTIC PROCEDURES THAT A CREDIBLE BUYER CAN READILY ACCEPT? Please see the instructional information in the author’s resource box below



Original article by Benjamin Anosike, PhD

Understanding Advertising Components – Marketing Basics

Before advertising for a real estate investing business, the business owner should understand the components of advertising. Placing an ad in a newspaper, posting door-to-door flyers or using a voice broadcast message are all useful advertising methods; however, the advertising will not be successful unless the real estate entrepreneur designates a fitting message with the right medium in the targeted market.

The three main components of advertising, also known as the three big M’s, are: the message, the media and the market. To briefly summarize what each component is: the message consists of the words used in the advertising; the media is the type of advertising; and the market is the targeted group the advertising is meant to reach. Now, the brainstorming can begin. When engaging in the brainstorming session to determine your message, medium and market, you can either do this by yourself or include other associates. The more minds the better the flow of ideas becomes.

To start, asses the market you are attempting to reach. In order to reach a high level of success with your advertising, narrow down your market. You want to make sure that you are targeting potential motivated sellers. Do not necessarily think that a larger, broader audience is better than a narrow, targeted audience. On the contrary, it is much easier to shape a message and pick a medium when you have targeted your market.

Once you have narrowed down your market, it is time to craft your message. This can be anything from an “elevator speech” to an eye-catching phrase. Remember that people are bombarded with advertising practically 100 percent of the time. This puts an added pressure on making sure that your message will appeal to motivated sellers. Center your message on what your business can do for the motivated seller – how will working with you benefit them.

Finally, choose the medium for your advertising. This can include post card mailings, newspaper ads, television spots, etc. A good place to start is to analyze what other investors are doing – where are they advertising? Analyze how their choices have been successful for them or detrimental to their work. The results of your analysis can be a start for your decision making.

Once you have finalized your decisions on your market, message and medium, be sure to have a system in place to track the success of your advertising. Always come back to the drawing table after assessing the effectiveness of your advertising. If the advertising is not working to its fullest potential, ask yourself the following questions: Does my message need to be tweaked? Is this the right medium for my market? Is my market too narrow or too broad?



Original article by James Orr

Holding Investment Real Estate – LLC, Trust, Or Both?

The Issue: How to Hold Property in California?

Countless individuals invest in real estate every day. Some dream of becoming the next real estate mogul, while others simply wish to supplement their salary with additional income. Whatever your motivations, owning investment properties can produce big rewards, but also big problems. This is why it is important to hold title to your property in the most beneficial way. The internet is saturated with various posts and articles touting the most effective techniques to manage your property. It can often be a daunting task weeding through the mass of information in an attempt to discern what advice is reliable and what advice can get you into trouble. Our goal here is to provide a succinct and clear summary of the safest and most important strategies for holding investment property in California. We hope the result will be a valuable starting point in considering the best ways to both protect you as the owner/landlord from liability and also guarantee the best treatment of your assets.

The Risks of Owning Real Estate

As stated above, while property can be a valuable investment, there are also significant risks. One of the biggest risks is lawsuits. From common slip and falls, to environmental contamination, landlords and owners are easily exposed to legal judgments. Landlords have also been successfully sued by victims of crimes — such as robberies, rape, and even murder — that occur on their property on the theory that the landlord provided inadequate security.

Options for Holding Real Estate

Faced with the risk of lawsuits, it is crucial that you do not own investment real property in your own name. (The only real property you should hold in your own name is your primary residence.) Thankfully, there are several ways in which an individual can hold property other than in his/her own name. These include as a corporation, limited partnership, limited liability company (“LLC”), trust, and many others. While there are many options, when it comes to real estate investment, LLCs are the preferred entity by most investors, attorneys and accountants.

For many reasons, few investors hold investment real estate in C corporations. A corporation protects the shareholders from personal liability, but the double taxation of dividends and the inability to have “paper losses” from depreciation flow through to owners make a C corporation inappropriate for real estate investments.

In the past, partnerships and limited partnerships were the entities of choice for real estate investors. Limited partners were protected from personal liability while also being able to take passed through tax losses (subject to IRS rules–you’ll need an accountant or attorney to sort out the issues of at-risk limitations and so on) from the property. However, the biggest downfall with limited partnerships was that someone had to be the general partner and expose himself to unlimited personal liability.

Many small real estate investors also hold property in a trust. While a living trust is important for protecting the owner’s privacy and provides valuable estate planning treatment, the trust provides nothing in the area of protection from liability. However, although a trust provides no liability protection, it should not be overlooked, as it can easily be paired with an LLC.

1. Benefits of a LLC

LLCs appear to be the best of all worlds for holding investment real estate. Unlike limited partnerships, LLCs do not require a general partner who is exposed to liability. Instead, all LLC owners — called members — have complete limited liability protection. LLCs are also superior to C corporations because LLCs avoid the double taxation of corporations, yet retain complete limited liability for all members. Furthermore, LLC’s are rather cheap and easy to form.

A. One LLC or Multiple LLCs?

For owners of multiple properties, the question arises whether to hold all properties under one LLC, or to create a new LLC for each additional property. For several reasons, it is generally advisable to have one LLC for each property.

First, having a separate LLC own each separate property prevents “spillover” liability from one property to another. Suppose you have two properties worth $500,000 and they’re held in the same LLC. If a tenant is injured at property 1, and wins a $750,000 judgment, he will be able to put a lien on both properties for the entire $750,000 even though property 2 had nothing to do with the plaintiff’s injury.

On the other hand, if each property had its own LLC, then the creditor could only put a lien on the property where the plaintiff was injured (assuming that they cannot pierce the corporate veil).

Additionally, many banks and lenders require separate LLCs for each property. They want the property they’re lending against to be “bankruptcy remote”. This means that the lender doesn’t want a problem at a separate property to jeopardize their security interest in the property that they’re lending on.

2. Benefits of a Trust

As stated above, an LLC may be used concurrently with a trust to provide the best protection and estate treatment for your property. There are many types of trusts, but the revocable living trust is probably the most common and useful for holding title to real estate. The major benefit from holding property in a trust is that the property avoids probate after your death. As many are aware, probate is a court-supervised process for transferring assets to the beneficiaries listed in one’s will. The advantages of avoiding probate are numerous. Distribution of property held in a living trust can be much faster than probate, assets in a living trust can be more easily accessible to the beneficiaries of the trust, and the cost of distributing assets held in a living trust is often less than going through probate. [Note: One should also be aware of other ways to avoid probate. For instance, property held in joint tenancy with a right of survivorship automatically avoids probate whether or not the property is in the living trust. Consult an estate planning attorney for more advice regarding probate matters.]

3. Use Both an LLC and a Trust

Because an LLC and a trust both provide significant benefits to the owner of real property, a smart investor should consider using both a LLC and a trust to adequately protect himself and his property. Utilizing both a trust and a LLC creates the best combination of liability protection and favorable estate planning. To accomplish this, the owner should hold the investment property in a single member LLC, with the living trust as the sole member of the LLC. Here, the trust is the owner of the company and holds all of the interests of the LLC. This form of ownership gives you an added layer of protection from the LLC as well as the additional estate planning benefits of a trust.

A. Costs

For the most part, the costs of forming and maintaining an LLC and trust are rather minimal. For an average LLC, the costs are simply nominal filing fees and an $800 per/yr fee to the state of CA. While simple incorporations may be done on your own, it is strongly advised that you seek the advice of a knowledgeable attorney so that no mistakes are made. The same may be said for forming a trust. A little money now is worth the price of avoiding big problems in the future.

B. The CA LLC Fee

While the costs of forming a LLC are generally small, there are additional fees that may be imposed on LLCs in California depending on gross profits. The California Revenue and Taxation Code Section 17942(a) includes an additional fee on LLCs if total gross income (i.e. rent) exceeds $250,000. “Total gross income” refers to gross revenues (not profits). Under this Tax Code Section, the amount of the fee is determined as follows:

1. $0 for LLCs with total gross income of less than $250,000;

2. $900 for LLCs with total gross income of at least $250,000 but less than $500,000;

3. $2,500 for LLCs with total gross income of at least $500,000 but less than $1,000,000;

4. $6,000 for LLCs with total gross income of at least $1,000,000 but less than $5,000,000; and

5. $11,790 for LLCs with total gross income of $5,000,000 or more.

Although the fee is relatively small, one must consider that the fee is assessed against gross revenues, not profits. This means that the fee is due whether or not your property is profitable. For a property with high revenues but narrow profit margins, the fee would reflect a higher portion of the property’s profitability than it would on a property that is highly profitable. For example, a company that owns an office building with revenues from rent totaling $1 million, but a mortgage of $995,000, would actually operate at a loss after the $6,000 fee was imposed. Furthermore, the fee would be particularly irksome for those companies that foresee incurring losses in their early stages of development.

4. Limited Partnership: a Possible Strategy if Gross Receipts Exceed $250,000

For the vast majority of investors, the CA LLC fee should not dissuade you from forming an LLC. If, however, the impact is severely detrimental, there are several potential solutions that may be explored. A competent attorney or accountant may be able to work with you to avoid this fee. One method may be to form a Limited Partnership. The partnership should be set up with an LLC as the General Partner (assuming liability) and the owner(s) of the property as the limited partner(s). By forming a limited partnership with an LLC acting as the general partner, the landlord can likely avoid the higher fee imposed on an LLC while still protecting his/her personal liability. While this may be a possible solution, it is strongly recommended that you consult with an attorney or accountant regarding the best course of action.

While there are risks associated with real estate, with intelligent decision-making and thoughtful preparation, real property can be a valuable investment. The first step though, is to make sure that you have adequately protected yourself and your property. We hope that this article helps property owners begin to discover the various ways in which one may hold investment property, as well as the protections and benefits provided by such ownership.



Original article by P. J. Javaheri