Buying a Flat From an Investor – What You Should Know

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It is a popular concept in Mumbai to purchase Investor flats. Mostly, you find them through the builder himself, after the builder has exhausted the stock in his hands.

What is an investor flat?

An investor flat is one in which an investor draws an agreement with the builder to purchase a given flat at a certain future point of time. In return for this promise, he pays a small token money towards the price of the flat. This agreement happens even before the construction begins. So, the price agreed upon for the flat is also quite less.

Benefits of investor flats to all parties

Investors:

The benefit of this agreement to the investor is the fact that he is able to procure it at a very low rate and needs to make payment only much later.

Builder:

The main benefit for the builder is the cash flow that accrues to him even before commencement of the project. This will ensure smooth execution of the project. Also, he is making sales even before the goods are produced.

Consumer:

It is not any problem to a consumer to buy a flat from an investor. As the agreement will be made with the builder itself (in case purchase is before possession) the agreement will be one of first-sale and not of resale. Depending upon the investors needs, prices become negotiable. Recently, I heard of an investor flat being quoted at nearly Rs 1000 per square feet lesser than that of the builder. Isn’t that great?

Therefore, when you search for new flats, don’t rule out investor flats. They are as good as buying from the builder itself.

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Original article by Archana Sarat

The Top 5 Key Benefits of Purchasing and Owning Investment Real Estate

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So… You may ask yourself, why should you buy or invest in real estate in the First Place? Because it’s the IDEAL investment! Let’s take a moment to address the reasons why people should have investment real estate in the first place. The easiest answer is a well-known acronym that addresses the key benefits for all investment real estate. Put simply, Investment Real Estate is an IDEAL investment. The IDEAL stands for:

• I – Income

• D – Depreciation

• E – Expenses

• A – Appreciation

• L – Leverage

Real estate is the IDEAL investment compared to all others. I’ll explain each benefit in depth.

The “I” in IDEAL stands for Income. (a.k.a. positive cash flow) Does it even generate income? Your investment property should be generating income from rents received each month. Of course, there will be months where you may experience a vacancy, but for the most part your investment will be producing an income. Be careful because many times beginning investors exaggerate their assumptions and don’t take into account all potential costs. The investor should know going into the purchase that the property will COST money each month (otherwise known as negative cash flow). This scenario, although not ideal, may be OK, only in specific instances that we will discuss later. It boils down to the risk tolerance and ability for the owner to fund and pay for a negative producing asset. In the boom years of real estate, prices were sky high and the rents didn’t increase proportionately with many residential real estate investment properties. Many naïve investors purchased properties with the assumption that the appreciation in prices would more than compensate for the fact that the high balance mortgage would be a significant negative impact on the funds each month. Be aware of this and do your best to forecast a positive cash flow scenario, so that you can actually realize the INCOME part of the IDEAL equation.

Often times, it may require a higher down payment (therefore lesser amount being mortgaged) so that your cash flow is acceptable each month. Ideally, you eventually pay off the mortgage so there is no question that cash flow will be coming in each month, and substantially so. This ought to be a vital component to one’s retirement plan. Do this a few times and you won’t have to worry about money later on down the road, which is the main goal as well as the reward for taking the risk in purchasing investment property in the first place.

The “D” in IDEAL Stands for Depreciation. With investment real estate, you are able to utilize its depreciation for your own tax benefit. What is depreciation anyway? It’s a non-cost accounting method to take into account the overall financial burden incurred through real estate investment. Look at this another way, when you buy a brand new car, the minute you drive off the lot, that car has depreciated in value. When it comes to your investment real estate property, the IRS allows you to deduct this amount yearly against your taxes. Please note: I am not a tax professional, so this is not meant to be a lesson in taxation policy or to be construed as tax advice.

With that said, the depreciation of a real estate investment property is determined by the overall value of the structure of the property and the length of time (recovery period based on the property type-either residential or commercial). If you have ever gotten a property tax bill, they usually break your property’s assessed value into two categories: one for the value of the land, and the other for the value of the structure. Both of these values added up equals your total “basis” for property taxation. When it comes to depreciation, you can deduct against your taxes on the original base value of the structure only; the IRS doesn’t allow you to depreciate land value (because land is typically only APPRECIATING). Just like your new car driving off the lot, it’s the structure on the property that is getting less and less valuable every year as its effective age gets older and older. And you can use this to your tax advantage.

The best example of the benefit regarding this concept is through depreciation, you can actually turn a property that creates a positive cash flow into one that shows a loss (on paper) when dealing with taxes and the IRS. And by doing so, that (paper) loss is deductible against your income for tax purposes. Therefore, it’s a great benefit for people that are specifically looking for a “tax-shelter” of sorts for their real estate investments.

For example, and without getting too technical, assume that you are able to depreciate $15,000 a year from a $500,000 residential investment property that you own. Let’s say that you are cash-flowing $1,000 a month (meaning that after all expenses, you are net-positive $1000 each month), so you have $12,000 total annual income for the year from this property’s rental income. Although you took in $12,000, you can show through your accountancy with the depreciation of the investment real estate that you actually lost $3,000 on paper, which is used against any income taxes that you may owe. From the standpoint of IRS, this property realized a loss of $3,000 after the “expense” of the $15,000 depreciation amount was taken into account. Not only are there no taxes due on that rental income, you can utilize the paper loss of $3,000 against your other regular taxable income from your day-job. Investment property at higher price points will have proportionally higher tax-shelter qualities. Investors use this to their benefit in being able to deduct as much against their taxable amount owed each year through the benefit of depreciation with their underlying real estate investment.

Although this is a vastly important benefit to owning investment real estate, the subject is not well understood. Because depreciation is a somewhat complicated tax subject, the above explanation was meant to be cursory in nature. When it comes to issues involving taxes and depreciation, make sure you have a tax professional that can advise you appropriately so you know where you stand.

The “E” in IDEAL is for Expenses – Generally, all expenses incurred relating to the property are deductible when it comes to your investment property. The cost for utilities, the cost for insurance, the mortgage, and the interest and property taxes you pay. If you use a property manager or if you’re repairing or improving the property itself, all of this is deductible. Real estate investment comes with a lot of expenses, duties, and responsibilities to ensure the investment property itself performs to its highest capability. Because of this, contemporary tax law generally allows that all of these related expenses are deductible to the benefit of the investment real estate landowner. If you were to ever take a loss, or purposefully took a loss on a business investment or investment property, that loss (expense) can carry over for multiple years against your income taxes. For some people, this is an aggressive and technical strategy. Yet it’s another potential benefit of investment real estate.

The “A” in IDEAL is for Appreciation – Appreciation means the growth of value of the underlying investment. It’s one of the main reasons that we invest in the first place, and it’s a powerful way to grow your net worth. Many homes in the city of San Francisco are several million dollars in today’s market, but back in the 1960s, the same property was worth about the cost of the car you are currently driving (probably even less!). Throughout the years, the area became more popular and the demand that ensued caused the real estate prices in the city to grow exponentially compared to where they were a few decades ago. People that were lucky enough to recognize this, or who were just in the right place at the right time and continued to live in their home have realized an investment return in the 1000’s of percent. Now that’s what appreciation is all about. What other investment can make you this kind of return without drastically increased risk? The best part about investment real estate is that someone is paying you to live in your property, paying off your mortgage, and creating an income (positive cash flow) to you each month along the way throughout your course of ownership.

The “L” in IDEAL stands for Leverage – A lot of people refer to this as “OPM” (other people’s money). This is when you are using a small amount of your money to control a much more expensive asset. You are essentially leveraging your down payment and gaining control of an asset that you would normally not be able to purchase without the loan itself. Leverage is much more acceptable in the real estate world and inherently less risky than leverage in the stock world (where this is done through means of options or buying “on Margin”). Leverage is common in real estate. Otherwise, people would only buy property when they had 100% of the cash to do so. Over a third of all purchase transactions are all-cash transactions as our recovery continues. Still, about 2/3 of all purchases are done with some level of financing, so the majority of buyers in the market enjoy the power that leverage can offer when it comes to investment real estate.

For example, if a real estate investor was to buy a house that costs $100,000 with 10% down payment, they are leveraging the remaining 90% through the use of the associated mortgage. Let’s say the local market improves by 20% over the next year, and therefore the actual property is now worth $120,000. When it comes to leverage, from the standpoint of this property, its value increased by 20%. But compared to the investor’s actual down payment (the “skin in the game”) of $10,000- this increase in property value of 20% really means the investor doubled their return on the investment actually made-also known as the “cash on cash” return. In this case, that is 200%-because the $10,000 is now responsible and entitled to a $20,000 increase in overall value and the overall potential profit.

Although leverage is considered a benefit, like everything else, there can always be too much of a good thing. In 2007, when the real estate market took a turn for the worst, many investors were over-leveraged and fared the worst. They could not weather the storm of a correcting economy. Exercising caution with every investment made will help to ensure that you can purchase, retain, pay-off debt, and grow your wealth from the investment decisions made as opposed to being at the mercy and whim of the overall market fluctuations. Surely there will be future booms and busts as the past would dictate as we continue to move forward. More planning and preparing while building net worth will help prevent getting bruised and battered by the side effects of whatever market we find ourselves in.

Many people think that investment real estate is only about cash flow and appreciation, but it’s so much more than that. As mentioned above, you can realize several benefits through each real estate investment property you purchase. The challenge is to maximize the benefits through every investment.

Furthermore, the IDEAL acronym is not just a reminder of the benefits of investment real estate; it’s also here to serve as a guide for every investment property you will consider purchasing in the future. Any property you purchase should conform to all of the letters that represent the IDEAL acronym. The underlying property should have a good reason for not fitting all the guidelines. And in almost every case, if there is an investment you are considering that doesn’t hit all the guidelines, by most accounts you should probably PASS on it!

Take for example a story of my own, regarding a property that I purchased early on in my real estate career. To this day, it’s the biggest investment mistake that I’ve made, and it’s precisely because I didn’t follow the IDEAL guidelines that you are reading and learning about now. I was naïve and my experience was not yet fully developed. The property I purchased was a vacant lot in a gated community development. The property already had an HOA (a monthly maintenance fee) because of the nice amenity facilities that were built for it, and in anticipation of would-be-built homes. There were high expectations for the future appreciation potential-but then the market turned for the worse as we headed into the great recession that lasted from 2007-2012. Can you see what parts of the IDEAL guidelines I missed on completely?

Let’s start with “I”. The vacant lot made no income! Sometimes this can be acceptable, if the deal is something that cannot be missed. But for the most part this deal was nothing special. In all honesty, I’ve considered selling the trees that are currently on the vacant lot to the local wood mill for some actual income, or putting up a camping spot ad on the local Craigslist; but unfortunately the lumber isn’t worth enough and there are better spots to camp! My expectations and desire for price appreciation blocked the rational and logical questions that needed to be asked. So, when it came to the income aspect of the IDEAL guidelines for a real estate investment, I paid no attention to it. And I paid the price for my hubris. Furthermore, this investment failed to realize the benefit of depreciation as you cannot depreciate land! So, we are zero for two so far, with the IDEAL guideline to real estate investing. All I can do is hope the land appreciates to a point where it can be sold one day. Let’s call it an expensive learning lesson. You too will have these “learning lessons”; just try to have as few of them as possible and you will be better off.

When it comes to making the most of your real estate investments, ALWAYS keep the IDEAL guideline in mind to make certain you are making a good decision and a solid investment.

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Original article by Michael Justin Wolf

3 Ways to Make Money in Real Estate Investing Without Ever Buying a Property

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There seems to be what I call a fog of information about real estate investing. It is not uncommon for a wannabe investor to pay more money learning about real estate investing than he would pay for a master’s degree. Even after spending all that money, many investors never do a real estate transaction. In spite of this there are some individuals making substantial incomes without actually buying and selling properties.

Following are three techniques that individuals in the real estate industry are using to make money without actually buying and selling properties themselves. I omitted ancillary investments like tax deeds or tax liens, lease options, options, realtors as commissioned agents and other methods that do not require your actually buying properties.

1. Selling Other People’s Properties (SOPPs) is a great way to begin doing real estate deals without having any money in the transactions. The first thing to do is build a buyers list using all the usual networking and internet collection methods. Next, contact every local wholesaler and request to re-sell whatever properties they have for sale. Usually they have no objection but they want you to mark up the properties from their offering price. Finally, you will email your list of the other wholesalers’ properties as they become available. Just because the original wholesaler may not have sold the property doesn’t mean that someone on your list won’t buy it.

You should establish what your compensation is before you email anyone else’s property and I suggest you get it in writing in a simple Partnership Agreement. This re-offering other wholesalers’ properties may require some travel on your part to make sure you get credit for the buyers you send to the property. Don’t send your buyers to properties that have For Sale signs with the wholesaler’s telephone number on them – otherwise your lead will call the owner!

2. To make more money on wholesale transactions, an investor should prospect for and get homeowners to sign a contract with them that has a 15 – 30 day inspection period and then advertise the property to his wholesale buyers list. The investor will not have to have money to close the transaction if he simply assigns the contract to the end-buyer he found. A guideline that I use is; if the profit is less than $15,000, the investor should assign the contract. If the profit is greater than $15,000, the investor should do a double closing so neither the buyer or seller knows the amount of the investor’s profit. In this case, money is needed but the investor can use transactional funding that should be much easier to get than hard money.

Investors who wholesale by selling to other investors, learn very quickly that their buyers list is critical to their success. The more emails on their buyers list, the easier it is to sell their properties and the competition by the buyers on their list leads to higher wholesale prices. In fact, the most successful wholesalers have the largest buyers lists. The continued success depends on their adding names continuously because a buyer may not be ready to buy at exactly the time a property is available for sale, or the wholesaler’s whale buyers may have run out of funds temporarily.

3. The even more productive method of making money in real estate, with no travel involved, is to become an expert in your market. This may sound impossible since you haven’t done any deals and may not have any experience, but you can do this by interviewing local and national experts, posting these interviews on your website, or by doing online teleseminars. All of the national experts and some of the local experts will have products that are commissionable to you. You should be able to line up plenty of speakers who are willing to work with you and planning for an entire year can be fairly easy.

In summary, there are a number of ways to make money in real estate without buying and selling properties. The end result of whether you wholesale other investors’ properties, your own properties, or you start an internet marketing program, your key to success is building a massive buyers list and continuing to add to it as often as possible. It has never been truer to say, “Your power is in your list!”

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Original article by Dave Dinkel

An Honest Jay Kubassek Review With All the Facts

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What Other Reviews Will Give You

Most other reviews on Jay will seem like night and day. Some will contribute positive feedback to this young entrepreneur, while others will slander the hell out of Jay. So why are there mixed reviews? It deals with the reviewers experience with Jay’s marketing system. Some have made money with the system and adore Jay. Some people didn’t make money with the system and then blame Jay for their shortcomings. In this review, you’ll get just the facts.

Who Is Jay Kubassek?

Jay Kubassek is a native Canadian and has been an entrepreneur all his life. He managed his family’s farm while he was only 19 years old. So it seemed almost inevitable that Jay would one day become the ultra success story he is presently. Jay dabbled in the home business industry, just like millions of other people with a dream to experience real freedom. He has been a member of Liberty League along with some other notable top earners in the industry as well as a few other MLM companies.

What Has Jay Accomplished?

Jay’s claim to internet fame came when he and his partner Aaron Parkinson launched Carbon Copy Pro in October of 2007. This is marketing system that now is worth over 20 million and is in over 160 countries. Jay is the owner of six businesses, part time philanthropist, professional speaker and trainer and real estate investor. Jay is relatively young and most would find it difficult to experience this level of success so early in life. Jay attributes his accomplishments to his desire to succeed and taking control of his life back when he was a lowly muffler salesman in Missouri.

So What Is Carbon Copy Pro?

This is by far one of Jay’s best accomplishments. Carbon Copy Pro is a marketing system that helps members sell products for Wealth Masters International (WMI), a direct sales company. Jay and Aaron basically took what they knew about becoming top earners in WMI and developed an internet marketing system so other people could leverage their results. This became a win-win situation for everyone because people with zero marketing experience could plug into a system and make money and Jay and Aaron benefited as well.

Can Jay’s System Help You Earn Money?

Absolutely. But only if two conditions are met. You have to be able to follow directions and know how to market. The system does work and there are about 15 members earning multiple five figures per month, but you must become a good marketer and generate a steady flow of leads. It soon becomes a numbers game and the system converts very high.

Final Thoughts On Jay

Jay is super successful. Additionally, Jay has helped hundreds of people to experience success online, even if they didn’t remain a member of his system. It is very admirable what Jay does with a lot of his money. He is a terrific example of what happens when you commit to your desire and let nothing hold you back. As far as working with the Carbon Copy Pro marketing system, this is a decision you will have to make on your own. In direct regards to Jay, he gets my stamp of approval and it will be awesome to see some more entrepreneurs break out like he did.

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Original article by Joey Fratantoni

Non Performing Loans Vs REO Bank Owned Property – How Do They Differ?

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To make real estate investing work for you, you must always take into consideration economic conditions that dictate which type of real estate investment is the best choice at any given time. Do you know your basics? What are Bank Owned REO Properties or non performing loans? What is the difference between the two? It is quite simple really.

Both non-performing loans and Bank Owned REO Properties are the unfortunate children of economic fall down. As economic crisis takes swing so does losing homes as struggling homeowners cannot keep up with loans and mortgages.

An adaptation of the well know children rhyme “First comes a non performing loan then a foreclosure” does well to illustrate the progression of distressed property handling and the major difference between the two concepts. Whereas they undoubtedly trod the same road, the difference in how far along the road each is.

Say a homeowner cannot afford to pay a loan anymore. First month the bank lets it slide. The second month, they mail the letter. The third the gavel comes down – the property has been declared a non-performing loan. For all intents and purposes non-performing real estate loan is a property loan that has defaulted or is in danger of defaulting when homeowner cannot make payments any longer. With some exceptions, three months is all a homeowner has to turn over the dough before his loan is declared non-performing. And current economic conditions being as they are, non-performing loans are sprouting like mushrooms after rain. Financial corporations specializing in non performing loans will help with purchasing a loan that best fits individual financial portfolios. By liquidating involved assets they can realistically provide a good value. But not a 50% discounted price. Not with complementary property repairs. Not bulk. And certainly not without tons of paperwork and fees. None of the things Banks Owned REO can and will do to move the sale along.

Bank owned REO property, on the other hand, is the next step in the distressed property timeline. No payment on a property loan will sooner or later result in “walking the plank”, in other words the dreaded foreclosure. Foreclosure unceremoniously plunks down distressed property to the auction table. Properties that cannot be auctioned off it end up as Bank Owned REO Properties. With current economy banks have a veritable tsunami of real estate properties coming their way. Wildly scrambling to regains at least some money and clear the books, banks sell Bank Owned REO Properties like tomatoes on local market, at a discount, liens and other expenses on the home removed.

While both are viable options for a real estate investor, everyone wants to buy where a deal is better. And in real estate, affordable, bulk, plenty and flexible of Bank Owned REO is a far better than a sometimes, costly, and rigamarole non-performing loan.

And who wouldn’t go for a deal that will brings maximum profit on a minimum investment, fast.

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Original article by Mark Bradley

Five Important Property Investment Ideas to Follow

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Nowadays, planning for property investment continues to be high among individuals. Every investment should be about increasing your capital and secure the future. However, we cannot make sure that all real estate investment will deliver positive results. Thus, here are five important investing ideas that will be essential for every land investor.

Selecting the Right Real Estate Company/Agency/Broker

You may wish to buy an empty land, constructed home or plots for sale. If you are investing through a company, agency or individual broker, then ensure about their trust among people in the society. Further, check for their track-record and previous customer feedback or testimonials. This will be an important factor to end up with a successful property investment.

Know the Fundamentals of Realty Investment

While if you go for a property agent or broker for investment, then initially you should not rely on them. You should first gather information related to the condition of the current real estate market, and then know the fundamentals of investing in properties. As this will help you to avoid any possible risks and make a profitable investment in the city you live.

Types of Real Estate Investments

Since, there are different types of property investments such as, Buy-to-let, Below Market Value (BMV) and Off-plan properties. Thus, the type of stake is also important. So, make sure what kind of investment you are looking for to yield a good profit.

Location of the Property

The location of the property always plays an important role while investing in real estate properties. As you may want to use the property, or sell it to someone in the future. A residential or commercial property that is in a better location will always gain good future appreciation. Thus, a location of the property will be an added advantage and proves to be a wise investment.

Property (ROI) Return on Investment

While investing in a residential property and if planning to let it for rent, it brings you instant profit. In this case, it is vital to make sure that you can get tenants for your residential property and the rental demand in the locality. In addition, buying a rental asset depends on the location, home type and many other important factors. Some real estate companies also help home buyers for rental needs.

Therefore, make sure you stick on with these five important real estate investment ideas and follow it accordingly for a successful property investment.

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Original article by Joel Jonathan

Alternative Loan Options for Residential Real Estate Investment

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Conventional loans are typically the hardest to obtain for real estate investors. Some lenders don’t allow income from investment properties to be counted toward total income, which can make global underwriting a problem for certain investors, especially those who already have several existing conventional, conforming real estate loans reporting on their credit. In these cases, the investor must look outside conventional funding for their investments. Two of the more popular choices for alternative financing are portfolio loans and hard money loans.

Portfolio Loans

These loans are loans made by banks which do not sell the mortgage to other investors or mortgage companies. Portfolio loans are made with the intention of keeping them on the books until the loan is paid off or comes to term. Banks which make these kinds of loans are called portfolio lenders, and are usually smaller, more community focused operations.

Advantages of Portfolio Loans

Because these banks do not deal in volume or answer to huge boards like commercial banks, portfolio lenders can do loans that commercial banks wouldn’t touch, like the following:

  • smaller multifamily properties
  • properties in dis-repair
  • properties with an unrealized after-completed value
  • pre-stabilized commercial buildings
  • single tenant operations
  • special use buildings like churches, self-storage, or manufacturing spaces
  • construction and rehab projects

Another advantage of portfolio lenders is that they get involved with their community. Portfolio lenders like to lend on property they can go out and visit. They rarely lend outside of their region. This too gives the portfolio lender the ability to push guidelines when the numbers of a deal may not be stellar, but the lender can make a visit to the property and clearly see the value in the transaction. Rarely, if ever, will a banker at a commercial bank ever visit your property, or see more of it than what she can gather from the appraisal report.

Disadvantages of Portfolio Loans

There are only three downsides to portfolio loans, and in my opinion, they are worth the trade off to receive the services mentioned above:

  • shorter loan terms
  • higher interest rates
  • conventional underwriting

A portfolio loan typically has a shorter loan term than conventional, conforming loans. The loan will feature a standard 30 year amortization, but will have a balloon payment in 10 years or less, at which time you’ll need to payoff the loan in cash or refinance it.

Portfolio loans usually carry a slightly higher than market interest rate as well, usually around one half to one full percentage point higher than what you’d see from your large mortgage banker or retail commercial chain.

While portfolio lenders will sometimes go outside of guidelines for a great property, chances are you’ll have to qualify using conventional guidelines. That means acceptable income ratios, global underwriting, high debt service coverage ratios, better than average credit, and a good personal financial statement. Failing to meet any one of those criteria will knock your loan out of consideration with most conventional lenders. Two or more will likely knock you out of running for a portfolio loan.

If you find yourself in a situation where your qualifying criteria are suffering and can’t be approved for a conventional loan or a portfolio loan you’ll likely need to visit a local hard money lender.

Hard Money and Private Money Loans

Hard money loans are asset based loans, which means they are underwritten by considering primarily the value of the asset being pledged as collateral for the loan.

Advantages of Hard Money Loans

Rarely do hard money lenders consider credit score a factor in underwriting. If these lenders do run your credit report it’s most likely to make sure the borrower is not currently in bankruptcy, and doesn’t have open judgments or foreclosures. Most times, those things may not even knock a hard money loan out of underwriting, but they may force the lender to take a closer look at the documents.

If you are purchasing property at a steep discount you may be able to finance 100% of your cost using hard money. For example, if you are purchasing a $100,000 property owned by the bank for only $45,000 you could potentially obtain that entire amount from a hard money lender making a loan at a 50% loan-to-value ratio (LTV). That is something both conventional and portfolio lenders cannot do.

While private lenders do check the income producing ability of the property, they are more concerned with the as-is value of the property, defined as the value of the subject property as the property exists at the time of loan origination. Vacant properties with no rental income are rarely approved by conventional lenders but are favorite targets for private lenders.

The speed at which a hard money loan transaction can be completed is perhaps its most attractive quality. Speed of the loan is a huge advantage for many real estate investors, especially those buying property at auction, or as short sales or bank foreclosures which have short contract fuses.Hard money loans can close in as few as 24 hours. Most take between two weeks and 30 days, and even the longer hard money time lines are still less than most conventional underwriting periods.

Disadvantages of Hard Money and Private Money Loans

Typically, a private lender will make a loan of between 50 to 70 percent of the as-is value. Some private lenders use a more conservative as-is value called the “quick sale” value or the “30 day” value, both of which could be considerably less than a standard appraised value. Using a quick sale value is a way for the private lender to make a more conservative loan, or to protect their investment with a lower effective LTV ratio. For instance, you might be in contract on a property comparable to other single family homes that sold recently for $150,000 with an average marketing time of three to four months. Some hard money lenders m lend you 50% of that purchase price, citing it as value, and giving you $75,000 toward the purchase. Other private lenders may do a BPO and ask for a quick sale value with a marketing exposure time of only 30 days. That value might be as low as $80,000 to facilitate a quick sale to an all-cash buyer. Those lenders would therefore make a loan of only $40,000 (50% of $80,000 quick sale value) for an effective LTV of only 26%. This is most often a point of contention on deals that fall out in underwriting with hard money lenders. Since a hard money loan is being made at a much lower percentage of value, there is little room for error in estimating your property’s real worth.

The other obvious disadvantage to a hard money loans is the cost. Hard money loans will almost always carry a much higher than market interest rate, origination fees, equity fees, exit fees, and sometimes even higher attorney, insurance, and title fees. While some hard money lenders allow you to finance these fees and include them in the overall loan cost, it still means you net less when the loan closes.

Weighing the Good and the Bad

As with any loan you have to weigh the good and the bad, including loan terms, interest rate, points, fees, and access to customer support. There is always a trade-off present in alternative lending. If you exhibit poor credit and have no money for down payment you can be sure the lender will charge higher interest rates and reduce terms to make up for the added risk.

When dealing with private lenders make sure to inquire about their valuation method.

Also, with hard money lenders, you should be careful in your research and background checking. While hard money loans are one of the more popular alternative financing options, they are often targets for unscrupulous third parties. Before signing any loan paperwork make sure to run all documentation by a qualified real estate attorney and/or tax professional. If you suspect fraud or predatory lending contact the state attorney general office.

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Original article by Craig Grella

How to Raise Rents – The Nuisance Rental Increase

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Every landlord is faced with the question: should I raise rent? And if so, by how much and how often? I like to employ what we call a nuisance increase.

If you raise rent by too much, you run the risk of the tenant moving out. An increase of $50-$100 or more will probably get your tenant thinking about another place to call home. Now, if for some reason you haven’t raised rent in many years and your current market rent really is $150 above what you now charge, you have two options.

First, you can raise rent by the full amount, explaining to your tenant that it’s the going rate and they will have to pay that amount elsewhere for a comparable dwelling. However, there is still a good chance that they will move out because they’re probably not prepared to take such a large hit to their budget.

The other alternative is to begin using the nuisance increase strategy by raising their rent every year when their lease renews by about $20-$25 until you reach current market rent. This amount usually won’t make a tenant move out – it should feel like a minor nuisance to them, but it’s easier for them to pay $20 more per month then go through the hassle of finding a new place and moving all of their stuff.

Ideally, you should be employing the nuisance increase strategy from the beginning with all of your properties. But, there is an upper limit to what you can charge for a certain property. You don’t want to price your unit out of the current rental market; stop increasing the rent before you reach this point. Instead, reevaluate every year and only increase the rent when prices go up again.

The nuisance increase works well because tenants can understand that your costs to maintain the property go up over time. Every year, you usually see a little bump in your property taxes and insurance, and over time repair costs go up as well. Tenants are okay with this. They usually aren’t okay with you blindsiding them with a huge rental hike.

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Original article by James Orr

Reasons to Invest in Real Estate in Mumbai

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One of the biggest questions about investing in residential or commercial properties is to single out the place where you want to invest. While many cities across India are developing rapidly, Mumbai still manages to hold the interest of investors in the real estate market. Although, the soaring property rates in the city is a hot topic, this mega city of dreams is always under the radar of this sector drawing more investors with its city-wide redevelopment schemes and concepts.

Here we take a quick look at some reasons to invest in Mumbai.

Financial Capital

Mumbai undoubtedly remains the financial hub of the country contributing enormously to the GDP of the nation and also across South Asia. As per Wikipedia, the city currently accounts for 10% of the country’s factory employment and contributes 6.16% of India’s GDP, 40% of foreign trade and 70% of the major transactions happening across the city. Mumbai is headquartering to a number of financial institutions, giant corporate firms and companies and even foreign establishments. The city is home to national and multinational banks offering loan schemes and financial investment options to investors wanting to invest in real estate in Mumbai.

Infrastructure

The quality of infrastructure matters when it comes to making urban real estate investment decisions. Mumbai has an excellent network of roads and flyovers, suburban train network, Mumbai Metro and bus transportation system to get you from one part of city to another in short time. It also has reliable and affordable energy, excellent telecommunications system including high-speed internet. Secondly, Mumbai also has some of the best schools in the country offering education in various fields. The city also boasts of some of the top hospitals across India offering high quality medical and health care 24X7 to locals and international patients. The night life in Mumbai is always bustling and throbbing with some of the best restaurants, bars, cafes and hotels available in different vicinities across the city. If you prefer to have an active, urban and modern lifestyle investing in Mumbai is worth

Bollywood

The presence of Bollywood in the city certainly makes Mumbai a hot spot for property investors. This sector’s market in the city is always on the rise as many B-town celebs make investments across the city splurging their money in high-end residential and commercial properties. Mumbai, the glamour capital of India is also the ‘most preferred zone of investment’ for investors from across the country and globally.

Modern Outlook

With multiple urban development projects happening across the city, Mumbai is the city of future. It is an ideal city to invest especially for those who want to have a second home in the city which can be used in the future. It has a modern and international appeal factor that makes it convenient for NRIs to settle their future back in their home country or to plan it for their kids. With its rapid development plans and modernistic approach, Mumbai has always remained a hot spot for investors looking to expand their property investment portfolio.

Apart from this, Mumbai also offer high ROI for property buyers and investors in the near future. It is recommended to look out for real estate broker or consultants before investing in Mumbai who can help you with their professional guidance and quality service to invest in best property deals in Mumbai.

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Original article by Sunil Chopra

Save Yourself From Fake Realtors

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People across the globe have been fooled and cheated by land scamsters. The misleading claims of real estate dealers lure people in buying property, which was never open to sale! If you are thinking of purchasing land, do the necessary homework beforehand to avoid falling victim to such land scams.

In these tough economic conditions, investing into real estate is considered to be a potent tool to attain financial stability. This is the reason why people find investment in real estate more reliable and are therefore ready to pour down their fortune to own a piece of land. As usual, this boom has also given birth to frauds and scams and a considerable amount of people have fallen victim to these swindlers.

So, if you are thinking of acquiring a plot, beware of these con artists. You can follow these simple steps to avoid being a victim;

Reputation Of The Real Estate Dealer

First look around to know about the reputation of the real estate dealer. You can also check with the firm itself to know about its experience in the field. Tell them to show you testimonials from previous clients. Find out whether the dealer you are thinking of hiring holds and participates in property exhibitions periodically. This will help you judge the goodwill of the firm or the dealer. You can also research on the amount of expertise or capability of the personnel associated with this firm. Last thing that counts to judge the reputation of the concern is whether the top brass of the firm are invited or rather asked to speak at social gatherings. These points will really help you to judge the reputation of the real estate dealer.

Visit The Realtors

Sometimes, due to work pressures, we often find it hard to manage time for a visit to the real estate dealer. And therefore we try to get the entire work done either through phone or online. Studies show that maximum land scams occur due to this very reason. Though you can start a negotiation online or through phone but you are advised to visit the realtor personally. Doing so will let you spend some time with the firm which will further educate you on their capabilities and previous work reports. Moreover, you can also ask them questions regarding the property.

Legal Guarantees

When you acquire land, you also get inclined to several issues and tensions. To get rid of such complications you should make sure that the realtor or firm you are choosing offers guarantee that the land is indeed up for sale and they have the right to sell it. Go through the legal documents very carefully.

Verify All The Claims Made

Your watch out job starts when you visit the real estate dealer and are presented with a brochure. This brochure usually contain information about the plot as researched by the firm in due times. Studying them carefully will give you an idea whether the inputs are sketchy or true to sense. This also depicts transparency and honesty on the dealers’ part while assessing the property.

Mode of payment

Another thing you should do visiting the dealer, is to ask for a client account. This account comprises the details of the services the real estate dealer is going to provide along with the fee structure. You may have noticed the fact that some dealers ask for advance payment. Well, that is pretty reasonable, but the fact you need to check whether the dealer is asking for proportionately large amount or whether they are trying to pocket the money before the deal is concluded.

Another way to avoid a fraudulent land or dealer is to go for government lands. These lands are usually free of issues and are comparatively cheaper. Therefore if you have made up your mind to acquire a piece of land you are advised to purchase the government land for sale through trusted dealers so that you can avoid dealing with swindlers.

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Original article by Lori M