Insiders Real Estate

Southwest letters

January 30, 2008 on 11:00 pm | In Real Estate | No Comments

Southwest letters
Minneapolis Star Tribune – I was asked by our superintendent to serve on this task force, as were the other members, due to my background in construction and real estate as well as being citizens of the district and parents of kids in the schools. We had an opportunity to tour

Home Depot’s Been Hammered Too Hard
Street.Com – Editor’s note: “Bricks and Mortar” is a mock portfolio created by reporter Nicholas Yulico that is meant to help generate real estate and gaming-related stock ideas. In keeping with TSC’s editorial policy, Yulico doesn’t own or short individual

Real solutions for your real estate needs.
USA Today – MANAGING YOUR MONEY: Sign up for our free e-mail newsletter. Every Friday, you’ll get a week’s worth of USA TODAY’s personal finance news and columns. READERS’ CHOICE: See the 50 stocks that appear most in USATODAY.com reader portfolios. YOUR

Real Estate Investing: Infomercial, Tax Sales And Mentoring Scams

January 30, 2008 on 11:01 am | In Real Estate | No Comments

Flipping through late-night infomercials recently, I saw two real estate get-rich quick schemes, and I couldn’t help but wonder why people still fall for those old scams? Has anyone really talked a seller out of his home for no money down with owner financing lately?

Real estate infomercials do great harm to beginning investors, who waste hundreds of dollars on old information. Worse yet, those beginners soon get discouraged and miss out on the true (and profitable) adventure of real estate investing.

One of the most popular late night infomercial shows tells beginners that it’s possible to make a fortune by buying houses with no money down and then renting them out to cover the monthly payments. It’s true that you can buy a home for no money down, but the requirements include having good credit, good income, and the home should be owner-occupied.

Rentals don’t normally qualify for no money down financing. Institutional lenders aren’t supposed to make no money down loans on investment properties, and even if you could buy an investment home with no money down, the monthly payments would generally eat up the rent.

Late-night scammers also claim that investors can get owners to pay the closing costs, including the down payment. But when a lender asks where your down payment will be coming from, saying, “the seller” is not the right answer! Today’s sellers are also fairly savvy, and understand that with no money invested in a property, a buyer could easily walk away and leave them with a home that’s been ruined by careless tenants.

Another TV program offers a bogus system for buying houses at ridiculous prices, but think about it: has anyone bought a home, free and clear, for $345.00 at a tax sale recently? Hordes of investors flock to the tax sales in the area where I live, bidding up the prices of foreclosure properties far beyond a few cents on the dollar. It just doesn’t happen.

Today, another real estate investment scam is popular in Southern California. Here?s how it works: a young person we’ll call Charles charged $4,000 on his credit card to hire a real estate “mentor,” after the mentor wined and dined him at a fancy Beverly Hills restaurant.

In exchange for the fee, the mentor instructed Charles to find distressed houses by driving around the area and writing down the addresses of ugly houses in nice neighborhoods. Once Charles had given him the addresses, the mentor obtained the owner’s address and sometimes a phone number. Then it was up to Charles to call the owners and talk them into selling their houses for no money down, and carrying the paper, too!

I met Charles when he called me about buying a property that my husband and I had on the market for $1.2 million. When I asked him how such a young man was going to make the payments on $1.2 million home, he told me that he planned to rent the house out for enough to make the payments.

As a real estate investor myself, I tried not to laugh at his naivete, and after talking to Charles and listening to his frustration about trying so hard to follow his mentor’s advice, I offered to help him find a property, and I’m happy to say that Charles now owns his own home. But he’ll still have to spend years paying off a $4,000 credit card bill.

If you want to make money as a real estate investor, a good first step is to buy your own home, like Charles did. You can do that for no money down if you have good credit, or for a relatively little amount of money down if your credit is poor. Once you’ve purchased your own home, fix it up and then either sell it or refinance it and use your profits as the down payment on an investment property.

Don’t pay hundreds of dollars for out-dated methods that may have worked in the middle of last century! They’re a waste of your time and money. Real estate investing is truly a great way to make a fortune, but you must stick to tried-and-true proven strategies, ones that work in today?s real estate market.

About the Author: Jeanette Fisher offers FREE How to Start Real Estate Investing Teleseminar, free ebook, The Truth about Making Money Flipping Houses http://doghousetodollhousefordollars.com/

#1 Real Estate Investing Mistake Of 2005

January 30, 2008 on 11:00 am | In Real Estate | No Comments

Over the past few years, real estate investors, hungry for break-even or positive cash flow rental properties, purchased income properties out of state. California investors bought houses in Florida, Texas, and Oklahoma. Florida investors purchased houses in Louisiana. Texas investors purchased in Las Vegas. Many of these investors made millions of dollars because of the appreciation in hot markets.

On the other hand, in 2005, some beginning investors lost their hard-earned investment capital or only made a meager profit because they failed to do their homework on the out-of-state area’s real estate market and customs.

If you ‘re thinking about buying investment properties in a different state than you’re accustomed to, beware of these five surprises.

Surprise # 1 – ‘These (extra) costs are the norm in this state!‘

Besides extra closing costs like pricey surveys, common in Florida but rare in California, other surprise costs included higher transfer fees and taxes. Property taxes in Florida cost much more for investors in Florida than in California. On the other side of the country, out-of-state investors were shocked by California’s state tax held in escrow: 3.8% of the property’s SALES price, no matter the actual profit made. In other words, an investor who made a quick profit of $20,000 on a fast flip could have more than the profit held until the next year’s income tax filing.

Surprise # 2 – ‘You can’t lease this property!‘

New home developers and many Homeowners’ Associations (HOA)s prohibit property owners from leasing their properties. Some of these restrictions got passed, without the investor being notified, during the property purchase phase. You must read the fine print to see if any clauses prevent the rental of the property. Home builders, to keep the value of the neighborhood up, added restrictions requiring the purchaser to occupy the home as a primary or secondary residence.

Surprise # 3 – ‘This house will only rent for $750 per month, not $1200!‘

This was one of the top mistakes made in 2005. Large real estate investing groups, selling out-of-state properties to local investors, inflated the rental income. Because so many houses were purchased in a limited area by investors, a rental glut lowered the expected income. This created hardships for investors who suddenly had to pay out hundreds of dollars a month instead of reaping promised profits.

Surprise # 4 – ‘You can’t sell this house, now!‘

Some investors who couldn’t rent the out-of-state property decided to sell because the values did rise significantly while the house was built or during the purchase time. However, many investors were stunned when they were told they couldn’t sell the property within the first year after purchase. Restrictions prohibiting real estate investors from quick-turning their properties is a trend that is growing increasingly popular with some developers.

Surprise # 5 – ‘Houses don’t appreciate 30% per year here!‘

Perhaps you’ve attended or been invited to a high-power investment seminar that promotes out-of-state real estate investing. Some of these ‘investor clubs’ really are promoters who receive kick-backs in real estate commissions, property management fees, mortgage loan fees, and even fire insurance premiums. They tell stories of huge appreciation gains, which are probably true. However, not all areas enjoy significant appreciation–year after year.

Don’t make the costly mistake of not fully researching the complete market customs and restrictions in the area where you’re thinking about investing. If you can’t afford to go check out the area in person, choose another area that you can visit.

About the Author: Jeanette Fisher offers FREE “How to Start Real Estate Investing Teleseminar,” free ebook, “The Truth about Making Money Flipping Houses” http://doghousetodollhouse.com

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