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Thursday, October 15, 2009

How to use "Owner Financing" for Real Estate investing

By Doc Schmyz

Owner financing often produces a winning situation for both the homeowner who is selling the property and for the buyer who is purchasing the property. Owner financing may be defined as the situation when a seller is willing to help finance a real estate transaction by creating a loan for the entire purchase if they own the home outright or by creating a loan for part of the purchase price when there is already an existing loan on the property.

There are numerous benefits when an owner financed transaction is used. For one, the transaction can proceed more quickly and easily than when conventional financing is used because there are fewer steps involved. For another, the seller is more apt to receive a higher sales price, and the seller will receive payments and interest over a long period of time. There are tax savings realized by selling under this installment plan. Additionally, the buyer will realize savings by avoiding loan fees and lender charges, and the negotiated interest rate will generally be lower than the available interest rates from a commercial lender. Also, for the 20% of prospective homebuyers who cannot qualify for a commercial mortgage loan, owner financing is a wonderful way for them to be able to own the home.

There are a few disadvantages to owner financing to consider. For one, if the buyer defaults on the loan the seller will have to initiate foreclosure proceedings. This can be costly. Of course, after the foreclosure the property can be sold again, an advantage for some owners and a disadvantage for other owners. Also, the interest income generated by the loan will be subject to taxes, which could be a disadvantage to a seller who is in a higher tax bracket. Additionally, the seller does not receive cash for their equity immediately, but rather will receive their equity in installment payments over time. This is a disadvantage if the seller has need for a large sum to be used in the near future.

TIPS: For the seller and the buyer to consider when negotiating an owner financed transaction. The seller should research the buyer's creditworthiness and ask numerous questions to become confident that the buyer can fulfill their obligation. The buyer should provide a written explanation of any problems that appear on their credit report, as well as give a list or personal references. The buyer should research the local housing market and the condition of the home to become confident that the home is priced fairly and is without major problems. Also, the seller should verify that the new owner is making all insurance and property tax payments. A proof of payment provision should be included in the sales contract. Lastly, the seller should require the buyer to stay ahead on payments, even submitting post dated checks, so that the seller has confidence that foreclosure will not become necessary in the future.

Owner financing home sales can be a winning situation for both sellers and buyers. It is important however, that both parties do their due diligence in order to reduce possible risks. - 23208

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Property Investing: Facts And Myths

By Arthur Butler

Real estate is often advertised as the hot way to make quick money. While property investing can be extremely financially rewarding, it takes hard work, patience, and perseverance to be successful.

The television show "Flip That House" makes piece of real estate flipping sound easy. But in reality, this type of business, and investing in property in general, can be difficult and risky. If you are going to go into real estate, it's important to avoid certain mistakes.

It takes several months to a year before you begin reaping the profits of your business. Finding your first investment and closing the deal cannot be done quickly, and then you have to put substantial work into your investment in order to get it ready to resell or rent out. If you do sell your investment, it takes just as long to finalize as it did when you bought the property.

The way house flipping is described, it sounds like all you have to do is stumble across a random house, buy it, and fix it up. In actuality, you have to put as much work into it as you would into any other job: writing a budget, making lists of the kind of investment you're looking for, and evaluating potential piece of real estates to see if they are a good fit for your plans. You are very unlikely to be successful without such a plan.

If you don't plan properly, often you find yourself overspending. If you put more money into a property than is reasonable, you won't be able to fix the property up or invest in any other properties.

MYTH #3: You can run a real estate business by yourself.

This may be true at the beginning, when you're dealing with just one investment. Even that can be overwhelming, as you will soon see. You have to find the right home, finalize the purchase, take care of maintenance and repairs, find renters or buyers, and so on. You also have to deal with tax laws and monthly mortgage payments. If your business becomes successful and you decide to make several investments at once, your workload will quadruple.

For all these reasons, you probably are going to end up needing to employ helpers at some point. The real estate investment business runs more smoothly when you have people you can trust to help run it. This means putting in the effort to find the right people, in addition to everything else you have to do, and losing some profit to pay their salaries. It's worth it, however, for the peace of mind and financial profits you will reap.

As your real estate business grows, you might want to purchase several properties at once. You soon will need to hire others to help out in the business. A successful real estate investment business is impossible to run singlehandedly.

Similarly, don't try to do everything yourself. Real estate is certainly not a one-man enterprise, and if you try to make it one you will just get burned out. Real estate can make you and your team plenty of money; there's no reason not to let other people help you.

Real estate is an exciting, lucrative, dynamic business. Go in armed with the facts and you may find yourself reaping handsome income. - 23208

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Saving: Bad For Our Economy?

By Jennifer McClelland

Saving money is a magnificent thing. It gives banks money to invest, it gives the average person money to invest, money is thrown into markets that would not have otherwise seen those dollars, and the list goes on. Unfortunately, the economy we live in is driven by consumer spending.

Money circulates even further, creating jobs and supporting industry, if spending rises or stays static.

The savings speed, which used to be reflected by unenthusiastic numbers, has risen all the way to 5.7% in April. (Here's a suggestion: If savings rates were once in negative levels, we were spending more than the money we earned.) In a time when what we really need is expenditures, that is when Americans have made the decision that we are going to save. That is so astoundingly backward. Let's spend when we actually need to save and let's save when we certainly need to spend.

The economic problems we are currently facing were somewhat created by the large amount of personal and government spending, fiscal irresponsibility, and escalated debt. Regrettably, personal spending, not government spending, mind you, on a small scale from a huge array of consumers, is really one of the best repairs for the economic challenges we are in right now. The humorous thing is that most Americans had the idea they were previously saving. They thought a lot of what they were spending was thought of as saving: home improvements to inflate home value, real estate buys, and much more, predicting these were all savings, with the hope of a definite return. This was further fueled by even more elevated home values and a parallel "wealth effect". Investors felt the same way regarding the stock market. Investments in the bank were low, making falling CD and saving account interest rates. It was reasonable, however, due to a much less return from banks than substitute investments. "What drove the savings rate down was stock price appreciation and housing appreciation. People spent on those because they thought it was like saving," said J.P. Morgan Chase economist Bruce Kasman.

The belief that investing is saving was clearly wrong, because it helped lead to the depreciation of banks, helping to cause this tragedy. The proper saving is always good for a flourishing economy. However, right now, no saving is good for the economy. Nobody had been saving before, so saving now is the right mode of recovery. Spending, which is growing, will actually be one of the most successful economic recovery actions the downturn has seen. When the economy has improved, all the indexes are solid, and unemployment is not so pitiful, feel free to save yet again the correct way. - 23208

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Real Estate During A Poor Market

By Doc Schmyz

First let's establish a few ground rules for this article.

1) The market has had a down turn before and people still made money.

2) Not every deal will fall into a cookie cutter format.

3) Not every tactic or idea works in EVERY state/province. Check local laws pertaining to real estate transactions.

Ok..now that we understand the rules...lets move forward.

So the market has taken a big drop this doesn't mean that you, as a real estate investor/professional, are out of luck. It only means you need to add new tricks and tools to your tool box. (Be warned I use "tool box" a lot.)

Marketing/locating property

Besides the normal channels of RE agents and brokers (still the best way to find good investments in my opinion) you have a huge amount or resources at your fingertip with the Internet.

You can join website communities for investors, follow blogs, get in on group discussion etc. You can even start your own website for investors and network. All of these things can lead to new and interesting deals.

Several investments have come to me via the web. I also have gotten many tips from other investors on investments and financing issues. Never over look the value of belonging to an "investor community website."

I truly feel that the future of investing will be web related. Not just in finding investment projects but in doing the research for them as well as finding the funding and the marketing/exit strategy as well.

"New" financing

Currently we are hearing about how the current market and credit crisis is making getting loans harder This is true. No way around it. The loan process has changed. So what options are left?? The answer is several.

Owner financing. Lease options. Assumable loans.

The above mentioned may well become the big trends in the next couple of years. I am waiting to see how the lenders change the loan guidelines in the next few months to "re introduce" the assumable loan. We are already seeing a HUGE trend in short sales. ( 10 years ago short sales were a lot harder to find, now it seems like every other distressed listing is a short sale in some cities.)

Please do not let the current market conditions scare you in to sitting this investment period out. On the contrary use it to inspire you. Take the time to do the research on finance options, look into building a LLC perhaps. Find out about buying real estate with your IRA. Etc, etc.

Buy books. Read investment strategies of the big names in investing. Use the time to educate yourself and above all be creative.

Don't let panic drive you off with everyone else. - 23208

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How To Avoid Foreclosure

By Annabella Sherie

We all know that no one ever wants to lose their home to foreclosure; however in the past year it seems like so many people struggled with learning how to keep their home out of foreclosure. If you have come to the internet for tips on what you can begin doing to avoid foreclosure; you are not alone.

If you have just purchased your home then you will want to know how to protect it; there is nothing wrong with learning about how to avoid foreclosure so you can protect your family. We have written this article in hopes of being able to provide you with some great tips and resources that you can use to protect your loved ones.

You will want to follow these tips so you can learn how to avoid foreclosure and keep your home happy.

1. Don't Purchase More Than You Can Afford: The sad truth is that many people will find themselves in situations where they have purchased more than they can afford. If you are a first time home buyer; you want to make sure that you do not over stretch your budget by buying a home that you can not afford to purchase.

2. Savings: It is important that you begin saving some money each and every month; this will prevent any type of financial disaster in case any type of emergency occurs. In fact research shows that we all should have enough savings to last us for at least 6 months in case we have to live off of our savings.

3. Payments: Always make your payments on time and if you begin falling behind on your scheduled payments do not hesitate to call your lender. The banks are not in the business to foreclose on homes; in fact they really do not want to foreclose on your home. However if you neglect to make the payments on time or notify them of your hardship then they will have no other option.

We have just listed a few of the tips that can help make any homeowner avoid foreclosure. These should get you started however if you want us to reveal some more tips that can help make your experience much more pleasant then you will want to continue reading.

If you want to learn some more vital tips about how to avoid foreclosure then be sure to stop by and visit our site below. As homeowners or someone who is searching for a new home; we all should be concerned with this growing problem. - 23208

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