DEAN GRAZIOSI: DEAN GRAZIOSI REVIEW – REAL ESTATE FEED BY DEAN GRAZIOSI

Given that there are terrific buying opportunities in today’s real estate market, the experienced real estate investor learns how to buy at the best price.  Real estate investors leave the emotion at the door and replace that emotion with facts, figures and budgets.  Quite simply, there is no other way to invest today.

So, now we need to build a reliable checklist that will eliminate surprises and lead us to the bottom line.  To build this list, we break expenses into three basic categories.

Purchase expenses – depending on the type property, the investor’s credit history and the lender’s requirements, there can be some variation to the cash requirements at time of closing.

·    Down payment
·    Attorney fees
·    Taxes in escrow
·    Recording fees
·    Survey costs if necessary
·    Title insurance
·    Pre-paid reimbursements to seller

Income & expenses – with most investment property, current and projected income and operating expenses affect the property’s value.  The buyer should understand:

·    Net heating and cooling costs
·    Net tax obligations
·    Net management fees
·    Annual maintenance expense
·    Cleaning or janitorial expenses
·    Lawn and landscape costs
·    Mortgage expense
·    Income

Each property presents unique income and expense opportunities.  When it comes to gathering this information, more is better than less.  Gather as much info as possible.

Immediate Cash Requirements – every property can be improved.  Some improvements are superficial while others can represent major expenses.  Again, the investor eliminates surprises. Check the following systems thoroughly and be safe rather than sorry by calling in experts for structural inspections.

·    Roofing
·    Basement
·    Heating and cooling
·    Exterior
·    Windows
·    Plumbing
·    Pest control
·    Asbestos mitigation
·    Elevator
·    Electrical

The successful investor will expand these basic lists.  Get behind the numbers to repair or upgrade these systems and use structural experts to help clarify the property’s true, not emotional value.  Your due diligence to these building systems could well determine the success of your investment.

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The world of real estate investing can get very confusing especially if you don’t have someone to guide you through. Thank God I found someone in Dean Graziosi. It is just that unless you understand the ins and outs of making a profit form real estate, you wont really understand what you are hearing. One moment it may seem like everybody is blogging, talking on twitter, or setting up a wiki that says that property is a great investment, and how it goes up in value (true), and the next moment you will be hearing how real estate investing is so volatile (and it can be).

The truth is that real estate investing is “easy” and “difficult” at the same time.  It is difficult when you have no idea what you are doing, and aren’t interested in putting in the time and effort to learn, and its easy when you have done your research, your work and everything that should be done for such a purchase.

The biggest factor that will determine whether you make  a profit from real estate  now or not is the location. You see, property prices change from community to community. This is due to the size of a community, its industry, or economic health, property laws and taxes.  This affects the value of the property and the quality of life of the people that live here. Even, the type of schools in the area influence the price of the property.

If the neighborhood is quiet, clean, and there are good schools around, then generally the price of real estate will be higher. If on the other hand the area has a lot of crime, most of the homes are run down and the area looks un-kept then the price will be cheap, but the question is do you really want to buy in such an area? Can your really make a profit from real estate now? These are questions you should ask yourself before investing in real estate in these types of areas.

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Every real estate investor is in the business to make a profit. As in any business, the larger the profit margin, the better. However, real estate has so many different facets involved in the investment that it can be difficult for a new investor to determine the exact dollar amount of their profit after they make the sale. Because of the cost in not only materials, but time and labor expertise it can be easy to overlook assets that have been invested in the property.

First, calculate every penny invested in the property. This can be closing costs, interest payments, and the price of any improvements done to the property. Account for every expense down to the last .10 screw. These are your out-of-pocket business expenses. Your sale price minus this number is not your profit on the property.

Don’t undervalue the work you do on the property. For every bit of work you do yourself, determine a fair wage for a professional to come do the work. Spend five hours deep-cleaning the house or shampooing the carpets? Call a couple of local businesses to find out how much they would have charged to come do the job, and calculate that amount as your expense.

Did you spend time taking sale pictures or visiting with your real estate agent? Time is money, so be sure to calculate in a fair wage for that time spent as well. This can be either your wage at your current job that you have to take time from to do this work, or a fair wage for a receptionist or personal assistant.

While that sale price minus the dollar expense may look like a nice number, it doesn’t tell the whole story on the profit scale. If you spend any kind of time, money or effort on this piece of property, make sure it’s accounted for and figured in. If the numbers don’t pan out with this figured in, you’re not getting your money’s worth out of this investment.

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While foreclosure auctions have long been a favorite place for investors to scope out new opportunities, the downturn in the economy and the accompanying high foreclosure rates mean the pickings are better than ever.  That is, the pickings are excellent for anyone who happens to have money to spare.

With foreclosures flooding the market and everyone staying on a tight budget, prices are staying quite low at auction and a large number of houses aren’t selling.  For those who have the capital to put into a real estate venture and have a bit of expertise to help in determining which are potentially good investments, this is an opportunity that won’t likely be equaled. The big question on many people’s minds is, how do I buy these foreclosed properties at auction?

The first thing to understand is that many properties never make it to the auction block, because an auction just about guarantees higher prices and smaller profits.  However, if you’ve made up your mind that you want to wait for foreclosure auctions, find a listing of foreclosures and pre-foreclosures in your area.  These can be obtained from several online sources, or the notices of foreclosure can be found at your local courthouse. Many times, realtors and real estate agents also keep lists of area foreclosures.

Research all properties of interest ahead of time. Request a viewing, if possible, or at least drive by the property to see what it looks like from the outside. Run checks through the courthouse to determine what liens are on the property and if there are any back taxes owed on it. Finally, write down all the details on each of the properties of interest and determine how much you’d be willing to pay for a given property, then find out the date of the auction and make sure you’re there to bid on your chosen property.

Buying at auction carries a number of risks. Namely, there is a lot of time and effort involved in researching properties, and there’s always the possibility that you will be bid over. Alternatively, the property may never make it to auction either because of a pre-foreclosure sale or because the owner came up with the means to stop the foreclosure process on their property.

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Whenever you purchase a piece of real estate, there are certain closing costs involved. Most people know this before they go into negotiation for a mortgage, though the vast majority of investors and potential homeowners do not fully understand what is involved with each of these fees. In addition to the costs discussed below, these can include survey fees, credit checks, home inspection, points and more.

Each lender is different, so consulting your loan officer is the first step to understanding your closing costs. Ask them what kind of origination fees they have, if there are points involved, and what kind of structure they have for property taxes. Many lenders will require a portion of your loan payment go to an Escrow account to pay for property taxes, homeowner’s insurance, and other such necessities to protect their investment. For the duration of the loan, Escrow fees are taken out of monthly payments; however, at the time the loan is approved there may be two or three months’ contribution to the Escrow account up front.

Origination fees are the fees exacted by every lender at the time the loan is approved to cover the paperwork, time with the lending officer, and other such fees. In many cases this is approximately 1% of the loan’s value, but this number can add up quickly so be sure you know what that cost will be before finalizing a loan.

Appraisals are almost always part of the closing cost. Lenders need to be certain that, in the case of a foreclosure, they will be getting a sound, valuable property. This requires that a licensed appraiser come to the prospective property and test its soundness on a range of aspects that may affect its overall value. Depending on the size of the home, this could add anywhere from a couple hundred to a couple thousand dollars to the cost.

The loan officer responsible for your prospective mortgage can cover all the closing costs with you before the loan is finalized. If the officer is unwilling to go over these in fine detail until you understand and are comfortable with all the costs involved, request another loan officer or go to a different lender. Lenders are in the business to help you purchase property and should always be willing to take the time to explain every facet of the process to you so that you can rest assured you’re getting what you’re paying for.

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Thousands of homeowners around the nation have recently become acquainted with the feeling of having a home go into foreclosure. This process generally begins when a homeowner is three or four months behind on their payments. Owners are generally given 120 days (depending on the state) to bring the loan current, plus pay any legal fees accrued through the foreclosure process up to that point.

Often, this means the owners must come up with as much as a couple thousand dollars in addition to the back payments on their property.  For many, especially those who are already financially distressed, this sum is far out of reach on short notice. These owners generally have the choice of either letting the home foreclose, or finding a buyer for the home before the foreclosure goes through. There is another option as well, one in which the owner may give their permission to their lender, or ask permission of the lender, to sell the home in a short sale – or for less than is still owed on the property.

The most obvious advantage to the owner in the case of a short sale is that they will not have a foreclosure on their credit if the home is sold while in pre-foreclosure. Credit scores are quite unforgiving in cases of any loan default, but arguably the worst of all of these as far as the credit is concerned is a mortgage default. These are generally loans with a high balance with a low percentage paid off, and are invariably reported to all the major credit bureaus.

Foreclosures can be costly, and the cost must be borne either by the financial institution initiating the foreclosure, or by the owner who wasn’t able to make their loan payment in the first place. The cost and risk can be significantly reduced for both parties by a short sale, and the lender may claim any difference as a loss on their taxes. In most cases, once a short sale is agreed upon, a deficiency judgment cannot be made against the owners for any difference between the owed amount and the sale price.

Finally, short sales are beneficial to the buyer because they often allow for great discounts off the market value of the property without the hassle and risk of foreclosure auctions. Many times, buyers looking to purchase at auction expend a lot of effort only to have their target property go for higher than their top bid, or not even make it to auction at all. There are a number of ways to buy distressed properties and short sales are but one option to explore when looking to make an investment.

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The terminology used in many real estate transactions, especially those that are meant to be financially beneficial investments, can be confusing to newcomers to the market.  Short sales are particularly confusing.  Most people starting out in real estate investments are primarily accustomed to more common house hunting methods or property buying procedures that involve an eager seller, considering true value, making bids and having them countered or accepted.  The idea of a short sale is somewhat foreign to most of those new investors.
A short sale is instigated when a seller is desperate to get out of a financially draining situation due to the economic market or loss of income.  In those cases, rather than go through an actual foreclosure, they will seek relief from their mortgage lender and request the ability to sell at a lower price than their actual mortgage reflects in order to move the property quickly.
It is important to note that not all lenders will agree to such an arrangement.  However, in some cases they may consider it advisable rather than lose the entire amount of the loan, or taking the property as an un-performing asset that may sit on the market for years doing nothing for their income.
A short sale can allow you to obtain real estate you would otherwise not be able to afford, or give you the ability to turn it over faster because of the lower cost to you and still make a decent profit if sold at a more realistic rate according to the market value.  Using short sales is an excellent strategy, but you should always seek the advice of a reputable real estate lawyer to be sure all of the documents are in order and the original lender is in complete agreement to avoid possible complications at a later date.

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Being in business for yourself can be risky.  Even when you are successful, it is important to keep your personal assets protected so that if problems pop up your family’s safety is secure.  The way all businesses do that, including real estate investors, is by forming an LLC for all of your related transactions.  Once you are an LLC you will no longer do business in your name, but rather as your company; even if it is named after yourself, it will be an entity protected by the legal structure.
What is an LLC?
LLC is an acronym for Limited Liability Company.  An LLC assigns all debts acquired by your company to be covered by any assets you hold as a company but NOT as a personal asset.  That means if a creditor comes after you, a deal goes bad and you owe money on it, or someone is hurt on one of your properties that you haven’t obtained insurance on yet, you may lose assets your company owns.  However, those assets won’t include what you own personally, like your car, your personal home, or money in your personal bank accounts.
Setting it up
Setting up an LLC is the first move you should ever make when considering any form of business, including investment businesses.  It is simple to start the paperwork for an LLC and they can often be established online without ever leaving home.  All you have to do is pick a name for your company, fill out the paperwork, develop an LLC agreement that most LLC websites will assist you in doing, publish a notice in your local paper of intent to become a LLC, and you have it.  Once you have that vital piece of business taken care of you can begin your career with a feeling of security, knowing that your family is protected from any problems you may encounter in your ventures.

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Fixed-rate mortgages are a safe, stable loan in which the interest rate never changes throughout the life of the loan. However, variable-rate loans continue to be the most popular loan type in the United States because of their very low introductory interest rates. Issues arise when the introductory period ends and the interest rates of variable-rate mortgages can skyrocket. The foreclosure crisis that caused the housing market crash in the US has been mainly attributed to these variable-rate mortgages.

In most cases, if you’re purchasing a primary home or a rental property a fixed-rate mortgage is the best loan to go with. Payments may be a little higher than variable-rate counterparts, but you are assured that those payments will remain the same for the next 20-30 years until the loan is paid off. For the most part, fixed-rate mortgages are the best option for long-term borrowing. Especially in times when the economy is down and the market is poor, fixed-rate mortgages should be seen as the best option as variable-rate interest can cause severe financial hardship.

If you’re looking to refinance a property, fixed-rate mortgages are generally preferable and easy to get in instances where a nice down payment is included. Many homeowners switch from variable-rate to fixed-rate mortgage loans before or shortly after the introductory period of their first loan is complete. If you’re planning to purchase a property and want to finance with a variable-rate loan first, make sure you know the policy for early payoff. Count in the cost for re-appraising the property and any other closing costs for the refinance to see if having a variable-rate mortgage to start will even save you any money. In many cases, these costs end up making it more expensive than if the buyer had just gone with a fixed-rate loan from the beginning.

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They say that 50% of potential buyers make up their minds about a house within the first sixty seconds. A seller can improve the odds for a sale by improving curb appeal and developing selling points such as efficiency. Replacing the windows is a relatively easy way to do this and it is a method often overlooked by sellers.

New windows are more energy-efficient, look nicer, and for a potential buyer they mean one less thing that might have to be dealt with after the purchase. Efficiency is a huge selling point because it lets buyers know they will be spending less on heating and cooling bills. Try to think about convenience for the new owner — what will be the easiest to clean and maintain – as well as the out-of-pocket cost for you.

If the windows are already fairly new, or you are unable to change them out completely but you wish to make them look better, you can replace the old hardware to add character and a fresher, cleaner look. Also, even if you can’t replace the windows, make sure that they can all be opened.  Consult an interior designer for a quick, general idea about changes if you are unsure of what will sell.

By replacing the windows in your investment property you can also modernize your house, thus making it more appealing to potential buyers. Historical properties can be given a more modern energy efficiency. For others, you can change the style, color, and about every other option imaginable to help give your property a look that will help make that sale.

Don’t forget that replacing the windows in your home, as well as other energy-efficient measures, increases the value of the home altogether. It usually brings an 80% return on your investment, but may mean the difference between selling or not. When you are looking to sell your home and increase its curb appeal and bottom line value, look to newer, energy-efficient windows that look great.

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