Do It Yourself Thursday!!!

How to patch Those Small Holes in Your Walls!!! Check it out!

http://www.facebook.com/l.php?u=http%3A%2F%2Fwww.youtube.com%2Fwatch%3Fv%3D-zop6ND1h4o%26feature%3Dyoutube_gdata_player&h=7AQHn59Jb

What you need to know Wednesday!!!

What is a balloon note?

When investing in real estate notes, there are options available to avoid balloon payments. Balloons have been called "foreclosures in embryo." These four techniques are ways to avoid or minimize the impact of balloon payments.

1. Balloon payment extension rate
Instead of a balloon payment, the interest rate could increase at a certain time. For example, at 60 months, the 10% interest rate may jump to 15% or some other rate. What would the seller do with the cash if he or she were paid off?

Plug into the note a rate that might make the seller happy with their rate of return. A higher rate may encourage the buyer to refinance, which would accomplish the same purpose.

2. Balloon payment--sell the note
Five years into the note, the note may be well seasoned with a good payment history. At that time, the note could be sold for cash to a paper investor.

If there were originally a balloon, it could be structured that with a good payment history and an acceptable loan to value (LTV) ratio based on current property values, the note could be extended for another five years.

This seasoned, short-term real estate note with a good payment history could be sold for little discount.

3. Bubbles instead of balloons
A small balloon payment for less than the full amount of the note is sometimes referred to as a bubble. What are the seller's needs? Could smaller lump sum payments over a few years meet his needs?

As a note broker, it is sad to see sellers sell a large note and take a big discount just to get a small amount of cash. At other times, sellers receive balloon payments then turn around and put it in the bank at half the rate they were getting on the note.

4. Partials instead of balloons
One way for a seller to receive cash is to arrange to sell the next few years worth of payments to a paper investor instead of a balloon payment in 60 months.

For any questions, please comment below. For investment services, leave a message at 314-246-9484 ror you can email at dhibb99@gmail.com

Tip of the day Tuesday!!!!

Hey Everyone!

Check out these tips on how to find and choose a great realtor!

http://www.youtube.com/watch?v=1X6Z_j00BZU&feature=youtube_gdata_player

Main Question of The Day Monday!!!

How Does a Short Sale Affect a Credit Score?

The #1 question my students are asked by distressed homeowners is: How does a short sale affect my credit score? Let's define what a credit score is first before we embark on how a short sale affects your score.

Your credit score is actually a formula developed and maintained by a private company called Fair Isaac Company, Inc. The score is determined on a weighted scale with:

Payment History, and

Amounts Owed

weighted far heavier than...

Length of Credit History

New Credit, and

Types of Credit Used

[See FICO Basics for a more detailed explanation.]

Since Fair Isaac invented and continues to maintain the credit score formula, naturally we should ask them how a short sale affects a credit score. The question posed to MyFICO.com was:

"How does a foreclosure or short sale affect my score?"

Their response was:

"Credit bureau reports are limited in how they represent foreclosures today, so it's generally not possible to tell from the credit report if a reported foreclosure is a short sale, deed in lieu of foreclosure, settled account, regular foreclosure, or some other variation.

The FICO score treats all of these descriptions that appear on credit reports as serious delinquencies, so they have an impact on the score similar to the impact from a charge off, tax lien, or account included in bankruptcy."

Not what you were hoping for, huh? Well, in another article, "Why a Short Sale is Better Than a Foreclosure," I'll describe the massive benefits of a short sale over letting the property go to foreclosure.

[As it turns out, the credit score itself is not necessarily helped by a short sale over any other seriously delinquent account, such as a foreclosure. So the initial score decrease will be the same--experts say a ballpark of 100-200 points on a scale of 300 to 850. And the higher the credit score the greater the fall.]

But the credit report itself looks far better. Most underwriters agree that a short sale looks better than a foreclosure on a credit report. When you're doing a short sale, it shows that you've actually done something about the foreclosure, versus letting it go to foreclosure.

In fact, FHA has developed a loan program just for borrowers who have had a short sale.

There is one way to minimize your credit score reduction when dealing with a short sale. Try to avoid allowing the payments to go behind. That maybe easier said than done, and I know that sounds like an oxymoron--doing a short sale while keeping the payments current, but it can be done.

My students and I do those all the time. The most destructive item to your credit score is the late payments. When it shows 30 days late, then 60, then 90, then 120+ days late, that's when the credit score takes it's biggest hit.

So if you can squeak by and keep the payments from falling 30 days late, you stand to really minimize the damage to your score from a short sale.

How Does a Short Sale Affect a Credit Report?

It is a very hot topic: How does a short sale affects your credit report? Let's have an inside look at what a short sale does to your credit report.

After a short sale transaction is complete, the lender is going to report to the three credit bureaus (Equifax, TransUnion, and Experian) that a short sale was conducted on the loan, as opposed to a full payoff.

Although lenders are subject to change their policies on a moment's notice, we have seen Countrywide report, "settled as agreed," Litton Loan Servicing report "account settled," HFC Beneficial report "settlement in full," and HSBC report, "Account legally paid in full for less than the full balance."

This terminology is very similar to what credit card companies report when a borrower settles an old collection for a percentage of the total amount owed.

In most cases, the short sale approval letter will specify the exact wording the lender is going to report to the bureaus. In isolated cases, you may find where the short sale approval letter does not specify how the short sale will be reported. In such cases, you should contact the department handling the short sale to determine how it is going to be handled.

Also, we have seen some cases where lenders fail to report a short sale to the credit bureaus, for who knows what reason. Maybe they forgot?

And if the account is more than 120 days past due, many times it will automatically show up as a "foreclosure" on the credit report. Therefore, it is imperative that you follow up with all three credit reporting bureaus a month or two after the short sale is complete to verify with all three credit bureaus that a "foreclosure" is not showing up.

In such cases, you may have to provide evidence to Equifax, TransUnion, and Experian to prove that indeed the property was sold prior to a foreclosure.

I hope this helps you understand how a short sale affects a credit score and a credit report. Stay tuned for: "Why a Short Sale is Better Than a Foreclosure.”

For any questions, please comment below. For investment services, leave a message at 314-246-9484 ror you can email at dhibb99@gmail.com

Facts Friday!!!!

If its too good to be true, it probably is!!!!


There's an old real estate scam going around again. New investors who don't know better are being taken in by more experienced investors offering to help them get started investing in real estate.

It goes something like this . . .
"Hey kid, haven't done a deal yet? No problem! Stick with me and I'll not only find you a good one, I'll negotiate it and even get the thing closed for you. You don't have to lift a finger."

Sound good? It does if you're brand-new and don't know any better. It sounds especially good if you're hungry and eager to get your first deal put together.

It gets even more tempting when he says he likes you so much that he'll set it up so you can get into it with nothing out of your pocket. Even better still, he'll massage the numbers so you can walk out of escrow with a check.

Aye Carumba!
Sure enough, the dust settles just like he said it would and not only do you walk out of escrow the proud owner of a new rental property, you collect a check for your troubles.

Hold on, hotshot because that ain't the end of our story . . .

You do this deal and you are now the proud owner of a junker rental property that's been prettied up just enough to sneak it past an appraiser and maybe fool a lender or two.

That new coat of paint, some new cheap carpeting, and a shiny brass door-knocker do not make your property "freshly rehabbed."

It's doubtful that your rental unit is actually ready for a tenant to move into. I'm guessing it's not even close.

More likely, your work is only just beginning because at best, you overpaid for your first investment property by no small margin, and you've got a junker on your hands you can't possibly give away for what you owe, much less rent out to break even.

Soon enough, you'll discover that the $3,000 you walked out of escrow with won't begin to cover the expenses you encounter when you find out all the things you must now do to get the place into rentable shape.

The house sits empty for a couple months while you fix the things you missed or didn't even know mattered.

And it's empty another couple months while you learn that the only people who want to rent a house in that neighborhood couldn't possibly qualify to buy a loaf of bread on credit.

And then you run out of money!

But hold on . . . there's a solution. Your investor buddy calls and offers you another deal just like the first one.

You jump on it because now you need that $3,000 kickback he's once again dangling in front of you.

This is a formula for disaster
Do one deal, and you'll likely get out alive. Do a half dozen of these since your hero investor is really on to something good, and you will soon find yourself in enough trouble that you probably will not get out alive, at least financially.

Instead, you'll be a slumlord with a bunch of garbage properties that are over-financed and are a constant and never-ending pain in the you-know-what.

Hey Newbie! That investor buddy of yours is NOT your friend and doesn't see you as his anything other than a pigeon with a financial statement.

You can bet that as soon as you miss a payment or two on all those over-leveraged junker properties he fixed you up with, that buddy will move on to the next new kid on the block.

Here's the part he's not telling you
That first house you bought, the one he got appraised at $92,000 and sold to you at the bargain basement price of $78,000 (and paid you $3,000 on top of that), did you ever stop and think what he paid for it?

I'm guessing somewhere around $30,000 tops, and he spent maybe another $3,000 or $4,000 prettying the thing up.

The exact numbers don't really matter, but you can be sure the check he walked out of escrow with was a multiple of your check, and in case you haven't noticed . . . you got taken.

Avoid "Red Ribbon Deals," in which someone else does all the work and delivers the transaction to you all wrapped up with a pretty little bow on top.

Rarely is this sort of thing anything more than a con job that'll leave some sucker out of money, out of credit, and out of real estate investing.

This business is all about work
I get paid because I can quickly solve difficult problems for people who desperately need someone to get things fixed in a hurry.

It's not easy, and it's often not particularly pretty, but I wouldn't want it any other way. Difficult problems are good. Hard work is good. It gives me the opportunity to show off my stuff and make things happen.

Forget about easy ways to invest in real estate. Believe me, I've looked, and there just aren't any. And even if there were . . . what would be the fun in that?

For any questions, please comment below. For investment services, leave a message at 314-246-9484 ror you can email at dhibb99@gmail.com

Do it Yourself Thursday!!!

Hey World! Check out my guys from ThinkGlink.com teaching you basic painting!!! Get prepared for your spring painting projects! Do them yourself this year!!!?

http://www.youtube.com/watch?v=pWZxzy2SbbI&feature=youtube_gdata_player

What You Need To Know Wednesday!

Using your IRA account to invest before retirement!!! Make Money Now!!!

Money in an IRA (and other retirement plans) is a great source of real estate investment funds. In fact, most people don't even know they can use their IRA money to invest in real estate, mortgages, and trust deeds. And, once they stash it away, many folks forget they even have money in a retirement account.

You can invest your IRA funds in real estate and mortgages if you have a self-directed fund. And here's the best part: All the profit you make from these investments goes back into your IRA tax free.

Few people know about self-directed IRAs. If you would like to use your retirement funds now for more lucrative real estate or mortgage investments, look for a financial planner who can help you convert to a self-directed plan that permits these investments. The effort is well worth it.

Why let the four to five percent inflation rate cancel out the six or seven percent appreciation rate of your retirement fund? Start making some real money instead. Investing in real estate or mortgages is a wonderful way to skyrocket the growth of your retirement fund. Get started today!

For any questions, please comment below. For investment services, leave a message at 314-246-9484 ror you can email at dhibb99@gmail.com