Tip of the day Tuesday! Tip of the day Tuesday!

Hey Everyone!!! Today I will be assisted by Howdini and Gerri Willis on home buying tips!!! Things to know before purchasing your new home!!! Tune in!

GO TO

http://www.youtube.com/watch?v=o0J0Ygn20NI&feature=youtube_gdata_player

Main Question Of the Day Monday

What is a Short Sale?

Anyone investing in real estate foreclosures and distressed properties has come across one major problem--finding deals with equity! There are so many foreclosures out there. Unfortunately, most of the homeowners owe what their property is worth.

We find that most real estate investors walk away from deals with no equity. Either, they don't know what to do with a no-equity deal or they are unwilling to put forth the effort necessary to make the deal work. In situations like this, we discount the mortgage.

"What is discounting?" you ask. Also known as a "short sale," discounting a mortgage means getting the bank to accept less than is what is owed as payment in full. Here are several steps that will ensure your success when discounting mortgages.

How it works

First of all, you must have the homeowner under control. Many investors are under the misconception that they can buy the property directly from the bank while it is in the foreclosure process.

Not true! The bank does not own the property until the moment of the courthouse sale.

You can buy the mortgage and finish the foreclosure process, but you cannot buy the property. You'll have to work hand-in-hand with the homeowner if you plan to discount mortgages.

Here is how it works: A homeowner calls and tells you he is in foreclosure; he owes $95,000 on his property; the house is worth $100,000; and he's eight months in arrears. He wants to move on with his life, but he can't sell his house because he owes what it's worth.

Here's where you come to the rescue. You meet with the homeowner and have him sign:

An "Authorization to Release" form (this gives the bank permission to speak with you about the account)



A sales contract for the amount you are willing to pay for his property. In this scenario, we are going to offer $50,000

Next, you call the bank and ask for the Loss Mitigation Department. This is the department that handles properties in foreclosure.

Tell the person handling the account that you are trying to help Mr. Smith with his foreclosure, and you are willing to buy the property from him. However, due to it's poor condition, you are only willing to pay $50,000 as payment in full.

Fax the sales contract for $50,000; comps in the area; an extensive list of repairs that are needed to bring the property up to marketable condition; a net sheet (a title company will help you with this); and some really bad pictures.

The bank will then review the information and make a decision. Let's say they counter at $65,000. You counter again at $55,000. They accept. It's that simple!

We discount many, many mortgages every year. Banks are not in the business of owning properties. They would rather discount a mortgage than go to the courthouse steps.

An incredible deal

We'd like to share an incredible deal one of our graduates put together. Cathi Dubois was helping some friends find a home in which they would live. They came across a property valued at $200,000 in a distress situation.

The property had a mortgage of approximately $197,000 and was in need of several thousand dollars of repairs.

Since the current owner owed what the property was worth, Cathi did what any prudent investor would do: She discounted the mortgage. She contacted the bank and began the process. Her first offer was $50,000. The bank laughed and told her to make a higher offer.

After several phone calls, the bank agreed to accept $130,000 as payment in full. That is a $67,000 discount! With the new payoff of $130,000, she then flipped the property to her friends for $140,000 and made a smooth $10,000 in less than a week.

A win/win solution

This is a typical case where having a firm grasp on creative real estate investing enabled Cathi to turn a "nothing deal" into a "something deal" just by picking up the phone. She made money (and a lot of it) on a deal most investors would have passed by.

The bank was happy with the discount, Cathi made $10,000, and her friends bought a home with $60,000 equity!

So, the next time you get a call from a distressed homeowner with no equity, what will you do? Walk away or make a few simple calls and turn your time into cash?

We certainly hope you will make the small effort it takes to do a few short sales. It's such an easy way to make money in an industry where great deals are tough to come by.

With short sales, not only are you helping yourself; you are helping distressed homeowners and giving them the chance to start over. You can't go wrong!

To contact Derrick Hibbler send a comment below or call 314-246-9484 :voice or you can email him @ dhibb99@gmail.com

OPEN HOUSE FRIDAY!

HOUSE OF THE WEEK

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To contact Derrick Hibbler send a comment below or call 314-246-9484 :voice or you can email him @ dhibb99@gmail.com

DO IT YOURSELF THURSDAYS!

I KNOW THE SEASON OF THE FLAT SCREEN PURCHASES HAVE COME UPON US!!!

LISTEN TO OUR GUYS FROM DIGITAL LANDING ON HOW TO PROPERLY INSTALL YOUR WALL MOUNT CORRECTLY!!!

SAVE YOURSELF SOME TIME AND A TON OF MONEY!!!

GO TO:http://www.youtube.com/watch?v=WBfVigFjnLY&feature=youtube_gdata_player

What You Need To Know Wednesday!!

Invest your Income Tax Returns Wisely...Buy an Investment Property!!! Several of them 15 thousand and under!!!


Investing in real estate has changed in many markets in our country. If you are like me, you live in a real estate market that has gone soft. There are still some areas in the country where homes are appreciating nicely, but nothing like it was a year or two ago.

There were a lot of self-proclaimed real estate gurus that popped up during the boom times telling you how to make HUGE PROFITS in real estate. Back then, during the up cycle, investing in real estate was so easy.

You could throw money at almost any piece of real estate and be practically guaranteed to make a profit. It seemed like anyone who had flipped a couple of houses and made a profit was an "expert" investor.

The times have changed

Things are different now. Investing in real estate takes a little more effort. Investors who haven not weathered "down" cycles before are struggling because all they know are massively appreciating markets. All too many of those self-proclaimed gurus lost their shirts when the markets changed.

Those ads that say, "I made $256 Million in real estate in four weeks with no money down" are a whole lot less believable. Okay, $256 Million is an exaggeration, but you know what I mean.

So the question is: "How can we still invest in real estate and make profits?" Can it be done in these soft markets? The answer to that question is quite simple. I can say without question and without hesitation, the answer is: YES! ABSOLUTELY!

I have been investing in real estate for a nice period of time. I have seen up cycles, and I have seen down cycles. I have made money and been successful in both. I can tell you several things about down markets that may surprise you.

First, experienced real estate investors will tell you that more money is made in down markets than in up markets. It's true, MORE MONEY is made in DOWN markets than in up markets!



Second, experienced investors PREFER to do the bulk of their investing in DOWN markets. There are a number of reasons for this, but the big ones are that there are more motivated sellers in down markets and the competition (other investors) pursuing these motivated sellers is LOWER. It's a double bonus.

Down markets = more deals and less competition

One of the investing techniques I specialize in is lease options. Lease Options are one of the absolute best techniques for investing in real estate in down markets. I'll say it again, because if you are looking for ways to get involved with real estate investing you need to know this:

Lease Options are one of the absolute best techniques for investing in real estate in down markets.

Let's take a look at why.

I've already said that down markets produce high numbers of motivated sellers.

Right now in Michigan, it's very common to see a house listed on the market in two ways, both for sale and for rent. They are listed this way because the sellers KNOW how bad it is and they want someone, anyone, to cover their mortgage payment.

These double listings SCREAM: "Motivated Seller"! Now, not every single one of these is going to be an excellent lease option deal. But you know what? That's okay, there are plenty to choose from!

The critical part in selecting your lease option candidates in an up market or a down market, is creating WIN-WIN-WIN situations. The seller must be satisfied with the deal, you must be satisfied, and the end buyer must be satisfied. When investing in real estate, this is what makes us successful.

How does this work?

To create a WIN for someone we must meet their core need. A motivated seller's goal is to sell his house. Eventually he needs his mortgage paid off and the deed transferred out of his name.

If he's willing to rent the house, as well as sell it, he's telling you that having his mortgage paid each month is more important right now than actually getting the house sold.

If we can find a tenant/buyer for them we are satisfying their core need of paying the mortgage each month and eventually selling the home. This is a WIN for the seller.

Our end buyers are looking for a home to own. Their current situation prevents them from getting a mortgage immediately, but they plan on being able to get a mortgage soon. They want a home now. They don't want to wait to get their house.

By allowing them to lease and then purchase the house we are meeting their core need. This gives our buyers a WIN.

Sub-prime fallout = more quality tenant/buyers

Before we talk about what makes a WIN for you as an investor, let's talk a little more about mortgages for our end buyer. There has been a lot of news lately about sub-prime lending woes and how lenders with riskier loans are facing high rates of foreclosure and may be going bankrupt.

As a result it is getting much harder for people with poor credit to obtain a mortgage. It is also getting harder for ANYONE to obtain a mortgage with 100% financing (i.e. no money out of the buyer's pocket). This may sound crazy, but this is actually a good thing for us when investing in real estate.

When investing in lease options, it is harder for us to find quality tenant/buyers when almost anyone who can fog a mirror can get a mortgage. Not only that, but because it was so easy to get 100% financing, most buyers save nothing and are unable or unwilling to pay much for an option fee.

With the lending companies tightening their belts, I expect we will see a growing population of QUALITY tenant/buyers who are able to pay HIGHER option fees.

The flip side of this is that because lenders are tightening their belts, your tenant/buyers will need to work harder to restore their credit. It may take as much as two to three years for some tenant\buyers to be able to qualify for mortgages instead of just one year as we had seen before.

Bottom line: When investing in real estate by using lease options the difficulties of the mortgage lenders are just another reason why this down market is a GREAT time for us investors.

What's in it for me?

Now let's look at the last part of our WIN-WIN-WIN equation--the WIN for us, the investor. For us to WIN, we need to make a profit. The profit comes both from the equity spread between your option price to the seller and the buyer's option price to you as well as any monthly cash flow in the rental payments.

With lease options, it pays to be creative. You'll find a lot more deals and be a lot more successful investing in real estate if you practice creativity in your structuring.

Time to start asking questions!

The most common motivated seller we encounter is the one who has little or no equity in his home. Too many sellers get calls from real estate investors that only care about, "What's it worth?" and "What do you owe?" If the numbers are too close together, they say, "Sorry I can't help you." Click.

What if you pursue it a little further with a creative mind? A good question to always ask is, "What are your monthly payments?" If the payments are lower than rental rates you may be able to make some monthly cash flow.

Another good question to ask is, "How soon do you need to sell the house?" You may want to ask this question a couple of times while you are talking to them. You could be surprised to find that the number grows longer each time you ask.

There aren't too many markets I can think of that stay down forever. Eventually the house should start appreciating again. If your option period to the seller is long enough you can capture appreciation to make your profit.

You have nothing to lose

What about this: "Are you willing to bring money to closing to sell your house?" And if their monthly payment is higher than what you can rent the house for, "Are you willing to pay the difference between the rental amount and your monthly payment?" These two questions may seem brazen, but ask yourself, what have you got to lose?

If the seller is fully leveraged on the house or their payment is higher than the rental rate you have nothing to lose because if they aren't willing to make concessions, then you can't help them!

It may feel awkward asking these questions; but trust me, no matter how embarrassed you might feel at first, after you ask this question 30 times, you will start to feel much more comfortable.

When you add all three of these together: meeting the seller's need, meeting the buyer's need, and you making a profit, you have created a WIN-WIN-WIN. This is what you MUST do to be successful when investing lease options.

Do you see how much BETTER it can be to find deals in down markets? Motivated Sellers are EVERYWHERE and there are far FEWER investors competing with you. These two factors allow you to choose your deals with greater care. Always "cherry pick" your deals in a soft market.

This is why experienced investors, who have been in both up markets and down markets, prefer the down markets. Soft markets can provide some of the best when investing in real estate.

To contact Derrick Hibbler send a comment below or call 314-246-9484 :voice or you can email him @ dhibb99@gmail.com

TUESDAY: TIP OF THE DAY

TIP OF THE DAY TUESDAY FROM AN EXPERT:

HOW TO GET A HOUSE OR APARTMENT RENTAL WITH LITTLE TO NO MONEY AND NOT SO GOOD CREDIT.

HELLO EVERYONE,

TODAY I HAVE ONE OF TOP PROPERTY MANAGEMENT COMPANIES IN THE WORLDS CEO KEVIN MAGEE BREAKING DOWN HOW TO GET INTO A RENTAL APARTMENT OR HOME 101. ALL THE INS AND OUTS!!! VERY INFORMATIVE AND WILL GET YOU ON THE WAY TO RENTING YOUR NEXT PLACE OR EVEN YOUR FIRST PLACE. TUNE IN!!!!

Go to http://youtu.be/X-r6xIWrMUQ

To contact Derrick Hibbler call 314-246-9484 :voice or you can email him @ dhibb99@gmail.com

MONDAY: MAIN QUESTION OF THE DAY

How the United States Housing Market Failed! The Subprime Loan...Education 101

The so-called day after "hangover" from the fast and loose lending spree that helped fuel the real estate boom during the first half of this decade keeps getting worse, with a continued fall out among lenders who catered to high-risk (or "subprime") borrowers. Several dozen lenders have closed their doors because the Wall Street firms who have provided their funding will no longer do so. 

SO THE MAIN QUESTION IS

What is a subprime mortgage?

 Generally speaking, it’s a home loan made to borrowers have low or no down payments and/or poor credit ratings. Although most home loans do not fall into this category, subprime mortgage programs have proliferated in recent times as the "rising tide that lifts all boats" propped up home values across the country and emboldened lenders to take on more risk. 

As real estate values moved higher after 2000, lenders expanded the use of subprime loans, adding enticing features that made home ownership possible for people who could not qualify for traditional mortgage loans. 

What went wrong? 

Increasingly, lenders approved subprime loans to shaky credit borrowers with little or no proof of income, little or no down payment funds, and with low "teaser" starting interest rates and payments. Some of these "stated-income" loans became referred to as "liar loans." 

Wall Street encouraged this behavior by bundling the loans into securities that were sold to pension funds and other institutional investors who were seeking higher rates of return. 

Seasoned real estate industry professionals watched the trend toward "easy money" loans with concern. As risky home loans soared in popularity, federal banking regulators were repeatedly warned that more borrowers were getting trapped in mortgages they simply could not afford. 

As long as home values rose, borrowers gained equity and could continue to refinance. However as interest rates rose and home values declined or flattened many borrowers could no longer get new loans and could no longer make their payments when their initial teaser rates expired. 

Rising defaults and delinquencies have caused more stringent underwriting standards and in some cases the outright elimination of certain loan programs. 

The "Piggyback 2nd Lien" Here is an example: 

Property Sales Price: $300,000

Buyer's Down Payment: $15,000

Balance Due: $285,000

1st Lien Loan 80% LTV: $240,000

2nd Lien Loan: $45,000 

A prospective buyer with shaky credit purchases a home for $300,000 and can put down 5% of the purchase price or $15,000. The lender agrees to lend the buyer/borrower a 1st mortgage loan for 80% of the sales price or $240,000. 

In addition to that mortgage, the lender also agrees to lend the remaining $45,000 to the buyer by allowing for a 2nd lien mortgage to be placed against the property, often known as a "piggyback" 2nd lien mortgage. 

So the buyer borrows a combined total of $285,000, and along with the $15,000 down payment is able to cash out the seller completely for the $300,000 purchase price. 

Typically the interest rates on the 1st lien mortgage are lower than that of the piggyback 2nd lien mortgage, which in some cases is called a Home Equity Line of Credit (HELOC) loan that is then drawn on. 

As long as the lenders were able to continue to originate these piggyback 2nd lien mortgages and Wall Street continued to have an appetite for them, this was wonderful for the sellers because they were getting ALL CASH for the sale of their property. 

Prudent lending or not? 

Let's take a look at that very tenuous $45,000 piggyback 2nd lien and see how unsafe it really can be. With a buyer/borrower who has little or no money of their own into a property, there is little or no true equity. If times get tough for such a borrower, the incentive to work things out becomes precarious. 

Add to this the sloppy credit history of the borrower, and that 2nd lien mortgage carries with it a tremendous amount of risk because it sits behind or "junior" to a much larger (and superior) $240,000 underlying 1st mortgage lien. Its no wonder Wall Street will no longer purchase such high risk "throw away" 2nd lien mortgages. 

Cause and effect 

Now buyers, their Realtors, and the buyers' mortgage brokers are trying to convince sellers to carry back the $45,000 piggyback 2nd lien mortgage. Yet most sellers can clearly see how uncertain and perilous holding such a smaller 2nd lien mortgage can be to their financial well being and refuse to do so except under extreme circumstances

An alternative way using seller financing 

What if you could structure the sale of a property to a prospective subprime candidate and not have to take back any high risk dangerous piggyback 2nd lien mortgage while still achieving a respectable all-cash sum when your property sells? Might this make more sense to a property seller? 

Using some of the creative and alternative methods involving the seller providing the financing (owner financing), this is very achievable. Let's take a look how: 

Property Sales Price: $300,000
Buyers Down Payment: $15,000
Balance Due: $285,000
1st lien Loan 95% LTV: $285,000 (seller financed) 

Step one: 

Let's the same $300,000 sales price and same $15,000 cash down payment from the buyer. However . . . 

Instead of the buyer being limited to only 80% loan to value (or $240,000 loan from a lender), the seller agrees to finance the buyer under the terms of the sale and agrees to take back a purchase money mortgage in the amount of $285,000 (the $300,000 sales price minus the $15,000 cash down payment). 

Step two: 

Now I know what a lot of you are saying: "If I provide seller financing to the buyer, how does that equal me getting cash?" The second step is the answer, and it involves the pre-sale or conversion of this $285,000 seller financed mortgage into a cash lump sum. 

Assuming that 

Some time was spent checking out the prospective borrower's employment, stability, overall credit profile, and credit scores, and the negotiated repayment terms of the seller financed instrument were commensurate with how strong (or not) these borrowers stacked up. . . then (using the services of a cash flow professional), the $285,000 seller-financed mortgage can typically be sold immediately to generate somewhere between $256,000 to $262,000 or more as a lump cash sum.

The seller receives the $262,000 cash sum from the sale of their seller-financed mortgage plus the $15,000 down payment--or a total of $277,000 in cash proceeds and it negates their having to hold a very, high-risk $45,000 piggyback 2nd lien mortgage as in the example above. 
Many sellers--especially investors, holding unsold homes in "inventory" will agree that $277,000 cash in hand today is far better than $255,000 cash (the $240,000 1st lien mortgage proceeds plus the $15,000 down payment) and a high-risk $45,000 piggyback 2nd lien mortgage they may have trouble later collecting on in the future.

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